Crawford & Company (CRDB) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Crawford & Company 2020 Annual Meeting of Stockholders -- I mean Shareholders. I will now turn the conference over to Charles Ogburn, Chairman of the Board. Sir, the floor is yours.

Thank you. Thanks, Chris. Good afternoon, ladies and gentlemen. I am Charles Ogburn, Non-Executive Chair of the Board of Directors of Crawford & Company, and I will be serving as Chair of this meeting. It is a pleasure to welcome you to our 2020 Annual Meeting of Shareholders, which is being held virtually this year. Before we go any further, I would like to introduce the other members of the Board who are all joining us also virtually. They are Jesse Crawford; Harsha Agadi; Lisa Hannusch; Michelle Jarrard; Inga Beale; Rahul Patel; Jesse Crawford, Jr.; and Rick Williams. Also present today are Joseph Blanco, our General Counsel and Corporate Secretary, who will record the minutes of this meeting. [ Cindy Gasmi ], the representative of EQ Shareholder Services (sic) [ EQ Shareowner Services ], who is our Inspector of Election; and Randy Gregson, the representative of Ernst & Young, Crawford's Independent Auditors. I also wanted to point out that any presentation you see on your screen is advanced by each of you so you can click the arrows to go forward or backward as the meeting progresses. At this time, I would like to call upon Mr. Blanco to make his report.

Thank you, Mr. Chairman. I present a proof by affidavit, the notice of this meeting has been duly given and that a proxy statement has been mailed to every holder of record of the Class B common stock of the company as of March 20, 2020. I also report that an amended notice was filed with the SEC on May 6, 2020, converting this meeting to a virtual meeting. The Inspector of Election, [ Cindy Gasmi ] of EQ, has signed and filed a certificate with me stating that the holders of a quorum of the Class B voting stock are present in person or are represented by proxy at this meeting.

Thank you, Joseph. I now declare that the 2020 Annual Meeting of Crawford & Company Shareholders to be officially convened. The first order of business is the election of directors. The Board of Directors has nominated for election the 9 individuals named in the proxy statement to act as directors for the company for the ensuing year or until their successors are chosen. And you can find them listed on Slide 3 of the presentation. They are Harsha Agadi; Inga Beale; Jesse Crawford; Jesse Crawford, Jr.; Lisa Hannusch; Michelle Jarrard; myself Charles Ogburn; Rahul Patel; and Rick Williams. Are there any other nominations for director? Mr. Blanco, have any shareholders indicated that there are additional nominations.

No, Mr. Chairman.

If there are no other nominations for director, I will declare the nominations for director closed and open the floor for any discussion of the nominees. Any discussion or questions on the nominees? If you are a Class B shareholder and have a question, please indicate so by clicking the message icon in the upper right-hand corner of the welcome screen. [Operator Instructions] If you are a registered shareholder of Class B shares and have not already voted, please do so now by following the instructions that are available on the virtual meeting website during the meeting. [Voting]

Joseph, are there any other questions at this time?

No shareholder has filed a question at this time.

Okay. The next item for a vote is proposal #2 in the proxy statement, and it is a proposal to approve an amendment to the Crawford & Company International Employee Stock Purchase Plan. If you have not already done so, please vote. [Voting]

The final item of business is proposal #3 in the proxy, the ratification of the appointment...

Yes, he is probably logged off.

The final item of business is proposal #3 in the proxy statement, the ratification of the appointment of Ernst & Young LLP as independent auditors for the company for the year 2020. If you've not already done so, please vote. [Voting]

I will now take any questions from holders of Class B shares as they relate to the 3 items on which we are voting today or on the voting process. Mr. Randy Gregson is available if the question relates to Ernst & Young. There will be an opportunity after Mr. Agadi's presentation to ask him questions pertaining to his presentation. While the votes are being tabulated, let me have our President and CEO, Harsha Agadi, say a few words about Crawford & Company. Before Harsha begins, I want to take this opportunity to thank him for his leadership of the company over the last 5 years. The company has benefited from his leadership in ways too numerous to catalog. But I'm particularly grateful for his articulating our mission of restoring enhancing lives, businesses and communities and the vision and values that support that mission. I'm excited to welcome him back to his original role as a Non-Executive Director as we will continue to benefit from his talents and energy and his 5 years of day-to-day experience as CEO. Harsha?

