CorVel Q4 2024 Earnings Call Transcript

Quartr
Provided by Quartr
May 22, 2024

There are 3 speakers on the call.

Operator

Thank you for standing by. Welcome to the CorVel Corporation Quarterly Earnings Release Webcast. During the course of this webcast, CorVel Corporation may make projections or other forward looking statements regarding future events or the future financial performance of the company. Qorvo wishes to caution you that these statements are only predictions and that 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 Form 10 ks and 10 Q files for the most recent fiscal year quarter.

Operator

These documents may 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, Chief Executive Officer and President.

Speaker 1

Thank you for joining us to review CorVel's March quarter and fiscal year 2024 results. On the call with me today is Brandon O'Brien, CorVel's Chief Financial Officer. Today, I will review business performance, the current environment and market trends and progress on new product and service offerings. Brenna will then provide an overview of our March quarter and the fiscal year financial results. The March quarter revenues were $207,000,000 12 percent over the $185,000,000 in revenue for the March 2023 quarter.

Speaker 1

The earnings per share for the quarter ended March 31, 2024 were $1.12 an increase of 8% over the same quarter of the prior year's EPS of $1.04 Revenues for fiscal year 2024 were $795,000,000 up 11% from $719,000,000 for the prior fiscal year. Earnings per share were $4.40 an increase of 17% compared to the $3.77 for the fiscal year ended March 31, 2023. During the quarter, we experienced a few one time events that impacted the financials. CorVel is self insured for our medical program and the March quarter expenses were elevated when compared to the same quarter of the prior year. The increase is attributed to a relatively small number of substantial claims.

Speaker 1

Additionally, the March quarter results were impacted by increased staffing to support several new large partner programs being onboarded. The financial results will balance and benefit from the new programs as they go live. One time events notwithstanding, we are pleased with the revenue increase in fiscal year 2024 as well as the new bookings achieved. We credit these results to the work the team is doing in the areas of operational excellence and sales management, which has elevated our reputation in the industry. With our reputation for strong results in conjunction with the broad service offerings, CorVel is enjoying an enhanced market position.

Speaker 1

We are presenting 2 and winning larger marquee accounts, a few of which as alluded to earlier will be live in the June September quarters. While gaining new accounts is always exciting, at CorVel we deeply value our relationships with existing partners. For fiscal year 2024, customer retention as measured by gross revenue retention was 94%, while net revenue retention was 108%. These numbers reflect the depth of engagement with our teams as well as the outcomes we achieve for our partners. Some years are more exciting than others.

Speaker 1

The traction achieved in key areas in fiscal year 2024 gave us a clearer picture of what's possible. With technological advances, including our work with generative AI, we had a year that produced compelling enhancements, meaningful results and has us looking forward to even more impactful In the P and C sector, companies working with our current vendor for several years and in some cases decades are now exploring the market. The causes driving the companies to test the market range from service erosion, perhaps related to changes in resource allocation due to the increased cost of servicing debt and the disruption caused by mergers and acquisitions, companies are looking for new offerings and more vibrant partnerships. We've also experienced companies returning to CorVel after brief departures to benefit from our strength and service offerings and consultative partnerships. The feedback we repeatedly hear is that our engagement, service, communication results and transparency are unmatched in the industry.

Speaker 1

In the commercial health market, large payers seek innovative solutions to achieve cost of care savings and increased ROI from their payment integrity vendors. The Cerus team is working to meet the evolving market requirements by launching new payment integrity concepts and enhancing system automation and augmentation to increase efficiencies. These come in the form of continually updated machine learning models to fine tune our claim selection process and using generative AI to increase efficiencies processing large medical documents. Additionally, Cerus is expanding its partner relationships to broaden the reach in the market. CorVel has invested substantially in advanced technologies, most recently generative AI.

Speaker 1

While the initial efforts were focused internally and brought substantive benefits across the enterprise, as well as a broad foundation from which additional generative AI functionality can be deployed in the future, in recent months, the team has been focused on extending the functionality to our managed care partners. As a result of these efforts, we are pleased to introduce a generative AI powered software as a service, SaaS platform to the managed care market. This data and service hub will automate tasks and leverage AI to increase efficiencies within our partners' business workflows. This enhancement will deliver the capacity to seamlessly integrate with key CorVel capabilities with their REMS systems, as well as with other analytics platforms, ancillary service providers, PPO vendors and more. Using this new model will lessen our partners' IT constraints and lead to better overall program outcomes.

