CORVEL CORP 10-K

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, 2025, 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 24 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, including our principal executive officer and principal financial officer, concluded that our internal control over financial reporting was effective as of March 31, 2025, 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. 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, 2025, 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, 2025, 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. 25 PART III Item 10. Directors, Executive Of ficers and Corporate Governance. The information required by this Item will be included under the captions "Election of Directors — Nominee Information", "Section 16(a) Beneficial Ownership Reporting Compliance," "Executive Officers," "Corporate Governance—Standing Committees and Attendance at Board and Committee Meetings," and "Corporate Governance — Corporate Governance Guidelines, Committee Charters and Code of Business Conduct" in the Company's Definitive Proxy Statement on Schedule 14A for its 2025 Annual Meeting of Shareholders (the "2025 Annual Meeting") to be filed within 120 days after March 31, 2025 (the "Proxy Statement"), and is incorporated herein by reference. Insider Trading Policies and Procedures The Company has an insider trading policy and procedures governing the purchase, sale and/or other dispositions of the Company’s securities that applies to all directors, officers, employees and certain other persons. It is also the Company’s policy to take appropriate steps to comply with applicable federal and state securities laws and regulations, as well as applicable stock exchange listing standards, when the Company engages in transactions in the Company’s securities. The Company believes that its insider trading policy and procedures are reasonably designed to promote compliance with insider trading laws, rules and regulations, and listing standards applicable to the Company. A copy of the Company’s insider trading policy is filed as Exhibit 19.1 to this annual report. Code of Ethics 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. Executi ve Compensation. The information required by this Item will be included under the captions "Compensation Discussion and Analysis," "Summary Compensation Table," "Employment and Change in Control Arrangements," "Corporate Governance—Director Compensation," "Report of the Compensation Committee of the Board of Directors on Executive Compensation," and "Compensation Committee Interlocks and Insider Participation" in the Company’s Proxy Statement, and is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Ow ners and Management and Related Stockholder Matters. The information required by this Item will be included under the captions “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” and “Equity Compensation Plan Information” in the Company’s Proxy Statement, and is incorporated herein by reference. Item 13. Certain Relationships and Related P arty Transactions, and Director Independence. The information required by this Item will be included under the captions “Certain Relationships and Related-Person Transactions,” “Election of Directors,” “Information Regarding Director Nominees,” and “Corporate Governance, Board Composition and Board Committees” in the Company’s Proxy Statement, and is incorporated herein by reference. Item 14. Principal Accou ntant Fees and Services. The information required by this Item will be included 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” in the Company’s Proxy Statement, and is incorporated herein by reference. 26 PART IV Item 15. Exhibit and Financial State ment Schedules. (a)(1) Financial Statements: The Company’s financial statements appear in a separate section of this annual report, beginning on the pages referenced below: Page Report of Independent Registered Public Accounting Firm (PCAOB ID: 200 ) 42 Consolidated Balance Sheets as of March 31, 2025 and 2024 45 Consolidated Statements of Income for the Fiscal Years Ended March 31, 2025, 2024 and 2023 46 Consolidated Statements of Stockholders’ Equity for the Fiscal Years Ended March 31, 2025, 2024 and 2023 47 Consolidated Statements of Cash Flows for the Fiscal Years Ended March 31, 2025, 2024 and 2023 48 Notes to Consolidated Financial Statements 49 (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 Balance at Beginning of Year Additions Charged to Cost and Expenses Deductions Balance at End of Year Allowance for expected credit losses: Fiscal Year Ended March 31, 2025: $ 4,245,000 $ 3,530,000 $ ( 86,000 ) $ 7,689,000 Fiscal Year Ended March 31, 2024: 2,823,000 1,828,000 ( 406,000 ) 4,245,000 Fiscal Year Ended March 31, 2023: 2,562,000 1,216,000 ( 955,000 ) 2,823,000 27 (a)(3) E xhibits: EXHIBITS Exhibit No. Title Method of Filing 3.1 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). 3.2 Certificate of Amendment of Fourth Amended and Restated Certificate of Incorporation of CorVel Corporation Incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on December 26, 2024. 3.2 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* 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). 10.2* 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. 10.3* 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). 10.4 Fidelity Master Plan for Savings and Investment, and amendments (P) Paper filing 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. 10.5*† 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). 10.6*† 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). 10.7*† 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). 28 10.8*† 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). 10.9*† 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). 10.10*† 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). 10.11*† 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). 10.12*† 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). 10.13*† 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). 10.14*† 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). 19.1 Insider Trading Policy Incorporated herein by reference to Exhibit 19.1 to the Company’s Annual Report on Form 10-K for the period ended March 31, 2024 filed on May 24, 2024 (File No. 000-19291). 21.1 Subsidiaries of the Company. Filed herewith. 23.1 Consent of Independent Registered Public Accounting Firm, Haskell & White LLP. Filed herewith. 31.1 Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith. 31.2 Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith. 32.1 Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith. 32.2 Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith. 97.1 Executive Clawback Policy Incorporated herein by reference to Exhibit 97.1 to the Company’s Annual Report on Form 10-K for the period ended March 31, 2024 filed on May 24, 2024 (File No. 000-19291). 101.INS Inline XBRL Instance Document Furnished herewith. 29 101.SCH Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents Furnished herewith. 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) Furnished herewith. * - 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. 