Corvel Corp 10-Q for FY2021 Q2

Corvel Corp (CRVL)

10-Q 2020-11-05 For: 2020-09-30

Added on April 04, 2026

About this 10-Q

Corvel Corp filed this 10-Q on November 5, 2020, covering the quarter ended September 30, 2020 (FY2021 Q2).

Headline figures

Quarter ended September 30, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $136.03M; down 7.4% from $146.97M a year earlier
Net income: $11.87M; down 7.8% from net income of $12.87M a year earlier
Diluted EPS: $0.65; down 5.8% from $0.69 a year earlier

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1920 Main Street, Suite 900
Irvine, CA		92614
(Address of principal executive offices)		(Zip Code)

Large accelerated filer	☑	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

Emerging growth company	☐

		Page

PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements	3

	Consolidated Balance Sheets – September 30, 2020 (unaudited) and March 31, 2020	3
	Consolidated Income Statements (unaudited) – Three months ended September 30, 2020 and 2019	4
	Consolidated Income Statements (unaudited) – Six months ended September 30, 2020 and 2019	5
	Consolidated Statements of Stockholders’ Equity (unaudited) – Three and six months ended September 30, 2020 and 2019	6
	Consolidated Statements of Cash Flows (unaudited) – Six months ended September 30, 2020 and 2019	7
	Notes to Consolidated Financial Statements (unaudited) – September 30, 2020	8

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	18

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25

Item 4.	Controls and Procedures	26

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	27

Item 1A.	Risk Factors	27

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35

Item 3.	Defaults Upon Senior Securities	35

Item 4.	Mine Safety Disclosures	35

Item 5.	Other Information	35

Item 6.	Exhibits	36

	Signatures	37

	September 30, 2020			March 31, 2020
	(Unaudited)
Assets
Current Assets
Cash and cash equivalents	$	106,082,000		$	83,223,000
Customer deposits		52,570,000			48,991,000
Accounts receivable, net		73,095,000			65,767,000
Prepaid taxes and expenses		10,561,000			11,010,000
Total current assets		242,308,000			208,991,000
Property and equipment, net		71,980,000			75,900,000
Goodwill		36,814,000			36,814,000
Other intangibles, net		2,322,000			2,540,000
Right-of-use asset, net (Note 9)		87,500,000			90,666,000
Other assets		656,000			1,349,000
TOTAL ASSETS	$	441,580,000		$	416,260,000
Liabilities and Stockholders' Equity
Current Liabilities
Accounts and taxes payable (Note 8)	$	13,309,000		$	16,363,000
Accrued liabilities (Note 8)		135,768,000			117,326,000
Total current liabilities		149,077,000			133,689,000
Deferred income taxes		7,205,000			7,764,000
Long-term lease liabilities (Note 9)		82,898,000			85,096,000
Total liabilities		239,180,000			226,549,000
Commitments and contingencies (Notes 6 and 7)
Stockholders' Equity
Common stock, $.0001 par value: 120,000,000 shares authorized at September 30, 2020 and March 31, 2020; 54,378,892 shares issued (17,908,338 shares outstanding, net of Treasury shares) and 54,254,557 shares issued (17,968,966 shares outstanding, net of Treasury shares) at September 30, 2020 and March 31, 2020, respectively		3,000			3,000
Paid-in capital		175,897,000			168,935,000
Treasury stock (36,470,554 shares at September 30, 2020 and 36,285,591 shares at March 31, 2020)		(546,204,000	)		(531,764,000	)
Retained earnings		572,704,000			552,537,000
Total stockholders' equity		202,400,000			189,711,000
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	441,580,000		$	416,260,000

	Three Months Ended September 30,
	2020		2019
REVENUES	$	136,028,000	$	146,970,000
Cost of revenues		105,525,000		114,127,000
Gross profit		30,503,000		32,843,000
General and administrative expenses		15,560,000		16,593,000
Income before income tax provision		14,943,000		16,250,000
Income tax provision		3,078,000		3,379,000
NET INCOME	$	11,865,000	$	12,871,000
Net income per common and common equivalent share
Basic	$	0.66	$	0.70
Diluted	$	0.65	$	0.69
Weighted average common and common equivalent shares
Basic		17,937,000		18,452,000
Diluted		18,174,000		18,771,000

