Crawford & Company

Good morning, my name is Enes and I'll be your conference facilitator today. At this time, I'd like to welcome everyone to the Crawford and Company's second quarter 2023 earnings release conference call. In conjunction with this call, a supplementary financial presentation is available on our website at www.crowco.com under the Investor Relations section. All lines are in place and mute to prevent any background noise. After the speaker's remarks, there will be a question and answer period. Instructions will follow 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, Friday, August 4th, 2023. Some of the matters to be discussed in this conference call and in this supplementary financial presentation may include forward-looking statements and about risks and uncertainties. These statements may relate to, among other things, our expected future operating results and financial conditions. Our ability to grow revenues and reduce our operating expenses, expectations regarding anticipated contributions to our undefined benefit pension plans, collectability for build and unbuild accounts, receivable financial results from our recently completed acquisitions, our continued compliance with financial and other covenants containing 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 will 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 the call or to reflect the occurrence of anticipated 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 quarter ended June 30, 2023, filed with the Securities and Exchange Commission. Particularly, the information under the headings Risk Factors and Management Discussion Analysis of Financial Conditions 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. Jorge Verma, Chief Executive Officer of Crawford & Company. Sir, you may begin your conference.

Thank you, Anas. Good morning and welcome to our second quarter 2023 earnings call. Joining me today is Bruce Swain, our Chief Financial Officer, and Joseph Blanco, our President. After our prepared remarks, we will open the call for your questions. During Q2, we continued to build upon our strong start to 2023. Our sustained momentum drove improved results across all segments of our business, resulting in revenue growth and margin improvement for the company. Before I jump into specific achievements in the quarter, I think it's important to take a moment to step back to highlight our market position and some of the broader trends we're seeing in the business. As many of you know, Crawford continues to strategically scale our business across complimentary service offerings within the claims space. We operate globally, manage over $18 billion in claims annually, and have approximately 10,000 employees and thousands of field resources. Our customer base is diversified and growing, including a wide spectrum of brand names who are increasingly looking to Crawford as a claims solution provider. That said, we estimate our market share to be in the low single digits. Clearly, we have a large market opportunity in front of us. There are some important growth drivers that support our confidence in the long-term opportunity before us. First, natural catastrophes are becoming more prevalent, and our services are increasingly called for as carriers and other providers need increased resources to help policyholders recover in the aftermath. Importantly, we do not take underwriting risk, an issue that many carriers wrestle with as loss patterns continue to get more frequent and more severe. Rather, we work with carriers, self-insured corporations, and captives to deliver outsourced claim solutions that offer expertise, timeliness, scale, proximity, and most of all, quality of service that is representative of their brand. Second, there continues to be a long-term tailwind driving the outsourcing of claims processing. PNC margin pressure is leading to more outsourcing of major and complex claims, and there is a greater need for a more nimble and empathetic response to major CAD events. Third, the independent loss-adjusting market in the U.S. is fragmented, and our growing scale is a considerable competitive advantage in a market where the reliability and resiliency of service providers are becoming more and more critical. Fourth, a key strategic focus of mine since I assume the role of the CEO has been to strengthen our strategic partnerships and relationships with key clients across all our customer segments. Our relationships have unquestionably grown deeper and this has led to increased business with our existing customers as well as uncovering new opportunities. And finally, we have industry-leading InsurTech capabilities that are creating double-digit growth across our platform segment. We are investing in innovation, whether it's machine learning, data visualization, or other SaaS-based offerings, improving the claims process and experience. We are keenly focused on driving technological evolution in our sector. Now let's get into the results for the second quarter. We delivered another quarter of strong results. Revenue grew by 9% or 12% on a constant currency basis and operating earnings nearly doubled year over year. We achieved revenue growth and profit expansion across all segments, highlighting the underlying strength of our business model and solid execution of our stated strategy. Our second quarter results mark our 11th consecutive quarter of revenue growth. reflecting the hard work and dedication of our valued teams across the globe. Their unwavering commitment to quality and customer excellence is enabling us to execute our long-term strategy and bring our envisioned future to life. We added $26 million in new enhanced business in Q2 2023. This growth included contributions from all of our business segments, helping to drive margin expansion and improve profitability. In the first quarter of this year, we had a slightly negative operating cash flow as we leveraged our liquidity to fund working capital needs related to the storm activities in Australia and the US. As expected, we saw significant improvement in cash generation in the second quarter with $27 million in operating cash flow, strengthening our position to be able to continue to invest in the business and return capital to shareholders. To that end, we have decided to raise our quarterly dividend to $0.07 going forward. Finally, our Net Promoter Score, a metric used to measure customer loyalty, which we track closely, was a healthy 46 in the quarter, and we are continuously looking for opportunities to improve our score. Two years ago, we communicated our strategic commitment to grow organically and improve margins across our business. Our subsequent financial results have demonstrated progress across our organization, a reflection of the continual execution of our strategy. While we may see quarterly fluctuations due to weather, our overall trajectory is ahead of our planned velocity. In our North America loss adjusting segment, we focused on driving low to mid single-digit revenue growth and improved margins through efficiency on the volume side and investments and expertise on the major and complex side. Our ongoing investments in onboarding expert adjusters, increasing coverage density of our adjusters in the U.S., and delivering industry-leading quality have continued to drive growth in the U.S. loss-adjusting business. Additionally, during the second quarter, our improved utilization drove meaningful margin expansion. We're seeing some softness in Canada, which we expect to continue for the rest of the year. While we're optimistic moving forward, we may face a tough comparison in the fourth quarter if we have a benign hurricane season. You may recall the fourth quarter of last year included activity from Hurricane Ian and winter storm Elliot. We are very pleased with the progress we're making in our international business, although there's still work to be done. Our goal has been to get international to a mid-single-digit growth target. In the second quarter, we saw just under 2% or 8.3% growth on a constant dollar basis. And we have a clear strategy to continue to enhance organic growth in this segment. International delivered significantly improved operating earnings of $3.7 million as compared to an operating loss in the second quarter of last year. We're still seeing slowness in Asia, but the UK and Latin America have bounced back well. This turnaround is largely the result of the specific actions we have taken to address pricing and productivity and to better align our cost structure with current market conditions. For Broad Spire, our focus has been to capture share in alternative markets and leverage data to offer cutting edge analytic services to clients. Similar to Q1, overall sales momentum in Q2 was driven by new client wins and accelerated improvement in medical management revenue. We expect continued recovery in medical management as claim frequency improves through new and existing client wins. We're also increasing unbundled offerings for medical management and data analytics. We are on course for what may very well be one of our best sales year in Broad Spire. Platform Solutions is performing extraordinarily well and we continue to scale this business to deliver double digit revenue growth and a strong flow through to the bottom line. Platforms is our highest margin operating segment and continues to serve as a key growth engine for our business. We delivered double digit revenue growth in the quarter driven by improved utilization and contractor connection, along with increasing our market share with our top five carrier partners in our CAT business and growth in our subrogation business. We expect continued strength moving forward, supported by healthy underlying margins and solid execution. Turning now to capital allocation. We continue to maintain a disciplined and prudent capital allocation strategy. As expected, we saw significant improvement in our cash generation this quarter over the previous quarters. Our stated goal was to have our leverage ratio below two times EBITDA by the end of 2023. And we achieved that ahead of plan coming in at 1.8 times at the end of Q2. Our positive earnings results and conservatively managed balance sheet gives us tremendous flexibility to make strategic investments for the benefit of the company. As we already shared, last week we raised our dividend to $0.07 from $0.06 per share for both CRDA and CRDB. We have also reinstated our share buyback program, further highlighting our commitment to deliver shareholder value. As a point of reference, we have returned more than $120 million of capital to shareholders through share buybacks and dividends since 2019. With that, I'd like to hand the call over to Joseph, who will discuss our business line results for the second quarter.

