CorVel Corp.

Thank you for standing by. Welcome to the Corvell Corporation Quarterly Earnings News Webcast. During the course of this webcast, Corvell Corporation may make projections or other forward-looking statements regarding future events or the future financial performances of the company. Corvell wishes to caution you that these statements are only predictions and that actual events or results may differ materially. Corvell refers you to the documents that the company files from time to time with the Securities and Exchange Commission, specifically the company's last form 10-K and 10-Q, trials 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 solid-looking statements. I would now like to turn it over to Michael Combs, President and Chief Executive Officer.

Good morning. Thank you for joining us to review Corvell's September quarter. On the call with me today is Brandon O'Brien, Corvell's Chief Financial Officer. Today I will be reviewing business performance, the current environment and market trends, and then move on to system development. Brendan will then provide an overview of our financial results for the September quarter. Revenues for the quarter ended September 30, 2021, were $158 million, an increase of $22 million, or 16%, from the same quarter of the prior year. The quarter's earnings per share were $0.88, increasing 36% from $0.65 per share for the previous year's same quarter. With the continued growth in new and existing business, revenues have increased and have salary expenses due to a rise in overall company headcount to support the expanding business, as well as wage inflation. While many are struggling to hire, we are pleased to welcome new team members into our culture of growth and advancement, and we look forward to their development and contributions in the coming years. After being with the same vendor for multiple decades in some cases, the number of large employers exploring the TPA options has increased significantly. This market churn is creating an exciting opportunity for Cordell and we are taking advantage of this environment. New business sales have continued at a robust rate for the year. And we have also had the privilege of welcoming back partners who were with us in years past. In total, those have added $34 million in expected annual revenue. We take a loss of business personally and work diligently to retain relationships with past partners and prospects. It is rewarding to welcome back former partners to Corvallis. Industry tends to overestimate the impact of system enhancements in the next few months or quarters, but underestimate their cumulative effect over the next few years. The inaccurate perception of change can roll organizations into inaction or ill-considered action. At Corvell, we embrace the technological speed of change that we are experiencing and work diligently to remain agile. Intentional business dexterity allows us to adapt to internal and external market changes and rapidly respond to our customers' needs. Cordell has been built from the bottom up to deliver meaningful value to our partners. We are not a combination of disparate enterprises founded upon large amounts of debt. For this reason, we are poised to increasingly capitalize on technology advances through our expanded R&D investments. Currently, this means we are heavily investing in machine learning and artificial intelligence. These technologies allow us to apply data analysis to systematically identify insights in large volumes of data, interpret and leverage voice analytics, and use process mapping to streamline complex workflows. The system enhancements on which we are focused increase the capacity of our team members, and the quality and consistency of their work product, which results in better outcomes for the patients we serve and the partners with which we work. At Corvell, we are thankful for the stable foundation we have enjoyed the last 30 years. We view success over the long term, in years and even decades. So yes, quarter-to-quarter results are essential, hence these earning calls, but we attribute the results that we're achieving today to an adherence to the core principles we've been guided by since our foundation. While we firmly believe that technology is vitally important, we maintain that people are the heart of our organization and essential to delivering the market-leading results we deliver. The best outcomes are being produced when technology is used to augment our team's work. which is consistent with the expectations of the next generation of professionals. People are looking for an ideal blend in the workplace. They want an elegant, logical application interface and also a company culture that encourages work-life integration. In addition to our working systems, we've also changed our approach to physical offices, transitioning from traditional workspaces to collaboration centers. With hiring and retention at the top of mind for all companies during this great resignation, at Corvo, we're focused on building intuitive systems and continuing to foster an environment where employees are respected, valued, and have opportunity to learn, grow, and advance. We also greatly value our partners and are pleased that after a one-year COVID-induced crisis, we held our annual partnership meeting this last month. It was genuinely refreshing to be together, sharing strategic initiatives we've implemented, receiving feedback, and discussing plans. In many cases, the feedback received from prior meetings was direct input to functionality demonstrated during the most recent partnership meeting. Likewise, the input we received at this meeting will guide future development initiatives. As we assess the impact of COVID on our book of business and the outcomes achieved for our partners, the last 18 months present a compelling picture. At Corvell, our claim cost is approximately 44% less than the national average in workers' compensation. In addition, 89% of all COVID claims reported to us have been closed. However, while we are pleased with the results delivered and the improvement in testing and treatments, the recent reduction in deaths, and the availability and advancement in PPE, the future development of COVID claims remains uncertain. Long-haul claims, claims resulting in permanent disabilities, claims reopening due to ongoing systems, the newly defined post-COVID stress disorder, and evolving legislation contribute to the uncertainty. At Corvell, we will continue to adapt to meet the evolving needs of our partners. The federal government has issued the first interim final rule implementing specific provisions of the No Surprise Act, scheduled to go live in January 2022. There will be impact with providers joining networks, accepting or disputing fair payment from payers, and transparency in charges and price comparison. Our proprietary database and experience allow us to reprice an out-of-network medical bill to a reasonable amount. The results of our adjudication process have historically been accepted as payment in full or requiring only minimal negotiation to settle. While the ultimate details and effects of the No Surprise Act remain to be seen, with our specialization in this area, we are well positioned to handle the upcoming changes from this legislation. Ferris remains a logical outsource solution for carriers and employers. For patients, unmanaged workers' compensation and group health can be a confusing maze. To make the process as easily navigable as possible, We start intake, which is the initial contact with a worker after a workplace injury, with a nurse advocate. This approach, in conjunction with our integrated total plans management process, has resulted in a more positive experience for patients and improved outcomes for our partners. Connecting patients with appropriate, quality care when an incident occurs is a differentiator in the market. As a result, our program has reduced costs by over 30%, average days open for a claim by over 25%, and litigation rates by over 60%. To further refine intake and move the patient towards the center of the process, our services will increasingly provide health care navigation for the injured employee, working in tandem with nurses and other stakeholders. This approach facilitates enhanced engagement between visits and assists patients with each transition in the claim continuum. In the health market, our service efforts are focused on the rollout and expansion of our existing product lines, as well as the creation of a configurable and modular cloud-based software platform. These efforts support our current business and increase capabilities in the future. Additional development staff have been engaged to increase production capacity and speed the market. Supply chain delays and a reduced workforce are driving the need to enhance efficiency in processing in many areas of business. Symbio, our revenue cycle management arm, delivers innovative AI-enhanced solutions that lead to faster, more efficient, accounts-payable processing with lower overall costs. For example, during the quarter, an all-new digital solution specializing in capturing bill information has realized a reduction of over 25% in processing costs and over 60% in manual resource utilization while increasing production throughput. This quarter, we received the Innovation Award from Business Insurance for our Virtual Functional Restoration Program. The program is an interdisciplinary, biopsychosocial model of care designed to remotely treat injured workers suffering from chronic pain. While chronic pain claims only account for 5-8% of cases, they drive well over 50% of costs. By introducing innovative approaches to address this area, Patients have seen an average reduction of 50% in morphine equivalency and significantly improved outcomes, and payers have seen unnecessary medical costs reduced. Bringing to market new services that drive enhanced results is a passionate pursuit at Corvell. We are thankful to the internal team that created the program and the recognition from the industry. Brandon will now provide an overview and additional texture on the September quarter's financial results. Brandon?

