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Date

Tuesday, Feb. 3, 2026 at 11:30 a.m. ET

Call participants

  • Chief Executive Officer — Michael Combs
  • Chief Financial Officer — Brian Nichols

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Takeaways

  • Revenue -- $236 million for the quarter, representing a 3% increase from $228 million.
  • EPS -- $0.47 for the quarter, a 2% rise compared to $0.46, with all figures adjusted for the 3-for-1 stock split of December 2024.
  • Net Income -- $24.1 million for the quarter, up from $23.8 million, reflecting operational growth during the period.
  • Operating Margin -- Rose slightly from 23.2% to 23.3% versus the prior comparable quarter.
  • General & Administrative Expense Allocation -- Decreased to 9.6% from 9.7%, indicating improved cost management.
  • Effective Tax Rate -- Increased and was cited as tempering the period's earnings results.
  • Share Repurchases -- 185,559 shares repurchased for $13.4 million during the quarter, funded entirely from operating cash flow.
  • Total Shares Repurchased (Inception-to-Date) -- 114.9 million shares bought at a cumulative cost of $868 million, representing 69% of total shares outstanding at an average price of $7.55 per share.
  • Cash Balance -- Quarter-end cash position reported at $230 million.
  • Year-to-Date Free Cash Flow -- $90 million, providing further financial flexibility.
  • Capital Expenditures (CapEx) -- $36 million year-to-date, compared to $24 million to $27 million in the previous year, due to increased investment in proprietary software development and software licenses.
  • Days Sales Outstanding -- 39 days, showing a three-day improvement over the previous period.
  • Net Revenue Retention -- Reported at 100% across the business for the period.
  • New Business Close Rate -- 44% for new business opportunities, accompanied by incremental growth with current partners.
  • AI and Automation Impact -- Management stated that ongoing initiatives are generating meaningful operational efficiency gains and supporting margin expansion.
  • Technology-Centric Acquisition -- Closed in June; integration into health payment integrity operations has delivered efficiency gains and enhanced capabilities.
  • Market Trends -- Noted lower overall work-related injury volumes and rising injury severity, with medical costs increasing 5% to 12% in multiple states per industry sources cited on the call.
  • CERES Division Positioning -- Growing demand for advanced payment integrity services as regulatory scrutiny and payer financial pressures increase; early integration benefits from the recent acquisition reported ahead of plan.

Summary

CorVel (CRVL 22.75%) reported modest top-line and bottom-line growth, supported by stable net income, disciplined expense management, and operational efficiencies realized through AI and automation. The period’s results were partially affected by a higher effective tax rate and increased capital spending, primarily tied to accelerated investment in proprietary software and integration of a technology-focused acquisition. Strategic metrics such as a 100% net revenue retention rate and continued momentum in partner expansion indicate resilience in the face of market trends—declining claims volumes, increasing severity, and elevated medical cost inflation. Enhanced traction in health payment integrity, especially within the CERES division, underscores CorVel's growing role as an advanced technology and compliance-driven partner in a more complex regulatory landscape.

  • Management explicitly stated that quarter results were "modest relative to expectations," attributing this primarily to short-term operational factors and tax normalization rather than a shift in business fundamentals.
  • The commercial health business reported increased claim volumes surpassing processing capacity, with technology leveraged to focus resources on highest-value opportunities and returns.
  • AI deployments were directly linked to reducing service delivery costs, productivity gains in clinical operations, and the introduction of decision support for adjusters and clinicians.
  • Michael Combs reported heightened interest from "large industry players seeking differentiated data-driven capabilities," reflecting strategic advancements from the recent acquisition and accelerated technology roadmap.

Industry glossary

  • CERES: CorVel's division specializing in healthcare payment integrity, fraud, waste, and abuse detection, delivering AI-driven solutions to payers for enhanced claims accuracy and cost containment.
  • Payment integrity: Industry term describing processes and tools used to identify, prevent, and recover improper healthcare payments.

