CorVel Corporation
Q1 2018 Earnings Call Transcript

Published: 1 Aug 2017

[Operator:]

Thank you for standing by. Welcome to the CorVel Corporation Quarterly Earnings Release Webcast. During the course of this webcast, CorVel Corporation may make projections or other forward-looking statements regarding future events or the future financial performances of the company. CorVel wishes to caution you that these statements are only predictions and that actual event or results may differ materially. CorVel refers you to these documents the company files from time-to-time with the Securities and Exchange Commission, specifically the company’s last Form 10-K and 10-Q filed for the most recent fiscal year and quarter. These documents contain and identify important factors that could cause the actual results to differ materially from those contained in our projections or forward-looking statements. I would now like to turn it over to Mr. Gordon Clemons.

[Gordon Clemons:]

Thank you and thank you for joining us to review CorVel's June quarter. As we did last quarter, I'll discuss an overview of our results and summarize the status of the markets, in which we operate and Michael Combs, our President will then discuss our operating results, the status of our product development and the additional statistics we include each quarter. Earnings per share for the quarter ended June 30, 2017 were a record $0.46, an increase of 22% from the prior year. Revenues for the June quarter were 137.6 million, 7% above the 128.5 million for the June quarter of 2016. Our network solutions services had improving results in the quarter. The enterprise comp TPA offering continued its growth with improving margins. G&A in the quarter was in line with expectations. Our R&D programs remain a bright spot. We have three important application launches scheduled for the second half of this year and early into next year. These focus on key aspects of our business and I believe will strengthen our competitive advantages. We look forward to presenting these in the marketplace. Today, I'd like to discuss our markets in the context of the emerging next generation of our industries service models. For many years service bureau, vendors brought specialty services to carriers and employers. This was true of the workers' compensation market but it was also true of all industries. Service results were communicated in month-end reports or small individual claims reports specific to individual assignments. Systems interfaces were seldom active and remain today on data DDI format. Advancing systems technologies next introduced an era of [indiscernible] [00

[Michael Combs:]

Thank you Gordon, I will begin by reviewing our product line results. Patient management includes third-party administration; TPA, services and traditional case management. Revenue for the quarter was 76.4 million, up 7% over the same quarter last year. Gross profit increased 16% from the June quarter of 2016. PPA Services had a nice increase in the quarter, while our case management business fell short of expectations. We have a number of operational and product development enhancements underway to improve results in this area of patient management. Independent actuarial studies have begun to report our results, exceeding the averages in our industry. Our integrated solution in combination with better management of early and late stages of claims is producing superior outcomes for our customers. Network solutions revenue sold in the wholesale market was 61 million for the quarter, up just over 7% from the same quarter of the prior year. Gross profit in the wholesale business was up 10% year-over-year. The release of the new Edge adjuster workstation increases the value of the medical review services that we provide to carriers. That coupled with our performance advantage will, we expect, help us to increase market penetration. The CERiS service line had some nice account wins in the third-party administration segment of the market. CorVel’s pharmacy benefit management services had a nice increase in revenue. This service is integrated with the Edge workstation to facilitate improved management of pharmacy programs. Pharmacy is an area of concern for employers, particularly the risks posed by excess consumption of opioids and the associated costs. CorVel’s pharmacy management programs include prospective management tools to address this important exposure. The review of specialty drugs and an expanded pre-authorization program are integrated with the Edge. Our product development efforts had a productive quarter. We are very pleased with the work being delivered by our product development team. Having a strong team combined with modern systems and the right vision is yielding outcomes that are further differentiating CorVel in the market. Broad areas of a focus include increasing the value of the medical review services that we deliver to the carrier market, the evolution of our hubbed activities, smart technology and business process workflow, laying the foundation for the next generation of medical review, ongoing improvements to our claims intake, medical review, PPO and return to work processes. In the quarter, we continued adding functionality to bring clients into our claims environment. We see a growing integration of our work with that of our employer customers. Each of the steps towards a more seamless integration of the tasks involved in risk management opens more opportunity for us to apply our expertise and yet to work more closely with employers to best address the healthcare needs of their employees. Work on the first phase of our new adjuster interface progressed nicely with a significance queue of compelling functionality plan for the Edge, selecting those features from our list to include in the version targeted for release this month was challenging. This will be a very active and exciting area for us for the foreseeable future. Work continued on improvements to claim intake. We have had -- we have an ambitious project underway to simplify intake and ensure that the right resources are engaged in a seamless process to assist the injured employee and increase the likelihood of an optimal outcome for each incident received. Development work was completed for our new return to work module, which will be released this month, ensuring that the adjuster is presented timely and actionable Return-to-Work information for each claim will improve overall outcomes. We added additional classes of rules to our repricing engine. Identifying additional edits to be applied in our medical bill review process is an ongoing effort. The combination of our proprietary rules engine, business process workflow and professional review is yielding outcomes exceeding industry averages. We continued plans for further expansion of our web service capabilities. The more we can work interactively and in real time with the systems used by our wholesale clients, the easier it is for them to receive good value when outsourcing tasks. Value is realized through better outcomes as well as an increase in process efficiencies. Now, I'd like to cover a few additional statistics. The quarter ending cash balance was 35 million and our DSO, that is days sales outstanding, and receivables was 41 days, down two days from last quarter. 249,000 shares were repurchased in the quarter for 11 million. We have returned 431 million to shareholders in the last 20 years, repurchasing 34,900,000 shares. Shares outstanding at the end of the quarter were 18,738,000 and diluted EPS shares were 19 million for the quarter. Shares outstanding were reduced 4% from last year. That concludes our remarks for today. Thank you for joining us. I’ll now turn the call over to our operator.

[Operator:]

This concludes today’s webcast. You may disconnect your lines at this time.