Crawford & Co (CRD.A) 2021 Q2 法說會逐字稿

Good morning. My name is Misty, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Crawford & Company Second Quarter 2021 Earnings Release Conference Call. In conjunction with this call, a supplementary financial presentation is available on our website at www.crawco.com under the Investor Relations section. (Operator Instructions) As a reminder, ladies and gentlemen, this conference is being recorded today, Wednesday, August 4, 2021.

Some of the matters to be discussed in this conference call and in the supplementary financial presentation may include forward-looking statements that involve risks and uncertainties. These statements may relate to, among other things, the impact of COVID-19, our expected future operating results and financial condition, our ability to grow our revenues and reduce our operating expenses, expectations regarding our anticipated contributions to our undefined benefit pension plans, collectability of our billed and unbilled accounts receivable. Financial results from our recently completed acquisitions, our continued compliance with the financial and other covenants contained in our financing agreements, our long-term capital resource and liquidity requirements and our ability to pay dividends in the future.

The company's actual results achieved in future quarters could differ materially from results that may be implied by such forward-looking statements. The company undertakes no obligation to publicly release revisions to any forward-looking statements made in this conference call to reflect events or circumstances occurring after the date of this call or to reflect the occurrence of unanticipated events. In addition, we are reminded that operating results for any historical period are not necessarily indicative of results to be expected for any future period.

For a complete discussion regarding factors, which could affect the company's financial performance, please refer to the company's Form 10-Q for the quarter ended June 30, 2021, filed with the Securities and Exchange Commission, particularly the information under the heading Risk Factors and management's discussion and analysis of financial condition and results of operations as well as subsequent company filings with the SEC. This presentation also includes certain non-GAAP financial measures as defined under SEC rules. As required, a reconciliation is provided for those measures to the most directly comparable GAAP measures.

I would now like to introduce Mr. Rohit Verma, Chief Executive Officer of Crawford & Company. Rohit, you may begin your conference.

Thank you so much, Misty. Good morning, and welcome to our second quarter 2021 earnings call. Joining me today is Bruce Swain, our Chief Financial Officer; Joseph Blanco, our President; and Jim Kochinski, our Deputy General Counsel. After our prepared remarks, we will open the call for your questions.

Crawford delivered exceptional results in the second quarter, with revenue increasing 14% and non-GAAP EPS for CRD-A, growing 32% year-over-year to $0.25. Importantly, we saw strength across the business despite the absence of significant weather-related activity, as claim volumes increase and our Platform Solutions business supported the transformation of the loss adjusting industry. Most notably, we have had 3 consecutive quarters of year-over-year revenue growth despite the continued impact of COVID on our business and humanity in general. Our financial position remains strong with a robust balance sheet, which is reinforced by the business' solid cash generation. We have continued to draw on our competitive position in the market and the advantages of our global scale. That said, this performance would not be possible without the unwavering commitment of our global workforce. Their resilience allows us to deliver on our purpose, day in and day out while strengthening our resolve to achieve excellence in client service while maintaining a sharp client focus.

In addition, the continuous support and confidence of our clients has been critical in Crawford's success. We are also executing on our enhanced strategy, which is shaping our results very favorably. We are building up our loss adjusting business by acquiring greater expertise and increasing the rigor on quality, which has resulted in double-digit growth in our U.S. market operations. Similarly, our pronounced focus on carrier and managing general agent markets enabled by our digital and analytics capabilities, has resulted in our U.S. TPA business growing by 10% over the prior year period.

Lastly, our Platform Solutions business remains a major transformational engine for Crawford and the industry at large as it delivered 39% revenue growth, while fueling improvements in underlying margins. We will look to build on this momentum in the second half of the year while being cognizant of the impact of COVID variants spreading across the globe. By reimagining the ecosystem of claims, we are differentiating Crawford from our competition. Quality, expertise and digital are the 3 pillars of this differentiation. Additionally, we are investing in emerging areas, including data and analytics for our TPA business, expanding our Crawford legal services footprint and innovating in our Platform Solutions business.

