Crawford & Company

Good morning. My name is Michelle, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Crawford & Company second quarter 2022 earnings release conference call. In conjunction with this call, a supplementary financial presentation is available on our website at www.crwco.com. Under the investor relations section, all lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer period. Instructions will follow at that time. Should anyone need assistance at any time during this conference, please press star then zero and an operator will assist you. As a reminder, ladies and gentlemen, this conference is being recorded today, Tuesday, August 9th, 2022. Now I'd like to introduce Tammy Stevenson, Crawford & Company's General Counsel.

Thank you, Michelle. Some of the matters to be discussed in this conference call and 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 conditions, our ability to grow our revenues and reduce our operating expenses, expectations regarding our anticipated contributions to our underfunded defined benefit pension plan, collectability of our billed and unbilled accounts receivable, financial results from our recently completed acquisitions, and 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 the 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 day of the call or to reflect the occurrence of unanticipated events. In addition, you 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 order ended June 30, 2022, filed with the Securities and Exchange Commission, particularly the information under the headings 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 the 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. Throw it. Thank you, Tammy.

Good morning and welcome to our second quarter 2022 earnings call. Joining me today is Bruce Wayne, our Chief Financial Officer, and Tammy Stevenson, our General Counsel. After our prepared remarks, we will open the call for your questions. Crawford delivered exceptional top-line results during the second quarter, with revenues increasing 10% to $293 million compared to the prior year period. This marks our fifth consecutive quarter of double-digit revenue growth driven by continued strategic investments in our business. I would like to thank our global team for their unwavering commitment to quality and customer excellence, as well as our clients for their confidence, which is enabling us to execute our long-term strategy and bring our envisioned future to life. We saw broad-based revenue increases across the business during the second quarter, led by platform solution and North America loss adjusting. We are actively investing in our North American businesses, which we believe are ripe for achieving even further growth and gaining additional market share. We are building up our loss adjusting business by acquiring more expertise and increasing the rigor on quality. This effort has resulted in 70 specialist adjuster hires this year and about 120 over the last 18 months. As you will recall, our three-year goal is to add over 200 specialist adjusters. This investment in quality and expertise has allowed Crawford to exceed quality measures, resulting in higher allocation of losses to us. Further, we've continued to invest in platforms and are leading the market in product and quality. Importantly, our broad-spot business also experienced growth with claims activity continuing to pick up post-COVID. This in addition to expanding our existing client base and securing new accountants. We expect to continue building on this momentum as we move into the second half of the year. Looking at our international business, we are focused on improving margins within international operations, particularly within the UK, Asia, and Europe. We are pleased with the progress we saw in Australia and Latin America during the quarter. Overall, the investments we've made in the business continue to highlight the success of our strategy and position Crawford for sustainable future growth. We remain confident in our ability to deliver revenue growth and targeted profitability over the strategic horizon for our stated strategy for all our businesses. In addition to driving revenue growth, we remain focused on improving margins across the business. First, we're adjusting pricing in areas of the business where we are underpriced compared to the value we believe we deliver. Second, we're aggressively addressing pockets of low productivity and underperformance in our business. Third, we're optimizing our cost structure to align to current market dynamics. And finally, rolling out new systems and process improvements for efficiency gains. This margin improvement plan complements our long-term growth strategy to position Crawford for profitable growth. As a reminder, our strategy is built around our three pillars of differentiation, quality that sets the industry benchmark, expertise that is deep and eminent, and digital that simplifies our business. Organic growth remains the foundation of this strategy and is augmented by our selective M&A. As you have seen in recent quarters, we have invested in strategic opportunities through acquisitions such as eJuster, Praxis, and Bross Boone, which have been an important contributor as we bolster our capabilities across the company. We would also like to take this opportunity to welcome our new colleagues at R.P. Van Dyke, our newest acquisition in Netherlands. Additionally, our people commitment, along with environmental, social, and governance principles, are at the heart of our long-term strategy. To that end, we recently announced the appointment of Nidhi Verma to Chief People and ESG Officer. In her new role, Nidhi will continue to drive people and culture initiatives while at the same time spearhead Crawford's ESG priorities, including our commitment to diversity, equity, and inclusion. We believe Nidhi's deep expertise in talent, culture, and DEI make her strong addition to our executive leadership team, and I'm excited to see the cultural transformation she will co-lead within our organization. Turning our attention to capital allocation. Our priorities remain to invest in the long-term growth and health of our company, particularly through organic growth and M&A, followed by consistent dividend and opportunistic share buybacks. We bought back 1.4 million shares during the second quarter with a total of 3.6 million shares purchased year-to-date. We believe this to be an attractive investment opportunity given our growth trajectory and our firm belief that our shares trade well below their intrinsic value. Our leverage ratio is approximately 2.5 