CorVel Corporation Q1 2010 Earnings Call Transcript

CorVel Corporation (CRVL)

Q1 2010 Earnings Call

August 03, 2010 11:30 am ET


Dan Starck - President, CEO and COO

Gordon Clemons - Chairman



Welcome to the CorVel Corporation Earnings Release Conference Call.

During the course of this conference call, 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 the 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.

At this time, all participants are in a listen-only mode. A question-and-answer session will be conducted later in the call with instructions being given at that time. As a reminder, this conference call is being recorded.

I would now like to turn the conference over to your host, Mr. Dan Starck and Mr. Gordon Clemons. Gentlemen, please go ahead.

Dan Starck

I would like to thank everyone for joining us today to review and discuss the results of CorVel's June 2010 quarter. I am joined by our chairman, Gordon Clemons, and in our normal fashion, I'll be reviewing the financial results and key initiatives, and Gordon will be reviewing product development. After the overview, we will open the call to questions.

Now, to the quarter results. Revenue for the June quarter was $91.5 million, an increase of 12.5% from the June 2009 quarter. Earnings per share were $0.64 for the quarter, an increase of 30% from the $0.49 reported in the June 2009 quarter.

During the June quarter, we continued the expansion of our Enterprise Comp product, CorVel's fully integrated workers' compensation claim solution and our Network Solutions results reflect growth in our pharmacy and directed care product lines, while case management growth is reflective of increasing volumes.

From a marketplace perspective, the labor market remains soft and with national unemployment near 10%, there are no signs of affirming of the labor market in the near future.

Workers' compensation claim volumes continue to decline, yet the average total cost per claim continues to increase. The increase in total claims cost is being driven by the growth in total medical cost thus emphasizing the need for cost containment.

Industry participants are looking for ways to bring expanded service offerings to clients in order to fuel growth to overcome the declining claims volume. The expansion of service offerings by our competitors is coming in the form of both, acquisition consolidation as well as strategic partnerships.

In this difficult economic period, the employers' decision to move their workers' compensation program is very difficult. Change and the associated frictional costs are becoming reason enough for companies to remain with their current workers' compensation service provider. This has prompted the new and creative approaches to pricing as well as performance-related metrics in our industry.

Now, while some of these items may be perceived as obstacles for CorVel, these dynamics only underscore the importance of executing our strategic transition to being a self full service provider.

As a full service provider, CorVel is able to offer solutions to meet the needs of the wholesale buyer of the industry both, insurance carriers and third-party administrators through our traditional managed care products as well as the retail buyer, the self-insured employer to our Enterprise Comp product.

Now, I would like to discuss our product line performance-specific results and our key initiatives for 2010. In Patient Management, revenue for the June quarter was $43.3 million. This is a 31% increase over the June 2009 quarter, and profit increased 126% over the June 2009 quarter.

Revenue increased 5% from the March 2010 quarter and profits increased 14%. Included in the Patient Management results are our third-party administration product Enterprise Comp and our traditional case management product.

CorVel is positioned in the third-party administrative business through our Enterprise Comp product is gaining stronger footing. Once thought of as a new comer to the business, we continue to advance our presence and gain momentum in the market through our unique approach to claims management and improved customer outcomes.

CorVel's unique approach has provided strong early results for our new customers and our dedication to local customer service has translated well to the TPA business. Not unlike manufacturers in other industries that have moved to consumer direct marketing and sales, the transition to providing a product directly to the end user has opened a considerable number of market opportunities for CorVel and as we gain traction in the third-party administrative business, CorVel's presence in the employer market growth.

In our case management product, we are benefiting from things we've learned in the TPA business. The view from that perspective has provided us with the fresh new look at the importance of case management in the total claims process, and we are actively working to incorporate our learnings in order to deliver a more impactful product.

In Network Solutions, revenue for the June quarter was $48.2. That's flat to last year's June quarter, and profit is down 6%. Sequentially, compared to the March 2010 quarter, revenues increased 4% and profits increased 7.5%.

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