Overall, we are well positioned and remain confident that our continued success will deliver value to our shareholders and further our purpose of restoring and enhancing lives, businesses and communities. As I mentioned, we are making significant progress, further positioning the business for future growth and cash generation. Our enhanced operating structure and culture of empowerment are creating a better focus on management, allowing us to deliver on customer needs and simplifying our capital allocation framework.

As part of our envisioned future, we believe our reimagined and simplified customer solutions will streamline the most aggravating processes in the insurance ecosystem while harmonizing the business. The quality of our services and solutions will set industry benchmarks globally and inspire prominent industry experts to join us in our purpose. This combination of innovation, quality and people will foster trust and compel our customers to choose us to enhance their brand. Further, our GSL specific strategies are aimed at advancing these efforts through expertise that is deep and eminent, digital that simplifies and quality that sets the benchmark.

Our loss adjusting strategy is focused on further unlocking speed, accuracy and simplicity to elevate our position in the marketplace. On the major and complex loss side, demand for expert adjusters is rising rapidly as claims become more complex and carriers look to outsource more of that business. We are continuing to develop our bench of experts to become the market leader for the complex claims business. Through the second quarter, we hired 46 specialist adjusters marking solid progress on our 3 year goal. We are gaining the most traction in the U.S. as the economic activity starts to recover and the demand for specialist adjusters continues to rise. Our strategy for the volume segment is to differentiate ourselves by streamlining low complexity, high-frequency claims processing using digital simplification and quality.

Our client relationships, global reach and investments in innovation are a competitive advantage, which we believe will enable us to capture market and improve margin. In fact, we are already seeing the impact from other digital investments we have made in Australia and the U.K. Our Platform Solution business is a major transformational driver for us as we aim to reimagine traditional loss adjusting by bringing together network resources and technology that transforms the current insurance claims value chain. Our goal is to embed Crawford within the insurance ecosystem and for Crawford to touch every property claim that is processed. Our focus for Platform Solutions is to scale the business and create a strong workflow right through to the bottom line. The second quarter saw the highest number of transactions in the last 2 years. As the economic environment improves, we expect the overall economics of the Platform Solutions segment to continue to follow suit.

Turning to TPA. Our strategy encompasses 3 areas to gain profitable market share, North America Broadspire, Crawford International TPA and Crawford legal services. In North America, we're leveraging technology and data insights to differentiate in the MGA, captive and carrier outsourced market, and we're gaining traction there as we've already written 16 new programs and 12 new carrier MGA relationships year-to-date. From an international perspective, we are differentiating through our digital product offering by creating a new mobility system. However, Canada and Europe, which represent our 2 largest areas outside the U.S., along with other international TPA operations have been severely impacted by COVID.

As we shared with you, the majority of our businesses outside the U.S. are skewed towards travel and entertainment. We're capturing market share by growing Crawford Legal Services in areas where we are allowed to complement our core loss adjusting business with the ownership of a law firm. Through the second quarter, we have grown the number of partner level attorneys that drive the bulk of this business. Crawford is committed to addressing the ESG factors most material to our operations.

During the second quarter, Michelle Jarrard was named Non-Executive Board Chair. In addition to being the first woman elected to Board Chair for Crawford, Michelle brings over 25 years of expertise in people strategy, talent acquisition and operations improvement. Michelle's contributions over the past 2 years as a member of the Crawford Board of Directors have added depth and strength to the Board, and I look forward to continuing to benefit from her energy, experience and guidance as she assumes the role of board chair.

We remain steadfast in our commitment to diversity, equity and inclusion, and we are committed to cultivating a safe inclusive environment in which everyone's unique perspective and experiences are heard and valued. As a key component to our success, we are continuously devoted to protecting the safety and well-being of our employees. The pandemic has also put into perspective and reminded us to appreciate the value of work-life balance. We are proud to say that Crawford has endlessly prioritized the health and safety of our employees. And as a result, we've been able to see a high level of performance and engagement through the pandemic.

Going into the back half of the year, we are in a healthy financial position with the liquidity necessary to respond and adapt to persistent challenges presented by the changing economic environment as well as evolving client demands. Our positive earnings results and reinforced balance sheet give us tremendous flexibility to move forward with making investments for the long-term benefit of the company as well as enabling us to continue our quarterly dividend at $0.06 per share for both CRD-A and CRD-B, further highlighting our commitment to deliver shareholder value.

