Good morning. My name is Brian and I'll be your conference facilitator today. At this time, I would now like to welcome everyone to the Crawford & Company First Quarter 2023 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. [Operator Instructions] As a reminder, ladies and gentlemen, this conference is being recorded today, Thursday, May 4, 2023. Now I would like to introduce Tami Stevenson, Crawford & Company's General Counsel.

Thank you, Brian. 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 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 any unanticipated events. In addition, you are reminded that operating results for any historical period are not necessarily indicative of the results to be expected for any future period. For a complete discussion regarding factors which could affect the company's financial performance, please refer the company's Form 10-K -- excuse me, 10-Q for the quarter ended March 31, 2023, 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. The 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 first quarter 2023 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. We continued our momentum and delivered another quarter of exceptional results. Revenues grew by 12% or 16% on a constant currency basis and operating earnings nearly doubled year-over-year. We experienced revenue growth and profit expansion across all segments, highlighting the underlying strength of our business model and solid execution of our stated strategy. Our outstanding first quarter results marks our 10th consecutive quarter of revenue growth, not only reflecting continued top line momentum and increasing profitability, but also the hard work and dedication of our valued teams across the globe. Their unwavering commitment to quality and customer excellence is enabling us to execute our long-term strategy and bring our envisioned future to life. Two years ago, we shared our long-term growth strategy focused on driving organic growth and improving margins across our business. I'm extremely pleased to share that to date, we have made tremendous progress against our goals, including sustained revenue growth and margin improvement. Recall for North America Loss Adjusting, our strategy was to drive low to mid-single-digit revenue growth and improve margins through efficiency on the volume side and investment in the expertise on the major and complex side. Our ongoing investment in expertise, expansion of our geographic footprint and industry-leading quality have continued to drive growth in the North America Loss Adjusting business. During the first quarter, our pricing actions and improved utilization drove meaningful margin expansion. Moving forward, we believe we will see further growth resulting from our efforts to hire additional specialist adjusters and increasingly scale the business.…

Thanks, Rohit. Beginning with North America Loss Adjusting, we experienced 20% revenue growth and expanded our operating margin by more 400 basis points. Strength in the quarter was driven by adjuster additions, increased utilization, and carryover from Hurricane Ian and winter storms in the U.S. We also gained new clients and saw organic growth with existing clients in the quarter. Our hiring efforts on the major and complex side during the first quarter allowed us to reach a significant milestone. We officially surpassed our 3-year global hiring goal of 200 specialist adjusters and we did it one year ahead of schedule. Looking ahead, we will continue to augment our deep bench of experts to drive penetration with top carriers as Crawford remains a premier destination for talent even in difficult labor market. We are pleased with the progress we have made in our international operations, which grew revenues and expanded margins. As Rohit mentioned, our actions to improve pricing and productivity as well as simplify our processes and cost structure are bearing fruit. These actions, combined with weather-related activity, drove a turnaround in the quarter. Australia experienced continued strength from last year's unprecedented flooding events in Southeast Queensland and New South Wales, along with the recovery in specialty claims. In the U.K., revenue growth was driven by winter freeze-related claim activity during the first quarter resulting in increased volumes. Our business in Europe also reported increased revenues and we made progress on our regionalization efforts, which have helped restructure our cost basis. Flooding in the Philippines, along with search activity in Thailand, and client wins in Singapore and Taiwan created higher-than-expected revenue in Asia. In Latin America, growth was driven by strength in Brazil where we continue to add clients to our core business. Looking at our Broadspire business, strength…

Thank you, Joseph. Company-wide revenues before reimbursements in the 2023 first quarter were $313 million, up 12% from $279 million in the prior year first quarter. Foreign exchange rates decreased revenues by $9.4 million or 3%. On a constant dollar basis, revenues totaled $322.4 million, increasing nearly 16% compared to the 2022 first quarter. GAAP diluted EPS in the 2023 first quarter was $0.22 for both CRD-A and CRD-B compared to $0.10 for both share classes in the 2022 period. On a non-GAAP basis, first quarter 2023 diluted EPS was $0.28 for both CRD-A and CRD-B compared to $0.14 for both share classes in the prior year period. Company's non-GAAP operating earnings totaled $24.9 million in the 2023 first quarter or 7.9% of revenues, up from $12.5 million or 4.5% of revenues in the prior year period. Consolidated adjusted EBITDA was $32.8 million in the 2023 first quarter or 10.5% of revenues compared to $21.3 million or 7.6% of revenues in the 2022 quarter. I'll now review the first quarter 2023 performance for each of our segments. North America Loss Adjusting revenues totaled $77.1 million in the 2023 first quarter, increasing 19.7% from $64.4 million reported in last year's quarter as we expanded our GTS roster and benefited from weather-related activity. Segment reported operating earnings of $8.1 million in the 2023 first quarter, nearly doubling the $4.1 million reported in last year's quarter. The operating margin was 10.5% in the 2023 quarter compared to 6.4% in the 2022 quarter. International operations revenues totaled $91.9 million in the 2023 first quarter, up 2.9% from the $89.3 million reported in last year's quarter, including $700,000 from the Van Dijk acquisition. On a constant dollar basis, International revenues totaled $99.6 million, growing 11.6% over last year's quarter. The segment reported operating earnings of…

