Good morning. My name is Sylvie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Crawford & Company Third 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, Tuesday, November 7, 2023. Now I would like to introduce Tami Stevenson, Crawford & Company's General Counsel.

Thank you, Sylvie. 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 unanticipated events. In addition, you are reminded that the 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 to the company's Form 10-Q for the quarter ended September 30, 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. This presentation also includes certain non-GAAP financial measures as defined under the 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 2023 earnings call. Joining me today is Bruce Swain, our Chief Financial Officer; Tami Stevenson, our General Counsel; and Joseph Blanco, our President. After our prepared remarks, we will open the call for your questions. Before I review our results, I would like to take a minute to acknowledge the heightened conflict currently ongoing in the Middle East. Our thoughts are with all of those directly impacted, and we join the world community in our desire for peace in the region. Let's turn to our results now. This was an excellent quarter for Crawford where we achieved record consolidated revenue and saw continued growth and profit expansion. We still have a lot of work to do, but this is a clear indication that our operational strategy is working, and we're making progress on our strategic initiatives across our business. As a reminder, Crawford is one of the world's largest providers of claims management. We operate globally, manage over $18 billion in claims annually and have approximately 10,000 employees and thousands of field resources. Our customer base is diversified and growing, including a wide spectrum of brand names who increasingly rely on Crawford as a claims solution provider. Our established partnerships are strong and getting stronger. And we have made meaningful strides acquiring new clients and establishing a leadership position. This has further reinforced my belief in the long-term growth opportunity for the business. There are multiple reasons that we're optimistic about our long-term growth prospects. First, globally, weather-related catastrophes are becoming more prevalent as floods, wildfires, hurricanes and other serious weather activity are increasing in both severity and frequency. That said, some years include multiple severe weather events and other years do not see any severe events. For example,…

Thanks, Rohit. As most of you know, we report our business in 4 operating segments. North America Loss Adjusting encompasses primarily our loss-adjusting business in the U.S. and Canada. Our International Operations is comprised of all reported service lines outside of North America. Broadspire is our TPA in the U.S., and Platform Solutions includes Contractor Connection, our Networks business, including catastrophe and WeGoLook, as well as our Subrogation business. As you can see, revenue contribution is fairly evenly spread across the reportable segments. Beginning with North America Loss Adjusting, we achieved revenues of $79.4 million, representing 19% year-over-year revenue growth. Operating earnings were $10.5 million, and we expanded our operating margin by 758 basis points. Strength in the quarter was driven by specialist adjuster additions. We have added approximately 60 adjusters year-to-date, which has enabled us to increase our coverage density in the U.S. and subsequently capture market share. Additionally, third quarter revenue increases are attributed to a meaningful increase in new account nominations and increased utilization of both GTS and field ops. Our International segment achieved strong results, indicating that the business has bounced back to a stable and healthy level post-pandemic. Third quarter revenue was $98.1 million, and operating earnings were $2.2 million. Our revenue growth was a very strong 14% over the prior year's third quarter, and operating margins expanded by 680 basis points. We are seeing the result of our actions to improve pricing and productivity in our International business, in addition to continued growth in our U.K. TPA and major loss businesses, large loss performance in Latin America and growth in high-margin countries in Europe. We have room to improve volumes and grow in Asia, which saw a weaker quarter, and our Australian business faces a tough comparison to 2022 cat activity. Overall, a strong…

Thank you, Joseph. Company-wide revenues before reimbursements in the 2023 third quarter were a new quarterly record of $325.6 million, up 10% from $294.9 million in the prior year third quarter. Foreign exchange rates increased revenues before reimbursements by $600,000 or less than 1%. GAAP net income attributable to shareholders totaled $12.3 million, increasing more than $27 million from a loss of $15.1 million in the same period of 2022. GAAP diluted EPS in the 2023 third quarter was $0.25 for both CRD-A and CRD-B compared to a loss per share of $0.31 for both share classes in the 2022 period. On a non-GAAP basis, diluted EPS was $0.35 for CRD-A and $0.36 for CRD-B compared to $0.15 for both share classes in the prior year period. The company's non-GAAP operating earnings totaled $29.9 million in the 2023 third quarter or 9.2% of revenues, more than doubling the $13.7 million or 4.6% of revenues in the prior year period. Consolidated adjusted EBITDA was $38.6 million in the 2023 third quarter or 11.9% of revenues compared to $21.4 million or 7.2% of revenues in the 2022 quarter. I will now review the third quarter performance for each of our segments. North America Loss Adjusting revenues totaled $79.4 million in the 2023 third quarter, increasing 18.8% from $66.8 million reported in last year's quarter due to new account nominations and increased utilization of our expert adjusters. The segment reported operating earnings of $10.5 million in the 2023 quarter, increasing from $3.8 million reported in last year's quarter. The operating margin was 13.2% in the 2023 quarter compared to 5.6% in the 2022 quarter. International Operations revenues totaled $98.1 million in the 2023 third quarter, up 13.9% from the $86.1 million reported in last year's quarter. On a constant dollar basis, International revenues…

Thank you, Bruce. This quarter has demonstrated that our operational strategy is clearly working. Crawford has exhibited unwavering resilience and adaptability, fostering a culture of innovation and efficiency, which has continued to drive our sustainable growth and reinforced our position as a leader in the industry. Our strong financial results and liquidity provide us with the flexibility to grow our market share as we continue to invest in our industry-leading capabilities. Our remarkable new account wins have resulted in a record quarter for our U.S. businesses, and our International business has demonstrated a strong turnaround. We will continue to leverage these new and existing customer relationships in order to create deeper and more durable partnerships. Our robust financial results underscore our commitment to strategic execution and operational excellence as we remain steadfast in our dedication to delivering exceptional value to our clients and shareholders. Thank you for your time today. Sylvie, please open the call for questions.

