[PART I - FINANCIAL INFORMATION](index=2&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section covers CorVel Corporation's unaudited financial statements, management's discussion, market risk, and controls [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Presents CorVel Corporation's unaudited consolidated financial statements and related notes for periods ending September 30, 2023 [Consolidated Financial Statements (Unaudited)](index=3&type=section&id=Consolidated%20Financial%20Statements%20(Unaudited)) Consolidated Balance Sheet Highlights (Unaudited) | Balance Sheet Items | Sep 30, 2023 (in thousands) | Mar 31, 2023 (in thousands) | | :--- | :--- | :--- | | **Total Current Assets** | $281,875 | $243,770 | | **Total Assets** | $434,117 | $393,923 | | **Total Current Liabilities** | $186,499 | $167,887 | | **Total Liabilities** | $211,548 | $191,747 | | **Total Stockholders' Equity** | $222,569 | $202,176 | Consolidated Income Statement Summary (Unaudited) | Metric (in thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Six Months Ended Sep 30, 2023 | Six Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | **Revenues** | $195,522 | $177,426 | $385,775 | $353,733 | | **Gross Profit** | $44,252 | $36,094 | $86,131 | $75,963 | | **Net Income** | $19,898 | $14,656 | $39,703 | $31,347 | | **Diluted EPS** | $1.15 | $0.83 | $2.29 | $1.77 | Consolidated Statement of Cash Flows Summary (Unaudited) | Cash Flow Activity (in thousands) | Six Months Ended Sep 30, 2023 | Six Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $54,619 | $39,755 | | Net cash used in investing activities | ($12,276) | ($13,396) | | Net cash used in financing activities | ($21,923) | ($48,238) | | **Increase/(decrease) in cash** | **$20,420** | **($21,879)** | [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) - The Company operates in a single reportable segment: managed care[39](index=39&type=chunk) Revenue by Service Line (in thousands) | Service Line | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Six Months Ended Sep 30, 2023 | Six Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Patient management services | $129,805 | $119,470 | $257,643 | $234,279 | | Network solutions services | $65,717 | $57,956 | $128,132 | $119,454 | | **Total services** | **$195,522** | **$177,426** | **$385,775** | **$353,733** | - During the six months ended September 30, 2023, the Company repurchased 133,493 shares of its common stock for $27.2 million at an average price of $203.80 per share[25](index=25&type=chunk) Accrued Liabilities (in thousands) | Liability Category | Sep 30, 2023 | Mar 31, 2023 | | :--- | :--- | :--- | | Payroll, payroll taxes and employee benefits | $29,324 | $22,170 | | Customer deposits | $90,127 | $80,022 | | Deferred revenue | $29,171 | $26,978 | | **Total accrued liabilities** | **$171,143** | **$152,578** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%202%20%E2%80%93%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management analyzes financial results for periods ended September 30, 2023, detailing revenue, costs, profitability, liquidity, and cash flows [Results of Operations for the three months ended September 30, 2023 and 2022](index=18&type=section&id=Results%20of%20Operations%20for%20the%20three%20months%20ended%20September%2030%2C%202023%20and%202022) Q3 Financial Performance Summary (in thousands) | Metric | Q3 2023 | Q3 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $195,522 | $177,426 | $18,096 | 10.2% | | Gross Profit | $44,252 | $36,094 | $8,158 | 22.6% | | Net Income | $19,898 | $14,656 | $5,242 | 35.8% | | Diluted EPS | $1.15 | $0.83 | $0.32 | 38.6% | - Q3 revenue increased by **10.2% YoY** to **$195.5 million**, driven by an 8.7% increase in Patient Management services and a 13.4% increase in Network Solutions services. The growth is attributed to existing customers and, to a lesser extent, new customers[99](index=99&type=chunk) - Cost of revenues for Q3 increased by **7.0% YoY**, primarily due to the 10.2% revenue growth and a 6.5% increase in salaries from an 8.6% rise in average headcount in field operations to support new and increased business volume[66](index=66&type=chunk)[82](index=82&type=chunk) - General and administrative expenses for Q3 rose **11.3% YoY** to **$19.5 million**, in line with the 10.2% revenue growth, maintaining its proportion at **10.0% of revenues**[76](index=76&type=chunk)[84](index=84&type=chunk) [Results of Operations for the six months ended September 30, 2023 and 2022](index=21&type=section&id=Results%20of%20Operations%20for%20the%20six%20months%20ended%20September%2030%2C%202023%20and%202022) Six-Month Financial Performance Summary (in thousands) | Metric | H1 2023 | H1 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $385,775 | $353,733 | $32,042 | 9.1% | | Gross Profit | $86,131 | $75,963 | $10,168 | 13.4% | | Net Income | $39,703 | $31,347 | $8,356 | 26.7% | | Diluted EPS | $2.29 | $1.77 | $0.52 | 29.4% | - Six-month revenue grew **9.1% YoY** to **$385.8 million**, with Patient Management services up 9.9% and Network Solutions services up 7.2%. The increase was primarily from growth with existing customers[105](index=105&type=chunk) - General and administrative expenses for the six-month period decreased by **0.6% YoY**, primarily due to a one-time insurance recovery settlement from a 2011 lawsuit[106](index=106&type=chunk) [Liquidity and Capital Resources](index=22&type=section&id=Liquidity%20and%20Capital%20Resources) - Working capital increased by **$19.5 million** to **$95.4 million** as of September 30, 2023, from March 31, 2023. Cash and cash equivalents increased by **$20.4 million** to **$91.7 million** in the same period[90](index=90&type=chunk) - Net cash from operating activities increased by **$14.9 million** to **$54.6 million** for the six months ended September 30, 2023, compared to the prior year, mainly due to higher net income[110](index=110&type=chunk) - Net cash used in financing activities decreased by **$26.3 million** to **$21.9 million** for the six-month period, primarily due to a reduction in share repurchases ($27.2 million in H1 2023 vs. $52.3 million in H1 2022)[112](index=112&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=24&type=section&id=Item%203%20%E2%80%93%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's