CorVel Corp. (CRVL)

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CorVel Corporation (CRVL)

F4Q08 Earnings Call

June 10, 2008 11:30 am ET


Daniel J. Starck - President, Chief Executive Officer, Chief Operating Officer

V. Gordon Clemons - Chairman of the Board

Scott F. McCloud - Chief Financial Officer


John Szabo - Flintridge Capital



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 of the future financial performance of the company. CorVel wishes to caution you that these statements are only predictions and that actually events or results may differ materially. CorVel refers to you 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 and quarter. These documents contain and identify important factors that could cause the actual results to differ materially from those contained in our projections for forward-looking statements.

(Operator Instructions) I would now like to turn the conference over to your host, Dan Starck. Sir, please go ahead.

Daniel J. Starck

Thank you, Ashley. I would like to thank everyone for joining us today to review and discuss CorVel's fiscal 2008 results and March 2008 quarter results. I am joined today by our Chairman, Gordon Clemons. Since the March quarter is the last quarter of our fiscal year, during the financial discussion I’ll cover both the quarter information as well as fiscal year results. And as we have for the past several calls, I will be covering the financial results and future initiatives and Gordon will be covering product development. After our overview, we will open the call to questions. Now to the financial results.

Revenue for the March quarter was $77.4 million, which is a 9.1% increase from the March 2007 quarter. Earnings per share were $0.44 for the quarter, up 20% from the $0.37 reported in the March 2007 quarter.

For the fiscal year, revenue was $302 million, up 10% over fiscal 2007, and earnings were $1.67, up 28% from fiscal 2007.

During the March quarter, in our traditional business lines our network solutions savings continued to expand and our case management business line appears to be stabilizing. We continued our strategic initiative of our enterprise comp expansion, which is our initiative of bringing a new approach to claims management and repositioning CorVel as a full service provider to the workers’ compensation market. And, as we have in the past, we continue to make substantial investments in our current technology platform, a key building block in our strategic development and evolution.

From a marketplace perspective, claim volumes continued to decline to historic lows. Based on a recently -- based on some recently released data, claim frequency declined approximately 2.5% in 2007. For the prior two years, claim frequencies had dropped at nearly 7%. The 2.5% decline in 2007 is much closer to the long-term trend for frequency decline of 3% to 4%.

Medical costs continue to become an ever-growing part of the average workers’ compensation claim. Medical benefits now make up nearly 60% of total losses. The average medical cost per claim continued to climb in 2007, rising by about 6%. Now, this is the lowest increase in the average medical claim cost since 1995.

From a political perspective, states continue to develop legislation geared towards automating the healthcare transaction process, and industry consolidation has had a significant impact this past year, especially in the PPO area. While this has disadvantaged some companies that lease access to technology or to PPO networks, CorVel has fared well in this situation because of our strategy of owning our own proprietary assets, such as our PPO.

Overall, with the current market environment and the positive trends in our results, we are confident in our strategic direction.

Now I’d like to discuss our product line performance, the specific results, and our key initiatives for 2008.

In our patient management line of business, revenue for the quarter was $33 million. That’s a 17.9% increase over the March quarter of last year and a negative 1.2% from the sequential quarter of December. Profit is up 69.8% over this March quarter of 2007 and up 2% over the December quarter of 2007.

From a fiscal year perspective, revenue in the patient management segment was $128 million. That’s a 19.3% increase over fiscal 2007 and profit was up 67.4% over fiscal 2007.

As most of you are familiar with, in the first half of 2007 CorVel acquired two claims administration companies and the results of those acquisitions are included in our patient management results. We’ve continued to reposition our entire patient management business throughout the year.

Our case management business stabilized this past quarter, after showing very solid improvement for the prior two quarters. While we’ve been actively moving away from low-priced business over the past couple of years, revenues now appear to be firming and margins are stabilizing.

With the addition of our claims administration capabilities, CorVel is now able to serve all types of customers in the workers’ compensation market, whether that’s insurance carriers, TPAs, as well as self-insured employers, those that are looking for either a fully integrated solution or those that still prefer to unbundle their TPA services and managed care services.

The expansion of our service offering has been received very positively from both the current customers and prospective customers, and as we move forward we’ll be able to deliver our integrated product to customers throughout our national footprint.

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