CorVel Corp (CRVL) 2014 Q1 法說會逐字稿

Thank you for standing by. Welcome to the CorVel Corporation earnings release conference call. During the course of this conference call, 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 events or results may differ materially.

CorVel refers you to the 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.

At this time, all participants are in a listen-only mode. A question-and-answer session will be conducted later in the call, with instructions being given at that time. As a reminder, this conference call is being recorded.

I would now like to turn the conference over to your host, Mr. Gordon Clemons. Sir, please go ahead.

Thank you for joining us to review CorVel's June quarter. Revenues for the June quarter were $118 million, 13% over the $105 million in revenue for the June 2012 quarter. Split adjusted earnings per share for the quarter ended June 30, 2013, were $0.40, up 38% from $0.29 in the same quarter of the prior year. During the quarter, the stock was split two-for-one. I would also note that the June quarter contained an extra workday compared to the March quarter and is also aided by seasonal reductions in unemployment taxes.

The quarter's EPS results reflected improved results in our Network Solutions service and the ongoing growth of our Enterprise Comp product line. Our TPA business continues to grow at more than 20% per year. Network Solutions has begun to respond to our increased investment. Corporate overhead, down year over year, is now increasing modestly as we expand investments in systems and software.

The market for our services has continued to be more active than it was during the recession and the ensuing extended recovery. Employers, hunkered down during the weak economy, have begun to explore the next phases in the development of their programs. Broker recognition of CorVel's services has also improved, opening more opportunities for the Company.

The Affordable Healthcare Act implementation has raised uncertainties, and as we've seen recently, may be accompanied by postponements or other disruptions. The Act has heightened the focus on containing healthcare costs. Our customers are exploring innovations which strengthen their management of costs. Healthcare inflation has slowed, but the overall cost level of healthcare remains a key issue.

We have adjusted our strategic plans to place more emphasis on our opportunities in both the private and public sectors in the healthcare marketplace -- that is, as distinguished from the worker's compensation marketplace. Expansion continues in our Medical Review for facility-based healthcare.

More specifically, in the first quarter of fiscal 2014, our Enterprise Comp -- that is, our full-service worker's compensation TPA offering -- continued to add new volumes in the quarter, gained market recognition, and added new customers. The first year in a typical new TPA account can have modest revenue if open claims from the prior years are not immediately transferred to CorVel. As such new accounts mature, though, the volume of claims under CorVel's management grows. This adds managed care revenue in a pattern which lags the sale of new accounts. Consequently, our revenue growth in this business tends to trail the account acquisitions. After a delay, though, this effect causes some tailwind in the business.

Network Solutions improvements gained some pace in the quarter. Case Management was modestly stronger in the quarter as well. As I mentioned earlier, we've begun increasing the pace of growth in our systems resources. Software investments continue to cross all services. We are also implementing newer forms of software languages, hardware, and other forms of foundational technology.

From a strategic perspective, our long-term strategy remains to invest in technology as the cornerstone of our business development. As CorVel grows, our ability to make such investments grows as well. Our business strategy has evolved somewhat over the last year. We are expanding our investments in Medical Review and in provider networks. The Enterprise Comp TPA area will require continued development, but is more established each year.

The Affordable Healthcare Act has increased customer interest in CorVel's Medical Review services. The application of Review services is impacted by government regulation, and this legislation has introduced a period of real change. The Act adds perhaps 30 million to the covered lives population, and the impact of that is going to flow through both the provider community and the payer cost structures.

CorVel has services with application in each of the segments of the regular healthcare market. We've expanded our strategy beyond the casualty market and are adding to our investments in targeted subsets of the accident and health markets.

Investments in our Enterprise Comp total worker's compensation solution continue. Leveraging CorVel's integrated service platform continues to be a strategic strength of our position in the casualty market. Our strategy in this market segment is to continue to invest in improvements to the service. We believe we've established a superior service model and have additional key improvements in development.

Mobile computing, new three or four years ago, is now reaching the development phase, for a number of the obstacles to its effectiveness are beginning to be addressed by the constant releases of new technology. Our strategic move into this segment has been a success, and we are now moving into the early development phase -- or from, rather, the early development phase -- into one of market recognition and acceptance of our offering.

We are continuing the expansion of our Liability Claims Management services and expect the growth of Enterprise Comp sales to be followed by other future extensions to this Claims Management product line.

Now I would like to discuss our product line results. Patient Management revenue for the quarter was $61 million, an increase of 16%. Profit increased by 27% over the June quarter of 2012. Patient Management includes our full-service worker's compensation solution and our traditional Case Management product.