market risk exposure is primarily limited to interest rate fluctuations on its cash and cash equivalents. As of September 30, 2023, the company held no market risk-sensitive instruments for trading, had no derivative financial instruments, and had no outstanding debt, thus minimizing its overall market risk - The company's primary market risk is from interest rate fluctuations on its cash and cash equivalents. A hypothetical one-percentage point increase in interest rates would not have a material effect on the fair value of its investment portfolio[116](index=116&type=chunk) - As of September 30, 2023, the Company had no debt outstanding and did not use any derivative financial instruments, thereby having no market risk related to debt[116](index=116&type=chunk) [Item 4. Controls and Procedures](index=24&type=section&id=Item%204%20%E2%80%93%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of September 30, 2023. There were no material changes in internal control over financial reporting during the quarter - The CEO and CFO concluded that as of September 30, 2023, the company's disclosure controls and procedures were **effective**[117](index=117&type=chunk) - There were **no changes in internal control** over financial reporting during the quarter ended September 30, 2023, that have materially affected, or are reasonably likely to materially affect, these controls[140](index=140&type=chunk) [PART II - OTHER INFORMATION](index=26&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity security sales, and other required disclosures [Item 1. Legal Proceedings](index=26&type=section&id=Item%201%20%E2%80%93%20Legal%20Proceedings) The company is involved in legal proceedings arising in the ordinary course of business but believes that their resolution will not have a material impact on its consolidated financial position or results of operations - The Company is involved in litigation from time to time in the ordinary course of business, but management believes the resolution of these matters will not be **material** to the company's financial position or results[113](index=113&type=chunk)[141](index=141&type=chunk) [Item 1A. Risk Factors](index=26&type=section&id=Item%201A%20%E2%80%93%20Risk%20Factors) This section outlines the significant risks that could adversely affect the company's business, financial condition, and results of operations. Key risks include intense competition, potential declines in workers' compensation claims, reliance on technology and cybersecurity vulnerabilities, potential litigation, evolving government regulations, and stock price volatility [Risks Related to Our Business and Industry](index=26&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Industry) - The company faces risks of fluctuating sequential revenue due to factors like declining manufacturing employment, price competition, and changes in workers' compensation laws, which could cause its stock price to **decline** if expectations are not met[120](index=120&type=chunk) - The market is **fragmented and competitive**, with rivals including national managed care providers, PPOs, and insurance companies that may have greater resources or perform services in-house[125](index=125&type=chunk) - Future success depends on effectively applying technology and data analytics. Failure to anticipate and respond to developments like AI, machine learning, and 'big data' could **adversely affect operating results and client relationships**[132](index=132&type=chunk) [Risks Related to Cybersecurity and Our Information Systems](index=31&type=section&id=Risks%20Related%20to%20Cybersecurity%20and%20Our%20Information%20Systems) - A cybersecurity attack could lead to the **loss or unauthorized disclosure of sensitive customer or company information**, potentially damaging customer relationships, exposing the company to litigation, and harming its reputation and financial results[157](index=157&type=chunk) - The frequency and sophistication of cyber-attacks are **increasing**. A breach could cause **significant business disruption, loss of revenue, regulatory actions, and other financial losses**, and insurance coverage may be insufficient[160](index=160&type=chunk)[180](index=180&type=chunk) [Risks Related to Potential Litigation](index=32&type=section&id=Risks%20Related%20to%20Potential%20Litigation) - The company's utilization management services, which involve recommendations on medical treatment plans, could expose it to claims for **adverse medical consequences or allegations of practicing medicine**[163](index=163&type=chunk) - Healthcare providers have filed individual and class action lawsuits challenging cost containment programs used by the company and its customers. Successful lawsuits could result in **significant liabilities**[165](index=165&type=chunk) [Risks Related to Our Regulatory Environment](index=33&type=section&id=Risks%20Related%20to%20Our%20Regulatory%20Environment) - The company is subject to evolving healthcare and workers' compensation regulations, and failure to comply with existing laws, obtain licenses, or adapt to new requirements could **adversely affect business**[190](index=190&type=chunk)[203](index=203&type=chunk) - Increasing regulatory focus and expanding privacy laws (e.g., GDPR, CCPA) could **impact business models and expose the company to public criticism, lawsuits, and liability for data handling practices**[191](index=191&type=chunk) [Risks Related to Ownership of Our Common Stock](index=34&type=section&id=Risks%20Related%20to%20Ownership%20of%20Our%20Common%20Stock) - The market price and trading volume of the company's common stock may be **volatile**, leading to potential **substantial losses for stockholders**[193](index=193&type=chunk)[207](index=207&type=chunk) - The stock repurchase program, while intended to enhance long-term value, could **increase stock price volatility, diminish cash reserves, and may not guarantee that the stock price won't decline below repurchase levels**[194](index=194&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=34&type=section&id=Item%202%20%E2%80%93%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's stock repurchase activity for the third quarter