30 SIGNAT URES 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. CorVel Corporation By: /s/ Michael G. Combs Michael G. Combs Chairman of the Board, Chief Executive Officer, and President (Principal Executive Officer) Date: May 23, 2025 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 Date /s/ Michael G. Combs Chairman of the Board, Chief Executive Officer, and President May 23, 2025 Michael G. Combs (Principal Executive Officer) /s/ Brandon T. O’Brien Chief Financial Officer May 23, 2025 Brandon T. O’Brien (Principal Financial Officer) /s/ Jennifer L. Yoss Vice President, Accounting May 23, 2025 Jennifer L. Yoss (Principal Accounting Officer) /s/ A lan R. Hoops Director May 23, 2025 Alan R. Hoops /s/ Steven J. Hamerslag Director May 23, 2025 Steven J. Hamerslag /s/ R. Judd Jessup Director May 23, 2025 R. Judd Jessup /s/ Joanna C. Burkey Director May 23, 2025 Joanna C. Burkey /s/ J effrey J. Michael Director May 23, 2025 Jeffrey J. Michael 31 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, (the "Securities Act") 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, 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; 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 potential 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 The Company 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 include 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. 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. 32 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 2025 Annual Results The Company had revenues of $896 million in fiscal 2025, an increase of $100 million, or 13%, compared to $795 million for fiscal 2024. This increase was due to an increase in revenues from both patient management and network solutions activity primarily with new customers. During fiscal 2025, the Company’s gross profit increased to $210 million from $172 million in fiscal 2024, an increase of $38 million, or 22%. This increase was primarily due to the increase of 13% in revenue mentioned above. This was offset by an increase in salaries by 9% resulting from increased average headcount of 6% in field operations. During fiscal 2025, the Company’s general and administrative expenses increased to $88.9 million from $76.6 million in fiscal 2024, an increase of $12.3 million, or 16%. In fiscal 2024, the Company had a one-time decrease in general and administrative expenses due to a one-time insurance recovery settlement from a lawsuit in 2011. The Company expects general and administrative expenses to grow at the same rate as revenues. During fiscal 2025, the Company’s net income before tax increased to $120.8 million from $95.1 million in fiscal 2024, an increase of $25.7 million, or 27%. The increase was primarily due to an increase in revenues and pretax margin. During fiscal 2025, the Company’s income tax expense increased to $25.7 million from $18.8 million in fiscal 2024, an increase of $6.8 million, or 36%. The increase was due to an increase in income before income taxes. The Company’s effective income tax rate was 21% for fiscal year 2025 and 20% for fiscal year 2024. Diluted weighted average shares were 52.0 million shares in fiscal 2025 and fiscal 2024, with a decrease of 47,000 shares, or 0.1%. This decrease was primarily due to the repurchase of 377,154 shares of common stock in fiscal 2025 under the Company’s stock repurchase program. Since commencing this program in the fall of 1996, the Company has repurchased 114,476,691 shares of its common stock through March 31, 2025, at a cost of $832 million. These repurchases were funded primarily from the Company’s operating cash flows. Diluted earnings per share increased to $1.83 per share in fiscal 2025 from $1.47 per share in fiscal 2024, an increase of $0.36 per share, or 24%. The increase in diluted earnings per share was primarily due to an increase in net income. During fiscal 2025, the Company effected a three-for-one forward stock split of its common stock. All prior period share, equity award and per share amounts and calculations in this annual report and in the consolidated financial statements contained in this annual report have been retroactively adjusted to reflect the stock split. 33 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, 2025, 2024 and 2023 are listed below. 2025 2024 2023 Patient management services 64.9 % 66.6 % 66.6 % Network solutions services 35.1 % 33.4 % 33.4 % 100.0 % 100.0 % 100.0 % As noted in the table above, revenue from patient management services decreased from fiscal 2023 to fiscal 2025 and network solutions services grew from fiscal 2023 to fiscal 2025. This is primarily due to the Company’s increased focus in enhanced bill review programs services, which are included within network solutions services. The following table shows the consolidated statements of income for the fiscal years ended March 31, 2025, 2024 and 2023, 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 2025 Fiscal 2024 Fiscal 2023 Amount Change from Fiscal 2024 to 2025 Amount Change from Fiscal 2023 to 2024 Percent Change from Fiscal 2024 to 2025 Percent Change from Fiscal 2023 to 2024 Revenues $ 895,589 $ 795,311 $ 718,562 $ 100,278 $ 76,749 12.6 % 10.7 % Cost of revenues 685,861 623,618 560,303 62,243 63,315 10.0 11.3 Gross profit 209,728 171,693 158,259 38,035 13,434 22.2 8.5 General and administrative 88,904 76,592 73,705 12,312 2,887 16.1 3.9 Income before income taxes 120,824 95,101 84,554 25,723 10,547 27.0 12.5 Income tax provision 25,659 18,849 18,189 6,810 660 36.1 3.6 Net income $ 95,165 $ 76,252 $ 66,365 $ 18,913 $ 9,887 24.8 % 14.9 % Net income per share: Basic $ 1.85 $ 1.48 $ 1.28 $ 0.37 $ 0.20 25.0 % 15.6 % Diluted $ 1.83 $ 1.47 $ 1.26 $ 0.36 $ 0.21 24.5 % 16.7 % Weighted average shares used in net income per share: Basic 51,379 51,366 51,984 13 (618 ) 0.0 % (1.2 %) Diluted 51,994 52,041 52,776 (47 ) (735 ) (0.1 %) (1.4 %) 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, 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, 2025, 2024 and 2023 are as follows: Income Statement Percentages 2025 2024 2023 Revenues 100.0 % 100.0 % 100.0 % Cost of revenues 76.6 % 78.4 % 78.0 % Gross profit 23.4 % 21.6 % 22.0 % General and administrative 9.9 % 9.6 % 10.3 % Income before income taxes 13.5 % 12.0 % 11.7 % Income tax provision 2.9 % 2.4 % 2.5 % Net income 10.6 % 9.6 % 9.2 % 34 Revenue 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 2025 Compared to Fiscal 2024 Revenues increased to $896 million in fiscal 2025 from $795 million in fiscal 2024, an increase of $100 million, or 13%. Patient management services increased to $581 million from $530 million, an increase from fiscal 2024 of 10%. This increase is primarily due to higher revenue from the Company’s TPA and related services. Total new claims increased by 5% during fiscal 2025 compared to fiscal 2024. Network solutions services revenues increased to $314 million from $265 million, an increase from fiscal 2024 of 19%. This increase is primarily due to increases in enhanced bill review programs services, which resulted in higher revenue per bill. Most of the increase is primarily attributable to the growth with new customers in managed care and enterprise companies and, to a lesser extent, growth with existing customers in enhanced bill review programs services. Fiscal 2024 Compared to Fiscal 2023 Revenues increased to $795 million in fiscal 2024 from $719 million in fiscal 2023, an increase of $77 million, or 11%. Patient management services increased to $530 million from $479 million, an increase of 11%. This increase is primarily due to higher revenue from the Company’s TPA and related services. Total new claims increased by 4% during fiscal 2024 compared to fiscal 2023. Network solutions services revenues increased to $265 million from $240 million, an increase of 11%. 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. 