CRD.B (CRD.B) Q4 2016 Earnings Report, Transcript and Summary

Good afternoon. My name is Victoria, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Crawford & Company Fourth Quarter 2016 Earnings Release Conference Call. In conjunction with this call, a supplementary financial presentation is available on our website at www.crawfordandcompany.com under the Investor Relations section. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer period. Instructions will follow at that time. [Operator Instructions] As a reminder, ladies and gentlemen, this conference is being recorded today, Monday, February 27, 2017. Now I would like to introduce Joseph Blanco, Crawford & Company’s Interim General Counsel.

Thank you. 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 include, but are not limited to statements regarding the funded status of our defined benefit pension plans, our expectations related to future revenues and expenses, our expectations regarding the timing, cost and synergies related to our Global Business Services Center, any acquisition and integration of GAB Robins in the UK, as well as other restructuring activities, our long-term 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 maybe implied by such forward-looking statements. The company undertakes no obligation to publicly release revisions to our 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 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 quarter-ended December 31, 2016 filed with the Securities and Exchange Commission, particularly the information under the headings, Business, Risk Factors, Legal Proceedings 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. Harsha Agadi, President and Chief Executive Officer of Crawford & Company. Harsha, you may begin your conference.

Good afternoon and welcome to our fourth-quarter and full-year 2016 earnings call. Joining me today are Bruce Swain, our CFO and Joseph Blanco, our Interim General Counsel. After our prepared remarks, we will open the call for your questions. Our fourth quarter and full year 2016 financial results are a clear indication of the strong progress that we have made towards positioning Crawford for a return to topline growth and more predictable financial results, regardless of the market backdrop. Our vigilant focus on expense reduction, delivered strong operating margin expansion and earnings growth in what continues to be a difficult revenue environment. This is evident as revenues before reimbursements declined by 4% in the fourth quarter and by 5% for the full-year. The largest factor impacting revenues were headwinds that we encountered from the stronger U.S. dollar. On a constant currency basis, our revenues would have declined by approximately 2% for the fourth quarter and 3% for the full-year. Beyond the impact of foreign exchange, we also saw revenues decline due to the expected and managed runoff of two large projects; one in each of our Garden City Group and U.S. Services segments. Despite these revenue headwinds, our results for the fourth quarter demonstrated solid growth as we delivered GAAP net income to shareholders of Crawford & Company of $7.8 million as compared to a net loss of $51.7 million in the fourth quarter of 2015, which was negatively impacted by a goodwill impairment charge. Non-GAAP consolidated operating earnings grew 7% to $20.3 million compared to the year ago quarter as we begin to lap the benefits of the cost-saving initiatives launched in 2015. In the fourth quarter, operating margins expanded 80 basis points to 7.4%. For the full-year 2016, our operating earnings increased 31% to $92.1 million as our operating margins expanded solidly by 230 basis points to 8.3%. This has firmly placed Crawford in a position to achieve our medium-term goal of delivering 10% consolidated operating margins in the future. Our non-GAAP consolidated adjusted EBITDA in the 2016 fourth quarter totaled $29.1 million increasing 2% from the $28.4 million that we achieved in the year ago period. For the year, we generated $126.2 million in adjusted EBITDA, up 18% from the $107.2 million that we delivered in 2015. I am very pleased with our results as they clearly demonstrate the considerable progress that our management team has achieved towards positioning Crawford to deliver more consistent financial results. When I accepted the opportunity to lead Crawford, I saw a company with strong global brands, a wide product suite that our customers relied on, a very loyal customer base and an extremely talented and dedicated workforce. The goal was to unleash the vast potential of the company, which at the time was being obscured by the inflated cost structure and challenging markets. The strategy that our team implemented was geared towards refocusing the company on cost discipline while reducing our dependence on severe weather-related items. As I will discuss, we have made significant progress on both fronts, though we have much less to accomplish. The restructuring initiatives that we implemented throughout 2015 combined with our continued cost vigilance in 2016 have contributed to strong margin expansion and earnings growth over the past year. Looking forward, we will continue to evaluate our cost structure with the goal of delivering EBITDA margins that are comparable to our peer group. Over the balance of 2017, we will be focused on further reducing our expense base while reinvesting a portion of the savings back into the business. The reinvestment will be centered on driving organic revenue growth as we reposition our sales teams to be more clients-centric with a focus on solution-driven selling. Today, we have a long-standing relationship with a few thousand insurance carriers and major corporations around the world. The great opportunity is to deepen those relationships and expand our market share as many of our major clients are not receiving the full benefit of Crawford diverse suite of products. A