of 2023. The company continued to execute its publicly announced stock repurchase plan, buying back shares in each month of the quarter Common Stock Repurchases (Q3 2023) | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | July 2023 | 14,784 | $202.68 | | August 2023 | 15,703 | $218.00 | | September 2023 | 15,014 | $199.64 | | **Total** | **45,501** | **$206.96** | - During the three months ended September 30, 2023, the Company repurchased **45,501 shares** for **$9.4 million**. As of this date, **37,951,359 shares** have been repurchased over the life of the program, which was expanded in November 2022 to a total of **39,000,000 shares**[209](index=209&type=chunk) [Item 3. Defaults Upon Senior Securities](index=35&type=section&id=Item%203%20%E2%80%93%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities - **None**[197](index=197&type=chunk) [Item 4. Mine Safety Disclosures](index=35&type=section&id=Item%204%20%E2%80%93%20Mine%20Safety%20Disclosures) This item is not applicable to the company - **Not applicable**[210](index=210&type=chunk) [Item 5. Other Information](index=35&type=section&id=Item%205%20%E2%80%93%20Other%20Information) The company reported no other information - **None**[198](index=198&type=chunk) [Item 6. Exhibits](index=36&type=section&id=Item%206%20%E2%80%93%20Exhibits) This section lists the exhibits filed with the quarterly report, including certifications by the CEO and CFO as required by the Sarbanes-Oxley Act of 2002 and XBRL-related documents - Exhibits filed with this report include CEO and CFO certifications pursuant to Sarbanes-Oxley Sections 302 and 906, and various Inline XBRL documents[212](index=212&type=chunk) [Signatures](index=37&type=section&id=Signatures)

Financial Data and Key Metrics - September quarter revenues were $196 million, a 10% increase from $177 million in the September 2022 quarter [5] - Earnings per share for the quarter were $1.15, up 39% from $0.83 in the same quarter of the prior year [5] - Gross profit increased by 43% compared to the September 2022 quarter [19] - Revenue for patient management was $130 million, a 9% annual increase [19] - Revenue for network solutions was $66 million, up 13% from the same quarter of the prior year [22] - Gross profit in the wholesale business was up 7% from the September 2022 quarter [22] - Day sales outstanding (DSO) was 40 days, down four days from a year ago [23] - Quarter-ending cash balance was $92 million [23] Business Line Performance - Network solutions and patient management business showed balanced growth [5] - CERiS, focused on the commercial health payment integrity market, is maturing with new services added last year [5] - CareIQ, the ancillary benefits management solution, is gaining market attention due to service quality and results [6] - CERiS continues to focus on adding new services, with workflow optimization for the DRG service introduced in early 2023 [15][16] - Symbeo is guiding partners through digital payment transformations, leveraging hyperautomation for faster invoice cycle times and lower costs [17] - Treasury Services Department expanded online payment portals to include claimants and customers, enhancing functionality [18] Market Performance - The insurance industry is facing challenges with the labor market, including a shortage of qualified professionals and the impact of baby boomer retirements [7][8] - Pharmacy utilization has decreased significantly in Texas following the adoption of a closed formulary, with pharmacy claims down 57%, total scripts down 73%, and opioid scripts down 86% [13] - Physical therapy visits have increased by 13% over the last eight years, with costs per visit rising by 17% [14] - CorVel's CareIQ has seen a 23% lower increase in visits and 65% lower cost per visit compared to industry averages [14] Strategic Direction and Industry Competition - The company is addressing labor market challenges with automation, machine learning, and Generative AI to enhance efficiency and decision-making [9][10] - CorVel University was launched to train current employees and external candidates in claims management, with over 1,100 applicants for the first class [11] - The company is investing in technology, including Generative AI, and programs like CorVel View to attract younger professionals and modernize operations [12] - CorVel is actively involved in influencing policy and legislation, particularly in physical therapy and pharmacy [12] - The company is leveraging AI and ML to optimize workflows and improve financial results, with additional technological enhancements planned for future quarters [16] Management Commentary on Operating Environment and Future Outlook - The company is proactively adjusting to a dynamic business environment and shifting industry landscape [12] - Management expects increasing momentum in CERiS as transaction volumes grow and new payment integrity services are optimized [5] - The company anticipates further adoption and restructuring of state-level pharmacy formularies, which could impact pharmaceutical costs [13] - CorVel's strong financial position, with no debt and strong operating cash flow, supports ongoing investments in technology and programs [12][23] Other Important Information - The company repurchased 45,501 shares during the quarter at a total cost of $9.4 million, bringing total repurchases to 38 million shares at a cost of $775 million since inception [23] - CorVel's debt-free balance sheet contrasts with many others in the segment facing increasing debt loads and interest rate cost headwinds [24] Q&A Session - No specific questions or answers were provided in the transcript [24]

