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.

Good morning. Thank you for joining us to review Corvell's June quarter. Brandon O'Brien, Corvell's Chief Financial Officer, is on the call with me today. Today I will review business performance, the current environment and market trends, and progress on new product and service offerings. Brandon will then provide additional detail on the financial results for the June quarter. The June quarter revenues were $190 million, 8% over the $176 million revenue for the June 2022 quarter. Earnings per share for the quarter were $1.14, increasing 21% from $0.94 per share, in the same quarter of the prior year. One-time events, both positive and negative, are common occurrences. In the June quarter, a legal recovery offset increased costs in Corbell's self-insured medical plan. Quarterly fluctuations in the self-insured medical plan are not unusual. The increase experienced in the June quarter was at the upper end of historical norms. The strength of results for the June quarter are attributed to newly onboarded partner programs and the successful work to rebalance labor in Corvall's property and casualty book of business. The transaction volume in our SARIS business, focused on payment integrity in the commercial health market, has stabilized. We look to realize an increased positive impact from SARIS on our financial results in the coming quarters due to the results of product, service, and partner diversification efforts. CoreVille's first generative AI initiative will be released in the September quarter. We have been actively engaged with the key vendors in this space to assess the various offerings and determine where the technology can be best applied to augment our team members' work and enhance the outcomes achieved for our partners. With the approaching technological advancement We will have partners who are early adopters and want to join us in exploring new areas of automation and augmentation. We also understand that others will be later adopters of the coming transformation. Our approach is to be intentional, working collaboratively with our team and partners. We are committed to using technology to elevate the work of our professional staff and, to reiterate, enhance the outcomes achieved for our partners. The Corvell team's expertise is critical and irreplaceable to the work we do for our partners in service of their employees and the outcomes that are being generated. Our objective is to equip our team with systems that reduce mundane, repetitive tasks and provide decision support at critical inflection points. We are also viewing augmenting decision support as a means to mitigate labor challenges and provide guidelines for future generations of professionals. Looking at archived historical decision-making data of seasoned professionals, we can leverage that information with machine learning and automation to provide another layer of decision support to newer professionals. The enhanced processes in combination with legislative and state regulations, best practice policies and context sensitive special handling instructions provide a valuable resource to bring newer professionals up to speed more quickly and increase the quality and consistency of the service provided. While technological advancements are having a positive impact, inflation is causing healthcare supplies in the risk management field to become more expensive. For NCCI, medical supplies and the other medical categories, including transportation, skilled nursing, and home health, have seen the most significant cost increases and inflationary impact. Current trends show a 5.5% increase year-over-year in this category, with NCCI predicting this trend to continue through 2023. CareIQ, Corvell's ancillary benefits solution, includes durable medical equipment, transportation, and home health services through a vendor panel approach. Offering a panel of vendors within this space allows for competitive pricing below the fee schedule and our customer service minimizes no-show costs and administrative fees. Corville also reduces the total cost of risk by integrating CareIQ solutions within our claims platform, which assures appropriate management of both the cost and utilization of medical supplies and services. Another area of heightened impact on medical spend is physician dispensing. Pharmacy costs have increased in recent years, but currently WCRI estimates a 17% higher average cost of claim when physician dispensing occurs. If physician dispensing is poorly managed, it can result in higher costs and impact patient health through potential overprescribing, unnecessary opioid dispensing, and potential drug interactions. Physician dispensed medications bypass PBM formularies, claim adjuster approval, and are often billed and reviewed up to 30 days after dispensing. Corvell's integrated platform, which includes pharmacy, claims, and bill review solutions, allows our pharmacy team to review both in and out of network pharmacy bills, which include physician dispensed medications. When flagged, our clinical teams reach out to the providers to review all identified drug interactions and potential overprescribing, prioritizing the injured employee's safety and well-being. Through data analytics, our solution identifies provider dispensing practices layered against our network guidelines to promote pharmacy benefits management utilization and non-allowance of physician dispensings. Our in-house pharmacists review and identify physician-dispensed drug trends to provide case managers and claim