CorVel [CRVL] Conference call transcript for 2022 q4
2022-02-01 13:13:05
Fiscal: 2022 q3
Disclaimer*: This transcript is designed to be used alongside the freely available audio recording on this page. Timestamps within the transcript are designed to help you navigate the audio should the corresponding text be unclear. The machine-assisted output provided is partly edited and is designed as a guide.:
Operator: 0:04 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 with future financial performances of the company. CorVel wishes to caution you that these statements are only predictions, and the actual events or results may differ materially. 00:27 CorVel refers you to the documents that the company files from time-to-time with the Securities and Exchange Commission, specifically the company's last Form 10-K and 10-Q files for the most recent fiscal year in 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. 00:49 I would now like to turn it over to Michael Combs, President and Chief Executive Officer.
Michael Combs: 0:53 Good morning. And thank you for joining us to review CorVel’s December quarter. Joining me on the call today is Brandon O'Brien, CorVel’s Chief Financial Officer. Today, as usual, I will be reviewing business performance, the current environment and market trends and then move on to system development. Brandon will then provide an overview of our financial results for the December quarter. 1:18 Revenues for the quarter ended December 31, 2021, were $164 million, that represents an increase of $23 million or 16% from the same quarter of the prior year. The quarter's earnings per share were $0.76, increasing 21% from $0.63 per share for the previous year's same quarter and revenues per day were up 18% over the same quarter in 2020. 1:49 New sales remained robust in the quarter. New bookings recorded a record high for us in calendar year 2021. Our sales staff have excelled in navigating the new normal of building relationships and establishing partnerships in a world that requires executing virtually as well as with traditional in-person meetings. Our ongoing investment in payment integrity services for the health market, contributed to strong new bookings for CERiS, an essential component of CorVel’s current and future sales success. 2:24 The December quarter always includes the holiday season work schedule. This year, the New Year's holiday fell in December instead of January, adding to costs in the quarter. Correspondingly, the March quarter will benefit from an increased number of working days without the typical New Year's holiday. 2:45 Our organization has adjusted well during the cycles of the pandemic. Recruiting and retention have been strong, reflecting our entrepreneurial culture designation as a great place to work, work from home flexibility and our robust production systems. As a result, we have stayed ahead of the increasing staffing required to support the record new sales. 3:11 We are responding to wage inflation by balancing salary adjustments with investments in customer service. The company's historical investment in web-based production systems has allowed us to use flexible work locations. First, to ease us through the pandemic and subsequently to implement more efficient office configurations, which also offset some of the inflation impacts. We expect investments in technology to continue to neutralize increased costs due to inflation. The pandemic has changed, the mix of workplace injuries and as we all know, has made healthcare facilities challenging to manage. 3:52 CorVel has been able to flex with these changes, having invested in the last decade in much improved systems for managing the reporting of an initial care for injured workers. Telehealth activities expanded throughout healthcare during the lockdowns and are beginning to see second generation forms more tailored towards specific care specialties. We have expanded our investment in supporting systems and expect this aspect of both our business and the focus of the entire health industry, to be very active in the coming decade. We see opportunities in care management as well as in Payment Integrity administration. 4:35 The insolence of private equity is left many market competitors highly leveraged. We appear to be entering a period of higher interest rates, which will impact such companies. The industry has seen companies changing hands being acquired merge, split off and sold during the year. Inflation and the corresponding higher interest rate it forces will likely increase this churn in the competitive environment as the debt of highly leveraged companies matures. 5:05 In addition, innovative approaches to delivering care including increased virtual care utilization will result in continued reductions in the cost of restoring injured employees health and returning them to work. These changes will require enterprise agility to leverage technology and deliver differentiated value to the market. CorVel with proprietary industry leading systems and a strong liquid balance sheet is well-positioned to excel in this dynamic business environment. 5:40 With the increase of COVID outbreaks due to the Omicron variant, access to virtual care, and the telephonic identification of injuries treatable with first aid without the need of a brick and mortar facility visit, continues to be of utmost importance. Today, over 350,000 digital health apps exist with over 90,000 released in 2020 alone. Fortunately, our advocacy 24/7 nurse and telehealth services are the ideal conduits for care without physical contact and we continue to see triple digit growth in the utilization of the services. In many industries, the great resignation has materially impacted normalized loss frequency, the number of losses per hours work, miles driven etc. 6:34 Frequencies have increased this past quarter in part from less experienced and poorly trained persons placed into production positions sooner than what may be considered ideal. Many of these less tenured injuries have been quite severe. At CorVel, we are working closely with our partners and their safety personnel to evaluate these trends and to make recommendations regarding how to make adjustments to improve results. 7:04 We bring a balanced blend of technology, while still facilitating the essential human connection. For example, employees reporting an injury, speak with an experienced nurse. We do not as do others, seek administrative efficiencies at this important initiation of an episode of care. By providing friendly immediate access to nursing, we can quickly assist patients in accessing the appropriate level of health care. 7:34 Our workflows leverage current technology to provide real time communication with providers and back to the patient. In addition, the injured worker can review self-care instructional documents by easily accessing supporting materials and processes. These hybrid forms of telehealth have resulted in improved user experience and health care outcomes. 