As part of our capital allocation strategy, we will continue to evaluate opportunities to extend our market-leading position through prudent investment and the launch of new innovative solutions. Part of this is our thoughtful M&A strategy. We're committed to employing a consistent framework and are staying disciplined in our valuation approach instead of following the market.

Having said that, we feel good about the pipeline we currently have. Our continued success is rooted in our purpose, people and strategy, and we're keeping our eyes on the road ahead. We believe that our strategic evolution, supported by a resilient global workforce and top bench of experts, along with our commitment to service excellence will position us well to execute on our growth strategy. At the same time, we will improve our competitive positioning, bolster our cash generation capability and deliver value to our shareholders. And most importantly, it will allow us to deliver on our purpose.

With that, I would like to turn the call over to Joseph.

Thank you, Rohit. Turning to our results in a bit more operational detail. From a weather standpoint, there were not any material storms during the second quarter. However, we are still seeing spillover activity from the winter storms in the U.S. earlier this year. From an economic standpoint, although global business activity continues to increase, it has not yet recovered to pre-pandemic levels. This is most notable outside of the U.S. while claims activity increased meaningfully in the quarter driven by the U.S. claims growth of 22%, the varying vaccine rollouts and rolling lockdowns across the world continue to be a headwind for our cash flow business in both loss adjusting and TPA. In terms of CAT events, the impact of all U.S. CAT is up $9.5 million year-over-year. Continued work from Q1 weather events, combined with increased utilization in programs with 2 top 5 carriers, positively impacted our second quarter, with overall surge revenues increasing $6.7 million year-over-year to $37 million.

As a reminder, we saw record storm activity in the second half of 2020, which included 30 name storms. As a result, our Q3 and Q4 2020 included approximately $82 million worth of surge revenue. While weather activity, by its nature is unpredictable, we will see more challenging comparisons in the back half of the year given the high activity in the second half of last year. Now I want to point to the employment picture in the U.S. and how it relates to Crawford's business. The unemployment rate versus pandemic levels has come down significantly over the past several months. While our Broadspire business in the U.S. is improving and claims are nearing pre-pandemic levels, our medical management business is still lagging. This is in part because of a natural lag in treatment from claim initiation, but is exacerbated by institutional and personal pandemic related decisions that are depressed the number of medical procedures. Despite this, we are optimistic that our Broadspire business will continue trending towards normalization as we move into the back half of 2021.

Turning to our GSLs, starting with loss adjusting. Loss adjusting achieved 6% revenue growth in the second quarter. We are seeing recovering economic activity in the U.S. and increasing demand for major and complex specialist adjustors, which is driving our investment in talent. As Rohit mentioned earlier, we made over 46 critical hires across GTS, including CFAS, inland Marine and construction, making solid progress on our 3 year goal. On the volume side, we are investing in quality and digital, primarily in Australia and the U.K. and are seeing growth in those areas.

Platform Solutions is a major transformational segment for Crawford, and we are starting to see it become a key contributor of profit. More work remains, however, in terms of gaining scale to improve margins. As Rohit mentioned, the volume of transactions is increasing. In the second quarter, we saw the highest number of quarterly transactions in the past 2 years. Our catastrophe business within the Platform Solutions segment was a core driver of growth in the second quarter. Despite benign weather during the quarter, flow through for Platform Solutions was strong. As we continue to increase transaction volumes, we will continue to see better flow through. We are also encouraged by the momentum WeGoLook is building, and we look forward to seeing this become a critical contributor to our top and bottom line in the coming years.

Moving to our TPA business. The decreased economic activity continues to be reflected in TPA's earnings. As of June 2021, U.S. casualty claims volumes remained approximately 5% below pre-COVID levels compared to the first quarter of 2020 before the COVID related shutdowns began. Medical management services show clinical activity is still below pre-pandemic levels though we are seeing some temporary benefits from COVID related claims. Although we have experienced further weakness in Canada and Europe, we are seeing signs of recovery in the U.S. as employment levels and business activities begin to improve. We expect this to continue to help our TPA business in future quarters.