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 2025 and 2024, approximately 33% and 34%, 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. Change in Cost of Revenue Fiscal 2025 Compared to Fiscal 2024 The Company’s cost of revenues increased to $686 million in fiscal 2025 from $624 million in fiscal 2024, an increase of $62 million, or 10%. The increase in cost of revenues was primarily due to the increase in total revenues of 13%. Just over half the Company’s cost of revenue is labor cost. Additionally, there was an increase in salaries of 9% resulting from increased average headcount of 6% in field operations and growth in average annual salary increases due to wage inflation. Headcount increased due to an increase in business volume. Fiscal 2024 Compared to Fiscal 2023 The Company’s cost of revenues increased to $624 million in fiscal 2024 from $560 million in fiscal 2023, an increase of $63 million, or 11%. The increase in cost of revenues was primarily due to the increase in total revenues of 11%. Just over half the Company’s cost of revenue is labor cost. Additionally, there was an increase in salaries of 10% resulting from increased average headcount of 8% in field operations and growth in average annual salary increases due to wage inflation. Headcount increased due to an increase in business volume. 35 General and Administrative Expense During fiscal years 2025, 2024 and 2023, approximately 44%, 51%, and 49%, 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 2025 Compared to Fiscal 2024 General and administrative expenses increased to $88.9 million in fiscal 2025 from $76.6 million in fiscal 2024, an increase of $12.3 million, or 16%. This increase was primarily due to a one-time insurance recovery settlement from a lawsuit in 2011 during fiscal 2024. The Company expects general and administrative expenses to grow at the same rate as revenues. Fiscal 2024 Compared to Fiscal 2023 General and administrative expenses increased to $76.6 million in fiscal 2024 from $73.7 million in fiscal 2023, an increase of $2.9 million, or 4%. This increase was primarily due to an increase in corporate system costs due to an increase of spending in developed software. Income Tax Provision Fiscal 2025 Compared to Fiscal 2024 The Company’s income tax expense increased to $25.7 million for fiscal 2025 from $18.8 million for fiscal 2024, an increase of $6.8 million. Income before income tax provision increased to $121 million in fiscal 2025 from $95 million in fiscal 2024, an increase of $25.7 million. The Company’s effective income tax rate was 21% for fiscal 2025 and 20% for fiscal 2024. The effective tax rate is less than the statutory tax rate primarily due to the impact of stock option exercises for both periods. Fiscal 2024 Compared to Fiscal 2023 The Company’s income tax expense increased to $18.8 million for fiscal 2024 from $18.2 million for fiscal 2023, an increase of $0.7 million. Income before income tax provision increased to $95.1 million in fiscal 2024 from $84.6 million in fiscal 2023, an increase of $10.5 million. The Company’s effective income tax rate was 20% for fiscal 2024 and 22% for fiscal 2023. The effective tax rate is less than the statutory tax rate primarily due to the impact of stock option exercises for both periods. Net Income Fiscal 2025 Compared to Fiscal 2024 The Company’s net income was $95.2 million in fiscal 2025 and $76.3 million in fiscal 2024, an increase of $18.9 million, or 25%. The increase was primarily due to an increase in revenues and pretax margin. Fiscal 2024 Compared to Fiscal 2023 The Company’s net income was $76.3 million in fiscal 2024 and $66.4 million in fiscal 2023, an increase of $9.9 million, or 14.9%. The increase in revenues was offset by a slight decrease in gross profit margin. The increase in cost of revenue is due to an increase in headcount. Earnings per Share Fiscal 2025 Compared to Fiscal 2024 The Company’s diluted earnings per share increased to $1.83 per share in fiscal 2025 from $1.47 per share in fiscal 2024, an increase of $0.36 per share, or 24%. This was primarily due to an increase in net income. 36 Fiscal 2024 Compared to Fiscal 2023 The Company’s diluted earnings per share increased to $1.47 per share in fiscal 2024 from $1.26 per share in fiscal 2023, an increase of $0.21 per share, or 16.7%. This was primarily due to an increase in net income. 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 33 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 41 to 43 days of average sales for the fiscal years ended March 31, 2025, 2024 and 2023. 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 $832 million of its common stock during the past 29 fiscal years, on inception-to-date net earnings of $903 million. The Company repurchases shares during periods of excess liquidity, which has occurred in all 34 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 increased to $183 million at March 31, 2025, from $118 million at March 31, 2024. This is primarily due to the increase in net income, and to a lesser extent, a decrease in spending to repurchase shares of the Company’s common stock under its stock repurchase program. 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, 2025, the Company had $171 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, 2025, along with anticipated internally-generated funds will be sufficient to meet the Company’s expected cash requirements for at least the next twelve months and beyond. Operating Cash Flows Fiscal 2025 Compared to Fiscal 2024 Net cash provided by operating activities increased to $127.3 million in fiscal 2025 from $99.2 million in fiscal 2024, an increase of $28.1 million. The increase in cash flow from operating activities was primarily due to an increase in net income of $18.9 million during fiscal 2025. Additionally, accounts receivable increased at a lesser rate than prior year due to improvement in days sales outstanding. 37 Fiscal 2024 Compared to Fiscal 2023 Net cash provided by operating activities increased to $99.2 million in fiscal 2024 from $82.3 million in fiscal 2023, an increase of $16.9 million. The increase in cash flow from operating activities was primarily due to an increase in net income of $9.9 million during fiscal 2024. Investing Activities Fiscal 2025 Compared to Fiscal 2024 Net cash flow used in investing activities increased to $35.8 million in fiscal 2025 from $29.2 million in fiscal 2024, an increase of $6.5 million. This increase in investing activity was primarily due to an increase in software development efforts. The Company expects future expenditures for property and equipment to increase if revenues increase. Fiscal 2024 Compared to Fiscal 2023 Net cash flow used in investing activities increased to $29.2 million in fiscal 2024 from $26.3 million in fiscal 2023, an increase of $2.9 million. This increase in investing activity was primarily due to an increase in software development efforts. The Company expects future expenditures for property and equipment to increase if revenues increase. Financing Activities Fiscal 2025 Compared to Fiscal 2024 Net cash flow used in financing activities decreased to $26.5 million in fiscal 2025 from $35.8 million in fiscal 2024, a decrease of $9.2 million. During fiscal 2025, the Company spent $37.6 million to repurchase 377,154 shares of its common stock (at an average price of $99.71 per share). During fiscal 2024, the Company spent $45.7 million to repurchase 645,939 shares of its common stock (at an average price of $70.76 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, 2025, to repurchase additional shares of its common stock in the future. Fiscal 2024 