Thank you, Charlie, and thank you for the opportunity as well. Thank you, everyone, in attendance across the globe. And I hope all of you are well especially during these COVID times, that's normally the first question we ask each other. This is the first time in Crawford's history as we hold our annual meeting of shareholders virtually. Welcome to our new Board member, Dame Inga Beale, Former CEO of Lloyd's of London, first female CEO in the global insurance and reinsurance market's 325-year history, with an array of international insurance carrier experience that will positively impact Crawford's strategy going forward. She has had the opportunity to run the most complex insurance system on the planet, Lloyd's of London. Going to the next slide, which is Slide 5, I think, in your slides, I just want to take a moment and remind all of you that we continue to manage a very large number of claims, $18 plus billion in claims managed across the globe, primarily in 4 brands. We have about 9,000 employees. It gives me a great amount of pleasure to say we have been very successful during these challenging times to state that 93% of our employees are now working from home very successfully, maintaining the high level of excellent service as we strive to offer our clients. New solutions to help clients navigate this challenging time. Let me give you some examples. Decontamination services from contractor connection, remote claims management from Crawford Claims services, crisis support solutions from our TPA business and business interruption from our CFAS business. Across the board, we have launched a number of solutions or enhanced during these times. We're also shifting focus to reintegrating the task force that is planning for safe openings of offices around the globe. We have a clear white paper with 5 steps on how to safely reopen businesses and it gives me pleasure to say that insurance carriers and Fortune 500 companies are paying heed to our approach, which is careful and thoughtful. Slide 6. To remind all of you of a well-established at this point, our mission, which has even more meaning during this pandemic that is around the planet. And in support of our vision, to be the most trusted source for expert assistance, we'll continue to look for new ways to support clients in the new normal on our values that actually enclosed in the word restored, respect, empowerment, sustainability, training, One Crawford recognition and entrepreneurial spirit is every moment of the day as we go through. And just to remember, our mission to restore and enhance lives, businesses and communities is more applicable now than ever before. Our strategic priority, and this is Slide 7, remains largely unchanged as we grow organically across all our global service lines, 2019 marked an epic year in terms of new client sales, and 2020 has started strong as well. The next one, people and system readiness. Very, very critical. Our mission to be the premier employer in the claims industry continues to be central focused and to drive relentless differentiation through innovation, data and integrated solutions, touchless claims, working remotely. We are known for that, and it is playing to our strong suit. And finally, fiscal responsibility, focusing on maximizing free cash flow and profitability. Unlike many other companies, we have been very conservative with our balance sheet and walked into this environment with very low debt and, hence, able to manage quite diligently through the crisis. Going to slide 8, I just want to talk about the 2019 business highlights, as I mentioned earlier, strongest sales pipeline in the company's history. In addition to that, we won the Allstate contract for daily CAT activity. We're 1 of 2 providers. Allstate is a top 5 carrier, and that business has begun and ramping up inside of Crawford. And we also completed the acquisition of Penta, a European GTS business and doing quite well. In terms of people readiness, our office of diversity and inclusion, is well in place, and I'm proud to say that 42% of our top 100 officers are either women or minority. Just to name a few, in terms of leadership positions: Meredith Brogan, President WeGoLook; Andrew Bart with GTS; Tim Jarman, President of Australia; Lisa Bartlett, President, U.K. and Ireland; Griff Rogers, President of CAT Services; Jack Schafer, CCO for Loss Adjusting U.S.; Maureen Westling, Vice President of U.S. CAT; and Veronica Grigg, President for Asia. As you can clearly see, we are living, talking, doing diversity and inclusion. Our system readiness to touch on our tailored One Crawford solution, whether it's through claims fabric, we have invested in internal systems as well as cybersecurity. And over the last few years, we've demonstrated very, very stringent fiscal responsibility by doing a record year of share buybacks last year, especially, our leverage is now at a 3-year low, our free cash flows are at a 3-year high. If you go to Slide 9, I just want to touch on those 3 factors in a little more detail. If you look at the operating cash flow, from '18 to '19, we have gone from approximately $52 million to $75 million. Debt has gone down from $137 million to $125 million, and that is net debt. And our share buyback has actually gone up each year and 2019 being a record. '19 has had its share of challenges, but Crawford has a much stronger and more determined demonstrating resilience despite the softness due to benign weather in '19 is a clear show. There is a reason this company does exist 79 years later. We talked about our operating cash flow that jumped up almost 44%. It's the best in the company's history. And our prudent expense management continues, combined with our conservative balance sheet. Let me go to Slide 10. Our first quarter results very, very briefly. Revenues exceeded $237 million and net loss attributable to shareholders as per GAAP was $11 million. Our operating earnings non-GAAP was $7 million, and our adjusted EBITDA consolidated on a global basis was $16.7 million. I want to just focus on our 4 boxes as we look forward. We will continue to enhance our market-leading position and focus on the long-term growth strategy, uphold our financial strength and flexibility while preserving long-term value for our shareholders and prudently invest in technology to add value to our customers and maintain a significant competitive edge over our competitors as we provide great solutions. And finally, deliver valuable solutions to our clients and achieve sustained revenue and earnings growth. We will live through our values and our mission statement continuously. Let me go to the next slide. And I'm going to be brief, as Charlie did mention, there were a number of things during my 5-year tenure that we enjoyed as well as celebrated. We developed our mission, vision values. We reorganized into global service lines. We did the acquisition of WeGoLook as well as Penta and divested at GCG, refocusing ourselves in the property claims business and third-party adjusted. In addition to that, we have new One Crawford branding and website, paid down debt significantly and shifting to client-centric approaches and launching multiple verticals with fair amount of strength in those sectors. We continue to invest in innovation, launching RENOVO, RPA, artificial intelligence as well as the first EOW solution; increasing the quality and transparency of communication, internally and externally; establishing strategic pillars; growth, people and system readiness; and fiscal responsibility. We did put a heavy investment in talent and culture, and we now have a focus on developing top leadership as well as middle level management as well as entry level and in addition to that, a lot of celebrations, everything from company picnics, were restarted and the global data service around the world is now recognized across the globe. We relocated our ASC to a single occupancy building that better fits our need, and I'm proud to say that our operating offices, there is more than one today that is larger than our Atlanta Support Center. We were able to ring the bell twice on the NYC, the 75th anniversary as well as 50 years of being public. And I personally had the opportunity visiting over 200 offices in 30 countries. Let me run through the global executive management team. And as you may remember, I did retain Bruce and Daniel long in experience at Crawford & Company and added Larry, Greta, Bonnie and Kieran getting internally promoted while I did bring in Joseph and Rohit to complete the team. Diversity and inclusion became a top priority. And as I said earlier, just on the gem, the top team, 66% of the gem are women and minorities which is probably the highest we see in the insurance sector. Women and minorities make up about 40-plus percent of the next 100, and the Board now has 3 women that, ladies and gentlemen, is a statement of fact. Let me now go to the next slide and with a lot of excitement and encouragement as well as looking forward, I had promised clearly to the Board 5 years ago that we will have a generational change in leadership. As a responsible Board as well as CEO, my congratulations goes to both Rohit and Joseph on their appointment of CEO and President. I leave you with extremely talented and very capable hands. Rohit has served as the company's Global Chief Operating Officer for almost 3 years. His industry experience, be it his work at Zurich or McKinsey or Deloitte, his leadership and client-centric vision makes him an excellent choice to lead Crawford into the future. I am equally excited with the appointment of Joseph Blanco as President of the company. Joseph joined as our General Counsel in 2016, while previously, he was the Managing Partner of the Dentons' office in Atlanta. We look forward to watching his responsibilities expand as he takes on the additional role as President. I am proud of all they have achieved today and have supreme confidence in their ability to lead this organization. Your support of me over the last 5 years have been truly invaluable. I have enjoyed every single day of my time here at Crawford as the President and CEO. I want to thank the gem immensely for supporting me and going along and creating the mission, vision, values and executing with relentless rigor on a daily basis. I want to thank the shareholders who have shown the support, not only over the last 5 years, in some cases, 20, 30, 50 years in the Crawford family, the entire time period. And finally, a massive thank you to all the employees, and I want to thank them here and now for the number of e-mails I have received, wishing me well and thanking me as I revert back to the Board as a Non-Executive Board member. I want to take a minute and thank Charlie Ogburn, our Non-Executive Chairman of the Board. He's been an incredible guide, incredible Chairman and coach at times and has done a superb job overseeing this company, and a big thank you to the Crawford family for placing the trust in me to run the company for 5 years. I'm looking forward to being a mentor and continuing to be part of the Crawford family. I wish you all, strength, coverage, prosperity and happiness now and in the future. God bless.