Thank you, Bruce. Overall, we are tremendously pleased with our strong results for the first quarter, which highlight the effectiveness of our long-term strategy, commitment to our people and confidence of our customers. As we look to the year ahead, we are excited about our promising growth trajectory and will continue our focus on delivering healthy margins and earnings growth across the business. We remain in an enviable financial position and we look forward to delivering value to our shareholders in 2023, while fulfilling our purpose of restoring lives, businesses and communities. Thank you for your time today. Brian, please open the call for questions.

[Operator Instructions] Your first question comes from the line of Kevin Steinke with Barrington Research. Please go ahead.

Hi, good morning, everyone. Congratulations on the strong results.

Thank you, Kevin. Good morning.

Thank you, Kevin. Good morning.

I just wanted to start off by asking generally about market share gains and if you feel like you're gaining momentum on that front across your various business lines based on the investments you've made. I know you mentioned onboarding a new top carrier client networks. Maybe that's one example. Or I don't know if you could point to any other color or examples on that front.

Sure. Kevin, this is Rohit. There is -- this is our 10th consecutive quarter of growth. So there's definitely market share that we're gaining. And I think if you look carefully across the results, you will see that every segment has grown in revenue as well as has expanded contribution of profit. So we definitely believe that we are gaining market share. Also we were certainly helped by the severe weather that we saw in the U.S. as well as U.K. and doing well in those weather conditions is also indicative that our clients are turning more towards us in their hour of need. So whether we look at our North America Loss Adjusting business, which contains Canada and U.S. loss adjusting, we've seen tremendous momentum in U.S. loss adjusting, both on the volume side as well as on the expertise side. As you know, we've doubled our expertise-based business over the last 2.5 years or so, which clearly demonstrates the addition of new clients or, I would say, market share gain. The same thing we're seeing in our Platforms business, whether it's networks, contractor connection. In contractor connection, as an example, we're now writing a majority of the top 10 carriers, and our goal is to grow in concentration with them. If you look at our Broadspire business, we have been winning a number of new clients in that business. In fact, we're just starting to eclipse the rate from a pre-pandemic level where we were. So we fully recovered from the pre-pandemic by addition of new clients as well as the growth in frequency. And then I think I was very pleased to see what we saw in international as well where we're starting to demonstrate that we are hitting the mid-single-digit growth rate that we had promised two years ago. And the key work for us there is to continue the transformation of our operating environment, which allows us to drive better margin. So in short, yes, we believe we are gaining market share. It's coming through across all our segments and the investments that we've made are starting to show results. And we're excited about the journey we're on.

Okay, great. And you mentioned there the severe weather. Just trying to get a sense as to how material that was in terms of the year-over-year growth. Maybe you should talk about weather surge revenue. But even, I guess, wrapped up within that I suppose would be the fact that you're probably capturing a greater share of weather-related claims than you even would have a year ago or two years ago. So I guess any comment on that.

Certainly. It's the easiest to measure in our catastrophe-related businesses. And that's where we've certainly seen a pretty significant movement. We can't always tell what is related to surge weather because sometimes our clients will take their internal adjusters and move them towards surge weather and use us on their sort of day-to-day claims. So it's not always easy to tell exactly what was surge or what was not. What I can tell you is that with some of our largest clients, we've seen double-digit increases in revenue with them. And we believe that probably 20% to 30% of that is related to them being distracted with weather or deploying us directly on their weather-related work. Bruce, do you want to comment on that?

No, I think that's exactly right.

