Good morning. My name is Phyllis and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Crawford & Company Third Quarter 2021 Earnings Release Conference Call. In conjunction with this call, a supplementary financial presentation is available on our website at www.crawco.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, Tuesday, November 9, 2021. Now, I would like to introduce Tami Stevenson, Crawford & Company's General Counsel.

Thank you, Phyllis. 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, the impact of COVID-19, 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 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 the 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 from 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, 2021, 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. Rohit Verma, Chief Executive Officer of Crawford & Company. Rohit?

Thank you, Tami. Good morning and welcome to our third quarter 2021 earnings call. Joining me today is Bruce Swain, our Chief Financial Officer; Joseph Blanco, our President; and Tami Stevenson, our General Counsel. After our prepared remarks, we will open the call for your questions. Crawford delivered strong top line results in the third quarter, with revenue increasing 14% compared to the prior year. We are very pleased with the organic growth that we've seen in the quarter. Our long-term growth strategy is enabling us to advance towards our envisioned future which is underscored by the strong momentum we're seeing across loss adjusting, TPA and Platform Solutions. In the U.S., we're making significant traction with the Top 5 carrier clients and this is evident in our revenue growth for both loss adjusting and Platform Solutions. During the quarter, Crawford deployed a record number of resources, more than twice the number of resources deployed at the peak of an active weather season. This reflects the increased penetration that Crawford has in the U.S. market and the expanded relationships Crawford has developed with top carriers. True to our previously communicated strategy, platform had the steepest growth, followed by loss adjusting and TPA. Despite a lag in management revenue recovery, U.S. TPA delivery expansion in both revenue and profit compared to last year. Overall, we believe our strategic approach built around our three pillars of expertise, quality and digital is resonating in the marketplace. While we are pleased with the top line growth we delivered in the quarter, there are pockets of the business that require our attention to improve profitability. On a non-GAAP basis, EPS for CRD-A was $0.24 and $0.25 for CRD-B. This was a decline from $0.34 for both CRD-A and CRD-B in the prior year period. Bruce will…

Thanks, Rohit. In August, Crawford acquired edjuster, the contents valuation leader in North America. Aligning with our strategic pillars of expertise in digital, edjuster specializes in contents valuation which establishes the cost of replacing belongings in the home or business when they are damaged or stolen. edjuster's full year 2020 revenues totaled $14 million. The acquisition of edjuster brings critical mass and adds a digital component to Crawford's existing contents valuation service for loss adjusting in North America. At the same time, it gives us access to the steadily growing $500 million North American contents market. Given the increasing adoption of content inclusive home insurance policies, the market opportunity for third-party content claims service providers is significant. edjuster's solution and digital platform cover all aspects of contents claims from start to finish, including inventory and valuation services from the desk, in the field and via SaaS offering. This ensures that the process is streamlined, controlling cost and increasing transparency, while allowing adjusters to do more work from the desk. Importantly, it gives carriers data and analytics which drives improved underwriting decisions. While edjuster is the leader in Canada with a blue-chip client roster, we believe we can significantly accelerate edjuster's U.S. growth. Crawford is making inroads into the fragmented and growing subrogation market with the acquisition of Praxis Consulting, the leading provider of outsourced subrogation claims management and recovering services in the U.S. Praxis utilizes decades of industry experience, coupled with proprietary data analytics software to identify and manage subrogation claims through the recovery process. Praxis's full year 2020 revenues totaled $14.3 million. This acquisition marks Crawford's formal entry into the $1 billion subrogation recovery market. Praxis is led by a tenured team, whose execution capability and long-standing client relationships provide a proven and trusted service offering to Crawford customers.…

