Corvel Corp 10-Q for FY2021 Q3

Corvel Corp (CRVL)

10-Q 2021-02-04 For: 2020-12-31

Added on April 04, 2026

About this 10-Q

Corvel Corp filed this 10-Q on February 4, 2021, covering the quarter ended December 31, 2020 (FY2021 Q3).

Headline figures

Quarter ended December 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $141.51M; down 4.4% from $148.09M a year earlier
Net income: $11.38M; up 21.7% from net income of $9.35M a year earlier
Diluted EPS: $0.63; up 26.0% from $0.50 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 – December 31, 2020 (unaudited) and March 31, 2020	3
	Consolidated Income Statements (unaudited) – Three months ended December 31, 2020 and 2019	4
	Consolidated Income Statements (unaudited) – Nine months ended December 31, 2020 and 2019	5
	Consolidated Statements of Stockholders’ Equity (unaudited) – Three and nine months ended December 31, 2020 and 2019	6
	Consolidated Statements of Cash Flows (unaudited) – Nine months ended December 31, 2020 and 2019	7
	Notes to Consolidated Financial Statements (unaudited) – December 31, 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

	December 31, 2020			March 31, 2020
	(Unaudited)
Assets
Current Assets
Cash and cash equivalents	$	128,829,000		$	83,223,000
Customer deposits		54,371,000			48,991,000
Accounts receivable, net		63,579,000			65,767,000
Prepaid taxes and expenses		12,453,000			11,010,000
Total current assets		259,232,000			208,991,000
Property and equipment, net		72,483,000			75,900,000
Goodwill		36,814,000			36,814,000
Other intangibles, net		2,213,000			2,540,000
Right-of-use asset, net (Note 9)		86,633,000			90,666,000
Other assets		490,000			1,349,000
TOTAL ASSETS	$	457,865,000		$	416,260,000
Liabilities and Stockholders' Equity
Current Liabilities
Accounts and taxes payable (Note 8)	$	17,494,000		$	16,363,000
Accrued liabilities (Note 8)		141,328,000			117,326,000
Total current liabilities		158,822,000			133,689,000
Deferred income taxes		6,893,000			7,764,000
Long-term lease liabilities (Note 9)		82,277,000			85,096,000
Total liabilities		247,992,000			226,549,000
Commitments and contingencies (Notes 6 and 7)
Stockholders' Equity
Common stock, $.0001 par value: 120,000,000 shares authorized at December 31, 2020 and March 31, 2020; 54,439,754 shares issued (17,887,043 shares outstanding, net of Treasury shares) and 54,254,557 shares issued (17,968,966 shares outstanding, net of Treasury shares) at December 31, 2020 and March 31, 2020, respectively		3,000			3,000
Paid-in capital		179,675,000			168,935,000
Treasury stock (36,552,711 shares at December 31, 2020 and 36,285,591 shares at March 31, 2020)		(553,889,000	)		(531,764,000	)
Retained earnings		584,084,000			552,537,000
Total stockholders' equity		209,873,000			189,711,000
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	457,865,000		$	416,260,000

	Three Months Ended December 31,
	2020		2019
REVENUES	$	141,506,000	$	148,092,000
Cost of revenues		110,613,000		118,839,000
Gross profit		30,893,000		29,253,000
General and administrative expenses		16,937,000		17,000,000
Income before income tax provision		13,956,000		12,253,000
Income tax provision		2,576,000		2,901,000
NET INCOME	$	11,380,000	$	9,352,000
Net income per common and common equivalent share
Basic	$	0.64	$	0.51
Diluted	$	0.63	$	0.50
Weighted average common and common equivalent shares
Basic		17,899,000		18,253,000
Diluted		18,180,000		18,526,000

	Nine Months Ended December 31,
	2020		2019
REVENUES	$	407,134,000	$	445,200,000
Cost of revenues		319,228,000		350,024,000
Gross profit		87,906,000		95,176,000
General and administrative expenses		48,084,000		49,290,000
Income before income tax provision		39,822,000		45,886,000
Income tax provision		8,275,000		10,256,000
NET INCOME	$	31,547,000	$	35,630,000
Net income per common and common equivalent share
Basic	$	1.76	$	1.94
Diluted	$	1.74	$	1.91
Weighted average common and common equivalent shares
Basic		17,939,000		18,410,000
Diluted		18,156,000		18,695,000

	Three Months Ended December 31, 2020
	Common Shares		Stock Amount		Paid-in- Capital		Treasury Shares			Treasury Stock			Retained Earnings		Total Stockholders' Equity
Balance – September 30, 2020		54,378,892	$	3,000	$	175,897,000		(36,470,554	)	$	(546,204,000	)	$	572,704,000	$	202,400,000
Stock issued under stock option plan, net of shares repurchased		60,862		—		2,527,000		—			—			—		2,527,000
Stock-based compensation expense		—		—		1,251,000		—			—			—		1,251,000
Purchase of treasury stock		—		—		—		(82,157	)		(7,685,000	)		—		(7,685,000	)
Net income		—		—		—		—			—			11,380,000		11,380,000
Balance – December 31, 2020		54,439,754	$	3,000	$	179,675,000		(36,552,711	)	$	(553,889,000	)	$	584,084,000	$	209,873,000