Full Conference Call Transcript

Michael Combs: Good morning, and thank you for joining us to review CorVel's December results. I am very pleased to have Brian Nichols, CorVel's Chief Financial Officer, on the call today. Thank you, Michael. Good morning, everyone. A pleasure to join the call this morning. Today, we are going to review operational performance, including 2025 highlights, a deeper dive into the value AI is bringing to our business model, key growth drivers, and the market trends that are shaping our business. Brian, let's start with an overview of the quarter's financial results. Absolutely, Michael. CorVel's revenue for the nine months ending 12/31/2025, was $710 million, a 7% increase from $664 million at the same period of the previous fiscal year.

Fiscal year-to-date earnings per share were $1.53, up 16% compared to $1.32 during the nine months ending 12/31/2024. The December 2025 quarter ended with revenues at $236 million, 3% above the $228 million achieved in December. Earnings per share for the December 2025 quarter were $0.47, an increase of 2% over the same quarter of the prior year's EPS at $0.46. I would like to remind our listeners that the earnings per share results from the quarter in annual comparisons have been adjusted to account for the three-for-one stock split reported in December 2024. In comparing the 2024 and 2025 December quarters, the allocation of general and administrative expenses decreased from 9.7% to 9.6%.

And margin had a commensurate improvement of 23.2% to 23.3%. However, an increase to the effective tax rate did temper earnings results. Overall, CorVel's operations netted an income of $24.1 million in December, which was an increase from $23.8 million in December 2024. Throughout the fiscal year, products highlighting the growth among network solutions and patient management services were independent medical evaluations, serious ancillary care solutions, medical bill review, and claims management. In addition to financial results, I would also like to discuss noteworthy trends in the workers' compensation market. These trends include lower volume of work-related injuries, increasing injury severity, rising medical costs, and shifts within the labor market.

The US Department of Labor recently reported a small decline in total work-related injuries from 2023 to 2024. While this report reflects results from more than a year ago, the trend is consistent with what has been occurring over the past decade and was magnified at the onset of the global pandemic in 2020. It is no secret that a reduction in work-related injuries equates to a lower volume of workers' compensation claims. CorVel certainly recognizes this trend. However, we also recognize that past declining volume of work-related injuries alone may not gauge the viability and value of the managed workers' compensation market. And other changes throughout the industry may be pointing toward growth opportunities.

While work-related injuries have been moving in a decreasing pattern, the inverse response is occurring for injury severity and medical cost per claim. According to the National Council on Compensation Insurance, average medical and lost time claim severity increased by a percent in 2024, resulting in elevated medical costs and extended duration to injury claims. Further, the report indicated five consecutive years with an increase. The cost of medical compensation claims is also being impacted by medical inflation. The Workers' Compensation Research Institute noted rising medical costs within a range of 5% to 12% among multiple states.

The inflationary change can be attributed to increased billed charges for medical providers and allowance of higher payments among multiple states' medical fee schedules. Labor market shifts, such as increasing job openings among occupations requiring moderate to heavy levels of physical demand, also be important to consider when valuing the managed workers' compensation industry. According to the US Bureau of Labor Statistics, new job openings are expected to maintain or exceed current growth averages among several physically demanding occupations, including transportation, construction, maintenance, food service, childcare, recreation, hospitality, and healthcare. These occupations are likely to be more susceptible to work-related injuries than those with sedentary or less physically demanding job functions.

Collectively, the trends I have shared support the argument that the workers' compensation market is a growing industry for organizations equipped to address its challenges. CorVel's focus on product innovation, savings through clinical outcomes, and effective management allow us to not only adapt to these industry shifts but also leverage them for continued market share gains. And with that overview of our financial performance, I'll now turn the call over to our CEO, Michael Combs, to discuss operational progress and strategic priorities. Thank you, Brian.

