Good morning, my name is Jessa, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Crawford & Company Third Quarter 2018 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. [Operator Instructions] As a reminder, ladies and gentlemen, this conference is being recorded today, Tuesday, November 6, 2018. I would now like to introduce Joseph Blanco, Crawford & Company's General Counsel. Please go ahead, sir.

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, 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 underfunded defined-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, 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 September 30, 2018, 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 the 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 morning and welcome to our third quarter 2018 earnings call. Joining me today are Bruce Swain, our CFO; and Joseph Blanco, our General Counsel. After our prepared remarks we will open the call for your questions. To start, our third quarter results demonstrate the continued progress that we are achieving in our journey to return Crawford & Company to sustained revenue growth, though we fell short of our expectations for operating earnings. For the quarter sales increased nearly 2% after excluding the disposal of the GCG business from the year-ago period. Our global TPA Solutions, Broadspire segment grew revenues 3% and Crawford Specialty Solutions was up almost 4% after adjusting for the GCG business. While our Crawford Claims Solution segment was down slightly, as compared to the same period in 2017 when we were responding to the surge in claims from Hurricanes Harvey, Irma and Maria. After adjusting for the GCG business disposal, Crawford has delivered a 4% revenue growth year-to-date versus 2017 and represents a marked acceleration from previous years. To deliver this growth and increase the pace of growth, we have made purposeful strategic investments into our 4 primary areas. First, in our salespeople to drive market share. Second, in our ongoing staff development training and rewards programs. Third, in technology to become more efficient. And fourth, in new product development to deliver innovative solutions designed to solve industry challenges where we see large untapped market opportunities. This investment is critical in order to achieve our goal of delivering strong sustained revenue growth. Investment in our global sales team has been a priority as we require experience solution based salespeople, who can deliver the full suite of Crawford's products to our clients around the world. Our focus this year has been to increase our local sales presence…

Thank you, Harsha. Company-wide revenues before reimbursements in the 2018 third quarter were $255 million compared with $270.6 million in the prior year's third quarter. On a non-GAAP basis, 2017 revenues excluding the disposed-of GCG business would have been $255 million, resulting in pro forma revenue growth of 2% in the 2018 quarter. Our net income attributable to shareholders of Crawford & Company, totaled $7.9 million in the 2018 third quarter compared to income of $11.8 million in the 2017 period. Third quarter 2018 diluted earnings per share were $0.15 for CRD-A and $0.13 for CRD-B compared to earnings of $0.22 for CRD-A and $0.20 for CRD-B in the 2017 period. There were no restructuring or special charges in the 2018 third quarter but we did record a $1.2 million non-cash adjustment to increase our loss on disposal of the GCG business line in the quarter. On a non-GAAP basis, excluding the operating results of GCG in all periods, restructuring costs and special charges in 2017 and the loss on disposal of the GCG business line in 2018, our third quarter 2018 non-GAAP diluted earnings per share were $0.17 for CRD-A and $0.15 for CRD-B as compared to 2017 diluted earnings per share of $0.22 for CRD-A and $0.20 for CRD-B. The company's adjusted operating earnings, totaled $16.5 million in the 2018 third quarter or 6.5% of revenues compared with $22.6 million or 9% of revenues in the prior-year period. Consolidated adjusted EBITDA was $25.5 million in the 2018 third quarter or 10% of revenues compared to $31.1 million or 12.4% of revenues in the 2017 quarter. I will now review the third quarter performance of each of our business units. To aid in the understanding of our underlying operating results, we have added supplementary information that highlights the gross…

Thank you, Bruce. We are starting to prove that we can grow revenues and gross profit. We must now show that we can translate this growth into operating earnings growth and improved profitability. As we look forward, let me remind you of our 6 primary objectives. First, we will continue our focus on increasing the velocity of our revenue growth. Second, we will continue to innovate new solutions and services, which will position Crawford as the established leader in the industry. Third, we will focus to maximize the benefits of our go-to-market strategy with carriers, corporates and intermediaries. Fourth, we will continue to prioritize our IT investments to improve our capabilities across the globe and to be at the forefront of innovation and disruption. Fifth, we will focus on our cash generation capabilities and improve our free cash flow. And sixth, we will continue to advance our employee training and leadership development programs which will help to transform the company into an engine for growth. All of which will position the company to achieve our longer-term target of 5% revenue and 15% earnings growth annually. We are committed to delivering sustained results as we celebrate our 50th anniversary as a public company this month by ringing the closing bell at the New York Stock Exchange on November, 16. Thank you again for your time today. And also a huge thank you to all our employees for all their efforts throughout the year. Operator, please open the call for questions.

[Operator Instructions] Your first question comes from the line of Mark Hughes.

Appreciate the breakout on the gross profit versus operating profit, when you look at that growth in indirect expenses, any way to break out how much of that might be kind of mix shift in the business versus these investment items that you've talked about?