We won close to $20 billion of new and enhanced business in the quarter, predominantly within our loss adjusting and TPA businesses, a strong sign that our focus on a reimagined claims ecosystem is resonating with our customers. We also retained 96% of our Broadspire renewable business through the second quarter. Our NPS increased to 46, up 1 point compared to last quarter, giving us confidence in our service levels and highlighting opportunities where we can further enhance our value proposition.

Lastly, we are excited to see increased customer interactions. During the second quarter, we recorded over 2,500 engagements with many being in person, as COVID restrictions eased up, further underscoring that business is continuing to normalize. That said, the environment as it relates to COVID is changing daily. And although we remain cautiously optimistic, we are monitoring the situation closely.

With that, let me turn the call over to Bruce for a deeper look at our financial performance.

Thank you, Joseph. Company-wide revenues before reimbursements in the 2021 second quarter were $267.5 million, up 14% over the $234.4 million in the prior year second quarter, presented on a constant dollar basis to the prior year, revenues before reimbursements totaled $255.2 million. GAAP diluted EPS in the 2021 second quarter was $0.22 for both CRD-A and CRD-B compared to EPS of $0.11 for both CRD-A and CRD-B in the 2020 period. On a non-GAAP basis, second quarter 2021 diluted EPS was $0.25 for CRD-A and $0.26 for CRD-B compared with $0.19 for both CRD-A and CRD-B in the 2020 period. The company's non-GAAP operating earnings totaled $19.6 million in the 2021 second quarter or 7.3% of revenues, increasing over the $18.2 million or 7.8% of revenues in the prior year period. Consolidated adjusted EBITDA was $29 million in the 2021 second quarter or 10.8% of revenues, up 14% over the $25.5 million or 10.9% of revenues in the 2020 quarter.

I will now review the second quarter performance of each of our segments. Crawford loss adjusting revenues totaled $116 million, increasing 6% from $109.1 million reported in last year's quarter. Foreign exchange rate benefits totaled approximately $8.7 million in the second quarter of 2021. The segment reported operating earnings of $6.2 million in the 2021 second quarter or 5.3% of revenues, decreasing from the $10 million or 9.2% of revenues in the prior year quarter. Margins were pressured due to the ongoing investments in talent recruitment and weakness in certain international markets. Revenues for Crawford Platform Solutions were $51.1 million in the 2021 second quarter, up 39% from $36.7 million in the prior year quarter. Foreign exchange rate benefits totaled $700,000 for the quarter. Operating earnings in Crawford Platform Solutions totaled $10.4 million or 20.3% of revenues in the 2021 second quarter, increasing 45% over operating earnings of $7.1 million or 19.5% of revenues in the 2020 quarter.

Crawford TPA Solutions revenues were $100.4 million in the 2021 second quarter, increasing 13% from $88.7 million in the 2020 period. Foreign exchange rate benefits totaled $2.8 million in the 2021 second quarter. Crawford TPA Solutions operating earnings were $4.7 million during the second quarter of 2021 compared to last year's second quarter operating earnings of $3.1 million. The operating margin in this segment was 4.7% in the 2021 quarter and 3.5% in the 2020 quarter. Unallocated corporate costs were $1.7 million in the second quarter of 2021 compared to cost of $2.1 million in the same period of 2020.

This decrease was primarily due to a reduction in severance costs present in 2021, partially offset by an increase in self-insurance costs and professional fees and a lower credit from the Canada emergency wage subsidy, also known as CEWS. During the 2021 second quarter, the company recognized a pretax benefit from CEWS totaling $2.2 million as compared to a benefit of $4.3 million in the 2020 quarter. The company does not expect to recognize any further benefit from CEWS during the remainder of 2021. During 2021, the company repurchased approximately 256,000 shares of CRD-A and 81,000 shares of CRD-B at an average per share cost of $9.09 and $8.28, respectively. The total cost of share repurchases during 2021 was $3 million.