Speaker 1

While telehealth volume settle into their post pandemic levels and usage stabilizes, CorVel has expanded its offerings to include an enhanced telehealth reporting and billing automation framework to further optimize the process. Using a web service integration model, we are expediting the time from appointment request to documented visit, which aids medical decision making and claims resolution. The time needed to share compliant billing and supporting documentation with stakeholders is less than half that of traditional workflows. The American Hospital Association estimates a shortage of up to 124,000 physicians by 2,030 and 200,000 additional nurses will be needed to meet rising demands. These shortages are expected to contribute to an increased reliance on telehealth as access to providers becomes constricted in certain areas.

Speaker 1

Whether we are dealing with a lack of available medical staff, transportation or weather challenges or the next major medical emergency, CorVel is ready to support our clients with newer and faster capabilities for telehealth services. Brandon will now provide an overview and additional texture on the financial results for the March quarter and the fiscal year. Brandon?

Speaker 2

Thank you, Michael, and good morning, everyone. Revenues for the March quarter were 207,000,000 dollars up 12% from the same quarter of the prior year. Earnings per share for the quarter were 1.12 an increase of 8% from the $1.04 per share in the same quarter of the prior year. Revenues for the fiscal year ended March 31, 2024 were $795,000,000 up 11%. Earnings per share for the fiscal year ended March were $4.40 up 17% from the prior fiscal year's EPS results of $3.77 The revenue for patient management, including third party administration, TPA services and traditional case management for the March quarter was $141,000,000 an annual increase of 12%.

Speaker 2

Gross profit increased by 4% from the March quarter of 2023. Patient management revenue for the fiscal year ended March 31, 24 was $530,000,000 an annual increase of 11%. Fiscal year gross profit increased 26%. CorVel's 3rd party administration, TPA business remains a key growth catalyst within patient management. As we capitalize on this growth, we are also reimagining our approach to talent acquisition, traditionally focused on recruiting adjusters from within the industry.

Speaker 2

To support our expansion, we launched the CorVel University program designed to attract and retain a new generation of claims adjusting professionals. This initiative has proven successful, garnering strong support from both our brokers and clients. In house well trained adjusters combined with KMC's GenAI advancements greatly unlock and enhance claims productivity and outcomes beyond the current state of capabilities. We are investing now to make this future a reality. The revenue for network solutions sold in the wholesale market for the March quarter was 67,000,000 dollars up 11% from the same quarter of the prior year.

Speaker 2

Gross profit in the wholesale business was up 2% from the March quarter of 2023. Network Solutions revenue for the fiscal year ended March 31, 2024 was 265,000,000 dollars an annual increase of 11%. Fiscal year gross profit decreased 6%. Syrris, part of network solutions, is expanding its services and increasing scalability. This aims to better meet the needs of our key health insurance clients.

Speaker 2

In the short term, strategic pricing adjustments and continuous improvements in DRG and ASO offerings, along with other capital and expense investments have moderated profit growth for the fiscal year. However, these steps are crucial for strengthening our partner relationships. The strategy is designed to enable sustained profit growth with our top carrier partners. Our robust roadmap presents many opportunities to grow volume through both existing services and new market additions. I would now like to review a few additional financial items.

Speaker 2

During the quarter, the company repurchased 37,829 shares at a total cost of $9,100,000 From inception to date, the company has repurchased 38,000,000 shares for a cost of $794,000,000 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 days sales outstanding of receivables, was 43 days, up 3 days from a year ago. The quarter ending cash balance was $106,000,000 CorVel's strong and debt free balance sheet generates improved earnings in contrast to many others in the segment facing increasing debt loads with associated interest rate cost headwinds. That concludes our remarks for today.

Speaker 2

Thank you for joining us. I'll now return the call to our operator.

Operator

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

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Key Takeaways

  • CorVel delivered double-digit revenue growth, with Q4 revenue up 12% to $207 M and FY24 revenue up 11% to $795 M, while EPS rose 8% to $1.12 and 17% to $4.40.
  • Elevated one-time expenses from substantial self-insured medical claims and increased staffing for new partner onboarding pressured quarterly profitability.
  • Customer engagement remained robust with 94% gross revenue retention and 108% net revenue retention in FY24.
  • Investments in generative AI have yielded a new AI-powered SaaS platform for managed care and enhanced telehealth reporting and billing automation to drive efficiency.
  • The company repurchased 37,829 shares for $9.1 M this quarter, bringing total buybacks to 69% of outstanding shares, funded by strong operating cash flow.
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Earnings Conference Call
CorVel Q4 2024
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