Thank you, Michael, and good morning, everyone. Revenues for the September quarter were a record $158 million, up 16% from the same quarter of the prior year. Earnings per share were $0.88, an increase of 35% from the $0.65 per share in the same quarter of the prior year. Robust new sales spanning the pandemic, plus the return of pre-pandemic market conditions, for our existing customers drove the revenue growth. The profit generated during this quarter reflected improved niche shift and operational efficiencies as the September quarter pre-tax operating margins increased from 11% in the September quarter of 2020 to 13% during the September quarter of 2021. Revenue for patient management, including third-party administration TPA services, And traditional case management for the September quarter was a record $105 million, an annual increase of 16%. Gross profit increased 1% from the September quarter of 2020. Our third-party administration services hit record levels, leveraging increased market recognition and engagement of Corvell's enterprise comp. Enterprise comp relationship growth came from a healthy mix of new clients in addition to the expansion of existing clients. Beneficial claims, outcomes, and experience from our enterprise comp program, as noted in Michael's opening comments, are positively felt by existing customers while providing sales leverage towards increasing market share penetration. Revenue for network solutions sold in the wholesale market for the quarter was $53 million. up 16% from the same quarter of the prior year. Gross profit in the wholesale business was up 45% from the September quarter of 2020. Gross margins increased due to the increasing business mix of the health market business within Network Solutions. Cirrus, providing payment integrity services, continues to gain traction by expanding the breadth and depth of services provided to the large commercial health carriers. Paris hit records throughout the quarter while still being in the early stages of several product and relationship expansions. I would now like to review a few additional financial items. During the quarter, the company repurchased 165,000 shares at a total cost of $2.6 million. From inception to date, the company has repurchased 36.9 million shares for a cost of $604 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. The quarter-ending cash balance was $131 million, up $25 million from the same quarter of a year ago. The company's liquidity and strong balance sheet continue to reflect the healthy conditions of our business. The investments we've made to our process and software has also included improvements to the revenue cycle management and operating effectiveness. Our DSO, day sales outstanding in receivables, was 40 days, down nine days from a year ago. This substantial improvement in our DSO is evidence of the steady improvements both we and our client partners are making in the integration of our services in their business processes, and in additional value stemming from the continuing digital evolution in managed care. That concludes our remarks for today. Thank you for joining us. I'll now return the call to our operator.

This concludes today's webcast. You may disconnect your lines at this time.