Thanks. Okay. And you mentioned when you laid out your longer term goals, you're targeting low to mid-single digit growth in North American Loss Adjusting. Obviously, you've been growing faster than that. Do you think like that -- do you think that's still the kind of the right longer term target to think about as that business develops?

Yes. I think longer term, that still is the right target. Do I think that we will continue to eclipse that growth, say, for the next few quarters? I do believe that that we will continue to eclipse that growth. But I think that is the right long-term growth for that because there are forces in that place of the market. And we try to predict this more on an overall cycle -- over the long-term cycle, as opposed to quarter-to-quarter because that business is extremely sensitive to what we were just talking about, the weather. That business is also extremely sensitive to potential disruptions that are coming into the marketplace. Now we're participating in those disruptions and we will see picking some of that revenue up on the Platform side. But I think for that segment, I still maintain that that's the right growth rate. We'll see maybe by the end of this year, we'll take another look at it and revise it. But at least for now, I think that's the right growth rate for us.

Okay, understood. And you mentioned reaching your target of 200 specialty adjusters. Hiring those folks with the North American Loss Adjusting, you've reached that 200 goal a year ahead of schedule. And I think I might have asked this something similar before, but now that you've reached that goal, would you like to continue adding there? Is there more capacity to do that or willingness to do that? And are you seeing the demand where that would require you to continue hiring there?

Yes. When we had set that original goal, we had a certain expectation of how much market share we can gain. Candidly speaking, I think we've done better than what we had originally expected in terms of market share that we can gain. So at this point, we don't believe there is any need for us to put our foot off the accelerator. So I think we will continue to find people that make sense, that align with our culture, that bring something differentiated to our expertise base. And if we find them, we'll bring them on.

Okay, great. I wanted to ask specifically about contractor connection. There was a sequential increase in revenue relative to kind of the quarterly run rate you've been on. I think you mentioned you're gaining traction with top carriers. Is that playing into that improved revenue? How much of that was related to weather? Just trying to get a sense as to what the trend line might be there going forward.

Yes, it was Q1. I believe it was the best Q1 we've had for contractor connection as far as we can remember. And I do believe that we're seeing traction from not only the new clients we brought in, but the sort of increased frequency that we've seen, also the increased inflation we've seen in construction cost. I think I feel that this traction will continue. Whether we'll have similar kind of growth trend or not, it's hard for me to comment at this point. But overall, we feel good about that business. We feel good about the traction that we are building as a result of the new clients that we're adding. As we had shared with you last time where we've been making pricing tweaks across the business, contractor connection was certainly one of them where we made some pricing tweaks. We believe that pricing tweak will hold. So we feel good about the business. It's hard for me to comment whether that exact same trend will continue or not because weather does play a pretty critical role in that business.

Okay. And where are you on your overall pricing journey as you think about offsetting inflationary headwinds? How far are you into that process? Is there a point where we kind of start to lap those increases? Do you feel like you have to put more increases in place? Or are you seeing inflation moderate somewhat?

I would probably not correlate it to inflation. I would say that pricing is a discipline that we have been working to build in our business. And it's a muscle memory that we're building. It's certainly building better in some parts of our business than others. But as a management team, we don't expect to relent on our pricing discipline. Now will we see similar kind of double-digit pricing increases that we've seen, say, in the latter half of last year or early part of this year? Probably not. But I think it will be sufficient to sustain us for solid profitability going forward.

Okay, thanks for taking all the questions. I'll turn it over.

Thanks Kevin as always.

Thank you. Your next question comes from Mark Hughes with Truist. Please go ahead.

Thanks. Good morning. Just a little bit -- hello, I missed a little bit of the early presentation, so I apologize if you've touched on some of these things. Medical management revenue, it sounds like it's up pretty strong. What is driving that? I know that had been under some pressure for a while. Is it finally just normalizing? Or is there some particular catalyst?

I don't -- I won't say it's normalizing. It's certainly up 10% from where it was last year. I still believe that it's below from a pre-pandemic level. And I think the major reason for the change that you've seen is: 1, I do believe that things are starting to normalize; 2, our claims volume has continued to increase as we've added new clients. I expect that it will continue to sort of ladder up, but I think it will take the full this year to come back to where it was in the pre-pandemic levels based on what we're seeing today.

And then on North America, the Loss Adjusting, the revenue was up pretty sharply, but the claim numbers were down year-over-year. Is that -- obviously a mix issue, but could you expand on that?