Compared to Fiscal 2023 Net cash flow used in financing activities decreased to $35.8 million in fiscal 2024 from $82.1 million in fiscal 2023, a decrease of $46.4 million. During fiscal 2024, the Company spent $45.7 million to repurchase 645,939 shares of its common stock (at an average price of $70.76 per share). During fiscal 2023, the Company spent $93.7 million to repurchase 1,794,723 shares of its common stock (at an average price of $52.19 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 2025; 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 Estimates Our consolidated financial statements are prepared in accordance with the accounting principles generally accepted in the United States of America (“GAAP”), which require management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. These accounting principles require us to make estimates and assumptions 38 that affect the reported amounts of assets and liabilities and revenues and expenses, and the disclosure of contingent assets and liabilities at the date of our consolidated financial statements. We periodically evaluate our estimates and assumptions, including those relating to revenue recognition, leases, allowance for uncollectible accounts, goodwill and long-lived assets, accrual for self-insured costs, accounting for income taxes, legal and other contingencies, share-based compensation, and software development costs. We base our estimates on historical experience and various assumptions that we believe to be reasonable based on specific circumstances. Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed herein. We believe the following significant accounting estimates may involve a higher degree of judgment and complexity. The following is not intended to be a comprehensive list of our accounting policies. See Note 1, “Summary of Significant Accounting Policies” in the notes to our consolidated financial statements for other significant accounting policies. 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. Revenue is recognized based upon the transfer of the results of the medical bill review service to the customer as this is the most accurate depiction of the transfer of the service to the customer. Medical bill review revenues are variable, 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. 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 Expected Credit Losses : 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. 39 Segment Reporting: Based on the Company’s Chief Operating Decision Maker’s ("CODM") review and assessment of the Company’s operations for purposes of performance monitoring and resource allocation, the Company determined that its operations and the decisions to allocate resources and deploy capital are organized and managed on a consolidated basis. Accordingly, management has identified one operating segment, which is its reportable segment, under this organizational and reporting structure. 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. 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, 2025 or March 31, 2024. However, future events or changes in current circumstances could affect the recoverability of the carrying value of goodwill and long-lived assets. 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 40 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). 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 2025. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by persons who receive equity awards. 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 In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures , to require disaggregated disclosure of certain income statement expense line items, such as purchases of inventory, employee compensation, and depreciation and amortization. The new standard is effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The amendments should be applied prospectively, but retrospective application is permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures , a new accounting standard to enhance the transparency and decision usefulness of income tax disclosures. The new standard is effective for fiscal years beginning after December 15, 2024, with retrospective application permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements. In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures , which requires more detailed information about a reportable segment’s expenses. The new standard is effective for fiscal years beginning after December 15, 2023 and interim periods beginning after December 15, 2024, with retrospective application required. The Company adopted this pronouncement retrospectively in the fiscal year of 2025 and provided required disclosures in Note 12 Segment Reporting to the consolidated financial statements. 41 REPORT OF INDEPENDENT REGIS TERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders 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, 2025 and 2024, the related consolidated statements of income, stockholders’ equity, and cash flows for each of the years in the three-year period ended March 31, 2025, 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, 2025, 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, 2025 and 2024, and the consolidated results of its operations and its cash flows for each of the years in the three-year period ended March 31, 2025, 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, 2025, 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. 42 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) relates 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. 43 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 to customers in an amount that reflects the consideration the Company expects to receive in exchange for those services. Certain services 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 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 evaluated the reasonableness of management’s estimates through tests of the underlying data used by the Company to determine related bill review revenue estimates. We examined customer contracts and analyzed historical utilization analyses completed by the Company. ▪ We tested 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 23, 2025 44 CORVEL CORPORATION CONSOLIDATED B ALANCE SHEETS March 31, 2025 2024 ASSETS Current Assets Cash and cash equivalents $ 170,584,000 $ 105,563,000 Customer deposits 101,472,000 88,142,000 Accounts receivable (less allowance for expected credit losses of $ 7,690,000 at March 31, 2025 and $ 4,245,000 at March 31, 2024) 104,126,000 97,108,000 Prepaid expenses and income taxes 10,507,000 11,418,000 Total current assets 386,689,000 302,231,000 Property and equipment, net 92,052,000 85,892,000 Goodwill 36,814,000 36,814,000 Other intangible assets, net 438,000 821,000 Right-of-use asset, net 20,825,000 24,058,000 Deferred tax asset, net 8,704,000 3,545,000 Other assets 454,000 1,318,000 Total assets $ 545,976,000 $ 454,679,000 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities Accounts and income taxes payable $ 16,792,000 $ 16,631,000 Accrued liabilities 187,244,000 167,868,000 Total current liabilities 204,036,000 184,499,000 Long-term lease liabilities 19,953,000 22,533,000 Total liabilities 223,989,000 207,032,000 Commitments and contingencies Stockholders’ Equity Common stock, $ .0001 par value: 360,000,000 shares authorized at March 31, 2025 and 2024; 165,836,235 shares issued ( 51,359,544 shares outstanding, net of treasury shares) and 165,486,225 shares issued ( 51,386,688 shares outstanding, net of treasury shares) at March 31, 2025 and March 31, 2024, respectively 5,000 3,000 Paid-in-capital 250,407,000 233,629,000 Treasury stock, at cost ( 114,476,691 and 114,099,537 shares at March 31, 2025 and 2024, respectively) ( 831,510,000 ) ( 793,905,000 ) Retained earnings 903,085,000 807,920,000 Total stockholders’ equity 321,987,000 247,647,000 Total liabilities and stockholders’ equity $ 545,976,000 $ 454,679,000 See accompanying notes to consolidated financial statements. 