Good morning, my name is Lori, and I'll be your conference facilitator today. At this time, I would like to welcome everyone to the Crawford & Company Fourth 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, February 26, 2019. 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 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-K for the year ended December 31, 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 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. Mr. Agadi, you may begin your conference.

Good morning, and welcome to our fourth quarter and full year 2018 earnings call. Joining me today is Bruce Swain, our Chief Financial Officer. After our prepared remarks, we will open the call for your questions. I'm excited to announce our results as our purposeful strategic investments designed to increase the pace of growth of the company are demonstrated in our fourth quarter results. As we have invested in transforming our culture and vision in our salespeople to drive market share, in technology to become more efficient and in product development to access large untapped market opportunities. We have started to deliver growth in many areas of our business, which is translating into higher gross profit as well. For the full year 2018, we delivered revenue growth of positive 1.4% after adjusting for the GCG business disposal, FX and accounting changes in our U.K. Contractor Connection business. When normalizing for severe weather from prior year hurricanes in the U.S. and Asia-Pacific regions, 2018 organic revenue growth was 3.4%, which is confirming the acceleration from prior years. This accelerating growth trajectory, which we are now firmly on, is a direct result of our unwavering focus in growing our core businesses. We have built a foundation to position Crawford to achieve our goal of delivering 5% revenue growth and 15% earnings growth annually as we solidify our position as the leadings claims outsourcing company globally. Our confidence comes from major wins with new clients and increased delivery of new services to existing clients. Central to delivering our growth commitment has been the cultural renaissance we have engineered across our entire organization globally. We have refocused all of our employees on delivering value to our clients and communities that we serve every day across the globe. The effect has changed, we have reviewed…

Thank you, Harsha. Company-wide revenues before reimbursements in the 2018 fourth quarter were $263.8 million compared with $298.8 million in the prior year's fourth quarter. On a non-GAAP basis, 2017 revenues, excluding the disposed of GCG business, would have been $282.2 million, resulting in a pro forma revenue decline of 7% in the 2018 quarter. The 2017 period included approximately $22 million in additional catastrophe revenues from hurricanes Harvey, Irma and Maria in the U.S. and Debbie and Hato in the Asia-Pacific region, which accounted for the decline. Normalizing for the year-over-year variance in catastrophe business, pro forma revenue growth would have been 1.5% in the 2018 quarter. Our net income attributable to shareholders of Crawford & Company totaled $11.9 million in the 2018 fourth quarter compared to a loss of $2 million in the 2017 period. Fourth quarter 2018 diluted earnings per share were $0.22 for CRD-A and $0.20 for CRD-B compared to a loss of $0.03 for CRD-A and $0.05 for CRD-B in the 2017 period. Non-GAAP 2018 diluted earnings per share were $0.32 for CRD-A and $0.30 for CRD-B as compared to 2017 diluted earnings per share of $0.31 for CRD-A and $0.29 for CRD-B. The company's operating earnings totaled $32.2 million in the 2018 fourth quarter were 12.2% of revenues compared with $24.8 million or 8.8% of revenues in the prior year period. Consolidated adjusted EBITDA was $41.4 million in the 2018 fourth quarter or 15.7% of revenues compared to $35 million or 12.4% of revenues in the 2017 quarter. Our non-GAAP results for the quarter and year have been calculated excluding the net operating results of the GCG business, which we sold in June 2018. Restructuring and special charges. The loss on the disposition of GCG, goodwill and intangible asset impairment charges and the impact…