	Three Months Ended December 31, 2019
	Common Shares		Stock Amount		Paid-in- Capital		Treasury Shares			Treasury Stock			Retained Earnings		Total Stockholders' Equity
Balance – September 30, 2019		54,176,531	$	3,000	$	163,847,000		(35,812,115	)	$	(494,472,000	)	$	531,438,000	$	200,816,000
Stock issued under stock option plan, net of shares repurchased		28,225		—		1,250,000		—			—			—		1,250,000
Stock-based compensation expense		—		—		1,143,000		—			—			—		1,143,000
Purchase of treasury stock		—		—		—		(240,026	)		(19,196,000	)		—		(19,196,000	)
Net income		—		—		—		—			—			9,352,000		9,352,000
Balance – December 31, 2019		54,204,756	$	3,000	$	166,240,000		(36,052,141	)	$	(513,668,000	)	$	540,790,000	$	193,365,000

	Nine Months Ended December 31, 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		182,024		—		6,999,000		—			—			—		6,999,000
Stock-based compensation expense		—		—		3,484,000		—			—			—		3,484,000
Purchase of treasury stock		—		—		—		(267,120	)		(22,125,000	)		—		(22,125,000	)
Net income		—		—		—		—			—			31,547,000		31,547,000
Balance – December 31, 2020		54,439,754	$	3,000	$	179,675,000		(36,552,711	)	$	(553,889,000	)	$	584,084,000	$	209,873,000

	Nine Months Ended December 31, 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		180,401		—		6,637,000		—			—			—		6,637,000
Stock-based compensation expense		—		—		3,566,000		—			—			—		3,566,000
Purchase of treasury stock		—		—		—		(588,903	)		(47,512,000	)		—		(47,512,000	)
Net income		—		—		—		—			—			35,630,000		35,630,000
Balance – December 31, 2019		54,204,756	$	3,000	$	166,240,000		(36,052,141	)	$	(513,668,000	)	$	540,790,000	$	193,365,000

	Three Months Ended		Three Months Ended
	December 31, 2020		December 31, 2019
Patient management services	$	96,554,000	$	98,326,000
Network solutions services		44,952,000		49,766,000
Total services	$	141,506,000	$	148,092,000

	Nine Months Ended		Nine Months Ended
	December 31, 2020		December 31, 2019
Patient management services	$	272,025,000	$	293,528,000
Network solutions services		135,109,000		151,672,000
Total services	$	407,134,000	$	445,200,000

	December 31, 2020			March 31, 2020
Billed receivables	$	52,594,000		$	51,208,000
Allowance for doubtful accounts		(3,800,000	)		(5,133,000	)
Unbilled receivables		14,785,000			19,692,000
Accounts receivable, net	$	63,579,000		$	65,767,000

	Nine Months Ended
	December 31, 2020
Beginning balance at April 1, 2020 (Note 8)	$	17,645,000
Additions		28,687,000
Revenue recognized from beginning of period		(8,311,000	)
Revenue recognized from additions		(15,499,000	)
Ending balance at December 31, 2020 (Note 8)	$	22,522,000

	Three Months Ended December 31, 2020					Three Months Ended December 31, 2019
	Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
Options outstanding, beginning		975,917		$	57.97		990,064		$	49.84
Options granted		122,750			87.69		144,650			77.93
Options exercised		(62,997	)		44.83		(28,225	)		44.28
Options cancelled/forfeited		(2,234	)		59.31		(6,975	)		48.55
Options outstanding, ending		1,033,436		$	62.30		1,099,514		$	53.66

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 $49.40		287,621		2.26	$	39.58		249,975	$	38.29
$49.41 to $59.32		316,197		2.90		57.32		105,756		57.70
$59.33 to $87.49		278,943		4.32		77.60		39,169		75.48
$87.50 to $88.22		150,675		4.71		87.79		—		—
Total		1,033,436		3.37	$	62.30		394,900	$	47.18

	Number of Options			Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value as of December 31, 2020
Options outstanding at October 1, 2020		975,917		$	57.97
Granted		122,750			87.69
Exercised		(62,997	)		44.83
Cancelled – forfeited		(1,905	)		63.54
Cancelled – expired		(329	)		34.78
Ending outstanding		1,033,436		$	62.30		3.37	$	45,161,613
Ending vested and expected to vest		808,294		$	53.51		3.41	$	22,224,930
Ending exercisable at December 31, 2020		394,900		$	47.18		2.50	$	23,230,004

