Q2 2023 CorVel Corp Earnings Call
Thank you for standing by welcome to the Corvo Corporation quarterly earnings release webcast.
During the course of this webcast Corbell Corporation may make projections or other forward looking statements regarding future events or the future financial performances of the company.
Although wishes to caution you that these statements are only predictions and that actual events or results may differ materially.
<unk> 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 actual results to differ materially from those contained in our projections or forward looking statements.
I would now like to turn the call over to Mr. Michael Combs, Chief Executive Officer and President.
Good morning, Thank you for joining us to review <unk> September quarter.
Brendan O'brien Courthouse, Chief Financial Officer is on the call with me today.
I will be reviewing business performance, the current environment market trends and progress achieved with systems development. Brandon will then provide additional details on the financial results for the September quarter.
The September quarter revenues were 177 million, 12% over the $158 million of revenue for the September 2021 quarter.
Earnings per share for the quarter were 83.
Decreasing five 6% from 88 per share in the same quarter of the prior year.
In prior earnings discussions, we've referred to the growing importance of Cirrus, which serves the commercial healthcare market on our financial results.
We are pleased with the strength of existing and developing partnerships and the service revenue trend line.
However, fluctuations in transaction volume, which requires a collaborative effort with providers and Payors occurred early in the September quarter.
EPS for the quarter was impacted by this temporary impedance and serious transaction flow.
Increased investment in service and elevated staffing levels in our property and casualty business.
I will now provide additional texture on the latter two of these items impacting earnings.
Sirius has gained traction with the current payment integrity suite of services, we've increased investment in the cerus team the SaaS platform research and development and the implementation of New services. As a result, we're actively laying the foundation for additional meaningful growth in 2023 and <unk>.
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With the challenges presented by the pandemic and great resignation. The company has prioritized the quality of engagement results and outcomes generated for our partners. In addition, the focus has been protecting our strong reputation in the markets we serve.
To that end enhanced retention efforts proactive hiring and increasing bench strength have been elements of our approach to mitigate the impact of the labor market challenges.
And overall, 97% customer retention rate for the year validates the efficacy of our efforts.
While the objective was to remain near neutral with overall staffing to transaction volume ratios recruiting efforts have exceeded attrition and the implementation of new business.
The existing labor market imbalances are being addressed primarily by new business being on boarded and attrition. We also expect the workforce pendulum to swing back to a more neutral position.
Turning to market served.
On a central factor in the managed care and claims management segments of the workers' compensation market as the number of highly leveraged vendors owned by private equity firms.
Higher interest rates and a recession should materialize may create challenges for such entities. However time as long as the economy will reveal durable companies with solid foundations.
At Coffeyville, we adhere to a long term view of success. It has sustained in the organization since its inception.
Along with Conservative fiscal model the organization strategy remains to differentiate our services and results achieved through technological innovation.
Our balance sheet strategic initiatives roadmap and operational fundamentals are healthy.
We have made intentional decisions that position us not only to weather, but to thrive in these unusual economic times.
Now looking at industry trends and opportunities.
Muscular skeletal disorders account for one third of workers' compensation costs.
The financial impact of Msas in the workplaces about 20 billion per year.
With the addition of indirect costs included training and loss productivity due to learning curves and replacement employees related overtime and administrative cost for supervisors the amount increases to over 45 billion.
A growing number of digital health startups are focused on the MSP space the.
The belief is that technology, you can have a material impact on treatment efficacy and the management of costs.
New entrants are proclaiming the benefits of all digital programming using apps and wearable devices.
However, there remains some ambiguity about who is advocating for the utilization of these solutions as they are not yet originating from treating physicians and workers with injuries may be slow to accept the new treatment approaches.
At <unk>, we're effectively minimizing medical spend and the muscular skeletal space through our networks and ancillary service programs using current physical therapy, which has proven to reduce average therapy visits per claim below industry standards.
We're exploring multiple solutions and partnerships specific to muscular skeletal injuries to achieve the optimal results for our partners.
We are developing enhanced data driven networks and treatment plans, including all brick and mortar and hybrid a combination of brick and mortar and virtual solutions in the health market companies are increasingly becoming self insured and CFO are looking for heightened accountability transparency and control.
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As such preemptive notification of large incoming expenditures and maximize savings on medical bills before payment or even more vital service has been successful in prepayment adjudication medical record retrieval and itemized Bill review all of which are foundational to prepayment process.
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In addition, the services provided are consistently defensible meet prompt paid guidelines and adhere to state specific policies, making cerus the partner of choice with best in class solutions that create maximum sustained savings as I indicated earlier in the call we've been.
Active with technological investments for Cerus for example, workflow and distribution management are vital to processing transactions in the September quarter efforts to build and implement a new workflow management system were completed.
The enhanced design provides increased scale ability configure ability and reduces impedance and the process, resulting in efficiency gains of up to 15% and overall labor costs.
<unk> also introduced new technology to automate the review of Medical Records.
This functionality eliminates manual processes early indications point to a 30% efficiency gain for the clinical review team performing diagnosis related group audits.