critical component to this strategic review is our recent recruitment of Andrew Robinson, who joined the company in January at our Chief Operating Officer, which is a new role at Crawford. Many of you will know Andrew from his time at Hanover Insurance Group where he ran their specialty insurance business and was also their Chief Risk Officer. I'm very excited to have Andrew on Board at his skillset and experience are well aligned with the renewed strategic direction of Crawford as well as the ongoing cultural shift within the company. Andrew's first priority will be the successful execution of our strategic review with a focus on optimizing our operations, sales and marketing efforts to ensure that we're maximizing the many cross-sale opportunities that exists. He will also be working to expand our client base to grow the global footprint of our well-known brands such as Broadspire, Contractor Connection and our recently acquired WeGoLook business. As we successfully deliver on these initiatives, I am confident we will begin to deliver improved organic revenue growth. I am also pleased to announce that Joseph Blanco, our Interim General Counsel will be joining Crawford on a full-time basis effective March 1. Prior to his role at Crawford, Joseph served as the Managing Partner of Denton's Atlanta office and in that role focused on general corporate counseling with an emphasis on mergers and acquisitions. Since joining Crawford on an interim basis, Joseph had been very instrumental in the execution of several recent initiatives including the acquisition of WeGoLook. I am pleased that Joseph had agreed to join the company on a full-time basis. Turning to WeGoLook, we acquired a majority stake in early January 2017, which has positioned Crawford to better serve the low value claims market, of market that has been moving away from the company due to increasingly unfavorable economics. WeGoLook's low cost structure is very appealing to both large and small insurance carriers. While WeGoLook's revenues are currently modest, we see a significant opportunity to rapidly grow the business by leveraging Crawford's existing client base as well as expanding WeGoLook's disruptive service offering into adjacent markets such as property claims and into noninsurance lines such as brand inspections and online purchase verification. The market for this product reaches far beyond the insurance industry, providing an opportunity to further reduce our dependence on whether and diversify our source of revenue. Importantly as WeGoLook grows over time, we believe that it will have the effect of smoothing the volatility in our claims business. Additionally, it is my belief that our industry will continue to experience rapid change like WeGoLook will deliver, require innovative thinking and further investment. To ensure that Crawford stays at the forefront of this change, we have created Crawford Innovative Ventures, which is led by Ken Fraser, our Chief Strategy and Development Officer. CIV has been formed to specific invest in strategic acquisitions and partnerships that will be disruptive to our industry and introduce Crawford to more adjacent services. WeGoLook is CIV's first investment. Turning to our business segment results, U.S. services delivered 1% revenue growth over the prior year quarter with Hurricane Matthew helping to offset the reduction in revenues from the runoff of our large outsourced service contract. While we continue to expect this contract to wind down, we experienced above-plan volumes in December, which have continued into the 2017 first quarter. Operating margin for the fourth quarter was 13%, which is a slight decrease from a year ago level. Contractor Connection, continued to deliver steady growth as revenues expanded 3% year-over-year. In January, we launched an advertising campaign in seven markets designed to penetrate the $25 billion insurance direct market. We are optimistic that advertising campaign will expand Contractor Connection into this very large market, but would caution that it will take time while the marketing spend will be a modest drag on the U.S. services segment margins. Expanding into the insurance direct market as well as exporting Contractor Connection to attractive international markets like the U.K., Germany and Australia are key priorities for us. Our international segment had another strong quarter driven by 400 basis points of operating margin expansion versus the year ago quarter as a result of expense reduction put through in 2015 combined with an improved operating environment. Importantly, we delivered 10% operating margins in the 2016 fourth quarter. Our Broadspire segment remains a key component to delivering consistent growth and profitability. In the 2016 fourth quarter, Broadspire delivered operating margins of 9%, which was consistent with the year ago period on revenues that were slightly down. During the quarter, Broadspire had several notable client wins, including Kinder Morgan, Travel Guard and Dongbu Insurance. Looking to 2017, Broadspire's new business pipeline continues to be very significant and we are encouraged by our future growth opportunity. Turning to Garden City Group, 2016 was an important year as our new leadership team has successfully managed the expected decline of two large projects, instill their culture of cost discipline and maintain the business competitive positioning in the market place. As we enter 2017, I am optimistic that GCG's revenues have bottomed and will return to growth on a full-year basis. That said, case volumes have been below expectations thus far in the first quarter, which will be a near term headwind in GCG's margins. Looking to 2017 as a whole, our backlog remains robust while projected revenues of $81 million which provides good visibility for the full year. I would now like to turn the call over to Bruce, to review the financial results of the fourth quarter in more detail.