	Three Months Ended
	December 31, 2020		December 31, 2019
Risk-free interest rate	0.33%		1.66%
Expected volatility	34%		31%
Expected dividend yield		0.00%		0.00%
Expected weighted average life of option in years	4.5 years		4.5 years


2021	$	3,989,000
2022		14,999,000
2023		14,214,000
2024		13,050,000
2025		12,917,000
Thereafter		54,115,000
Total lease payments		113,284,000
Less interest		(17,354,000	)
Total lease liabilities	$	95,930,000

	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	$	89,725,000	$	3,603,000	$	27,885,000	$	26,146,000	$	32,091,000
Software licenses		2,510,000		615,000		1,895,000		—		—
Total	$	92,235,000	$	4,218,000	$	29,780,000	$	26,146,000	$	32,091,000

	December 31, 2020		March 31, 2020
Accounts payable	$	12,065,000	$	15,145,000
Income taxes payable and uncertain tax positions		5,429,000		1,218,000
Total accounts and taxes payable	$	17,494,000	$	16,363,000

	December 31, 2020		March 31, 2020
Payroll, payroll taxes and employee benefits	$	38,254,000	$	26,024,000
Customer deposits		54,371,000		48,991,000
Accrued professional service fees		6,443,000		5,919,000
Self-insurance accruals		3,319,000		3,248,000
Deferred revenue		22,522,000		17,645,000
Operating lease liabilities		13,653,000		13,223,000
Other		2,766,000		2,276,000
Total accrued liabilities	$	141,328,000	$	117,326,000

	December 31, 2020			March 31, 2020
Right-of-use asset, net	$	86,633,000		$	90,666,000
Short-term lease liability	$	13,653,000		$	13,223,000
Long-term lease liability		82,277,000			85,096,000
Total lease liabilities	$	95,930,000		$	98,319,000
Weighted average remaining operating lease term	7.94 years			8.27 years
Weighted average remaining finance lease term	4.5 years				—
Weighted average discount rate		4.0	%		4.0	%

	Three Months Ended			Three Months Ended						Percentage
	December 31, 2020			December 31, 2019			Change			Change
Revenue	$	141,506,000		$	148,092,000		$	(6,586,000	)		(4.4	%)
Cost of revenues		110,613,000			118,839,000			(8,226,000	)		(6.9	%)
Gross profit		30,893,000			29,253,000			1,640,000			5.6	%
Gross profit as percentage of revenue		21.8	%		19.8	%
General and administrative		16,937,000			17,000,000			(63,000	)		(0.4	%)
General and administrative as percentage of revenue		12.0	%		11.5	%
Income before income tax provision		13,956,000			12,253,000			1,703,000			13.9	%
Income before income tax provision as percentage of revenue		9.9	%		8.3	%
Income tax provision		2,576,000			2,901,000			(325,000	)		(11.2	%)
Net income	$	11,380,000		$	9,352,000		$	2,028,000			21.7	%
Weighted Average Shares
Basic		17,899,000			18,253,000			(354,000	)		(1.9	%)
Diluted		18,180,000			18,526,000			(346,000	)		(1.9	%)
Earnings Per Share
Basic	$	0.64		$	0.51		$	0.13			25.5	%
Diluted	$	0.63		$	0.50		$	0.13			26.0	%

					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
October 1 to October 31, 2020		24,428	$	89.99		24,428		505,018
November 1 to November 30, 2020		24,726	$	90.93		24,726		480,292
December 1 to December 31, 2020		33,003	$	98.05		33,003		447,289
Total		82,157	$	93.51		82,157		447,289

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).

10.2†		Stock Option Agreement granted November 5, 2020 by and between CorVel Corporation and Michael G. Combs, providing for performance vesting. Incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 12, 2020.

10.3†		Stock Option Agreement granted November 5, 2020 by and between CorVel Corporation and Brandon T. O’Brien, providing for performance vesting. Incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on November 12, 2020.

10.4†		Stock Option Agreement granted November 5, 2020 by and between CorVel Corporation and Diane J. Blaha, providing for performance vesting. Incorporated herein by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on November 12, 2020.

10.5†		Stock Option Agreement granted November 5, 2020 by and between CorVel Corporation and Maxim Shishin, providing for performance vesting. Incorporated herein by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on November 12, 2020.

10.6†		Stock Option Agreement granted November 5, 2020 by and between CorVel Corporation and Jennifer L. Yoss, providing for performance vesting. Incorporated herein by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on November 12, 2020.

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).

†		Certain confidential information contained in this exhibit has been omitted by means of redacting a portion of the text and replacing it with empty brackets indicated by [ ] pursuant to Regulation S-K Item 601(b)(10)(iv) of the Securities Act of 1933, as amended. Certain confidential information has been excluded from the exhibit because it (i) is not material and (ii) would likely cause competitive harm to CorVel if publicly disclosed. An unredacted copy of the exhibit will be provided on a supplemental basis to the SEC upon request.

	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)