CorVel Corp.

Thank you for standing by. Welcome to the Corvell Corporation quarterly earnings release 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 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. I would now like to turn it over to Michael Combs, President and Chief Executive Officer.

Thank you for joining us to review Corvell's March quarter and fiscal year 2023 results. On the call with me today is Brandon O'Brien, Corvell's Chief Financial Officer. Today, I will review business performance, the current environment and market trends, and progress on new product and service offerings. Brandon will then provide an overview of our March quarter and fiscal year financial results. The March quarter revenues were $185 million, 8% over the revenue for the March 2022 quarter. The earnings per share for the quarter ended March 31, 2023, or $1.04. a decrease of 5% over the prior year's same quarter. Revenues for fiscal year 2023 were $719 million, up 11%. Earnings per share were $3.77, an increase of 3%. During the quarter, it is not unusual to have one-time events that impact financial performance. What is unusual, however, is the number of one-time events that positively impacted the March 2022 quarter and those that negatively impacted the March 2023 quarter. The foundation of the business is solid, and we are pleased with the underlying results for the March quarter and fiscal year 2023, unusual events notwithstanding. Generative AI is a topic that has been prevalent in the media these past few months. At a very high level, implementations of the technology, such as Microsoft's Chat GPT and Google's BARD, can identify patterns within historical data to generate new content. Practical examples span from content generation and writing to virtual avatars, chatbots, and virtual assistants, to name just a few. The fuel that powers the generative AI engine is historical data. While the technology is nascent, the current and emerging applications to business systems and processes are impressive. The functionality is rapidly evolving with new entrants and advancements announced on a weekly, if not a daily basis. Generative AI will likely power a productivity renaissance in business, and that is how we at Corvell are approaching the technology. We are moving forward quickly and intentionally with our use of generative AI. Ensuring the security of Corvell's closed source customer data is the top priority for each implementation. The technology will be incorporated into Cogent CIQ service offerings and will provide an expanding list of benefits. The following are just a few examples. Automating objective tasks to accelerate the claims processing cycle, such as summarizing medical documents, entity extraction, answering specific questions, and bringing important items to the attention of claims professionals or nurses. enabling faster claim closures, identifying potential fraud cases, expediting the learning curve of young claims professionals, and leveraging chatbots to enhance customer service and engagement. Using generative AI will elevate the work of the claims professionals and, most importantly, it will increase the time our staff is able to spend interacting directly with customers' employees with injuries. Generative AI will also improve the experience of the injured workers and enhance the outcomes for our partners. While our efforts in automation and augmentation are not new, we see our advancements in these areas accelerating with the new emerging technologies. As previously mentioned, generative AI can ameliorate staffing shortages and help with the knowledge gap with new industry professionals. However, across the industry, hiring and retention challenges continue to be an issue in professional health care positions. An estimated one in five health care workers decided to leave the profession in 2022, causing shortages with physicians and nurses as well as support staff. This is directly impacting patient care and the ability to deliver timely, quality care to injured workers. At Corvell, our case managers are navigating these challenges using their local relationships and knowledge of centers of excellence to ensure patients receive timely care and the attention they need. Case managers overcome delays in care by connecting patients to telehealth, virtual physical therapy, Corvell PPO providers, and using technology to keep injured workers engaged in their own recovery. CareIQ, our network specializing in ancillary services and cost containment programs, has experienced significant growth this quarter and fiscal year. In the March 2023 quarter, revenue increased 20% from the March 2022 quarter and 15% over the previous fiscal year. With a combination of retrospective and prospective reviews, CareIQ delivers cost savings to customers on both sides of the treatment. In addition to expanding the service offerings and network coverage, we have also enhanced the operational systems with updated clinical and management workstations. The efficiencies create more time for our staff to provide best-in-class service by working with consulting physicians and physical therapists to ensure treatment is producing optimized results and returning the patient to maximum medical improvement. Seris. Our payment integrity service offering within the health market expanded during the fiscal year with existing and developing partners. Vendor consolidation continues to be a recurring theme in this market. The mergers and acquisitions and resulting churn and integration challenges have created opportunities for CERIS as large payers look for partners with stability and a track record for proven results. We have increased the investment in the team, SaaS platform, R&D, and have applied ML and AI to increase the ROI and strengthen our competitive position. Utilizing advanced technologies drives operational efficiencies and improves workflows, which in turn create better outcomes with faster turnaround times for our partners. With a consistent investment in the people, processes, and technology, Ceres is well positioned to scale for the additional business. Corvell is committed to digital transformation and delivering solutions that meet our partners wherever they are from a technology perspective. One such product we are offering through Symbio is a virtual mailbox. With workforce transitioning or transitioned to remote and hybrid and the issues with staffing, especially at entry levels, mailroom functions in the industry have become more challenging. There is also the desire to keep sensitive information out of email as much as possible, which means employers need a solution that works to transfer important documents for review or payment. The virtual mailbox is a new interface that has been added to Corvell's provider portal, which allows documents to be uploaded simply and securely with metadata extraction and identification as necessary. In addition to data security, the virtual mailbox also confirms submission with receipt and tracking. It does not require manual pre-processing and provides same day handling that can be initiated from any location. There are also cost savings with the increase in speed of the upload process, as well as the avoidance of costs associated with physical mailing. This project was designed to be quickly scalable, and we are currently onboarding customers with their users. Future phases are already in the works. Brandon will now provide an overview and more in-depth analysis of the financial results for the March quarter and the fiscal year.

