Crawford & Company has delivered a modest earnings growth for its fourth quarter, driven by the strength of three of its business segments.
For the quarter ended Dec. 31, 2017, the claims-management company reported revenues before reimbursements of $298.8m, compared with $272.4m for the 2016 fourth quarter; consolidated operating earnings of $24.2m, versus $20.3m of the same period the previous year; and consolidated adjusted EBITDA of $34.4m, compared to$29.1m in the 2016 period.
“Overall, I am pleased with our results this quarter, as we delivered 19% operating earnings growth driven by strength in our US Services segment, which continued to benefit from the recent CAT activity; our international segment, which experienced strong operating margin expansion; and Broadspire, which continued to deliver consistent revenue and earnings growth,” said Harsha Agadi, president and CEO of Crawford & Company. “I am particularly proud that all three of these divisions ended the year with operating margins in excess of 10%, which has been management’s medium-term goal.”
US Services posted a 48% increase in revenues before reimbursements from the 2016 fourth quarter to $84.8m, while its operating earnings, at $9.5m, were also up from the fourth quarter of 2016's $7.7m, representing operating margins of 11% in the 2017 period and 13% in the 2016 period.
For the firm's international segment, fourth quarter 2017 revenues before reimbursement totaled $118.9m, compared with $116.8m in the 2016 fourth quarter; while its operating earnings were $17.6m in the 2017 fourth quarter, compared with $11.4m in the 2016 fourth quarter, representing operating margins of 15% and 10% in the 2017 and 2016 periods, respectively.
The Broadspire segment recorded revenues before reimbursements were $78.6m in the 2017 fourth quarter, up 6% from $74.0m in the 2016 fourth quarter; and operating earnings of $8.5m in the fourth quarter of 2017, representing an operating margin of 11%, compared with $6.5m, or 9% of revenues, in the 2016 fourth quarter.
Dampening the firm's fourth-quarter performance, however, was its Garden City Group segment, which “continues to experience a difficult market backdrop combined with the expected wind-down of a large project.”
The struggling segment posted revenues before reimbursements of $16.5m in the fourth quarter of 2017, down from $24.2m in the same period of 2016; and operating losses of $(2.1)m in the 2017 fourth quarter, compared with operating earnings of $1.2m in the 2016 period. The segment’s operating margin for the 2017 quarter was (13)%, as compared to 5% in the 2016 quarter.
“As a result, we recorded a non-cash $19.6m goodwill impairment charge in the quarter related to the Garden City Group segment,” Agadi said. “This charge had no impact on our credit agreement, liquidity, or operating results. On a non-GAAP basis before goodwill impairment charges, restructuring and special charges, and the impact of US tax reform, our diluted earnings per share for CRD-B surged 87% in the 2017 fourth quarter as compared to the 2016 fourth quarter, aided by the one-time tax benefit of $0.05 per share we referred to last quarter.”
Agadi said Crawford & Company is looking forward to delivering a 5% annual revenue growth and 15% annual earnings growth over the longer term, but expects its 2018 results to be “impacted by the expected challenges” in its Garden City Group business.