	Six Months Ended September 30,
	2020		2019
REVENUES	$	265,628,000	$	297,109,000
Cost of revenues		208,616,000		231,132,000
Gross profit		57,012,000		65,977,000
General and administrative expenses		31,145,000		32,345,000
Income before income tax provision		25,867,000		33,632,000
Income tax provision		5,700,000		7,354,000
NET INCOME	$	20,167,000	$	26,278,000
Net income per common and common equivalent share
Basic	$	1.12	$	1.42
Diluted	$	1.11	$	1.40
Weighted average common and common equivalent shares
Basic		17,960,000		18,488,000
Diluted		18,144,000		18,779,000

	Three Months Ended September 30, 2020
	Common Shares		Stock Amount		Paid-in- Capital		Treasury Shares			Treasury Stock			Retained Earnings		Total Stockholders' Equity
Balance – June 30, 2020		54,296,812	$	3,000	$	171,412,000		(36,320,229	)	$	(534,162,000	)	$	560,839,000	$	198,092,000
Stock issued under employee stock purchase plan		3,173		—		257,000		—			—			—		257,000
Stock issued under stock option plan, net of shares repurchased		78,907		—		2,990,000		—			—			—		2,990,000
Stock-based compensation expense		—		—		1,238,000		—			—			—		1,238,000
Purchase of treasury stock		—		—		—		(150,325	)		(12,042,000	)		—		(12,042,000	)
Net income		—		—		—		—			—			11,865,000		11,865,000
Balance – September 30, 2020		54,378,892	$	3,000	$	175,897,000		(36,470,554	)	$	(546,204,000	)	$	572,704,000	$	202,400,000

	Three Months Ended September 30, 2019
	Common Shares		Stock Amount		Paid-in- Capital		Treasury Shares			Treasury Stock			Retained Earnings		Total Stockholders' Equity
Balance – June 30, 2019		54,117,215	$	3,000	$	160,522,000		(35,587,649	)	$	(475,275,000	)	$	518,567,000	$	203,817,000
Stock issued under employee stock purchase plan		3,323		—		239,000		—			—			—		239,000
Stock issued under stock option plan, net of shares repurchased		55,993		—		1,888,000		—			—			—		1,888,000
Stock-based compensation expense		—		—		1,198,000		—			—			—		1,198,000
Purchase of treasury stock		—		—		—		(224,466	)		(19,197,000	)		—		(19,197,000	)
Net income		—		—		—		—			—			12,871,000		12,871,000
Balance – September 30, 2019		54,176,531	$	3,000	$	163,847,000		(35,812,115	)	$	(494,472,000	)	$	531,438,000	$	200,816,000

	Six Months Ended September 30, 2020
	Common Shares		Stock Amount		Paid-in- Capital		Treasury Shares			Treasury Stock			Retained Earnings		Total Stockholders' Equity
Balance – March 31, 2020		54,254,557	$	3,000	$	168,935,000		(36,285,591	)	$	(531,764,000	)	$	552,537,000	$	189,711,000
Stock issued under employee stock purchase plan		3,173		—		257,000		—			—			—		257,000
Stock issued under stock option plan, net of shares repurchased		121,162		—		4,472,000		—			—			—		4,472,000
Stock-based compensation expense		—		—		2,233,000		—			—			—		2,233,000
Purchase of treasury stock		—		—		—		(184,963	)		(14,440,000	)		—		(14,440,000	)
Net income		—		—		—		—			—			20,167,000		20,167,000
Balance – September 30, 2020		54,378,892	$	3,000	$	175,897,000		(36,470,554	)	$	(546,204,000	)	$	572,704,000	$	202,400,000