[Operator Instructions] And your first question will be from Mark Hughes of Truist.

The Broadspire segment does some real standout performance this quarter. But this gross profit, was this an unusual mix of business? Or is this kind of little mid-double-digit profitability, is that sustainable?

We believe it's sustainable. I mean as Broadspire, as you know, is one of our more resilient businesses from a weather perspective, obviously, there is almost no dependence on weather. And then as you know, we've been investing significantly in technology. We're starting to see those results. Also, we're starting to see a return of our Medical Management business, which is almost at the same level this year back to where it used to be pre-pandemic. We still believe that there's more room to gain on the medical bill review side, but the overall Medical Management business is roughly on par with what it used to be in 2019. So we believe that this is a pretty durable profitability number. Obviously, there is some help from the interest rate environment in that, and we expect that to continue in the near term. But overall, we feel a good trajectory and trend on our Broadspire business.

But likewise, North America, the loss adjusting margin was as good as we've seen in quite some time. Anything unusual about that mix? I hear that your -- your point about hiring more technical adjusters and the higher utilization, is this -- likewise, is this something that's sustainable?

Yes. And Mark, you'll recall that when we had discussed our strategy back in 2020, we had talked about specifically focused on our North America Loss Adjusting business, growing the bench of experts on the complex side and then deploying technology on the volume side as well as other efficiency gains on the volume side. All of those things are starting to take effect. As you know, obviously, this business gets impacted significantly by weather. But we're seeing that on our large and complex business that we call GTS, that we've got pretty good strength in that business and sustainability in that business. The volume business will fluctuate a little bit with weather events.

And then on Broadspire, any comments on frequency or severity around workers' comp? I think you're certainly being helped by new business, but is the medical case management, is it being driven by uptick in, I guess, either frequency or severity with your existing clients?

I don't know if I can comment on the frequency and severity. I think it's hard for me to do that, but we're definitely seeing that the slowdown in the medical case management that happened during COVID, that has certainly gotten better. And we're seeing a lot more people now going back into the medical offices than they used to. And then we've also been leveraging quite a lot of our technology to make sure that we are identifying cases where an early medical intervention can actually help the case move faster and better through the process. Bruce, I don't know if you want to add anything to that.

No, I think that covers it.

Yes. And then on the pension, any thought of doing any kind of risk transfer with that? You're not fully funded as of yet, but $25 million feels like something that could be manageable. Is that something that you even consider? Or is that you're happy to progress as you have been?

Yes, it's certainly something that we've considered. What we have done over the past several years is annuitized certain portions of the pension plan. So we've kind of systematically been cutting the tail off of the plan and transferring liabilities to insurance companies along the way. So I think we'll continue to do that as we go forward to reduce the amount of the benefit obligation and reduce some of the volatility associated with the plan. Although having said that, I mean the plan is fairly well immunized from interest rate changes, and we feel good about the position of the plan relative to market risk.

[Operator Instructions] And your next question will be from Kevin Steinke at Barrington.

I wanted to follow up on the North America Loss Adjusting business and the strength there. You mentioned new client wins and new account nominations. Just wondering how we should think about that in terms of how broad-based those wins were. Are we talking about addition of large clients seeing some new business activity in the small and midsized market?

Yes. Kevin, this is Rohit. So we've -- particularly in our large and complex segment, which we call our GTS business, the account nominations have been very, very strong. It's something that we focus on, and adding the experts gives us the bench to go after these account nominations. So we feel that, that business is strong, and we see trajectory of that business to grow. On our field operations business as well, we believe that there is significant opportunity for us. We are still in the low- to mid-single digits in market share. And we have a very pronounced strategy there to continue to penetrate what we call the regional company America. So we believe that we will continue to see growth in that business. And as I've stated before, that business is quite susceptible to the changes in weather. The third element in that business is Canada. And Canada has been going through a very low frequency environment. We did see some cat activity there, but really did not result in too many claims. And we believe that there's an opportunity in Canada as well for us to continue our strategic position there. Overall, if you go back to our strategy that we shared in 2020, we had talked about margin expansion as well as mid-single-digit growth. So far, we've exceeded on both fronts. And we expect that over the cycle, we'll get there somewhere.

Okay. And yes, you mentioned there, I was going to ask you about that, the longer-term kind of mid -- low- to mid-single-digit growth for North America Loss Adjusting, but clearly, you've been exceeding that, growing more at like mid to high teens. And outside of the upcoming fourth quarter here, where we have some just weather-related comps, I mean do you think there's some legs to sustaining growth above that low- to mid-single-digit target over the next few quarters or the next year?

