UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to x
Commission file number
(Exact Name of Registrant as Specified in its Charter)
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Registrant’s telephone number, including area code
Not Applicable
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
The number of shares outstanding of the registrant's Common Stock, $0.0001 par value per share, as of October 31, 2023, was
CORVEL CORPORATION
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
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Page |
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Item 1. |
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3 |
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Consolidated Balance Sheets – September 30, 2023 (unaudited) and March 31, 2023 |
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3 |
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Consolidated Income Statements (unaudited) – Three months ended September 30, 2023 and 2022 |
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4 |
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Consolidated Income Statements (unaudited) – Six months ended September 30, 2023 and 2022 |
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5 |
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6 |
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Consolidated Statements of Cash Flows (unaudited) – Six months ended September 30, 2023 and 2022 |
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Notes to Consolidated Financial Statements (unaudited) – September 30, 2023 |
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8 |
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Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
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17 |
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Item 3. |
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24 |
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Item 4. |
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24 |
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Item 1. |
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26 |
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Item 1A. |
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26 |
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Item 2. |
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34 |
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Item 3. |
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35 |
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Item 4. |
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35 |
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Item 5. |
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35 |
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Item 6. |
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36 |
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37 |
Page 2
PART I – FINANCIAL INFORMATION
ITEM 1 – FINANCIAL STATEMENTS
CORVEL CORPORATION
Consolidated Balance Sheets
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September 30, 2023 |
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March 31, 2023 |
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(Unaudited) |
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Assets |
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Current Assets |
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Cash and cash equivalents |
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$ |
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$ |
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Customer deposits |
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Accounts receivable, net |
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Prepaid taxes and expenses |
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Total current assets |
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Property and equipment, net |
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Goodwill |
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Other intangibles, net |
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Right-of-use asset, net |
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Deferred tax asset, net |
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Other assets |
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TOTAL ASSETS |
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$ |
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$ |
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Liabilities and Stockholders' Equity |
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Current Liabilities |
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Accounts and taxes payable |
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$ |
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$ |
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Accrued liabilities |
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Total current liabilities |
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Long-term lease liabilities |
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Total liabilities |
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Stockholders' Equity |
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Common stock, $ |
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Paid-in capital |
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Treasury stock ( |
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Retained earnings |
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Total stockholders' equity |
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
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$ |
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$ |
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See accompanying notes to unaudited consolidated financial statements.
Page 3
CORVEL CORPORATION
Consolidated Income Statements – (Unaudited)
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Three Months Ended September 30, |
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2023 |
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2022 |
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REVENUES |
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$ |
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$ |
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Cost of revenues |
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Gross profit |
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General and administrative expenses |
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Income before income tax provision |
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Income tax provision |
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NET INCOME |
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$ |
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$ |
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Net income per common and common equivalent share |
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Basic |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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Weighted average common and common equivalent shares |
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Basic |
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Diluted |
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See accompanying notes to unaudited consolidated financial statements.
Page 4
CORVEL CORPORATION
Consolidated Income Statements – (Unaudited)
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Six Months Ended September 30, |
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2023 |
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2022 |
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REVENUES |
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$ |
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$ |
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Cost of revenues |
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Gross profit |
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General and administrative expenses |
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Income before income tax provision |
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Income tax provision |
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NET INCOME |
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$ |
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$ |
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Net income per common and common equivalent share |
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Basic |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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Weighted average common and common equivalent shares |
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Basic |
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Diluted |
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See accompanying notes to unaudited consolidated financial statements.
Page 5
CORVEL CORPORATION
Consolidated Statements of Stockholders’ Equity – (Unaudited)
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Three Months Ended September 30, 2023 |
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Common |
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Stock |
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Paid-in- |
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Treasury |
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Treasury |
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Retained |
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Total |
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Balance – June 30, 2023 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Stock issued under employee stock |
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Stock issued under stock option plan, |
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Stock-based compensation expense |
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— |
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— |
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Purchase of treasury stock |
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Net income |
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Balance – September 30, 2023 |
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$ |
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$ |
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( |
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$ |
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$ |
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$ |
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Three Months Ended September 30, 2022 |
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Common |
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Stock |
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Paid-in- |
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Treasury |
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Treasury |
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Retained |
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Total |
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Balance – June 30, 2022 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Stock issued under employee stock |
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Stock issued under stock option plan, |
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Stock-based compensation expense |
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— |
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— |
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Purchase of treasury stock |
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Net income |
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Balance – September 30, 2022 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Six Months Ended September 30, 2023 |
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Common |
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Stock |
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Paid-in- |
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Treasury |
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Treasury |
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Retained |
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Total |
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Balance – March 31, 2023 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Stock issued under employee stock |
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Stock issued under stock option plan, |
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Stock-based compensation expense |
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— |
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— |
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Purchase of treasury stock |
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( |
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Net income |
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Balance – September 30, 2023 |
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$ |
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$ |
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( |
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$ |
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$ |
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$ |
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Six Months Ended September 30, 2022 |
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Common |
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Stock |
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Paid-in- |
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Treasury |
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Treasury |
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Retained |
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Total |
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Balance – March 31, 2022 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Stock issued under employee stock |
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Stock issued under stock option plan, |
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Stock-based compensation expense |
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— |
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— |
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Purchase of treasury stock |
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Net income |
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Balance – September 30, 2022 |
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$ |
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$ |
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( |
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$ |
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$ |
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$ |
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See accompanying notes to unaudited consolidated financial statements.
