CRVL
#Thank you, and thank you for joining us to review CorVel's December quarter.
Joining me today will be <UNK> <UNK>, CorVel's President.
Revenues for the December quarter of 2017 were $141 million, 9.6% over the revenue for the December 2016 quarter.
Earnings per share for the quarter ended December 31, 2017, were $0.50, up 39% from the same quarter of the prior year.
This reflects a combination of the operating effectiveness upon which we've been working as well as, of course, the impact of the new tax law change.
The tax rate reduction for us is expected to take us from approximately 38% for the combination of state and federal to about 25% to 26%.
Our Enterprise Comp, TPA, continued its growth and the development of its services.
Results in our CERiS medical review services entity also had a strengthening quarter.
The results for the quarter continued the recent demonstration of the operating improvements we have been making in the Network Solutions portion of our business.
As I discussed last quarter, every quarter is impacted by, what most refer to as, onetime events.
Although typically, such references are to unusual expenses, we are impacted by onetime events that are both positive and negative.
Where once we could pick out an occasional item of this nature, in recent years it feels as though every quarter has some.
Each is, yes, a onetime event, but every quarter has a number of such onetime events, so in the aggregate, they are really not onetime in nature.
<UNK> <UNK> will provide more detail on these items.
I would like to discuss them at a more conceptual level here.
We believe the tax law change adds to our competitive advantage, in that it improves our cash flow and net of taxes paid relative to that of our PEO and competitors.
This is due to the limitations the new legislation places upon the deductibility of interest for tax purposes.
The limitation impacts any firm highly leveraged as are most of the PEO and firms.
In the quarter, we also had operational issues, which adversely impacted our operating margins.
We incurred some expenses related to the fair value of some of our investment in startups.
We also had a philosophy of making continuous investments in technology and in the expansion of the services we can provide or the markets we serve.
Such investments are important to the long-term success of the company, but inevitably result in quarters where we have short-term expenses.
Ultimately, our focus has to remain long term in nature and on producing ever more productive services for our customers.
Turning to the state of our markets served.
The markets for all of our services remained in a healthy condition during the quarter.
Strength of the current economy and related labor markets has reduced unemployment to record levels.
Once such tighter labor markets have been in place beyond the initial recovery, workplace injuries have a tendency to increase.
This period comes toward the end of most recoveries, as employers push into segments of the workforce less trained and less acclimated to work and should improve the market for our services.
I would add that this improvement, should it occur, would be an offset to the long-term decline in claims reported, which has typified the worker's compensation market for the last couple of decades.
Automation continues to be a theme in the marketplace.
Last quarter, we discussed the impact technology is having to encourage outsourcing.
We had a particularly busy quarter upgrading our interface to our customers.
This change involved increased customer support, as we rolled out the new claims management workstation for many of our customers.
This upgrade kicks off a series of regular upgrades to our interface with major customers.
In turn, this is expected to make the outsourcing of key functions ever easier for our insurer partners.
In our markets, most vendors sell either service or software.
CorVel is unique in that our offerings include software as a pre-component of our service.
This and the growth of the cloud place ever-increasing pressures on companies that either sell only service or only software.
We are all aware of the movement toward distributed ledger approaches to transaction processing.
Our approach is to interface with existing legacy platforms at our clients and to bring with our service free usage of a claims management workstation.
This technology brings the advantages of current technology to those carrier customers wanting to extend the life of their legacy platforms and, yet, still want to access current technology.
The sale of a service or a product is increasingly bundled with the software to manage the transaction and related accounting and payments processing.
For the health care provider community, we also provide a portal, which presents the ledger status of their accounts receivable with CorVel and with the carriers we represent.
These applications were a highly ---+ were a high priority for us last year and will remain so in the coming year.
Improving the velocity and dependability of health care transaction processing is the goal of the various application launches currently underway.
Separately, our sales mix continues to reflect the impact technology has had upon the relative value contributed by each form of care management.
For example, our older case management product revenues have declined.
This has been more than offset by the increase in our Enterprise Comp TPA sales.
In fact, the automation of interfaces and record-keeping is reducing the need for consultative connection support, such as case management provided to traditional claims management.
Instead, we employ our technology to connect the parties involved in a worker's compensation claim and to increasingly integrate them.
This change is occurring quietly and relatively slowly, but it continues to evolve the environment in which patients find themselves as they pass through an episode of care.
The Edge adjuster workstation, now being expanded incrementally each month, already serves approximately 3,000 claims professionals.
CorVel is bringing outsourced business functionality to markets beyond insurance.
We do this under the brand name, Symbeo.
This business unit began many years ago by doing subsets of the transaction processing cycle and is now offering to do the entire payables function for large corporations.
Symbeo is setting up our first facility dedicated entirely as a hub, delivering turnkey transaction processing, both within and outside the insurance industry.
The broader health care market continues to be an important ---+ to CorVel's overall results and future plans.
The cost of health care continues to increase at rates above the rate of increase in average incomes.
New therapies, biotech cures and treatments and improved diagnostic technologies drive ongoing cost increases per employee.
Thus, approaches to reducing the cost of health care tend to be eagerly reviewed.
We expect to expand the scope of our service program for the health market.
I'd now like to turn the call over to <UNK> <UNK>, who will discuss our operating results and product development.
Thank you, <UNK>.
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