Thank you, Harsha. Company-wide revenues before reimbursements in the 2016 fourth quarter were $272.4 million down 4% as compared with $284.9 million in the prior year's fourth quarter. The company's selling, general and administrative expenses, or SG&A totaled $61.7 million, down from $62.3 million in the prior-year quarter. The decrease in these costs is primarily due to lower self-insured expense in the 2016 period. During the 2016 fourth quarter, the company recorded restructuring and special charges of $2.1 million pretax or $0.03 per share after-tax, compared to $18 million pretax or $0.25 per share after-tax in the 2015 quarter. These charges were associated with the ongoing implementation of the Global Business Services Center, the GAB Robins integration and other restructuring activities in operating and administrative areas around the world. The 2015 fourth quarter also included goodwill impairment charges of $49.3 million pretax or $0.86 per share after tax. There were no goodwill impairment charges in 2016. Our net income attributable to shareholders of Crawford & Company totaled $7.8 million in the 2016 fourth quarter, compared to a net loss of $51.7 million in the 2015 period. Fourth quarter 2016 diluted earnings per share were $0.14 for CRDA and $0.13 for CRDB compared to diluted loss per share of $0.93 for CRDA and $0.95 for CRDB in the 2015 period. On a non-GAAP basis, before goodwill impairment, restructuring and special charges in both the 2016 and 2015 periods, fourth quarter 2016 diluted earnings per share were $0.17 for CRDA and $0.15 for CRDB compared with non-GAAP diluted earnings per share of $0.18 for CRDA and $0.16 for CRDB in the 2015 period. I will now review the fourth quarter performance of each of our business units starting with the U.S. services segment. Revenues from the U.S. services segment totaled $57.4 million up 1% from the $56.8 million reported in last year's quarter, primarily as a result of higher catastrophe revenues and growth in Contractor Connection. Operating earnings in our U.S. Services Segment were $7.7 million in the 2016 fourth quarter or 13% of revenues compared to operating earnings of $7.9 million or 14% of revenues in the prior-year quarter. Revenues generated by our catastrophe adjusters in the U.S. totaled $15.4 million in the 2016 fourth quarter, compared to $15 million in the 2015 quarter. The revenue improvement for the 2016 quarter was primarily driven by the impact of Hurricane Matthew offsetting lower revenues from our project-based outsourcing contract with a major U.S. insurance carrier. International revenues decreased to $117.5 million from $124.9 million in the 2015 period, primarily due to a stronger U.S. dollar, which reduced revenues by 4% or $6.1 million during the 2016 quarter. International operating earnings were $11.3 million during the current quarter, increasing over last year's fourth quarter operating earnings of $7.3 million. The operating margin in this segment was 10% in the 2016 