Thanks, Roy. As most of you know, we report our business in four operating segments. North America loss adjusting encompasses primarily our loss adjusting business in the U.S. and Canada. Our international operations is comprised of all reported service lines outside of North America. Broad Spires are TPA in the U.S. and platform solutions includes contractor connection, our networks business, including Catastrophe and We Go Look, as well as our subrogation business. As you can see, revenue contribution is fairly evenly spread across the reportable segments. Beginning with North America loss adjusting, we achieved revenues of $75.8 million, representing 15% year-over-year revenue growth. Operating earnings were $3.9 million, and we expanded our operating margin by 112 basis points. Strength in the quarter was driven by specialist adjuster additions as Crawford continues to seek and secure the highest quality industry talent. Additionally, Q2 revenue increases are attributed to new account nominations and overall increased utilization of adjusters in the U.S. due to severe convective storm activity. We continue to see progress in our international segment, where second quarter revenue was $95.3 million and operating earnings were $3.7 million. Notably, as Rohit highlighted a moment ago, operating earnings grew by more than $4 million year over year, and margins expanded by 463 basis points. Our ability to significantly improve operating metrics is a direct result of our actions to improve pricing and productivity, as well as simplifying our cost structure. We saw growth in our UK TPA business and large loss performance in Latin America with continued volume improvement in Brazil and Peru. Our Australian business continues to see benefits from the tail of 2022 CAD activity. For Europe, Revenue growth is primarily attributed to growth in high margin areas, including Holland and the Middle East. Furthermore, efficiency improvement measures in Europe help drive increased margins. As Rohit mentioned, we remain focused on enhancing organic growth in this segment. Looking at our Broad Spire business, Q2 revenue grew 5%. Medical management services continued to perform well, with revenues growing 7% as we saw sales momentum in alternative markets and data and analytical services. Our innovative technology, including advanced data analytics and predictive modeling, is driving market share and will retain 97% of our business year-to-date. Platform solutions also delivered strong results, with double-digit revenue growth of 22% over the prior year. This was led by networks, which grew 18% as we continued to deepen our relationships with two of the top five carriers in our property and flood businesses. We are expanding relations now with a third carrier in this space and are excited about the prospects. We saw increased contribution from contractor connection, benefiting from pricing actions and improved utilization, along with continued market share gains. And our subrogation business had a stellar quarter. With that, let me turn the call over to Bruce for a deeper look at our financial performance.