Victor Clemons - Chairman, CEO & COO Michael Combs - President.

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 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 files 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 the results of CorVel's June quarter. This last quarter continues recent trends and improving operating results. The background environment in the economy in health care and in the insurance market continues to be positive as well.

The federal tax rate reduction is also an important outside variable bolstering our results. The lower rate is improving the already strong cash flows in our business. In turn, this better positions CorVel to consider options for redeploying the resulting cash flow.

Technology investments have increased our ability to improve the patient's experience and to achieve better outcomes. We expect to continue such investments and also look for acquisition candidates in our target markets. I'd now like to turn the call over to Michael Combs to discuss the details of the quarter..

Thank you, Gordon. I will be providing an overview of our results and then provide insights into the markets in which we operate. Lastly, I will share our operating results, the status of our product development and the additional statistics, which we include each quarter.

Earnings per share for the quarter ended June 30, 2018, was a record $0.62, an increase of 34.8% from the same quarter of the prior year. Revenues for the June quarter were $150 million, 9.3% above the $137.6 million for the June 2017 quarter.

The results of the June quarter reflect operational increases and improvements, health care costs for our own employee benefit plan, falling to the more normal levels of the prior year, and payroll taxes returning to the seasonal lower portion of the year.

In the workers' compensation markets, we are seeing an increased and very appropriate expectation that Managed Care and claims management vendors leverage technologies, such as business intelligence and analytics to drive improved outcomes.

The expectation is not that analytics is merely part of the package, but their partnership exists where the insights revealed are combined with expert analysis and suggestions for prospective action.

Gartner, an information technology research and consultancy company created a model to represent the lifecycle stages that a technology goes through, from inception to maturity and widespread adoption. The model has several stages. The technology trigger, the initial stage where the idea is conceptualized.

The peak of inflated expectations, this is after the initial implementation, where there is hopes for great things, often followed by the trough of disillusionment, where reality falls short of expectations.

And then, in some cases, the plateau of productivity, where the technology matures and the broad market applicability and relevance are clearly paying off.

In the area of business intelligence and analytics, the technology has moved well past the trough of disillusionment into the state where meaningful benefits are being realized, specifically the transformation and translation of data into knowledge and actionable insights. Data is the price of entry for effective business intelligence and analytics.

In the risk management space, in which CorVel operates, having real-time access to the full complement of data from the constituent services in our integrated solution is a meaningful advantage. For many years, we've advocated a bundled solution for claims management.

The plateau of productivity, with respect to business analytics, can be fully realized when each of the data elements from claims, bill review, utilization review, case management and pharmacy. The data that exists natively in our bundled solution are available as inputs to the analytic process.

Leveraging data to gain insights and to optimize processes and ultimately results is no longer a nice to have. Those not capitalizing on this ability will eventually be left behind. The initial applications designed for claims management, medical bill review and case management were systems of record for data storage.

They did not contain business intelligence. The amount of data captured and stored has increased exponentially over the last many years. The industry has responded by making systems more complex, read lots more screens.

In addition to being subject matter experts, systems users are now, in many cases, also expected to be application experts, being intimately familiar with, what is referred to as, the application site map. That is the reference that tells them where to find, on the myriad of screens, the critical information that they need to do their work.

The tech-savvy population entering the workforce has expectations that application interfaces are intuitive and that they even guide the users interacting with the system. A fundamental paradigm shift is occurring with what is possible in systems.

A marrying of business intelligence and intuitive interfaces that shift the management of claims from a reactive and retrospective process to a proactive prospective process. This is the vision being realized by the introduction of our adjuster workstation, The Edge.

On elegant and intuitive interface, The Edge leverages business analytics with real-time integration of all episode of care data to present actionable prioritized insights to the claims and risk management teams. I'll provide details regarding the work completed on The Edge this last quarter later in the discussion.

It is well understood in the industry that the length of time that it takes for a claim to be filed for an injured worker to receive medical guidance and attention is directly related to the ultimate cost of the claim. Claims reported 7 to 14 days subsequent to the injury cost 18% more than those filed within a week of injury.

Claims filed 15 to 28 days after injury can cost 30% more. CorVel was one of, if not, the first workers' compensation TPA to come to market in 2015 with telehealth services. Telehealth qualifies as another technology, which has moved well past the trough of disillusionment to rapidly growing acceptance.

Telehealth is a critical component of our intake process, which compresses the time that it takes to record an instance of injury and, more specifically, to connect the injured employee with the appropriate medical professionals.

CorVel just received an Integration Award from American Well, our telehealth partner, for the innovative work that we have done reshaping and improving the health care delivery model for injured workers.

As our listeners may recall, in addition to managing provider reimbursements in health care, CorVel provides a payment solution outside the world of health care through its SYMBEO operations. SYMBEO is introducing an AP payment solution through a new partnership with Invoice Pay, a leading provider for payments automation.