period, compared with 6% in the 2015 quarter. Broadspire revenues were $74 million in the 2016 fourth quarter down from $75.4 million in the prior-year quarter, primarily as a result of lower claim volumes. Operating earnings in Broadspire totaled $6.5 million or 9% of revenues in the 2016 fourth quarter compared to operating earnings of $7 million or 9% of revenues in the 2015 quarter. Garden City Group revenues totaled $23.6 million in the 2016 fourth quarter, decreasing from $27.7 million in the prior year quarter. This revenue decrease was largely related to lower levels of work on certain large projects, which were continuing to wind down during the 2016 period. Operating earnings totaled $1.3 million in the 2016 fourth quarter compared to $1.7 million in the prior year period. The operating margin in this segment was 6% in 2016 period, unchanged from the 2015 quarter. The company's cash and cash equivalent position at December 31, 2016, totaled $81.6 million as compared to $76.1 million at the 2015 year-end. Our investment and unbilled and billed receivables has decreased by $7.9 million, during 2016, reflecting lower receivables in Broadspire and GCG. Pension liabilities decreased by $16.6 million reflecting cash contributions made in the U.S. and U.K. during 2016. Our total debt decreased in 2016 by $59.3 million as a result of strong operating cash flows during the year, with net debt declining $64.8 million to $106.4 million at year-end 2016. Cash provided by operations totaled $98.9 million for 2016 which is a new record for the company and compares to $61.7 million provided in the prior year. This improvement was primarily due to an increase in operating earnings, reduced special charges and a decline in working capital requirements. Free cash flow improved by $40.9 million year-over-year. Let me now review the initial guidance for 2017. 2017 guidance includes the impact of restructuring cost related to the ongoing implementation of the Global Business Services center and other restructuring activities planned for 2017. These costs should total approximately $13 million pretax or $0.15 in diluted earnings per share. Our initial 2017 guidance is as follows. Consolidated revenues before reimbursements between $1.1 billion and $1.13 billion. After expected restructuring and special charges, net income attributable to shareholders of Crawford &Company between $34 million and $39 million or $0.63 to $0.73 diluted earnings per CRDA share and $0.55 to $0.65 diluted earnings per CRDB share. Consolidated operating earnings between $90 and $100 million, consolidated adjusted EBITDA between $130 million and $140 million. Before expected restructuring and special charges, net income attributable to shareholders of Crawford & Company on a non-GAAP basis between $43 million and $48 million were $0.78 to $0.88 diluted earnings per CRDA share and $0.71 to $0.81 diluted earnings per CRDB share. With that, I would like to turn the call back to Harsha for concluding remarks.

