Gordon Clemons – Chairman and Chief Executive Officer Michael Combs – Chief Information Officer.

Analysts:.

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 the actual events or results may differ materially. 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 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..

Thank you for joining us to review CorVel's December quarter. Joining me today will be Michael Combs, CorVel's Chief Information Officer. Revenues for the December quarter were $128 million, 3.6% over the revenue for the December 2015 quarter. Revenues were impacted by the weather and holiday calendar, but so were the prior years’ result.

Product development continued on several key initiatives for the coming year. Earnings per share for the quarter ended December 31, 2016 were $0.36, up 7% from the same quarter of the prior year. We're beginning to see some traction on the operations management initiatives begun a year ago.

Our Enterprise Comp, TPA, continued its growth and the development of its services results in our CERiS medical review services for the group health. Medicare and Medicaid markets had a strengthening quarter. The results for the quarter continued the recent demonstration of the improvements in most segments of our business.

We are working through the expenses associated with the labor law environment in some areas of the country. Expenses in this area have been up considerably and we're hoping the environment improves over the next few years. We're also upgrading a number of the larger offices and incurring some expenses in that effort.

The company is moving to an open office style of work area, which at times obsoletes some of our prior office improvement. Turning now to our markets. The country and most business markets have come through an unusual election year. The election results promised the possibility of a stronger labor market, which is typically positive for our business.

Our activity normally lags the economy though. It is fair to say the mood in business has been void and I believe that that will lead to some improvement in the backdrop for business in general.

To some extent the new administration has caused some health care management decisions to be put on pause pending more clarity as they resolve and present their plans. Some markets are more impacted than our others. Our workers' compensation markets for example are less impacted than our of course the Medicare and regular group health markets.

In the workers' compensation market, our track record in the TPA space is becoming more well recognized and known, which improves our reception in perspective opportunities.

We've been competing in the TPA space for long enough that some of our large client programs results now form good examples of the improved outcomes our service model can produce. In addition, we have enough experience with our new service to know which elements have the most impact upon our program results.

As Michael Combs will discuss later, we've begun projects to strengthen the most important elements of our service model. These improvements in our name recognition and the ongoing improvements in our unique service process position the company to begin selling into the largest prospect.

These are the most attractive accounts, but they are the accounts that change vendors leased often. The sales cycle in this segment is longer than that for the mid-level and smaller accounts. However, these larger employers are in the best position to implement the newer service features we offer.

Beyond that expansion, we look to begin adding services, which are tangential to our current position. We're expanding for example our liability claims operation and expect to follow that with additional services. The private regular health market is also promising for CorVel.

As we've discussed previously, CorVel has a strong segment of our medical review services, where we specialized in reviewing facility based care in the regular health, Medicare and Medicaid markets. We're looking to expand both the number of segments into which we sell medical review as well as expand the scope of the reviews performed.

The healthcare and insurance industries are highly regulated and the election year has introduced a fair amount of uncertainty. The uncertainty regarding the possible adjustments to the existing ACA that’s Obama Care Legislation has lengthened sales cycle.

Although some decisions are on hold pending some clarity regarding how the change will take shape, we are optimistic that the need to reduce costs will remain a primary driver of our services. We currently expect the strengthening environment over the next couple of years.

We've been increasing the selling activity for our facility based medical review in the middle market and smaller carrier markets where decision making has continued during this period of uncertainty. Selling medical review into the group health, Medicare and Medicaid market continues to represent one of the best long-term opportunities for CorVel.

Now, I'd like to turn the call over to Michael Combs, our CIO, who will cover product development..

Thank you, Gordon.

It has been my privilege to be a member of the product development team at CorVel for the past 25 plus years that we have had as many on the team with us for more than 10, 15 and even 20 years reflects both the satisfaction that we find applying leading edge technology to provide unique business solutions and CorVel’s strong culture.

It is a common refrain that the essential components of an effective IT organization are people, process and technology. While there is certainly truth to this assertion without heart, passion and vision long-term results are unlikely. I am extremely proud of the team we have in place and the values that drive the consistent result achieved.

At our recent annual customer partnership meeting, we shared prototypes for strategic initiatives that are underway. The first will bring actionable managed care information to the adjuster in a simple interface.

It also sets the foundation for a next phase of development where we will apply artificial intelligence to prioritize next steps in the claims management process and recommend those to the adjuster. The second effort brings information from the treating physicians to the plan for return to work in a more usable format for the adjuster.

These are applications, which leverage CorVel’s integrated solutions in healthcare claims management and provide more useful reporting formats of our results to the carriers and other administrators for whom we work. The prototypes were exceptionally well received.

There will be more details provided on these as they reach the implementation stage over the next several quarters.

A primary focus of our work in product development is to leverage CorVel’s integrated service continuum by providing the technology solutions that can best reduce lag time in a typical episode of care and to address some of the many points of friction for patients and clinicians in the healthcare system.

