CRVL

CorVel Corp. (CRVL)

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Exchange: NASDAQ
Industry: Finance
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CorVel Corporation (CRVL)

F4Q10 (Qtr End 03/31/10) Earnings Call

June 8, 2010 11:30 am ET

Executives

Dan Starck – CEO, President and COO

Gordon Clemons – Chairman

Analysts

Dan Baldini [ph]

Presentation

Operator

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 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

Joining us this morning to review and discuss the results of CorVel's March 2010 quarter and the results of the fiscal year 2010, I am joined by our Chairman, Gordon Clemons. Since the March quarter concludes our fiscal year there will be a fairly balanced discussion today between the March quarter results as well as the fiscal year results. And after the overview we will open the call to questions.

Now to the quarter results and the fiscal year result. Revenue for the March quarter was $87.6 million, an increase of 14% from the March 2009 quarter, and earnings per share were $0.54 for the quarter, an increase of $0.63 – an increase of 63% from the $0.33 reported in the March 2009 quarter.

For the fiscal year revenue grew to $338 million, a 9% increase over the prior fiscal year, and earnings per share increased to $2.06, a 46% increase over fiscal 2009. The March quarter results reflect the continued strengthening of our traditional managed care business in both network solutions and case management. They also reflect the continued expansion of our Enterprise Comp business, our integrated approach to managing workers compensation claims.

The fiscal year results provide a broader view of CorVel’s strategic transition and reflect the coming to fruition, if you will, of a number of products and strategies that have been at work for the past four or five years. CorVel posted strong results back in fiscal 2007 and fiscal 2008 as we made gains in our traditional business, and began our strategic repositioning process through a series of acquisitions and internal investments.

In fiscal 2009, we experienced an earnings decline as our growth slowed during some of the heavy investment periods of our strategic transition. However, in the face of the worst economic environment since the great depression, we remain undeterred and continue to build for the long term. When we put some of the transition issues behind us and our growth rate returned early last year, we had the infrastructure to support the growth and thus we were able to bring margin leverage and nice EPS leverage on the new growth.

This isn't to say that we are finished as it will always be a work in progress, but we do believe that some of the more difficult parts of our transition are behind us. From a marketplace perspective, lost [ph] time claim volumes continued their annual decline mowing down by approximately 4% in 2009. As the labor market remained soft with unemployment hovering around 10%, any short-term or even medium-term increase in claim counts seems quite unlikely.

The average total cost per claim rose by approximately 4.5% last year with both components that make up the total cost, indemnity costs and medical costs increasing at nearly the same rate, the 4.5% to 5%. The competitive environment of the business continues to become more aggressive. Perspective customers are requiring compelling reasons to move their business, responding [ph] both innovation and service delivery and pricing approaches within the industry.

The declining claim volume has had an affect on the entire workers compensation industry. In addition to that the poor economy has provided difficultly for nearly every business in the country. While these have been obstacles for CorVel they only underscore the importance of executing our strategic transition and becoming a full service provider.

Now I would like to turn over to discussion of the product line performance and the specific results. In patient management, revenue for the quarter was 41.3 million. This is an annual increase of 30% over last March, and profit grew by 292% over last March. From a fiscal year perspective revenue was 151 million, a 13.8% growth over the prior fiscal year and profit grew by 58%. This past year we expanded our enterprise comp customer base in both new industries and new geographies thus strengthening our position in the TPA marketplace.

We also continued to invest in advancing our systems foundation, and our work towards integration. The Enterprise Comp product is providing CorVel with the vehicle to move from a traditional subcontractor position to the retail position in the workers compensation industry. In the retail position as a third party administrator; we are able to deploy our full product line for the end customer’s benefit through our integrated approach.

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