Thank you, Bruce. I am very pleased with our results over the past year as we've firmly positioning Crawford to return to revenue growth and more predictable financial results. Importantly, the significant steps that we have taken to reduce our expense structure have firmly positioned Crawford to deliver our medium-term goal of 10% operating margins in the future. Looking at 2017, the execution of our strategic review will drive further margin expansion as well as improved organic revenue growth as we focus our sales teams on cross-selling. Additionally, as we further grow our recurring revenue businesses such as Contractor Connection, Broadspire and now WeGoLook, the volatility in our global claims businesses will continued to diminish, which can already be seen as we exceeded our financial guidance for 2016. Lastly, we will continue to evaluate M&A opportunities to further enhance our product offering as well as our competitive position. Ladies and gentlemen, 2016 was a solid year for Crawford & Company. 2017, I would term as their journey that begins towards transformation to make Crawford & Company the great company that it should be. Thank you very much. Operator, please open the call for questions.

[Operator instructions] Your first question comes from line of Greg Peters with Raymond James.

Good afternoon. Harsha and Bruce and Joseph. Hey, a couple questions, with GCG, I think you talked about in your comments, projected backlog of revenue about $81 million. I think you did according to lease about $96 million in 2016. Is this a case where this projected backlog builds through the year, so it will get up to a level comparable of last year potentially exceeded or how should we view that number?

I would say that that backlog is only the backlog Greg, but we have ongoing activity. So, we should exceed over time last year's number. We're seeing that bottoming of if you will the large case that we had. So, if anything continued to rise against that. So, don't be -- don't mix up the backlog with the year's projection if you will.

Thanks for the color, Harsha. And on Broadspire, I really felt like you had a little bit of momentum that was starting to build in 2016. So, I was a little bit surprised by the fourth quarter result, which looked like it was down a little bit, can you speak more broadly to how the opportunities are developing at Broadspire and what the outlook is for that business in '17?

Sure, first of all, Q4 seasonally had a lower claims volume in the space that Broadspire plays in. So, we've gone back and looked at Q4's for multiple years and so we're not really concerned about any perceived slowness that there might be. Having said that, we've had a slew of new client’s start-up while we continue to retain in excess of say 96%, 97% of client retention. We have a number of new clients that have started many of them on January 1. Some starting up soon in March. Some starting up May. So, having said that, the pipeline is robust. The new clients have started on target. What is also very positive is their pipeline is in excess of $120 million, which makes it a very, very strong pipeline and maybe the strongest we have inside of Crawford in terms of sales opportunity.

Excellent, excellent. So, if I just step back and think about where Crawford is entering 2017 and compare it with other companies operating in the insurance industry, some of the insurance brokers will say that they need organic revenue growth system-wide in excess of 2% or 3% to actually start to generate some margin improvement. Otherwise they will just be struggling to maintain their margins. And it looks like you have a little bit more room of margin improvement left for 2017, just through the global business service center etcetera, but will we hit an inflection point at some point for Crawford in the next 12 to 18 months where we'll need to see organic revenue growth in order to get further margin expansion? I am just curious about your thoughts on that?

Greg, I think the question is right on. I think with our strategic review that is going on in '17 we'll have another surge if you well in cost initiatives that will jump the margin, but eventually for this business to continue to grow predictably, we need to be increasing organic revenue growth and that is in place in many cases and continuing to build up in some of our divisions. So, having said that and with the runoff of the two projects that happen in '16, we should see organic revenue growth actually beginning in '17 and will only gather more momentum in '18, '19 onwards. In '16, majority of our earnings story was cost initiatives. In '17 it will be a mix between some revenue growth and cost initiatives. '18 onwards it will be the organic revenue growth that will deliver majority of the increase if you will in margins. We're playing heavily with the largest carriers today. We're starting to look at the midyear, the regional carrier. These are actually the carriers that might not be Tier 2, but might not be Tier 1, but they're actually sitting in between with strong, regional play if you will. So, we are actually going after that space and frankly, Crawford has seen us great value. So, to me, regardless of M&A activity, we are going to need to deliver organic revenue growth and hence, that's the other piece that I should mention. Andrew Robinson who is our new Chief Operating Officer, his job number one is to recharge that sales teams across the four divisions to make sure that we have the organic revenue growth and what's even better is we have if you will a former client, a customer of ours leading that space.

Excellent, and so as part of this re-calibration of the sales effort, is this part of where when you talk about reinvestments where you think you might invest in some additional sales people or just some perspective there? And then the final question and I got to let others ask calls would be the call just, is there any change or can you update us on your capital plans for 2017?

