CorVel Corp. (CRVL)

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CorVel Corporation. (CRVL)

Q4 2008 Earnings Call

February 03, 2009, 11:30 am ET


Dan Starck - CEO, President and COO

Gordon Clemons - Chairman


Mark Dickherber - Segal Bryant & Hamill



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 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 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, Dan Starck and Gordon Clemons. Gentlemen, please go ahead.

Dan Starck

Thank you, [Cara], and good everyone. This is Dan Starck, and I would like to thank everyone for joining us today to review and discuss CorVel's December, 2008 quarter results.

I'm joined by our Chairman, Gordon Clemons. And today in our usual format, I will cover the financial results and future initiatives and Gordon will be covering product development. Shortly after our review, we will open the call to questions.

Now let's discuss the December 2008 quarter results. Revenue for the quarter was $77 million, which is a slight increase from the December 2007 quarter. Earnings per share were $0.34 for the quarter, down from the $0.43 reported in the December 2007 quarter.

In our traditional business lines, our network solutions results reflect continued expansion in customer savings as well as some mix shift in our revenue stream. Our case management results are reflective of investments made in the product line and some seasonal slowing normally associated with the December quarter.

We also continued with our Enterprise Comp expansion; our strategic initiative of bringing a new approach to claims management and our overall transition to becoming a full service provider to the workers' compensation market.

Beginning with the December 2007 quarter, CorVel had experienced a step-up in our G&A expenses in order to support our growth in systems development associated with our strategic transition.

Towards the end of the September quarter, several measures were put in place in order to provide a better balance of our spending with our overall revenue growth in strategic process transformation. The result of some of these measures have started to appear in the December quarter, as we have seen reduction in our G&A expenses on, both an annual quarter comparison and a sequential quarter comparison.

Our approach has been to reduce spending on projects that are on the periphery of our strategy and gain a stronger focus. We continued to invest in systems development, management and training for initiatives that are core to our strategy and we expect to execute on those.

From a marketplace perspective, claims volumes have continued to decline to historically low levels. Initial indications show that claims volumes dropped 11% in the first nine months of 2008, versus the first nine months of 2007.

The 2007 drop was 2.5% when compared to 2006. Frequency, that is the number of claims continues to decline. However severity, the medical cost per claim continues to increase and indications are it will increase again this year.

From a political perspective, there is legislation at both the State level and now the Federal level that will have some effect on the industry this year. States continue to develop legislation geared towards automating the healthcare transaction process.

In Minnesota for example, legislation is scheduled to take effect in July will require payors to be able to accept the bills electronically from providers. In December payments back to the providers from the payors will need to be able to be transmitted electronically as well.

At the Federal level, new reporting requirements will take effect later this year that will acquire the submission of claim data to the Federal government that has not been required in the past. The submission this claim information is geared toward ensuring that the Medicare program is not paying inappropriately, or expenses that were the results of an occupational injury.

Legislation in the form of Medicare set-asides has existed since 1992. However the enforcement of this has been minimal. However the new legislation provides the foundation for that enforcement.

While these individual pieces of legislation are important in their own right, we believe that this is part of a broader movement that will continue moving the healthcare transaction and the healthcare industry in general towards automation. CorVel is prepared to meet these challenges and Gordon will discuss this further in the product development portion of the call.

In summary, we believe that market conditions coupled with the continued movement towards electronic transactions supports our longer-term strategic approach of becoming a full service provider to the workers' compensation market and continued systems investment. Now I would like to discuss our product line performance, specific results and our key initiatives for 2009.

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