PART I – FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) CorVel Corporation's unaudited consolidated financial statements for Q2 2023 show increased revenues and net income [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Total assets increased to $417.6 million by June 30, 2023, driven by cash, with liabilities and equity also rising Consolidated Balance Sheet Summary (in thousands) | Account | June 30, 2023 (in thousands) | March 31, 2023 (in thousands) | | :--- | :--- | :--- | | **Total Current Assets** | $267,950 | $243,770 | | **Total Assets** | $417,573 | $393,923 | | **Total Current Liabilities** | $187,731 | $167,887 | | **Total Liabilities** | $210,593 | $191,747 | | **Total Stockholders' Equity** | $206,980 | $202,176 | [Consolidated Income Statements](index=4&type=section&id=Consolidated%20Income%20Statements) Q2 2023 revenues rose 7.9% to $190.3 million, with net income up 18.7% to $19.8 million and diluted EPS at $1.14 Quarterly Income Statement Highlights (in thousands, except per share data) | Metric | Q2 2023 (in thousands) | Q2 2022 (in thousands) | | :--- | :--- | :--- | | **Revenues** | $190,253 | $176,307 | | **Gross Profit** | $41,878 | $39,869 | | **Income Before Tax** | $25,428 | $21,198 | | **Net Income** | $19,805 | $16,691 | | **Diluted EPS** | $1.14 | $0.94 | [Consolidated Statements of Stockholders' Equity](index=5&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity) Stockholders' equity increased to $207.0 million by June 30, 2023, driven by net income and offset by treasury stock repurchases - Key changes in stockholders' equity for the three months ended June 30, 2023, include net income of **$19.8 million**, stock-based compensation of **$1.3 million**, and treasury stock purchases of **$17.8 million**[171](index=171&type=chunk) [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Operating activities generated $36.6 million in cash, leading to a net $15.3 million increase in cash and equivalents for Q2 2023 Quarterly Cash Flow Summary (in thousands) | Activity | Q2 2023 (in thousands) | Q2 2022 (in thousands) | | :--- | :--- | :--- | | **Net Cash from Operating Activities** | $36,626 | $30,021 | | **Net Cash used in Investing Activities** | $(5,049) | $(8,380) | | **Net Cash used in Financing Activities** | $(16,313) | $(24,837) | | **Net Increase/(Decrease) in Cash** | $15,264 | $(3,196) | [Notes to Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail accounting policies, revenue recognition for patient management and network solutions, and other financial disclosures - The company generates revenue through two service lines: patient management and network solutions, and operates in a single reportable segment called managed care[10](index=10&type=chunk) Revenue by Service Line (in thousands) | Service Line | Q2 2023 (in thousands) | Q2 2022 (in thousands) | | :--- | :--- | :--- | | Patient management services | $127,838 | $114,810 | | Network solutions services | $62,415 | $61,497 | | **Total services** | **$190,253** | **$176,307** | - As of June 30, 2023, the company had **$27.7 million** in remaining performance obligations, primarily related to deferred revenues for claims and non-claims services, with **96%** expected to be recognized as revenue within one year[155](index=155&type=chunk) - Share-based compensation expense was **$1.31 million** for the three months ended June 30, 2023, compared to **$1.38 million** for the same period in 2022[18](index=18&type=chunk) - During the quarter, the company repurchased **87,992 shares** of its common stock for **$17.8 million** at an average price of **$201.06** per share[184](index=184&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=15&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q2 2023 financial results, noting revenue growth, slight margin decrease, reduced G&A, and strong liquidity [Results of Operations](index=17&type=section&id=Results%20of%20Operations) Q2 2023 revenues rose 7.9% to $190.3 million, driven by patient management, with net income up 18.7% to $19.8 million Q2 2023 vs Q2 2022 Performance Comparison (in thousands) | Metric | Q2 2023 (in thousands) | Q2 2022 (in thousands) | Change ($) (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | **Revenue** | $190,253 | $176,307 | $13,946 | 7.9% | | **Cost of Revenues** | $148,375 | $136,438 | $11,937 | 8.7% | | **Gross Profit** | $41,878 | $39,869 | $2,009 | 5.0% | | **General & Administrative** | $16,450 | $18,671 | $(2,221) | (11.9%) | | **Net Income** | $19,805 | $16,691 | $3,114 | 18.7% | - The increase in revenue was primarily driven by an **11.3%** increase in patient management services, attributed to higher revenue from TPA and related services, with total new claims increasing by **9%**[254](index=254&type=chunk) - The decrease in general and administrative expense was primarily due to a one-time insurance recovery settlement from a 2011 lawsuit, with expectations for this expense to return to **10% to 12%** of revenues in future quarters[224](index=224&type=chunk)[232](index=232&type=chunk) [Liquidity and Capital Resources](index=19&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with increased working capital and cash, and operating cash flow sufficient for future needs - Working capital increased to **$80.2 million** as of June 30, 2023, from **$75.9 million** as of March 31, 2023[258](index=258&type=chunk) - Net cash provided by operating activities increased by **$6.6 million** YoY, primarily due to higher net income and timing of accrued payroll[261](index=261&type=chunk) - Net cash used in financing activities decreased by **$8.5 million** YoY, mainly due to reduced spending on share repurchases[262](index=262&type=chunk) - The company believes its cash and cash equivalents, along with cash from operations, will be sufficient to satisfy cash requirements for the next 12 months and beyond[235](index=235&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=20&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's market risk is primarily limited to interest rate fluctuations on cash, with no debt or derivative instruments - The company's market risk is primarily limited to interest rate risk on its portfolio of cash and cash equivalents[65](index=65&type=chunk) - As of June 30, 2023, the company had no debt outstanding and did not use any derivative financial instruments[65](index=65&type=chunk) [Item 4. Controls and Procedures](index=20&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal controls - The CEO and CFO concluded that as of June 30, 2023, the company's disclosure controls and procedures were effective[243](index=243&type=chunk) - No material changes were made to the company's internal control over financial reporting during the three months ended June 30, 2023[58](index=58&type=chunk) PART II – OTHER INFORMATION [Item 1. Legal Proceedings](index=22&type=section&id=Item%201.