I believe so. I mean notwithstanding the tough comparisons because of weather, I believe that there is still quite a lot of gas left in the engine for us to throttle it up.

Okay. Great. And also following up on Broadspire, certainly strong performance there. And you mentioned new business development efforts driving that growth. What stood out to me was the strong sequential growth in both revenue and operating earnings and operating margin for that segment. So was there some sort of new business wins, larger contracts ramping up in the quarter that led to that strong sequential increase?

Yes, I would attribute that to 3 things. One, we have had some initiatives to improve profitability by the use of technology. That certainly is starting to gain some critical mass or you're starting to see it in the numbers. Second, we have had a strong sort of new business -- several quarters of strong new business wins, which is what is leading to a full year of our largest -- almost largest new business win here. And then third is that we've also been working on right-pricing some accounts that needed the pricing shift, and we've been successful in doing that. So we believe the profitability is coming back in line with where we expect the profitability for this business to be. And then, obviously, the fourth, which is not something that we control, but it's the interest rate environment. That has helped us.

Okay. How meaningful is the interest rate piece when thinking about the profitability for Broadspire?

It's a contributor, but the majority of the increase in profitability is coming from the core underlying business.

Okay. Great. Certainly another nice profitability and improvement year-over-year for the International Operations. Just on a sequential basis, there was a bit of a step-down in the operating earnings. I don't know if there's anything to call out there or kind of what the pattern might be like going forward. If we should expect some just quarterly ups and downs with the continued up into the right over the long term?

That's how I would look at it. I think over the long term, it would continue to be on an upward trajectory. You might see some quarterly ups and downs. As an example, we had a pretty large event in Australia that we worked through all through the year, and that event has largely been tailing off. So you will see some impact of that. We also had some events early in the year or late last year and early this year in the U.K., which were also starting to tail off. So I think it's more that than anything. We still believe that there is more room for us to improve International, and that's what we're going to continue to work on. And that's what gives us the confidence that we'll continue to move it in the, as you said, the upper-right quadrant.

Okay. And just on the comments around the fourth quarter we're in here and the difficult weather-related comps. Bruce, I think you said $40 million to $50 million of revenue, $10 million to $15 million of operating earnings in the year-ago fourth quarter that won't recur. If I look at the more weather-sensitive segments, North America Loss Adjusting had an $11 million sequential revenue increase in the year-ago fourth quarter and then the Networks line was about, I think, $15 million sequential increase. So should we think about those 2 particular business lines seeing sequential declines in this fourth quarter of 2023? Or where -- I assume that's kind of where the weight of the absence of revenue is going to fall.

Yes, that -- the $40 million to $50 million and the $10 million to $15 million in operating earnings is related to the North America Loss Adjusting business and then Networks component within Platforms. So it's not our International business. It's certainly not the Broadspire business. So that's how you should think about that.

Okay. Yes, lastly, I wanted to ask about, you had a favorable adjustment to contingent consideration, which is indicative of the prior acquisitions that you made are performing well or better than expectations. So I don't know if there's any particular businesses to call out there that have been performing well? Or what -- if there's anything in particular you'd want to highlight there.

Yes. I mean I think one to call out that's been a strong performer for us and was a strong performer in the third quarter is the Subrogation business that we purchased a few years ago. They've had a -- they've been performing very well. But a number of our acquisitions have done well. And that adjustment that we made in the quarter just wasn't related to the Subrogation acquisition. It was -- it included other businesses that we've purchased as well.

Okay. That's good. Well, I might as well ask then just about your view on acquisitions and the acquisition pipeline. I guess it's been a little bit of time since you've done a deal, but just what you're seeing out there and what might be attractive.

We're -- on the acquisition pipeline, I wouldn't say it's as robust right now as it used to be, say, 2 years ago, and that's mainly reflective of the deal flow in the market than a change in our posture. We continue to look for acquisitions, which will add a specific capability to us that we can scale across our platform and the valuation is attractive from our standpoint. So we'll continue to be -- we'll continue to have a very discerning attitude towards acquisitions as we've had. And we've got plenty of capital capacity to make the acquisition if we need to, but it needs to be the right acquisition. So that's the discipline that we'll continue to maintain.

And at this time, we have no other questions registered. So I would like to turn the call back over to Mr. Verma.

Thank you, Sylvie. Let me first thank all our employees, our clients and shareholders for your continued commitment to Crawford & Company. Looking ahead, we are resolute in our efforts to navigate the dynamic landscape of the industry, leveraging our new expertise and harnessing emerging opportunities for continued success and sustainable growth in the quarters to come. Thank you, and God bless.

Thank you. Thank you for participating in today's Crawford & Company conference call. Note that this call will be available for replay beginning at 11:30 a.m. Eastern today through 11:59 p.m. Eastern on December 7, 2023. The conference ID number for the replay is 766677#. The number to dial for the replay are (877) 674-7070 or (416) 764-8692. Thank you again. You may now disconnect.