CorVel Q3 Earnings Call Highlights

Core Insights - CorVel reported a net income of $24.1 million for the December 2025 quarter, showing a slight increase from $23.8 million in the same period last year [1] - The company achieved revenue of $236 million in the December 2025 quarter, a 3% increase from $228 million in December 2024, with earnings per share (EPS) rising to $0.47 from $0.46 [2][6] - For the nine months ending December 31, 2025, revenue reached $710 million, up 7% from $664 million in the prior-year period, and year-to-date EPS increased by 16% to $1.53 from $1.32 [3][6] Financial Performance - The allocation of general and administrative expenses decreased to 9.6% from 9.7%, while the margin improved to 23.3% from 23.2% [2] - CorVel ended the quarter debt-free with $230 million in cash and reported fiscal year-to-date free cash flow of $90 million [5][16] - The company repurchased 185,559 shares for $13.4 million during the quarter, totaling 114.9 million shares repurchased for $868 million, representing approximately 69% of shares outstanding [5][15] Operational Insights - Management attributed modest growth to short-term operational factors rather than changes in underlying business fundamentals, emphasizing continued investment in artificial intelligence (AI) and automation [4][8] - The company completed a technology-focused acquisition in late June, which is enhancing efficiency and capabilities in commercial health, claims management, and payment integrity services [5][9] - CorVel's healthcare payment integrity business, CERIS, is evolving as medical costs rise, with health plans increasingly turning to technology to improve accuracy and financial performance [10][11] Market Trends - The U.S. Department of Labor reported a small decline in total work-related injuries from 2023 to 2024, which correlates with a longer-term downward trend [6] - Despite fewer injuries leading to fewer claims, the severity and medical costs per claim have been increasing, with average medical and lost-time claim severity rising by 6% in 2024 [6][7] - Labor market dynamics are also significant, with expectations for job openings in physically demanding occupations that are more susceptible to work-related injuries [7] Strategic Focus - The company is leveraging technology to automate lower-value activities, aiming to reduce service delivery costs while improving client outcomes [10] - AI is being utilized to enhance claims management, case management, and software development processes, supporting margin expansion through productivity gains [12][13] - CorVel's focus on payment integrity and fraud prevention aims to address rising medical costs and improper payments, with recoveries exceeding $6.8 billion in the healthcare sector in 2025 [14]