	Six Months Ended September 30, 2019
	Common Shares		Stock Amount		Paid-in- Capital		Treasury Shares			Treasury Stock			Retained Earnings		Total Stockholders' Equity
Balance – March 31, 2019		54,021,032	$	3,000	$	155,798,000		(35,463,238	)	$	(466,156,000	)	$	505,160,000	$	194,805,000
Stock issued under employee stock purchase plan		3,323		—		239,000		—			—			—		239,000
Stock issued under stock option plan, net of shares repurchased		152,176		—		5,387,000		—			—			—		5,387,000
Stock-based compensation expense		—		—		2,423,000		—			—			—		2,423,000
Purchase of treasury stock		—		—		—		(348,877	)		(28,316,000	)		—		(28,316,000	)
Net income		—		—		—		—			—			26,278,000		26,278,000
Balance – September 30, 2019		54,176,531	$	3,000	$	163,847,000		(35,812,115	)	$	(494,472,000	)	$	531,438,000	$	200,816,000

	Three Months Ended		Three Months Ended
	September 30, 2020		September 30, 2019
Patient management services	$	90,250,000	$	95,715,000
Network solutions services		45,778,000		51,255,000
Total services	$	136,028,000	$	146,970,000

	Six Months Ended		Six Months Ended
	September 30, 2020		September 30, 2019
Patient management services	$	175,471,000	$	195,202,000
Network solutions services		90,157,000		101,907,000
Total services	$	265,628,000	$	297,109,000

	September 30, 2020			March 31, 2020
Billed receivables	$	58,224,000		$	51,208,000
Allowance for doubtful accounts		(6,172,000	)		(5,133,000	)
Unbilled receivables		21,043,000			19,692,000
Accounts receivable, net	$	73,095,000		$	65,767,000

	Six Months Ended
	September 30, 2020
Beginning balance at April 1, 2020 (Note 8)	$	17,645,000
Additions		18,255,000
Revenue recognized from beginning of period		(5,084,000	)
Revenue recognized from additions		(10,350,000	)
Ending balance at September 30, 2020 (Note 8)	$	20,466,000

	Three Months Ended September 30, 2020					Three Months Ended September 30, 2019
	Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
Options outstanding, beginning		1,017,494		$	55.54		1,000,830		$	47.05
Options granted		41,650			79.49		50,450			87.49
Options exercised		(80,455	)		38.66		(55,993	)		33.72
Options cancelled/forfeited		(2,772	)		54.70		(5,223	)		51.52
Options outstanding, ending		975,917		$	57.97		990,064		$	49.84

Range of Exercise Price	Number of Outstanding Options		Weighted Average Remaining Contractual Life		Outstanding Options – Weighted Average Exercise Price		Exercisable Options – Number of Exercisable Options		Exercisable Options – Weighted Average Exercise Price
$21.87 to $48.35		285,745		2.28	$	37.55		256,481	$	36.58
$48.36 to $57.75		262,904		3.04		55.07		110,308		55.48
$57.76 to $77.93		309,586		3.60		69.07		46,812		63.03
$77.94 to $88.22		117,682		5.59		84.83		12,662		87.49
Total		975,917		3.30	$	57.97		426,263	$	45.88

	Number of Options			Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value as of September 30, 2020
Options outstanding at July 1, 2020		1,017,494		$	55.54
Granted		41,650			79.49
Exercised		(80,455	)		38.66
Cancelled – forfeited		(263	)		64.07
Cancelled – expired		(2,509	)		47.92
Ending outstanding		975,917		$	57.97		3.30	$	26,974,518
Ending vested and expected to vest		838,745		$	47.03		2.97	$	24,141,622
Ending exercisable at September 30, 2020		426,263		$	45.88		2.58	$	16,882,794

	Three Months Ended
	September 30, 2020		September 30, 2019
Risk-free interest rate	0.21%		1.54%
Expected volatility	34%		31%
Expected dividend yield		0.00%		0.00%
Expected weighted average life of option in years	4.4 years		4.4 years


2021	$	7,601,000
2022		14,160,000
2023		14,255,000
2024		13,009,000
2025		12,672,000
Thereafter		51,746,000
Total lease payments		113,443,000
Less interest		(17,678,000	)
Total lease liabilities	$	95,765,000

	Payments Due by Period
			Within One		Between One and		Between Three and		More than
	Total		Year		Three Years		Five Years		Five Years
Operating and finance leases	$	122,680,000	$	7,806,000	$	29,334,000	$	27,011,000	$	58,529,000
Software licenses		3,125,000		1,230,000		1,895,000		—		—
Total	$	125,805,000	$	9,036,000	$	31,229,000	$	27,011,000	$	58,529,000

