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 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 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 Michael Combs, President and Chief Executive Officer. .

Thank you for joining us to review Corvel's June quarter. On the call with me today is Brandon O'Brien, CorVel's Chief Financial Officer. Today, I will be discussing market trends, strategic themes on which we are focused and the progress that we've made on our key initiatives.

I will also be providing information related to a security incident which affected our system availability subsequent to the June quarter. Brandon will then provide an overview of our financial results. .

Earnings per share for the quarter ended June 30, 2019, were a record $0.71, increasing 15% from $0.62 per share in the same quarter of the prior year. The earnings per share increase included a 1% decline in corporate expenses, a 1% decline in the tax rate and a 1.6% drop in shares outstanding. Revenues for the period were $150 million. .

We're coming through a unique time during which our new approach to claims management is emerging and our customer relationships continued to expand with those entities seeking improved solutions for their disability management. The value in our new processes is visible in our earnings.

However, the evolution in our service has led to some unevenness in our revenue results. As the results of our new service model become more well known, we expect the growth in the bottom line to be mirrored in the top line results as well. .

Let me further explain the breakthroughs that we're making. Historically, the claims management model in our industry has not evolved much over the past 50 years. And consequently, results have not improved much either.

Customers have focused on the cost per unit of service rather than the cost of the overall programs, which is common in the markets for commodity services and products.

Our investments have been in the creation of a new value-added service that improves the individual experiences of patients while simultaneously reducing the total cost of benefit programs for employers. .

engagement with patients at the outset of their episodes of care; real-time integration of all service programs; and ever-improving analytics support to both the development of service and to the delivery of service. .

While these can sound like familiar managed care goals, their meaning has changed completely from the standards of just a few years ago. Today, early intervention means immediate activity rather than just a shifting from a month to a week or 2 late.

In the past, integration has meant sending batch files to other entities at the end of a production period and in a form not necessarily usable by most receiving entities. .

In our process, integration means interacting in real-time and in a consistent format across all major elements of care management. Analytics is not an end-of-period report or analysis. Instead, with our new program, it means having access to all data across platforms to facilitate the identification of actionable insights as events occur.

These innovative upgrades have created a complete program that not only assist patients in real-time but also produces total cost 25% below that of competing programs. This type of industry-leading change is not achieved by one or even a couple of big adjustments.

This is the result of numerous improvements working together to alter the nature of the process. And we aren't stopping there. With AI, machine learning and cryptocurrency, all services in the financial sector are involved in this transformative change. .

There is much we are doing today to leverage emerging technologies. And we are well positioned to take advantage of coming breakthroughs. .

Over the last year, the improvements created to benefit our carrier customers have also created immediate benefits in our own TPA business as we experienced the most rapid adoption of new processes in our own service. Like our competitors, we seek customers in every segment of the markets we serve.

However, we're learning that those entities most comfortable with implementing new approaches to the management of casualty claims are the most appropriate partners for us. .

The market share positions in the industry have been in a state of considerable flux. The largest workers' compensation insurer for 50 years recently fell out of the top 5. Other insurers that were relatively small for some time have accepted new approaches to business and leaped up the rankings. .

Over the last year, we lost a couple of insured customers who didn't share our focus on the implementation of new techniques that will help the industry adapt and thrive into the future. As we continue to grow with the industry, additional components in our service model are scheduled for release within the next 6 months.

With each addition of new features, the total program becomes more compelling.

As the results for companies that implemented new approaches over the last few years becomes more apparent, we expect the market to move from a stage where only early adopters buy in to the phase where the bulk of potential customers find our offerings to be more mainstream and appealing. .

Before getting into more details on our product development and product line operations, I'd like to summarize how we are currently set up to move forward. We see our long-term investment in information processing as having positioned the company to benefit from the current trends in technology and data analytics.

We've been moving computing from our colos steadily to the cloud. We've made good progress with our integration team and see this opening new capabilities in the future. .

Our analytics effort will evolve towards machine learning and AI and are well supported by our investments in software and our unified software platform. These were not factors favored by the casualty industry in the past and some questioned our orientation to the digital wave in services.