%20Legal%20Proceedings) Ongoing litigation in the ordinary course of business is not expected to materially impact the company's financial position or results - The company states that ongoing litigation from the ordinary course of business is not expected to have a material financial impact[267](index=267&type=chunk)[185](index=185&type=chunk) [Item 1A. Risk Factors](index=22&type=section&id=Item%201A.%20Risk%20Factors) This section details significant risks including competition, customer loss, cybersecurity, litigation, regulatory changes, and stock volatility [Risks Related to Our Business and Industry](index=23&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Industry) The company faces intense competition, declining referrals, healthcare provider resistance, and inflationary cost pressures - The company faces a fragmented and competitive market, with rivals including national providers, smaller vendors, and insurance carriers that may insource managed care services[72](index=72&type=chunk) - A decline in referrals for patient management services, driven by factors like fewer long-term disability cases and increased competition, could materially harm revenues[73](index=73&type=chunk) - Inflationary risks could increase wages, benefits, and other costs, potentially reducing profitability if these costs cannot be passed on to clients[79](index=79&type=chunk) - The business is dependent on key management personnel, particularly the Chairman and CEO, and the loss of such personnel could have a material adverse effect[84](index=84&type=chunk) [Risks Related to Cybersecurity and Our Information Systems](index=27&type=section&id=Risks%20Related%20to%20Cybersecurity%20and%20Our%20Information%20Systems) The company faces increasing cybersecurity risks, where breaches could cause business disruption, reputational harm, and financial losses - The company is exposed to sophisticated and frequent cyber-attacks, which could result in reputational harm, loss of revenue, regulatory actions, and litigation if sensitive customer or company information is compromised[88](index=88&type=chunk)[109](index=109&type=chunk) - A breach of security or system failure could cause customers to stop using the company's services and may have a material adverse effect on business operations and financial results[90](index=90&type=chunk)[112](index=112&type=chunk) [Risks Related to Potential Litigation](index=29&type=section&id=Risks%20Related%20to%20Potential%20Litigation) The company faces litigation risks from its services and cost containment programs, potentially leading to significant liabilities - The company could be exposed to claims for adverse medical consequences arising from its recommendations concerning the appropriateness of medical treatment plans[115](index=115&type=chunk) - Healthcare providers have initiated individual and class action lawsuits against the company and its customers, challenging its cost containment programs, which could lead to significant liabilities if successful[117](index=117&type=chunk) [Risks Related to Our Regulatory Environment](index=30&type=section&id=Risks%20Related%20to%20Our%20Regulatory%20Environment) Regulatory changes in healthcare, workers' compensation, and privacy laws could impact demand, increase costs, and create liabilities - The company is subject to state licensing and regulatory requirements which can increase costs of operation and impact its ability to compete[118](index=118&type=chunk) - Changes in government regulations in workers' compensation, automobile insurance, and group healthcare could reduce demand for the company's services or limit the fees it can charge[119](index=119&type=chunk)[137](index=137&type=chunk) - Increasingly stringent privacy and data security laws, such as the GDPR and CCPA, could impact business models and expose the company to public criticism, lawsuits, and regulatory penalties[139](index=139&type=chunk) [Risks Related to Ownership of Our Common Stock](index=31&type=section&id=Risks%20Related%20to%20Ownership%20of%20Our%20Common%20Stock) Common stock ownership involves risks of price volatility, and the share repurchase program could impact liquidity and strategic opportunities - The market price and trading volume of the company's common stock may be highly volatile, which could lead to substantial losses for stockholders[122](index=122&type=chunk)[141](index=141&type=chunk) - The stock repurchase program could increase stock price volatility and reduce cash reserves, which might impact the company's ability to fund future strategic acquisitions[123](index=123&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=30&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased 87,992 shares for $17.8 million in Q2 2023, with 1,094,142 shares remaining authorized for repurchase Common Stock Repurchases (Q2 2023) | Period | Total Shares Purchased (Count) | Average Price Paid (USD) | Shares Purchased as Part of Program (Count) | Max Shares Remaining for Purchase (Count) | | :--- | :--- | :--- | :--- | :--- | | April 2023 | 28,877 | $197.29 | 28,877 | 1,153,257 | | May 2023 | 31,850 | $207.10 | 31,850 | 1,121,407 | | June 2023 | 27,265 | $197.92 | 27,265 | 1,094,142 | | **Total** | **87,992** | **$201.03** | **87,992** | **1,094,142** | - The Board of Directors authorized a stock repurchase program in 1996, which was most recently expanded in November 2022 to a total of **39,000,000 shares** over the life of the program[123](index=123&type=chunk)[143](index=143&type=chunk) [Item 3. Defaults Upon Senior Securities](index=31&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities occurred during the period - There were no defaults upon senior securities during the period[126](index=126&type=chunk) [Item 4. Mine Safety Disclosures](index=31&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - This item is not applicable to the company[144](index=144&type=chunk) [Item 5. Other Information](index=31&type=section&id=Item%205.%20Other%20Information) No other information to report for this period - There is no other information to report for this period[249](index=249&type=chunk) [Item 6. Exhibits](index=32&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO/CFO certifications and Inline XBRL documents - Exhibits filed include CEO and CFO certifications under Sarbanes-Oxley Sections 302 and 906, as well as various Inline XBRL files[128](index=128&type=chunk) Signatures The report was signed on August 3, 2023, by the Chief Executive Officer and Chief Financial Officer - The report was duly signed on August 3, 2023, by Michael G. Combs, Chief Executive Officer and President, and Brandon T. O'Brien, Chief Financial Officer[129](index=129&type=chunk)[147](index=147&type=chunk)