	September 30, 2020		March 31, 2020
Accounts payable	$	11,280,000	$	15,145,000
Income taxes payable and uncertain tax positions		2,029,000		1,218,000
Total accounts and taxes payable	$	13,309,000	$	16,363,000

	September 30, 2020		March 31, 2020
Payroll, payroll taxes and employee benefits	$	35,935,000	$	26,024,000
Customer deposits		52,570,000		48,991,000
Accrued professional service fees		7,957,000		5,919,000
Self-insurance accruals		3,374,000		3,248,000
Deferred revenue		20,466,000		17,645,000
Operating lease liabilities		12,867,000		13,223,000
Other		2,599,000		2,276,000
Total accrued liabilities	$	135,768,000	$	117,326,000

	September 30, 2020			March 31, 2020
Right-of-use asset, net	$	87,500,000		$	90,666,000
Short-term lease liability	$	12,867,000		$	13,223,000
Long-term lease liability		82,898,000			85,096,000
Total lease liabilities	$	95,765,000		$	98,319,000
Weighted average remaining operating lease term	8.07 years			8.27 years
Weighted average remaining finance lease term	4.75 years				—
Weighted average discount rate		4.0	%		4.0	%

	Three Months Ended			Three Months Ended						Percentage
	September 30, 2020			September 30, 2019			Change			Change
Revenue	$	136,028,000		$	146,970,000		$	(10,942,000	)		(7.4	%)
Cost of revenues		105,525,000			114,127,000			(8,602,000	)		(7.5	%)
Gross profit		30,503,000			32,843,000			(2,340,000	)		(7.1	%)
Gross profit as percentage of revenue		22.4	%		22.3	%
General and administrative		15,560,000			16,593,000			(1,033,000	)		(6.2	%)
General and administrative as percentage of revenue		11.4	%		11.3	%
Income before income tax provision		14,943,000			16,250,000			(1,307,000	)		(8.0	%)
Income before income tax provision as percentage of revenue		11.0	%		11.1	%
Income tax provision		3,078,000			3,379,000			(301,000	)		(8.9	%)
Net income	$	11,865,000		$	12,871,000		$	(1,006,000	)		(7.8	%)
Weighted Shares
Basic		17,937,000			18,452,000			(515,000	)		(2.8	%)
Diluted		18,174,000			18,771,000			(597,000	)		(3.2	%)
Earnings Per Share
Basic	$	0.66		$	0.70		$	(0.04	)		(5.7	%)
Diluted	$	0.65		$	0.69		$	(0.04	)		(5.8	%)

					Total Number of
					Shares Purchased		Maximum Number
					as Part of Publicly		of Shares that may
	Total Number of		Average Price Paid		Announced		yet be Purchased
Period	Shares Purchased		Per Share		Program		Under the Program
July 1 to July 31, 2020		57,863	$	76.00		57,863		621,908
August 1 to August 31, 2020		51,736	$	80.92		51,736		570,172
September 1 to September 30, 2020		40,726	$	84.81		40,726		529,446
Total		150,325	$	80.08		150,325		529,446

3.1		Amended and Restated Certificate of Incorporation of the Company. Incorporated herein by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2020 filed with the SEC on August 6, 2020 (File No. 000-19291).

3.2		Amended and Restated Bylaws of the Company. Incorporated herein by reference to Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly report period ended June 30, 2020 filed with the SEC on August 6, 2020 (File No. 000-19291).

10.1		CorVel Corporation Restated Omnibus Incentive Plan (Formerly The Restated 1988 Executive Stock Option Plan). Incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on August 4, 2020 (File No. 000-19291).

31.1		Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

32.2		Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

101.INS		Inline XBRL Instance Document.

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

	CORVEL CORPORATION

	By:		/s/ Michael G. Combs
	Michael G. Combs, Chief Executive Officer and President

	By:		/s/ Brandon T. O’Brien
	Brandon T. O’Brien,
	Chief Financial Officer (Principal Financial Officer)