Thank you, Joseph. Company-wide revenues before reimbursements in the 2021 third quarter were $288.5 million, up 14% over the $253.1 million in the prior year's third quarter. Presented on a constant dollar basis to the prior year, revenues before reimbursements totaled $279.1 million. GAAP diluted EPS in the 2021 third quarter was $0.20 for CRD-A and $0.21 for CRD-B compared to EPS of $0.46 for both CRD-A and CRD-B in the 2020 period. On a non-GAAP basis, third quarter 2021 diluted EPS was $0.24 for CRD-A and $0.25 for CRD-B compared with $0.34 for both CRD-A and CRD-B in the 2020 period. The company's non-GAAP operating earnings totaled $20.8 million in the 2021 third quarter or 7.2% of revenues, decreasing from $28.1 million or 11.1% of revenues in the prior year period. Consolidated adjusted EBITDA was $29.5 million in the 2021 third quarter or 10.2% of revenues compared to the $35.1 million or 13.8% of revenues in the 2020 quarter. I will now review the operating performance of each of our segments. Crawford loss adjusting revenues totaled $124 million, increasing 11.8% from $110.9 million reported in last year's quarter. Foreign exchange rate benefits totaled approximately $6.6 million in the 2021 third quarter. The segment reported operating earnings of $7.1 million in the 2021 third quarter or 5.7% of revenues, decreasing from the $14.1 million or 12.7% of revenues in the prior year quarter. Margins were pressured due to ongoing investments in talent recruitment and weakness in certain international markets. Revenues for Crawford Platform Solutions were $64.3 million in the 2021 third quarter, up 20.7% from $53.3 million in the prior year quarter. Foreign exchange rate benefits totaled $600,000 for the quarter. Operating earnings in Crawford Platform Solutions totaled $11 million or 17.1% of revenues in the 2021 third quarter, increasing…

Thank you so much, Bruce. As we have stated before, our strategy is to drive organic growth through our three pillars of differentiation, quality, expertise and digital. We continue to make significant progress on our strategy, further positioning the business for future growth and cash generation. In addition, a cultural transformation to increase empowerment is creating a better focus for management, allowing us to deliver on customer needs and simplify our capital allocation framework. As part of our envisioned future, we believe our reimagined and simplified customer solutions, combined with the quality of our service will foster trust and compel our customers to choose us to enhance their brands. Turning to our strategy again. Within loss adjusting, our client relationships, global reach and investments in innovation are significant competitive advantages, enabling us to capture market share and improve margins. As you know, we think of this business in two verticals, major and complex claims and volume claims. On the major and complex side, we intend to develop a deep bench of experts that will enable us to become market leader. On the volume side, our strategy is to differentiate ourselves through digital simplification and best-in-class quality. We believe this will give us low to mid-single digit revenue growth. Turning to our Platform Solutions. This business continues to be a major transformational driver as we aim to reimagine the traditional claims process. Our goal is to embed Crawford within the insurance ecosystem and touch every property claim that is processed. Our ongoing focus is to scale this business, creating a strong flow-through to the bottom line. We expect this business to deliver double-digit growth over the cycle. In North America, our TPA business is leveraging technology and data insights to differentiate in the MGA, captive and carrier outsourced market. From an international perspective, we are differentiating through a digital product offering by creating a new mobility system. Lastly, we're also capturing market share by growing proper legal services in areas that complement our core loss adjusting business. Our expectation from this business is to grow mid-single digits. As we see the light around the corner of COVID, we remain focused on executing our strategy and realizing value from our investments in people, technology, new acquisitions and relationships. We remain steadfast in our commitment to diversity, equity and inclusion and we are committed to cultivating a safe, inclusive environment in which everyone's unique perspectives and experiences are heard and valued. We are confident in our ability to deliver superior results for our shareholders over the long term. And we look forward to the journey ahead as we continue our relentless pursuit of restoring and enhancing lives, businesses and communities. Thank you so much for your time today. Phyllis, please open the call for questions.

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

Hi, Mark.

Yes, thank you. Good morning. On the quarterly earnings top line growth, you're pull-through of EBIT was a little bit -- and I think you went through various factors by line.

Mark?

But I wonder if you could just kind of address that question more broadly. Is there a delay in the drop down to earnings from top line growth? How would you characterize what you saw in Q3? How that may -- you may able to get more operating leverage in the future?

Mark, can you hear me okay? Mark?

Yes.

I can hear you now. So, I think I caught most of your question.

I apologize. Let me rephrase that. It was my mistake. AirPod issue. Let me say my question briefly was you had very good top line growth, kind of limited pull-through of the EBIT line. I think you've addressed some of that. But I wonder if you could just kind of globally talk about your ability to get operating leverage across these different segments.