December results were modest relative to expectations, primarily reflecting short-term operational factors rather than a change in fundamentals, including, as Brian mentioned, the normalization of our effective tax rate after an extended period of lower-than-average levels. I want to transition to highlights from 2025. The net revenue retention for business was 100%. We had a 44% close rate on new business opportunities, and we experienced strong incremental growth with existing partners. On the AI front, increased traction with our AI initiatives and following our thematically, the areas of focus. Augmenting the development process, increasing operational efficiency, elevating the work of our team members, and enhancing outcomes achieved for our partners.

In addition, there was a technology-centric acquisition that we closed in June. While relatively small, we are realizing meaningful increases in efficiency and effectiveness in the health payment integrity services for the commercial health segment through the integration of related logic and functionality through the acquisition. The realized ROI and impact are consistent with optimistic expectations. Continuing on AI and how we are harnessing AI and automation opportunities across our business, this is a little more detail in specific projects. As lower-value activities are increasingly automated, we expect meaningful reduction in service delivery costs while simultaneously improving client outcomes. Although pricing pressure is likely over time, we expect cost efficiencies to more than offset any associated fee adjustments.

The near-term implications of AI on our business are becoming clearer in focus. They are broad, spanning our products, services, and software development processes. Following are a few specific examples. In the commercial health business, we routinely receive claim volumes that surpass processing capacity. While some claims present limited savings potential, others offer significantly higher value for our partners. Because each claim we select includes a cost regardless of its ultimate savings, disciplined selection is critical. We are increasingly leveraging technology to prioritize those claims where we can deliver the greatest impact while also generating the strongest return on investment for CorVel.

In claims management, transitions and adjuster assignments often create inefficiencies as new adjusters take on large portfolios of open claims. With roughly 125 active cases, achieving timely visibility into risk, complexity, and required actions for assigned claims can be challenging. We are deploying technology to augment adjuster decision-making, providing rapid understanding of claim nuances and clear prioritization of those tasks requiring immediate attention. Also in claims management, there are many stakeholders, partners, healthcare providers, clinical team members, all requiring information. We are leveraging technology to provide a seamless interface that allows stakeholders to self-service, obtaining real-time information for many even complex inquiries. In case management, AI is enhancing the efficiency and scalability of our team's operations.

Using AI to automate documentation, data synthesis, and routine workflows will allow clinicians to manage higher caseloads and focus on complex high-impact interventions. Financially, this supports margin expansion through productivity gains while maintaining an outcome-driven service model. Strategically, AI strengthens our platform by embedding decision support into workflows that are difficult to replicate without CorVel's data, clinical expertise, and regulatory experience. And finally, AI is transforming the software development process from ideation to deployment, enabling us to accomplish more, more quickly. We have a very compelling software development roadmap for 2026. This is certainly not a comprehensive list, but a few representative examples of areas of focus.

In the property and casualty business, by intentionally applying technology across our claims and case management systems, introducing intelligence earlier in the process, reducing administrative friction, modernizing data exchange, and leveraging automation and AI, we deliver a fundamentally simpler, more efficient, and more accurate experience. As buyers prioritize efficiency, transparency, outcomes, and cost, CorVel is well-positioned to generate differentiated results while scaling in 2026 and beyond. On the healthcare payment integrity front, this is our CERES division. The market continues to evolve as medical costs rise while reimbursement rates remain flat, intensifying pressure on payers to control costs.

In response, health plans are increasingly turning to technology, particularly AI and automation, to improve accuracy, identifying errors earlier in the claims life cycle, and strengthening financial performance. At the same time, ongoing vendor consolidation is prompting payers to reevaluate their partnerships. With a growing preference for proven scalable vendors that can consistently deliver measurable results, operational stability, and long-term value, CERES combines deeper clinical expertise and efficient proven workflows to identify issues before claims are paid. We continue to advance the use of AI, machine learning, and predictive analytics to deliver solutions that are more accurate, scalable, and impactful, driving increased business and value for our partners. This momentum is reflected in the operating results.

