Annual
Report &
Form 10K
Taking care of
people & business.
We make a
difference by
being different.
Partnership, not transaction.
Care, not services.
We work to understand our customers’
We create patient-first solutions that
needs, build solutions that fit, and provide
real-time support.
ensure our customers’ employees and
businesses reach their full potential.
Innovation, not status quo.
Reward, not risk.
We leverage our industry-leading
We deliver results that transform our
technology to provide deeper insights and
clients’ businesses, from quicker return-
more accurate analytics to our clients.
to-work rates to lower claims costs.
Letter to Shareholders
This last year has been one of exciting growth. We experienced record revenue through new
bookings and increased transaction volume with existing partners. Also very satisfying
was welcoming back customers with whom we’ve previously worked. Each day our 4,200
dedicated team members work diligently to achieve optimal results for all partners.
So while revenue and new sales were unprecedented, I am even more pleased with the
outcomes achieved for those we serve.
Our product development efforts have focused on automation, augmentation, and
integration. Automation enhances the quality and consistency of our results, removes the
burden of repetitive menial tasks, and increases the time our team spends on higher-value
activities. Augmentation elevates the team’s decision-making and, ultimately, improves
outcomes. And integration more seamlessly interfaces and exchanges information with our
partners.
Mergers and acquisitions, inflation, and the Great Resignation are impacting the casualty
and health markets. However, with fiscal conservatism, the ongoing development of our
team, and continual investment in technology and innovation, CorVel is benefiting from the
dynamics affecting the markets we serve. Our consistent commitment to preparation is
presenting opportunities for an acceleration in meaningful growth.
We introduced telehealth to the workers’ compensation market in 2014, long before the
global pandemic made it a necessity for other TPAs. Over these last eight years, our award-
winning virtual care services have evolved, enhancing the process and transforming care
delivery in this market.
We lead with compassionate attention and a “care first” philosophy that prioritizes patient
care over compensability. Our Advocacy 24/7 nurse line initiates the intake model, delivers
empathetic telephonic care quickly, and sets claims on the right path for the best outcome
for the patient. In addition, the model results in an average cost savings of 42% as well as a
62% reduction in litigation.
With the results achieved with telehealth, our virtual care service model was expanded
to include TelePT, TeleCBT, and home delivery for DME and Pharmacy. In addition to
convenience, speed of service and savings, virtual care also results in 32% higher patient
satisfaction. Our growing suite of virtual care services is delivered through our proprietary
integrated platform, CareMC, which provides visibility to all stakeholders.
In addition to expanding services, improving savings and enhancing results achieved in the
workers’ compensation arena, we have also increased CERiS’s payment integrity offerings.
Prepayment itemized bill review has been the backbone of CERiS for years, but we have
consistently introduced additional reviews to achieve more rigorous cost control. DRG
validation, post-pay review, negotiations, out-of-network repricing and transplant reviews
are some of our added services. We also review implants and device bundles, resulting
in an average savings per claim of 62%. Combining clinical expertise, cost containment
solutions and sincere dedication makes CERiS the partner of choice in the health market.
As we transition to the post-COVID era, I am proud of our team’s flexibility and
determination. Despite the many challenges and changes we’ve experienced during and
after the pandemic, they have remained focused on the task at hand, providing exemplary
service and results to our partners — it is my honor and privilege to serve them. I am also
thankful for the support of our business partners and you, our shareholders, for your trust in
the Company and our management team.
MICHAEL G. COMBS
President and CEO
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2022
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
Commission File Number 0-19291
CorVel Corporation
(Exact name of registrant as specified in its charter)
Delaware
( State or other jurisdiction of
incorporation or organization)
5128 Apache Plume Road, Suite 400
Fort Worth, Texas
(Address of principal executive offices)
76109
(Zip Code)
Registrant’s telephone number, including area code: (817) 390-1416
33-0282651
(I.R.S. Employer
Identification No.)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, Par Value $0.0001 Per Share
Securities registered pursuant to Section 12(g) of the Act: None
Trading Symbol(s)
CRVL
Name of each exchange on which registered
The Nasdaq Global Select Market
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐ NO ☒
☒
☐
Non-accelerated filer
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. YES ☐ NO ☒
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. YES ☒ NO ☐
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). YES ☒ NO ☐
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.
Large accelerated filer
☐
☐
☐
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒
As of September 30, 2021, the aggregate market value of the registrant’s voting and non-voting common equity held by non-affiliates of the registrant was approximately
$1,725,578,000 based on the closing price per share of $186.22 for the registrant’s common stock as reported on The Nasdaq Global Select Market on such date multiplied
by 9,266,340 shares (total outstanding shares of 17,763,576 less 8,497,236 shares held by affiliates) of the registrant’s common stock which were outstanding on such
date. For the purposes of the foregoing calculation only, all of registrant’s directors, executive officers and persons known to the registrant to hold ten percent or greater
of the registrant’s outstanding common stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.
The number of shares of registrant’s Common Stock outstanding as of May 23, 2022 was 17,488,588.
Emerging growth company
Small reporting company
Accelerated filer
DOCUMENTS INCORPORATED BY REFERENCE
Information required by Items 10 through 14 of Part III of this Form 10-K, to the extent not set forth herein, is incorporated herein by reference to portions of the
registrant’s definitive proxy statement for the registrant’s 2022 annual meeting of stockholders, which will be filed with the Securities and Exchange Commission not
later than 120 days after the end of the fiscal year ended March 31, 2022. Except with respect to the information specifically incorporated by reference in this Form 10-
K, the registrant’s definitive proxy statement is not deemed to be filed as a part of this Form 10-K.
Auditor Firm Id: 200
Auditor Name: Haskell & White LLP
Irvine, California, United States
CORVEL CORPORATION
2022 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
PART I
Item 1.
Business
Item 1A.
Risk Factors
Item 1B.
Unresolved Staff Comments
Item 2.
Properties
Item 3.
Legal Proceedings
Item 4.
Mine Safety Disclosures
Page
3
12
20
20
20
20
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
21
PART II
Item 6.
Reserved
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Financial Statements and Supplementary Data
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A.
Controls and Procedures
Item 9B.
Other Information
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
Item 11.
Executive Compensation
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13.
Certain Relationships and Related Transactions, and Director Independence
Item 14.
Principal Accountant Fees and Services
PART IV
Item 15.
Exhibit and Financial Statement Schedules
Item 16.
Form 10-K Summary
Signatures
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i
In this Annual Report on Form 10-K (this “annual report”), the terms “CorVel,” “Company,” “we,” “us,” and “our” refer to CorVel
Corporation and its subsidiaries.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This annual report and information incorporated by reference herein contain forward-looking statements within the meaning of
the Securities Act of 1933, as amended (the "Securities Act"), and the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), including, but not limited to, the statements about our plans, strategies and prospects in Part I, Item 1, “Business,” Part II, Item
7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this annual report.
Words such as “expects,” “anticipates,” “intends,” “plans,” “predicts,” “believes,” “seeks,” “estimates,” “potential,” “continue,”
“strive,” “ongoing,” “may,” “will,” “would,” “could,” and “should,” as well as variations of these words or similar expressions are
intended to identify forward-looking statements. These forward-looking statements are based on management’s current expectations,
estimates and projections about our industry, management’s beliefs, and certain assumptions made by management, and we can give no
assurance that we will achieve our plans, intentions or expectations. Certain important factors could cause actual results to differ
materially from the forward-looking statements we make in this annual report. Representative examples of these factors include (without
limitation):
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The impact of global pandemics, such as COVID-19;
General industry and economic conditions, including a decreasing number of national claims due to decreasing number of
injured workers;
Competition from other managed care companies and third-party administrators;
The Company's ability to renew or maintain contracts with its customers on favorable terms or at all;
The ability to expand certain areas of the Company's business;
Growth in the the Company's sale of third-party administrator (“TPA”) services;
Shifts in customer demands;
Increases in operating expenses, including employee wages, benefits and medical inflation;
The ability of the Company to produce market-competitive software;
Cost of capital and capital requirements;
Our ability to attract and retain key personnel;
The impact of possible cybersecurity incidents on its business;
Possible litigation and legal liability in the course of operations, and the Company's ability to resolve such litigation;
Changes in regulations affecting the workers’ compensation, insurance and healthcare industries in general;
Governmental and public policy changes, including, but not limited to, legislative and administrative law and rule
implementation or change; and
The availability of financing in the amounts, at the times, and on the terms necessary to support the Company's future
business.
Part I, Item 1A of this annual report, “Risk Factors,” discusses these and other important risk factors that may affect our business,
results of operations and financial condition. The factors listed above and the factors described in Part I, Item 1A of this annual report,
as well as similar discussions in our other filings with the Securities and Exchange Commission ("SEC") are not necessarily all of the
important factors that could cause actual results to differ materially from those expressed in any of our forward-looking statements.
Other unknown or unpredictable factors also could have material adverse effects on our future results. Investors should consider these
factors before deciding to make or maintain an investment in our securities. The forward-looking statements included in this annual
report are based on information available to us as of the date of this annual report. We expressly disclaim any intent or obligation to
update any forward-looking statements to reflect subsequent events or circumstances.
2
Item 1. Business.
INTRODUCTION
PART I
CorVel applies certain technology, including artificial intelligence, machine learning and natural language processing, to enhance
the management of episodes of care and the related health-care costs. We partner with employers, TPAs, insurance companies and
government agencies to assist our customers in managing the increasing medical cost of workers' compensation, group health and auto
insurance, and in monitoring the quality of care provided to claimants. Our diverse suite of solutions combines our integrated
technologies with a human touch. CorVel's customized services, delivered locally, are backed by a national team to support its clients,
as well as their customers and patients.
The Company's services include claims management, bill review, preferred provider networks, utilization management, case
management, pharmacy services, directed care and Medicare services. CorVel offers its services as a bundled solution (i.e. claims
management), on a standalone basis, or as add-ons to existing customers. Customers that do not purchase a bundled solution generally
use another provider, an in-house solution, or choose not to utilize such a service to manage their workers’ compensation, health, auto
or other liability costs. The price of the bundled services is generally the same as if the products were purchased on an individual basis.
Bundled products are generally delivered in the same accounting period.
CorVel was incorporated in Delaware in 1987, and its principal executive offices are located at 5128 Apache Plume Road, Suite
400, Fort Worth, Texas 76109. The Company's telephone number is (817) 390-1416. The Company maintains a nationwide presence
across a network of branches, and our Fort Worth, Texas location provides a centrally located hub for the Company. The location
provides a sizable property footprint, a concentrated number of employees, and serve as the site for this year’s annual meeting of
stockholders. Additionally, our Dallas-Fort Worth metropolitan area offices perform both worker’s compensation and group health
services. We believe the location of our headquarters puts us in the best position for future growth across our business in these area or
service.
INDUSTRY OVERVIEW
CorVel provides services to employers and payors in the risk management and insurance services arenas, including workers'
compensation, general liability, auto liability, and hospital bill auditing and payment integrity. Workers’ compensation is a federally
mandated, state-legislated insurance program that requires employers to fund medical expenses, lost wages, and other costs resulting
from work-related injuries and illnesses. Workers’ compensation benefits and arrangements vary extensively on a state-by-state basis
and are often highly complex. State statutes and court decisions control many aspects of the compensation process, including claims
handling, impairment or disability evaluation, dispute settlement, benefit amount guidelines, and cost-control strategies.
In addition to the compensation process, cost containment and claims management continue to be significant employer concerns
and many look to managed care vendors and TPAs for cost savings solutions. Cost drivers in workers’ compensation include
implementing effective return-to-work and transitional duty programs, coordinating medical care, medical cost management,
recognizing fraud and abuse, and improving communications with injured workers. Further, failing to recognize a complex claim at the
onset of an injury, often results in a lengthier claims process and a delayed return to work, which drives costs. We offer holistic savings
solutions to cost containment using an integrated claims model, which controls costs by advocating medical management at the onset
of injury to decrease administrative costs and to reduce the duration of a claimant's disability.
FISCAL 2022 DEVELOPMENTS — Stock Repurchase Program
During fiscal year ended March 31, 2022 ("fiscal 2022"), the Company spent $90 million to repurchase 566,073 shares of its
common stock under a plan approved by the Company’s Board of Directors in 1996. Since the commencement of this program in the
fall of 1996 through fiscal 2022, the Company has repurchased 37,219,625 shares of its common stock, at a cost of approximately $655
million, and we had 780,375 shares of common stock authorized for repurchase remaining under our share repurchase program as of
March 31, 2022. These repurchases were funded primarily from the Company’s operating cash flows.
Expiration of Shareholder Rights Plan
On February 10, 2022, the Second Amended and Restated Preferred Shares Rights Agreement, dated as of November 17, 2008,
by and between the Company and Computershare Trust Company, N.A., as amended (the “Shareholder Rights Plan”), and all preferred
stock purchase rights distributed to holders of the Company’s common stock pursuant to the Shareholder Rights Plan, expired by their
respective terms. Accordingly, the Shareholder Rights Plan is of no further force and effect.
3
BUSINESS — SERVICES
The Company's network solutions and patient management services reduces claim costs by advocating medical management at
the onset of an injury. These solutions offer personalized treatment programs that use precise protocols to advocate timely, quality care
for injured workers.
Network Solutions Services
CorVel offers a complete medical savings solution for all in-network and out-of-network medical bills. The Company's services
include professional nurse review, true line item review, expert fee negotiations, specialty networks, preferred provider organization
("PPO") management, medical bill repricing, automated adjudication, and electronic reimbursement. Each feature focuses on increasing
process efficiencies and maximizing savings opportunities for our customers.
Bill Review
Many states have adopted fee schedules, which regulate the maximum allowable fees payable under workers’ compensation for
procedures performed by a variety of health treatment providers. Developed in 1989, CorVel’s proprietary bill review and claims
management technology automates the review process to provide customers with a faster turnaround time, more efficient bill review
and higher total savings. CorVel’s artificial intelligence engine includes over 112 million individual rules, which creates a
comprehensive review process that is more efficient than traditional manual bill review processes.
Our online portal, CareMC, offers a paperless and cost-effective solution for payors to review and approve bills online and access
savings reports. Further, CorVel’s solutions are fully customizable and can be tailored to meet unique payor requirements.
As discussed in greater detail below, bill review services include:
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Coding review and re-bundling;
Reasonable and customary review;
Fee schedule analysis;
Out-of-network bill review;
Pharmacy review;
PPO management;
Repricing.
PPO Management
PPOs are groups of hospitals, physicians and other healthcare providers that offer services at pre-negotiated rates to employee
groups. The Company believes that PPO networks offer employerS an additional means of managing healthcare costs by reducing the
per-unit price of medical services provided to employees. CorVel began offering a proprietary national PPO network in 1992 and added
leased network agreements to offer our customers extensive coverage and optimal network performance. As of March 31, 2022, the
Company's PPO network was comprised of over 1.2 million providers nationwide, which are searchable based on quality, types of
services, and location by the public through the Company's mobile application.
CorVel has a long-term strategy of network development, providing comprehensive networks to our customers and customization
of networks to meet the specific needs of our customers. The Company believes that the strength of its national PPO network, combined
with local PPO developers’ commitment and community involvement, enables CorVel to grow its PPO network's size, quality, depth of
discount, and commitment to service.
4
The Company has a team of national, regional and local personnel supporting the CorVel network. This team of developers is
responsible for local recruitment, contract negotiations, credentialing and re-credentialing of providers, and working with customers to
develop customer-specific provider networks. Each bill review operation has provider relations support staff to address provider
grievances and other billing issues.
The Company selects its providers based on their quality, range of services, price and location. The Company evaluates and
credential each provider before inviting them to join its network, and re-credential them every three years. Through this extensive
evaluation process, we are able to provide significant hospital, physician and ancillary medical savings, while maintaining high quality
care. Provider network services include a national network for all medical coverages, board-certified physicians, provider credentialing,
patient channeling, online PPO look-up, printable directories and driving directions, and medical care organizations ("MCOs").
CERiS®
CERiS, CorVel’s enhanced review program, performs a clinical review and comparative analysis of itemized billing statements
against national and customer payment standards. CERiS is a national provider of cost management solutions to employers, TPAs,
insurance companies and government agencies. The Company’s comprehensive forensic solution reviews charge utilization,
appropriateness of charges, and billing behavior, to verify proper payment of claims. CERiS offers clarity to those who pay facility
claims and are unsure if the billing is correct. CERiS produces incremental savings both prior and post payment, lowers provider friction,
increases efficiencies with client and facility relationships, and easily scales to a payor’s enterprise needs.
Professional Review
CorVel’s professional review service audits and validates facility bill accuracy. This solution also includes review of in-network
facility bills. If a bill is identified for professional review, the bill image and its associated medical reports are routed within the system
to an experienced medical nurse for review and auditing. The Company’s experienced nurse auditors have clinical backgrounds in all
areas of medicine, medical billing and coding to ensure an accurate, consistent and thorough review.
Provider Reimbursement
CorVel’s bill review service automatically issues provider reimbursements, and allows its customers to track dollars spent and
bills reviewed, and set reserves through charts available online.
SymbeoSM
We complement our comprehensive solutions by offering our Symbeo technologies, which include scanning, optical character
recognition, and document management services. We have added scanning operations to most of the Company’s larger offices around
the country, designating them “Capture Centers,” and sell scanning and document management services through all offices. Our scanning
service includes a web interface, which provides immediate access to documents and data. Secure document review, approval,
transaction workflow and archival storage are available at subscription-based pricing.
Additionally, Symbeo automates the accounts payable process, configuring coding and approvals to customer specific workflows.
Pharmacy Services
CorVel provides patients with a full-feature pharmacy program that offers formulary management, discounted prescriptions, drug
interaction monitoring, utilization management and eligibility confirmation. Our network of nationally recognized pharmacies offers
claimants savings on the retail price of prescriptions associated with a workers’ compensation claim. The Company’s pharmacy services
program includes preferred access to a national pharmacy network, streamlined processing for pharmacies at point of sale, first fill and
next fill programs, out-of-network management, medication review services and clinical modeling.
Directed Care Services
CorVel offers a national directed care network that provides access to specialty medical services, which may be required to support
an injured worker’s medical treatment plan. CorVel has contracted with medical imaging, physical therapy, diagnostics and ancillary
service networks to offer convenient access, timely appointments and preferred rates for these services. The Company manages the
entire coordination of care from appointment scheduling through reimbursement, working to achieve timely recovery and increased
savings. The Company has directed care networks for CTs and MRIs, diagnostic imaging, physical and occupational therapy,
independent medical evaluations, durable medical equipment and transportation and translation.
5
Medicare Solutions
The Company offers solutions to help manage the requirements mandated by the Centers for Medicare and Medicaid Services
(“CMS”). Services include Medicare set asides and agent reporting services to help employers comply with new CMS reporting
legislation. As an assigned agent, CorVel can provide services for responsible reporting entities (known as RREs), such as insurers and
employers. As an experienced information-processing provider, CorVel is able to electronically submit files to the CMS in compliance
with timelines and reporting requirements.
Clearinghouse Services
CorVel’s proprietary medical review software and claims management technology interfaces with multiple clearinghouses to
provide for medical review, conversion of electronic forms to appropriate payment formats, seamless submission of bills for payments
and rules engines used to help ensure jurisdictional compliance.
Patient Management Services
CorVel offers a unique approach to patient management through the TPA services it offers. Patient management services include
claims management and all services sold to claims management customers, as well as case management, its 24/7 virtual care platform
with nurse triage, utilization management, vocational rehabilitation, and disability, liability claims, and auto claims management. This
integrated service model controls claims costs by advocating medical management at the onset of a claimant's injury to decrease
administrative costs and to shorten the duration of the claimant's disability. This automated solution offers a personalized treatment
program for each injured worker, using precise treatment protocols to meet the changing needs of patients on an ongoing basis. The
Company offers these services on a stand-alone basis or as an integrated component of its medical cost containment services.
Claims Management
The Company serves customers in the self-insured and commercially-insured markets. Incidents and injuries are reported through
a variety of intake methods including a 24/7 nurse triage call center, website, mobile applications, toll-free call centers and traditional
methods of paper and fax reporting. Reported incidents and injuries are immediately processed by CorVel’s proprietary rules engine,
which provides alerts and recommendations throughout the life of a claim. This technology instantly assigns the claimant an expert
claims professional, while simultaneously determining if a claim requires immediate attention for triage.
The Company serves customers through alternative loss-funding methods and provides them with a complete range of services,
including claims administration, case management, and medical bill review. In addition to the field investigation and evaluation of
claims, the Company may also provide initial loss reporting services for claims, loss mitigation services, vocational rehabilitation,
administration of trust funds established to pay claims, and risk management information services.
Features of claims management services include automated first notice of loss, three-point contact within 24 hours, prompt claims
investigations, detailed diary notes for each step of the claim, graphical dashboards and claim history scorecards, and litigation
management and expert testimony.
Case Management
CorVel’s case management and utilization review services address all aspects of disability management and recovery, including
utilization review (pre-certification, concurrent review and discharge planning), early intervention, telephonic, field and catastrophic
case management, as well as vocational rehabilitation.
The medical management components of CorVel’s program focus on medical intervention, management and appropriateness. In
these cases, the Company’s case managers confer with the attending physician, other providers, the patient and the patient’s family to
identify the appropriate rehabilitative treatment and most cost-effective healthcare alternatives. The program is designed to offer the
injured party prompt access to appropriate medical providers who will provide quality cost-effective medical care. Case managers may
coordinate the services or care required and arrange for special pricing of the services.
A telephonic case manager focuses on assisting the claimant's early return to work, medical improvement and determining the
appropriate duration of disability. Further, the telephonic case manager facilitates treatment, negotiates with medical providers on behalf
of the injured worker and directs the worker's care until certain case closure criteria is met. Utilization review of provider treatment
remains ongoing until discharge from treatment.
6
A field case manager ("FCM") is assigned to claims requiring an onsite referral. Cases are referred to the most appropriate FCM
based on geographic location and injury type. Specialized case management services include catastrophic management, life care
planning, and vocational rehabilitation services.
Virtual Care Platform
Injured workers can contact our 24/7 nurse triage hotline to speak with a registered nurse who specializes in occupational injuries.
An assessment is immediately made to recommend self-care, or refer the worker to seek further medical care from our network of
preferred providers. CorVel is able to provide quick and accurate care intervention, often preventing a minor injury from becoming an
expensive claim. Our virtual platform allows employer access to online case information, comprehensive incident gathering, and
healthcare advocacy for injured workers. Additionally, after being screened by a triage nurse, the service now offers Telehealth, which
connects injured workers with doctors for virtual appointments via their computers and smart mobile devices. Telehealth, which is
approved in nearly all states, is integrated into CorVel’s healthcare model as an option for qualified injuries, primarily musculoskeletal.
Telehealth preserves the integrity of the patient-physician relationship with confidential, HIPAA compliant transactions, while also
channeling injured workers to network providers for physical therapy or prescriptions when needed.
