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CorVel Corporation (NASDAQ: CRVL)
Q4 2018 Earnings Conference Call
Feb. 05, 2019, 11:30 a.m. ET
- Prepared Remarks
- Questions and Answers
- Call Participants
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. CorVel wishes to caution you that these statements are only predictions and that actual events or results could differ materially. CorVel 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 the call over to Mr. Gordon Clemons.
Gordon Clemons -- Chairman and Chief Executive Officer
Thank you for joining us, and welcome to CorVel's quarterly review of results. The December quarter continued our recent progress on a number of fronts. Michael Combs will discuss the quarter's results and our key initiatives.
At CorVel, we're focused on improving patient experiences and outcomes in their healthcare benefits program. The entirety of the healthcare marketplace is overwhelmingly complex, and thus having a tightly focused vision is vital to maintaining a viable strategy. We began our healthcare administration services that is our enterprise comp business with the purpose of building a new service model for the treatment of workplace injuries and making a meaningful difference for all of our constituencies. We're finding that we can do that.
The healthcare economic model is very complex and generally not well-articulated in the press coverage it gets. CorVel competes in a relatively small corner of the total healthcare marketplace, and thus we are able to explore new approaches that involve a subset of the complexity of the entire healthcare continuum. We have trusted in new innovations to create practical solutions for our customers. And the next wave of sales success for CorVel.
On the outset, our healthcare administration business models have been structured to leverage our investments in technology and to increasingly produce results superior to those available elsewhere in the industry. For the coming year, we have specific projects in place to bring more of our planned integrated total service model to market. We now have enough experience with our new processes to be able to demonstrate the effectiveness of our model to prospective customers, and this is visible in our sales results.
Most healthcare management efforts have focused upon improving each silo within the total healthcare continuum. It was intuitive for people to try to reduce the total cost of individual programs as the logical pathway to reducing the total cost of healthcare. However, much of the healthcare cost issue is the result of mismatched resources rather than ineffective solutions to specific components of the continuum. Each disease state developed its own silo collection of resources and solutions. Our approach is instead focused on identifying the appropriate resources from the onset of an episode of care and improving the manner in which various resources are organized to provide solutions. To this end, we've been building systems for 30 years. We have persevered and more than ever believe we are building a process that delivers improved outcomes. We remain focused on long-term goals and yet manage our business to provide returns to all of our constituents along the way.
Where most savings are reported in managed care as the difference between the amount invoiced for care and the amount paid, we measure progress and having current year's total program costs be below those of prior years. This is a true savings for our customers as opposed to the reductions from fictitious proposed levels of reimbursement in each silo of healthcare. This year we will implement new additions to our disruptive service model.
I'd now like to turn the call over to Michael to discuss the details of the quarter.
Michael Combs -- President
Thank you, Gordon, and good morning, everyone. Thank you for joining our call.
The operations of the Company continued to be strong in the third quarter. Pre-tax earnings increased 34.5% from the quarter ended December 31, 2017. Earnings per share for the quarter ended December 31, 2018 were $0.54, up 34.5% from the same quarter of the prior year excluding tax rate differences. Earnings per share increased 8.4% from the December quarter of 2017 as reported. The federal tax change implemented in December 2017, in addition to reducing that base tax rate created a one-time tax rate reduction, the effects of which were reflected in the quarter ended December 31, 2017.
Revenues for the December quarter were $146.1 million 3.8% above the 140.7 million for the December 2017 quarter. We continue to realize strong revenue growth and improved margins with our enterprise comp TPA offering. Network Solutions wholesale services decreased in revenue and margins during the quarter. The government segment of this business is subject to churn as such entities are required by law to rebid their vendors regularly.
The quarter reflects a loss of one of these government accounts from earlier in the year, developing our private sector carrier wholesale accounts is an area of focus for CorVel. Our competitive positioning affords us the ability to absorb occasional losses, while allowing for long-term overall growth.
G&A in the quarter was consistent with our historical ratios. As Gordon indicated previously, consistent investment in our systems, leveraging technology to pave the path forward is part of our DNA. One of the emerging trends in workers compensation industry is the adoption of telehealth services. CorVel first introduced our workers' compensation telehealth solution in 2015. While we received positive feedback early in the program, the initial usage rates were short of expectations.
Over the last two years, the pace of adoption has increased and is now consistent with the growth seen in the personal healthcare space. Patients are becoming more comfortable with use of technology for receiving healthcare services including video conferencing capabilities. CorVel's telehealth solution leverages a combination of integrated services that increased the value realized for our employer and carrier clients.