Yes. Now Mark, that's a very good question. So obviously, you've seen that we've driven quite a significant top line growth. It's something that we have been talking about, I would say, for at least the last two years as we were investing in sales and other capabilities to drive that growth. So we feel very good about the momentum that we've created. I think when you look at our international business and we called out some of that, we've seen certainly a lower pace of recovery. I think when we were sitting at the same time last year, we were all anticipating by Q2 of 2021, we should see a secular recovery across the globe from COVID. And as a result of that, we held on to what I would say, resources within our businesses to plan for that recovery, expecting that recovery to come in. Also, in markets like Canada, we had benefit from CEWS and we applied that benefit to the intended purpose of that benefit and that is to preserve our staffing levels in anticipation of things coming back. We all know things have not come back at the same pace that we expected to, obviously, U.S. being an exception. As a result of that, this shortfall in revenue in a lot of places has gone straight to the bottom line, creating a disproportionate impact on our earnings as compared to the revenue growth that we've seen in the U.S. And that's really the underlying position that we are coming from. We feel that some of the steps that we're taking, as an example, the diversification of business in Europe, that is absolutely going to take longer but other places where we believe that we need to just right size our operation to match the incoming volume of claims a little bit faster to do. But -- so our anticipation is that when we sit for Q2 of next year, we will start to see impact of some of these actions as we progress through the next couple of quarters. Bruce, I don't know if you want to add anymore color to it?

Yes, I think that's a good summary.

Yes. Understood. How about -- when you think about the Ida claims or CAT claims in this quarter, obviously, another meaningful event. How do you view your ability to monetize those events? I think, maybe sometimes in the past, the adjusters, the CAT adjusters have been able to capture a little more of the economics for themselves and it became more of a hot market. And I don't know whether this is your experience but others had to pay up for those claims adjusters. And so the extra volume ends up being of marginal profitability. How would you characterize the situation that you experienced it in Q3 with IDA?

Yes, another very good question, Mark. So I would probably answer this in three parts, right? So first part is that if you look at the size of Ida and you compare that, it was about a $25 billion to $35 billion event. And you compare that to other events that we've serviced in the past, the number of people that we deployed was significantly more than what we've done in the past. And that's the great evidence in demonstrating that our penetration in the U.S. carrier market, particularly the large Top 5, Top 10 carrier market is gaining traction because we wouldn't have been able to really deploy that many people and have the kind of revenue impact that you're seeing in the past from a similar size event. Part two is that because we have -- we are now a much more formidable player in this space, we have a little more leverage on economics where we've got the adjusters who know that we are probably providers of work throughout the year as opposed to only during the Gulf hurricane season and that creates some level of loyalty. And then number three is that last year, we invested significantly and trained 1,500 new CAT adjusters and we expect to hit a larger number over the course of the next 12 to 18 months. And we believe that by doing that, we are actually not only bringing new workforce to this space which creates a better demand supply economics but also by bringing this workforce in, we create a greater loyalty towards the corporate brand and should see better economics coming out of that. So that's sort of a three part answer to your question.

Yes, that's helpful. And then, you obviously have got a lot of traction with a couple of major carrier partners. Can't help but look at the opportunity for perhaps others; is there a pipeline? Do you feel like you're getting some broader momentum perhaps?

We do feel that we're getting broader momentum. In fact, if you look at our U.S. results in isolation, I think the momentum is quite evident. We also feel very good about the quality and the breadth of relationships that we're building in the U.S. market. While claims volume, obviously, is a complex equation of what's happening with the weather, what's happening with the internal staffing, we believe that the foundation of our relationships has gotten stronger and we think that we will continue to see a greater increase in our market share. In fact, with a couple of the players, we have targeted to have about 20% to 25% market share with them and we believe that we're touching 30% to 35% market share with them already.

Excellent. Thank you very much.

Thank you, Mark.

Your next question comes from the line of Kevin Steinke with Barrington Research.

Hi, good morning.

Hey, Kevin. Good morning.

Good morning. I wanted to ask about new business. I believe you mentioned $37 million in new business; was that specific to TPA or was that across your segments?

That was total business that we won. TPA just tends to always have a higher share because it's more quantifiable business because it's the contract business.

Okay. I think last quarter, you were able to break it down into new business wins across the segments. I don't know if you're able to do that. You mentioned TPA is more quantifiable but maybe any more color on that front?

Bruce, you want to touch upon that?

I mean, we've seen new business growth from all three of our segments. I don't have the segment-by-segment breakdown in front of me but we are seeing traction in all of our segments, Kevin.

