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. .

Good morning. Thank you for joining us to review CorVel's September 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. Brandon will then provide an overview of our financial results for the September quarter. .

Revenues for the September quarter were $147 million. Earnings per share was $0.69, an increase of 2% from $0.67 per share in the same quarter of the prior year. The earnings per share increase was enabled through a 4% increase in gross profit, a 1 percentage point decline in the tax rate and a 2% reduction in shares outstanding. .

The results we are achieving in claims management are predicated on ensuring that all constituents in the claim continuum are actively engaged as key events unfold throughout the life of the claim.

This model represents a fundamental change from the historical diary approach to claims management, in which stakeholders review claim [ INFOREM ] in disparate systems as infrequently as every few weeks. .

Early engagement of the appropriate medical constituents is the objective of our 24/7 service, which is the first step in guiding an injured employee to appropriate care immediately following an instance of injury.

While we implemented 24/7 many years ago, payers, including carriers, are now more fully appreciating the importance of this service in driving optimal outcomes. .

The service's transitioned from a nice to have to an essential component in achieving optimal outcomes. .

In the workers' compensation claims management space, we have chosen to manage claims to optimize the recovery of injured workers and focus on Return-to-Work. We have also chosen to provide a full line of integrated services and have shown that this model can produce results 25% better than the best-of-breed legacy model. .

In the short term, this strategic positioning has sacrificed some growth opportunity by reducing unnecessary but common fees and services. But in the intermediate term, we are confident that this path of digital transformation will continue to lead to steadily improving results for our customers as well as for our investors. .

Challenging the way things have always been done, reimagining what is possible is an essential part of our story at CorVel. The results achieved for those utilizing our model have been outstanding. We're working on doing a better job communicating our results to the insurance claims marketplace.

We're excited about the future for Care management and have a rich pipeline of new product releases in the queue for this next quarter and next year..

Turning to the state of our markets served. There are multiple trends currently in the workers' compensation market, which favored the business model that we have created at CorVel. The consolidation of large entities causes most companies to have some channel conflicts.

We continue to see firms being bought and sold by PE firms using extremely high portions of debt to finance high valuations. These PE firms are trading assets among themselves with each sale, adding more debt and an even higher assumed value. We have seen 2 more entities in financial distress this quarter and expect the trend to continue. .

Integration is a key to immediate support to the worker, which, in turn, creates the single most powerful way to improve results. At CorVel, all of our services are integrated on our single platform, CareMC.

Time lost due to lag in communication between vendors is eliminated in our model as well as the antiquated practice of voiding on diaries to prompt claim staff to review files. .

With the Edge, our proactive, integrated claims management platform, invested parties from claims staff to nurse case managers are prompted in real time when actions are required to ensure appropriate steps are taken at the time they are needed. This model has proven to create better outcomes in the programs of our partners.

In addition, using one platform is favored by security professionals. .

Pharmacy costs continue to rise, in many cases, becoming the most expensive portion of a claim, especially as it ages. Efforts to bring awareness of the dangers of opioids seems to be working as our usage is tapered in new claims, but the legalization of marijuana in additional states is raising concerns for what comes next.

How will acute or chronic pain be treated moving forward?.

At CorVel, we have been leading the industry in cognitive behavioral therapy and virtual visits and believe these will continue to play an increasingly important role as our industry moves forward. .

Employers are recognizing the value of clinical risk assessments during the critical period immediately following a work injury. Involving nurses within the first 30 days following a work injury has been trending for the better part of the year, but at CorVel, intermediate intervention has been a cornerstone of our programs for over 30 years. .

We are well equipped to provide actionable information before [ ITAS ] become issues, which minimizes risk for injured workers, employers and payers. .

Our integrated systems collect critical data in codified ways in order to identify clinical trends and take actions to improve medical and RTW outcomes. .

The payment integrity marketplace has seen recent service and solution acquisitions with one of the top health insurers. This will provide opportunities for CERiS to replace misaligned partnerships amongst the remaining players. CERiS is focused on maximizing cost of care reduction by investing in prepayment solutions.

Building upon this foundation, CERiS intends to expand into additional product offerings. .

Momentum in CorVel's payment integrity health solution continued during the September quarter. Our increasing customer base, positioning within each partnership, and our enhanced capabilities in analytics and cost-containment services serve as a strong foundation from which to build. .

The market size continues to grow at a 5.5% rate annually. Our client base, historically in the Medicare, Medicaid and commercial health space, has grown significantly in the self-insured marketplace, as we have seen a demand for greater transparency and payment accuracy from our partners. .

In the quarter, the SYMBEO team welcomed new customers who are taking advantage of SYMBEO's newest service offerings that lie beyond traditional accounts payable automation solutions. As finance organizations mature in optimizing the highly-objective elements of accounts payable, they're seeking solutions for the more subjective work found in AP..

