Good morning. My name is Angeline, and I will be your conference facilitator for today. At this time, I would like to welcome everyone to the Crawford & Company Third Quarter 2024 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, the conference is being recorded today, Tuesday, November 5, 2024. Now I would like to introduce Tami Stevenson, Crawford & Company's General Counsel.

Thank you, Angeline. 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 contribution 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 this call or to reflect the occurrence of unanticipated events. In addition, you are reminded that operating results for any historical period are not necessarily indicative of results to be expected for any future period. For a complete discussion regarding factors which could affect the company's financial performance, please refer to the company's Form 10-Q for the quarter ended September 30, 2024, 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 like now to introduce Mr. Rohit Verma, Chief Executive Officer of Crawford & Company. Rohit?

Thank you, Tami. Good morning and welcome to our third quarter 2024 earnings call. Joining me today is Bruce Swain, our Chief Financial Officer; and Tami Stevenson, our General Counsel. Before we start today, I would like to take a moment to comment on the recent devastations in North Carolina and Florida from Hurricanes Helene and Milton. Our thoughts are with all those affected and our staffs are on the ground to support impacted communities as they rebuild. Our thoughts are also with those in Florida and Louisiana, who are preparing for Tropical Storm Rafael as it forms in the Gulf. Our third quarter consolidated revenues were consistent with the previous year's quarter, reflecting our ability to drive continued momentum in our core non-weather dependent businesses. Broadspire achieved a new quarterly revenue record and our international operations also demonstrated revenue growth with margin expansion driven by growth across key markets. That said, our third quarter results similar to the second quarter reflects the lower weather related revenue in our North America Loss Adjusting and Platform Solutions segments contributing to a decline in consolidated earnings for the quarter. Today, I'll walk you through the key operational highlights of the quarter and then I'll turn it over to Bruce for a deeper review of our financial performance. Crawford is the largest publicly traded claims management provider managing over $20 billion in claims each year across 70 countries. We are proud to serve a broad base of clients, including some of the most recognized names in the insurance industry. With a team of approximately 10,000 skilled professionals and tens of thousands of field resources, our scale and global reach set us apart in a fragmented market making us the preferred partner for top carriers, many of whom have been longstanding clients. The longevity…

Thank you, Rohit. As most of you know, our business is diversified and is comprised of four segments. North America Loss Adjusting encompasses our loss adjusting business in the U.S. and Canada and accounted for 24% of our third quarter 2024 revenues. Our international business is comprised of all reported service lines outside of North America and contributed 32% of our revenues. Broadspire is our third party administrator in the U.S. and accounts for 30% of our revenues. And Platform Solutions, which includes Contractor Connection and our Networks and Subrogation businesses contributed 14%. Now let's review each of these segments. Beginning with North America Loss Adjusting, in the third quarter of 2024 our revenues were $79.3 million consistent with the prior year quarter. Operating earnings were $5.4 million, a decrease of 48% from the prior year quarter. This decrease was a result of a difficult year-over-year revenue comparison in U.S. field operations in Canada and increased expenses in our U.S. GTS operations. Within these results, our U.S. GTS service line achieved a record for quarterly revenue and continues to demonstrate solid top line growth with 19% revenue growth in the quarter as we reap the benefits of our ongoing investments in this service line. International operations continues to demonstrate a solid recovery post-pandemic. Revenue for the 2024 third quarter was $105.7 million and operating earnings were $5.1 million. Our revenue grew 8% from $98.1 million in the third quarter of 2023 or 10% when measured in constant currency. Our operating earnings showed a significant increase of more than 130% over the prior year quarter reflecting improved performance in the UK and Europe. We are confident that our strategies to improve efficiencies in key growth areas will continue to position us well for the future. Our Broadspire business set a new…