45 CORVEL CORPORATION CONSOLIDATED STAT EMENTS OF INCOME Fiscal Years Ended March 31, 2025 2024 2023 Revenues $ 895,589,000 $ 795,311,000 $ 718,562,000 Cost of revenues 685,861,000 623,618,000 560,303,000 Gross profit 209,728,000 171,693,000 158,259,000 General and administrative 88,904,000 76,592,000 73,705,000 Income before income taxes 120,824,000 95,101,000 84,554,000 Income tax provision 25,659,000 18,849,000 18,189,000 Net income $ 95,165,000 $ 76,252,000 $ 66,365,000 Net income per share: Basic $ 1.85 $ 1.48 $ 1.28 Diluted $ 1.83 $ 1.47 $ 1.26 Weighted average shares outstanding: Basic 51,379,000 51,366,000 51,984,000 Diluted 51,994,000 52,041,000 52,776,000 See accompanying notes to consolidated financial statements. 46 CORVEL CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY Common Shares Stock Amount Paid-in-Capital Treasury Shares Treasury Stock Retained Earnings Total Stockholders’ Equity Balance – March 31, 2022 164,366,136 $ 3,000 $ 201,609,000 ( 111,658,875 ) $ ( 654,520,000 ) $ 665,303,000 $ 212,395,000 Stock issued under employee stock purchase plan 13,371 — 676,000 — — — 676,000 Stock issued under stock option plan, net of shares repurchased 582,591 — 10,856,000 — — — 10,856,000 Stock-based compensation expense — — 5,559,000 — — — 5,559,000 Purchase of treasury stock — — — ( 1,794,723 ) ( 93,675,000 ) — ( 93,675,000 ) Net income — — — — — 66,365,000 66,365,000 Balance – March 31, 2023 164,962,098 3,000 218,700,000 ( 113,453,598 ) ( 748,195,000 ) 731,668,000 202,176,000 Stock issued under employee stock purchase plan 9,534 — 681,000 — — — 681,000 Stock issued under stock option plan, net of shares repurchased 514,593 — 9,266,000 — — — 9,266,000 Stock-based compensation expense — — 4,982,000 — — — 4,982,000 Purchase of treasury stock — — — ( 645,939 ) ( 45,710,000 ) — ( 45,710,000 ) Net income — — — — — 76,252,000 76,252,000 Balance – March 31, 2024 165,486,225 3,000 233,629,000 ( 114,099,537 ) ( 793,905,000 ) 807,920,000 247,647,000 Stock issued under employee stock purchase plan 7,129 — 749,000 — — — 749,000 Stock issued under stock option plan, net of shares repurchased 342,881 — 10,317,000 — — — 10,317,000 Stock-based compensation expense — — 5,714,000 — — — 5,714,000 Purchase of treasury stock — — — ( 377,154 ) ( 37,605,000 ) — ( 37,605,000 ) Adjusted shares outstanding — 2,000 ( 2,000 ) — — — — Net income — — — — — 95,165,000 95,165,000 Balance – March 31, 2025 165,836,235 $ 5,000 $ 250,407,000 ( 114,476,691 ) $ ( 831,510,000 ) $ 903,085,000 $ 321,987,000 See accompanying notes to consolidated financial statements. 47 CORVEL CORPORATION CONSOLIDATED STATEM ENTS OF CASH FLOWS Fiscal Years Ended March 31, 2025 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 95,165,000 $ 76,252,000 $ 66,365,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 29,536,000 26,252,000 25,121,000 Loss on write down or disposal of property, capitalized software or investment 443,000 290,000 415,000 Stock compensation expense 5,714,000 4,982,000 5,559,000 Provision for expected credit losses 3,445,000 1,828,000 1,216,000 Deferred income taxes ( 5,159,000 ) ( 3,321,000 ) ( 1,913,000 ) Changes in operating assets and liabilities: Accounts receivable ( 10,463,000 ) ( 17,902,000 ) 336,000 Customer deposits ( 13,330,000 ) ( 8,120,000 ) ( 10,241,000 ) Prepaid expenses and income taxes 910,000 ( 32,000 ) 3,738,000 Other assets 863,000 60,000 ( 919,000 ) Accounts and income taxes payable 162,000 1,322,000 ( 4,395,000 ) Accrued liabilities 19,376,000 15,290,000 ( 4,361,000 ) Operating lease liabilities 653,000 2,336,000 1,367,000 Net cash provided by operating activities 127,315,000 99,237,000 82,288,000 CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property and equipment ( 35,755,000 ) ( 29,240,000 ) ( 26,320,000 ) Net cash used in investing activities ( 35,755,000 ) ( 29,240,000 ) ( 26,320,000 ) CASH FLOWS FROM FINANCING ACTIVITIES Exercise of employee stock purchase options 749,000 681,000 676,000 Exercise of common stock options 10,317,000 9,266,000 10,856,000 Purchase of treasury stock ( 37,605,000 ) ( 45,710,000 ) ( 93,675,000 ) Net cash used in financing activities ( 26,539,000 ) ( 35,763,000 ) ( 82,143,000 ) Net increase (decrease) in cash and cash equivalents 65,021,000 34,234,000 ( 26,175,000 ) Cash and cash equivalents at beginning of year 105,563,000 71,329,000 97,504,000 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 170,584,000 $ 105,563,000 $ 71,329,000 Supplemental cash flow information Income taxes paid $ 28,095,000 $ 22,874,000 $ 19,993,000 Accrual of software license purchase $ — $ — $ 5,273,000 See accompanying notes to consolidated financial statements. 48 CORVEL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Fiscal Years Ended March 31, 2025, 2024 and 2023 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. 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 expected credit losses, 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, 2025 and 2024 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, 2025 and 2024 , 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 49 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 expected credit losses. 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 $ 46,493,000 and $ 42,417,000 of unbilled receivables at March 31, 2025 and 2024 , 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 accounte d for 10 % or more of revenue for fiscal 2025, 2024 or 2023. Two customers accounted for 10 % or more of accounts receivable as of March 31, 2025 and one customer accounted for 10 % or more of accounts receivable as of March 31, 2024 . Segment Reporting: Based on the Company’s Chief Operating Decision Maker’s (“CODM”) review and assessment of the Company’s operations for purposes of performance monitoring and resource allocation, the Company determined that its operations and the decisions to allocate resources and deploy capital are organized and managed on a consolidated basis. Accordingly, management has identified one operating segment, which is its reportable segment, under this organizational and reporting structure. 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 Estimated Useful Life 40 years 20 years 20 years Leasehold Improvements Shorter of 5 years or the life of lease Furniture and Equipment 5 to 7 years Computer Hardware 2 to 5 years Computer Software 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 $ 42,756,000 (net of $ 170,041,000 in accumulated amortization) and $ 37,166,000 (net of $ 155,998,000 in accumulated amortization), as of March 31, 2025 and 2024 , 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. 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. 50 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. Operating 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, 2025 and 2024 . However, future events or changes in current circumstances could affect the recoverability of the carrying value of goodwill and long-lived assets. 