Increasingly, though, throughout the service industry, information management is transforming how business is done and obsoleting service forms built on the prior industry paradigms. .

Our CERiS database is a good example of a long-term investment that prepares us for the expansion into machine learning. CERiS has cross-mapped most of the hospital chargemasters in the country into one unified database of facility-based treatment information. The quality of this database is important to more advanced forms of analytics.

In addition, the CERiS platform is the foundation of CorVel's expanding foothold into the much larger health care market outside our casualty base. .

The markets in which we operate continue to be very active. The national health care discussion, which began when Theodore Roosevelt was President over 100 years ago, received renewed energy with the advent of the Affordable Care Act in 2010 and again with the current administration.

It will likely remain a polarizing topic for the electorate for the foreseeable future given the shifting age in health dynamics. 3.6 million people are turning 65 each year. People are living longer than prior generations, but are not necessarily healthier in those later years. .

The group health market will play an increasingly important role in our future expansion and growth. Mergers and acquisitions continued during the quarter with notable deals announced in the health and workers' compensation sectors.

While we believe current valuations are generally at elevated levels, our stance regarding acquisitions is to review and consider synergistic opportunities which are reasonably valued. .

access to care, quality of care, timeliness of treatment, cost, and separately from cost, the adjudication of health care transactions. These themes in varying degrees have provided the underpinnings on which we have built our base in the workers' compensation market and our payment integrity position in the health market. .

There are many different areas in which CorVel could focus, but it is essential that CorVel identify its areas of strength and focus on the related opportunities. In most industries, the customer chooses, pays and then uses. In health care, the physician typically chooses, the patient uses and the employer or public entity pays.

Managed care attempts to bring the 3 separate aspects of the customer function together as seamlessly as possible. Data, rules engine, the cloud, and to a growing degree, machine learning are the foundation of that position. .

Health care and insurance are migrating from the world of paper and fax documents to digital transactions. There are, however, a vast array of practices, processes and enterprises that have been built up over a 200-year period and are structured assuming paper processing. .

The restructuring from paper to digital is not trivial. With digitization, the next most visible evolution is connectivity. CorVel has a 30-year history investing in and maintaining current systems and plans to fully harness our inventory of assets that investment has created.

CorVel possesses a unique combination of local presence in most metropolitan areas, coupled with distributed computing capabilities which leverage the substantial assets available in the cloud. The challenges that were common in the industry related to access of essential system processing horsepower are largely behind us.

Resources that were historically focused on optimizing performance to deliver usable systems are now focused on the connectivity and integration of disparate systems within enterprises and across enterprises. .

Integration platform as a Service is an emerging model or pattern that addresses the need to build business-critical workflows that connect in real-time processes, services, applications and data across organizations. These platforms have gotten very sophisticated over the last 3 years.

It is as much about process integration and workflow as it is about data integration. Integration platform as a Service is a key objective of the solution that we are building with The Edge. .

The Edge, our collaborative claims management platform which supports our carrier and employer customers, as well as further advancements to our integrated intake project. .

The Edge workstation is the market's first fully integrated, prospective claims management platform. During the June quarter, enhancements were completed to facilitate robust routing and two-way communications between adjusters and the pharmacy management team which facilitates enhanced pharmacy eligibility and prescription prior authorizations.

Work also progressed with the integration of our bill review platform into The Edge. A comprehensive management dashboard was delivered to ensure the visibility and delivery of a consistent bill review product. .

Our integrated claim intake project remains on its successful path forward. With the goal of connecting claimants to the appropriate professionals quickly and efficiently, the objective of the project is to provide guided personal care and to achieve improved outcomes.

During the quarter, work was completed to simplify the interfaces utilized by our 24/7 team when commencing initial care. This includes integrated services with telehealth, providing the claimant with a higher quality of care at the onset of the claim. .

It is affirming as we build and deploy new functionality each month to see the cumulative difference that our efforts are having on the patients served and the outcomes achieved.

While the progress that our team has made over the past several years to improve the way in which we move from the concept phase of a software project to delivery is truly impressive, we are working to significantly expand our delivery capabilities. .