Thank you, Bruce. As we conclude, I want to emphasize the strength and resilience of our diversified business model. While the quarter presented challenges to North America loss adjusting and platform solutions associated with reduced storm activity, our non-weather businesses continue to drive strong performance and steady growth. The strength of our diversified business lines enables us to mitigate challenges encountered in one part of the business with growth from other segments. Looking ahead, we remain optimistic about our long term prospects. Our teams are well prepared to respond swiftly to any future weather events. Additionally, our strategic focus on non-weather businesses, technology and operational excellence provides a solid foundation from which we can deliver value for our clients and shareholders. We will also maintain our disciplined approach to capital allocation, prioritizing investments that enhance our capabilities and strengthen our market position. I want to take this opportunity to thank our dedicated employees for their hard work. Your commitment to supporting our clients and communities has been remarkable. I also extend my gratitude to our shareholders and partners for your continued trust and support. We look forward to building on our successes as we close out the year and move into 2025. Thank you for joining us today and Angeline. We can now open the call for questions.

Thank you. [Operator Instructions] Your first question comes from the line of Mark Hughes from Truist. Please go ahead.

Yes, thanks. Good morning.

Hi Mark.

Hi Mark.

How much revenue you think might weather revenue might extend in the Q1? I think you described kind of a $20 million to $30 million benefit in Q4 does that – will that cover it or will there be more next quarter?

I would say, Mark, that most of it will get covered in Q4 until we see storm activity from Rafael, which as you know is just forming in the Gulf right now.

Understood. And then the GTS had strong growth there. How much of that is headcount growth versus volume, pricing? Just kind of sense of what's driving that for you?

I would say it's volume growth, but it's driven by the increased headcount which gives us the ability to have the experts on staff and giving us more confidence to our clients to give us larger and complex losses. Pricing, as you know, we have been making sure that we continue to stay price competitive. So, we feel that we've been good on pricing, but the growth is not a pure price play here. It's more of an expertise play.

Understood. How is Broadspire shaping up for a new business? I think am I right in thinking kind of the Q4 into Q1 as their big season for new business? How are you seeing that shape up for 2025?

Yes, I would not say that Q4 to Q1 is necessarily, I mean there are some parts of the business that you're right tend to start in Q1. We're seeing a good amount of RFP activity. We're very active in the marketplace. And we feel we have good momentum on new business. No reason for us to believe any slowdown in 2025.

Okay. And then the corporate expenses, I think some insurance, self-insurance, was there some catch up this quarter, would we expect that to calm down a little bit in the fourth quarter or is this kind of the new normal?

Yes. Hey Mark, it's Bruce. No, we – self-insurance can bounce around a little bit for us. We can see credit some quarters and expenses others. This was not a catch up. We had some higher severity claims in our self-insured medical. That was the primary driver. But we saw a little bit increased frequency in our, a couple of our other P&C lines as well. The other thing that drove the increase in the quarter was we had some higher professional fees quarter-over-quarter which we expect to tamp down as we go into 2025. And we also had some other reserves on assets and severance related costs which is more one time in nature.

Okay. And then on the cash flow front, the compensation was headwind in the quarter. Was that a timing issue? I guess I won't say reverse at any point. Yes.

Yes, I mean, so the cash flow drivers year-over-year are really three, it's a reduction in operating earnings. We paid out higher incentive compensation in 2024 related to 2023 earnings. And so that put pressure on operating cash flow from the first quarter on. And then we've seen an increase in our unbilled revenues related to revenue growth that we've seen in, Broadspire, and GTS and our international business. And that's a timing difference and that's going to reverse and bring our operating cash flow up. As we close the year, we'll be – we're expected to be down year-over-year. I mean, last year 2023 was a tremendous operating cash flow year. So, we'll be down compared to that, largely because our earnings are down. And we had higher cash outflows related to incentive compensation earned in 2023.

And then contractor connection. Do you have the revenue comparison for that specific business for Q3 versus Q3 last year?

Yes. So, it's down, 10% quarter-to-quarter from $19 million down to $17.1 million.

Okay. And then the international operations kind of high single digit growth, pretty steady the last three, four quarters. What are the prospects for that to be sustained?

Mark we believe the international business will stabilize. As you know, we had been working on turning around that business. Again, our push on that business is continuing to improve profitability and continue to diversify our revenue base. That business was helped a little bit by the extreme weather in Europe that we saw, Europe and Middle East that we saw in the quarter. But I think that the growth of that business should stabilize to low single digits.