adjusters education on the implications of these medications, alternative drug considerations, and to encourage documentation of medical necessity. Jurisdictional regulations regarding physician dispensing are enforced through the processing of out-of-network pharmacy bills. Corvell's pharmacy solution offers both pharmacy benefit management and out-of-network solutions, reducing the overall cost per claim. The review of ancillary benefits is increasingly important with the continued escalation in claim severity, despite modest reductions in frequency. In addition to loss prevention studies showing the decline, we also see it in Corvell's book of business. Though in our book of business, a contributing factor is our early intervention model focused on immediate care. In this case, first aid type incidents are handled without becoming claims, leaving only the most severe and catastrophic claims to be processed. In the payables market, fraud remains a leading risk throughout the supply chain, which is exacerbated by increasing M&A activity. The consolidation, movement, and frequent openings and closings of payers allow counterfeit companies to hide within the melee. Fraudulent vendor account information and subsequent payments can be difficult to detect for organizations with a high volume of financial transactions. The supplier onboarding offering used by our revenue cycle management arm, Symbio, validates the authenticity of new suppliers and includes early warning fraud detection for every transaction. These additional reviews safeguard the assets of our partners and provide confidence in the payment process. In prior releases, we have referred to the investments we have been making in SARIS, our payment integrity service offering within the health market. We are pleased with the progress of business development efforts at Ceres and the recent meaningful addition of new partners. It is rewarding to see the returns on our investments and hard work of our team being recognized. Though never satisfied with the status quo, we will continue our focus on expanding our product and service offerings. We are confident of the results we generate. and are grateful our partners recognize the ROI Ceres brings to their programs. To generate additional value, we are diligently working on a SaaS offering to address the market's current momentum towards insourcing. Our desire is to continue to be a trusted partner and as such, adapt to market changes to address the needs of our partners. With this model, we will work with payers to allow them to perform in-house transaction reviews. Over the last 12 months, we have made meaningful changes in the leadership team at Corvell. I am pleased with the evolution of the team and have seen the impact of their strengths, passion, and commitment on business results. Brandon will now provide additional texture on the financial results for the June quarter. Brandon.

Thank you, Michael, and good morning, everyone. As Michael indicated at the top of the call, revenue for the June quarter was $190 million, up 8% from the same quarter of the prior year. Earnings per share were $1.14, a 21% increase from the $0.94 per share in the same quarter of the prior year. One-time events, both positive and negative, are common occurrences. In the June quarter, we had a one-time insurance recovery relating to a prior settlement, offsetting increased costs in Corvell's self-insured medical plan. Quarterly fluctuations in the self-insured medical plan are not unusual. The increased experience in the June quarter was at the upper end of the historical norms. The revenue for patient management, including third-party administration, TPA services, And traditional case management for the June quarter was $128 million, an annual increase of 11%. Gross profit increased by 65% from the June quarter of 2022. Enhancements in the operational efficiencies, particularly the alignment of staffing and claims 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 tools in various stages of development and implementation within CareMC provides additional potential to elevate the TPA service experience and results for our partners, injured workers, and employees. The revenue for network solutions sold in the wholesale market for the June quarter was $62 million. up 1% from the same quarter of the prior year. Gross profit in the wholesale business was down 28% from the June quarter of 2022. Cirrus, included within Network Solutions, has been expanding services and enhancing its ability to scale to meet the varied and new product needs of major health insurance partners, while supporting increased transaction volume in each area. Developing and launching new projects requires hiring and training staff before the official launch with our partners. This investment is necessary for the strategic growth of Cirrus and has impacted profits in the current quarter. Overall, the company's results were strong, as demonstrated by the record revenue and EPS numbers. During the quarter, the company repurchased 87,992 shares at a total cost of $17.8 million. From inception to date, the company has repurchased 37.9 million shares at a total cost of $766 million. Through this program, the company has repurchased 69% of the total shares outstanding. The repurchasing of the shares continues to be funded via the company's strong operating cash flow. Our DSO, as in day sales outstanding of receivables, was 40 days, down two days from a year ago. The quarter-ending cash balance was $87 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.