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…

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…

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.