Sure. Maybe I'll have Bruce talk about the capital plan, but let me talk on the sales real quick. I think there are two front to it or maybe even three fronts. One, we are going to reinvest in more sales folks and we have specific areas, we have outlined internally and actually our business unit leaders are as we speak, filling those positions where we need and we can accelerate even more. Second, I think our value proposition to carriers as well as Fortune 1000 companies needs to be significantly sharpened and positioned as one example going after how do you reduce the loss adjusting expense for carriers? How do you make a material difference to carriers where you're truly adding value and then how do you deliver that proposition to the carriers in a very successful seamless technology-enabled manner and I think both of those are happening simultaneously? The third piece is we've referred to on previous calls cross-selling. Another way to look at it is a turnkey or a basket of solutions that today we're offering still. It is hit and miss depending on the carrier. We're going to realign our sales force so that a single sales point of contact is to a carrier where that individual offers the entire slew of products be it field operations, be it GTS, be it Contractor Connection, be it WeGoLook as one example. And also, Cat services, all of the above in one slew of services that's going to make a difference. We as an organization need to be really geared more and more into a very, if you will a sales mentality organization just as another important fact. Even our management incentives are now wearing towards Greg a higher proportion of driving organic revenue growth, which means the Board is also very confident that the incentives need to be aligned towards driving organic revenue growth.

So, getting to your question on capital allocation Greg, your heard Harsha mention investments in our value proposition and value delivery systems, that's going to require some investment on our part in innovative technologies and as we've looked at our strategy over the next few years, we've identified a lot of investment that needs to be made in that area, primary around technology. We anticipate spending approximately $50 million this year in CapEx that's both on the technology side, capitalized software as well as right now equipment and fixed asset type of purchases and that's over the low 30s that we've spent historically over the last few years and that's in our plan for this year.

I think in addition just to remind you Greg from a governance point of view, it is really the Board that looks at capital allocation and I as the CEO, present the management team's viewpoints and we have a wide array of choices particularly coming off if you will the strongest year in 75 years of Crawford's history in terms of operating cash flow. So, we have an array of choices and I'll just throw that out one is dividends; two is share repurchase; three is reduction of debt, which I have to give credit Bruce's super disciplined about that. The fourth could be to how fix some of the pension issues. The fifth Bruce talked about which is reinvestment into innovative products and services. And finally, if there is M&A activity, we are constantly scanning our universe to look at what other disruptive technologies we could put our hands on that will make a meaningful difference to deliver claims management at if you will top quality and promptly to our carriers.

Great, great answers and great color. I would just circle back on you mentioned the operating cash flow and investments and alternatives about dealing with the pensions or paydowns, how much excess capital do you think Crawford currently has at the moment?

I think we obviously ended the year strong from a cash perspective and de-levered nicely. As I said, we've got investment goals for 2017 in order to enhance our service offerings to the industry. So, we feel that we've got adequate capital today both cash in hand as well as borrowing capabilities to safely and comfortably fun the strategic plans that we have as a company as well as provide a meaningful and competitive return back to our shareholders and still keep our leverage at reasonable levels that we like to keep it at. And I think let me remind you Greg that our competition is levered between 7 and 15 times EBITDA and we are hovering in the 1.5 times. So, we are sitting at one a healthy, very healthy balance sheet and two, the insured tech world is clearly aware that we will close on a transaction rather quickly as long as it meets our requirement's needs and passes due diligence and it has a further offering to our client base. Recently as you know, we acquired WeGoLook and frankly we got kudos almost immediately from one of our largest customers saying, “hey great acquisition. I want some more of that in terms of services” and I think this will continue forward in that direction.

Thank you for your answers.

Thank you.

[Operator instructions] Your next question comes from line of Mark Hughes from SunTrust.

Thank you. Good afternoon.

Good afternoon, Mark.

Bruce on the cash flow outlook, do you think cash from operations will be as big or bigger in 2017 or might some of those working capital flows reverse themselves a little bit.

They might reverse themselves a little that. We've obviously got a healthy amount of first quarter payments going out and things like incentive compensation and bonus funding 401(k) and pension funding that will, that provided cash during '16 and will be a use of cash in the first quarter of '17. But that said, we do have a significant opportunity to drive lower day sales outstanding as a company. We ended the year in the mid 60-day working day level and we think we can bring that down to the high 50s and each day's worth about $3 million, $3.5 million for us. So, there is still opportunity for us to better manage the balance sheet but if we have to hit our guidance and generate the operating earnings that we're anticipating, we should have a strong cash flow year.

