CorVel(CRVL) - 2026 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements The company's Q2 2025 financial statements reflect 11% revenue growth, a 26% net income increase, and asset growth to $597.4 million, with all prior period share data retroactively adjusted for a stock split - On December 24, 2024, the company executed a three-for-one forward stock split of its common stock, with all share and per-share data for prior periods retroactively adjusted to reflect this split[22] Consolidated Balance Sheets Total assets increased to $597.4 million by June 30, 2025, driven by higher cash and cash equivalents, with corresponding increases in liabilities and stockholders' equity Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | March 31, 2025 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $202,025 | $170,584 | | Total current assets | $421,624 | $386,689 | | TOTAL ASSETS | $597,448 | $545,976 | | Liabilities & Equity | | | | Total current liabilities | $235,221 | $204,036 | | Total liabilities | $254,916 | $223,989 | | Total stockholders' equity | $342,532 | $321,987 | | TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $597,448 | $545,976 | Consolidated Income Statements Revenues for the quarter ended June 30, 2025, grew 10.9% to $234.7 million, with net income increasing 26.2% to $27.2 million and diluted EPS reaching $0.52 Quarterly Income Statement Summary (in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | REVENUES | $234,711 | $211,722 | | Gross profit | $56,761 | $48,155 | | Income before income tax | $35,283 | $28,035 | | NET INCOME | $27,235 | $21,577 | | Diluted EPS | $0.52 | $0.42 | Consolidated Statements of Stockholders' Equity Stockholders' equity increased to $342.5 million by June 30, 2025, primarily due to $27.2 million in net income, partially offset by $9.6 million in treasury stock purchases - During the three months ended June 30, 2025, the company's stockholders' equity was impacted by: - Net income of $27.2 million - Purchase of treasury stock for $9.6 million - Stock-based compensation expense of $1.4 million[13] Consolidated Statements of Cash Flows Net cash provided by operating activities significantly increased to $55.0 million, while investing activities used $15.5 million and financing activities used $8.1 million, primarily for treasury stock repurchases Quarterly Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $55,011 | $40,439 | | Net cash used in investing activities | ($15,463) | ($7,673) | | Net cash used in financing activities | ($8,107) | ($6,421) | | Increase in cash and cash equivalents | $31,441 | $26,345 | Notes to Consolidated Financial Statements Key notes detail revenue recognition, disaggregated into Patient Management ($146.8 million) and Network Solutions ($87.9 million), along with $9.6 million in stock repurchases and $1.4 million in stock-based compensation expense Revenue by Service Line (in thousands) | Service Line | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Patient management services | $146,767 | $139,172 | | Network solutions services | $87,944 | $72,550 | | Total services | $234,711 | $211,722 | - During the three months ended June 30, 2025, the company repurchased 87,105 shares of common stock for approximately $9.6 million at an average price of $110.01 per share[52] - Stock-based compensation expense was $1.4 million for the three months ended June 30, 2025, compared to $1.1 million for the same period in 2024[45] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes 11% revenue growth to new customer activity, improving gross profit margin to 24.2%, and notes a strong financial condition with $202.0 million in cash, sufficient to fund operations and repurchases for the next 12 months Results of Operations Quarterly revenues increased 10.9% to $234.7 million, primarily from a 21% rise in Network Solutions services, leading to a 17.9% gross profit increase and 26.2% net income growth to $27.2 million Quarterly Performance Comparison (in thousands) | Metric | Q1 FY2026 (ended Jun 30, 2025) | Q1 FY2025 (ended Jun 30, 2024) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | $234,711 | $211,722 | 10.9% | | Gross Profit | $56,761 | $48,155 | 17.9% | | Gross Margin | 24.2% | 22.7% | - | | Net Income | $27,235 | $21,577 | 26.2% | - The 11% increase in total revenue was primarily driven by a 21% increase in Network Solutions services revenues, which rose to $87.9 million from $72.6 million, attributed to new customers in managed care and growth with existing customers in enhanced bill review[87] Liquidity and Capital Resources Liquidity strengthened with cash and cash equivalents increasing by $31.4 million to $202.0 million, driven by robust $55.0 million net cash from operations, deemed sufficient for the next 12 months - Cash and cash equivalents increased by $31.4 million to $202.0 million as of June 30, 2025, primarily due to an increase in net income[95] - Net cash provided by operating activities increased by $14.6 million to $55.0 million for the quarter, driven by higher net income and changes in accrued payroll[100] - The company believes its cash reserves and ongoing cash generation will be sufficient to satisfy cash requirements for the next 12 months, including funding operations, stock repurchases, and service development[98] Quantitative and Qualitative Disclosures About Market Risk No material changes