Q3 2020 Earnings Call
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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 with future financial performance isn't the company.
Corvel wishes to caution you that these statements are only predictions and 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 in core.
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.
I would now like to turn it over to Michel Combes, President and Chief Executive Officer.
Thank you for joining us to review Corvels December quarter.
On the call with me today is branded O'brien, Corvels Chief Financial Officer.
So there won't be discussing market trends the services on which we are focused.
The progress that we've made on our key initiatives.
Brendan will then provide an overview of our financial results for the December quarter.
Revenues for the December quarter were 148 million.
Earnings per share were 50 cents, a decrease of 7% for 54 cents per share in the same quarter of the prior year.
Each quarter has positive and negative one time events, while each maybe unique and appropriately categorized as one time the occurrence of such items, it's not unusual.
In the December quarter, the adverse onetime events exceeded those which were positive.
The quarter included onetime expenses related to our recovery from the security event for the prior quarter.
We've had a change in subcontractors used by Corvel and this created bowls that some onetime expenses as well as a true you'd have time, where some of our special to revenues were disrupted.
Within the March quarter, we will be operating under more normal conditions.
Girls results for the quarter also include the investments, we're making and the ongoing digital transformation and health care.
Advances in computing power, the impending Fiveg evolution and communications and in general the multifaceted implementation health care of improving information management combined to create acceleration in the pace of change in our industry.
The overarching trend in health care market is ongoing rapid computing power advances.
Which is bringing more practicalities of becoming uses of artificial intelligence and health care.
The innovations, resulting from the application of machine learning and AI promise to improve health care as well as to make it more affordable.
However, a fundamental prerequisite is a dramatic improvement in the clarification in storage of health care data.
To make healthcare data useful in this emerging environment health care information must be able to be integrated across services specialties and related sets of diagnostic and treatment activities.
Within the managed care industry in casualty healthcare only corvel possesses an integrated database that includes all the critical managed care specialties.
Concurrent with the advances in the use of computing power is imperative to protect personal health care information.
Investments required to make the necessary assurances our substantial and ongoing.
A significant implication of the security mandate is a direct correlation in the inherent risk as the number of vendors connected in an unbundled workers compensation managed care model increase.
Workers comp claims environments grew out of the very early entry of property casualty insurers in the first workers comp laws as the industry evolved new forms of managed care developed typically each innovation came from a different new vendor and does today's programs usually include a dozen or may.
More different vendors, most of whom are relatively small firms, which exposes patient information to a wide array of vulnerabilities.
Just as other industries evolve towards full service vendors. The managed care industries move in that direction is being accelerated by the need to close down the vulnerability of patient information to the complexities created through the access many small entities have to ensure information flows.
Corvel is fully integrated system allows insurers to reduce outside access to their computing platforms significantly.
The power of Tele health is perhaps the most widely accepted new development and treatment modalities.
To employ telehealth productively, a patient must have immediate access telephonically to an advocate who country as appropriate.
Corvel initiate healthcare episodes from a telephonic nursing hotline and tree options incoming incidence to tele health.
Spanning the supporting technology has been a priority for us.
And lastly, corvel is expanding its position in a much larger health markets, Medicare Medicaid and group or private pay health care.
The company's Cerus Division has been expanding more rapidly in the last few years serious is developing a broader product line and beginning promising projects in segments of the market share to four unaddressed.
There was noteworthy M&A activity in 2019, which has in part been driven by low interest rates.
One aspect of the movement has been an increase in corporate debt, which has doubled to nearly 10 trillion over the past 20 years.
The implications of this increase in debt are unclear, though there is concern that if we were to experience and economic slowdown the impact could be significant.
We observed a glimpse of what might be on the horizon with a large player in the healthcare market this past quarter.
Corvel is well positioned to execute a meaningful acquisition, while maintaining a fiscally sound position.
We continue to review synergistic reasonably valued opportunities if a slowdown were to occur we would expect to see the number of compelling acquisition opportunities increase.