The Contractor Connection, the growth profile there up -- still up low single digits, was that influenced by weather utilization, anything like that? How should we think about that growth going forward?

I think Mark generally and again, I looked at this as while just like I did at Broadspire. Q4 is generally a quieter period for Contractor Connection, but despite all that, they continue to grow versus a year ago, but I think Q1, Q2 it picks up a fair amount of steam as is coming out into the new year. The good news is we have increased activity of some smaller clients that are now ramping up after tasting Contractor Connection in 2015 and '16. In addition to that, we are already examining very seriously a linkup and partnership between WeGoLook and Contractor Connection that will actually continue to drive if you will, the claims processing continuum. Again, it goes to top quality promptly and where processing a claim from end to end quicker and quicker will make a difference. What WeGoLook bring in is speed and certainty what Contractor Connection partners with that is actually closing the claim and fulfillment of the claim. So, I think you're going to see this ramping up. So, I think we're not concerned and in addition, we have chosen to enter the insurance direct market, which is a $25 billion market. Contractor Connection is right now testing in seven markets with an advertising campaign and these are the customers who will receive a check as for and final settlement on damage if you will to their homes as an example. They get to choose which contractor they go with as opposed to the carrier and we are appealing to them to come give their work to us. Now that has already begun and we're starting to get early results that are encouraging, but over time it will build and in a 12 to 18-month period we should see significant impact coming out of that on top of the traditional carrier business.

Any way to I think you said spending would impact, advertising spending and Contractor Connection would impact the margin or the headwind. Can you quantify that in terms of actual dollars or percent of margins?

So first of all what I would say is it will have some marginal impact on U.S. services as it is part of U.S. services and it might have an impact in a quarter maybe a $1 million or $2 million, but it's not going to be that significant that it should be concerning frankly to any extent.

The new initiative to make investments, I think you're putting that in a separate bucket so to speak, why you look at that as a segregated operation? What's the long-term goal of that?

Sure Mark. First of all, I think it is important for us to announce our arrival strategically to the insured tech world and so we've created what we call as Crawford Innovative Ventures, which we funded and we got our first acquisition, which is WeGoLook. It is more of I'll call it a holding tank where we make sure that the acquisition coming in is performing in the first 12 to 18 months, exactly as it is supposed to with little to no surprises and also giving it enough freedom if you will from the Crawford system to flourish very entrepreneurially. Then what happens is it comes to a stage where we then integrate it into one of our operating divisions as Phase 2 as it starts bundling and channeling with other branding services. So, the other pieces we are as you would expect non trolling and literally the word trolling, the world of insured tech to see what else is out there that we can pick up that will be a serious addition. And the good news is we are getting direct client input on ideas that we should invest and we're engaging them at times even in discussion to say, what other spaces do we need to be in. This company has been around for 75.5 years and we need to be much more agile and nimble and what CIV does is provide exactly that to make us agile and nimble if you will in the venture capital world for us to go after some innovative products and services.

Are financials going to be reported separately or broken out for adjusted earnings?

They're going to be reported within the U.S. services segment. In this case, it belong to U.S. service.

Right. And we'll be reporting the revenues, but we'll not be disclosing a full P&L for it.

Right. Okay. All right. Great. Thank you.

Thank you, Mark.

There are no further questions at the time. Mr. Agadi, do you have any closing remarks?

No. I think I should thank all the investors and the for their continued support and we will continue to be more and more a predictable business. Thank you everybody for your time and energy on this call. Goodbye.

Thank you for participating in today's Crawford & Company conference call. This call will be available for replay beginning at 6:00 PM today through 11.59 PM on March 27, 2017. The conference ID number for the replay is 6371106. The number to dial for the replay is 1-855-859-2056 or 404-537-3406. Thank you. You may now disconnect.