Company Overview - As of March 31, 2023, CorVel's PPO network comprised over 1.2 million providers nationwide, enhancing coverage and network performance[9]. - CorVel had 4,444 employees as of March 31, 2023, with no employees represented by collective bargaining units, indicating a stable workforce[51]. - As of March 31, 2023, over 33% of the company's employees identify as racially or ethnically diverse, and over 79% identify as women[64]. - The company has been certified as a "Great Place to Work" for three consecutive years, reflecting its commitment to employee satisfaction and organizational culture[63]. - The company’s common stock is traded on the Nasdaq Global Select Market under the symbol CRVL, with approximately 760 holders of record as of May 23, 2023[147]. Financial Performance - In fiscal 2023, the company repurchased 598,241 shares of its common stock at a cost of $93.7 million, totaling approximately $748 million since the program's inception[19]. - The stock repurchase program has authorized the repurchase of up to 39 million shares, but it may not enhance long-term stockholder value[115]. - As of March 31, 2023, the company has repurchased a total of 37,817,866 shares under its stock repurchase program, which has been authorized for up to 39,000,000 shares[156]. - The company’s stockholder returns have increased significantly from 100.00 in 2018 to 376.42 in 2023, outperforming both the U.S. Nasdaq and the U.S. Nasdaq Healthcare Services Index[158]. - The company’s stock price has shown significant volatility, which could lead to substantial losses for stockholders[140]. Employee Development and Wellness - Employee development remains a strategic priority, with a leadership development program expanded to additional cohorts, focusing on enhancing leadership skills through workshops and curated reading[53]. - The company provides comprehensive benefit programs to support employee wellness, including fitness challenges, telemedicine, and retirement savings plans[65]. Technology and Innovation - CorVel's CareMC platform facilitates electronic communication and reporting, allowing customers to manage claims and access treatment calendars efficiently[33]. - The company has implemented scanning and automated data capture processes to improve workflow and reduce manual handling of claims documents[46]. - The company continues to leverage technological innovations to connect all parties involved in the workers' compensation and risk management processes[40]. - The company’s proprietary bill review and claims management technology automates the review process, enhancing efficiency and savings for customers[173]. - CorVel's proprietary medical review software interfaces with multiple clearinghouses to ensure compliance and streamline payment processes[201]. - The company automates the accounts payable process through Symbeo, enhancing efficiency in coding and approvals[198]. Market and Competition - The company faces risks related to competition, with potential declines in growth and profits if market share among insurance carriers and self-funded employers is not increased[60]. - The fragmented and competitive market for network services poses challenges, with competition from national managed care providers and smaller independent vendors[70]. - The company’s strategy includes capturing market share in cost containment services, but there is no assurance of success in marketing these services to insurance carriers and employers[78]. Risks and Challenges - The company faces risks related to internal growth and strategic acquisitions, which may impact its ability to execute its business plan and maintain service levels[77]. - The company is subject to inflation risks that could increase wages and other costs, potentially reducing profitability[86]. - Cybersecurity risks pose a significant threat, with potential impacts on customer trust and operational integrity due to data breaches[93]. - Any cyber-attack resulting in data loss could lead to regulatory actions, litigation, and reputational damage, adversely affecting financial performance[96]. - The company faces significant risks if it cannot effectively apply technology and data analytics, which could adversely affect operating results and client relationships[99]. - The company may experience a decline in results if several customers terminate contracts in a short period, especially due to industry consolidation[101]. - The company is subject to evolving regulations in healthcare and workers' compensation, which could increase operational costs[111]. - Compliance with privacy laws and regulations may impose additional burdens and liabilities on the company[139]. Services Offered - The company offers a comprehensive medical savings solution, including services like expert fee negotiations and medical bill repricing, aimed at maximizing savings for customers[8]. - CorVel offers a range of services including claims management, bill review, preferred provider networks, and pharmacy services[194]. - The company provides a full-feature pharmacy program that includes formulary management and discounted prescriptions, resulting in savings for claimants[199]. - The integrated service model controls claims costs by advocating medical management from the onset of a claimant's injury[202]. - CorVel's case management services include early intervention and vocational rehabilitation, addressing all aspects of disability management[204]. - The company serves customers through alternative loss-funding methods, providing a complete range of services including claims administration and risk management[203]. - The company evaluates and re-credentials providers every three years to maintain high-quality care and significant savings[196].