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. The difference between the basic weighted average shares and the diluted weighted average shares for each of the fiscal years ended March 31, 2025, 2024 and 2023 is as follows: Fiscal 2025 Fiscal 2024 Fiscal 2023 Basic weighted average shares 51,379,000 51,366,000 51,984,000 Treasury stock impact of stock options 615,000 675,000 792,000 Diluted weighted average shares 51,994,000 52,041,000 52,776,000 51 During fiscal 2025, the Company effected a three-for-one forward stock split of its common stock . All prior period share, equity award and per share amounts and calculations in these consolidated financial statements and elsewhere in this annual report have been retroactively adjusted to reflect the stock split. Recently Issued Accounting Standards In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures , to require disaggregated disclosure of certain income statement expense line items, such as purchases of inventory, employee compensation, and depreciation and amortization. The new standard is effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The amendments should be applied prospectively, but retrospective application is permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures , a new accounting standard to enhance the transparency and decision usefulness of income tax disclosures. The new standard is effective for fiscal years beginning after December 15, 2024, with retrospective application permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements. In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures , which requires more detailed information about a reportable segment’s expenses. The new standard is effective for fiscal years beginning after December 15, 2023, and interim periods beginning after December 15, 2024, with retrospective application required. The Company adopted this pronouncement retrospectively in the fiscal year of 2025 and provided required disclosures in Note 12 Segment Reporting to the consolidated financial statements. Note 2 – Revenue Recognition Revenue from Contracts with Customers The Company generates revenue through its patient management and network solutions service lines. The Company operates in one reportable operating segment: managed care. 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 described in greater detail below, it has an unconditional right to consideration pursuant to 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. 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 and performance obligations are satisfied through efforts 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 by utilizing a portfolio approach based on time elapsed for these claims, which is generally between three and fifteen months . The Company believes this approach reasonably reflects the transfer of the claims management services to its customers. The Company’s obligation to manage claims and cases under patient management service line contracts range from less than one year to multiple years. The term of these contracts are typically one year; however, many of these contracts contain auto-renewal provisions leading the Company’s customer relationships to 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 also 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 52 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. Revenue from medical bill review services is recognized at a point in time when control of the service is transferred to the customer, based upon the transfer of the results of the medical bill review service to the customer as this is the most accurate depiction of the transfer of the service to the customer. Medical bill review revenue is variable, generally based on performance metrics set forth in the underlying contracts. Each period, the Company bases its revenue estimates on a contract-by-contract basis. The Company makes its best estimate using amounts the Company has earned and expects to be collected using historical averages and other factors to project such revenues. Variable consideration is recognized when the Company concludes it is probable that a significant revenue reversal will not occur in future periods. Third-party services revenue includes pharmacy, directed care services and other services, and includes amounts received from customers compensating the Company for certain third-party costs associated with providing its integrated network solutions services. The Company is considered the principal in these transactions as it directs the third party, controls the specified service and the 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 that the Company is the principal and therefore required to recognize gross revenue and operating expense from service-partner fees within the Company’s consolidated statements of income. The following table presents revenues disaggregated by service line for the fiscal years ended March 31, 2025, 2024 and 2023: 2025 2024 2023 Patient management services $ 581,192,000 $ 529,995,000 $ 478,751,000 Network solutions services 314,397,000 265,316,000 239,811,000 Total services $ 895,589,000 $ 795,311,000 $ 718,562,000 Arrangements with Multiple Performance Obligations The Company offers multiple services under its patient management and network solutions service lines. While it provides a menu of offerings from which its customers may choose to purchase, the Company typically has one performance obligation per customer. The Company always provides its customers with an option to contract additional services. The price of each service is separate and distinct to each 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 unconditionally due to the Company 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 . March 31, 2025 March 31, 2024 Billed receivables $ 65,323,000 $ 58,936,000 Allowance for expected credit losses ( 7,690,000 ) ( 4,245,000 ) Unbilled receivables 46,493,000 42,417,000 Accounts receivable, net $ 104,126,000 $ 97,108,000 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 53 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 straight-lined and recognized over the expected service periods by type of claim. The table below presents the deferred revenues balance and the significant activity affecting deferred revenues during the fiscal year ended March 31, 2025: March 31, 2025 Beginning balance at April 1, 2024 $ 29,961,000 Additions 71,754,000 Revenue recognized from beginning of period ( 27,611,000 ) Revenue recognized from additions ( 43,295,000 ) Ending balance at March 31, 2025 $ 30,809,000 Remaining Performance Obligations As of March 31, 2025 , the Company had $ 30.8 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 99 % of its remaining performance obligations as revenues within one year and expects to recognize the remaining balance as revenues 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 that the Company recognizes revenue for the amount it has the right to invoice for services performed, and (ii) contracts with variable consideration allocated entirely to a single performance obligation. 54 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, 2025 , options exercisable for up to 61,845,000 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 2025 and 2024 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. 