We've experienced some recovery from the negative economic impact of COVID-19 in recent months, particularly in the U.S. compared to the significant revenue reductions in the prior year. That said, certain parts of our international operations continue to be impacted by lockdowns and a slow recovery. The company's cash and cash equivalent position as of June 30, 2021, totaled $44.7 million, unchanged from December 31, 2020. The company made $4.5 million in contributions to its U.S. defined benefit pension plan in 2021 compared with $3 million in 2020. The company's total debt outstanding as of June 30, 2021, totaled $125 million compared with $113.6 million as of December 31, 2020.

Net debt stood at $80.3 million as of June 30, 2021, while our leverage ratio under our credit agreement closed at a very strong 1.07x EBITDA. Additionally, our pension liability was down to $44.2 million at the end of the second quarter. We are encouraged by our operating cash flow so far in 2021. Cash provided by operations totaled $10.5 million during 2021, decreasing $1.5 million compared to 2020. The decrease in cash provided by operating activities was primarily due to higher pension contributions and growth in receivables, partially offset by higher net income in 2021. Free cash flow was negative $1.7 million for the first 6 months of 2021 compared with the prior year's negative $2.3 million. Our free cash flow generation remains a top priority for the company.

With that, I would like to turn the call back to Rohit, for concluding remarks.

Thank you, Bruce. As we look towards the second half of 2021, we are focused on maintaining our leading position within the industry through innovation and best-in-class solutions. Our global footprint and empowered teams all around the world give us the reach and agility to meet the changing needs of the industry. Crawford's emphasis on our people and delivering service excellence to our clients will always remain at the forefront of our priorities. We are confident in our ability to deliver superior results for our shareholders over the long-term as we remain committed to fulfilling our purpose of restoring and enhancing lives, businesses and communities. Thank you for your time today.

Operator, please open the call for questions.

(Operator Instructions) Your first question comes from the line of Alex Bolton with Raymond James.

I'm calling in on behalf of Greg Peters. Maybe we can first talk about the lower margins in loss adjusting. I know spurs from the 46 adjusters that you're kind of making investments towards. You talked about the demand for these experts. Can you comment if you're seeing wage inflation for these hires?

Alex, thank you so much for your question. Great catch by you. Yes, you're absolutely right. That was the only place where our margin diluted a little bit from 2020. Three factors driving that. First, you already talked about, which is we are investing in getting more experts, no question about it. And I would say that as you bring those experts in, it takes about 6 months or so to ramp up to get the revenue lift from that. And that certainly has been one factor in the margin.

The second factor in the margin has been just long tail claims. We've got a pretty significant WIP that's building up as a result of these long tail claims. And in significant parts of the world outside the U.S., we are paid on what is called scaled fees, which basically, we don't get paid until the claim actually settles. So that's the second part.

And then the third and final part, there is weakness in some of our operations, which is somewhat impacted by COVID, somewhat impacted by competitive dynamics, as an example, in Asia, we're seeing some weakness, which is putting a drag on our margins. So those are the 3 big factors. Your other question, are we seeing wage inflation? I would say more in pockets than a secular wage inflation in this sector? So where the competitive dynamics are pretty strongly contested. You are seeing some wage inflation, but it's -- I would say it's mainly in pocket so far.

Okay. Perfect. And then maybe just broadly across the board, I guess, seeing expenses other than direct compensation coming down within the segments. Maybe you can touch on initiatives or efforts there and the accomplishments you've made?

Sure. We've -- the thing that we talk about within the organization is that we are a company focused on growth, but we're expense aware. We have been working hard at our non-comp expenses for some time now. And I think if you look at our history, we've taken our non-comp expenses from being somewhere around -- somewhere between 24% to 26% of our revenue down into the very low 20s. Big factors for this, and I'm sure Bruce can touch upon them in greater detail. Obviously, travel is light travel is significantly lower than, say, 2019 levels and even 2020 levels. As well as we've been slowly chopping away at our rent. If you go back and look at our rent at one point, it used to be about somewhere between 4% and 5%. We brought it below 4% and working towards it. So I would say those are probably the 2 predominant factors, but there are other things that we've been doing for a few years now around procurement, around building efficiency in our processes, which is helping the non-comp expenses. I don't know, Bruce, if you want to add anything?