Sure. I think I'd be leaning more towards the investment items than the mix shift. And we've done a series of investments purposefully just to name a few, just to remind you, one is our ongoing investment in WeGoLook. We also have renewable phase 2, which is our adjusted deployment system. We have invested in data analytics that is starting to produce some early results. And frankly, our execution in our current hurricanes is significantly superior to last year and we're actually moving up, if you will, in the service provider rankings for large carriers. And some of the carriers are actually sharing that information back to us. We have had to invest in security, more firewalls as well as a different set of virus protection as the world is changing in front of us. We have started to get real estate more efficient. So we're doing things that are much more beneficial long-term. And finally, a pretty heavy investment in training and in executive development. Crawford & Company, Mark, for years and years was known as the company that trained adjusters in the entire industry. And over the last say 15, 20 years we had kind of walked away from that a little bit. And we've reenergized, we've reinvested and we actually are seeing a fair amount of traction with now, carriers inquiring about sending their folks to our training programs, of course for a charge.

The unallocated corporate expenses were -- it's been a volatile line that was net flat for the first half of the year and then $5.8 million, if I'm seeing it properly, for the third quarter. Could you just talk about that kind of expense profile and then, how does that trend in the fourth quarter and as we think about next year.

Sure. So this is Mark -- this is Bruce, Mark. The cost in the third quarter picked up a bit over where we were year-to-date, we had some higher self-insured expenses as well as a bit higher allowance for doubtful accounts that hit in the quarter. We've also got some costs that we think are probably going to be non-continuing around certain professional fees that we've incurred for complying with tax reform looking in at cost related to the implementation of our ledger package, and then some of the real estate costs and lease termination costs that Harsha mentioned. And that line can have a little bit of volatility for us. As we look to the fourth quarter, we would certainly expect for that line to be a lot less than where we were last year in the fourth quarter. We had a number of pretty significant lease termination costs that came in last year in the fourth quarter really related to the GCG business line. And of course, those won't be continuing this year. So we should see that line moderate pretty significantly in the fourth quarter compared to last year's fourth quarter.

How about sequentially, this last year's fourth quarter, if I'm looking at this properly, was $11 million?

Correct. Yes and sequentially, we think that this cost will be down versus the third quarter.

And how about an update on the Contractor Connection expansion in the new geographies or underlying growth in the business, can you talk a little bit about that?

Sure. I think, Mark, first of all, we're continuing to ramp up in Germany and in Canada, we're actually reaching levels that we haven't reached before, so Canada continues to scale. But even more importantly, in the United States, we do have a ramp-up of a very large carrier that signed up with Contractor Connection and I am pleased to say when it activated sometime in the latter half of Q3, it has ramped up every single day and will continue to ramp up through 2019 and possibly beyond. And Contractor Connection being the largest and the best and the most highly rated, their execution being close to flawless, the carrier is quite pleased with the intake that's coming in and for Contractor Connection, if you will commit to the Managed Repair Solution to the carrier. So we see very positive news coming out of Contractor Connection as time goes by.

Then a final point on Broadspire. Are you getting -- what kind of visibility do you have for 2019 now presumably many employers have made decisions in this area, do you have a good sense of backlog, is that something that only emerges in coming weeks and can you talk about how that may be shaping up?

Sure. I think, first of all on our sales pipeline, we continue to harness and feed it very early on in the year and these are longer cycle businesses. So I'm happy to report that the sales pipeline on Broadspire is the highest it's ever been, it's very robust. We are seeing the marketplace change, unemployment being at its lowest, worker's comp claims will continue to increase, so we see a lot of positiveness coming out of the TPA business. Also the other piece is as we went to GSLs, our TPA Broadspire leader, Danielle Lisenbey, has taken control of both the Canadian as well as the U.K. and in fact also the Australian Broadspire businesses. And they're also starting to have traction both bottom and top line similar to the United States. It's early in those markets. The U.S. is far more advanced but having a robust sales pipeline we see a fair amount of growth expected over the years on Broadspire and we will see growth in 2019.

There are no further questions at this time. Mr. Agadi, I turn the call back over to you for closing remarks.

Yes, thank you very much. I just wanted to summarize very quickly the good news of Q3. Revenues are up 3% and more, gross margins are up, operating cash flow is up significantly in Q3 in excess of $35 million, even after taking into account a voluntary pension contribution. Our pension balances are down significantly by over $25 million. We've paid down debt just shy of $13 million. And our effectiveness of execution in hurricanes have gone up. All in all, I feel very optimistic about the business as we move forward. Again, big thank you to all of the employees around the world for really putting in a huge effort in Q3, as well as already in Q4. Thank you.

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 December 6, 2018. The conference ID number for the replay is 939-2449. The number to dial for the replay is 1 (855) 859-2056 or (404) 537-3406. Thank you. You may now disconnect.