Additionally, the team continues to see a strong demand for international capture services for accounts payable invoices and is leveraging a newly signed partnership to take this solution to market. .

At CorVel, in each of the markets in which we compete, we leverage technology to deliver innovative solutions, which drive differentiated results. We have a continual flow of strategic enhancements at various stages of completion being developed by our team of software engineers.

The time from conception of an initiative to implementation can vary from a few months to more than a year. .

The September quarter was one of the best quarters in our company's history regarding the completion of substantial enhancements to our CareMC platform.

CorVel's CareMC Edge is a dynamic integrated claims management platform that modernizes claims processing and empowers claims professionals to take informed action, drive better outcomes and reduce the total cost of risk. .

We are extremely pleased to have completed the implementation of a comprehensive claims summary and management interface during the quarter. This industry-leading feature provides adjusters, supervisors and risk managers a clear understanding of essential aspects of a claim throughout its life cycle in a single interface. .

The Edge claims summary and management interface is fully integrated into our model and also includes an API, application program interface, for the employer and carrier markets. .

Our goal is to replace traditional, inefficient, retrospective claim reviews with real-time prospective insights, which answer essential questions with up-to-date information, allowing our customers to review critical information about the status and development of claims at any time in real time, not just at preappointed quarterly or annual meetings.

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This quarter, we delivered a new, innovative activities management interface that facilitates the capture of essential patient claim information, information which has historically been buried within narrative notes.

This codification of critical information is consumed by our proprietary business intelligence engine, which generates and publishes real-time insights to our case management and claims professionals. .

This reimagined approach to the capture of case management information also enables enhanced reporting for our managed care and claims management clients. .

Additionally, we are pleased to announce that our case management platform as a service, allowing for the employer carrier market to harness the Edge application for internal medical management of their claims, was released during the quarter. .

Brandon will now provide an overview of our financial results for the September quarter. .

Thank you, Michael, and good morning, everyone. .

Revenues for the September quarter were $147 million. Earnings per share were $0.69, an increase of 2% from $0.67 per share in the same quarter of the prior year. The earnings per share increase was enabled through a 4% increase in gross profit, a 1 percentage point decline in the tax rate and a 2 percentage drop in the shares outstanding. .

Gross profit and net income increased on lower revenue due to the continued attraction of a higher margin CERiS business, offsetting decreases in lower-margin services. .

Results for each quarter can be affected by items referred to as one-time events. These events, typically categorized as unusual, can be positive or negative. .

During the September quarter, there was a small one-time decrease of revenue and corresponding profit as a result of the July security event. That effect on financials was partially offset by another one-time positive change in expenses generated from lower employee health plan costs within the quarter. .

Revenue for patient management, including third-party administration, TPA services, and traditional case management for the September quarter was $96 million, an annual increase of 4%. Gross profit increased 7% from the September quarter of 2018. .

Our third-party administration services continue to be well-received in the marketplace, providing ongoing annual growth. .

Revenue for network solutions, sold in the wholesale market, for the quarter, was $51 million, a decrease of 9% from the same quarter of the prior year. Gross profit in the wholesale business was up 2% from September quarter in 2018.

Within network solutions, while there has been customer churn leading to the decrease in revenues, mix shift through growth in CERiS enabled the gross profit to increase. CERiS has continued to gain traction by the expansion of the breadth and depth of the services being provided to the large group health carriers. .

Market consolidations via acquisitions in the space can create advantages or disadvantages to maintaining ongoing relations free of channel conflicts. The most recent marketplace changes have presented favorable demand increases for our independently-produced CERiS services. .

This CERiS growth has been accretive to the gross profit margins of Network Solutions. Increasing capital and operating investments are expected to facilitate additional service lines and enhance existing service offerings provided by CERiS. .

These product development enhancements, along with investments in systematic security hardening, contributed to a G&A increase of slightly less than 1% of revenue. .

These investments, including the planning and transitioning of more of our systems to cloud-based servers, provide current and future capability enhancements, including increases in speed, function and uptime. .

The company expects these investment levels in capital and operational expenditures to continue into the foreseeable future. .

I would now like to review a few additional financial items. During the quarter, the company repurchased 224,466 shares for a total price of $19.2 million. Inception to date, the company has repurchased 35.8 million shares for a cost of $494 million. .

Through this program, the company has repurchased 66% of the total shares outstanding. .

The quarter ending cash balance was $98 million. .

Our DSO, that is days sales outstanding and receivables, was 44 days, up 4 days from a year ago. The increase in DSO was primarily due to a temporary disruption in the timing of invoicing and collections occurring within the quarter. The DSO is expected to return to lower levels during the December quarter. .

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

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