Thank you. Appreciate it.

Thank you.

Thank you.

Thank you. [Operator Instructions] The next question comes from Kevin Steinke from Barrington Research. Please go ahead.

Good morning.

Hey, Kevin.

Good morning.

Wanted to start off by continuing to talk about GTS. Obviously you've had good success there hiring specialist adjusters. Just wondering what the opportunity is for continued hiring there. I assume it's a fairly narrow set of available talent given that's pretty specialized, expertise. But just wondering what the available opportunities for hiring there going forward as well as are you able to, maybe at times develop those people, turn internally as well.

Hi Kevin, this is Rohit. We are able to do both. We are developing people internally and bringing people in from non-insurance sectors, and coaching them and developing them in the insurance aspect of the business. But we still believe that there is opportunity for us to hire people from the market. We believe that we've emerged as a solid and strong destination for talent and there is quite a lot of movement in the marketplace which has been benefiting us. So, I feel that for the next couple of quarters, I don't see a reason why we can continue hiring.

Okay, good. And obviously you talked about GTS with a quarterly record for revenue and 19% growth for that business is quite impressive. Just wondering how you think about that growth rate for that business longer term, next several years, kind of what would be a more normalized rate of growth?

Yes, I think if you look at the three-year CAGR on that business, it's roughly about 24% to 25%. So, it's come down slightly right now to about 19%. I still think that low-double digits is a decent growth rate for us to have for at least the next year or so.

Okay, sounds good. And obviously you know you talked about continued new business wins. I believe you said $25 million of new and enhanced business

[Indiscernible]

Okay. So, are there any specific wins that stand out there? Is it kind of across the board, or areas of the business that are at particular momentum? I know Broadspire continues to do well, but anything else that you would call out in that mix?

I would say that overall, the U.S. businesses had momentum. So, whether that's Broadspire or loss adjusting via GTS, and our field operations business, as well as even business and platforms, I think, the only reason you've seen a lower expression of revenue is because of the – is because of lack of weather. So, we believe that the winds are pretty secular across the business. U.S. obviously continues to lead the pack of those wins and that's mainly because of the size of the market and our presence in the market.

Okay, understood. International profitability continues to improve nicely. You're around a mid-single-digit operating margin the last couple quarters here. Do you have a sense as to the pace at which margins could improve there and again maybe touch on the longer term margin target for the international operations?

Our longer term margin target for the operation is about 10% operating margin. I think our near term that we've stated even last quarter is that we want to get to a consistent 5% margin which is what we are shooting towards and getting to that we can consistently deliver it as you will see this year we're getting there but we did not deliver that consistently every quarter. Our goal is to get that to be consistently delivering to that level in the very near future with a long-term goal of getting to 10%.

Okay, thanks. And within North American loss adjusting obviously you highlighted GTS there but I know Canada has been a bit softer recently. Has that started to pick up at all or what are you seeing more on the small claim side? I guess that would be more driven by weather, but what are the trends there? Any new business or just trying to dig into the other parts of that North America loss adjusting segment?

Sure. Canada started to pick up. It's still not at the level that we need it to be. And you are right, the lower frequency there hasn't really helped the situation. But we're making some other changes in Canada that we believe position us well for the midterm and we should see continued improvement in Canada in the coming quarters.

Okay, sounds good. Well, thanks for taking the questions. I'll turn it back over.

Thanks, Kevin.

Thanks, Kevin.

Thank you. There are no further questions at this time. I would like to turn the call over to Mr. Rohit Verma for closing remarks.

Thank you so much, Angeline. And thank you to all our employees, clients and shareholders for your continued commitment to Crawford & Company. Thank you so much and God bless.

Thank you. Thank you for participating in today's Crawford & Company conference call. This call will be available for replay beginning at 11:30 a.m. Eastern Standard Time today through 11:59 p.m. Eastern Standard Time on December 5, 2024. The conference ID number for the replay is 04164#. The number to dial for the replay is 1-888-660-6264. Thank you. You may now disconnect.