Gordon Clemons - Chairman and CEO.

Analysts:.

Thank you for standing by. Welcome to the CorVel Corporation Quarterly 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. 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 fiscal year 2016 ended March quarter. Revenues for fiscal 2016 were $504 million; earnings per share were $1.43. The March quarter revenues were $128 million, 5% over the revenue for the March 2015 quarter.

Earnings per share for the quarter ended March 31, 2016 were $0.34, an increase of 24% over the same quarter of the prior year. We are improving our management of operations an effort consistent with the ongoing use of technology in the business. It is imperative that we evolve our business model as technology enable such change.

Last year the quarter included some unusual expenses as unfortunately it did again this year. Although we are working on expense reduction two legal settlements in the quarter took our G&A to record level.

Without getting into the details these law suits exemplify the kind of issues nurtured by some states governance and also the contrast of those states with others where commerce is less encumbered. As always jobs in commerce will move to the most attractive domiciles.

At this time we are seeing improving sales results and are working on several projects to help us better manage our operations. We’ve maintained our pace of investment in new technology and are optimistic about the futures we have planned for the coming year.

We will be continuing to work on cost control throughout the year and expect to make incremental progress during the year. I’ll now discuss the internal and external aspects of the current environment. The market environment for CorVel continues to improve. The company’s profile as a provider of total workers’ compensation managed care solution.

With brokers and employers continues to steadily improve. This trend should continue over a number of years as the long standing relationships between brokers and older TPAs gradually include CorVel as a new TPA. We have added some nice brand names to our list of customers. Each addition helps us.

The ongoing implementation of the affordable care act continues to be the top priority for our healthcare customers. The act has created meaningful change in our customers’ environment. The act pushed the largest carriers to see consolidations and those mergers will consume much of their attention throughout the current year.

As we’ve all seen some of the major carriers are also dropping out of the exchanges. Consumers in the exchanges have demonstrated a propensity to come in and out of the coverage depending upon their need for expensive care. This aspect of the exchange business has led to underwriting losses for participating carriers.

The election is going to be important to ACA, but regardless of who wins rationalizing ACA and having it actually work appears likely to extend for quite a few years. We expect the trends in the broad health insurance markets to be bumpy as participants respond to the ultimate ACA developments.

In the workers’ compensation markets states continue to legislate changes to their individual regulations as well. Technology is also having an increasing impact upon the design of services, the volume of claims continues to decline slightly, but the cost of medical care has escalated.

As I observed last quarter we feel our long-term investments in both systems and provider networks position CorVel well to gain competitive advantage as change and the pace of change continues in healthcare.

A major factor in the managed care and claims management segments of the workers compensation market is the degree to which vendors in the market are now owned by private equity firms.

How the PE firms ultimately complete their investment in those firms and resell them will have a big effect upon the firms themselves than upon how they are positioned to compete. Private equity has brought more strategic thinking to our market and has made scale more important.

It’s important we respect their skills and competitive threat it’s unclear to us just how this phase will evolve or end. Our response has been to tighten our strategic focus, and to continue our strategy of continuous long-term investments.

Because we’ve built our continuum of services on one platform we’re better positioned to continue product development especially the longer this phase of outside investment lasts. During the last year we placed increased emphasis on the middle market workers’ compensation carriers.

We’ve been able to add several middle market managed care programs in the last year. The midsize carriers tend to outsource managed care and to value integrated solutions CorVel offers. Turning now to product development the quarter included continuing releases of new software.

Our investment strategy has been to focus on the ongoing development of our technology and its deployment into our business. We’ve been able to gradually build more process into our services and to improve our operating efficiency. As it is in other industries we believe technology will increasingly be the dominant force in our industry.

Our backlog of product development ideas is very full we’re working on improved planning and implementation to support the ongoing investments in new technology. We do not see an end to the investment opportunities. Broad areas of focus for us about which I’ve spoken previously include the following.

The evolution of our hub activities in smart technology, building workflow processes which in turn increase specialization of labor, being prepared for the next generation of electronic payment processing, and ongoing improvements to our claims intake, medical review, preferred provider organizations and the return to work processes involved.

There was not any meaningful change in our focus in product development in the last quarter. All four of these broad areas represent aspects of the evolving nature of transaction processing in our service. CorVel’s total investment pace is being expanded as we grow and as our operating results improve.

We have a gradual improvement underway in the process as we employ to bring ideas for new features through the planning process and into development.

Areas of particular progress include adding claims management functionality to our web based platform, improvements to our document management system, increasing the integration of services during claims intake, developing our My Care mobile app, this mobile app for claimants places them in control of their information related to episodes of care.

This element of our claims management ecosystem is in its nascent stage we can all see the rapid change going on in retail commerce we expect such change to come eventually to the healthcare market perhaps more quickly at some point than many expect.

And lastly extending our care management workflow to include telemedicine services in support of patients during their episodes of care. Telemedicine and increasing automation of supporting pharmacy management services, create a continuum of care which eliminates some of the delays in the current diagnosis and treatment processes.

Our ability to integrate the activities of patients, providers, employers and managed care activities is a natural byproduct of the long-term investments we’ve been making in web based smart processing tools.

I think you can see from just the last few items I’ve discussed that the pervasive nature of the changes going on in all retail is expected to come to healthcare. Today this coming changes represented largely by the vital signs monitoring we see in wrist bands.

In the near future conducting a retail healthcare transaction from a personal mobile device seems increasingly practical. Now I’d like to discuss our product line results. Patient management includes third party administrative TPA services and traditional case management. Revenue for the quarter was $70.3 million, an annual increase of about 4%.

Gross profit increased 17% from the March quarter of 2015. TPA services continue their strong performance in the market. Our integrated solution together with better management of the early stages of claims is producing superior outcomes for our customers. The pipeline of further improvement to service is full.

We’ve also been expanding our volume of liability claims management services. Total case management revenues were flat. We have been disappointed with our internal operations in this service area and expect to address that during the current year. Patient management services are scheduled for improvements to the daily operations metrics involved.

This is an aspect of operations management where we believe we face opportunities to be more effective. As a smaller company we didn’t install the kinds of operations’ metrics, which today we see as necessary to meeting our performance goal.

Networks solutions revenue sold in the wholesale market that is to carriers and large TPA for the quarter was $58 million, up 6.4% from the same quarter of the prior year. Gross profit in the wholesale business was up 17% year-over-year.

The services in this segment are benefited by our investments in technology and remain a core strength of the company. We are expanding our pace of investment in this segment. We are several years now into a total rewrite of the supporting technology, with plans to introduce new features in the coming year.

A couple of additional statistics I’d like to cover. The quarter ending cash balance was $33 million and our days sales outstanding and receivables was 42, down a day from a year ago. 111,000 shares were repurchased in the quarter for $4.7 million. We’ve returned $392 million to shareholders in the last 19 years, repurchasing 33,900,000 shares.

Shares outstanding at the end of the quarter were 19,562,000 and diluted EPS shares were 19,766,000 for the quarter. Share outstanding were reduced 3.7% from the same time last year. That includes our remarks for today. Thank you for joining us. I’ll now turn the call back over to our operator..

This concludes today’s teleconference. You may disconnect your line at this time. Thank you for your participation..