CorVel Corporation Q2 FY2023 earnings call

• CERiS: Growing importance in financial results, but early September quarter had transaction volume fluctuations. Increased investment in CERiS team, SaaS platform, R&D, and new services to lay foundation for growth in 2023 and beyond.
• Labor market: 97% customer retention rate validates efforts. Proactive hiring, enhanced retention, and increasing bench strength to address labor market challenges. Workforce pendulum expected to swing back to neutral staffing to transaction volume ratios.
• Markets served: Managed care and claims management affected by private equity-owned vendors; CorVel adheres to long-term view and tech differentiation.
• Industry trends: Musculoskeletal disorders impact workers' compensation costs; CorVel's CareIQ reduces therapy visits per claim; exploring MSK solutions and partnerships.
• Technology: Completed new workflow management system for CERiS, providing 15% labor cost efficiency gain; AI-assisted solutions for operational efficiencies; expansion of text messaging in claims and case management.
• Partnerships: Annual partnership meeting, positive feedback from carrier partners, and 2022 Risk Management Team of the Year with Bass Pro Shops.

For the September quarter, total revenue was $177 million, which is 12% higher than the $158 million in the September 2021 quarter. The Patient Management segment, including third-party administration, TPA services, and traditional case management, generated $119 million in revenue for the quarter, representing a 14% annual increase. The Network Solutions segment, which sells in the wholesale market, had revenue of $58 million, a 9% increase from the same quarter in the prior year. Revenue contribution: Patient Management accounted for approximately 67.2% of total revenue ($119M / $177M), while Network Solutions accounted for approximately 32.8% ($58M / $177M).

• Actively laying the foundation for additional meaningful growth in 2023 and beyond through CERiS investments.
• Expect the workforce pendulum to swing back to a more neutral position regarding staffing to transaction volume ratios.
• Plan to realize a 40% decrease in total leased office space from 2020 levels by 2025 for ongoing cost structure efficiencies.

• Fluctuations in CERiS transaction volume early in the September quarter impacted EPS.
• Labor market challenges leading to elevated staffing levels in property and casualty business.
• Higher interest rates and potential recession posing challenges for private equity-owned vendors in the workers' compensation market.