Utilization Management
CorVel's utilization management programs review proposed care to determine appropriateness, frequency, duration and setting.
These programs utilize experienced registered nurses, proprietary medical treatment protocols and systems technology to avoid
unnecessary treatments and associated costs. Utilization management processes include injury review, diagnosis and treatment planning,
contacting and negotiating provider treatment requirements, certifying appropriateness of treatment parameters, and responding to
provider requests for additional treatment. Utilization management services include prospective review, retrospective review, concurrent
review, professional nurse review, second opinion, peer review, precertifications and independent medical evaluation.
Vocational Rehabilitation
CorVel’s vocational rehabilitation program is designed for injured workers needing assistance returning to work or retaining
employment. This comprehensive suite of services helps employees who are unable to perform their work functions and who face the
possibility of joining the open labor market to seek re-employment. These services are available unbundled on an integrated basis as
dictated by the requirement of each case and customer preference, or by individual statutory requirements. Vocational rehabilitation
services include: ergonomic assessments, rehabilitation plans, transferable skills analysis, labor market services, job seeking skills,
resumé development, job analysis and development, job placement, career counseling and expert testimony.
Disability Management
CorVel’s disability management programs offer a continuum of services for short and long-term disability coverages that advocate
an employee’s early return to work. Disability management services include: absence reporting, disability evaluations, national preferred
provider organizations, independent medical examinations, utilization review, medical case management, return-to-work coordination
and integrated reporting.
Liability Claims Management
CorVel also offers liability claims management services that can be sold on a stand-alone basis or as part of patient management.
Liability claims management services include claims management, adjusting services, litigation management, claims subrogation, and
investigations regarding auto liability, general liability, product liability, personal injury, professional liability, property damage,
accidents and weather-related damage.
Auto Claims Management
Injury claims are one of the largest components of auto indemnity costs. Effective management of these claims and their associated
costs, combined with an optimal healthcare management program, helps CorVel’s customers reduce claim costs. The Company’s auto
claims services include national preferred provider organizations, medical bill review, first and third party bill review, first notice of
loss, demand packet reviews and reporting and analytics.
7
SYSTEMS AND TECHNOLOGY
Infrastructure and Data Center
The Company utilizes a tier III-rated data center as its primary processing site. Redundancy is provided at many levels in power,
cooling, and computing resources, with the goal of ensuring maximum uptime and system availability for the Company’s production
systems. The Company has embraced server virtualization and consolidation techniques to push the fault-tolerance of systems even
further. These technologies bring increased availability, speed-to-production and scalability.
Adoption of Imaging Technologies and Paperless Workflow
Utilizing scanning and automated data capture processes allows the Company to process incoming paper and electronic claims
documents, including medical bills, with less manual handling, which has improved the Company’s workflow processes and resulted in
cost savings to us and our customers. Through the Company’s online portal, CareMC, customers can review bills as soon as they are
processed and approve a bill for payment, streamlining their workflows and expediting the payment process.
Redundancy Center
The Company’s national data center is located near Portland, Oregon. The redundancy center, which is located in Lone Mountain,
Nevada, is the Company’s backup processing site in the event that the Portland data center suffers catastrophic loss. Currently, the
Company’s data is continually replicated to Lone Mountain in near-real time, so that in the event the Portland data center is offline, the
redundancy center can be activated with current information quickly. The Lone Mountain data center also hosts duplicates of the
Company’s websites. The systems are maintained and exercised on a continuous basis as they host demonstration and pilot environments
that mirror production, with the goal of ensuring their ongoing readiness.
CareMC®
The Company's CareMC (www.caremc.com) platform offers customers direct and immediate access to the Company’s primary
service lines. CareMC allows for electronic communication and reporting between providers, payors, employers and patients. The
website allows customers to report an incident/injury, request service, schedule an appointment, review bills, manage claims, access
their treatment calendar, contest medical bills, and access automated provider reimbursement.
In addition, through CareMC, customers can:
• Manage files throughout the life of the claim;
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Receive and relay case notes from case managers; and
Integrate information from multiple claims management sources into one database.
CareMC facilitates healthcare transaction processing. Using artificial intelligence technology, the website provides situation alerts
and event triggers, to facilitate prompt and effective decisions. CareMC users can quickly see where event outliers are occurring within
the claims management process. If costs exceed pre-determined thresholds or activities fall outside expected timelines, the customer can
be quickly notified. The latest feature within CareMC, the Edge, modernizes claims processing and adapts to the way people work. This
module facilitates quicker decision making by prioritizing information that is easily actionable. Seamlessly integrated within the
platform, the Edge browses codified data and prioritizes claims, alerting adjusters to those claims needing attention and actions that need
to be taken. The Edge displays live, claims information on one screen to help guide users toward their next action.
Claims Processing
We continue to develop our claims system capabilities, which reflects the Company’s preference for owning and maintaining our
own software assets. Integration projects, some already completed, are underway to present more of this claims-centric information
available through the CareMC online portal. The Company’s goal is to continue to modernize user interfaces, give more rapid feedback
and put real-time information in the hands of our customers.
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CUSTOMERS AND MARKETING
CorVel serves a diverse group of customers, which include insurers, TPAs, self-administered employers, government agencies,
municipalities, state funds, and numerous other stakeholders in the health care industry. CorVel provides workers’ compensation
services to virtually any size employer and in any state or region of the United States. No single customer represented more than 10%
of revenues in fiscal 2022, or in fiscal years ended March 31, 2021 and 2020. One customer accounted for 10% or more of accounts
receivable as of March 31, 2022 and 2021. Many claims management decisions in workers’ compensation are the responsibility of the
local claims office of national or regional insurers. The Company’s national branch office network enables the Company to market and
offer its services at both a local and national account level, though the Company placed increasing emphasis on national account
marketing. The sales and marketing activities are conducted primarily by account executives located in key geographic areas.
COMPETITION AND MARKET CONDITIONS
The healthcare cost containment industry is competitive and is subject to economic pressures for cost savings and legislative
reforms. CorVel’s primary competitors in the workers’ compensation market include TPAs, MCOs, large insurance carriers and
numerous independent companies. Many of the Company’s competitors are significantly larger and have greater financial and marketing
resources than the Company. Moreover, the Company’s customers may establish the in-house capability of performing the kinds of
services offered by the Company. If the Company is unable to compete effectively, it will be difficult to add and retain customers, and
the Company’s business, financial condition and results of operations will be materially and adversely affected.
There has been unprecedented acceleration in mobile and other technology in the past few years. This capability provides
immediate access and begins to present business opportunities that were previously predicated on a less connected environment. The
Company continues to leverage the latest technological innovation to connect all parties involved in the workers' compensation, risk
management, and insurance processes in ways that were unimaginable in the past. The Company remains focused on executing its
strategy to offer industry-leading claims management and cost containment solutions to the market.
GOVERNMENT REGULATIONS
General
Managed healthcare programs for workers’ compensation are subject to various laws and regulations. Both the nature and degree
of applicable government regulation vary greatly depending upon the specific activities involved. Generally, parties that actually provide
or arrange for the provision of healthcare services, such as the Company, assume financial risk related to the provision of those services
or undertake direct responsibility for making payment or payment decisions for those services. These parties are subject to a number of
complex regulatory requirements that govern many aspects of their conduct and operations.
In contrast, the management and information services provided by the Company to its customers typically have not been the
subject of regulation by the federal government or the states. Since the managed healthcare field is a rapidly expanding and changing
industry and the cost of healthcare continues to increase, it is possible that state and federal regulatory frameworks will expand to have
a greater impact on the conduct and operation of the Company’s business.
Under the current workers’ compensation system, employer insurance or self-funded coverage is governed by individual laws in
each of the 50 states and by certain federal laws. The management and information services that make up the Company’s managed care
program serve markets that have developed largely in response to needs of insurers, employers and large TPAs, and generally have not
been mandated by legislation or other government action. On the other hand, the vocational rehabilitation case management marketplace
within the workers’ compensation system has been dependent upon the laws and regulations within those states that require the
availability of specified rehabilitation services for injured workers. Similarly, the Company’s fee schedule auditing services address
market needs created by certain states’ enactment of maximum permissible fee schedules for workers’ compensation services. Changes
in individual state regulation of workers’ compensation may create a greater or lesser demand for some or all of the Company’s services
or require the Company to develop new or modified services to meet the needs of and compete effectively in the marketplace.
We are required to be licensed or receive regulatory approval in nearly every state and foreign jurisdiction in which we do business.
In addition, most jurisdictions require individuals who engage in claim adjusting and certain other insurance service activities to be
personally licensed. These licensing laws and regulations vary from jurisdiction to jurisdiction. In most jurisdictions, licensing laws and
regulations generally grant broad discretion to supervisory authorities to adopt and amend regulations and to supervise regulated
activities.
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Medical Cost Containment Legislation
Historically, governmental strategies to contain medical costs in the workers’ compensation field have been generally limited to
legislation on a state-by-state basis. For example, many states have implemented fee schedules that list maximum reimbursement levels
for healthcare procedures. In certain states that have not authorized the use of a fee schedule, the Company adjusts bills to the usual and
customary levels authorized by the payor. Opportunities for the Company’s services could increase if more states legislate additional
cost containment strategies. Conversely, the Company would be materially and adversely affected if states elect to reduce the extent of
medical cost containment strategies available to insurance carriers and other payors, or adopt other strategies for cost containment that
would not support a demand for the Company’s services.
HUMAN CAPITAL
As of March 31, 2022, CorVel had 4,233 employees, including nurses, claims adjusters, and other employees. Our entire
workforce is concentrated in the United States. No employees are represented by any collective bargaining unit. Management believes
the Company’s relationship with its employees to be good.
The COVID-19 pandemic had a significant impact on our human capital management. Most of our office locations are operating
at reduced capacity as 62% of our employees are permanent work from home. We have instituted safety protocols and procedures for
employees when they are in an office.
Human Capital is a key component to our success. CorVel was recently awarded, for the second year in a row, certification as a
Great Place to Work Company based on independent surveys of its employees. Our culture and organizational purpose is embodied by
our ACE-IT values of Accountability, Commitment, Excellence, Integrity, and Teamwork. These values define our desired culture, and
influence organizational behavior, decision-making and our people priorities. Our mission is to provide an enduring culture where we
are empowered to seek our full potential, working together to change the industry, making a real difference to those we serve. Our vision
is to make a real difference with our partners by creating a new standard of excellence in service and outcomes.
Diversity, Equity and Inclusion
Diversity and inclusion are core to the Company’s values and instrumental in delivering stronger business growth. The more
diverse our backgrounds and experiences, the more we can achieve together working side by side. We are committed to recruiting the
most qualified people for the job regardless of gender, ethnicity or other protected traits and to comply fully with all domestic, foreign
and local laws relating to discrimination in the workplace. Additionally, we believe in providing opportunities for career progression for
our people and as such, we strive to fill our open positions with internal talent whenever possible. Our Company’s greatest strength and
resource is the talent of our employees.
To ensure that our leaders and employees model fairness and inclusivity in their behaviors; diversity, equity and inclusion training
was completed by our leaders and mandated for all employees. We are proud of having a diverse workforce and remain committed to
increasing the empowerment of women and minorities across our operations.
As of March 31, 2022, over a third of our employees identify as racially/ethnically diverse. Additionally, over 79% of our
employees identify as women. Over 71% of the Company’s managers identify as women.
Employee Wellness
At CorVel, we provide a variety of comprehensive benefit programs that are designed to support the physical, mental and financial
well-being of our people. Examples of such programs include: formal wellness programs with fitness challenges and incentives for
prioritizing physical exercise; employee assistance programs; group healthcare and telemedicine programs; company-sponsored
retirement savings plans; tuition assistance; and programs that support work-life balance such as remote work arrangements and paid-
time off.
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Employee Development
Employee development continues to be of strategic importance in fiscal 2022. We require our adjusters and nurse case managers
to take specific trainings related to their responsibilities as part of the onboarding process. In 2021, we held our first leadership
development program for managers. In 2022, the leadership program is being expanded to additional cohorts and is open to managers
and supervisors. The program was designed internally and is a combination of six focused workshops facilitated by different members
of our executive team and a curated reading list. During the program, the participants work individually and in group sessions to learn
and improve leadership skills from proven resources and have the opportunity to roundtable situations to provide optimal resolutions
for their teams.
AVAILABLE INFORMATION
Copies of our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements
and any amendments to those reports filed or furnished pursuant to Sections 13(a) or 15(d) of the Exchange Act, as well as other filings
made with the SEC, are available free of charge through our website (http://www.corvel.com, under the Investor section) as soon as
reasonably practicable after such reports are electronically filed with, or furnished to, the SEC. The SEC also maintains a website at
www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically
with the SEC.
The inclusion of our website address and the address of any of our portals, such as www.caremc.com, in this annual report does
not include or incorporate by reference into this annual report any information contained on, or accessible through, such websites.
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Item 1A. Risk Factors.
Past financial performance is not necessarily a reliable indicator of future performance, and investors in our common stock
should not use historical performance to anticipate results or future period trends. Investing in our common stock involves a high degree
of risk. Investors should consider carefully the following risk factors, as well as the other information in this annual report and our
other filings with the SEC, including our consolidated financial statements and the related notes, before deciding whether to invest or
maintain an investment in shares of our common stock. If any of the following risks actually occurs, our business, financial condition,
and results of operations would suffer. In this case, the trading price of our common stock would likely decline. The risks described
below are not the only ones we face. Additional risks that we currently do not know about or that we currently believe to be immaterial
may also impair our business operations.
Risks Related to Our Business and Industry
Our sequential revenue may not increase and may decline. As a result, we may fail to meet or exceed the expectations of investors
or analysts which could cause our common stock price to decline.
Our sequential revenue growth may not increase and may decline in the future as a result of a variety of factors, many of which
are outside of our control. If changes in our sequential revenue fall below the expectations of investors or analysts, the price of our
common stock could decline substantially. Fluctuations or declines in sequential revenue growth may be due to a number of factors,
including, but not limited to, those listed below and identified throughout this “Risk Factors” section: the decline in manufacturing
employment, the decline in workers’ compensation claims, the decline in healthcare expenditures, the considerable price competition in
a flat-to-declining workers’ compensation market, litigation, the increase in competition, and the changes and the potential changes in
state workers’ compensation and automobile-managed care laws which can reduce demand for our services. These factors create an
environment where revenue and margin growth is more difficult to attain and where revenue growth is less certain than historically
experienced. Additionally, our technology and preferred provider network face competition from companies that have more resources
available to them than we do. Also, some customers may handle their managed care services in-house and may reduce the amount of
services which are outsourced to managed care companies such as us. These factors could cause the market price of our common stock
to fluctuate substantially. There can be no assurance that our growth rate in the future, if any, will be at or near historical levels.
Our results of operations have been adversely affected and could in the future be materially adversely affected by the COVID-19
coronavirus pandemic, or other pandemics or incidents of disease.
The global spread of the COVID-19 coronavirus has created significant volatility, uncertainty, unemployment and economic
disruption. The extent to which the COVID-19 pandemic impacts our business, operations and financial results will depend on numerous
evolving factors that we may not be able to accurately predict, including:
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the duration and scope of the pandemic;
governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic;
the distribution and effectiveness of vaccines;
the impact of the pandemic on economic activity and actions taken in response;
the effect on our customers and customer demand for our services and solutions, that could cause a reduction in revenue;
our ability to sell and provide our services and solutions, including as a result of travel restrictions and employees working
from home and widespread unemployment;
the ability of our customers to pay for our services and solutions;
the impact on our third party vendors;
any closures of our, and our customers’ and providers’ offices and facilities, and
any restrictions on our ability to provide services at a claim site or the location of a claimant whether for purposes of
evaluating the claim or delivering services.
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The closure of offices or restrictions inhibiting our employees’ ability to travel or interact with claimants and access claim sites,
has disrupted, and could in the future disrupt, our ability to provide our services and solutions to our customers. In addition, widespread
unemployment has resulted in fewer doctor visits and fewer workers’ compensation and general liability claims. The majority of our
workforce continues to work from home, which in the long run could have material adverse impact on our level of service. This may
result in, among other things, decreased demand for our services, terminations of customer contracts, delays in our ability to perform
services, an altering of the mix of services requested by customers and claimants, and other losses of revenue. Customers may also slow
down decision making, delay planned work or seek to terminate existing agreements. Any of these events could cause or contribute to
the risks and uncertainties enumerated in this report and could materially adversely affect our business, financial condition, results of
operations and/or stock price.
Natural and other disasters may adversely affect our business.
We may be vulnerable to damage from severe weather conditions or natural disasters, including hurricanes, fires, floods,
earthquakes, power loss, communications failures, and similar events, including the effects of pandemics, war or acts of terrorism. If a
disaster were to occur, our ability to operate our business could be seriously or completely impaired or destroyed. The insurance we
maintain may not be adequate to cover our losses resulting from disasters or other business interruptions.
The rapid and widespread transmission of COVID-19 continues to impact us in significant ways. If the pandemic does not subside,
or if there is a resurgence, it could materially adversely impact our business operations, financial position and results of operations in
unpredictable ways that depend on highly-uncertain future developments, such as determining the effectiveness of current or future
government actions to address the public health or economic impacts of the pandemic. Any of these risks might have a materially
adverse effect on our business operations and our financial position or results of operations.
If we fail to grow our business internally or through strategic acquisitions we may be unable to execute our business plan, maintain
high levels of service, or adequately address competitive challenges.
Our strategy is to continue internal growth and, as strategic opportunities arise in the workers’ compensation managed care
industry, to consider acquisitions of, or relationships with, other companies in related lines of business. As a result, we are subject to
certain growth-related risks, including the risk that we will be unable to retain personnel or acquire other resources necessary to service
such growth adequately. Expenses arising from our efforts to increase our market penetration may have a negative impact on operating
results. In addition, there can be no assurance that any suitable opportunities for strategic acquisitions or relationships will arise or, if
they do arise, that the transactions contemplated could be completed. If such a transaction does occur, there can be no assurance that we
will be able to integrate effectively any acquired business. In addition, any such transaction would be subject to various risks associated
with the acquisition of businesses, including, but not limited to, the following:
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an acquisition may (i) negatively impact our results of operations because it may require incurring large one-time charges,
substantial debt or liabilities; (ii) require the amortization or write down of amounts related to deferred compensation,
goodwill and other intangible assets; or (iii) cause adverse tax consequences, substantial depreciation or deferred
compensation charges;
we may encounter difficulties in assimilating and integrating the business, technologies, products, services, personnel, or
operations of companies that are acquired, particularly if key personnel of the acquired company decide not to work for us;
an acquisition may disrupt ongoing business, divert resources, increase expenses, and distract management;
the acquired businesses, products, services, or technologies may not generate sufficient revenue to offset acquisition costs;
we may have to issue equity or debt securities to complete an acquisition, which would dilute the position of stockholders
and could adversely affect the market price of our common stock; and
the acquisitions may involve the entry into a geographic or business market in which we have little or no prior experience.
There can be no assurance that we will be able to identify or consummate any future acquisitions or other strategic relationships
on favorable terms, or at all, or that any future acquisition or other strategic relationship will not have an adverse impact on our business
or results of operations. If suitable opportunities arise, we may finance such transactions, as well as internal growth, through debt or
equity financing. There can be no assurance, however, that such debt or equity financing would be available to us on acceptable terms
when, and if, suitable strategic opportunities arise.
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If we are unable to increase our market share among national and regional insurance carriers and large, self-funded employers,
our results may be adversely affected.
Our business strategy and future success depend in part on our ability to capture market share with our cost containment services
as national and regional insurance carriers and large, self-funded employers look for ways to achieve cost savings. There can be no
assurance that we will successfully market our services to these insurance carriers and employers or that they will not resort to other
means to achieve cost savings. Additionally, our ability to capture additional market share may be adversely affected by the decision of
potential customers to perform services internally instead of outsourcing the provision of such services to us. Furthermore, we may not
be able to demonstrate sufficient cost savings to potential or current customers to induce them not to provide comparable services
internally or to accelerate efforts to provide such services internally.
If competition increases, our growth and profits may decline.
The markets for our network services and patient management services are fragmented and competitive. Our competitors include
national managed care providers, preferred provider networks, smaller independent providers, and insurance companies. Companies
that offer one or more workers’ compensation managed care services on a national basis are our primary competitors. We also compete
with many smaller vendors who generally provide unbundled services on a local level, particularly companies with an established
relationship with a local insurance company adjuster. In addition, several large workers’ compensation insurance carriers offer managed
care services for their customers, either by performance of the services in-house or by outsourcing to organizations like ours. If these
carriers increase their performance of these services in-house, our business may be adversely affected. In addition, consolidation in the
industry may result in carriers performing more of such services in-house.
If the referrals for our patient management services decline, our business, financial condition and results of operations would be
materially adversely affected.
In some years, we have experienced a general decline in the revenue and operating performance of patient management services.
We believe that the performance decline has been due to the following factors: the decrease of the number of workplace injuries that
have become longer-term disability cases; increased regional and local competition from providers of managed care services; a possible
reduction by insurers on the types of services provided by our patient management business; the closure of offices and continuing
consolidation of our patient management operations; and employee turnover, including management personnel, in our patient
management business. In the past, these factors have all contributed to the lowering of our long-term outlook for our patient management
services. If some or all of these conditions continue, we believe that revenues from our patient management services could decrease.
Declines in workers’ compensation claims may materially harm our results of operations.
Within the past few years, as the labor market has become less labor intensive and more service oriented, there are declining work-
related injuries. Additionally, employers are being more proactive to prevent injuries. If declines in workers’ compensation costs occur
in many states and persist over the long-term, it would have a material adverse impact on our business, financial condition and results
of operations.
We provide an outsource service to payors of workers’ compensation benefits, automobile insurance claims, and group health
insurance benefits. These payors include insurance companies, TPAs, municipalities, state funds, and self-insured, self-administered
employers. If these payors reduce the amount of work they outsource, our results of operations would be materially adversely affected.
Healthcare providers are becoming increasingly resistant to the application of certain healthcare cost containment techniques; this
may cause revenue from our cost containment operations to decrease.
Healthcare providers have become more active in their efforts to minimize the use of certain cost containment techniques and are
engaging in litigation to avoid application of certain cost containment practices. Recent litigation between healthcare providers and
insurers has challenged certain insurers’ claims adjudication and reimbursement decisions. These cases may affect the use by insurers
of certain cost containment services that we provide and may result in a decrease in revenue from our cost containment business.
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Our failure to compete successfully could make it difficult for us to add and retain customers and could reduce or impede the growth
of our business.