CERiS maintains a strong and growing position within the payment integrity marketplace. With a solution that facilitates a comprehensive review of hospital bills, it provides accuracy for the prepayment of medical bills for the top insurers and TPAs across the nation.

CERiS continues to capitalize on its prepayment capabilities, adding incremental services to the core functionality. CERiS works with all insurance market types, including Medicare, Medicaid, commercial health and casualty markets.

CERiS realized a nice lift in revenue in the second quarter, attributable to several implementations completed in the first quarter. .

SYMBEO is creating value for large corporations by automating the accounts payable process and freeing finance operations to focus on investing in their relationships with their supply chains. In the second quarter, SYMBEO added several new customers and saw continued revenue additions as existing customers reached production volumes.

Strengthening partnerships with procure-to-pay platforms and consulting groups is driving steady demand for SYMBEO's complementary accounts payable automation services. .

As I mentioned during my opening comments, I would like to address the security incident that occurred after the close of the most recent quarter. On July 21, we discovered a security incident, which in an abundance of caution required that we take our systems off-line. They remained off-line for the week of July 22.

As of today, our systems are incrementally coming back online, and we are rapidly addressing all associated issues to ensure support to injured workers and compliance requirements for our clients. .

We are in the early stages of assessing and addressing the impact of this attack, and we expect to incur certain costs and experience delays associated with the incident and our response efforts, which could adversely affect our financial results in future periods.

While we anticipate that any such cost and delays would likely be incurred during the September quarter, with the primary impact being in the short and intermediate term, there can be no assurance of the ultimate impact of this attack on our business, results of operation or financial condition.

However, we do not believe that this incident will have a long-term material adverse impact on our business, results of operation or financial condition. .

Our mettle has been tested and I am happy to report that the CorVel team has risen to the occasion. Brandon will now provide an overview of our financial results for the June quarter. .

Thank you, Michael, and good morning, everyone. As stated earlier, revenues for the June quarter were $150 million. Earnings per share were a record $0.71, an increase of 15% from the $0.62 per share in the same quarter of the prior year.

The earnings per share increase included a 1% decline in the corporate expenses, a 1% decline in the tax rate and a 1.6% drop in shares outstanding. Net income increased on comparative revenue due to attracting a higher mix of CERiS customer business offsetting decreases in lower-margin services. .

Revenue for patient management, including third-party administration, TPA services and traditional case management for the June quarter was a record $99 million, an annual increase of 13%. .

Gross profit increased 48% from the June quarter of 2018. Patient management, driven by CorVel's Enterprise Comp TPA business, continues to lead in revenue and profit growth.

During this quarter, the landscape of the work comp TPA business consolidated further, opening up additional opportunities for CorVel to align with those customers focused on moving their programs forward.

With the aforementioned market consolidation plus CorVel's industry-leading organic growth, CorVel is now vying for a place among the top 3 workers' compensation third-party administrators. .

Revenue for Network Solutions sold in the wholesale market for the quarter was $51 million, off 19% from the same quarter of the prior year. Gross profit in the wholesale business was down 17% from March 2018. Despite being lower in annual quarter comparisons, gross profit in Network Solutions improved sequentially from the March quarter.

As Michael mentioned earlier, our approach to managing claims is a fit for those entities prepared to engage in a meaningful change in past practice. And yet, that model is not suited to all. The desire for more proactive, AI-enhanced insights are a common theme for those carriers and employers who align with our innovative outcomes vision. .

The Edge represents an innovative platform making current and future insights visible and actionable. Thematically, The Edge platform is attracting a new round of Network Solutions wholesale customers who are embracing new approaches to the management of casualty claims.

The Edge platform facilitates the existing and emerging multifaceted services without the traditional level of added capital expenditures needed to upgrade all the elements of their existing systems. .

I would now like to review a few additional financial items. During the quarter, the company repurchased 124,411 shares for a total price of $9.1 million. Inception to date, the company has repurchased 35.6 million shares for a cost of $475 million. Through this program, the company has repurchased 66% of the total shares outstanding.

The quarter ending cash balance was $104 million. Our DSO, that is day sales outstanding, in receivables was 41 days, up from a day a year ago. .

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

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