Thank you, Bruce. 2018 was a very successful year for Crawford as we launched our Global Service Lines, implemented industry verticals and solutions, advance our cultural renaissance across the company and reinforced our 1 Crawford values, implemented cutting-edge technologies such as RENOVO, robotic process automation, drones and much more. Accelerated innovation by partnering with early and growth stage startups. Sold the Garden City Group business line, improved free cash flow and reduced debt to the lowest level in 3 years. And finally, celebrated 50 years as a public company with a foundation of predictability and stability. To conclude, we're starting to prove that we can grow revenues and gross profits. We must show that we can translate this growth into operating earnings growth and improved profitability. Looking forward, we have 4 primary objectives for 2019. The first is growth, as we must increase the velocity of revenue growth through continuous innovation, as we work to deliver our goal of achieving 5% revenue growth and 15% earnings growth annually. I'm pleased to say that we're on our way as we have won several new client engagements in 2018 as well as more recently in 2019. The second is systems readiness as we prioritize IT investments across the globe in order to position Crawford to be at the forefront of innovation and disruption. This has resulted in a forecasted reduction in maintenance CapEx. The third is people readiness, where we need to continue to attract, develop, engage and retain the most caring and capable people who deliver the company's mission every day. In fact, our recent internal companies survey confirm the highest level of employee engagement, since I came on as CEO in 2015, as we have driven a cultural renaissance at Crawford, and their journey continues. And lastly, we need to remain fiscally responsible as we continue to focus on improving the company's free cash flow, while maintaining prudent expense management and the most conservative balance sheet in the market, while maximizing our return on invested capital and providing a stellar return to shareholders, all of which will position the company to achieve our mission of restoring and enhancing lives, businesses and communities, while delivering on our financial target of 5% revenue and 15% earnings growth annually. 2019 will be known as the year of growth. Thank you, again, for your time today. Operator, please open the call for questions.

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

You talk about the growth prospects in the TPA solutions. Broadspire, the -- up 2% this quarter, was sort of at the lower end of the recent range, sounds like you've won some new business, but what do you see developing there?

Yes, I think, first of all, Mark, yes, we're up positive and maybe a little less than, say, the previous run rate we've had, the same number of clients, but we've had a slightly lower volume of claims coming out of the clients. So not to be terribly concerned. The number of new clients we have signed up, they're all starting up at various times throughout this year. Some have started in January, some in February, some in March, some in April. So we expect a robust pickup on the TPA Broadspire side. In addition, when we reorganized into GSL's, Danielle Lisenbey, who runs our TPA business globally, has now direct control over the U.K., over Australia, over Canada, over Norway, just to name a few countries, where there is now going to be more and more impact, if you will, in the workers comp, disability, medical bill review as well as medical management. So we see that 2.5% or 2% is okay, but I think we're going to see a bigger pick up here coming on.

Bruce, did you give an overall fourth quarter organic number -- excuse me, ex the CAT and the currency and the accounting change? I know that for the year it's at 3.4%, what was it for the fourth quarter did you say?

Yes, in the fourth quarter, we were at 1.5%.

Okay. The...

We're still rolling over Irma, Harvey, Maria and the remnants of it, and we had some other activity in other parts of the world. But having said that, it's in the positive direction.

Understood. The CapEx outlook for 2019, you were down pretty meaningfully in 2018. Where do you see that shaking out this year?

Yes, I mean, our CapEx should probably be in the $25 million to $30 million range. And that's probably a decent number to think about going forward.

Yes, we've continued, I think, Mark, moving only in 1 direction. And so I think we've gotten more efficient. And as I said on the call, in my prepared remarks, we have positioned majority of our CapEx towards innovation, disruption and client solutions, as opposed to the maintenance CapEx that was going on, on some legacy systems as we're moving to common platforms more and more on a monthly, weekly basis.

Bruce, what was the CapEx for 2018? I apologize, I don't have it in front of me.

The CapEx for 2018, one second, was right at $30 million.

Okay. So flat to down...

So maybe -- that would be the high end of our range, if you will, in 2019.

The share buybacks have been pretty robust, down 5.5% in terms of share count is meaningful. As you think over the next 12 months, are you thinking that's going to be a priority -- the priority? Is there much M&A that you're looking at out in the market?