We face competition from PPOs, TPAs, and other managed healthcare companies. We believe that as managed care techniques
continue to gain acceptance in the workers’ compensation marketplace, our competitors will increasingly consist of nationally-focused
workers’ compensation managed care service companies, insurance companies, HMOs and other significant providers of managed care
products. Legislative reform in some states has been considered, but not enacted, to permit employers to designate health plans such as
HMOs and PPOs to cover workers’ compensation claimants. Because many health plans have the ability to manage medical costs for
workers’ compensation claimants, such legislation may intensify competition in the markets served by us. Many of our current and
potential competitors are significantly larger and have greater financial and marketing resources than we do, and there can be no
assurance that we will continue to maintain our existing customers, maintain our past level of operating performance, or be successful
with any new products or in any new geographical markets we may enter.
If the utilization by healthcare payors of early intervention services continues to increase, the revenue from our later-stage network
and healthcare management services could be negatively affected.
The performance of early intervention services, including injury occupational healthcare, first notice of loss, and telephonic case
management services, often result in a decrease in the average length of, and the total costs associated with, a healthcare claim. By
successfully intervening at an early stage in a claim, the need for additional cost containment services for that claim often can be reduced
or even eliminated. As healthcare payors continue to increase their utilization of early intervention services, the revenue from our later
stage network and healthcare management services will decrease.
We face competition for staffing, which may increase our labor costs and reduce profitability.
We compete with other healthcare providers in recruiting qualified management and staff personnel for the day-to-day operations
of our business, including nurses and other case management professionals. In some markets, the scarcity of nurses and other medical
support personnel has become a significant operating issue to healthcare providers. This shortage may require us to enhance wages to
recruit and retain qualified nurses and other healthcare professionals. Our failure to recruit and retain qualified management, nurses, and
other healthcare professionals, or to control labor costs could have a material adverse effect on profitability.
Sustained increases in the cost of our employee benefits could materially reduce our profitability.
The cost of our current employees’ medical and other benefits substantially affects our profitability. In the past, we have
occasionally experienced significant increases in these costs as a result of macro-economic factors beyond our control, including
increases in healthcare costs. There can be no assurance that we will succeed in limiting future cost increases, and continued upward
pressure in these costs could materially reduce our profitability.
The introduction of software products incorporating new technologies and the emergence of new industry standards could render
our existing software products less competitive, obsolete, or unmarketable.
There can be no assurance that we will be successful in developing and marketing new software products that respond to
technological changes or evolving industry standards. If we are unable, for technological or other reasons, to develop and introduce new
software products cost-effectively, in a timely manner and in response to changing market conditions or customer requirements, our
business, results of operations, and financial condition may be adversely affected.
Developing or implementing new or updated software products and services may take longer and cost more than expected. We
rely on a combination of internal development, strategic relationships, licensing and acquisitions to develop our software products and
services. The cost of developing new healthcare information services and technology solutions is inherently difficult to estimate. Our
development and implementation of proposed software products and services may take longer than originally expected, require more
testing than originally anticipated and require the acquisition of additional personnel and other resources. If we are unable to develop
new or updated software products and services cost-effectively on a timely basis and implement them without significant disruptions to
the existing systems and processes of our customers, we may lose potential sales and harm our relationships with current or potential
customers.
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We may not be able to develop or acquire necessary IT resources to support and grow our business, and disruptive technologies
could impact the volume and pricing of our products, which could materially adversely affect our business, results of operations,
and financial condition.
We have made substantial investments in software and related technologies that are critical to the core operations of our business.
These IT resources will require future maintenance and enhancements, potentially at substantial costs. Additionally, these IT resources
may become obsolete in the future and require replacement, potentially at substantial costs. We may not be able to develop, acquire
replacement resources or identify new technology resources necessary to support and grow our business.
In addition, we could face changes in our markets due to disruptive technologies that could impact the volume and pricing of our
products, or introduce changes to the claims management processes which could negatively impact our volume of case referrals. Our
failure to address these risks, or to do so in a timely manner, or at a cost considered reasonable by us, could materially adversely affect
our business, results of operations, and financial condition.
The failure to attract and retain qualified or key personnel may prevent us from effectively developing, marketing, selling,
integrating, and supporting our services.
We are dependent, to a substantial extent, upon the continuing efforts and abilities of certain key management personnel. In
addition, we face competition for experienced employees with professional expertise in the workers’ compensation managed care area.
The loss of key personnel, especially V. Gordon Clemons, our Chairman, and Michael Combs, our Chief Executive Officer and
President, or the inability to attract qualified employees, could have a material adverse effect on our business, financial condition, and
results of operations.
If we lose several customers in a short period, our results may be materially adversely affected.
Our results may decline if we lose several customers during a short period. Most of our customer contracts permit either party to
terminate without cause. If several customers terminate, or do not renew or extend their contracts with us, our results could be materially
and adversely affected. Many organizations in the insurance industry have consolidated and this could result in the loss of one or more
of our customers through a merger or acquisition. Additionally, we could lose customers due to competitive pricing pressures or other
reasons.
We are subject to risks associated with acquisitions of intangible assets.
Our acquisition of other businesses may result in significant increases in our intangible assets and goodwill. We regularly evaluate
whether events and circumstances have occurred indicating that any portion of our intangible assets and goodwill may not be
recoverable. When factors indicate that intangible assets and goodwill should be evaluated for possible impairment, we may be required
to reduce the carrying value of these assets. We cannot currently estimate the timing and amount of any such charges.
Risks Related to Cybersecurity and Our Information Systems
A cybersecurity attack or other disruption to our information technology systems could result in the loss, theft, misuse, unauthorized
disclosure, or unauthorized access of customer or sensitive company information or could disrupt our operations, which could
damage our relationships with customers or employees, expose us to litigation or regulatory proceedings, or harm our reputation,
any of which could materially adversely affect our business, financial condition or results of operations.
We rely on information technology to support our business activities. Our business involves the storage and transmission of a
significant amount of personal, confidential, or sensitive information, including the personal information of our customers and
employees, and our company’s financial, operational and strategic information. As with many businesses, we are subject to numerous
data privacy and security risks, which may prevent us from maintaining the privacy of this information, result in the disruption of our
business and online systems, and require us to expend significant resources attempting to secure and protect such information and
respond to incidents, any of which could materially adversely affect our business, financial condition or results of operations. The loss,
theft, misuse, unauthorized disclosure, or unauthorized access of such information could lead to significant reputational or competitive
harm, result in litigation or regulatory proceedings, or cause us to incur substantial liabilities, fines, penalties or expenses.
Cybersecurity breaches of any of the systems on which we rely may result from circumvention of security systems, denial-of-
service attacks or other cyber-attacks, hacking, “phishing” attacks, computer viruses, ransomware, malware, employee or insider error,
malfeasance, social engineering, physical breaches or other actions. According to media reports, the frequency, intensity, and
sophistication of cyber-attacks, ransomware attacks, and other data security incidents generally has significantly increased around the
globe in recent years. As with many other businesses, we have experienced, and are continually at risk of being subject to, attacks and
incidents, including cybersecurity breaches such as computer viruses, unauthorized parties gaining access to our information technology
systems and similar incidents. Cybersecurity breaches could cause us, and in some cases, materially, to experience reputational harm,
loss of customers, loss and/or delay of revenue, loss of proprietary data, loss of licenses, regulatory actions and scrutiny, sanctions or
other statutory penalties, litigation, liability for failure to safeguard customers’ information, financial losses or a drop in our stock price.
We have invested in and continue to expend significant resources on information technology and data security tools, measures, processes,
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initiatives, policies and employee training designed to protect our information technology systems, as well as the personal, confidential
or sensitive information stored on or transmitted through those systems, and to ensure an effective response to any cyber-attack or data
security incident. These expenditures could have an adverse impact on our financial condition and results of operations, and divert
management’s attention from pursuing our strategic objectives. In addition, the cost and operational consequences of implementing,
maintaining and enhancing further system protective measures could increase significantly as cybersecurity threats increase, and there
can be no assurance that the security measures we employ will effectively prevent cybersecurity breaches or otherwise prevent
unauthorized persons from obtaining access to our systems and information.
As these threats evolve, cybersecurity incidents could be more difficult to detect, defend against, and remediate. Cyber-attacks or
data incidents could remain undetected for some period, which could potentially result in significant harm to our systems, as well as
unauthorized access to the information stored on and transmitted by our systems. Further, despite our security efforts and training, our
employees may purposefully or inadvertently cause security breaches that could harm our systems or result in the unauthorized
disclosure of or access to information. Any measures we do take to prevent security breaches, whether caused by employees or third
parties, could have the potential to harm relationships with our customers or restrict our ability to meet our customers' expectations.
If a cyber-attack or other data incident results in the loss, theft, misuse, unauthorized disclosure, or unauthorized access of personal,
confidential, or sensitive information belonging to our customers or employees, it could put us at a competitive disadvantage, result in
the deterioration of our customers’ confidence in our services, cause our customers to reconsider their relationship with our company or
impose more onerous contractual provisions, cause us to lose our regulatory licenses, and subject us to potential litigation, liability, fines
and penalties. For example, we could be subject to regulatory or other actions pursuant to privacy laws. This could result in costly
investigations and litigation, civil or criminal penalties, operational changes and negative publicity that could adversely affect our
reputation, as well as our results of operations and financial condition.
A cyber-attack or other data security incident could result in the significant and protracted disruption of our business such that:
•
•
•
•
•
•
•
critical business systems become inoperable or require a significant amount of time or cost to restore;
key personnel are unable to perform their duties or communicate with employees, customers or other third-parties;
it results in the loss, theft, misuse, unauthorized disclosure, or unauthorized access of customer or company information;
we are prevented from accessing information necessary to conduct our business;
we are required to make unanticipated investments in equipment, technology or security measures;
customers cannot access our websites and online systems; or
we become subject to other unanticipated liabilities, costs, or claims.
Any of the foregoing could have a material adverse effect on our business, financial condition and results of operations, and result
in harm to our reputation. While we maintain insurance coverage that may, subject to policy terms and conditions, cover certain aspects
of the losses and costs associated with cyber-attacks and data incidents, such insurance coverage may be insufficient to cover all losses
and would not, in any event, remedy damage to our reputation. In addition, we may face difficulties in recovering any losses from our
provider and any losses we recover may be lower than we initially expect.
A breach of security may cause our customers to curtail or stop using our services.
We rely largely on our own security systems, confidentiality procedures, and employee nondisclosure agreements to maintain the
privacy and security of our and our customers’ proprietary information. Accidental or willful security breaches or other unauthorized
access by third parties to our information systems, the existence of computer viruses in our data or software, and misappropriation of
our proprietary information could expose us to a risk of information loss, litigation, and other possible liabilities which may have a
material adverse effect on our business, financial condition, and results of operations. If security measures are breached because of third-
party action, employee error, malfeasance, or otherwise, or if design flaws in our software are exposed and exploited, and, as a result, a
third party obtains unauthorized access to any customer data, our relationships with our customers and our reputation will be damaged,
our business may suffer, and we could incur significant liability. Because techniques used to obtain unauthorized access or to sabotage
systems change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these
techniques or to implement adequate preventative measures.
An interruption in our ability to access critical data may cause customers to cancel their service and/or may reduce our ability to
effectively compete.
Certain aspects of our business are dependent upon our ability to store, retrieve, process, and manage data and to maintain and
upgrade our data processing capabilities. Interruption of data processing capabilities for any extended length of time, loss of stored data,
programming errors or other system failures could cause customers to cancel their service and could have a material adverse effect on
our business, financial condition, and results of operations.
17
In addition, we expect that a considerable amount of our future growth will depend on our ability to process and manage claims
data more efficiently and to provide more meaningful healthcare information to customers and payors of healthcare. There can be no
assurance that our current data processing capabilities will be adequate for our future growth, that we will be able to efficiently upgrade
our systems to meet future demands, or that we will be able to develop, license or otherwise acquire software to address these market
demands as well or as timely as our competitors.
If we are unable to leverage our information systems to enhance our outcome-driven service model, our results may be adversely
affected.
To leverage our knowledge of workplace injuries, treatment protocols, outcomes data, and complex regulatory provisions related
to the workers’ compensation market, we must continue to implement and enhance information systems that can analyze our data related
to the workers’ compensation industry. We frequently upgrade existing operating systems and are updating other information systems
that we rely upon in providing our services and financial reporting. We have detailed implementation schedules for these projects that
require extensive involvement from our operational, technological, and financial personnel. Delays or other problems we might
encounter in implementing these projects could adversely affect our ability to deliver streamlined patient care and outcome reporting to
our customers.
Risks Related to Potential Litigation
Exposure to possible litigation and legal liability may adversely affect our business, financial condition, and results of operations.
We, through our utilization management services, make recommendations concerning the appropriateness of providers’ medical
treatment plans for patients throughout the country, and as a result, could be exposed to claims for adverse medical consequences. We
do not grant or deny claims for payment of benefits and we do not believe that we engage in the practice of medicine or the delivery of
medical services. There can be no assurance, however, that we will not be subject to claims or litigation related to the authorization or
denial of claims for payment of benefits or allegations that we engage in the practice of medicine or the delivery of medical services.
In addition, there can be no assurance that we will not be subject to other litigation that may adversely affect our business, financial
condition or results of operations, including but not limited to being joined in litigation brought against our customers in the managed
care industry. We maintain professional liability insurance and such other coverages as we believe are reasonable in light of our
experience to date. If such insurance is insufficient or unavailable in the future at reasonable cost to protect us from liability, our business,
financial condition, or results of operations could be adversely affected.
If lawsuits against us are successful, we may incur significant liabilities.
We provide to insurers and other payors of healthcare costs managed care programs that utilize preferred provider organizations
and computerized bill review programs. Healthcare providers have brought, against us and our customers, individual and class action
lawsuits challenging such programs. If such lawsuits are successful, we may incur significant liabilities.
We make recommendations about the appropriateness of providers’ proposed medical treatment plans for patients throughout the
country. As a result, we could be subject to claims arising from any adverse medical consequences. Although plaintiffs have not, to date,
subjected us to any claims or litigation relating to the granting or denial of claims for payment of benefits or allegations that we engage
in the practice of medicine or the delivery of medical services, we cannot assure you that plaintiffs will not make such claims in future
litigation. We also cannot assure you that our insurance will provide sufficient coverage or that insurance companies will make insurance
available at a reasonable cost to protect us from significant future liability.
The increased costs of professional and general liability insurance may have an adverse effect on our profitability.
The cost of commercial professional and general liability insurance coverage has risen significantly for us in the past several years,
and this trend may continue. In addition, if we were to suffer a material loss, our costs may increase over and above the general increases
in the industry. If the costs associated with insuring our business continue to increase, it may adversely affect our business. We believe
our current level of insurance coverage is adequate for a company of our size engaged in our business. Additionally, we may have
difficulty getting carriers to pay under coverage in certain circumstances.
Risks Related to Our Regulatory Environment
Changes in government regulations could increase our costs of operations and/or reduce the demand for our services.
Many states, including a number of those in which we transact business, have licensing and other regulatory requirements
applicable to our business. Approximately half of the states have enacted laws that require licensing of businesses which provide medical
review services such as ours. Some of these laws apply to medical review of care covered by workers’ compensation. These laws
18
typically establish minimum standards for qualifications of personnel, confidentiality, internal quality control, and dispute resolution
procedures. These regulatory programs may result in increased costs of operation for us, which may have an adverse impact upon our
ability to compete with other available alternatives for healthcare cost control. In addition, new laws regulating the operation of managed
care provider networks have been adopted by a number of states. These laws may apply to managed care provider networks we have
contracts with or to provider networks which we may organize. To the extent we are governed by these regulations, we may be subject
to additional licensing requirements, financial and operational oversight and procedural standards for beneficiaries and providers.
Regulation in the healthcare and workers’ compensation fields is constantly evolving. We are unable to predict what additional
government initiatives, if any, affecting our business may be promulgated in the future. Our business may be adversely affected by
failure to comply with existing laws and regulations, failure to obtain necessary licenses and government approvals, or failure to adapt
to new or modified regulatory requirements. Proposals for healthcare legislative reforms are regularly considered at the federal and state
levels. To the extent that such proposals affect workers’ compensation, such proposals may adversely affect our business, financial
condition, and results of operations.
In addition, changes in workers’ compensation, automobile insurance, and group healthcare laws or regulations may reduce
demand for our services, which would require us to develop new or modified services to meet the demands of the marketplace, or reduce
the fees that we may charge for our services.
Increasing regulatory focus on privacy issues and expanding privacy laws could impact our business models and expose us to
increased liability.
U.S. privacy and data security laws apply to our various businesses. Governments, privacy advocates and class action attorneys
are increasingly scrutinizing how companies collect, process, use, store, share and transmit personal data. Globally, new laws, such as
the General Data Protection Regulation in Europe, the California Consumer Privacy Act in California, and industry self-regulatory codes
have been enacted and more are being considered that may affect our ability to respond to customer requests under the laws, and to
implement our business models effectively. These requirements, among others, may force us to bear the burden of more onerous
obligations in our contracts. Any perception of our practices, products or services as a violation of individual privacy rights may subject
us to public criticism, class action lawsuits, reputational harm, or investigations or claims by regulators, industry groups or other third
parties, all of which could disrupt our business and expose us to increased liability. Additionally, we store information on behalf of our
customers and if our customers fail to comply with contractual obligations or applicable laws, it could result in litigation or reputational
harm to us.
Risks Related to Ownership of Our Common Stock
The market price and trading volume of our common stock may be volatile, which could result in rapid and substantial losses for
our stockholders.
The market price of our common stock may be highly volatile and could be subject to wide fluctuations. In addition, the trading
volume in our common stock may fluctuate and cause significant price variations to occur. The stock market has in the past experienced
price and volume fluctuations that have particularly affected companies in the healthcare and managed care markets resulting in changes
in the market price of the stock of many companies, which may not have been directly related to the operating performance of those
companies. There can be no assurance that the market price of our common stock will not fluctuate or decline significantly in the future.
We cannot assure our stockholders that our stock repurchase program will enhance long-term stockholder value and stock
repurchases, if any, could increase the volatility of the price of our common stock and will diminish our cash reserves.
In 1996, our Board of Directors authorized a stock repurchase program and, since then, has periodically increased the number of
shares authorized for repurchase under the repurchase program. The most recent increase occurred in May 2021 and brought the number
of shares authorized for repurchase over the life of the program to 38,000,000 shares. There is no expiration date for the repurchase
program. The timing and actual number of shares repurchased, if any, depend on a variety of factors including the timing of open trading
windows, price, corporate and regulatory requirements, and other market conditions. The program may be suspended or discontinued at
any time without prior notice. Repurchases pursuant to our stock repurchase program could affect our stock price and increase its
volatility. The existence of a stock repurchase program could also cause our stock price to be higher than it would be in the absence of
such a program and could potentially reduce the market liquidity for our stock. Additionally, repurchases under our stock repurchase
program will diminish our cash reserves, which could strain our liquidity, could impact our ability to pursue possible future strategic
opportunities and acquisitions and could result in lower overall returns on our cash balances. There can be no assurance that any further
stock repurchases will enhance stockholder value because the market price of our common stock may decline below the levels at which
we repurchased shares of stock. Although our stock repurchase program is intended to enhance long-term stockholder value, short-term
stock price fluctuations could reduce the program’s effectiveness.
19
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
In its fiscal year ended March 31, 2021, the Company relocated its principal executive office to Fort Worth, Texas. The Company
entered into a lease for approximately 25,000 square feet for its headquarters, which expires in April 2028. The Company leases 71
branch offices in 43 states, which range in size from 200 square feet up to 59,000 square feet. The lease terms for the branch offices
range from monthly to ten years and expire at various dates through 2029. In addition to its leased properties, the Company owns a
32,000 square foot building located in Milwaukie, Oregon. The Company believes that its facilities are adequate for its current needs
and that suitable additional space will be available as required to scale its business.
The Company’s lease agreements may include options to extend the lease following the initial term. At the time of adopting
ASC 842, the Company determined that it was reasonably certain it would exercise the option to renew; accordingly, these options
were considered in determining the initial lease term. The Company elected the practical expedient of hindsight in determining the
option to renew. The Company has since reassessed the assumption of the renewal term and determined that due to the COVID-19
pandemic, the Company is now expecting more of its workforce to be working from home permanently. Therefore, expecting a
reduction in overall square footage of office space needs, the Company no longer believes it is reasonably certain it will exercise most
of its options to renew, and therefore, has removed the renewal term of several lease obligations.
Item 3. Legal Proceedings.
From time to time the Company is involved in litigation arising in the ordinary course of business. Management believes that
resolution of these matters will not result in any payment that, in the aggregate, would be material to its financial position or results of
operations.
Item 4. Mine Safety Disclosures.
Not applicable.
20
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
The Company’s common stock is traded on The Nasdaq Global Select Market under the symbol CRVL.
Holders. As of May 23, 2022, there were approximately 804 holders of record of the Company’s common stock according to the
information provided by the Company’s transfer agent.
Dividends. The Company has never paid any cash dividends on its common stock and has no current plans to do so in the
foreseeable future. The Company intends to retain future earnings, if any, for use in the Company’s business and for purchases of stock
under its stock repurchase program. The payment of any future dividends on its common stock will be determined by the Board of
Directors in light of conditions then existing, including the Company’s earnings, financial condition and requirements, restrictions in
financing agreements, business conditions and other factors.
Recent Sales of Unregistered Equity Securities. None.
Issuer Purchases of Equity Securities. The following table summarizes purchases of the Company’s common stock made by or
on behalf of the Company or on behalf of any affiliated purchaser in the quarter ended March 31, 2022.
Period
January 1 to January 31, 2022
February 1 to February 28, 2022
March 1 to March 31, 2022
Total
Total
Number of
Shares
Purchased
Average
Price Paid
Per Share
Total Number of Shares
Purchased as Part of
Publicly Announced
Program
Maximum Number of
Shares that may yet
be Purchased Under
the Program
42,629
47,586
55,776
145,991
$
$
187.59
159.65
164.89
169.81
42,629
47,586
55,776
145,991
883,737
836,151
780,375
780,375
In 1996, the Company’s Board of Directors authorized a stock repurchase program initially for up to 100,000 shares of the
Company’s common stock. The Company’s Board of Directors has periodically increased the number of shares of common stock
authorized for repurchase under the program. In May 2021, the Company’s Board of Directors increased the number of shares of
common stock authorized to be repurchased over the life of the program by 1,000,000 shares of common stock to 38,000,000 shares of
common stock. As of March 31, 2022, the Company has repurchased 37,219,625 shares of its common stock over the life of the
program. There is no expiration date for the program.
21
STOCK PERFORMANCE GRAPH
The graph and the table depicted below show a comparison of cumulative total stockholder returns for the Company, the Nasdaq
and the Nasdaq Healthcare Services Index over a five year period beginning on March 31, 2017. The graph assumes that $100 was
invested in the Company’s Common Stock on March 31, 2017, and in each index, and that all dividends were reinvested. No cash
dividends have been paid or declared on the Common Stock. Stockholder returns over the indicated period should not be considered
indicative of future stockholder returns.