Thank you, Harsha, my friend. The voting is now closed. If there are any questions for Harsha, we can take them now before I ask Mr. Blanco to announce the preliminary results of the voting. Are there any questions for Harsha? [Operator Instructions] Joseph, are there any questions?

No, we haven't received any questions.

Okay. Mr. Blanco, would you please present the preliminary results of the voting?

Yes. Prior to announcing the results of the voting, I would like to remind everyone that some of the matters we have discussed in this meeting include forward-looking statements that involve risks and uncertainties. The company's actual results achieved in future quarters may differ materially from results that might have been implied by such forward-looking statements. For a complete discussion regarding factors which could affect the company's financial performance, please refer to the company's Form 10-K for the year ended December 31, 2019, 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. Additionally, the reconciliation of non-GAAP measures is provided in the appendix at the end of the slide presentation on your screen. From the total executed proxies in the vote summary report received from EQ Shareowner Services on May 15, 2020, which constitutes a majority of votes, the preliminary tabulation of votes cast showed that each of the Board's nominees for directors has been elected. The amendment to the Crawford & Company International Employee Stock Purchase Plan has been approved and the appointment of Ernst & Young LLP as independent auditors for 2020 has been ratified. These are preliminary findings, and the final vote will be available in the Form 8-K, which will be filed with the Securities and Exchange Commission within 4 business days of today's meeting.

Thank you. I declare that the 9 director nominees named in the proxy statement, each of whom received a plurality of the votes cast, are hereby elected as directors of the company for the ensuing year and that the amendment to the Crawford & Company International Employee Stock Plan -- Stock Purchase Plan is approved, and that Ernst & Young LLP is ratified as the company's independent auditor for 2020. Before we conclude, I wanted to thank Harsha for his service as CEO, and I also want to congratulate Rohit Verma, our new CEO; and Joseph Blanco, our new President. They will take over day-to-day operations of the company at the conclusion of this meeting. I'm excited about the next -- this next chapter of the history of this great company. Is there any further business to come before this meeting? If there's no...

No further business.

If there's no further business, I declare that the 2020 Annual Meeting of Shareholders of Crawford & Company is adjourned. Thank you.

Ladies and gentlemen, this concludes the meeting. You may now disconnect. Have a pleasant day, and enjoy your weekend.