Page 6
CORVEL CORPORATION
Consolidated Statements of Cash Flows – (Unaudited)
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Six Months Ended September 30, |
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2023 |
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2022 |
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Cash Flows from Operating Activities |
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NET INCOME |
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$ |
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$ |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation and amortization |
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Loss on write down or disposal of property, capitalized software or investment |
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Stock compensation expense |
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Provision for doubtful accounts |
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Deferred income tax |
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Changes in operating assets and liabilities |
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Accounts receivable |
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( |
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Customer deposits |
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( |
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Prepaid taxes and expenses |
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Other assets |
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( |
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( |
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Accounts and taxes payable |
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Accrued liabilities |
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Operating lease liabilities |
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Net cash provided by operating activities |
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Cash Flows from Investing Activities |
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Purchase of property and equipment |
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Net cash used in investing activities |
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Cash Flows from Financing Activities |
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Purchase of treasury stock |
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Proceeds from exercise of common stock options |
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Proceeds from purchases under employee stock purchase plan |
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Net cash used in financing activities |
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( |
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Increase/(decrease) in cash and cash equivalents |
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( |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
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$ |
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$ |
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Supplemental Cash Flow Information: |
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Income taxes paid |
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$ |
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$ |
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Purchase of software license under finance agreement |
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$ |
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$ |
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See accompanying notes to unaudited consolidated financial statements.
Page 7
CORVEL CORPORATION
Notes to Consolidated Financial Statements
September 30, 2023
Note 1 — Summary of Significant Accounting Policies
Basis of Presentation: The unaudited consolidated financial statements include the accounts of CorVel Corporation and its subsidiaries. Significant intercompany accounts and transactions have been eliminated in consolidation.
The unaudited consolidated financial statements herein have been prepared by CorVel Corporation (“the Company”, “we”, “our”, “us”) pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). The accompanying interim unaudited consolidated financial statements have been prepared under the presumption that users of the interim financial information have either read or have access to the audited consolidated financial statements for the latest fiscal year ended March 31, 2023. Accordingly, note disclosures which would substantially duplicate the disclosures contained in the March 31, 2023 audited consolidated financial statements have been omitted from these interim unaudited consolidated financial statements.
The Company evaluated all subsequent events and transactions through the date of filing this report.
Recent Accounting Pronouncements: The Company has evaluated recent accounting pronouncements through the date the financial statements were issued and filed with the Securities and Exchange Commission and believes that there are none that will have a material impact on the Company’s financial statements.
Note 2 – Revenue Recognition
Revenue from Contracts with Customers
Revenue is recognized when control of the promised services is transferred to the Company’s customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. As the Company completes its performance obligations, which are identified below, it has an unconditional right to consideration as outlined in the Company’s contracts. Generally, the Company’s accounts receivable are expected to be collected in
The Company generates revenue through its patient management and network solutions service lines. The Company operates in
Patient Management Service Line
The patient management service line provides services primarily related to workers’ compensation claims management and case management. This service line also includes additional services such as accident and health claims programs. Each claim referred by the customer is considered an additional optional purchase of claims management services under the agreement with the customer. The transaction price is readily available from the contract and is fixed for each service. Revenue is recognized over time as services are provided as the performance obligations are satisfied through the effort expended to research, investigate, evaluate, document, and report the claim and control of these services is transferred to the customer. Revenue is recognized based on historical claim closure rates and claim type applied utilizing a portfolio approach based on time elapsed for these claims, generally between and
Page 8
The patient management service line also offers the services of case managers who provide administration services by proactively managing medical treatment for claimants while facilitating an understanding of and participation in their rehabilitation process. Revenue for case management services is recognized over time as the performance obligations are satisfied through the effort expended to manage the medical treatment for claimants and control of these services is transferred to the customer. Case management services are generally billed based on time incurred, are considered variable consideration, and revenue is recognized at the amount in which the Company has the right to invoice for services performed. The Company believes this approach reasonably reflects the transfer of the case management service to the customer.