CORVEL CORPORATION (Exact Name of Registrant as Specified in its Charter) Emerging growth company ☐ Item 1. Financial Statements 3 December 31, 2022 March 31, 2022 (Unaudited) Assets Current Assets Cash and cash equivalents $ 78,031,000 $ 97,504,000 Customer deposits 82,857,000 69,781,000 Accounts receivable, net 82,791,000 82,586,000 Prepaid taxes and expenses 13,064,000 15,123,000 Total current assets 256,743,000 264,994,000 Property and equipment, net 82,066,000 76,268,000 Goodwill 36,814,000 36,814,000 ...

Revenue and Income - The Company's revenues increased to $177.4 million in the quarter ended September 30, 2022, from $157.7 million in the quarter ended September 30, 2021, an increase of $19.7 million, or 12.5%[85] - Patient management services revenues increased to $119.5 million from $104.7 million, an increase of 14.1%, primarily due to higher revenue from the Company's TPA and related services[93] - Network solutions services revenues increased to $58.0 million from $53.1 million, an increase of 9.2%, driven by enhanced bill review programs services[93] - Income before income tax provision decreased to $18.5 million in the quarter ended September 30, 2022, from $20.0 million in the quarter ended September 30, 2021, a decrease of $1.5 million, or 7.3%[88] - Diluted earnings per share decreased to $0.83 per share in the quarter ended September 30, 2022, from $0.88 per share in the quarter ended September 30, 2021, a decrease of $0.05 per share, or 5.7%[90] - Net income decreased to $31.3 million for the six months ended September 30, 2022, from $32.9 million for the same period in 2021, a decrease of $1.6 million, or 4.8%[102] - Income before income tax provision decreased to $39.7 million for the six months ended September 30, 2022, from $40.6 million for the same period in 2021, a decrease of $0.8 million, or 2.0%[106] - Revenues increased to $353.7 million for the six months ended September 30, 2022, from $310.4 million for the same period in 2021, an increase of $43.4 million, or 14.0%[103] Costs and Expenses - Cost of revenues increased to $141.3 million in the quarter ended September 30, 2022, from $121.1 million in the quarter ended September 30, 2021, an increase of $20.3 million, or 16.7%[96] - The increase in cost of revenues was primarily due to the increase in total revenues of 12.5% and a 19.4% increase in salaries due to a 13% increase in average headcount[96] - General and administrative expense increased to $17.5 million in the quarter ended September 30, 2022, from $16.7 million in the quarter ended September 30, 2021, an increase of $0.9 million, or 5.3%[87] - General and administrative expenses increased to $36.2 million for the six months ended September 30, 2022, from $33.3 million for the same period in 2021, an increase of $2.9 million, or 8.8%[105] - Cost of revenues increased to $277.8 million for the six months ended September 30, 2022, from $236.5 million for the same period in 2021, an increase of $41.3 million, or 17.5%[104] Taxation - The effective tax rate was 21.0% for the quarter ended September 30, 2022, compared to 19.7% in the quarter ended September 30, 2021[88] - The effective tax rate was 21.1% for the six months ended September 30, 2022, compared to 18.9% for the same period in 2021[106] Cash Flow and Financial Position - Cash decreased to $75.6 million as of September 30, 2022, from $97.5 million as of March 31, 2022, a decrease of $21.9 million[107] - Net cash provided by operating activities increased to $39.8 million for the six months ended September 30, 2022, from $35.2 million for the same period in 2021, an increase of $4.6 million[112] - Net cash flow used in financing activities increased to $48.2 million for the six months ended September 30, 2022, from $32.2 million for the same period in 2021, an increase of $16.0 million[114] Claims and Market Risk - Total new claims increased by 7% during the September 30, 2022 quarter compared to the September 30, 2021 quarter[93] - Total new claims increased by 8% during the six months ended September 30, 2022, compared to the same period in 2021[103] - Market risk exposure is primarily due to fluctuations in interest rates[121] - As of September 30, 2022, the fair value of cash and cash equivalents approximated its carrying value due to short-term duration[121] - A hypothetical one-percentage point increase in interest rates would not materially affect the fair values of cash and cash equivalents[121] - The company held no market risk sensitive instruments for trading purposes as of September 30, 2022[121] - No derivative financial instruments or other financial instruments were employed to hedge market risk[121] - The company had no outstanding debt as of September 30, 2022, resulting in no market risk related to debt[121]