times EBITDA given the growth in our working capital, share buybacks, and the recent M&A activity. We expect strong collections through the back half of the year and plan to unwind our working capital. While this level of leverage ratio is well below our industry average, we expect this ratio to drop below two times EBITDA absent any transactions between now and the end of the year. Overall, Crawford is in an enviable financial position, and we feel confident in our ability to continue executing a growth strategy to drive margin improvement while navigating an evolving and uncertain macroeconomic environment. Let me now discuss our business line results for the second quarter. Let's begin with North America loss adjusting. North America loss adjusting services the North American property and casualty market. Second quarter revenues were driven by new client wins in our large and complex business during the quarter. We are realizing the benefits from our ongoing investment and expertise, which continues to drive new business wins, especially among large U.S. clients. This year, we have added 70 specialist loss adjusters through our targeted recruiting. On the volume side, we are investing in quality and widening our footprint to have more market makers on our team. We are outperforming the client benchmarks and earning a high level of allocation for many of our clients despite benign weather. Turning to our Canadian business, we experienced year-on-year revenue growth related to a continued market recovery as well as an added benefit from May and June storm activity in the Toronto area. We expect margins in this business to get in line with expectations as our new hires ramp up. In our international operations, we are making steady progress as our business in Australia and Latin America experienced a recovery during the second quarter. This helped to offset continued weakness related to certain businesses like in the UK, Europe, and Asia. The year-over-year improvement in Australia was driven by growth in our specialty business. We also benefited from unprecedented levels of flooding in Southeast Queensland and New South Wales that occurred in February and March. In Asia, revenue growth was driven primarily by major flooding events across Malaysia and the Philippines, as well as other non-flood-related growth. Latin America benefited from volume growth in Brazil during the quarter. While the overall margin in the segment is weak, we're taking affirmative steps to improve margin, as I've outlined before. Our prospect business was a notable bright spot this quarter as the segment continued to experience the recovery in claims volume. Revenue growth during the quarter was driven by new business wins in casualty, disability, and accident health claims, as well as growth of our existing clients and increased usage of our case management service. This enabled favorable flow-through and improved our margin compared to last year. Our platform solution segment demonstrated strong revenue growth in the quarter, driven primarily by our recently acquired Praxis consulting business and increased activity in our network business. Margin declined significantly in the quarter, largely driven by the weakness in our contractor connection business. This weakness was related to decreased claims frequency in the 2022 period, along with tougher year-over-year comparability due to winter storm Marie, which impacted results in the second quarter of 2021. We believe the weakness in contractor connection is transitional and expected to improve through the course of the year as weather picks up. We're excited about the growth we're experiencing in CAD and WeGoLook. We believe that these businesses, along with our practice consulting business, will continue to make meaningful contributions to the bottom line. Our efforts in this segment are continuing to drive growth, and we remain confident that the platform segment will deliver best-in-class margins over our strategic horizon. Our new business momentum continued in the quarter. As always, we continue to deepen our relationship with our existing client base in addition to attracting new business. During the second quarter, we won over $23 million worth of new and enhanced business. Our NPS remained healthy at 48, and we're actively looking for opportunities to improve our score. Additionally, we retained 94% of our BroadSpot business year-to-date, and we continue to increase market share with key carrier clients. We're also excited to see increased customer interactions. Notably, our 24th annual Contractor Connection Conference Restore returned in person for the first time since 2019 and brought together more than 2,700 attendees. We will continue our commitment to delivering service excellence as we move through 2022. We believe our commitment to environmental, social, and governance principles underpins our ability to execute on a long-term strategy and fulfill our purpose to restore lives, businesses, and communities. Our commitment to diversity, equity and inclusion, sustainable business practices, and ethical behavior are reflected in our purpose, envisioned future, and values. Throughout the quarter, we made progress on our ESG initiatives, beginning with the publication of our inaugural Global Citizenship Report, Stronger Together. This report highlights our accomplishments to date and outlines our ESG commitments for the future. The report also serves as an important first step towards transparency in all that we are doing to fulfill our corporate responsibility goals. As highlighted in the report, you will see that we boast a diverse and inclusive workforce at Crawford. In the U.S., 16% of our employees are black or African American, which exceeds the national average of 12%. Globally, women represent 55% of our workforce, and our global senior management team is over 30% combined women and minorities. At the governance level, women represent 30% of our board of directors, including our non-executive chair. Crawford proudly joins other leading companies that have taken the critical step of including at least three women directors on their board. These are just a few of the ways we are creating an environment where every idea is embraced, Every voice is heard, and every employee can bring their fullest self to work. Overall, we are proud of what we have achieved across the globe to prioritize our employees, clients, and communities. And with the addition of Nidhi's role, we look forward to making an even greater impact in the future. With that, let me turn the call over to Bruce for a deeper look at our financial performance.