Yes. And Kevin, if you look for the year, we won about $80 million of new business in the first three quarters for the year. We feel very good about that sort of momentum. And it's hard to comment about what Q4 will bring but that momentum we're seeing to continue in terms of the new business wins across all three segments.

Right. Okay. No, I mean, clearly, the momentum is showing up. If you just -- I think it was $20 million last quarter and then $13 million in the first quarter, now $37 million. So just any more comment on the state of ability to gaining traction on the new business fronts? And what's driving that?

Yes. The key driver for that really is the investment that we've made in sales and relationship management over the last three years or so. And that's what the driver is. We believe that as our international operations start to come more in line with how we expected them to be with the rebounding of the economic activity and sort of getting around COVID, we think that we'll start to see the momentum from our international operations as well, where, particularly in U.K., Australia and then more recently in Asia, we've been investing in sales and account management infrastructure. But it's not just an investment in sales and account management but it's also in our operational capabilities which is evident with the CapEx that we have put in over the last three to five years as well.

And Kevin, maybe an update on that. I mean, the breakdown, I was able to get the breakdown. About $16 million in loss adjusting, $19 million in TBA with the remainder in Platforms.

All right. Great. So when we look at the sequential growth in loss adjusting revenue, yes, I guess, should we think about that as you mentioned that the penetration and the greater penetration of Top 5, Top 10 carriers, coupled with the uptick from Ida is kind of the driver there? Or I guess, you also -- was edjuster layered into there as well? I guess that would have been only a one month contribution but maybe the same finance on this [ph].

Yes. Look, we're excited about the acquisitions we made. We believe that both edjuster and Praxis, along with BosBoon over the cycle are going to be significant contributors. But I think for this cycle or this quarter, it was a very small contribution. So the former explanation that you had which is greater traction with the larger clients as well as the impact of Ida has certainly helped. We've also seen some, what I would call, significant volume increases with a lack of staff available to our clients which has led to more overflow work coming to our hand. As you know, we have stated before, it's hard to look at sequential quarter -- sequential quarterly revenue increases because second and third quarter just tend to be the strongest quarters for us. Because of the weather activity and sort of other economic activity that picks up during summer, we tend to see a lot more overflow claims. As a result of that, it reflects in our revenues as well as earnings. But I think like I said before, the quality of our relationship, the breadth of our relationships have significantly increased over the last couple of years. And I believe that from an overall perspective, it will contribute towards our growth.

Okay, great. Contractor connection, it was a little bit flattish year-over-year but should we think about continued tailwinds from the ramp-up with -- I think you started a new relationship with a Top 5 carrier or not too long ago. Just maybe comment on contractor connection and the pace of growth? And are you still going to see the benefit of that ramp-up going forward?

Yes, we believe so. As we've shared with you all before that contractor connection typically takes 12 to 18 months for large relationships to ramp up because of the change management involved inside the organization. We feel very good about our contractor connection business. We continue to enjoy very, very high, in the high 80s kind of NPS score from claimants on that business. And in all the client conversations that we're having, we believe that the clients see the benefit of it clearly and we expect it to continue to build traction. I think part of the reason for not having adequate growth or, as you call it, flattish growth, is also related to the construction activity that from an insurance perspective, slowed down, contract -- the lead time for contractors have gone up, lead time for materials had gone up and that has certainly impacted the business. But I think as things begin to stabilize and normalize more, we expect that business to continue delivering the top line and bottom line growth that we have. It still continues to be a significant contributor for us.

Right. Okay. So maybe you're choosing some of that, I don't know, what we call kind of the supply chain issues or the labor issues that are impacting the economy now or…

Yes, we believe so. It's sometimes hard to do a true causal relationship. But certainly, we had seen that contractor capacity is being down and supplier issues is definitely playing a role in it.

Okay. No, that's helpful. And can you delve into the -- just the Platform Solutions, the operating earnings margin a bit more? I think, Bruce, you mentioned to -- that was -- I believe you said continued penetration in contractor connection. But just kind of the driver of the Platform Solutions operating earnings margin in the quarter relative to the year ago?