CorVel Corporation
U.S. Nasdaq
U.S. Nasdaq Healthcare Services
2017
100.00
100.00
100.00
2018
116.21
119.48
110.76
2019
149.98
130.75
122.05
2020
125.31
130.25
116.14
2021
235.84
224.08
172.90
2022
387.22
240.55
144.11
Notwithstanding anything to the contrary set forth in any of our previous filings made under the Securities Act or the Exchange
Act that might incorporate future filings made by us under those statutes, neither the preceding Stock Performance Graph, nor the
information relating to it, is “soliciting material” or is “filed” or is to be incorporated by reference into any such prior filings, nor shall
such graph or information be incorporated by reference into any future filings made by us under those statutes.
Item 6. [Reserved.]
22
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Management's Discussion and Analysis of Financial Condition and Results of Operations financial condition appears in a separate
section of this annual report immediately following the "Signatures" section, and is incorporated herein by this reference.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices
and rates. Our market risk exposure is primarily the result of fluctuations in interest rates. We do not hold or issue financial instruments
for trading purposes.
Our invested assets are primarily held as cash and cash equivalents, which are subject to various market risk exposures such as
interest rate risk. The fair value of our portfolio of cash and cash equivalents as of March 31, 2022 approximated its carrying value
due to its short-term duration. We estimated market risk as the potential decrease in fair value resulting from a hypothetical one-
percentage point increase in interest rates for the instruments contained in the cash and cash equivalents investment portfolio. The
resulting fair values were not materially different from their carrying values at March 31, 2022.
Item 8. Financial Statements and Supplementary Data.
The Company’s consolidated financial statements, as listed under Item 15(a)(1), appear in a separate section of this annual report,
and are incorporated herein by this reference. The financial statement schedule is included below under Item 15(a)(2). The Company’s
selected quarterly financial data appears in Note 14 to the Company’s consolidated financial statements in a separate section of this
annual report, and is incorporated herein by this reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer,
has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31,
2022, our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in the reports
filed or submitted by us under the Exchange Act is (i) recorded, processed, summarized, and reported, within the time periods specified
in the SEC's rules and forms and (ii) accumulated and communicated to our management, including our principal executive and principal
accounting officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining a system of internal control over financial reporting as defined
in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Internal control over financial reporting is designed to provide reasonable
assurance regarding the reliability of our financial reporting and preparation of financial statements for external purposes in accordance
with accounting principles generally accepted in the United States. Internal control over financial reporting includes maintaining records
that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as
necessary for preparation of our financial statements in accordance with accounting principles generally accepted in the United States
of America; providing reasonable assurance that our receipts and expenditures are made in accordance with authorizations of our
management and directors; and providing reasonable assurance that unauthorized acquisition, use or disposition of our assets that could
have a material effect on our financial statements would be prevented or detected on a timely basis.
Management conducted an assessment of the effectiveness of our internal control over financial reporting based on the framework
set forth by the Committee of Sponsoring Organizations of the Treadway Commission in the 2013 Internal Control—Integrated
Framework. Based on this assessment, our management concluded that our internal control over financial reporting was effective as of
March 31, 2022 to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements
for external reporting purposes in accordance with accounting principles generally accepted in the United States of America.
23
Our independent registered public accounting firm, Haskell & White LLP, has audited our consolidated financial statements
included in this annual report and has issued an attestation report on the effectiveness of our internal control over financial reporting as
of March 31, 2022 as stated in their report that is included in Part II, Item 8 herein.
Changes to Internal Control over Financial Reporting
During the quarter ended March 31, 2022, there were no changes in our internal control over financial reporting (as defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
Item 9B. Other Information.
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
None.
24
Item 10. Directors, Executive Officers and Corporate Governance.
PART III
The information in the sections titled “Proposal One: Election of Directors,” “Corporate Governance, Board Composition and
Board Committees,” and “Information About Our Executive Officers” appearing in the Company’s definitive proxy statement for the
2022 annual meeting of stockholders ("2022 Annual Meeting") is incorporated herein by reference.
The Board of Directors has adopted a code of ethics and business conduct that applies to all of the Company’s employees, officers
and directors. The full text of the Company’s code of ethics and business conduct is posted on the Company’s website at
www.corvel.com. The Company intends to disclose future amendments to certain provisions of the Company’s code of ethics and
business conduct, or waivers of such provisions, applicable to the Company’s directors and executive officers, at the same location on
the Company’s website identified above. The inclusion of the Company’s website address in this annual report does not include or
incorporate by reference the information on the Company’s website into this annual report.
Item 11. Executive Compensation.
The information in the sections titled “Executive Compensation,” “Compensation Discussion and Analysis,” “Compensation
Committee Interlocks and Insider Participation,” “Compensation Committee Report,” and “Compensation of Directors,” appearing in
the Company’s definitive proxy statement for the 2022 Annual Meeting is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information in the sections titled “Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters” and “Equity Compensation Plan Information” appearing in the Company’s definitive proxy statement for the 2022
Annual Meeting is incorporated herein by reference.
Item 13. Certain Relationships and Related Party Transactions, and Director Independence.
The information in the sections titled “Certain Relationships and Related Person Transactions,” “Proposal One: Election of
Directors,” and “Corporate Governance, Board Composition and Board Committees” appearing in the Company’s definitive proxy
statement for the 2022 Annual Meeting is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services.
The information under the captions “Principal Accountant Fees and Services,” “Audit Committee Pre-Approval of Audit and
Permissible Non-Audit Services of Independent Registered Public Accounting Firm” and “Ratification of Appointment of Independent
Registered Public Accounting Firm” appearing in the Company’s definitive proxy statement for the 2022 Annual Meeting is
incorporated herein by reference.
25
Item 15. Exhibit and Financial Statement Schedules.
(a)(1) Financial Statements:
PART IV
The Company’s financial statements appear in a separate section of this annual report, beginning on the pages referenced below:
Report of Independent Registered Public Accounting Firm ...........................................................................................................
Consolidated Balance Sheets as of March 31, 2022 and 2021 ........................................................................................................
Consolidated Statements of Income for the Fiscal Years Ended March 31, 2022, 2021 and 2020 ................................................
Consolidated Statements of Stockholders’ Equity for the Fiscal Years Ended March 31, 2022, 2021 and 2020 ...........................
Consolidated Statements of Cash Flows for the Fiscal Years Ended March 31, 2022, 2021 and 2020 ..........................................
Notes to Consolidated Financial Statements ...................................................................................................................................
44
47
48
49
50
51
Page
(a)(2) Financial Statement Schedule:
The Company’s consolidated financial statements, as listed under Item 15(a)(1), appear in a separate section of this annual report
and are incorporated herein by this reference. The Company’s financial statement schedule is as follows:
Schedule II — Valuation and Qualifying Accounts
Allowance for doubtful accounts:
Fiscal Year Ended March 31, 2022:
Fiscal Year Ended March 31, 2021:
Fiscal Year Ended March 31, 2020:
Balance at
Beginning of Year
Additions
Charged to Cost
and Expenses
Deductions
Balance at
End of Year
$
$
3,274,000
5,133,000
5,508,000
158,000
2,021,000
1,606,000
$
(870,000 ) $ 2,562,000
3,274,000
5,133,000
(3,880,000 )
(1,981,000 )
26
(a)(3) Exhibits:
EXHIBITS
Exhibit
No.
3.1
3.2
Title
Method of Filing
Fourth Amended and Restated Certificate of Incorporation of
CorVel Corporation.
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 on August 6, 2020 (File No.
000-19291).
Second Amended and Restated Bylaws of CorVel
Corporation.
Incorporated herein by reference to Exhibit 3.2 to the
Company’s Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 2020 filed on August 6, 2020 (File No.
000-19291).
4.1
Description of Securities
Filed herewith.
10.1*
10.2*
10.3*
10.4
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 on August 4,
2020 (File No. 000-19291).
Forms of Notice of Grant of Stock Option, Stock Option
Agreement and Notice of Exercise Under the Restated
Omnibus Incentive Plan (Formerly The Restated 1988
Executive Stock Option)
Incorporated herein by reference to Exhibit 10.2 to the
Company’s Current Report on Form 8-K filed on August 8,
2018 (File No. 000-19291), Exhibit 10.2 to the Company’s
Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 2006 filed on November 9, 2006 (File
No. 000-19291), Exhibits 10.7, 10.8 and 10.9 to the
Company’s Annual Report on Form 10-K for the fiscal year
ended March 31, 1994 filed on June 29, 1994 (File No. 000-
19291), Exhibits 99.2, 99.3, 99.4, 99.5, 99.6, 99.7 and 99.8 to
the Company’s Registration Statement on Form S-8 (File No.
333-94440) filed on July 10, 1995, and Exhibits 99.3 and 99.5
to the Company’s Registration Statement on Form S-8 (File
No. 333-58455) filed on July 2, 1998.
Restated 1991 Employee Stock Purchase Plan, as amended Incorporated herein by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K filed on August 11,
2021 (File No. 000-19291).
Fidelity Master Plan for Savings and Investment, and
Incorporated herein by reference to Exhibits 10.16 and
10.16A to the Company’s Registration Statement on Form S-
1 Registration No. 33-40629 initially filed on May 16, 1991.
amendments (P) Paper filing
27
10.5
10.6*†
10.7*†
10.8*†
10.9*†
Second Amended and Restated Preferred Shares Rights
Agreement, dated as of November 17, 2008, by and between
CorVel Corporation and Computershare Trust Company,
N.A., including the original Certificate of Designation, the
Certificate of Designation Increasing the Number of Shares,
the form of Rights Certificate (as amended) and the Summary
of Rights (as amended) attached thereto as Exhibits A-1, A-
2, A-3, B and C, respectively
Incorporated herein by reference to Exhibit 4.1 to the
Company’s Current Report on Form 8-K filed on November
24, 2008 (File No. 000-19291).
Stock option agreement, dated November 3, 2016, between
the Company and Michael G. Combs, providing for
performance vesting.
Incorporated herein by reference to Exhibit 10.9 to the
Company’s Annual Report on Form 10-K for the fiscal year
ended March 31, 2020 filed on June 10, 2020 (File No. 000-
19291).
Stock option agreement, dated November 3, 2016, between
the Company and Diane J. Blaha, providing for performance
vesting.
Incorporated herein by reference to Exhibit 10.10 to the
Company’s Annual Report on Form 10-K for the fiscal year
ended March 31, 2020 filed on June 10, 2020 (File No. 000-
19291).
Stock option agreement, dated November 3, 2016, between
the Company Richard Schweppe, providing for performance
vesting.
Incorporated herein by reference to Exhibit 10.11 to the
Company’s Annual Report on Form 10-K for the fiscal year
ended March 31, 2020 filed on June 10, 2020 (File No. 000-
19291).
Stock Option Agreement, dated November 2, 2017, by and
between CorVel Corporation and Michael G. Combs,
providing for performance vesting.
Incorporated herein by reference to Exhibit 10.12 to the
Company’s Annual Report on Form 10-K for the fiscal year
ended March 31, 2020 filed on June 10, 2020 (File No. 000-
19291).
10.10*† Stock Option Agreement, dated November 2, 2017, by and
between CorVel Corporation and Diane J. Blaha, providing
for performance vesting.
Incorporated herein by reference to Exhibit 10.13 to the
Company’s Annual Report on Form 10-K for the fiscal year
ended March 31, 2020 filed on June 10, 2020 (File No. 000-
19291).
10.11*† Stock Option Agreement, dated November 2, 2017, by and
between CorVel Corporation and Michael Saverien,
providing for performance vesting.
Incorporated herein by reference to Exhibit 10.14 to the
Company’s Annual Report on Form 10-K for the fiscal year
ended March 31, 2020 filed on June 10, 2020 (File No. 000-
19291).
10.12*†
Stock Option Agreement, dated November 2, 2017, by and
between CorVel and Corporation and Maxim Shishin,
providing for performance vesting.
Incorporated herein by reference to Exhibit 10.15 to the
Company’s Annual Report on Form 10-K for the fiscal year
ended March 31, 2020 filed on June 10, 2020 (File No. 000-
19291).
10.13*† Stock Option Agreement, dated November 1, 2018, by and
between CorVel Corporation and Michael G. Combs,
providing for performance vesting.
Incorporated herein by reference to Exhibit 10.16 to the
Company’s Annual Report on Form 10-K for the fiscal year
ended March 31, 2020 filed on June 10, 2020 (File No. 000-
19291).
10.14*† Stock Option Agreement, dated November 1, 2018, by and
between CorVel Corporation and Diane J. Blaha, providing
for performance vesting.
Incorporated herein by reference to Exhibit 10.17 to the
Company’s Annual Report on Form 10-K for the fiscal year
ended March 31, 2020 filed on June 10, 2020 (File No. 000-
19291).
28
10.15*† Stock Option Agreement, dated November 1, 2018, by and
between CorVel Corporation and Michael Saverien,
providing for performance vesting.
Incorporated herein by reference to Exhibit 10.18 to the
Company’s Annual Report on Form 10-K for the fiscal year
ended March 31, 2020 filed on June 10, 2020 (File No. 000-
19291).
10.16*† Stock Option Agreement, dated November 1, 2018, by and
between CorVel and Corporation and Maxim Shishin,
providing for performance vesting.
Incorporated herein by reference to Exhibit 10.19 to the
Company’s Annual Report on Form 10-K for the fiscal year
ended March 31, 2020 filed on June 10, 2020 (File No. 000-
19291).
10.17*† Stock Option Agreement, dated November 1, 2018, by and
between CorVel and Corporation and Brandon O’Brien,
providing for performance vesting.
Incorporated herein by reference to Exhibit 10.20 to the
Company’s Annual Report on Form 10-K for the fiscal year
ended March 31, 2020 filed on June 10, 2020 (File No. 000-
19291).
10.18*† Stock Option Agreement, dated November 1, 2018, by and
between CorVel and Corporation and Jennifer Yoss,
providing for performance vesting.
Incorporated herein by reference to Exhibit 10.21 to the
Company’s Annual Report on Form 10-K for the fiscal year
ended March 31, 2020 filed on June 10, 2020 (File No. 000-
19291).
10.19*† Stock Option Agreement, dated November 5, 2019, by and
between CorVel Corporation and Michael Combs, providing
for performance vesting.
Incorporated herein by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K/A filed on
December 31, 2019 (File No. 000-19291).
10.20*† Stock Option Agreement, dated November 5, 2019, by and
between CorVel Corporation and Brandon O’Brien,
providing for performance vesting.
Incorporated herein by reference to Exhibit 10.2 to the
Company’s Current Report on Form 8-K/A filed on
December 31, 2019 (File No. 000-19291).
10.21*† Stock Option Agreement, dated November 5, 2019, 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/A filed on
December 31, 2019 (File No. 000-19291).
10.22*† Stock Option Agreement, dated November 5, 2019, by and
between CorVel Corporation and Michael Saverien,
providing for performance vesting.
Incorporated herein by reference to Exhibit 10.4 to the
Company’s Current Report on Form 8-K/A filed on
December 31, 2019 (File No. 000-19291).
10.23*† Stock Option Agreement, dated November 5, 2019, by and
between CorVel Corporation and Maxim Shishin, providing
for performance vesting.
Incorporated herein by reference to Exhibit 10.5 to the
Company’s Current Report on Form 8-K/A filed on
December 31, 2019 (File No. 000-19291).
10.24*† Stock Option Agreement, dated November 5, 2019, by and
between CorVel Corporation and Jennifer Yoss, providing
for performance vesting.
Incorporated herein by reference to Exhibit 10.6 to the
Company’s Current Report on Form 8-K/A filed on
December 31, 2019 (File No. 000-19291).
10.25*†
Stock Option Agreement, dated November 5, 2020, by and
between CorVel Corporation and Michael 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 (File No. 000-19291).
10.26*†
Stock Option Agreement, dated November 5, 2020, by and
between CorVel Corporation and Brandon 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 (File No. 000-19291).
10.27*†
Stock Option Agreement, dated 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 (File No. 000-19291).
10.28*†
Stock Option Agreement, dated 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 (File No. 000-19291).
10.29*†
Stock Option Agreement, dated November 5, 2020, by and
between CorVel Corporation and Jennifer 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 (File No. 000-19291).
29
10.30*†
10.31*†
10.32*†
10.33*†
10.34*†
Stock Option Agreement, dated December 8, 2021, by and
between CorVel Corporation and Michael Combs, providing
for performance vesting.
Incorporated herein by reference to Exhibit 10.1 to the
Company’s Quarterly Report on Form 10-Q for the quarterly
period ended December 31, 2021 filed on February 3, 2022
(File No. 000-19291).
Stock Option Agreement, dated December 8, 2021, by and
between CorVel Corporation and Brandon O’Brien,
providing for performance vesting.
Incorporated herein by reference to Exhibit 10.2 to the
Company’s Quarterly Report on Form 10-Q for the quarterly
period ended December 31, 2021 filed on February 3, 2022
(File No. 000-19291).
Stock Option Agreement, dated December 8, 2021, 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 Quarterly Report on Form 10-Q for the quarterly
period ended December 31, 2021 filed on February 3, 2022
(File No. 000-19291).
Stock Option Agreement, dated December 8, 2021, by and
between CorVel Corporation and Maxim Shishin, providing
for performance vesting.
Incorporated herein by reference to Exhibit 10.4 to the
Company’s Quarterly Report on Form 10-Q for the quarterly
period ended December 31, 2021 filed on February 3, 2022
(File No. 000-19291).
Stock Option Agreement, dated December 8, 2021, by and
between CorVel Corporation and Jennifer Yoss, providing
for performance vesting.
Incorporated herein by reference to Exhibit 10.5 to the
Company’s Quarterly Report on Form 10-Q for the quarterly
period ended December 31, 2021 filed on February 3, 2022
(File No. 000-19291).
21.1
Subsidiaries of the Company.
Filed herewith.
23.1
Consent of Independent Registered Public Accounting Firm,
Filed herewith.
Haskell & White LLP.
31.1
Certification of the Chief Executive Officer Pursuant to
Filed herewith.
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
Certification of the Chief Financial Officer Pursuant to
Filed herewith.
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.
30
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
Furnished herewith.
101.SCH Inline XBRL Taxonomy Extension Schema Document
Furnished herewith.
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase
Furnished herewith.
Document
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase
Furnished herewith.
Document
101.LAB Inline XBRL Taxonomy Extension Label Linkbase
Furnished herewith.
Document
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase
Furnished herewith.
Document
104
Cover Page Interactive Data File (formatted as Inline XBRL
Furnished herewith.
and contained in Exhibit 101)
* - Denotes management contract or compensatory plan or arrangement.
† - 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.
(P) – Previously filed only in paper.
(b) Exhibits
The exhibits filed as part of this annual report are listed under Item 15(a)(3) of this annual report.
(c) Financial Statement Schedule
The Financial Statement Schedule required by Regulation S-X and Item 8 of Form 10-K is listed under Item 15(a)(2) of this annual
report.
Item 16. Form 10-K Summary.
None.
31
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, as amended, the registrant has duly
caused this annual report to be signed on its behalf by the undersigned thereunto duly authorized.
SIGNATURES
CorVel Corporation
By:
/s/ Michael G. Combs
Michael G. Combs
Chief Executive Officer and President
Date: May 27, 2022
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this annual report has been signed below by
the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Chairman of the Board
Date
May 27, 2022
/s/ V. GORDON CLEMONS
V. Gordon Clemons
/s/ MICHAEL G. COMBS
Michael G. Combs
/s/ BRANDON T. O’BRIEN
Brandon T. O’Brien
/s/ JENNIFER L. YOSS
Jennifer L. Yoss
/s/ ALAN R. HOOPS
Alan R. Hoops
/s/ STEVEN J. HAMERSLAG
Steven J. Hamerslag
/s/ R. JUDD JESSUP
R. Judd Jessup
/s/ JEAN H. MACINO
Jean H. Macino
/s/ JEFFREY J. MICHAEL
Jeffrey J. Michael
Chief Executive Officer and President
May 27, 2022
May 27, 2022
May 27, 2022
May 27, 2022
May 27, 2022
May 27, 2022
May 27, 2022
May 27, 2022
(Principal Executive Officer)
Chief Financial Officer
(Principal Financial Officer)
Vice President, Accounting
(Principal Accounting Officer)
Director
Director
Director
Director
Director
32
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management’s Discussion and Analysis of Financial Condition and Results of Operations may include certain forward-
looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, including (without limitation) statements with respect to anticipated future operating and financial
performance, including the impact of COVID-19, growth and acquisition opportunities and other similar forecasts and statements of
expectation. Words such as “expects,” “anticipates,” “intends,” “plans,” “predicts,” “believes,” “seeks,” “estimates,” “potential,”
“continue,” “strive,” “ongoing,” “may,” “will,” “would,” “could,” “should,” as well as variations of these words and similar expressions,
are intended to identify these forward-looking statements. Forward-looking statements made by the Company and its management are
based on estimates, projections, beliefs and assumptions of management at the time of such statements and are not guarantees of future
performance.
The Company disclaims any obligations to update or revise any forward-looking statement based on the occurrence of future
events, the receipt of new information or otherwise. Actual future performance, outcomes, and results may differ materially from those
expressed in forward-looking statements made by the Company and its management as a result of a number of risks, uncertainties and
assumptions. Representative examples of these factors include (without limitation) the impact of global pandemics, such as COVID-19;
general industry and economic conditions, including a decreasing number of national claims due to a decreasing number of injured
workers; competition from other managed care companies and third party administrators; the ability to expand certain areas of the
Company’s business; growth in the Company’s sale of TPA services; shifts in customer demands; the ability of the Company to produce
market-competitive software; changes in operating expenses including employee wages, benefits, and medical inflation; cost of capital
and capital requirements; dependence on key personnel; the impact of possible cybersecurity incidents; existing and possible litigation
and legal liability in the course of operations and the Company’s ability to resolve such litigation; governmental and public policy
changes, including but not limited to legislative and administrative law and rule implementation or change; the impact of recently issued
accounting standards on the Company’s consolidated financial statements; the continued availability of financing in the amounts and at
the terms necessary to support the Company’s future business and the other risks identified in Part I, Item 1A of this annual report, “Risk
Factors.”
Overview
CorVel Corporation is an independent nationwide provider of medical cost containment and managed care services designed to
address the escalating medical costs of workers’ compensation benefits, automobile insurance claims, and group health insurance
benefits. The Company’s services are provided to insurance companies, TPAs, governmental entities, and self-administered employers
to assist them in managing the medical costs and monitoring the quality of care associated with healthcare claims.
Network Solutions Services
The Company’s network solutions services are designed to reduce the price paid by its customers for medical services rendered
in workers’ compensation cases, automobile insurance policies, and group health insurance policies. The network solutions services
offered by the Company include automated medical fee auditing, preferred provider management and reimbursement services,
retrospective utilization review, facility claim review, professional review, pharmacy services, directed care services, Medicare
solutions, clearinghouse services, independent medical examinations, and inpatient medical bill review. Network solutions services also
includes revenue from the Company’s directed care network (known as CareIQ), including imaging, physical therapy, durable medical
equipment, and translation and transportation.