I previously mentioned the impact of the great resignation at core well, while that is slowing the talent gap created by boomers, leaving the adjusting workforce will continue for many years.
As well as mentoring and training we believe a continued focus on system automation will significantly impact new and existing team members.
Ensuring our claim system is intuitive streamlining workflows and removing mundane repetitive objective tasks will optimize the team's effectiveness and enhance the overall outcomes for our partners.
In addition to automation the younger generation desires faster more direct communication.
One of the most prominent examples is a preference for text messaging over phone calls and claims case management and our ancillary benefits management program care IQ, we are expanding the use of text messaging to enhance the efficacy of communication with all stakeholders, including the workers with injuries.
We also continue to enhance system dashboards and interactive interfaces in collaboration with partners feedback during regular business, an intentional forums like our partnership meeting, which I'll discuss later.
Improvements to visibility assure a more in depth and real time access to key performance indicators and that facilitates better management for our book of business and individual partner programs. This collaborative development assures the creation of interfaces that provide the views most helpful to all stakeholders.
Most recently this interactive process occurred with corn belts returned to work dashboard the.
The interface provides detailed information regarding which workers are off work at work with restrictions are back to work full duty.
Visibility into this information is vital for risk managers their input insurers. The project results give them. The most pertinent details at the end of September we were pleased to host our annual partnership meeting.
Each year, we bring partners to share innovative enhancements, we have implemented and a preview of new products and services we are developing.
An essential objective for the meeting is to receive feedback on recent efforts and to explore additional areas of opportunity and the dynamic market landscape.
This meeting also provides invaluable insight to guide system and service initiatives and a chance to deepen our partner relationships.
Additional opportunities to meet with our partners in the employer broker and carrier markets were provided during the national workers compensation and disability conference last month.
It was rewarding to hear positive feedback, but one in particular stood out.
Our carrier partner with whom we have won over a dozen accounts in the past year shared their annual internal Tpa scorecard, which showed the results of the programs, we handle versus competitors base.
Based on the carrier scorecard, not only our core valves services, producing higher savings and better results, but the conversion process to move to core Bell is more straightforward and our system interface much preferred.
Furthermore, we received the 2022 risk management team of the year from business Insurance's U S Insurance awards with our partner bass pro shops.
Bass pro is dedicated to ensuring its employees received the most appropriate care and claim monitoring to achieve optimal recovery.
A dedicated team of cortisol nurses and coordinators works closely with Adjustors providers and the workers with injuries to ensure an effective and timely returned to work with maximum medical improvement as.
As a result bass pro has seen decreased our cartage usage reduced number of employees on temporary total disability and lowered overall medical costs in their program. We are grateful for our partnership with bass Pro and look forward to continued success in the future.
Brandon will now provide additional texture on the financial results for the September quarter.
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Thank you Michael and good morning, everyone as Michael indicated at the top of the call revenue for the September quarter was $177 million up 12% from the same quarter of the prior year earnings per share were <unk> 83 a.
Five 6% decrease from the 88 per share in the same quarter of the prior year.
The revenue for patient management, including third Party administration, Tpa services and traditional case management for the September quarter was $119 million, an annual increase of 14%.
Gross profit decreased 9% from the September quarter of 2021, primarily due to the increased staffing costs influenced by our commitment to maintaining service quality, while addressing the headwind pressures of the great resignation.
Advancements in AI assisted solutions rolling out internally over the next three months and beyond provide stronger operational efficiencies, adding relief to the increasing cost pressures, while delivering more timely service outcomes.
The revenue for network solutions sold in the wholesale market during the September quarter was $58 million at 9% increase from the same quarter of the prior year.
Gross profit in the wholesale business was up 5% from the September quarter of 2021. This growth is attributable to the change in business mix more towards the health market business within network solutions.
Throughout the company Corvallis embracing the hybrid work model, allowing employees to work from home, but also to come into the office for team collaboration.
This shift has created positive effects on productivity as well as employee morale team culture and the environment.
You are designated desks and more conference rooms are designed to facilitate impactful team meetings.
These design changes allow us to enhance the positives of the in office experience through reduced office footprint, while growing the business.
By 2025, we plan to realize a 40% decrease in total leased office space from our prior 2020 levels, providing ongoing cost structure efficiencies.
I would now like to review a few additional financial items.
During the quarter the company repurchased 164500 shares at a total cost of $26 million from inception to date. The company has repurchased $37 6 million shares at a total cost of $707 million.
Through this program the company has repurchased 68% of the total shares outstanding.
The repurchasing of shares continues to be funded via the company's strong operating cash flow.
Our DSO as in days sales outstanding of receivables was 43 days up three days from a year ago.
The quarter, ending cash balance was $76 million corabelle strong and debt free balance sheet generates improved earnings in contrast to many others in the segment facing increasing debt loads with associated interest rate cost headwinds.
That concludes our remarks for today. Thank you for joining US I will now return the call to the operator.
This concludes today's webcast you may disconnect your lines at this time.