The partnership will be the first of its kind, targeted at enterprise-level businesses, allowing finance executives of large corporations to optimize their entire processing of invoice payments. Adding Invoice Pay's payment services to SYMBEO's proven invoice automation suite completes the cycle of invoice management.

By leveraging Invoice Pay's payment network service, SYMBEO's corporate customers can now rely on Invoice Pay to manage how their suppliers are paid and convert the suppliers to faster and less expensive electronic payment methods.

The service delivers significant savings in time lost in managing vendor payments as well as eliminating costly check-printing operations. The broader health care market will be increasingly important to CorVel's overall results.

CorVel's health solutions continue to grow market share through our core products, including recent addition of several third-party administrator clients, who serve the self-insurance marketplace. Cost containment and care management continues to be our focus.

The health care market requires both short-term cost-containment and long-term cost avoidance through analytically led care management. CorVel is well positioned to meet this need. I'll now discuss our operating results. Patient management includes third-party administration TPA services and traditional case management.

Revenue for the quarter was $87.9 million, an annual increase of 15%. Gross profit increased 17% from the June quarter of 2017. The combination of strong revenue growth with increasing margins led to record profit for our TPA services. CorVel's reputation in the industry as a leader in claims management service and outcomes is now well established.

We intend to continue to invest in our systems to further distinguish the results that our dedicated team is delivering to our clients. Late in the June quarter, we adjusted strategic operating parameters and made modifications to the management business objectives for our case management service.

Preliminary results indicate that the modifications are having the intended impact. We have a number of additional initiatives currently under review, which will also improve the results in this area of our business. Revenue for Network Solutions sold in the wholesale market were $62.5 million, up 2% from the same quarter of the prior year.

Gross profit in the wholesale business was up 3.9% year-over-year. We have applied incremental and continuous improvement to our Network Solutions program for nearly 30 years.

From intake, auto-adjudication, advanced rules processing and smart routing to embedded treatment guidelines, specialty bill review, proprietary and lease networks and integrated pharmacy benefits management, we consistently deliver industry-leading results.

At our recent stewardship meeting, reviewing the first year program results, the client's risk manager was amazed at the significant increase in the savings achieved by CorVel over the prior risk management vendor. Continuous investment over time does indeed make a meaningful difference.

Product development efforts proceeded in a number of key areas in the June quarter. The strategic changes related to providing intuitive interfaces containing actionable business intelligence for our own adjusters and professional staff as well as our customers improve outcomes and reduce the total cost of risk.

Broad areas of focus included CareMC Edge. As I mentioned earlier, the latest phases of our adjuster workstation are fulfilling the vision of integrating the full continuum of claims management data and presenting actionable insights to the claims professionals.

During the quarter, we introduced new views to review approved bills and accepted body parts and enhanced integration and workflow with pharmacy and case management, including the ability to identify claims that could benefit from medical management as well as the ability to initiate a referral to case management directly from The Edge.

Future phases will integrate specialty services and enhancements to supervisor and executive dashboards. We believe that our ability to leverage business analytics and present the right information to the right people at the right time will result in even better outcomes.

Return-to-Work remains a key area of focus, improved views into work history and validating payment of lost wages to ensure that work status information is accurate and complete, which will allow us to achieve the best outcome possible.

The outcome being the employees returning to full duty, returning to work with restrictions, identifying an alternate position or determining that the maximum medical improvement, MMI, has been reached. Medical bill review has been a core competency of CorVel for many years now.

We strongly believe that it is important and necessary to continually upgrade our systems to the latest technologies, so that we can capitalize on higher speed, better security and leverage emerging technologies. We began piloting our next generation of medical review software to a limited number of our locations during the quarter.

Our goal is to provide a common platform for all parties involved in the medical bill review continuum from the initial submission of the bill to issuing payments.

Work continued in the last quarter on our integrated intake module, in which we intend to reduce the lag time between the initial incident of injury and provision of interventions as well as integration of telehealth and specialty services. We expect to release the first phase in the next quarter.

Cyber security is an area where we must continually remain vigilant. We are enhancing our encryption and systematic auditing capabilities. GDPR enforcement went into effect during this last quarter. Conversion to cloud computing requires a deliberate approach.

Currently, we are working on architectural and design considerations and migrating the hosting of certain financial applications in our corporate website to the cloud.

We believe that cloud computing will allow us to increase the pace of product development, tap into more elastic storage and computational power and take advantage of multilayered security and infrastructure management that can be provided in a hosted cloud environment. I would now like to review a few additional financial items.

During the quarter, the company repurchased 57,000 shares for a total price of $3.5 million. Inception to date, the company has repurchased 35 million shares for a cost of $435 million. The quarter-ending cash balance was $73 million. Our DSO, that is days sales outstanding and receivables, was 40 days, down 2 days from a year ago.

That concludes our remarks for today. Thank you for joining us. I'll now turn the call over to our operator..

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

End of Q&A:.