Patient Management Services
In addition to its network solutions services, the Company offers a range of patient management services, which involve working
one-on-one with injured employees and their various healthcare professionals, employers and insurance company adjusters. Patient
management services include claims management and all services sold to claims management customers, case management, 24/7 nurse
triage, utilization management, vocational rehabilitation, and life care planning. The services are designed to monitor the medical
necessity and appropriateness of healthcare services provided to workers’ compensation and other healthcare claimants and to expedite
return to work. The Company offers these services on a stand-alone basis, or as an integrated component of its medical cost containment
services. Patient management services include the processing of claims for self-insured payors with respect to property and casualty
insurance.
33
Organizational Structure
The Company’s management is structured geographically with regional vice presidents who are responsible for all services
provided by the Company in his or her particular region and responsible for the operating results of the Company in multiple states.
These regional vice presidents have area and district managers who are also responsible for all services provided by the Company in
their given area and district.
Business Enterprise Segments
The Company operates in one reportable operating segment, managed care. The Company’s services are delivered to its customers
through its local offices in each region and financial information for the Company’s operations follows this service delivery model. All
regions provide the Company’s patient management and network solutions services to customers. Financial Accounting Standards
Board (“FASB”) Accounting Standard Codification (“ASC”) 280-10, “Segment Reporting”, establishes standards for the way that public
business enterprises report information about operating segments in annual and interim consolidated financial statements. The
Company’s internal financial reporting is segmented geographically, as discussed above, and managed on a geographic rather than
service line basis, with virtually all of the Company’s operating revenue generated within the United States.
Under FASB ASC 280-10, two or more operating segments may be aggregated into a single operating segment for financial
reporting purposes if aggregation is consistent with the objective and basic principles, if the segments have similar economic
characteristics, and if the segments are similar in each of the following areas: (i) the nature of products and services; (ii) the nature of
the production processes; (iii) the type or class of customer for their products and services; and (iv) the methods used to distribute their
products or provide their services. The Company believes each of its regions meet these criteria as each provides similar services and
products to similar customers using similar methods of production and distribution.
Because we believe we meet each of the criteria set forth above and each of our regions have similar economic characteristics, we
aggregate our results of operations in one reportable operating segment, managed care.
Number of Working Days
We are affected by the change in working days in a given quarter. There are generally fewer working days for our employees to
generate revenue in the third fiscal quarter due to employee vacations, inclement weather and holidays.
Summary of Fiscal 2022 Annual Results
The Company had revenues of $646 million in fiscal 2022, an increase of $94 million, or 17%, compared to $553 million for
fiscal 2021. This increase was due to an increase in revenues in patient management and network solutions services primarily as a result
of the economy recovering from the impact of the economic shutdown due to the COVID-19 pandemic in the United States. Most of
the increase in revenues resulted from an increase in activity and services provided for existing customers and, to a lesser extent, an
increase in new customers.
During fiscal 2022, the Company’s gross profit increased to $152 million from $124 million in fiscal 2021, an increase of $28
million, or 23%. This increase was primarily due to the increase of 17% in revenue mentioned above. Additionally, there was an increase
in salaries resulting from increased headcount of 15% in field operations.
During fiscal 2022, the Company’s general and administrative expenses increased to $67.6 million from $64.4 million in fiscal
2021, an increase of $3.2 million, or 4.9%. This increase was primarily due to an increase in marketing and software development costs
in support of the Company's proprietary systems.
During fiscal 2022, the Company’s net income before tax increased to $84.5 million from $59.2 million in fiscal 2021, an increase
of $25.3 million, or 42.8%. The increase was primarily due to an increase in revenues and pretax margin.
During fiscal 2022, the Company’s income tax expense increased to $18.1 million from $12.8 million in fiscal 2021, an increase
of $5.3 million, or 41.2%. The increase was due to an increase in income before income taxes. The Company’s effective income tax
rate was 21% for fiscal year 2022 and 22% for fiscal year 2021.
34
Diluted weighted average shares were 18.1 million shares in fiscal 2022 and 18.2 million shares in fiscal 2021, with a decrease of
39,000 shares, or 0.2%. This decrease was primarily due to the repurchase of 566,073 shares of common stock in fiscal 2022 offset by
stock issuances to employees. Since commencing this program in the fall of 1996, the Company has repurchased 37,219,625 shares of
its common stock through March 31, 2022, at a cost of $655 million. These repurchases were funded primarily from the Company’s
operating cash flows.
Diluted earnings per share increased to $3.66 per share in fiscal 2022 from $2.55 per share in fiscal 2021, an increase of $1.11 per
share, or 43.5%. This was primarily due to an increase in net income.
COVID-19 Pandemic
The COVID-19 pandemic impacted our business, most significantly during the June and September 2020 quarters. We
implemented a 10% reduction in headcount that began late in the March 2020 quarter and continued through the June 2020 quarter. We
took actions intended to protect our employees and our customers that adversely affected our results. We reduced discretionary spending,
including but not limited to cutting spending in planned capital expenditures, travel, recruiting, consulting and temporary help expenses.
We did not apply for governmental loans to support our operations, but we have taken advantage of certain aspects of the CARES Act
such as the deferral of payroll tax deposits through December 31, 2020. The Company paid back half the deferral of payroll tax deposits
during the December 31, 2021 quarter. The Company will pay back the rest of the payroll tax deposits by the end of calendar year 2022.
The majority of our workforce continues to work from home.
Results of Operations
The Company derives its revenues from providing patient management and network solutions services to payors of workers’
compensation benefits, automobile insurance claims, and group health insurance benefits. Patient management services include claims
management and all services sold to claims management customers, case management, 24/7 nurse triage, utilization management,
vocational rehabilitation, and life care planning. Network solutions services include fee schedule auditing, hospital bill auditing,
pharmacy, independent medical examinations, directed care services, diagnostic imaging review services and preferred provider referral
services. The percentages of total revenues attributable to patient management and network solutions services for the fiscal years ended
March 31, 2022, 2021 and 2020 are listed below.
Patient management services
Network solutions services
2022
2021
2020
65.6 %
34.4 %
100.0 %
66.7 %
33.3 %
100.0 %
65.3 %
34.7 %
100.0 %
As noted in the table above, patient management services grew slightly, from fiscal 2020 to fiscal 2022. This is primarily due to
the Company’s increased focus in the sale of TPA and related services, which are included within patient management services.
The following table shows the consolidated statements of income for the fiscal years ended March 31, 2022, 2021 and 2020 and
the dollar changes, as well as the percentage changes for each fiscal year. The following amounts are in thousands, except per share
data and percentages.
Fiscal 2022
Fiscal 2021
Fiscal 2020
Amount Change
from Fiscal
2021
to 2022
Amount Change
from Fiscal
2020
to 2021
Percent Change
from Fiscal
2021
to 2022
Percent Change
from Fiscal
2020
to 2021
Revenues
Cost of revenues
Gross profit
General and administrative
Income before income taxes
Income tax provision
Net income
Net income per share:
Basic
Diluted
Weighted average shares used in net
income per share:
Basic
Diluted
$
$
$
$
646,230
494,116
152,114
67,602
84,512
18,102
66,410
$
$
552,644
429,020
123,624
64,449
59,175
12,819
46,356
$
$
592,225
466,304
125,921
65,210
60,711
13,334
47,377
$
$
93,586
65,096
28,490
3,153
25,337
5,283
20,054
$
$
3.74
3.66
$
$
2.59
2.55
$
$
2.59
2.55
$
$
1.15
1.11
$
$
17,753
18,127
17,930
18,166
18,326
18,602
(177 )
(39 )
(39,581 )
(37,284 )
(2,297 )
(761 )
(1,536 )
(515 )
(1,021 )
-
-
(396 )
(436 )
16.9 %
15.2
23.0
4.9
42.8
41.2
43.3 %
44.4 %
43.5 %
(1.0 %)
(0.2 %)
(6.7 %)
(8.0 )
(1.8 )
(1.2 )
(2.5 )
(3.9 )
(2.2 %)
0.0 %
0.0 %
(2.2 %)
(2.3 %)
35
As previously identified in Part I, Item 1A of this annual report, “Risk Factors,” the Company’s ability to maintain or grow
revenues is subject to several risks including, but not limited to, the COVID-19 pandemic, changes in government regulations, exposure
to litigation and the ability to add or retain customers. Any of these, or a combination of all of them, could have a material and adverse
effect on the Company’s results of operations going forward.
The following table sets forth, for the periods indicated, the percentage of revenues represented by certain items reflected in the
Company’s consolidated statements of income. The Company’s past operating results are not necessarily indicative of future operating
results. The percentages for the fiscal years ended March 31, 2022, 2021 and 2020 are as follows:
Income Statement Percentages
Revenues
Cost of revenues
Gross profit
General and administrative
Income before income taxes
Income tax provision
Net income
Revenue
2022
2021
2020
100.0 %
76.5 %
23.5 %
10.5 %
13.0 %
2.8 %
10.2 %
100.0 %
77.6 %
22.4 %
11.7 %
10.7 %
2.3 %
8.4 %
100.0 %
78.7 %
21.3 %
11.0 %
10.3 %
2.3 %
8.0 %
The Company derives its revenues from providing patient management and network solutions services to payors of workers’
compensation benefits, automobile insurance claims, and group health insurance benefits.
Change in Revenue
Fiscal 2022 Compared to Fiscal 2021
Revenues increased to $646 million in fiscal 2022 from $553 million in fiscal 2021, an increase of $94 million, or 17%. Patient
management services increased to $424 million from $369 million, an increase of 15%. This increase is primarily due to higher revenue
from the Company’s TPA and related services. Total new claims increased by 17% during fiscal 2022 compared to fiscal 2021. Network
solutions services revenues increased to $222 million from $184 million, an increase of 21%. This increase is primarily due to increases
in enhanced bill review programs services, which resulted in higher revenue per bill. Most of the increase in revenues resulted from an
increase in activity and services provided for existing customers and, to a lesser extent, an increase in new customers.
Fiscal 2021 Compared to Fiscal 2020
Revenues decreased to $553 million in fiscal 2021 from $592 million in fiscal 2020, a decrease of $40 million, or 7%. The decrease
in revenues was primarily due to a decrease in network solutions services, which decreased to $184 million from $205 million, a decrease
of 10.5%. Patient management services decreased to $369 million from $387 million, a decrease of 4.6%. The decrease in revenues was
primarily due to lower bill volume. Due to the COVID-19 pandemic and economic shutdown, the Company saw a decrease in bill
volume of 22% during fiscal 2021 compared to fiscal 2020, as well as a 2.5% decrease in workers compensation claims, which was
partially offset by an increase in revenue per bill.
Cost of Revenue
The Company’s cost of revenues consists of direct expenses, costs directly attributable to the generation of revenue, and indirect
costs which are incurred to support the operations in the field offices which generate the revenue. Direct expenses primarily include (i)
case manager and bill review analysts’ salaries, along with related payroll taxes and fringe benefits, and (ii) costs associated with
independent medical examinations (known as IME), prescription drugs, and MRI, physical therapy, and durable medical equipment
providers. Most of the Company’s revenues are generated in offices which provide both patient management services and network
solutions services. The largest of the field indirect costs are (i) manager salaries and bonuses, (ii) account executive base pay and
commissions, (iii) salaries of administrative and clerical support, field systems personnel and PPO network developers, along with
related payroll taxes and fringe benefits, and (iv) office rent. During fiscal 2022 and 2021, approximately 36% and 37%, respectively,
of the costs incurred in the field were considered field indirect costs, which support both the patient management services and network
solutions services operations of the Company’s field operations.
36
Change in Cost of Revenue
Fiscal 2022 Compared to Fiscal 2021
The Company’s cost of revenues increased to $494 million in fiscal 2022 from $429 million in fiscal 2021, an increase of $65
million, or 15%. The increase in cost of revenues was primarily due to the increase in total revenues of 17%. Additionally, there was
an increase in salaries resulting from increased headcount of 15% in field operations. Headcount has increased due to an increase in
new business and volume of business.
Fiscal 2021 Compared to Fiscal 2020
The Company’s cost of revenues decreased to $429 million in fiscal 2021 from $466 million in fiscal 2020, a decrease of $37
million, or 8%. The decrease in cost of revenues was primarily due to the decrease in total revenues of 7%. Additionally, the Company
reduced headcount by 10% during the June 2020 quarter that was partially offset by hiring employees during the remainder of fiscal
2021 due to customer needs. In fiscal 2021, headcount in field operations decreased by 3.8% compared to fiscal 2020. Additionally,
mileage, travel and meals expenses decreased by $6.6 million in fiscal 2021.
General and Administrative Expense
During fiscal years 2022, 2021 and 2020, approximately 51%, 51%, and 53%, respectively, of general and administrative costs
consisted of corporate systems costs, which include the corporate systems support, implementation and training, rules engine
development, national IT strategy and planning, depreciation of hardware costs in the Company’s corporate offices and backup data
center, the Company’s nationwide area network, and other systems related costs. The Company includes all IT-related costs managed
by the corporate office in general and administrative whereas the field IT-related costs are included in the cost of revenues. The
remaining general and administrative costs consist of national marketing, national sales support, corporate legal, corporate insurance,
human resources, accounting, product management, new business development, and other general corporate expenses.
Change in General and Administrative Expense
Fiscal 2022 Compared to Fiscal 2021
General and administrative expenses increased to $67.6 million in fiscal 2022 from $64.4 million in fiscal 2021, an increase of
$3.2 million, or 4.9%. This increase was primarily due to an increase in advertising and corporate marketing events which started to
occurring again in calendar year 2021 after being cancelled in 2020 due to the COVID-19 pandemic. Additionally, software development
costs also increased due to an increase in headcount and consulting expenses.
Fiscal 2021 Compared to Fiscal 2020
General and administrative expense decreased to $64.4 million in fiscal 2021 from $65.2 million in fiscal 2020, a decrease of $0.8
million, or 1.2%. The decrease in general and administrative expense was primarily due to a decrease in legal expenses.
Income Tax Provision
Fiscal 2022 Compared to Fiscal 2021
The Company’s income tax expense increased to $18.1 million for fiscal 2022 from $12.8 million for fiscal 2021, an increase of
$5.3 million. Income before income tax provision increased to $84.5 million in fiscal 2022 from $59.2 million in fiscal 2021, an increase
of $25.3 million, or 42.8%.The Company’s effective income tax rate was 21% for fiscal 2022 and 22% for fiscal 2021. The effective
tax rate is less than the statutory tax rate primarily due to the impact of stock option exercises for both periods.
Fiscal 2021 Compared to Fiscal 2020
The Company’s income tax expense decreased to $12.8 million for fiscal 2021 from $13.3 million for fiscal 2020, a decrease of
$0.5 million. The Company’s effective income tax rate was 22% for fiscal years 2021 and 2020. Income before income tax provision
decreased to $59.2 million in fiscal 2021 from $60.7 million in fiscal 2020, a decrease of $1.5 million.
37
Net Income
Fiscal 2022 Compared to Fiscal 2021
The Company’s net income increased to $66.4 million in fiscal 2022 from $46.4 million in fiscal 2021, an increase of $20.1
million, or 43.3%. This increase was primarily due to an increase in pretax margin, which increased to 13.1% from 10.7%, and a 17%
increase in revenues.
Fiscal 2021 Compared to Fiscal 2020
The Company’s net income decreased to $46.4 million in fiscal 2021 from $47.4 million in fiscal 2020, a decrease of $1.0 million,
or 2.2%. This decrease was primarily due to a 7% decrease in revenues.
Earnings per Share
Fiscal 2022 Compared to Fiscal 2021
The Company’s diluted earnings per share increased to $3.66 per share in fiscal 2022 from $2.55 per share in fiscal 2021, an
increase of $1.11 per share, or 43.5%. This was primarily due to an increase in net income.
Fiscal 2021 Compared to Fiscal 2020
The Company’s diluted earnings per share was $2.55 in fiscal 2021 and 2020. This was primarily due to a decrease in net income
and a decrease in diluted weighted average shares because of shares repurchased under the Company’s stock repurchase program.
Liquidity and Capital Resources
The Company manages its liquidity and financial position in the context of its overall business strategy. The Company continually
forecasts and manages its cash, investments, working capital balances and capital structure to meet the short- and long-term obligations
of its businesses while seeking to maintain liquidity and financial flexibility. Cash flows generated from operating activities are
principally from earnings before non-cash expenses. The risk of decreased operating cash flow from a decline in earnings is partially
mitigated by the diversity of the Company’s services, geographies and customers, and the Company has had virtually no interest-bearing
debt for the past 31 years.
The Company has historically funded its operations and capital expenditures primarily from cash flow from operations, and to a
lesser extent, stock option exercises. The Company’s net accounts receivables have ranged from 39 to 44 days of average sales for the
fiscal years ended March 31, 2022, 2021 and 2020. The Company expects days sales outstanding (known as DSO) to remain in the low
to mid 40-day range. The Company’s historical profit margins and historical ratio of investments in assets used in the business has
allowed the Company to generate sufficient cash flow to repurchase $655 million of its common stock during the past 25 fiscal years,
on inception-to-date net earnings of $665 million. The Company repurchases shares during periods of excess liquidity, which has
occurred in all 31 years that the Company has been public. Should the Company have lower income or cash flows, it could reduce or
eliminate repurchases under the stock repurchase program until earnings and cash flow improved. Working capital decreased to $93.6
million at March 31, 2022 from $106.5 million at March 31, 2021. This is primarily due to the increase in spending to repurchase shares
of the Company’s common stock. The Company did not apply for governmental loans to support the Company’s operations, but has
taken advantage of certain aspects of the CARES Act such as the deferral of payroll tax deposits. The Company deferred a total of $10.4
million in payroll tax deposits, half of which was paid during the December 31, 2021 quarter, and the other half of which will be paid
back by the end of calendar year 2022.
38
The Company is not a party to off-balance sheet arrangements as defined by the SEC. However, from time to time the Company
enters into certain types of contracts that contingently require the Company to indemnify parties against third-party claims. The contracts
primarily relate to: (i) certain contracts to perform services, under which the Company may provide customary indemnification for the
purchases of such services, (ii) certain real estate leases, under which the Company may be required to indemnify property owners for
environmental and other liabilities, and other claims arising from the Company’s use of the applicable premises, and (iii) certain
agreements with the Company’s officers, directors and employees, under which the Company may be required to indemnify such persons
for liabilities arising out of certain actions taken by such persons, acting in their respective capacities within the Company. The terms
of such customary obligations vary by contract and in most instances a specific or maximum dollar amount is not explicitly stated
therein. Generally, amounts under these contracts cannot be reasonably estimated until a specific claim is asserted. Consequently, no
liabilities have been recorded for these obligations on the Company’s balance sheets for any of the periods presented.
The Company believes that cash from operations and funds from exercises of stock options granted to employees are adequate to
fund existing obligations, repurchase shares of the Company’s common stock under its current stock repurchase program, introduce
new services, and continue to develop the Company’s healthcare related services for at least the next twelve months. Should the
Company have lower income or cash flows, it could reduce or eliminate repurchases under the stock repurchase program until earnings
and cash flow have returned to comfortable levels. The Company regularly evaluates cash requirements for current operations,
commitments, capital acquisitions, and other strategic transactions. The Company may elect to raise additional funds for these purposes,
through debt or equity financings or otherwise, as appropriate. However, additional equity or debt financing may not be available when
needed, with terms favorable to the Company or at all.
As of March 31, 2022, the Company had $97.5 million in cash and cash equivalents, invested primarily in short-term, interest-
bearing, highly-liquid, investment-grade securities with maturities of 90 days or less.
The Company believes that the cash balance at March 31, 2022 along with anticipated internally-generated funds will be sufficient
to meet the Company’s expected cash requirements for at least the next twelve months.
Operating Cash Flows
Fiscal 2022 Compared to Fiscal 2021
Net cash provided by operating activities decreased to $67.2 million in fiscal 2022 from $94.4 million in fiscal 2021, a decrease
of $27.2 million. The decrease in cash flow from operating activities was primarily due to the fact that the Company had a prior year
deferral of payroll taxes provided by the CARES Act in 2020 that was no longer available during the same period in 2021. The Company
paid back half of the deferral of payroll taxes during the December 31, 2021 quarter. There was an increase in accounts receivable due
to an increase in revenues. Additionally, annual bonuses for calendar years 2021 and 2022 were paid in fiscal 2022.
Fiscal 2021 Compared to Fiscal 2020
Net cash provided by operating activities increased to $94.4 million in fiscal 2021 from $80.8 million in fiscal 2020, an increase
of $13.6 million. The improvement in cash from operating activities was primarily due to the payroll taxes deferral provided by the
CARES Act partially offset by a decrease in net income.
Investing Activities
Fiscal 2022 Compared to Fiscal 2021
Net cash flow used in investing activities increased to $29.8 million in fiscal 2022 from $17.2 million in fiscal 2021, an increase
of $12.6 million. The Company increased its spending primarily on developed software and reduced its spending on furniture and
leasehold improvements as the Company reduces its lease footprint.
Fiscal 2021 Compared to Fiscal 2020
Net cash flow used in investing activities decreased to $17.2 million in fiscal 2021 from $32.4 million in fiscal 2020, a decrease
of $15.1 million. This decrease was due to the Company reducing its planned capital expenditures due to the COVID-19 pandemic. The
Company expects to see its office space, and the associated capital expenditures, decrease over time due to more employees switching
to working from home.
39
Financing Activities
Fiscal 2022 Compared to Fiscal 2021
Net cash flow used in financing activities increased to $79.6 million in fiscal 2022 from $20.6 million in fiscal 2021, an increase
of $59.0 million. During fiscal 2022, the Company spent $90 million to repurchase 566,073 shares of its common stock (at an average
price of $159.14 per share). During fiscal 2021, the Company spent $33 million to repurchase 367,961 shares of its common stock (at
an average price of $88.79 per share).
If the Company continues to generate cash flow from operating activities, the Company may continue to repurchase shares of its
common stock on the open market, if authorized by the Company’s Board of Directors pursuant to the Company's stock repurchase
program, or seek to identify other businesses to acquire. The Company has historically used cash provided by operating activities and
from the exercise of stock options to repurchase stock. The Company expects that it may use some of the cash on the balance sheet at
March 31, 2022 to repurchase additional shares of its common stock in the future.
Fiscal 2021 Compared to Fiscal 2020
Net cash flow used in financing activities decreased to $20.6 million in fiscal 2021 from $57.0 million in fiscal 2020, a decrease
of $36.3 million. During fiscal 2021, the Company spent $33 million to repurchase 367,961 shares of its common stock (at an average
price of $88.79 per share). During fiscal 2020, the Company spent $66 million to repurchase 822,353 shares of its common stock (at an
average price of $79.78 per share).
Litigation
The Company is involved in litigation arising in the ordinary course of business. Management believes that resolution of these
matters will not result in any payment that, in the aggregate, would be material to the consolidated financial position or results of
operations of the Company.