There is much left to do, but we're currently working on new features in our claims management ecosystem, which appear to be producing the most improvement in outcomes. Over the past several years, we have been approached with several business opportunities that would best be categorized as a hybrid software-as-a-service model for claims management.

In the December quarter, we completed a key initiative to satisfy this business need. Customers using this new model will have full access to our claims management functionality and corresponding services.

In simpler terms, this initiative allows us to share the use of our systems and the responsibility of some components of the total claims management process with our customers. We see this as a logical trend in the industry and are investing in our technology to provide this more complex total environment.

In 1994, we introduced payment services for our managed care customers. This area has expanded over the years to a full suite of treasury and fulfillment services. In 2003, our wholly owned subsidiary, Scan One, introduced a service to provide managed automation for invoice processing.

The service has grown to the point where we are now one of the largest providers of managed invoice automation in North America. With our service, we effectively automate 80% of the invoice process from data acquisition and workflow including document management to invoice approval.

The Scan One and treasury services have experienced consistent revenue growth each year. CorVel has named the merged functionality of our treasury and Scan One Services Symbio.

The combination of data acquisition, complex rules processing, business process workflow, vendor management and treasury services with managed automation, which is the application of system logic in combination with human oversight yields a truly compelling set of capabilities.

Our first offering under the Symbio moniker will be an accounts payable service where we expect to automate 80% of the accounts payable process for our customers. The service will be deployed in a cloud based solution. It is a truly remarkable time from a technological perspective.

We’re at the leading edge of a new industrial revolution based on artificial intelligence and machine learning, which will fundamentally transform the business landscape.

Having a passionate, knowledgeable, dedicated team and a fully integrated modernized suite of applications affords us the agility necessary to leverage emerging technologies resulting in better outcomes for our customers and better bottom line results for CorVel. I would like to turn the webcast back over to Gordon Clemons..

I’d now like to discuss our operations and product line result. I've commented in prior quarters regarding two ongoing initiatives. First improving our use of production metrics to help us better manage our operation and secondly continuing the evolution of our organization structure to reflect the changes created by our investments in technology.

We've made progress in improving our use of metrics in the business and that has helped us better manage our services. The use of technology to facilitate the hubbing of some of our operations is an effort that will extend over quite a few years. We have increased our use of call centers and expect that trend to continue.

We continue to maintain about 80 offices, which gives us widespread sales and account service coverage. We have a number of productivity projects active for the coming year. Now to the specific results by product segment. Patient management includes third party administration that is TPA services and traditional case management.

Revenue for the quarter was $71.4 million. Gross profit in the quarter declined 6% from the prior year. Within this segment, TPA service volumes were up double digits year-over-year although gross profits were flat. Case management volumes sold in the insurance market were down as were gross profit. TPA sales continue to be active.

The service model we employ is unique in the industry highlighted by its integration of the many service components.

The results achieved have been very well received, steadily improving our reputation within the brokerage and employer community, studies of these results have isolated a couple of key components of the total service, which are particularly effective at improving results and we have projects underway to leverage those aspects of our service.

I'm referring here the projects to which Michael Combs referred. As he noted, we’ll provide more detail following their launches scheduled for this year. Case management is a mature product line that has not performed as we'd like for a couple of years now. Results in this segment remain below the levels we believe we should produce.

Network solutions revenue sold in the wholesale market for the quarter was $57 million, up 1.4% annually. Gross profits were up 5.6% annually. As I mentioned in the opening, our CERiS product line had an improving quarter. We're cautiously optimistic for more improvement in medical review services this year.

We've had important initiatives coming along in this segment and I'm looking forward to having more to talk about after we implement our enhancement.

Everything we see going on in the retail transaction processing whether it's from Starbucks applications or Panera Bread mobile app to Amazon Prime voice-based order and delivery has meaning in health care. Health care commerce though is complex and the delivery system fragmented.

So the newest innovations in other markets come more slowly in health care. We feel our strategy of leveraging information processing technology is only becoming more relevant as computers continue their rapid increase in power. Network solution remains a core competency of the company, one that drives a lot of our financial results.

Now, I'd like to add a couple of additional statistics for the quarter. The quarter ending cash balance was $38.8 million and our DSO that is our days sales outstanding in accounts receivable was 42 days compared to 41 days a year ago. 318,000 shares were repurchased in the quarter for $10.9 million.

We returned $407 million to shareholders in the last 20 years, repurchasing $34,306,000 shares or 60% of the total outstanding shares. Shares outstanding at the end of the quarter were 19,238,000, diluted EPS shares were $19,549,000 for the quarter, shares outstanding were reduced 1.5% this last year.

I'd now like to turn the webcast over to our operator. Thank you..

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

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