We have strengthened our market position, created opportunities to expand across additional products and lines of business, and seen heightened interest in CERES from large industry players seeking differentiated data-driven capabilities. We also accelerated our technology roadmap through the strategic acquisition mentioned earlier on the call. Integration is progressing ahead of plan, and we are already seeing the benefits from faster innovation and enhanced capabilities. Of note, the US Department of Justice recently released its False Claims Act enforcement statistics, which reported that settlements and judgments reached record levels in 2025, with recoveries exceeding $6.8 billion. Of that, $5.7 billion in total recoveries were in the healthcare sector.

CERES's payment integrity and fraud, waste, and abuse services help partners address this risk by utilizing prepaid services to prevent improper payments before they occur and identifying aberrant billing patterns early, while postpaid services can recoup dollars due to the same issues. These capabilities reduce exposure to false claims and deliver measurable financial impact through avoided or reclaimed overpayments and lower medical cost trends. Taken together, these dynamics underscore the growing importance of proactive technology-enabled payment integrity solutions. CERES is well-positioned to meet this need by combining advanced analytics, clinical rigor, and scalable operations to help partners reduce risk, improve compliance, and make meaningful impact to medical costs.

As regulatory scrutiny intensifies and financial pressure on payers continues, our ability to prevent improper payments before they occur while efficiently recovering dollars post-payment creates sustained value for our partners. With strong operational momentum, an accelerated technology roadmap, and increasing interest from larger industry participants, CERES remains focused on expanding its role as a trusted, differentiated partner in an increasingly complex healthcare landscape. Brian, would you provide the additional financial metrics for the quarter? During the quarter, CorVel repurchased 185,559 shares at a cost of $13.4 million. From inception to date, the company has repurchased 114.9 million shares for an aggregated total of $868 million.

Through this program, the company has now repurchased 69% of the total shares outstanding at an average price of $7.55 per share. The repurchasing of shares continues to be funded from the company's strong operating cash flow. CorVel's days sales outstanding was 39 days in the December 2025 quarter, which is an improvement of three days compared to the same period a year ago. The quarter-ending cash balance was $230 million. Fiscal year-to-date free cash flow is $90 million, with $36 million having been used for capital expenditures. In the same period of the previous fiscal year, capital expenditures were $24 million to $27 million.

This change in CapEx is a result of increased spending on our proprietary software development and software licenses. CorVel's financial strategy will remain committed to responsible management of financial risk. Conversely, many competing organizations throughout the market spaces in which we operate are faced with the costs and challenges of considerable debt obligations and consequently may lack the financial agility needed for service integration and innovation. We believe that our strong and debt-free balance sheet uniquely positions CorVel for continued strategic product expansion, technological advancement, and acquisition opportunities. Thank you for your time this morning. I will now invite the operator to open this session for questions.

Operator: Thank you. On the web platform and click enter to submit. We will pause for a brief moment to see if any come in. We do have a web question from Adam. Can you provide more detail on the deceleration of year-over-year revenue growth?

Brandon O'Brien: For each segment. There has been a long track record of quarter-over-quarter revenue growth that ended this quarter. What drove that?

Michael Combs: And we are live. Yes? Yeah. I would say we look at the fundamentals on which the organization was structured. And revenue growth over our history, certainly, if you look at the ten years, it is not a straight line necessarily. So we believe that the focus we have with the investment in technology, our reputation in the business, and the trajectory, the momentum we have indicates that the historical pattern will continue. So we are not looking at a small cycle change, if you will, as an indication of future results.

Brandon O'Brien: Have an online firm Jesse, can you please provide more context around segment quarter three?

Michael Combs: CorVel operates within a single segment. And the services that we provide within that segment are patient management and network solutions. As a policy, we do not break up the various products and report those separately. Rather, our entire company and all of our products operate through one single segment.

Operator: There are no further questions at this time. I would like to hand the conference back over to management for closing remarks.

Michael Combs: Thank you for joining the call today.

Operator: Thank you. This will conclude today's conference. You may disconnect at this time, and thank you for your participation.