The December quarter was one of the most significant in our company's history regarding the strategic software enhancements released.
The enhancements leverage two of our most valuable assets the vast to volumes of data, which we manage and our proprietary systems.
The work on which we've been focused represents an essential shift in the role data plays within our business systems. Yes data is still captured presented in our application interfaces used to generate reports received and transmitted presented in visually appealing interactive dashboard using advanced analytics.
And consumed by our proprietary rules engine.
But each of these traditional uses of data doesn't fully realize the potential of digital transformation.
Within our data centric approach data is being used dynamically to generate recommendations fraction predict outcomes and facilitate data driven and data driving capabilities.
Did is playing an increasingly active role in our business systems as we focus on the methods in which information has captured and leverage advanced algorithms to distill and apply the signal from within the data.
Following or several highlights of our data centric approach.
We've optimized how case management clinical information has captured facilitating systematic review of the data which results in actions being recommended to the claims and case management professionals.
A new claim interface has been developed which provides an interactive holistic view of the development of the claim.
We've introduced to universe, Lynn take interface, which simplifies the process of capturing the data related to an incident of injury.
The first step of the process, which compressed as the time that it takes to connect to patients with the most appropriate medical care shortening the time that it takes to connect and injured employ with a proper medical professional is proven to reduce the cost of the claim and his best facilitated by our fully integrated system.
The edge interface the core of our data centric model has been enhance to prompt action from our case managers and claims specialist. One example, being when the signal within the data indicates that optimal our tw is in jeopardy.
There is much work and opportunity with AI and business intelligence in our data centric model. We're excited about the progress that we've made and the impact we intend to have in this space.
Brandon will now provide an overview of our financial results for the December quarter.
Thank you Michael and good morning, everyone.
Revenues for the December quarter increase to 148 million producing a net income of 9.4 million.
Earnings per share were 50 cents for the December quarter.
Decrease a 7% from 54 cents per share in the same quarter of the prior year.
Revenue for patient management, including third Party administration, TCPA services and traditional case management for the December quarter was $98 million and annual increase of 7%.
Gross profit increased by 9% from the December quarter of 2018.
Our third party administration services hit record levels and continue to be well received in the marketplace driving annual growth of patient management.
As mentioned earlier, a subset of the patient management services experienced a temporary capacity decrease due to a change in subcontractors.
This transitionary disruption lowered the total output of the utilization management services, leaving some of the demand for these services, partially unfulfilled by Corvel.
We expect to achieve the supply and demand equilibrium of these services again during this current quarter ending March 2020.
Revenue for network solutions sold in the wholesale market for the quarter was 50 million a decrease of 8% from the same quarter of the prior year.
Gross profit in the wholesale business was down 8% from the December quarter of 2018.
Gross margins were maintained while experiencing cresting customer churn primarily in the casualty wholesale market.
Anticipated growth of the serious business within network solutions were present, an opportunity of new revenue at accretive margins.
Investments in our security positioning contributed to higher DNA period costs from comparative quarters.
Professional consulting services contributed as onetime or short term increases.
These investments are expected to positively impact our long term growth potential by expanding our customer experience in our current services and expanding into new service capabilities in the ongoing digital transformation of health care.
I would now like to review a few additional financial items.
Operating cash flow in the quarter was strong at $20 million and together with our strong balance sheet continues to position the company well for new investments.
During the quarter the company repurchased 240000 shares for a total price of 19.2 million inception to date. The company has repurchased 36.1 million shares for our cost of 514 million.
Through this program the company has repurchased 67% of the total shares outstanding.
The quarter ending cash balance was $90 million, our DSO that is day sales outstanding in the receivables was 41 days up two days from a year ago and down three days from the September quarter.
That concludes our remarks for today. Thank you for joining us I'll now return the call to our operator.
Concludes today's webcast you may disconnect your lines at this time.