Our Enterprise Comp product has continued to mature, both in its content and in its role within our organization. This segment within Patient Management is the most dynamic within CorVel. Our expansion phase in this segment is on track, and we expect the results to continue to increase as a percentage of the Company's operations.

Our Case Management business was pressured somewhat during the recession and the ensuing soft labor market, but has been improving recently. We have invested in mobile computing applications for this service and will be implementing some new capabilities later this year. The mobile platform improves the value of the service by improving the immediacy of the information the service produces for claims professionals. We have software initiatives underway. We expect to improve the effectiveness of this service in Claims Management.

Network Solutions revenue for the quarter was almost $57 million, up 9% from the same quarter of the prior year. Profit was up 11%. Results in Network Solutions are influenced by any new or lost sales and can therefore be more bumpy than those in other services from CorVel. This product line continues to include significant proprietary strengths, which in turn create strong results for our customers. We see opportunities in bill review, provider network, and evolving forms of review. Our MedCheck system has always been one of the Company's most valued assets. It is now well along in a complete rewrite to incorporate the latest in software technology.

Product development remains very active, with a full backlog. Today I'll update you briefly on the project areas I've discussed over the recent past, and I'd like to also give you a brief picture of how our technology has changed the operating structure of our enterprise.

The June quarter continued the project areas we discussed last year; that is, (a) claims intake and related workflows in claims administration, (b) new claims system features, (c) making our Web portals more friendly, (d) Network Solutions investments, and (e) adding foundation strength to our systems and data centers.

Claims intake sets the table for Claims Management. This effort is focused upon meaningfully improving the immediacy of service on all new claims. We are also improving workflow management by integrating all intake services with the early stages of Claims Management.

Projects in the new claims systems features area tend to unbundle the Claims Management function, allowing us to use workflow management to bring specialization of labor to the Claims Management function. We have meaningful improvement to our Claims Management process we expect to implement later this year and into the new calendar year. We expect this initiative to improve the power of our integrated service model.

More friendly systems interfaces for our customers will improve the use of our product. This is an ongoing effort and will be aided in the next year or so by new forms of mobile computing. We have a new release of our Case Management application, for example, coming in the fall.

As I discussed earlier, Network Solutions is undergoing a major rewrite. This began a couple of years ago and will stretch through 2014 calendar year.

Investments in the foundations to our systems include a new data center we're in the process of standing up, expansions to our use of dotNET software and Web services, a gradual inclusion of new programming languages and tools, as well as continuous improvements to the hardware we employ.

Systems have increasingly modified how CorVel is structured. We began as a network of branches, each operating on a local minicomputer. In those early days, we connected our branches with a somewhat limited network. Over the years, we have evolved to a more centralized computing format networked to local area networks in each branch.

As workflow management grew in strength, we began hubbing some of our activities and also started using call centers. Today we operate more and more hub services, although always networked to our branches. Our branches are critical to our marketing model and still do quite a bit of our services.

At this point, though, almost one-third of our revenue comes from hubbed activities. We've done this while stubbornly hanging onto our culture of local service for the customer and local commitment from our management teams. We now use call centers to bring specialty capabilities to our customers.

The early investments we made in sophisticated financial reporting have paid off for us. Our goal is to continue to increase the sophistication of our call center and hubbed activities while maintaining our local presence in as many markets as possible.

I'd now like to add a few additional statistics for the quarter. The quarter ending cash balance was $25 million, and our days sales outstanding in accounts receivable was 39 days versus 40 a year ago. 286,000 shares were repurchased in the quarter. We have returned over $309 million to shareholders in the last 16 years and believe this is the most flexible form of shareholder return, in that it allows those shareholders who wish to remain in investment to hold larger percentages of the Company without triggering taxes, as cash dividends would. Those who prefer cash dividends can sell a pro-rated portion of their shares and achieve a cash dividend.

Shares outstanding at the end of the quarter were 21,301,000, and diluted EPS shares were 21,584,000 for the quarter. Shares were reduced 5% this quarter over the same quarter of the prior year.

I'd now like to turn the call back over to the operator for the question-and-answer period. Thank you.

Ladies and gentlemen, we will now begin the question-and-answer session. (Operator Instructions.) Sir, there are no questions at this time. Mr. Clemons, do you have any further comments?

Yes. I would just like to thank everyone for joining us today, and since a lot of our audience are made up of associates of CorVel, I would like to take this opportunity to thank them for all their work this last year, and especially in this last quarter. We're involved in a very unique time in healthcare, and I think we all have a chance to make a difference, and it's a pleasure to be associated with all of you. And I think we're in for an interesting time. We look forward to talking to the investors again in another quarter. Thank you.

Thank you. This concludes our conference call for today. Thank you for your participation. Please disconnect at this time.