7:59 The combination of the pandemic and challenges presented by the labor market is resulting in companies shifting toward outsourcing functions. For example, Symbeo (ph), our revenue cycle management arm offers customers and on demand service option. This offering allows the effort and expense previously provided by an onsite accounts payables team to be outsourced and enhanced. In addition, Symbeo leverages a modernized BPO approach. We have also seen an increase in carriers outsourcing their claims administration to TPAs, and other services, such as Bill review and pharmacy. 8:40 As a result, we continue investing and enhancing our service offerings to support both ala carte services, as well as fully integrated solutions to take advantage of the shifting needs of the industry. That includes using technology to automate tasks and augment the ability of employees, which will reduce dependence on human capital, allowing that additional capacity to be used on more critical subjective work, which will improve service experience and outcomes. 9:13 As previously mentioned, expanding our growth in the health market is of strategic importance. Payment integrity programs have evolved quickly in the insurance industry, from a nice to have to a contractual requirement, specifically in the area of prepayment review. With the increased pressure to reduce risk and costs, parents are transitioning to ensure that medical payments are 100% accurate before processing payments instead of attempting to recover overpayments. 9:48 To achieve appropriate prepayment results, insurers and employers must build the capabilities themselves or partner with someone who has an established adjudication history, which is core to Saras (ph). Our review services can obtain review and return the results within the turnaround times each state requires ensuring each claim has maximum savings with precise results. We rely on the practical application of technology to deliver differentiated solutions and results to the market. owning our own systems enhances agility, our ability to respond to the rapidly evolving customer needs. 10:31 Current broad areas of project development focus include expansion of prepay Payment Integrity solutions, enhancements to our edge interface to support tighter integration with each of our constituencies in healthcare. Optimization of advocacy 24/7 virtual care interfaces to improve the overall patient experience. The application of artificial intelligence and machine learning to augment our professional staff and increased system automation across enterprise applications to increase quality, consistency, and to elevate the work of those interacting with our business applications. 11:18 Brandon will now provide an overview and additional texture on the December quarter’s financial results. Brandon?
Brandon O'Brien: 11:27 Thank you, Michael and good morning everyone. Revenues for the December quarter were record $164.5 million, up 16% from the same quarter of the prior year. Earnings per share were $.076, an increase of 21% from the $0.63 per share in the same quarter of the prior year. Growth in the new customer sales during the past year plus favorable mix shift of products and services sold led to the revenue and profit growth. 11:56 Total new sales were robust throughout 2021, exceeding past performance. The calendar year trends for 2021 new sales were 20% higher than calendar year 2020 and more than double those of 2019. Although awarded, they take time to implement and to achieve their ultimate run rate, providing positive tailwinds into future quarter results. 12:22 Revenue for patient management including third party administration, TPA services, and traditional case management for the December quarter was a record $108 million, an annual increase of 12%. Gross Profit decreased 2% from the December quarter of 2020. The calendar was unusually difficult in the quarter, pulling forward some payroll expenses, which would typically hit the March quarter. The calendar effect more specifically impacted our patient management profits as a higher percentage of the total cost relate to payroll. Therefore, we expect the March quarter to more accurately reflect the positive trends in the business segment. 13:04 As part of patient management, our third party administration services hit record levels, leveraging increased market condition and engagement of CorVel’s enterprise comp. CorVel has moved up into the grouping of the top third largest third party administrators when measured by the workers compensation business. Enterprise comp relationship growth came from the healthy mix of new clients in addition to the expansion of existing clients. 13:32 Beneficial claims outcomes and experience from our enterprise comp program are positively felt by existing customers while creating positive industry buzz. Revenue for Network Solutions sold in the wholesale market for the quarter was $57 million, up 26% from the same quarter of the prior year. Gross profit in the wholesale business was up 30% from the December quarter of 2020. Gross margins increase due to a higher percentage of health market business within Network Solutions. 14:05 CorVel is executing on our strategy of expanding our penetration in the health markets. The total addressable markets and health as well as the government segments represented primarily by Medicare and Medicaid are all many multiples the size of the company's current primary market and workers compensation. The company is leveraging its sound base and Payment Integrity services and is introducing new services into other segments, complementary to its current service segment. 14:37 I would now like to review a few additional financial items. During the quarter, the company repurchased 135,734 shares, at a total cost of $25.5 million. From inception to date, the company has repurchased $37.1 million shares for a total cost of $630 million. Through this program, the company has repurchased 68% of the total shares outstanding. The repurchasing of shares continues to be funded via the company's strong operating cash flow. 15:13 The quarter ending cash balance was $116 million. The company's liquidity and strong balance sheet continued to reflect the healthy conditions in our business. The investments we've made to our process and software has also included improvements to our revenue cycle management and operating effectiveness. Our DSO, day sales outstanding and receivables was 38 days, down three days from a year ago. This represents the company's best quarterly DSO measurement during the last 10 years. This improvement in our DSO is evidence of the steady improvements both we and our client partners are making in the integration of our services and their business process and the additional value stemming from the conditional digital evolution in managed care. 16:02 That concludes our remarks for today. Thank you for joining us. I'll now return the call to our operator.
End of Q&A: 16:11 This concludes today's webcast, you may disconnect your lines at this time.