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, 2025, 2024 and 2023: Fiscal 2025 Fiscal 2024 Fiscal 2023 Expected volatility 32 % 34 % 36 % Risk free interest rate 3.89 % to 4.59 % 3.91 % to 4.65 % 2.73 % to 4.36 % Dividend yield 0.0 % 0.0 % 0.0 % Weighted average option life 3.9 to 4.0 years 4.0 to 4.1 years 4.2 to 4.3 years For the fiscal years ended March 31, 2025, 2024 and 2023 , the Company recorded share-based compensation expense of $ 5,714,000 , $ 4,982,000 , and $ 5,559,000 , respectively. The table below shows the amounts recognized in the financial statements for the fiscal years ended March 31, 2025, 2024 and 2023. Fiscal 2025 Fiscal 2024 Fiscal 2023 Cost of revenue $ 2,794,000 $ 2,797,000 $ 2,566,000 General and administrative 2,920,000 2,185,000 2,993,000 Total cost of stock-based compensation included in income before income taxes 5,714,000 4,982,000 5,559,000 Amount of income tax benefit recognized ( 1,256,000 ) ( 987,000 ) ( 1,210,000 ) Amount charged to net income $ 4,458,000 $ 3,995,000 $ 4,349,000 Effect on basic earnings per share $ 0.09 $ 0.08 $ 0.08 Effect on diluted earnings per share $ 0.09 $ 0.08 $ 0.08 The following table summarizes informa tion for all stock options for the fiscal years March 31, 2025, 2024 and 2023: Fiscal 2025 Fiscal 2024 Fiscal 2023 Options outstanding – beginning of fiscal year 1,469,181 1,955,571 2,171,628 Options granted 115,225 179,700 504,900 Options exercised ( 364,422 ) ( 603,879 ) ( 627,903 ) Options cancelled/forfeited ( 34,257 ) ( 62,211 ) ( 93,054 ) Options outstanding – end of fiscal year 1,185,727 1,469,181 1,955,571 During the fiscal year, weighted average exercise price of: Options granted $ 101.18 $ 68.92 $ 53.14 Options exercised $ 34.27 $ 26.77 $ 21.07 Options cancelled/forfeited $ 57.57 $ 52.61 $ 46.79 At the end of fiscal year: Price range of outstanding options $ 11.05 -$ 110.18 $ 11.05 -$ 78.45 $ 11.05 -$ 65.72 Weighted average exercise price per share $ 51.07 $ 43.13 $ 36.03 Options available for future grants 1,775,459 1,856,427 1,973,916 Exercisable options 740,454 807,759 959,109 55 The following table summarizes the status of stock options outstanding and exercisable at March 31, 2025: Range of Exercise Prices Number of Outstanding Options Weighted Average Remaining Contractual Life Outstanding Options – Weighted Average Exercise Price Exercisable Options – Number of Exercisable Options Exercisable Options – Weighted Average Exercise Price $ 11.05 to $ 29.23 337,577 2.14 $ 22.42 337,577 $ 22.42 $ 29.24 to $ 52.00 358,978 2.53 48.86 219,751 47.56 $ 52.01 to $ 66.85 330,661 3.23 62.32 169,138 61.84 $ 66.86 to $ 110.18 158,511 5.05 93.60 13,988 74.20 Total 1,185,727 2.95 $ 51.07 740,454 $ 39.87 The following table summarizes the status of all outstanding options at March 31, 2025, and changes during the fiscal year then ended: Number of Options Weighted Average Exercise Price per Share Weighted Average Remaining Contractual Life (Years) Aggregate Intrinsic Value as of March 31, 2025 Options outstanding, March 31, 2024 1,469,181 $ 43.13 Granted 115,225 101.18 Exercised ( 364,422 ) 34.27 Cancelled – forfeited ( 32,523 ) 58.05 Cancelled – expired ( 1,734 ) 48.09 Options outstanding, March 31, 2025 1,185,727 $ 51.07 2.95 $ 72,213,987 Options vested and expected to vest 1,094,300 $ 50.12 2.94 $ 67,679,221 Ending exercisable 740,454 $ 39.87 2.43 $ 53,389,590 The weighted average fair value of options granted during fiscal 2025, 2024 and 2023 was $ 33.64 , $ 25.16 , and $ 18.78 , respectively. The total intrinsic value of options exercised during fiscal years 2025, 2024 and 2023 was $ 24,182,000 , $ 29,230,000 , and $ 21,094,000 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, 2025, 2024 and 2023 , the Company recognized stock compensation expense for performance-based options in the amount of $ 1,715,000 , $ 1,199,000 , and $ 1,961,000 , respectively. The Company received $ 10,317,000 , $ 9,266,000 , and $ 10,856,000 of cash receipts from the exercise of stock options during fiscal 2025, 2024 and 2023, respectively. As of March 31, 2025 , $ 6,765,000 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, 2025 and 2024: 2025 2024 Computer software $ 234,459,000 $ 213,145,000 Office equipment and computers 65,429,000 66,608,000 Land, building and improvements 11,047,000 11,123,000 Leasehold improvements 22,607,000 18,010,000 333,542,000 308,886,000 Less: accumulated depreciation and amortization ( 241,490,000 ) ( 222,994,000 ) $ 92,052,000 $ 85,892,000 56 Depreciation expense totaled $ 29,152,000 , $ 25,829,000 and $ 24,696,000 for the fiscal years ended March 31, 2025, 2024 and 2023 , respectively. Note 5 — Accounts and Income Taxes Payable and Accrued Liabilities Accounts and income taxes payable consisted of the following at March 31, 2025 and 2024: 2025 2024 Accounts payable $ 15,422,000 $ 16,410,000 Income taxes payable 1,370,000 221,000 $ 16,792,000 $ 16,631,000 Accrued liabilities consisted of the following at March 31, 2025 and 2024: 2025 2024 Payroll, payroll taxes and employee benefits $ 30,971,000 $ 26,291,000 Customer deposits 101,472,000 88,142,000 Accrued professional service fees 11,004,000 9,838,000 Self-insurance accruals 3,276,000 3,818,000 Deferred revenue 30,809,000 29,961,000 Operating lease liabilities 8,126,000 8,864,000 Other 1,586,000 954,000 $ 187,244,000 $ 167,868,000 Note 6 — Income Taxes The income tax provision consisted of the following for the fiscal years ended March 31, 2025, 2024 and 2023: 2025 2024 2023 Current — Federal $ 23,985,000 $ 17,463,000 $ 14,745,000 Current — State 6,833,000 4,707,000 5,357,000 Subtotal 30,818,000 22,170,000 20,102,000 Deferred — Federal ( 4,594,000 ) ( 2,828,000 ) ( 1,321,000 ) Deferred — State ( 565,000 ) ( 493,000 ) ( 592,000 ) Subtotal ( 5,159,000 ) ( 3,321,000 ) ( 1,913,000 ) $ 25,659,000 $ 18,849,000 $ 18,189,000 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, 2025, 2024 and 2023: 2025 2024 2023 Income taxes at federal statutory rate $ 25,373,000 $ 19,971,000 $ 17,757,000 State income taxes, net of federal benefit 4,937,000 3,369,000 3,890,000 Uncertain tax positions 9,000 ( 22,000 ) ( 77,000 ) Stock-based compensation and §162(m) limitation ( 3,687,000 ) ( 3,961,000 ) ( 3,098,000 ) Permanent items and tax credits ( 568,000 ) ( 480,000 ) ( 384,000 ) Adjustments to returns as filed ( 420,000 ) 67,000 163,000 Valuation allowance 15,000 ( 95,000 ) ( 62,000 ) $ 25,659,000 $ 18,849,000 $ 18,189,000 57 Deferred tax assets and liabilities at March 31, 2025 and 2024 are, as follows: 2025 2024 Deferred tax assets: Accrued liabilities not currently deductible $ 8,363,000 $ 7,181,000 Allowance for expected credit losses 1,947,000 1,076,000 Stock-based compensation 2,808,000 2,489,000 Deferred lease liability 7,094,000 7,917,000 Capitalized research and development expenditures 5,826,000 4,124,000 Other 541,000 497,000 Deferred tax assets 26,579,000 23,284,000 Deferred tax liabilities: Excess of book over tax basis of fixed assets ( 4,645,000 ) ( 5,758,000 ) Intangible assets ( 4,905,000 ) ( 4,922,000 ) Right-of-use asset ( 5,267,000 ) ( 6,075,000 ) Accrued revenue ( 2,350,000 ) ( 2,284,000 ) Other ( 456,000 ) ( 464,000 ) Total deferred tax liabilities ( 17,623,000 ) ( 19,503,000 ) Valuation allowance ( 252,000 ) ( 236,000 ) Deferred tax liabilities ( 17,875,000 ) ( 19,739,000 ) Net deferred tax assets (liabilities) $ 8,704,000 $ 3,545,000 Prepaid income taxes are $ 0 at March 31, 2025, and $ 2,169,000 at March 31, 2024. 