Inflation
The Company experiences pricing pressures in the form of competitive prices. The Company is also impacted by rising costs for
certain inflation-sensitive operating expenses such as labor, employee benefits, and facility leases. The Company does not believe these
impacts were material to its revenues or net income in fiscal 2022; however, the Company believes inflation could have a material
impact to pricing and operating expenses in future years due to the state of the economy and current inflation rates.
Critical Accounting Policies
The SEC defines critical accounting policies as those that require application of management’s most difficult, subjective or
complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may
change in subsequent periods.
The following is not intended to be a comprehensive list of our accounting policies. The Company’s significant accounting policies
are more fully described in Note 1, “Summary of Significant Accounting Policies” in the notes to our consolidated financial statements.
In many cases, the accounting treatment of a particular transaction is specifically dictated by accounting principles generally accepted
in the United States of America (“GAAP”), with no need for management’s judgment in their application. There are also areas in which
management’s judgment in selecting an available alternative would not produce a materially different result.
We have identified the following accounting policies as critical to us: (i) revenue recognition, (ii) leases, (iii) allowance for
uncollectible accounts, (iv) goodwill and long-lived assets, (v) accrual for self-insured costs, (vi) accounting for income taxes, (vii) legal
and other contingencies, (viii) share-based compensation, and (ix) software development costs.
Revenue Recognition: Revenue is recognized when control of the promised services is transferred to the Company’s customers
in an amount that reflects the consideration expected 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 billed accounts receivable are expected to be collected in 30 days in accordance with the underlying
payment terms. For many of the Company’s services, the Company typically has one performance obligation; however, it also provides
the customer with an option to acquire additional services. The Company offers multiple services under its patient management and
network solutions service lines. The Company typically provides a menu of offerings from which the customer may choose to purchase.
The price of each service is separate and distinct and provides a separate and distinct value to the customer. Pricing is generally consistent
for each service irrespective of the other services or quantities requested by the customer.
40
In transactions related to third-party service revenue, which includes pharmacy, directed care services and other services provided
by the Company’s integrated network solutions services, the Company is considered the principal, 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, it is required to recognize revenue gross and
service partner vendor fees in the cost of revenue in the Company’s consolidated income statements.
Leases: The Company determines if an arrangement includes a lease at inception. Right-of-use assets represent the Company’s
right to use an underlying asset for the lease term; and lease liabilities represent the Company’s obligation to make lease payments
arising from the lease. Right-of-use assets and lease liabilities are recognized at the commencement date of the lease, renewal date of
the lease or significant remodeling of the lease space based on the present value of the remaining future minimum lease payments.
Leases with a term greater than one year are recognized on the balance sheet as right-of-use assets and short-term and long-term lease
liabilities, as applicable.
Operating and financing lease liabilities and their corresponding right-of-use assets are initially recorded based on the present
value of lease payments over the expected remaining lease term. The interest rate implicit in lease contracts is typically not readily
determinable. As a result, we utilize our incremental borrowing rate to discount lease payments, which reflects the fixed rate at which
we could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic
environment. The Company’s leases may include options to extend or terminate the lease which are included in the lease term when it
is reasonably certain that we will exercise any such options. Lease expense for lease payments is recognized on a straight-line basis
over the lease term.
Allowance for Uncollectible Accounts: The Company determines its allowance for uncollectible accounts by considering a
number of factors, including the length of time trade accounts receivable are past due, the Company’s previous loss history, the
customers’ current ability to pay its obligation to the Company, and the condition of the general economy and the industry as a whole.
The Company writes off accounts receivable when they become uncollectible.
The Company must make significant judgments and estimates in determining contractual and bad debt allowances in any
accounting period. One significant uncertainty inherent in the Company’s analysis is whether its past experience will be indicative of
future periods. Although the Company considers future projections when estimating contractual and bad debt allowances, the Company
ultimately makes its decisions based on the best information available to it at the time the decision is made. Adverse changes in general
economic conditions or trends in reimbursement amounts for the Company’s services could affect the Company’s contractual and bad
debt allowance estimates, collection of accounts receivable, cash flows, and results of operations. One customer accounted for 10% or
more of accounts receivable at March 31, 2022 and 2021.
Goodwill and Long-Lived Assets: Goodwill arising from business combinations represents the excess of the purchase price over
the estimated fair value of the net assets of the acquired business. Pursuant to ASC 350-10 through ASC 350-30, “Goodwill and Other
Intangible Assets,” goodwill is tested annually for impairment or more frequently if circumstances indicate the potential for impairment.
Also, management tests for impairment of its amortizable intangible assets and long-lived assets whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable. The impairment test is conducted at the company
level. The measurement of fair value is based on an evaluation of market capitalization and is further tested using a multiple of earnings
approach. In projecting the Company’s cash flows, management considers industry growth rates and trends and cost structure changes.
Based on the Company’s tests and reviews, no impairment of its goodwill, intangible assets, or other long-lived assets existed at
March 31, 2022 or March 31, 2021. However, future events or changes in current circumstances could affect the recoverability of the
carrying value of goodwill and long-lived assets.
41
Accrual for Self-insurance Costs: The Company accrues for the group medical costs and workers’ compensation costs of its
employees based on claims filed and an estimate of claims incurred but not reported as of each balance sheet date. The Company
determines its estimated self-insurance reserves based upon historical trends along with outstanding claims information provided by its
claims paying agents. However, it is possible that recorded accruals may not be adequate to cover the future payment of claims.
Adjustments, if any, to estimated accruals resulting from ultimate claim payments will be reflected in earnings during the periods in
which such adjustments are determined. The Company’s self-insured liabilities contain uncertainties because management is required
to make assumptions and judgments to estimate the ultimate cost to settle reported claims and claims incurred but not reported at the
balance sheet date.
The Company does not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions
used to calculate its self-insured liabilities. However, if actual results are not consistent with these estimates or assumptions, the
Company may be exposed to losses or gains that could be material.
Accounting for Income Taxes: The Company records a tax provision for the anticipated tax consequences of its reported results
of operations. The provision for income taxes is computed using the asset and liability method, under which deferred tax assets and
liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases
of assets and liabilities, and for operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using the
currently-enacted tax rates that apply to taxable income in effect for the years in which those tax assets are expected to be realized or
settled. The Company records a valuation allowance, if necessary, to reduce deferred tax assets to the amount that is believed more
likely than not to be realized.
The Company recognizes tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be
sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the
financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being
realized upon ultimate settlement.
Management believes it is more likely than not that forecasted income, including income that may be generated as a result of
certain tax planning strategies, together with future reversals of existing taxable temporary differences, will be sufficient to fully recover
the deferred tax assets. In the event that the Company determines all or part of the net deferred tax assets are not realizable in the future,
the Company will make an adjustment to the valuation allowance that would be charged to earnings in the period such determination is
made. In addition, the calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the
application of GAAP and complex tax laws. Resolution of these uncertainties in a manner inconsistent with management’s expectations
could have a material impact on the Company’s financial condition and operating results. The significant assumptions and estimates
described above are important contributors to our ultimate effective tax rate in each year.
Legal and Other Contingencies: As discussed in Part I, Item 3 of this annual report, “Legal Proceedings” and in Note 10,
“Contingencies and Legal Proceedings” in the notes to our consolidated financial statements, the Company is subject to various legal
proceedings and claims that arise in the ordinary course of business. The Company records a liability when it is probable that a loss has
been incurred and the amount is reasonably estimable. There is significant judgment required in both the probability determination and
as to whether an exposure can be reasonably estimated. The outcomes of legal proceedings and claims brought against the Company
are subject to significant uncertainty.
Share-Based Compensation: The Company accounts for share-based compensation in accordance with the provisions of ASC
Topic 718 “Compensation – Stock Compensation”. Under ASC 718, share-based compensation cost is measured at the grant date, based
on the calculated fair value of the award, and is recognized as an expense over the employee’s requisite service period (generally the
vesting period of the equity grant). For the fiscal year ended March 31, 2022, the Company recorded share-based compensation expense
of $5,198,000.
The Company estimates the fair value of stock options using the Black-Scholes valuation model. Key input assumptions used to
estimate the fair value of stock options include the exercise price of the award, the expected option term, the expected volatility of the
Company’s stock over the option’s expected term, the risk-free interest rate over the option’s term, and the Company’s expected annual
dividend yield. The Company issues performance-based stock options which vest only upon the Company’s achievement of certain
earnings per share targets on a calendar year basis, as determined by the Company’s Board of Directors. These options were valued in
the same manner as the time-based options. However, the Company only recognizes stock compensation expense to the extent that the
targets are determined to be probable of being achieved, which triggers the vesting of the performance options. The Company’s
management believes that this valuation technique and the approach utilized to develop the underlying assumptions are appropriate in
calculating the fair values of the Company’s stock options granted in fiscal 2022. Estimates of fair value are not intended to predict
actual future events or the value ultimately realized by persons who receive equity awards.
42
The Company does not believe there is a reasonable likelihood that there will be a material change in the future estimates or
assumptions we use to determine stock-based compensation expense. However, if actual results are not consistent with our estimates or
assumptions, we may be exposed to changes in stock-based compensation expense that could be material.
Software Development Costs: Development costs incurred in the research and development of new software products and
enhancements to existing software products for internal use are expensed as incurred until technological feasibility has been established.
After technological feasibility is established, any additional external software development costs are capitalized and amortized on a
straight-line basis over the estimated economic life of the related product, which is typically five years. The Company performs an
annual review of the estimated economic life and the recoverability of such capitalized software costs. If a determination is made that
capitalized amounts are not recoverable based on the estimated cash flows to be generated from the applicable software, any remaining
capitalized amounts are written off. Although the Company believes that its approach to estimates and judgments as described herein
is reasonable, actual results could differ and the Company may be exposed to increases or decreases in revenue that could be material.
Recently Issued Accounting Standards
Management has evaluated recent accounting pronouncements through the date the financial statements were issued and filed
with the SEC and believes that there are none that will have a material impact on the Company’s financial statements.
43
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of CorVel Corporation
Opinions on the Consolidated Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of CorVel Corporation (the “Company”) as of March 31, 2022
and 2021, the related consolidated statements of income, stockholders’ equity, and cash flows for each of the years in the three-year
period ended March 31, 2022, and the related notes and financial statement schedule (collectively referred to as the “consolidated
financial statements”). We also have audited the Company’s internal control over financial reporting as of March 31, 2022, based on
criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission (“COSO”).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated
financial position of the Company as of March 31, 2022 and 2021, and the consolidated results of its operations and its cash flows for
each of the years in the three-year period ended March 31, 2022, in conformity with accounting principles generally accepted in the
United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial
reporting as of March 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
Basis for Opinion
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control
over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the
accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the
Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our
audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether
due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
44
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (Continued)
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of
the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining
an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating
the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures
that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.
The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as
a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or
on the accounts or disclosures to which they relate.
45
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (Continued)
Revenue Recognition - Refer to Note 2 to the Consolidated Financial Statements
Critical Audit Matter Description:
The Company recognizes revenue upon transfer of control of promised services or products to customers in an amount that reflects
the consideration the Company expects to receive in exchange for those services or products. Certain services and products involve
estimation of the related transaction price that, in turn, led to a high degree of auditor judgment, subjectivity and effort in performing
procedures and evaluating audit evidence related to management’s judgments. Revenues that are most significantly impacted by
management’s estimates and judgments include (i) bill review services that contain contractual provisions that allow the customer to
compensate the Company only for services that it utilizes and (ii) directed care services at period-end for which the Company has not
been billed by the related providers.
How the Critical Matter was Addressed in the Audit:
The primary procedures we performed to address this critical audit matter included the following, among others:
▪ We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s
process to estimate the most likely amount of consideration to which the Company will be entitled in exchange for transferring
the promised services or products to a customer. We tested the effectiveness of certain controls over revenue recognition,
including management’s controls over the methodology used to determine estimated revenues.
▪ We tested the underlying data used by the Company to determine related bill review revenue estimates by examining customer
contracts and analyzing historical utilization analyses completed by the Company. We also examined subsequent period
invoicing and cash collection activities to evaluate the reasonableness of management’s estimates.
▪ We tested significant assumptions used in management’s calculations of period-end directed care revenues by analyzing
historical time lag patterns between the provision of service and provider invoicing. We also examined trends associated with
the number of period-end provider referrals and performed gross margin reasonableness analyses to evaluate management’s
estimates.
▪ We tested the mathematical accuracy of management’s calculations of revenue and the associated timing of revenue
recognized in the consolidated financial statements.
/s/ HASKELL & WHITE LLP
We have served as the Company’s auditor since 2006.
Irvine, California
May 27, 2022
46
CORVEL CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
Current Assets
Cash and cash equivalents
Customer deposits
Accounts receivable (less allowance for doubtful accounts of $2,562,000 at March 31,
2022 and $3,274,000 at March 31, 2021)
Prepaid expenses and income taxes
Total current assets
Property and equipment, net
Goodwill
Other intangible assets, net
Right-of-use asset, net
Deferred tax asset, net
Other assets
Total assets
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts and income taxes payable
Accrued liabilities
Total current liabilities
Deferred income taxes, net
Long-term lease liabilities
Total liabilities
Commitments and contingencies
Stockholders' Equity
Common stock, $.0001 par value: 120,000,000 shares authorized at March 31, 2022 and
2021; 54,788,712 shares issued (17,569,087 shares outstanding, net of treasury shares)
and 54,529,642 shares issued (17,876,090 shares outstanding, net of treasury shares) at
March 31, 2022 and March 31, 2021, respectively
Paid-in-capital
Treasury stock, at cost (37,219,625 and 36,653,552 shares at March 31, 2022 and 2021,
respectively)
Retained earnings
Total stockholders' equity
Total liabilities and stockholders' equity
March 31,
2022
2021
$
97,504,000
69,781,000
$
139,716,000
56,497,000
82,586,000
15,123,000
264,994,000
76,268,000
36,814,000
1,669,000
35,020,000
—
481,000
415,246,000
14,431,000
156,939,000
171,370,000
1,689,000
29,792,000
202,851,000
$
$
64,722,000
8,006,000
268,941,000
70,619,000
36,814,000
2,104,000
45,324,000
613,000
345,000
424,760,000
13,574,000
148,886,000
162,460,000
—
41,898,000
204,358,000
$
$
3,000
201,609,000
3,000
185,941,000
(654,520,000 )
665,303,000
212,395,000
415,246,000
$
(564,435,000 )
598,893,000
220,402,000
424,760,000
$
See accompanying notes to consolidated financial statements.
47
CORVEL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Revenues
Cost of revenues
Gross profit
General and administrative
Income before income taxes
Income tax provision
Net income
Net income per share:
Basic
Diluted
Weighted average shares outstanding:
Basic
Diluted
2022
$ 646,230,000
494,116,000
152,114,000
67,602,000
84,512,000
18,102,000
66,410,000
Fiscal Years Ended March 31,
2021
$ 552,644,000
429,020,000
123,624,000
64,449,000
59,175,000
12,819,000
46,356,000
2020
$ 592,225,000
466,304,000
125,921,000
65,210,000
60,711,000
13,334,000
47,377,000
$
$
$
$
$
3.74
3.66
$
$
2.59
2.55
$
$
2.59
2.55
17,753,000
18,127,000
17,930,000
18,166,000
18,326,000
18,602,000
See accompanying notes to consolidated financial statements.
48
CORVEL CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Fiscal Years Ended March 31, 2022, 2021 and 2020
Balance – March 31, 2019
Stock issued under employee stock
purchase plan
Stock issued under stock option
plan, net of shares repurchased
Stock-based compensation expense
Purchase of treasury stock
Net income
Balance – March 31, 2020
Stock issued under employee stock
purchase plan
Stock issued under stock option
plan, net of shares repurchased
Stock-based compensation expense
Purchase of treasury stock
Net income
Balance – March 31, 2021
Stock issued under employee stock
purchase plan
Stock issued under stock option plan,
net of shares repurchased
Stock-based compensation expense
Purchase of treasury stock
Net income
Balance – March 31, 2022
Common
Shares
54,021,032
Stock
Amount
$
3,000
Paid-in-Capital
155,798,000
$
Treasury
Shares
(35,463,238 )
Treasury
Stock
$
(466,156,000 )
$
Retained
Earnings
505,160,000
Total
Stockholders'
Equity
194,805,000
$
8,451
225,074
—
—
—
54,254,557
6,007
269,078
—
—
—
54,529,642
3,363
255,707
—
—
—
54,788,712
$
—
—
—
—
—
3,000
—
—
—
—
—
3,000
—
—
—
—
—
3,000
505,000
—
—
—
505,000
8,147,000
4,485,000
—
—
168,935,000
—
—
(822,353 )
—
(36,285,591 )
—
—
(65,608,000 )
—
(531,764,000 )
—
—
—
47,377,000
552,537,000
8,147,000
4,485,000
(65,608,000 )
47,377,000
189,711,000
534,000
—
—
—
534,000
11,494,000
4,978,000
—
—
185,941,000
—
—
(367,961 )
—
(36,653,552 )
—
—
(32,671,000 )
—
(564,435,000 )
—
—
—
46,356,000
598,893,000
11,494,000
4,978,000
(32,671,000 )
46,356,000
220,402,000
564,000
—
—
—
564,000
9,906,000
5,198,000
—
—
201,609,000
$
—
—
(566,073 )
—
(37,219,625 )
—
—
(90,085,000 )
—
(654,520,000 )
$
—
—
—
66,410,000
665,303,000
$
$
9,906,000
5,198,000
(90,085,000 )
66,410,000
212,395,000
See accompanying notes to consolidated financial statements.
49
CORVEL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization
Loss on write down or disposal of property, capitalized software or
investment
Stock compensation expense
Provision for doubtful accounts
Deferred income taxes
Changes in operating assets and liabilities:
Accounts receivable
Customer deposits
Prepaid expenses and income taxes
Other assets
Accounts and income taxes payable
Accrued liabilities
Operating lease liabilities
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Exercise of employee stock purchase options
Exercise of common stock options
Purchase of treasury stock
Net cash used in financing activities
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
CASH AND CASH EQUIVALENTS AT END OF YEAR
Supplemental cash flow information
Income taxes paid
Accrual of software license purchase
2022
Fiscal Years Ended March 31,
2021
2020
$
66,410,000
$
46,356,000
$
47,377,000
23,916,000
23,436,000
22,516,000
122,000
5,198,000
158,000
2,302,000
(18,022,000 )
(13,284,000 )
(7,116,000 )
(135,000 )
1,423,000
8,052,000
(1,802,000 )
67,222,000
590,000
4,978,000
2,021,000
(8,376,000 )
(976,000 )
(7,507,000 )
3,003,000
504,000
(3,355,000 )
31,561,000
2,144,000
94,379,000
149,000
4,485,000
1,606,000
1,470,000
3,964,000
(3,723,000 )
(3,834,000 )
(595,000 )
1,095,000
11,885,000
(5,569,000 )
80,826,000
(29,819,000 )
(29,819,000 )
(17,243,000 )
(17,243,000 )
(32,360,000 )
(32,360,000 )
564,000
9,906,000
(90,085,000 )
(79,615,000 )
(42,212,000 )
139,716,000
97,504,000
534,000
11,494,000
(32,671,000 )
(20,643,000 )
56,493,000
83,223,000
$ 139,716,000
$
505,000
8,147,000
(65,608,000 )
(56,956,000 )
(8,490,000 )
91,713,000
83,223,000
19,405,000
—
$
$
20,760,000
—
$
$
15,077,000
3,790,000
$
$
$
See accompanying notes to consolidated financial statements.
50
CORVEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal Years Ended March 31, 2022, 2021 and 2020
Note 1 — Summary of Significant Accounting Policies
Organization: CorVel Corporation (“CorVel” or “the Company”), incorporated in Delaware in 1987, is an independent
nationwide provider of medical cost containment and managed care services designed to address the escalating medical costs of workers’
compensation benefits, automobile insurance claims, and group health insurance benefits. The Company’s services are provided to
insurance companies, TPAs, governmental entities, and self-administered employers to assist them in managing the medical costs and
monitoring the quality of care associated with healthcare claims.
Basis of Presentation: The consolidated financial statements include the accounts of CorVel and its wholly-owned subsidiaries.
Significant intercompany accounts and transactions have been eliminated in consolidation. Certain prior year amounts have been
reclassified to conform to fiscal 2022 presentation. These changes had no impact on previously-reported results of operations or
shareholders’ equity.
The Company evaluated all subsequent events and transactions through the date of this filing.
Use of Estimates: The preparation of financial statements in compliance with GAAP requires management to make estimates and
assumptions that affect the amounts reported in the accompanying consolidated financial statements. Actual results could differ from
those estimates. Significant estimates include the values assigned to intangible assets, capitalized software development, the allowance
for doubtful accounts, work in process, accrual for income taxes, share-based payments related to performance-based awards, loss
contingencies, estimated lives of claims for claims administration revenue recognition, estimates used in stock options valuations, and
accrual for self-insurance reserves.
Cash and Cash Equivalents: Cash and cash equivalents consist of short-term, interest-bearing highly-liquid investment-grade
securities with maturities of 90 days or less when purchased. The carrying amounts of the Company’s financial instruments approximate
their fair values at March 31, 2022 and 2021 due to the short-term nature of those instruments. Customer deposits represent cash that is
expected to be returned or applied towards payment within one year through the Company’s provider reimbursement services.
Fair Value of Financial Instruments: The Company applies ASC 820, “Fair Value Measurements and Disclosures,” which defines
fair value, establishes a framework for measuring fair value, and provides for disclosures about fair value measurements, with respect
to fair value measurements of (i) nonfinancial assets and liabilities that are recognized or disclosed at fair value in the Company’s
consolidated financial statements on a recurring basis (at least annually) and (ii) all financial assets and liabilities. ASC 820 prioritizes
the inputs used in measuring fair value into the following hierarchy:
Level 1 Quoted market prices in active markets for identical assets or liabilities;
Level 2 Observable inputs other than those included in Level 1 (for example, quoted prices for similar assets in active markets or
quoted prices for identical assets in inactive markets); and
Level 3 Unobservable inputs reflecting management’s own assumptions about the inputs used in estimating the value of the asset.
The carrying amount of the Company’s financial instruments (i.e. cash and cash equivalents, accounts receivable, accounts
payable, etc.) approximates their fair values at March 31, 2022 and 2021 due to the short-term nature of those instruments. The Company
has no financial instruments that are measured at fair value on a recurring basis.
Revenue Recognition: Revenue is recognized when control of the promised services is transferred to the Company’s customers in
an amount that reflects the consideration expected to be entitled to in exchange for those services. As the Company completes its
performance obligations which are identified in Note 2, it has an unconditional right to consideration as outlined in the Company’s
contracts. Generally, the Company’s billed accounts receivable are expected to be collected in 30 days in accordance with the underlying
payment terms. For many of the Company’s services, the Company typically has one performance obligation; however, it also provides
the customer with an option to acquire additional services. The Company offers multiple services under its patient management and
network solutions service lines. The Company typically provides a menu of offerings from which the customer may choose to purchase.