No, I think that's a good overview. Those are the main drivers.

Okay. And then within Platform Solutions, I mean, we've seen significant growth there, probably tougher comps going into the back half of the year. Is it right to think that growth will be a little tougher going into the back half?

Yes. Look, we -- so 2 things here, right? First and foremost, we're excited about our platforms business. We think that that's the business that has strong potential, both top line and bottom line for the company looking forward. And over the coming investor events, we are probably going to start to highlight more of what we're doing in that business to create more awareness with you guys and other investors. If you look at our business, despite there being less weather in Q2, we actually had pretty decent growth in that business.

And the reason for that is that we're trying to move our business to be less dependent on the Southeastern Gulf wind exposure, but more focused on continuing to build capability, which is being deployed against the severe convective storm market. So yes, the comps for third quarter will definitely be tough. You had 30 name storms last year. If we get another 30 name storms. I don't think that comparison will be difficult. But I think being realistic, it's hard to predict that and say, whether we're going to have 30, 10 or maybe 3 storms.

If the storm activity continues, we feel very confident if the storm activity slows, we believe the business is resilient. You've seen the business do well last year despite COVID, and we think we'll continue to do fine. But from a competitive perspective, this would be a difficult comparison between Q3 of last year and this year, if the weather is significantly different from last year.

Okay. And then lastly, maybe you could speak on the auto claims activity you've seen within WeGoLook. I guess as auto insurers have seen frequency increase.

Yes. WeGoLook has been a great story for us. It was -- the growth was certainly triggered through the pandemic, but the experience that our clients are having and what we're hearing from our clients, we believe that there will be continued traction. Today, the bulk of the claim activity that we're seeing in WeGoLook is auto related. And as driving distances increase and driving frequency increases, we believe that we will continue to see growth in that.

But also, we are building that solution and have been building for some time and getting the position for property claims, which we believe further diversifies the type of claims that we will handle to WeGoLook. I would say, last couple of quarters, we've had many months of record volume. And I think the way -- the traction that we're seeing, we believe that, that volume will continue to increase. It will further increase as we build a better following of the property solution there in addition to the auto solution.

Your next question is from Kevin Steinke with Barrington Research.

I wanted to start off by asking about the growth you saw in loss adjusting in the U.S.15% year-over-year, you tied that to your hiring of specialty adjusters. And then you mentioned you're on track with your 3-year goal there. Can you just refresh or update us on what that 3-year goal is in terms of driving growth and hiring in the major and complex claims business.

Sure, Kevin. Thank you so much. And by the way, I'm really, really excited about you starting to follow our stock. So you and I have not had a chance to really meet in person. But hopefully, as the pandemic slows down, we'll get a chance to catch up. Great observation. Yes. The loss adjusting business in the U.S. has been growing. I would say the most significant factor has been the addition of people. But also, I would add, the strategy that we have put in place, which is to have a significant quality enhancements in our offering. As well as the additional sales focus that we've had, which has been increasing our market activity.

I think we've mentioned that we had over 2,000 interactions in the marketplace this quarter. I think all of those factors are leading to the growth. In terms of our target, we have -- I won't say that we have a U.S. target. We have a global target over the next 3 years to add somewhere around 200 to 250 additional experts. And those experts are in the areas of forensic accounting, cyber, energy, construction, like some of the very specific skill sets that we believe are going to be needed as we look to the future. So our hire of 46, we believe, is a great progress against that goal of 200 to 240 over the next 3 years.

Okay. Great. And what's the pipeline of talent look like for you there in terms of your ability to hire? And I guess, Crawford is being an attractive platform for that type of talent.

So the pipeline looks very good. I think the work that we've been doing on our brand, obviously, we've been a known brand for the last 80-plus years now, and people feel Crawford is synonymous to excellence in claims. So we believe that we're becoming an attractive place for adjusters to be. There's a lot of work that we've been doing on culture as well. And I think I've shared that before, the culture that we're creating of empowerment, the culture that we're creating a growth mindset. I think as more and more people are experiencing that, they're realizing what a valuable asset that is. And I think that's creating a lot of attraction for adjusters to join us.