Brandon? Thank you, Michael, and good morning, everyone. Revenues for the March quarter were $185 million, up 8% from the same quarter of the prior year. Earnings per share for the quarter were $1.04, a decrease of 5% from the $1.09 per share in the same quarter of the prior year. Revenues for the fiscal year ended March 31, 2023, were $719 million, up 11%. Earnings per share for the fiscal year ended March were $3.77, up 3% from the prior year fiscal year EPS result of $3.66. Results for each quarter can be affected by items referred to as one-time events. These events, typically categorized as unusual, can be both positive or negative. The March quarter of 2023 and the comparative March quarter of 2022 incurred a relatively significant number of one-time impacts to revenue, expenses, and the corresponding profit. As a result, if these one-time events were to be removed from both the March 2022 and March 2023 quarters, the pro forma year-over-year results would have shown an EPS growth of 15%. The adjusted value more accurately reflects the health of the fundamental operating business. The revenue for patient management, including third party administration, TPA services, And traditional case management for the March quarter was $126 million, an annual increase of 13%. Gross profit increased by 29% from the March quarter of 2022. Patient management revenue for the fiscal year ended March 31, 2023, was $479 million, an increase of 13%. Fiscal year gross profit increased 6%. Enhancements in operational efficiencies, particularly the alignment of staff claim volume within our third-party administration services, played a significant role in boosting the gross profit for the quarter. This achievement was made possible through an exhaustive review of our procedures carried out by management at all levels. Artificial intelligence holds the potential to elevate the experience and results for our partners, injured workers, and employees. Our TPA business emerges as the prime candidate for such transformative opportunities. The revenue for Network Solutions sold in the wholesale business for the March quarter was $60 million, flat from the same quarter of the prior year. Gross profit in the wholesale business was down 27% from the March quarter of 2022. Network Solutions revenue for the fiscal year ended March was $240 million, an increase of 8%. Fiscal year gross profit increased 2%. As Michael indicated, Cirrus has been expanding the range of services it provides to our major health payer partners, introducing further new offerings during the recent quarter. However, this expansion hasn't been able to fully compensate for the temporary drop in transaction volume from key partners who initiated internal end-of-year process changes. These decreases in transactions continued longer into the March quarter than originally anticipated. Most of the changes related to these partners' workflows have been addressed, and they are actively working to clear their backlog and redirect the volume to Cirrus. The decreased profit experienced in the quarter will significantly correct as the restored volume and revenue is recognized. Despite the one-time events and temporary volume decreases, the company's results were strong as they represented the second highest reported EPS. I would now like to review a few additional financial items. During the quarter, the company repurchased 106,748 shares at a total cost of $18.6 million. From inception to date, the company has repurchased 37.8 million shares for a cost of $748 million. Through this program, the company has repurchased 69% of the total shares outstanding. The repurchasing of shares continues to be funded via the company's strong operating cash flow. Our DSO, as in day sales outstandings of receivables, was 40 days, down four days from a year ago. The quarter-ending cash balance was $71 million. Corvell's strong and debt-free balance sheet generates improved earnings in contrast to many others in the segment facing increased debt loads with associated interest rate cost headwinds. That concludes our remarks for today. Thank you for joining us. I'll now return the call to the operator.

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