Sure. So I'll start off and let Rohit add a little color at the end. So Platform Solutions is made up of three businesses: our networks business which is largely our old catastrophe business and weather response; contractor connection; and then the WeGoLook business. We saw really great results out of our networks business, really where most of the, if not all, of the revenue growth came from in the segment and good operating leverage there and good contribution margins year-over-year. We're investing in the contractor connection business, both in terms of quality assurance and operational capabilities within the business as well as business development resources which weighed on their contribution quarter-over-quarter. But as Rohit indicated, we do expect for contractor connection to continue to benefit from the onboarding of the Top 5 carrier that they are continuing with, assuming we would expect those margins to improve as we go forward.

Bruce, yes. You've really summarized it well.

Great. Can you quantify or I think you have in the past, just what you would term "weather surge" revenue in the quarter? I know the year ago quarter was fairly strong on that front, I believe. But did we actually go up in that regard due to Ida?

Yes. So picking apart the revenue surge, it's always an estimation. But yes, we do feel that we were above the prior year period related to Ida. We estimate that our weather surge globally was about $47 million compared to about $36 million in the prior year.

Okay. So you made -- it looks like three nice acquisitions just within the last few months here. So is that just you think a matter of your concerted efforts pursuing M&A? Is this picking up and gaining traction here? Are you seeing maybe a loosening in the market in terms of more willing sellers? Or just any comments on the recent momentum you've seen in completing acquisitions. I know those are always difficult to predict when they're going to close but maybe any comments on your M&A pipeline and your efforts there.

Sure. Look, we believe we've always had momentum. Unfortunately, we've taken certain things to do almost the last mile and then decided that it didn't make sense to pursue. So it come across as a sporadic activity where we've certainly come up with three and not had anything before. As we have said before, that organic strategy is -- organic growth is the bedrock of our strategy and we will continue to push on that. However, M&A is an important enabler for us to take market share where it makes sense. We continue to be very disciplined in the valuation. We continue to be very disciplined in terms of making sure that they is a strategic fit. And unless it checks all those boxes, it frankly doesn't make it through to the level where we even engage in any sort of strategic way on the acquisition. Our pipeline remains fairly strong. But again, we're going to be extremely discerning. We don't see much loosening in the valuation so far. However, we still believe that there are opportunities to gain significant value, particularly when we see a seller who sees the value of what we as Crawford & Company bring to the table in terms of our reach, in terms of our brand, in terms of our capabilities and where they believe that merging with us is a better option for their business going forward and for us together than sort of staying independent or frankly, going through a pure financial transaction. But I'll let Joseph add anything, if you might want to add to that?

No, I think that sums it up. I mean I think that we are particularly -- which is we're excited about these three acquisitions where it's one and one make more than two, where we are bringing something to the table that just makes sense as we continue to build out the claims ecosystem.

Great. Should we think of all three of those falling within loss adjusting? And then maybe just any comments on the margin profile of those acquired businesses? I know they're relatively small compared to your total revenue but just how should we think about profitability?

So a couple of things. BosBoon and edjuster, both form -- they both fall in the loss adjusting family and then subrogation which is Praxis falls under our Platforms business. The general margin profile for these businesses is at or better than what we are doing right now in sort of the businesses that we have. But as you pointed out, the scale of these businesses is generally much smaller in the operations that they're joining. But we think that because we're joining forces together, we will eventually have significant growth coming from these operations which should be both a solid top line as well as bottom line contributor over the coming years.

Okay, that's helpful. Just, I guess, one last question. The -- your comments on diversifying your business in Europe. I guess that's just a matter of just reducing dependence on travel and entertainment. Is that what you're driving at there?

That is absolutely right. And we believe BosBoon which gave us capability in injury as well as construction is just on the step in that direction.

Great, thank you. I'll turn it over. Thanks.

Thank you. Phyllis, are there any more questions?

At this time, there are no further questions. I would now like to turn the call back over to Mr. Verma for closing remarks.

Thank you, Phyllis. Really appreciate your help. Let me close by thanking all our employees, clients and shareholders for your continued commitment to Crawford & Company. Our third quarter results are not only indicative of Crawford's strength and resilience through 2021 but also evidence of our incredible momentum in organic growth. We continue to wish you well and we look forward to finishing our 2021 on positive and impactful note. Thank you very much and god bless.

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 Standard Time today through 11:59 P.M. Eastern Standard Time on December 9, 2021. The conference ID number for the replay is 5484757. The number to dial for the replay is 800-585-8367 or 416-621-4642. Thank you. You may now disconnect.