in market risk exposures were reported for the three months ended June 30, 2025, consistent with prior annual disclosures - There have been no material changes in market risk during the three months ended June 30, 2025[108] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - As of June 30, 2025, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective[109] - No changes in internal control over financial reporting occurred during the quarter that materially affected or are likely to materially affect such controls[110] PART II - OTHER INFORMATION Legal Proceedings The company is involved in various ordinary course legal proceedings but does not anticipate any probable material losses from current cases - The company states that while it is involved in various legal proceedings from time to time, it does not believe any current proceedings will result in a probable material loss[111] Risk Factors The company faces significant risks including intense competition, potential revenue declines from workers' compensation claims, cybersecurity threats, litigation, regulatory changes, and stock price volatility Risks Related to Business and Industry Business risks include potential revenue declines, intense competition from various providers, and adverse impacts from declining workers' compensation claims or resistance to cost-containment techniques - Factors such as declining manufacturing employment, fewer workers' compensation claims, and intense price competition create an environment where revenue and margin growth is difficult to attain[114] - The markets for network and patient management services are fragmented and competitive, with rivals including national providers, smaller local vendors, and insurance carriers performing services in-house[118] Risks Related to Cybersecurity and Information Systems Significant cybersecurity risks, including sophisticated attacks, could lead to data loss, operational disruption, reputational damage, and potential litigation or regulatory action - A cybersecurity attack could result in the loss, theft, or unauthorized disclosure of sensitive information, potentially damaging customer relationships, exposing the company to litigation, and harming its reputation[139][140] - The frequency and sophistication of cyber-attacks have increased, and despite security investments, there is no assurance that the company's measures will be effective in preventing all incidents[141] Risks Related to Potential Litigation Services involving medical treatment recommendations expose the company to litigation for adverse outcomes, while challenges to cost-containment programs could result in significant liabilities and impact profitability - The company could be exposed to claims for adverse medical consequences arising from its utilization management services, which make recommendations on the appropriateness of medical treatments[151] - Healthcare providers have brought individual and class action lawsuits challenging the company's managed care programs, which could lead to significant liabilities if successful[153] Risks Related to Regulatory Environment Extensive state and federal regulations, including privacy laws and licensing, pose risks of increased operational costs or reduced demand, with growing scrutiny on 'big data' and AI usage - Changes in government regulations, including state licensing requirements for medical review services, could increase costs of operations or reduce demand for services[156] - Expanding privacy laws and increasing regulatory focus on how companies handle personal data could impact business models and expose the company to increased liability[159] Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 87,105 shares for $9.6 million under its stock repurchase program during the quarter, with 2,436,204 shares remaining available Issuer Purchases of Equity Securities (Quarter ended June 30, 2025) | Period | Total Shares Purchased | Average Price Paid Per Share | Total Purchased as Part of Program | | :--- | :--- | :--- | :--- | | April 2025 | 27,985 | $112.51 | 27,985 | | May 2025 | 28,081 | $112.14 | 28,081 | | June 2025 | 31,039 | $105.83 | 31,039 | | Total | 87,105 | $110.01 | 87,105 | - The Board of Directors has authorized the repurchase of up to 117 million shares over the life of the program, which has no expiration date[168] Defaults Upon Senior Securities No defaults upon senior securities were reported during the period - No defaults upon senior securities were reported[170] Mine Safety Disclosures This item is not applicable to the company's operations - This item is not applicable to the company[171] Other Information No directors or officers adopted, modified, or terminated Rule 10b5-1 trading arrangements, though an affiliated entity adopted a plan to sell up to 120,000 shares - No directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement during the quarter ended June 30, 2025[173] - On May 28, 2025, Corstar Holdings, Inc., an entity where director Jeffrey Michael is president and CEO, adopted a Rule 10b5-1 plan to sell up to 120,000 shares of the company's stock[174] Exhibits This section lists exhibits filed with Form 10-Q, including CEO and CFO certifications required by Sarbanes-Oxley Act and interactive data files - The report includes required certifications from the CEO and CFO under Sections 302 and 906 of the Sarbanes-Oxley Act[176]