Yes, it's absolutely a mix issue. Look, what we're seeing now is that as we continue to grow our large and complex business, that business just tends to be having a much higher average cost or average revenue per file. And as a result of that, we're seeing definitely, as that business -- the growth of that outpaces the other parts of North America Loss Adjusting, we will continue to see that. Also the strength was more in the U.S. versus Canada where we tend to see larger sized claims versus, say, in Canada where the claim size is smaller in terms of the revenue that those claims produce for us. And so I think that's the big push. We've also seen in Canada some weakness in our TPA business, which tends to have much higher claim count compared to, say, what we see in the U.S. So it's absolutely a mix issue. And look, I think that we will continue to see that, right? Whether we'll see that at the same magnitude as we saw or not, time will tell. But our large and complex business continues to be extremely strong. And even on the volume side, we're tending to see claims which are a little bit larger in terms of the revenue that they create.

One thing I'd add to that is -- one thing I'd add to that, Mark, is it's not just a North America Loss Adjusting phenomenon. Actually, our cases in each of our segments are down while our revenues are up. And you kind of have the same sort of mix issue where maybe we had takeover cases in the prior year that weren't present this year; the number of looks, there's variability there year-over-year. And some of our revenues are generated by us providing staff to our carrier clients and that revenue is not denominated in claims. So we particularly see that in the networks business within Platforms where revenues can be up materially and there won't be any cases associated with it because our folks are working within the carrier's offices on their systems.

Thank you for that. And then on the Platform systems, how much more build-out is there? You've got the increased market share you highlight with the two carriers you're onboarding, onboarding another carrier. Is there -- how much growth is in the pipeline, so to speak, as you continue to ramp those relationships? Or are you at kind of stability with some of them and it was the benefit of the CAT this quarter that drove the top line growth?

Mark, there's definitely a benefit of CAT that drove the top line growth. There's no question about it. But I think as far as the opportunity is concerned, we believe that there is still significant opportunity in the network business to continue grow. The two clients that we already have, there's still headroom for us to scale with them. You called it right. We've added a third client, which we are scaling and will likely add more. There's certainly more that we can do on the looker side of our business. So I think there is still quite a lot of headroom for us to grow there. That business will continue to be dependent significantly on weather. So the individual quarterly revenue on that will depend on how much weather we saw. But I think at this point, what we're trying to do is we're trying to onboard as many clients as we can. And be as we move forward and we drive greater quality in our CAT execution, we should start to see more traction of market share in that business. So I feel extremely excited about that business in terms of the growth prospects ahead of us and certainly don't believe that it's tapering by any stretch of the imagination.

And you had mentioned -- last question. You had mentioned work or potential work with MGAs or other third parties. Could you expand on that a little bit? How meaningful, if at all, is it in your current book of business? And how real are those prospects?

Yes. I would put that all in what we call alternative market segment. And it's not -- it's there in our book today, but it's probably not as meaningful as we'd like it to be. There is -- if you look at the market, there is a consistent increase happening in MGAs and alternate market sort of activity. You're seeing more captives being formed, you're seeing more MGAs being formed. And a lot of them are looking for unbundling of claims, meaning the places where they're getting the paper from is different from where they want to place their claims. So I think that is a trend that will continue, particularly given the harder market on the P&C side, as I'm sure you're covering for your carrier clients. And as a result of that, the clients would like to take on more risk and will use different vehicles to take on risk. So us being present there as the chosen claims provider for that is pretty important. So I just want to make sure that we, as a claims company, is capturing that aspect of the market going forward. And having the kind of capabilities that we have in Broadspire like digital capabilities, like med management and coupled with that, the capabilities to handle field claims as well as large and complex claims I think places us very uniquely in the market to serve that segment.

Understood. Thank you very much.

Thanks, Mark.

And there are no further questions. I'll pass the call over to Mr. Verma for closing remarks.

Thank you, Brian, and thank you all of our employees, our clients, our shareholders, for your continued commitment to Crawford & Company. Our fantastic start to 2023 provides strong momentum for the rest of the year and beyond. As always, we wish you well and look forward to taking you along on the journey with us. Thank you and God bless.

Thank you for participating in today's Crawford & Company legal conference call. This call will be available for replay beginning 11:30 a.m. Eastern today through 11:59 p.m. Eastern on June 4, 2023. The conference ID number for the replay is 184847#. The number to dial for the replay is (877)674-7070 or (416)764-8692. Thank you. You may now disconnect.