Financial Data and Key Metrics Changes - Revenue for the September quarter was $177 million, a 12% increase from $158 million in the same quarter of the prior year [5][23] - Earnings per share (EPS) for the quarter were $0.83, a decrease of 5.6% from $0.88 in the same quarter of the prior year [5][23] - Days sales outstanding (DSO) increased to 43 days, up three days from a year ago [27] Business Line Data and Key Metrics Changes - Revenue for patient management, including third-party administration and traditional case management, was $119 million, an annual increase of 14% [24] - Gross profit for patient management decreased by 9% due to increased staffing costs [24] - Revenue for network solutions sold in the wholesale market was $58 million, a 9% increase from the same quarter of the prior year, with gross profit up 5% [25] Market Data and Key Metrics Changes - The financial impact of musculoskeletal disorders (MSKs) in the workplace is approximately $20 billion per year, with indirect costs raising this figure to over $45 billion [11] - The company is focusing on minimizing medical spend in the musculoskeletal space through enhanced networks and service programs [13] Company Strategy and Development Direction - The company aims to differentiate its services through technological innovation and has a long-term view of success [10] - Investments in CERiS are being prioritized to enhance operational efficiencies and service outcomes [14][15] - The company is embracing a hybrid work model to improve productivity and employee morale while reducing office space by 40% by 2025 [26] Management's Comments on Operating Environment and Future Outlook - Management acknowledges challenges from the pandemic and labor market but emphasizes a strong customer retention rate of 97% [7] - The company is optimistic about future growth, particularly in the CERiS segment, and is actively investing in technology to improve service delivery [6][10] - Management believes that the current economic environment will reveal durable companies with solid foundations [9] Other Important Information - The company repurchased 164,500 shares at a total cost of $26 million during the quarter, with a total of 37.6 million shares repurchased to date [27][28] - The company received the 2022 Risk Management Team of the Year award from Business Insurance's US Insurance Awards [22] Q&A Session Summary - The Q&A session did not contain any recorded questions or answers, as the call concluded without further inquiries [28]

Financial Data and Key Metrics Changes - Revenues for the June quarter were $176 million, increasing 16% from $153 million in the same quarter of the prior year [4][23] - Earnings per share for the quarter were $0.94, a 2% increase from $0.92 per share in the same quarter of the prior year [4][23] - The company repurchased 174,822 shares at a total cost of $26.7 million during the quarter, with a total of 37.4 million shares repurchased for $681 million since inception [28] Business Line Data and Key Metrics Changes - Revenue for patient management, including TPA services, was $115 million, an annual increase of 14%, but gross profit decreased by 14% [24][25] - Revenue for network solutions sold in the wholesale market was $61 million, an increase of 18% from the same quarter of the prior year, with gross profit up 24% [26][27] Market Data and Key Metrics Changes - The company noted that inflation is at levels not experienced for many decades, impacting operational costs and the overall economic environment [9] - The workers' compensation industry is seeing higher increases in mega claims, driven by factors such as inflation, liability risk, and an aging workforce [11] Company Strategy and Development Direction - The company is focusing on automation and operational efficiencies to improve bottom line performance while managing increased operational costs [5][25] - CorVel is exploring synergistic acquisition opportunities, particularly in light of reduced valuations in the market [10] - The company continues to invest in technology and automation to enhance service delivery and operational efficiency [20][21][19] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about the ongoing economic dynamics, including inflation and the potential for a recession, which are affecting M&A activity [9] - The company remains optimistic about the demand for telehealth and virtual care models, despite regulatory challenges [15][14] Other Important Information - CorVel received the Business Insurance Innovation Award for its advanced data analytics solution, Cogency, highlighting its commitment to innovation [7][8] - The company is leveraging technology to keep injured workers engaged in their recovery, which is expected to reduce overall costs of care [16] Q&A Session Summary - The Q&A session concluded without any specific questions or answers being recorded [29]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, Par Value $0.0001 Per Share CRVL The Nasdaq Global Select Market FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ...

CorVel Corporation (NASDAQ:CRVL) Q4 2022 Earnings Conference Call May 26, 2022 11:30 AM ET Company Participants Michael Combs - President & Chief Executive Officer Brandon O’Brien - Chief Financial Officer Conference Call Participants 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 performances ...