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, 2024 $ 145,000 Additions based on tax positions related to the current year — Additions for tax positions of prior years 65,000 Reductions for tax positions related to the current year — Reductions for tax positions of prior years ( 47,000 ) Balance as of March 31, 2025 $ 163,000 The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. During the fiscal years ended March 31, 2025, 2024 and 2023 , the Company recognized approximately $( 9,000 ), $( 14,000 ) and $( 13,000 ) in interest and penalties, respectively. As of March 31, 2025, 2024 and 2023 , accrued interest and penalties related to uncertain tax positions were $ 31,000 , $ 40,000 and $ 54,000 , respectively. The tax fiscal years from 2019-2024 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 8,550,000 shares have been authorized for issuance under the ESPP. As of March 31, 2025 , 7,517,839 shares had been issued pursuant to the ESPP. Summarized ESPP information is as follows: 2025 2024 2023 Employee contributions $ 749,000 $ 681,000 $ 676,000 Shares acquired 7,129 9,534 13,371 Average purchase price $ 105.05 $ 71.40 $ 50.54 58 Note 8 — Treasury Stock During each of the three fiscal years ended March 31, 2025 , 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 3,000,000 share expansion authorized in November 2022 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 117,000,000 shares of common stock. Purchases may be made from time to time depending on market conditions and other relevant facto rs. During fiscal 2025, the Compan y effected the three-for-one forward stock split. All prior period share, equity award and per share amounts and calculations in these consolidated financial statements and elsewhere in this annual report have been retroactively adjusted to reflect the stock split. The share repurchases for the fiscal years ended March 31, 2025, 2024 and 2023 and cumulatively since inception of the authorization, are as follows: 2025 2024 2023 Cumulative Shares repurchased 377,154 645,939 1,794,723 114,476,691 Cost $ 37,605,000 $ 45,710,000 $ 93,675,000 $ 831,510,000 Average price $ 99.71 $ 70.76 $ 52.19 $ 7.26 During the period subsequent to March 31, 2025, through the date of filing this annual report, the Company repurchased 46,715 shares for $ 5.2 million, or an average of $ 112.34 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 contains a lease at contract inception. The Company’s current lease agreements have remaining lease terms between 1 and 8 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. Accounting Standard Codification ("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 aftermath of the COVID-19 pandemic, the Company expects 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 from 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. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company recognizes lease expense for these leases on a straight-line basis over the lease term. 59 The components of lease expenses are as follows: March 31, 2025 March 31, 2024 March 31, 2023 Operating lease expense $ 9,070,000 $ 9,989,000 $ 12,259,000 Finance lease expense 80,000 86,000 92,000 Short-term lease expense 114,000 114,000 16,000 Variable lease expense 665,000 559,000 555,000 Total lease expenses $ 9,929,000 $ 10,748,000 $ 12,922,000 The following table presents the lease related assets and liabilities recorded on the Company’s consolidated balance sheets related to its operating leases at March 31, 2025 and March 31, 2024: March 31, 2025 March 31, 2024 Right-of-use asset, net $ 20,825,000 $ 24,058,000 Short-term lease liability $ 8,126,000 $ 8,864,000 Long-term lease liability 19,953,000 22,533,000 Total lease liabilities $ 28,079,000 $ 31,397,000 Weighted average remaining lease term 4.01 years 4.11 years Weighted average finance lease term 0.25 year 1.25 years Weighted average discount rate 4.5 % 3.7 % Supplemental cash flow information related to operating leases for fiscal years ended March 31, 2025 and 2024 were as follows: March 31, 2025 March 31, 2024 Cash paid for amounts included in the measurement of operating lease liabilities $ 9,151,000 $ 8,692,000 Operating lease liabilities arising from obtaining ROU assets $ 46,954,000 $ 53,617,000 Finance lease liabilities arising from obtaining ROU assets $ 358,000 $ 358,000 Additions to ROU assets resulting from additions to operating lease liabilities $ 4,555,000 $ 6,247,000 As of March 31, 2025, maturities of operating and financing lease liabilities for each of the next five years and thereafter are as follows: 2026 $ 9,161,000 2027 7,368,000 2028 6,451,000 2029 4,208,000 2030 2,275,000 Thereafter 1,475,000 Total lease payments 30,938,000 Less interest ( 2,859,000 ) Total lease liabilities $ 28,079,000 As of March 31, 2025 , the Company has approximately $ 1.1 million of additional operating lease commitments that have not yet commenced. This lease commences in May 2025 and has lease terms of 5 years. Note 10 — Contingencies and Legal Proceedings From time to time, the Company is involved in litigation arising in the ordinary course of business. Although the results of these ordinary course matters cannot be predicted with certainty, we believe that the resolution of these matters will not, individually or in the aggregate, have a material adverse effect on our financial position or results of operations. 60 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 $ 1,696,000 , $ 1,505,000 and $ 1,315,000 were charged to operations for the fiscal years ended March 31, 2025, 2024 and 2023 , respectively. Note 12 — Segment Reporting The Company operates as one operating segment, and the Company’s Chief Operating Decision Maker ("CODM") is its Chief Executive Officer. The CODM reviews segment financial information presented on a consolidated basis, including revenue, gross profit and operating expenses, and considers budget-to-actual variances for the purposes of making operating decisions, assessing financial performance and allocating resources. 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, 2025, 2024 and 2023 are listed below. 2025 2024 2023 Patient management services 64.9 % 66.6 % 66.6 % Network solutions services 35.1 % 33.4 % 33.4 % 100.0 % 100.0 % 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. The following table presents the financial information for the Company’s one reportable and operating segment for fiscal years ended March 31, 2025, 2024 and 2023: 2025 2024 2023 Revenues $ 895,589,000 $ 795,311,000 $ 718,562,000 Less: Labor expenses 445,701,000 406,422,000 361,555,000 Direct product expenses 269,471,000 258,489,000 232,446,000 Depreciation and amortization expenses 29,536,000 26,252,000 25,121,000 Income tax provision 25,659,000 18,849,000 18,189,000 Other items (1) 30,057,000 9,047,000 14,886,000 Net income $ 95,165,000 $ 76,252,000 $ 66,365,000 (1) Includes other operating costs (such as marketing and maintenance expenses), net gain (loss) on asset sales and disposals and other costs. 61 Note 13 — Other Intangible Assets Other intangible assets consisted of the following at March 31, 2025: Item Life Cost Fiscal 2025 Amortization Expense Accumulated Amortization at March 31, 2025 Cost, Net of Accumulated Amortization at March 31, 2025 Covenant Not to Compete 5 years $ 775,000 $ — $ 775,000 $ — Customer Relationships 18 - 20 years 7,922,000 383,000 7,484,000 438,000 Third Party Administrator Licenses 15 years 204,000 — 204,000 — Total $ 8,901,000 $ 383,000 $ 8,463,000 $ 438,000 Other intangible assets consisted of the following at March 31, 2024: Item Life Cost Fiscal 2024 Amortization Expense Accumulated Amortization at March 31, 2024 Cost, Net of Accumulated Amortization at March 31, 2024 Covenant Not to Compete 5 years $ 775,000 $ — $ 775,000 $ — Customer Relationships 18 - 20 years 7,922,000 421,000 7,101,000 821,000 Third Party Administrator Licenses 15 years 204,000 2,000 204,000 — Total $ 8,901,000 $ 423,000 $ 8,080,000 $ 821,000 Amortization expense is expected to be $ 175,000 in fiscal 2026, $ 174,000 in fiscal 2027, $ 42,000 in fiscal 2028, $ 18,000 in fiscal 2029, $ 18,000 in fiscal 2030, and $ 11,000 thereafter. 62