Network Solutions Service Line
The network solutions service line consists primarily of medical bill review and third-party services. Medical bill review services provide an analysis of medical charges for customers’ claims to identify opportunities for savings. Medical bill review services revenues are recognized at a point in time when control of the service is transferred to the customer. Revenue is recognized based upon the transfer of the results of the medical bill review service to the customer as this is the most accurate depiction of the transfer of the service to the customer. Medical bill review revenues are variable and generally based on performance metrics set forth in the underlying contracts. Each period, the Company bases its estimates on a contract-by-contract basis. The Company makes its best estimate of amounts the Company has earned and expects to be collected using historical averages and other factors to project such revenues. Variable consideration is recognized when the Company concludes that it is probable that a significant revenue reversal will not occur in future periods.
Third-party services revenue includes pharmacy, directed care services and other services, and includes amounts received from customers compensating the Company for certain third-party costs associated with providing its integrated network solutions services. The Company is considered the principal in these transactions as it directs the third party, controls the specified service, performs program utilization review, directs payment to the provider, accepts the financial risk of loss associated with services rendered, and combines the services provided into an integrated solution, as specified within the Company’s customer contracts. The Company has the ability to influence contractual fees with customers and possesses the financial risk of loss in certain contractual obligations. These factors indicate the Company is the principal and, as such, is required to recognize revenue gross and service partner vendor fees in the operating expense in the Company’s consolidated statements of income.
The following table presents revenues disaggregated by service line for the three and six months ended September 30, 2023 and 2022:
|
|
Three Months Ended |
|
|
Three Months Ended |
|
||
|
|
September 30, 2023 |
|
|
September 30, 2022 |
|
||
Patient management services |
|
$ |
|
|
$ |
|
||
Network solutions services |
|
|
|
|
|
|
||
Total services |
|
$ |
|
|
$ |
|
|
|
Six Months Ended |
|
|
Six Months Ended |
|
||
|
|
September 30, 2023 |
|
|
September 30, 2022 |
|
||
Patient management services |
|
$ |
|
|
$ |
|
||
Network solutions services |
|
|
|
|
|
|
||
Total services |
|
$ |
|
|
$ |
|
Arrangements with Multiple Performance Obligations
For many of the Company’s services, the Company typically has
Page 9
Contract Balances
The timing of revenue recognition, billings and cash collections results in billed accounts receivables, unbilled receivables, and contract liabilities (reported as deferred revenues) on the Company’s consolidated balance sheets. Unbilled receivables are due to the Company unconditionally for services already rendered except for physical invoicing and the passage of time. Invoicing requirements vary by customer contract, but substantially all unbilled revenues are billed within
|
|
September 30, 2023 |
|
|
March 31, 2023 |
|
||
Billed receivables |
|
$ |
|
|
$ |
|
||
Unbilled receivables |
|
|
|
|
|
|
||
Allowance for doubtful accounts |
|
|
( |
) |
|
|
( |
) |
Accounts receivable, net |
|
$ |
|
|
$ |
|
When the Company receives consideration from a customer prior to transferring services to the customer under the terms of certain claims management agreements, it records deferred revenues on the Company’s consolidated balance sheets, which represents a contract liability. Such deferred revenue is included within accrued liabilities on the accompanying consolidated balance sheets.
Certain services, such as claims management, are provided under fixed-fee service agreements and require the Company to manage claims over a contract period, typically for one year with the option for auto renewal, with the fixed fee renewing on the anniversary date of such contracts. The Company recognizes deferred revenues as revenues when it performs services and transfers control of the services to the customer and satisfies the performance obligation which it determines utilizing a portfolio approach. For all fixed fee service agreements, revenues are recognized over the expected service periods by type of claim.
The table below presents the deferred revenues balance and the significant activity affecting deferred revenues during the six months ended September 30, 2023:
|
|
Six Months Ended |
|
|
|
|
September 30, 2023 |
|
|
Beginning balance at April 1, 2023 |
|
$ |
|
|
Additions |
|
|
|
|
Revenue recognized from beginning of period |
|
|
( |
) |
Revenue recognized from additions |
|
|
( |
) |
Ending balance at September 30, 2023 |
|
$ |
|
Remaining Performance Obligations
As of September 30, 2023, the Company had $