The price of each service is separate and distinct and provides a separate and distinct value to the customer. Pricing is generally consistent
for each service irrespective of the other services or quantities requested by the customer.
51
In transactions related to third-party service revenue, which includes pharmacy, directed care services and other services provided
by the Company’s integrated network solutions services, the Company is considered the principal, 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, it is required to recognize revenue gross and
service partner vendor fees in the cost of revenue in the Company’s consolidated income statements.
Accounts Receivable: The majority of the Company’s accounts receivable are due from companies in the property and casualty
insurance industries, self-insured employers and governmental entities. Credit is extended based on evaluation of a customer’s financial
condition and, generally, collateral is not required. Accounts receivable are generally due within 30 days and are stated at amounts due
from customers net of an allowance for doubtful accounts. Those accounts outstanding longer than the contractual payment terms are
considered past due. The Company determines its allowance by considering a number of factors, including the length of time trade
accounts receivable are past due, the Company’s previous loss history, the customer’s current ability to pay its obligation to the
Company, and the condition of the general economy and the industry as a whole. The Company writes off accounts receivable against
the reserve when they become uncollectible. Accounts receivable includes $27,307,000, and $17,213,000 of unbilled receivables at
March 31, 2022 and 2021, respectively. Unbilled receivables represent the amounts expected to be collected for work performed which
has not yet been invoiced to the customer. Unbilled receivables are generally invoiced within one year.
Concentrations of Credit Risk: Substantially all of the Company’s customers are payors of workers’ compensation benefits and
property and casualty insurance, which include insurance companies, third party administrators, self-insured employers and government
entities. Credit losses consistently have been within management’s expectations. Virtually all of the Company’s cash is invested at
financial institutions in amounts which exceed the FDIC insurance levels. No customer accounted for 10% or more of revenue for fiscal
2022, 2021 or 2020. One customer accounted for 10% or more of accounts receivable at March 31, 2022 and 2021.
Property and Equipment: Additions to property and equipment are recorded at cost. The Company provides for depreciation on
property and equipment using the straight-line method by charges to operations in amounts that allocate the cost of depreciable assets
over their estimated lives as follows:
Asset Classification
Building
Building Improvements
Land Improvements
Leasehold Improvements
Furniture and Equipment
Computer Hardware
Computer Software
Estimated Useful Life
40 years
20 years
20 years
Shorter of 5 years or the life of lease
5 to 7 years
2 to 5 years
3 to 5 years
The Company accounts for internally-developed software costs in accordance with ASC 350-40, “Internal Use Software”.
Capitalized software development costs, intended for internal use, totaled $29,806,000 (net of $131,907,000 in accumulated
amortization) and $27,902,000 (net of $120,832,000 in accumulated amortization), as of March 31, 2022 and 2021, respectively. These
costs are included in computer software in property and equipment and are amortized over a period of five years.
Long-Lived Assets: The carrying amount of all long-lived assets is evaluated periodically to determine if adjustment to the
depreciation and amortization period or to the unamortized balance is warranted. Such evaluation is based principally on the expected
utilization of the long-lived assets and the projected, undiscounted cash flows of the operations in which the long-lived assets are
deployed.
52
Leases: The Company determines if an arrangement includes a lease at inception. Right-of-use assets represent the Company’s
right to use an underlying asset for the lease term; and lease liabilities represent the Company’s obligation to make lease payments
arising from the lease. Right-of-use assets and lease liabilities are recognized at the commencement date of the lease, renewal date of
the lease or significant remodeling of the lease space based on the present value of the remaining future minimum lease payments.
Leases with a term greater than one year are recognized on the balance sheet as right-of-use assets and short-term and long-term lease
liabilities, as applicable.
Operating and financing lease liabilities and their corresponding right-of-use assets are initially recorded based on the present
value of lease payments over the expected remaining lease term. The interest rate implicit in lease contracts is typically not readily
determinable. As a result, we utilize our incremental borrowing rate to discount lease payments, which reflects the fixed rate at which
we could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic
environment. The Company’s leases may include options to extend or terminate the lease which are included in the lease term when it
is reasonably certain that we will exercise any such options. Lease expense for lease payments is recognized on a straight-line basis
over the lease term.
Goodwill and Indefinite Lived Long-Lived Assets: The Company accounts for its business combinations in accordance with the
ASC 805-10 through ASC 805-50, “Business Combinations,” which (i) requires that the purchase method of accounting be applied to
all business combinations and (ii) addresses the criteria for initial recognition of intangible assets and goodwill. In accordance with ASC
350-10 through ASC 350-30, goodwill and other intangible assets with indefinite lives are not amortized but are tested for impairment
annually, or more frequently if circumstances indicate the possibility of impairment. If the carrying value of goodwill or an intangible
asset exceeds its fair value, an impairment loss will be recognized. Based on the Company’s tests and reviews, no impairment of its
goodwill, intangible assets or other long-lived assets existed at March 31, 2022 and 2021. However, future events or changes in current
circumstances could affect the recoverability of the carrying value of goodwill and long-lived assets. Goodwill amounted to $36,814,000
(net of accumulated amortization of $2,069,000) at March 31, 2022 and at March 31, 2021.
Cost of Revenues: Cost of services consists primarily of the compensation and fringe benefits of field personnel, including
managers, medical bill analysts, field case managers, telephonic case managers, systems support, administrative support, account
managers and account executives, and related facility costs including rent, telephone and office supplies. Historically, the costs
associated with these additional personnel and facilities have been the most significant factor driving increases in the Company’s cost
of services.
Income Taxes: The Company provides for income taxes in accordance with provisions specified in ASC 740, “Accounting for
Income Taxes”. Accordingly, deferred income tax assets and liabilities are computed for differences between the financial statement
and tax bases of assets and liabilities. These differences will result in taxable or deductible amounts in the future, based on tax laws and
rates applicable to the periods in which the differences are expected to affect taxable income. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the periods in which temporary differences become deductible.
In making an assessment regarding the probability of realizing a benefit from these deductible differences, management considers the
Company’s current and past performance, the market environment in which the Company operates, tax-planning strategies and the
length of carry-forward periods for loss carry-forwards, if any. Valuation allowances are established when necessary to reduce deferred
tax assets to amounts that are more likely than not to be realized. Further, the Company accrues for income tax issues not yet resolved
with federal, state and local tax authorities, when it appears more likely than not that a tax liability has been incurred.
Share-Based Compensation: The Company accounts for share-based compensation in accordance with the provisions of ASC
Topic 718 “Compensation – Stock Compensation.” Under ASC 718, share-based compensation cost is measured at the grant date, based
on the calculated fair value of the award, and is recognized as an expense over the requisite service period (generally the vesting period
of the equity grant). The Company issues performance-based stock options which vest only upon the Company’s achievement of certain
earnings per share targets on a calendar year basis, as determined by the Company’s Board of Directors. These options were valued in
the same manner as the time-based options. However, the Company only recognizes stock compensation expense to the extent that the
targets are determined to be probable of being achieved, which triggers the vesting of the performance options.
Accrual for Self-insurance Costs: The Company self-insures for the group medical costs and workers’ compensation costs of its
employees. Management believes that the self-insurance reserves are appropriate; however, actual claims costs may differ from the
original estimates requiring adjustments to the reserves. The Company determines its estimated self-insurance reserves based upon
historical trends along with outstanding claims information provided by its claims paying agents.
Earnings per Share: Earnings per common share-basic is based on the weighted average number of common shares outstanding
during the period. Earnings per common shares-diluted is based on the weighted average number of common shares and common share
equivalents outstanding during the period. In calculating earnings per share, earnings are the same for the basic and diluted calculations.
Weighted average shares outstanding is greater for diluted earnings per share due to the effect of stock options.
53
The difference between the basic weighted average shares and the diluted weighted average shares for each of the fiscal years
ended March 31, 2022, 2021 and 2020 is as follows:
Basic weighted average shares
Treasury stock impact of stock options
Diluted weighted average shares
Fiscal 2022
Fiscal 2021
Fiscal 2020
17,753,000
374,000
18,127,000
17,930,000
236,000
18,166,000
18,326,000
276,000
18,602,000
Recently Issued Accounting Standards
Management has evaluated recent accounting pronouncements through the date the financial statements were issued and filed
with the SEC 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 30 days in accordance with the underlying payment terms.
The Company generates revenue through its patient management and network solutions service lines. The Company operates in
one reportable operating segment, managed care.
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 three and fifteen months.
The Company believes this approach reasonably reflects the transfer of the claims management services to its customer.
The Company’s obligation to manage claims and cases under the patient management service line can range from less than one
year to multi-year contracts. They are generally one year under the terms of the contract; however, many of these contracts contain auto-
renewal provisions and the Company’s customer relationships can span multiple years. Under certain claims management agreements,
the Company receives consideration from a customer at contract inception prior to transferring services to the customer, however, the
Company would begin performing services immediately. The period between a customer’s payment of consideration and the completion
of the promised services is generally less than one year. There is no difference between the amount of promised consideration and the
cash selling price of the promised services. The fee is billed upfront by the Company in order to provide customers with simplified and
predictable ways of purchasing the Company’s services.
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
54
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, 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 in the amount that the Company concludes 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 and its pricing,
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, it 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 fiscal years ended March 31, 2022 and 2021:
Patient management services
Network solutions services
Total services
2022
424,050,000 $
222,180,000
646,230,000 $
2021
368,853,000 $
183,791,000
552,644,000 $
2020
386,814,000
205,411,000
592,225,000
$
$
Arrangements with Multiple Performance Obligations
For many of the Company’s services, the Company typically has one performance obligation; however, the Company also
provides the customer with an option to acquire additional services. The Company offers multiple services under its patient management
and network solutions service lines. The Company typically provides a menu of offerings from which the customer may choose to
purchase. The price of each service is separate and distinct and provides a separate and distinct value to the customer. Pricing is generally
consistent for each service irrespective of the other services or quantities requested by the customer.
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 one year.
Billed receivables
Allowance for doubtful accounts
Unbilled receivables
Accounts receivable, net
March 31, 2022
$
57,841,000
(2,562,000 )
27,307,000
82,586,000
March 31, 2021
$ 50,783,000
(3,274,000 )
17,213,000
$ 64,722,000
$
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.
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.
55
The table below presents the deferred revenues balance and the significant activity affecting deferred revenues during the fiscal
year ended March 31, 2022:
Beginning balance at April 1, 2021
Additions
Revenue recognized from beginning of period
Revenue recognized from additions
Ending balance at March 31, 2022
March 31, 2022
$
22,514,000
41,451,000
(12,825,000 )
(25,344,000 )
25,796,000
$
Remaining Performance Obligations
As of March 31, 2022, the Company had $25.8 million of remaining performance obligations related to claims and non-claims
services for which the price is fixed. Remaining performance obligations consist of deferred revenues. The Company expects to
recognize approximately 96% of its remaining performance obligations as revenues within one year and the remaining balance thereafter.
See the discussion below regarding the practical expedients elected for the disclosure of remaining performance obligations.
Costs to Obtain a Contract
The Company has an internal sales force compensation program where remuneration is based solely on the revenues recognized
in the period and does not represent an incremental cost to the Company which provides a future benefit expected to be longer than one
year and would meet the criteria to be capitalized and presented on the Company’s consolidated balance sheets.
Practical Expedients Elected
As a practical expedient, the Company does not adjust the consideration in a contract for the effects of a significant financing
component. It expects, at contract inception, that the period between a customer’s payment of consideration and the transfer of promised
services to the customer will be one year or less.
For patient management services that are billed on a time-and-expense incurred or per unit basis and for which revenue is
recognized over time, the Company recognizes revenue at the amount to which it has the right to invoice for services performed.
The Company does not disclose the value of remaining performance obligations for (i) contracts for which it recognizes revenue
at the amount to which it has the right to invoice for services performed, and (ii) contracts with variable consideration allocated entirely
to a single performance obligation.
Note 3 — Stock Options and Stock-Based Compensation
Under the Company’s Restated Omnibus Incentive Plan (formerly the Restated 1988 Executive Stock Option Plan) (“the Plan”)
as in effect at March 31, 2022, options exercisable for up to 20,615,000 shares of the Company’s common stock may be granted over
the life of the Plan to key employees, non-employee directors, and consultants at exercise prices not less than the fair market value of
the common stock on the date of grant. Options granted under the Plan are non-statutory stock options and generally vest 25% one year
from the date of grant, with the remaining 75% vesting ratably each month for the next 36 months. The options granted to employees
and the Company’s Board of Directors expire at the end of five years and ten years from date of grant, respectively. All options granted
in fiscal 2022 and 2021 were granted with an exercise price equal to the fair value of the Company’s common stock on the grant date.
The Company records compensation expense for employee stock options based on the estimated fair value of the options on the
date of grant using the Black-Scholes option-pricing model with the assumptions included in the table below. The Company uses
historical data, among other factors, to estimate the expected volatility, the expected dividend yield, and the expected option life. The
Company accounts for forfeitures as they occur, rather than estimate expected forfeitures. The risk-free rate is based on the interest rate
paid on a U.S. Treasury issue with a term similar to the estimated life of the option.
56
The fair value of each grant is estimated on the date of grant using the Black-Scholes option-pricing model. The following
weighted average assumptions were used for the fiscal years ended March 31, 2022, 2021 and 2020:
Expected volatility
Risk free interest rate
Dividend yield
Weighted average option life
Fiscal 2022
Fiscal 2021
Fiscal 2020
36 %
34 %
33 %
0.71% to 1.66%
0.21% to 0.46%
1.42% to 2.33%
0.0 %
0.0 %
0.0 %
4.3 to 4.4 years
4.4 to 4.5 years
4.4 to 4.5 years
For the fiscal years ended March 31, 2022, 2021 and 2020, the Company recorded share-based compensation expense of
$5,198,000, $4,978,000, and $4,485,000, respectively. The table below shows the amounts recognized in the financial statements for
the fiscal years ended March 31, 2022, 2021 and 2020.
Cost of revenue
General and administrative
Total cost of stock-based compensation
included in income before income taxes
Amount of income tax benefit recognized
Amount charged to net income
Effect on basic earnings per share
Effect on diluted earnings per share
Fiscal 2022
Fiscal 2021
Fiscal 2020
$
$
$
$
2,063,000
3,135,000
$
2,020,000
2,958,000
$
5,198,000
(1,119,000 )
4,079,000
0.23
0.23
$
$
$
4,978,000
(1,057,000 )
3,921,000
0.22
0.22
$
$
$
2,028,000
2,457,000
4,485,000
(985,000 )
3,500,000
0.19
0.19
The following table summarizes information for all stock options for the fiscal years March 31, 2022, 2021 and 2020:
Options outstanding – beginning of fiscal year
Options granted
Options exercised
Options cancelled/forfeited
Options outstanding – end of fiscal year
During the fiscal year, weighted average exercise
price of:
Options granted
Options exercised
Options cancelled/forfeited
At the end of fiscal year:
Price range of outstanding options
Weighted average exercise price per share
Options available for future grants
Exercisable options
Fiscal 2022
Fiscal 2021
Fiscal 2020
937,158
130,200
(298,570 )
(44,912 )
723,876
1,029,103
234,175
(278,094 )
(48,026 )
937,158
1,058,411
271,575
(235,932 )
(64,951 )
1,029,103
$
$
$
161.95
55.44
79.30
$
$
$
81.12
44.17
61.26
$
$
$
79.49
38.34
59.87
$22.07-$197.16
84.55
$
805,097
354,460
$21.87-$103.31
64.28
$
880,542
421,964
$20.08-$88.22
54.87
$
316,691
468,107
The following table summarizes the status of stock options outstanding and exercisable at March 31, 2022:
Range of
Exercise Prices
$22.07 to $57.35
$57.36 to $77.93
$77.94 to $88.22
$88.23 to $197.16
Total
Number of
Outstanding
Options
194,471
183,160
196,330
149,915
723,876
Weighted
Average
Remaining
Contractual
Life
Outstanding
Options –
Weighted
Average
Exercise Price
2.60
2.06
4.02
4.82
3.31
$
$
43.39
69.75
86.21
153.87
84.55
Exercisable
Options –
Number of
Exercisable
Options
163,658
122,565
63,082
5,155
354,460
Exercisable
Options –
Weighted
Average
Exercise Price
$
$
41.46
67.29
86.34
103.31
59.28
57
The following table summarizes the status of all outstanding options at March 31, 2022, and changes during the fiscal year then
ended:
Options outstanding, March 31, 2021
Granted
Exercised
Cancelled – forfeited
Cancelled – expired
Options outstanding, March 31, 2022
Options vested and expected to vest
Ending exercisable
Weighted
Average
Exercise
Price per
Share
64.28
161.95
55.44
79.37
70.98
84.55
82.53
59.28
Number of
Options
937,158
130,200
(298,570 )
(44,546 )
(366 )
723,876
659,402
354,460
$
$
$
$
Weighted Average
Remaining
Contractual Life
(Years)
Aggregate
Intrinsic Value
as of March 31,
2022
3.31
3.30
2.57
$ 62,156,642
$ 57,717,373
$ 38,692,989
The weighted average fair value of options granted during fiscal 2022, 2021 and 2020 was $50.29, $23.24, and $22.99,
respectively. The total intrinsic value of options exercised during fiscal years 2022, 2021 and 2020 was $27,615,000, $12,272,000, and
$10,281,000 respectively.
Included in the above-noted stock option grants and stock compensation expense are performance-based stock options which vest
only upon the Company’s achievement of certain earnings per share targets on a calendar year basis, as determined by the Company’s
Board of Directors. These options were valued in the same manner as the time-based options. However, the Company only recognizes
stock compensation expense to the extent that the targets are determined to be probable of being achieved, which triggers the vesting of
the performance options. During the fiscal years ended March 31, 2022, 2021 and 2020, the Company recognized stock compensation
expense for performance-based options in the amount of $2,280,000, $2,080,000, and $1,625,000, respectively.
The Company received $9,906,000, $11,494,000, and $8,147,000 of cash receipts from the exercise of stock options during fiscal
2022, 2021 and 2020, respectively. As of March 31, 2022, $6,566,000 of total unrecognized compensation costs related to stock options
is expected to be recognized over a weighted average period of 3 years.
Note 4 — Property and Equipment
Property and equipment, net consisted of the following at March 31, 2022 and 2021:
Computer software
Office equipment and computers
Land, building and improvements
Leasehold improvements
Less: accumulated depreciation and amortization
2022
177,150,000
77,380,000
11,081,000
18,582,000
284,193,000
(207,925,000 )
76,268,000
$
$
2021
163,829,000
66,714,000
11,081,000
17,562,000
259,186,000
(188,567,000 )
70,619,000
$
$
Depreciation expense totaled $23,481,000, $23,001,000 and $22,081,000 for the fiscal years ended March 31, 2022, 2021 and
2020, respectively.
58
Note 5 — Accounts and Income Taxes Payable and Accrued Liabilities
Accounts and income taxes payable consisted of the following at March 31, 2022 and 2021:
Accounts payable
Income taxes payable
2022
$ 14,080,000
351,000
$ 14,431,000
2021
$ 12,353,000
1,221,000
$ 13,574,000
Accrued liabilities consisted of the following at March 31, 2022 and 2021:
Payroll, payroll taxes and employee benefits
Customer deposits
Accrued professional service fees
Self-insurance accruals
Deferred revenue
Operating lease liabilities
Other
2022
$ 36,066,000
69,781,000
8,073,000
2,798,000
25,796,000
13,348,000
1,077,000
$ 156,939,000
2021
$ 43,998,000
56,498,000
7,016,000
3,704,000
22,514,000
12,765,000
2,391,000
$ 148,886,000
Note 6 — Income Taxes
The income tax provision consisted of the following for the fiscal years ended March 31, 2022, 2021 and 2020:
Current — Federal
Current — State
Subtotal
Deferred — Federal
Deferred — State
Subtotal
2022
$ 11,977,000
3,823,000
15,800,000
1,784,000
518,000
2,302,000
$ 18,102,000
2021
$ 16,608,000
4,587,000
21,195,000
(6,809,000 )
(1,567,000 )
(8,376,000 )
$ 12,819,000
$
2020
9,212,000
2,652,000
11,864,000
1,418,000
52,000
1,470,000
$ 13,334,000
The following is a reconciliation of the income tax provision from the statutory federal income tax rate to the effective rate for the
fiscal years ended March 31, 2022, 2021 and 2020:
Income taxes at federal statutory rate
State income taxes, net of federal benefit
Uncertain tax positions
Stock-based compensation and §162(m) limitation
Permanent items and tax credits
Adjustments to returns as filed
Valuation allowance
2022
$ 17,748,000
3,658,000
(222,000 )
2021
$ 12,427,000
3,102,000
(693,000 )
(2,697,000 ) (1,654,000 )
(364,000 )
192,000
(191,000 )
(465,000 )
176,000
(96,000 )
2020
$ 12,749,000
2,243,000
(263,000 )
(1,453,000 )
(179,000 )
110,000
127,000
$ 13,334,000
$ 18,102,000
$ 12,819,000
59
Deferred tax assets and liabilities at March 31, 2022 and 2021 are, as follows:
Deferred tax assets:
Accrued liabilities not currently deductible
Allowance for doubtful accounts
Stock-based compensation
Deferred lease liability
Deferred payroll taxes
Other
Deferred tax assets
Deferred tax liabilities:
Excess of book over tax basis of fixed assets
Intangible assets
Right-of-use asset
Accrued revenue
Other
Total deferred tax liabilities
Valuation allowance
Deferred tax liabilities
Net deferred tax assets (liabilities)
2022
2021
$
6,277,000
658,000
2,090,000
11,002,000
1,332,000
675,000
22,034,000
$
7,908,000
849,000
2,242,000
14,080,000
2,693,000
877,000
28,649,000
(7,313,000 )
(4,937,000 )
(8,939,000 )
(1,665,000 )
(476,000 )
(23,330,000 )
(393,000 )
(23,723,000 )
(1,689,000 )
(9,166,000 )
(4,820,000 )
(11,668,000 )
(1,526,000 )
(367,000 )
(27,547,000 )
(489,000 )
(28,036,000 )
613,000
$
$
Prepaid income taxes are $2,367,000 at March 31, 2022. There were no prepaid taxes at March 31, 2021.
A reconciliation of the financial statement recognition and measurement of uncertain tax positions during the current fiscal year
is as follows:
Balance as of March 31, 2021
Additions based on tax positions related to the current year
Additions for tax positions of prior years
Reductions for tax positions related to the current year
Reductions for tax positions of prior years
Balance as of March 31, 2022
$
$
418,000
—
—
—
(201,000 )
217,000
The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. During the fiscal years
ended March 31, 2022, 2021 and 2020, the Company recognized approximately $(40,000), $(99,000) and $(10,000) in interest and
penalties, respectively. As of March 31, 2022, 2021 and 2020, accrued interest and penalties related to uncertain tax positions were
$67,000, $107,000 and $206,000, respectively.