The effect of this combined group of service capabilities is to improve the ease and appropriateness of onset of care for an injured worker. As the use of our total health services increasing, we look forward to expanding our current programs, as well as to developing new ones. In the new enterprise model of our telehealth platform, we will be developing integration across components of the managed care continuum along with customizing subsets of the service in order to ensure scalability and to pursue improvements to patient outcomes. In addition, we will be extending our business intelligence functionality to identify an inflection points throughout the life of the claim.
Inflection points were various types of intervention have the potential to positively impact the outcome. Over the past few years, we have seen a greater adoption of the advocacy model for workers' compensation claims management. Our enterprise comp TPA solution is focused on assisting the injured worker to obtain the right care promptly whereas our return to work module ensures that the injured workers can resume their jobs as quickly as possible. These components of our claims management program are examples of our services, which result in increased advocacy for the employee and contribute directly to the reduction in the total cost of risk achieved for our customers.
This brings us to a third trend, which is the increasing importance of data analytics and workflow and decision-making software tools. While some concepts can be overhyped before they become widely adopted and effective, which was the case with business intelligence. The opportunities to leverage machine learning, predictive and prescriptive analytics are very real today. As a provider of one of the broadest suite of services, CorVel's dataset is as equally deep as it is expansive. The projects that we have completed in this space contribute directly to the enhanced results, which we are delivering today.
As it relates to our Group health line of business, we are seeing consolidation trends similar to those observed in our workers' compensation line of business, each of the largest players in the segment has a somewhat differentiated core strategy, with the goal of expanding from unique base, CorVel is no different. We have one of the most compelling and valuable systems to improve the accuracy and the appropriateness of group health medical payments.
CorVel continues to expand in this market with the implementation of our core products for another top health insurance TPA this past quarter. As we experienced healthy foundational margin and growth CorVel intends to incorporate additional services and solutions to enhance the results that we are able to achieve and to incrementally deepen our client partnerships, both cost containment and analytics continue to grow as a need in this very large 2.5 billion plus market.
As our listeners may recall, in addition to managing provider reimbursements in healthcare, CorVel provides a payment solution outside the world of healthcare through its SYMBEO operations. SYMBEO close the final quarter of 2018, with strong performance in both channel partner and direct sales. SYMBEO will continue to diversify its partner ecosystem in 2019 and increase investments in direct sales and marketing to facilitate optimal growth given the increasing demand for the managed accounts payable services SYMBEO provides.
Product development efforts were focused on the following key areas this past quarter. The Edge, our claims management workstation interface, which supports our carrier and enterprise comp customers, implementation of the latest version of our bill review system and enhancements to our integrated intake module, which will be deployed over the next 12 months. The Edge workstation introduces a new model to the workers compensation industry. It combines business analytics with real-time integration of all episodes of care data to present actionable prioritized insights to the claims and risk management teams.
During the December quarter, additional integration points were added to the Edge including new services and the corresponding workflows. During the December quarter, CorVel successfully rolled out our next generation of medical bill review software to each of our centers of excellence across the country. The enhanced platform harnesses emerging technologies, which we believe is essential for CorVel to continue to set the standard for reducing the total cost of risk for the customers we serve.
I'll now discuss our operating results. Patient management includes third-party administration services and traditional case management. Revenue for the quarter was a record $92.1 million an annual increase of 16.1%. Gross profit increased 87.2% from the December quarter of 2017. CorVel's enterprise comp business is benefiting from increased margins attributable to achieving economies of scale improvements. New revenue is not requiring the same level of incremental expense in overhead as the base business initially required which is leading to meaningful increases in profit.
Revenue for network solutions sold in the wholesale market for the quarter was $54 million, down 12.1% from the same quarter of the prior year. Gross profit in the wholesale business was down 17.2% year-over-year due primarily as I previously indicated to churn in the government segment of this portion of the business.
I would now like to review a few additional financial items. During the quarter, the company repurchased a 186,574 shares for a total price of $11.3 million. Inception to-date the company has repurchased 35 million shares for a cost of $454 million. The quarter ending cash balance was $96 million. Our DSO that is days sales outstanding and receivables was 39 days, down three days from a year ago.
That concludes our remarks for today. Thank you for joining us. I'll now turn the call over to our operator.
This concludes today's webcast. You may disconnect your lines at this time.
Duration: 14 minutes
Gordon Clemons -- Chairman and Chief Executive Officer
Michael Combs -- President
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