We're -- it's certainly -- share buyback is certainly something that we will look at in terms of our capital deployment strategy. We're obviously going to be investing back in our business, be that through investing in the new solutions that we've developed in CapEx on the innovation front. And also looking for M&A opportunities, where it makes sense. So we're always on the lookout for that, and we're evaluating potential targets continually I would say. Obviously, having a meaningful yield to our shareholders is important to us, and keeping our dividend yield at a healthy level is important. And then looking at share repurchases as well, particularly where we see the shares trading at a significant discount to intrinsic value, we'll look to be opportunistic there.

So I think, Mark, in addition to Bruce's remarks. Here's what I will say, we, as a management team, propose a capital plan in our final board meeting to the Board. The Board is involved heavily in capital allocation decisions, which any board should be, and I'm part of the board. And I would say to you when we're looking at buying shares back or investing in an M&A transaction, we look at alternatives to make sure the every dollar that's going out is going to generate the highest possible return based on the choices available at that time. So the discipline on CapEx has increased as each year has gone by under my leadership, but in addition to that, I would also say that buying back shares, as Bruce said, as long as there is intrinsic value and there is a sufficient discount to what we believe is true value, we will continue to see where opportunities exist for us to pick up shares.

And I'll ask one, sort of, big picture question. You mentioned that you need to be more effective or you need to educate your clients more so that they are aware of the variety of services that you offer? I think you're trying to roll out new services that are little more disruptive in the marketplace. What gives you confidence that you're on the right track there? Do you -- what early markers you've seen that your education initiatives are bearing fruit, and that the -- these new services the take rate is going to be sufficient to support your growth goals?

Right. So first of all, here is what I would say is every one of our clients, whether it's a carrier or a broker or a Fortune 500 company, is continually trying to dial down the cost of, I'll call it, loss-adjusting expense or leakage as they call it. And they're also looking for a solution that is top quality and promptly, which means accurate and fast. And for us to do that, we have, as we mentioned, a slew of new solutions using technology and leveraging technology. We are also taking this technology and 1 testing, and even partnering with our clients and with certain startup firms to test the validity. So I'm just going to give you a couple of homegrown examples. We deployed RENOVO, our CAT-adjusted deployment system in the events of Florence and Michael, and it was rather successful. So successful that we're already moving on RENOVO Phase 2 to get this even better. I just came back from Dallas at our annual Crawford CAT services conference, where RENOVO was not only displayed, but a number of adjustors, there were hundreds of adjustors, who were raving about our new technology, and why they have left the other competitors to sign up and join our workforce because of the ease of doing business. And then another example would be predictive analytics that we're applying to litigated claims, and we're able to sell these claims a little faster. And it's gaining a lot of appreciation and traction, if you will, with the carriers on the TPA side. Because of predictive analytics, we have increased the medical bill savings as well as workers are coming back even faster, all of this resulting in simplistically superior financial outcomes. So what we're doing is going back to the continuum of claim from the FNOL to the total solution and mitigation of the claim. We are inserting pieces of technology, marrying it carefully with our world-class force of adjustors, so that the adjustors are actually using the technology to leverage and actually process more claims in a single day and even more accurately. So there is a whole trial, testing, deployment, partnering and doing it in a very efficient manner through all of this. And we have several of those that we spent a fair amount of time on in 2018, and it was worthwhile to invest. And some of those results are already coming through in Q4 as you can see.

I will now return the call to Mr. Agadi for any additional or closing remarks --

Thank you, again, for the questions, Mark. I want to offer a special thank you to all adjustors of Crawford & Company around the world, and all of the employees like me and others who support the adjustors in their day-to-day jobs in adjusting claims and therefore, restoring and enhancing lives, businesses and communities. God bless.

Thank you for participating in today's Crawford & Company conference call. This call will be available for replay beginning 11:30 a.m. today through 11:59 p.m. on March 26, 2019. The conference ID number for the replay is 5283639. The number to dial for the replay is 1 (855) 859-2056 or (404) 537-3406. Thank you. You may now disconnect.