The tax fiscal years from 2016-2021 remain open to examination by the major taxing jurisdictions to which the Company is
subject.
Note 7 — Employee Stock Purchase Plan
The Company maintains an Employee Stock Purchase Plan (as amended, “ESPP”) which allows employees of the Company and
its subsidiaries to purchase shares of common stock on the last day of two six-month purchase periods (i.e. March 31 and September
30) at a purchase price which is 95% of the closing sale price of shares as quoted on NASDAQ on the last day of such purchase period.
Employees are allowed to contribute up to 20% of their gross pay. A maximum of 2,850,000 shares have been authorized for issuance
under the ESPP. As of March 31, 2022, 2,495,935 shares had been issued pursuant to the ESPP. Summarized ESPP information is as
follows:
Employee contributions
Shares acquired
Average purchase price
2022
2021
2020
564,000
3,363
167.71
$
$
534,000
6,007
88.85
$
$
505,000
8,451
59.70
$
$
60
Note 8 — Treasury Stock
During each of the three fiscal years ended March 31, 2022, the Company continued to repurchase shares of its common stock
under a program originally approved by the Company’s Board of Directors in 1996. Including a 1,000,000 share expansion authorized
in May 2021 by the Company’s Board of Directors, the total number of shares of common stock authorized to be repurchased over the
life of the program is 38,000,000 shares of common stock. Purchases may be made from time to time depending on market conditions
and other relevant factors. The share repurchases for the fiscal years ended March 31, 2022, 2021 and 2020 and cumulatively since
inception of the authorization, are as follows:
Shares repurchased
Cost
Average price
2022
566,073
90,085,000
159.14
$
$
2021
367,961
32,671,000
88.79
$
$
2020
822,353
65,608,000
79.78
$
$
Cumulative
37,219,625
654,520,000
17.59
$
$
During the period subsequent to March 31, 2022, through the date of filing this annual report, the Company repurchased 88,833
shares for $14 million, or an average of $162.06 per share. The repurchased shares were recorded as treasury stock, at cost, and are
available for general corporate purposes. The repurchases were primarily financed from cash generated from operations and from cash
proceeds from the exercise of stock options.
Note 9 – Leases
The Company determines if an arrangement is or contains a lease at contract inception. These lease agreements have remaining
lease terms of 1 to 15 years. The Company recognizes a right-of-use (“ROU”) asset and a lease liability at the lease commencement
date. The lease liability is initially measured at the present value of the unpaid lease payments as of the lease commencement date. Key
estimates and judgments include how the Company determines (1) the discount rate it uses to discount the unpaid lease payments to
present value, (2) the lease term, and (3) lease payments.
ASC 842 requires a lessee to discount its unpaid lease payments using the interest rate implicit in the lease or, if that rate cannot
be readily determined, its incremental borrowing rate. Generally, the Company cannot determine the interest rate implicit in the lease
because it does not have access to the lessor's estimated residual value or the amount of the lessor's deferred initial direct costs. Therefore,
the Company generally uses its incremental borrowing rate as the discount rate for the lease. The Company's incremental borrowing
rate for a lease is the rate of interest it would have to pay on a collateralized basis to borrow an amount equal to the lease payments
under similar terms. Because the Company does not generally borrow on a collateralized basis, it uses quoted interest rates obtained
from financial institutions as an input to derive an appropriate incremental borrowing rate, adjusted for the amount of the lease payments,
the lease term, and the effect on that rate of designating specific collateral with a value equal to the unpaid lease payments for that lease.
The Company’s lease agreements may include options to extend the lease following the initial term. At the time of adopting ASC
842, the Company determined that it was reasonably certain it would exercise the option to renew; accordingly, these options were
considered in determining the initial lease term. The Company elected the practical expedient of hindsight in determining the option to
renew. The Company has since reassessed the assumption of the renewal term and determined that due to the COVID-19 pandemic, the
Company is now expecting more of its workforce to be working from home permanently. Therefore, expecting a reduction in overall
square footage of office space needs, the Company no longer believes it is reasonably certain it will exercise most of its options to
renew, and therefore, has removed the renewal term of several lease obligations. The subsequent re-measurement reduced the right-of-
use asset and related lease liability on the consolidated balance sheet, but had an immaterial impact on the income statement.
For lease agreements entered into or reassessed after the adoption of ASC 842, the Company has elected the practical expedient
to account for the lease and non-lease components as a single lease component. Therefore, for those leases, the lease payments used to
measure the lease liability include all of the fixed consideration in the contract.
Variable lease payments associated with the Company’s leases are recognized upon occurrence of the event, activity, or
circumstance in the lease agreement on which those payments are assessed.
61
Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet. The Company recognizes
lease expense for these leases on a straight-line basis over the lease term.
The components of lease expenses are as follows:
Operating lease expense
Finance lease expense
Short-term lease expense
Variable lease expense
Total lease expenses
March 31, 2022
$
March 31, 2021
$
13,768,000
98,000
13,000
495,000
14,374,000
$
$
15,591,000
77,000
174,000
328,000
16,170,000
March 31, 2020
$ 14,992,000
—
323,000
124,000
$ 15,439,000
The following table presents assets and liabilities recorded on the Company’s consolidated balance sheets related to its operating
leases:
Right-of-use asset, net
Short-term lease liability
Long-term lease liability
Total lease liabilities
Weighted average remaining lease term
Weighted average finance lease term
Weighted average discount rate
March 31, 2022
$
$
35,020,000
13,348,000
29,792,000
43,140,000
4.32 years
3.25 years
$
March 31, 2021
$
$
45,324,000
12,765,000
41,898,000
54,663,000
5.42 years
4.25 years
$
2.6 %
3.9 %
Supplemental cash flow information related to operating leases for fiscal years ended March 31, 2022 and 2021 were as follows:
Cash paid for amounts included in the measurement
of operating lease liabilities
Operating lease liabilities arising from obtaining ROU assets
Finance lease liabilities arising from obtaining ROU assets
Reductions to ROU assets resulting from reductions to
operating lease liabilities
$
$
$
$
15,001,000
54,311,000
358,000
$
$
$
15,218,000
59,145,000
358,000
1,550,000
$
36,145,000
March 31, 2022
March 31, 2021
As of March 31, 2022, maturities of operating and financing lease liabilities for each of the next five years and thereafter are as
follows:
2023
2024
2025
2026
2027
Thereafter
Total lease payments
Less interest
Total lease liabilities
$ 14,165,000
9,658,000
7,430,000
5,253,000
3,629,000
5,861,000
45,996,000
(2,856,000 )
$ 43,140,000
As of March 31, 2022, the Company has approximately $5.7 million of additional operating lease commitments that have not yet
commenced. These leases commence in 2022 and have lease terms between 2 years and 5 years.
62
Note 10 — Contingencies and Legal Proceedings
The Company is involved in litigation arising in the ordinary course of business. Management believes that resolution of these
matters will not result in any payment that, in the aggregate, would be material to the consolidated financial position or results of
operations of the Company.
Note 11 — Retirement Savings Plan
The Company maintains a retirement savings plan for its employees, which is a qualified plan under Section 401(k) of the Internal
Revenue Code. Full-time employees that meet certain requirements are eligible to participate in the plan. Employer contributions are
made annually, primarily at the discretion of the Company’s Board of Directors. Contributions of $1,088,000, $853,000 and $829,000
were charged to operations for the fiscal years ended March 31, 2022, 2021 and 2020, respectively.
Note 12 — Segment Reporting
The Company derives the majority of its revenues from providing patient management and network solutions services to payors
of workers’ compensation benefits, automobile insurance claims and group health insurance benefits. Patient management services
include claims administration, utilization review, medical case management, and vocational rehabilitation. Network solutions services
include fee schedule auditing, hospital bill auditing, coordination of independent medical examinations, diagnostic imaging review
services and preferred provider referral services. The percentages of revenues attributable to patient management and network solutions
services for the fiscal years ended March 31, 2022, 2021 and 2020 are listed below.
Patient management services
Network solutions services
2022
2021
2020
65.6 %
34.4 %
100.0 %
66.7 %
33.3 %
100.0 %
65.3 %
34.7 %
100.0 %
The Company’s management is structured geographically with regional vice presidents who are responsible for all services
provided by the Company in his or her particular region and responsible for the operating results of the Company in multiple states.
These regional vice presidents have area and district managers who are also responsible for all services provided by the Company in
their given area and district.
Under ASC 280-10, two or more operating segments may be aggregated into a single operating segment for financial reporting
purposes if aggregation is consistent with the objective and basic principles, if the segments have similar economic characteristics, and
if the segments are similar in each of the following areas: (i) the nature of products and services, (ii) the nature of the production
processes, (iii) the type or class of customer for their products and services, and (iv) the methods used to distribute their products or
provide their services. The Company believes each of the Company’s regions meet these criteria as they provide similar managed care
services to similar customers using similar methods of production and distribution. All of the Company’s regions perform both patient
management and network solutions services.
Because the Company believes it meets each of the criteria set forth above and each of the Company’s regions has similar
economic characteristics, the Company aggregates its results of operations in one reportable operating segment.
63
Note 13 — Other Intangible Assets
Other intangible assets consisted of the following at March 31, 2022:
Item
Covenant Not to Compete
Customer Relationships
Third Party Administrator Licenses
Total
Life
5 years
18-20 years
15 years
$
Cost
775,000
7,922,000
204,000
$ 8,901,000
Fiscal 2022
Amortization
Expense
Accumulated
Amortization at
March 31, 2022
Cost, Net of
Accumulated
Amortization at
March 31, 2022
$
$
—
422,000
13,000
435,000
$
$
775,000
6,258,000
199,000
7,232,000
$
$
—
1,664,000
5,000
1,669,000
Other intangible assets consisted of the following at March 31, 2021:
Item
Covenant Not to Compete
Customer Relationships
Third Party Administrator Licenses
Total
Life
5 years
18-20 years
15 years
$
$
Cost
775,000
7,922,000
204,000
8,901,000
$
$
Fiscal 2021
Amortization
Expense
Accumulated
Amortization at
March 31, 2021
Cost, Net of
Accumulated
Amortization at
March 31, 2021
—
421,000
14,000
435,000
$
$
775,000
5,836,000
186,000
6,797,000
$
$
—
2,086,000
18,000
2,104,000
Amortization expense is expected to be $427,000 in fiscal 2023, $422,000 in fiscal 2024, $384,000 in fiscal 2025, $175,000 in
fiscal 2026, $174,000 in fiscal 2027, and $87,000 thereafter.
Note 14 — Quarterly Results (Unaudited)
The following is a summary of unaudited quarterly results of operations for each of the quarters in the fiscal years ended March 31,
2022 and 2021:
Revenues
Gross Profit
Net Income
Net Income
per Basic
Common
Share
Net Income
per Diluted
Common
Share
Fiscal Year Ended March 31, 2022:
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Fiscal Year Ended March 31, 2021:
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
$
$
$
$
152,620,000
157,743,000
164,508,000
171,359,000
129,600,000
136,028,000
141,506,000
145,510,000
$
$
37,213,000
36,661,000
35,188,000
43,052,000
26,509,000
30,503,000
30,893,000
35,719,000
$
$
16,843,000
16,072,000
13,858,000
19,637,000
8,302,000
11,865,000
11,380,000
14,809,000
$
$
0.94
0.90
0.78
1.11
0.46
0.66
0.64
0.83
0.92
0.88
0.76
1.09
0.46
0.65
0.63
0.81
64
DESCRIPTION OF SECURITIES
EXHIBIT 4.1
The following description of capital stock of CorVel Corporation (the “company,” “we,” “us” and “our”)
summarizes certain provisions of our amended and restated certificate of incorporation and our amended and restated
bylaws. The description is intended as a summary, and is qualified in its entirety by reference to our amended and
restated certificate of incorporation and our amended and restated bylaws, copies of which have been filed as exhibits
incorporated by reference to this Annual Report on Form 10-K.
Our certificate of incorporation authorizes us to issue 120,000,000 shares of Common Stock, par value $0.0001
per share, and 1,000,000 shares of Preferred Stock, par value $0.0001 per share, of which 200,000 shares have been
designated as Series A Junior Participating Preferred Stock. As of March 31, 2022, there were 17,569,087 shares of
Common Stock issued and outstanding. Holders of shares of Common Stock are entitled to one vote per share on all
matters to be voted on by stockholders. Holders of Common Stock are entitled to receive ratably such dividends as
may be declared by our Board of Directors in its discretion from funds legally available therefor. In the event of our
liquidation, dissolution or winding up, holders of Common Stock are entitled to share ratably in all assets remaining
after payment of liabilities and the payment of any liquidation preferences on any preferred stock. Holders of Common
Stock have no preemptive rights and have no conversion or other subscription rights. There are no redemption or
sinking fund provisions applicable to the Common Stock. Our certificate of incorporation provides that Delaware is
the sole and exclusive forum for certain legal actions and that the federal district courts of the United States of America
are the sole and exclusive forum for any action arising under the Securities Act of 1933. These exclusive forum
provisions may have the effect of limiting a stockholder’s ability to bring a claim in a judicial forum that it finds
favorable for disputes with us or our directors, officers, employees, or agents and could increase the cost to bring
claims, which may discourage such lawsuits against us and such persons.
Under our Restated Omnibus Incentive Plan (formerly the Restated 1988 Executive Stock Option Plan) (“the
Plan”) as in effect at March 31, 2022, options exercisable for up to 20,615,000 shares of our Common Stock may be
granted over the life of the Plan to key employees, non-employee directors, and consultants at exercise prices not less
than the fair market value of the Common Stock on the date of grant. The exercise price is subject to proportional
adjustment for stock splits and the like. Options granted under the Plan are non-statutory stock options and generally
vest 25% one year from the date of grant, with the remaining 75% vesting ratably each month for the next 36 months.
The options granted to employees and our Board of Directors expire at the end of five years and ten years from date
of grant, respectively. As of March 31, 2022, there were 17,569,087 options outstanding.
On February 10, 2022, the Second Amended and Restated Preferred Shares Rights Agreement, dated as of
November 17, 2008, by and between the Company and Computershare Trust Company, N.A., as amended (the
“Shareholder Rights Plan”), and all preferred stock purchase rights distributed to holders of the Company’s common
stock pursuant to the Shareholder Rights Plan, expired by their respective terms. Accordingly, the Shareholder Rights
Plan is of no further force and effect.
Our Board of Directors is authorized by our certificate of incorporation to establish classes or series of preferred
stock and fix the designation, powers, preferences and rights of the shares of each such class or series and the
qualifications, limitations or restrictions thereof without any further vote or action by our stockholders. Any shares of
preferred stock so issued could have priority over our common stock with respect to dividend or liquidation rights.
Any future issuance of preferred stock may have the effect of delaying, deferring or preventing a change in our control
without further action by our stockholders and may adversely affect the voting and other rights of the holders of our
common stock. The issuance of shares of preferred stock, or the issuance of rights to purchase such shares, could be
used to discourage an unsolicited acquisition proposal. For instance, the issuance of a series of preferred stock might
impede a business combination by including class voting rights that would enable a holder to block such a transaction.
In addition, under certain circumstances, the issuance of preferred stock could adversely affect the voting power of
holders of our common stock. Although our Board of Directors is required to make any determination to issue
preferred stock based on its judgment as to the best interests of our stockholders, our Board of Directors could act in
a manner that would discourage an acquisition attempt or other transaction that some, or a majority, of our stockholders
might believe to be in their best interests or in which such stockholders might receive a premium for their stock over
the then market price of such stock. Our Board of Directors presently does not intend to seek stockholder approval
prior to the issuance of currently authorized stock, unless otherwise required by law or applicable stock exchange
rules.
Our certificate of incorporation and bylaws contain a number of provisions that could make an acquisition of us
by means of a tender or exchange offer, a proxy contest or otherwise more difficult. Our certificate of incorporation
provides that any amendment to our bylaws that would increase or reduce the authorized number of directors, or that
would change the requirements for calling meetings of our Board of Directors, must be unanimously approved by our
Board of Directors, and any amendment to our bylaws approved by stockholders must be approved by no less than
the affirmative vote of 66 2/3% of our outstanding shares entitled to vote. Our certificate of incorporation also provides
that our directors may only be removed by the affirmative vote of holders of at least a majority of the shares entitled
to vote. Our bylaws provide that special meetings of stockholders may only be called by our Chairman of the Board,
Chief Executive Officer, Secretary or a majority of our Board of Directors.
We are subject to the provisions of Section 203 of the Delaware General Corporation Law regulating corporate
takeovers. Section 203 of the Delaware General Corporation Law (the “DGCL”) provides, in general, that a
stockholder acquiring more than 15% of the voting power of a corporation subject to the statute (referred to in this
prospectus as an Interested Stockholder) but less than 85% of the voting power of such corporation may not engage
in certain business combinations (as defined in Section 203 of the DGCL) with the corporation for a period of three
years subsequent to the date on which the stockholder became an Interested Stockholder unless (i) prior to such time
the corporation’s board of directors approved either the business combination or the transaction in which the
stockholder became an Interested Stockholder or (ii) the business combination is approved by the corporation’s board
of directors and authorized by a vote of at least 66 2⁄3% of the voting power of the corporation not owned by the
Interested Stockholder.
The provisions of Delaware law, our certificate of incorporation and our bylaws could have the effect of
discouraging others from attempting hostile takeovers. These provisions may also have the effect of preventing
changes in our management. It is possible that these provisions could make it more difficult to accomplish transactions
that stockholders may otherwise deem to be in their best interests.
Name of Subsidiary
State of Incorporation
Relationship to Registrant
SUBSIDIARIES OF THE REGISTRANT
EXHIBIT 21.1
CorVel Health Care Organization
California
CorVel Healthcare Corporation
California
CorVel Enterprise Comp, Inc. of New York New York
CorVel Enterprise Comp, Inc.
CorVel IME Corporation
CareIQ, Inc.
CorVel Ohio MCO, Inc.
CorVel NY IPA, Inc.
Delaware
New York
Minnesota
Ohio
New York
CorVel Rehabilitation Services, Inc.
Minnesota
Symbeo, Inc.
Delaware
CorVel Enterprise Comp, Inc. of Canada
Delaware
CERiS
Texas
wholly-owned subsidiary
wholly-owned subsidiary
wholly-owned subsidiary
wholly-owned subsidiary
wholly-owned subsidiary
wholly-owned subsidiary
wholly-owned subsidiary
wholly-owned subsidiary
wholly-owned subsidiary
wholly-owned subsidiary
wholly-owned subsidiary
wholly-owned subsidiary
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statements on Form S-8 (File Nos. 333-248244, 333-226825, 333-
144402, 333-58455, 333-16379, 333-107428, 333-128739, 333-94440, 333-53684, 333-48186, 333-42554, and 333-42424) and in the
Registration Statement on Form S-3 (File No. 333-209388) of CorVel Corporation (the “Company”) of our report dated May 27, 2022,
relating to the Company’s consolidated financial statements, financial statement schedule and internal controls included in the
Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2022.
/s/ HASKELL & WHITE LLP
EXHIBIT 23.1
Irvine, California
May 27, 2022
Exhibit 31.1
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Michael G. Combs, certify that:
1.
I have reviewed this annual report on Form 10-K of CorVel Corporation;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in
this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report
based on such evaluation; and
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the
equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: May 27, 2022
/s/ Michael G. Combs
Michael G. Combs
Chief Executive Officer and President
(Principal Executive Officer)
Exhibit 31.2
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Brandon T. O’Brien, certify that:
1.
I have reviewed this annual report on Form 10-K of CorVel Corporation;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in
this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report
based on such evaluation; and
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the
equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: May 27, 2022
/s/ Brandon T. O’Brien
Brandon T. O’Brien
Chief Financial Officer
(Principal Financial Officer)
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
UNDER SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the Annual Report of CorVel Corporation (the “Registrant”) on Form 10-K for the fiscal year ended March 31,
2022, as filed with the Securities and Exchange Commission on the date hereof (the “Annual Report”), I, Michael G. Combs, Chief
Executive Officer and President of the Registrant, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1) the Annual Report fully complies with the requirements of Section 13(a) or 15 (d) of the Securities Exchange Act of 1934;
and
(2) the information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of
operations of the Registrant.
/s/ Michael G. Combs
Michael G. Combs
Chief Executive Officer and President
(Principal Executive Officer)
May 27, 2022
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise
adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has
been provided to CorVel Corporation and will be retained by CorVel Corporation and furnished to the Securities and Exchange
Commission or its staff upon request.
This certification accompanies this Annual Report and is being furnished pursuant to Item 601(b)(32) of Regulation S-K
promulgated under the Securities Act of 1933, as amended (the “Securities Act”) and the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), and pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. This certification shall not, except to the extent
required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Registrant for purposes of Section 18 of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, or incorporated by reference into any
filing under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific incorporation by reference in such
a filing.
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
UNDER SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
In connection with the Annual Report of CorVel Corporation (the “Registrant”) on Form 10-K for the fiscal year ended March 31,
2022, as filed with the Securities and Exchange Commission on the date hereof (the “Annual Report”), I, Brandon T. O’Brien, Chief
Financial Officer of the Registrant, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002, that to my knowledge:
(1) the Annual Report fully complies with the requirements of Section 13(a) or 15 (d) of the Securities Exchange Act of 1934;
and
(2) the information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of
operations of the Registrant.
/s/ Brandon T. O’Brien
Brandon T. O’Brien
Chief Financial Officer
(Principal Financial Officer)
May 27, 2022
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise
adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has
been provided to CorVel Corporation and will be retained by CorVel Corporation and furnished to the Securities and Exchange
Commission or its staff upon request.
This certification accompanies this Annual Report and is being furnished pursuant to Item 601(b)(32) of Regulation S-K
promulgated under the Securities Act of 1933, as amended (the “Securities Act”) and the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), and pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. This certification shall not, except to the extent
required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Registrant for purposes of Section 18 of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, or incorporated by reference into any
filing under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific incorporation by reference in such
a filing.
Corporate Address
Independent Auditors
Investor Relations
CorVel Corporation
5128 Apache Plume Road
Suite 400
Fort Worth, Texas 76109
Telephone: 888.7.CORVEL
Haskell & White LLP
Irvine, California
Stock Symbol
CorVel Corporation
1920 Main Street
Suite 900
Irvine, California 92614
Transfer Agent and Registrar
Computershare Investor Services
Canton, Massachusetts
Counsel
The common stock of CorVel Corporation
Telephone: 888.7.CORVEL
is traded on the NASDAQ Global Select
Market under the stock symbol CRVL.
corvel.com/investors/annual-reports
Form 10K
CorVel Corporation Annual Report on Form
10K filed with the Securities and Exchange
Stradling Yocca Carlson & Rauth, P.C.
Commission may be obtained without
Newport Beach, California
charge by contacting Investor Relations.