Great. I wanted to ask about Platform Solutions as well. And specifically, the strong sequential growth in both contractor connection and the network businesses. You mentioned no real significant weather activity. So should we think of that sequential growth as just continued ramp-up of new business or any other factors? Or did weather have any sort of meaningful impact in terms of, I think, in contractor connection and U.S. Tech?

Sure. So as you know, we've added a number of top 5 carriers, and we've shared before that it takes 12 to 18 months for us to ramp up the large carriers. That ramp-up is still going on. So some of the impact of the growth that you're seeing is purely the ramp-up of those top 5 carriers that we added about 12 to 18 months ago. And I think the other piece, which I mentioned in my answer to Alex's question, we are increasing our footprint to participate in the severe convective storm, which are a lot more frequent than the hurricanes.

And they are a lot more localized events than being the events that we see, which are much talked about in the news, which are the wind events in the Gulf and the southeast. And that -- while the weather has not been too severe, you've still seen pockets of these severe convective storms that have led for us to deploy our people and deliver on our mission and deliver on our commitment to our clients. So that's another factor of growth. But the large part of the growth is coming from the continued ramp-up of the top 5 clients.

Okay. Great. And what are the legs that we should think about in terms of the ongoing ramp-up of those top 5? Does that kind of continue to show through for the next couple of quarters here in terms of...

I would imagine that, that we will continue to see ramp-up of those clients. But I remember, the space of ramp up often is impacted or influenced by weather as well. If weather picks up and there is severe pressure on the carrier client to handle claims quickly, they start to ramp up what they have with us. If they have enough internal capacity to handle claims because the weather generally is benign, then that ramp up generally tends to be slow. So yes, we -- I expect that the ramp-up will continue, but there's a possibility of the ramp-up accelerating if the weather becomes too severe.

Okay. Understood. I did want to circle back on platform Solutions in terms of the strong margin, the operating earnings margin there. And you mentioned that margin could continue to improve along with the economy. I'm just trying to get a sense, and as you build scale, at least qualitatively, how much more room there is for the margin to improve within platform Solutions?

Yes. Kevin, as you know, that the underlying economics in the platform business are extremely attractive. If you look at a pure transaction basis, the -- at a pure transaction level, the margin is very attractive to us. And our goal is to build the scale of the transaction so that, that margin starts to flow through right to the bottom line because once we cover our fixed costs, we believe that the contribution margin in this business can be very attractive. So our goal right now is to continue to build scale in this business and create more transactions, I shouldn't say create, but handle more transactions so that we can we can get to a better bottom line. So that's the goal. Qualitatively, I would say there is still a significant room for us in this business.

Okay. Great. And maybe a couple more housekeeping type questions here. You mentioned the spillover of weather claims from the first quarter, specifically related to the winter storm. I mean should we think about that spillover is a meaningful number? Or a comment in terms of just the size or impact of that?

Not a material impact. I think we saw most of the benefit in the first quarter, just the tail going through the second, and I think it's kind of largely behind us at this point.

Okay. Good. And then are we past the point here, Bruce, where it makes sense to call out a specific dollar impact of COVID on the business, as you have, in the last few quarters here?

Yes. I think as we look at -- while we still have some pockets in our company that are being impacted -- we look at the Far East, Europe, and Canada as being the three areas. Overall -- and the COVID impact that we've been disclosing previously has been a consolidated number. Overall, in the second quarter, we didn't see a net impact from COVID. But we did have certain parts of our company that we're still continuing to be impacted.

(Operator Instructions) I would now like to turn the call back over to Mr. Verma for closing remarks.

Thank you, Misty, and thank you to all our employees, clients and shareholders for your continued commitment to Crawford & Company. Our second quarter results reinforce our confidence in the future of the company, and we look forward to taking you on the journey with us as we make our way through the second half of 2021. Thank you, and God bless.

Thank you for participating in today's Crawford & Company conference call. This call will be available for replay beginning at 11:30 a.m. Eastern Time today through 11:59 p.m. Eastern Time on September 4, 2021. The conference ID number for the replay is 9538728. The number to dial for the replay is (800) 585-8367 or (416) 621-4642. Thank you. You may now disconnect.