What changed in this filing

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Item 1. Financial Statements

2021-08-05 compared with 2021-02-04 · 85 added, 184 removed, 302 unchanged (47% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

December 31, 2020

June 30, 2021

March 31, 2021

7 unchanged sentences

Other intangibles, net

Right-of-use asset, net (Note 9)

Right-of-use asset, net

Deferred tax asset, net

Liabilities and Stockholders' Equity

Current Liabilities

Accounts and taxes payable (Note 8)

Accrued liabilities (Note 8)

Accounts and taxes payable

Accrued liabilities

Total current liabilities

Deferred income taxes

Long-term lease liabilities (Note 9)

Long-term lease liabilities

Total liabilities

Commitments and contingencies (Notes 6 and 7)

Commitments and contingencies

Stockholders' Equity

Common stock, $ .0001 par value:

120,000,000 shares authorized at December 31, 2020

120,000,000 shares authorized at June 30, 2021

and March 31, 2021;

1 unchanged sentence

Treasury shares) and 54,529,642 shares issued ( 17,876,090 shares outstanding, net of

Treasury shares) at December 31, 2020 and March 31, 2020, respectively

Treasury shares) at June 30, 2021 and March 31, 2021, respectively

Paid-in capital

Treasury stock ( 36,552,711 shares at December 31, 2020 and 36,285,591 shares at

Treasury stock ( 36,772,445 shares at June 30, 2021 and 36,653,552 shares at

March 31, 2021)

7 unchanged sentences

CONSOLIDATED INCOME STATEMENTS – UNAUDITED

Three Months Ended December 31,

Cost of revenues

General and administrative expenses

Income before income tax provision

Income tax provision

Net income per common and common equivalent share

Weighted average common and common equivalent shares

See accompanying notes to unaudited consolidated financial statements.

CORVEL CORPORATION

CONSOLIDATED INCOME STATEMENTS – UNAUDITED

Nine Months Ended December 31,

Three Months Ended June 30,

Cost of revenues

7 unchanged sentences

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY – UNAUDITED

Three Months Ended December 31, 2020

Stockholders'

Balance – September 30, 2020

( 546,204,000

Stock issued under stock option plan,

net of shares repurchased

Stock-based compensation expense

Purchase of treasury stock

Balance – December 31, 2020

( 553,889,000

Three Months Ended December 31, 2019

Stockholders'

Balance – September 30, 2019

( 494,472,000

Stock issued under stock option plan,

net of shares repurchased

Stock-based compensation expense

Purchase of treasury stock

Balance – December 31, 2019

( 513,668,000

Nine Months Ended December 31, 2020

Three Months Ended June 30, 2021

Stockholders'

1 unchanged sentence

( 564,435,000

Stock issued under employee stock

purchase plan

Stock issued under stock option plan,

2 unchanged sentences

Purchase of treasury stock

Balance – December 31, 2020

Balance – June 30, 2021

( 578,631,000

Nine Months Ended December 31, 2019

Three Months Ended June 30, 2020

Stockholders'

1 unchanged sentence

( 531,764,000

Stock issued under employee stock

purchase plan

Stock issued under stock option plan,

2 unchanged sentences

Purchase of treasury stock

Balance – December 31, 2019

Balance – June 30, 2020

( 534,162,000

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS – UNAUDITED

Nine Months Ended December 31,

Three Months Ended June 30,

Cash Flows from Operating Activities

1 unchanged sentence

Depreciation and amortization

Loss on write down or disposal of property, capitalized software or investment

(Gain) loss on write down or disposal of property, capitalized software or investment

Stock compensation expense

15 unchanged sentences

Exercise of common stock options

Purchases under employee stock purchase

Net cash used in financing activities

Increase in cash and cash equivalents

(Decrease)/increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

2 unchanged sentences

Income taxes paid

Purchase of software license under finance agreement

See accompanying notes to unaudited consolidated financial statements.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020

June 30, 2021

Note 1 — Summary of Significant Accounting Policies

8 unchanged sentences

In the opinion of management, all adjustments considered necessary for a fair presentation have been included.

Operating results for the three and nine months ended December 31, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2021.

For further information, refer to the audited consolidated financial statements and notes thereto for the fiscal year ended March 31, 2020 included in the Company's Annual Report on Form 10-K filed with the SEC on June 10, 2020.

Operating results for the three months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2022.

For further information, refer to the audited consolidated financial statements and notes thereto for the fiscal year ended March 31, 2021 included in the Company's Annual Report on Form 10-K filed with the SEC on May 28, 2021.

Impact of COVID-19:

3 unchanged sentences

Even after the COVID-19 pandemic has subsided, we may continue to experience adverse impacts to our business as a result of any economic recession or depression that has occurred or may occur in the future.

Therefore, the Company cannot reasonably estimate the full impact at this time.

Therefore, the Company cannot reasonably estimate the full impact at this time, however, the Company feels the impact has decreased over time.

Recent Accounting Pronouncements:

In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes”.

The pronouncement simplifies the accounting for income taxes by removing certain exceptions to the general principles in ASC Topic 740, “Income Taxes”.

The pronouncement also improves consistent application of and simplifies GAAP for other areas of Topic 740 by clarifying and amending existing guidance.

This standard is effective for fiscal years beginning after December 15, 2020, with early adoption permitted.

We are still evaluating the impact this guidance will have on our consolidated financial statements.

Guidance Adopted:

In June 2016, the FASB issued ASU 2016-13 regarding ASC Topic 326, “Measurement of Credit Losses on Financial Instruments”.

The pronouncement changes the impairment model for most financial assets and will require the use of an "expected loss" model for instruments measured at amortized cost.

Under this model, entities will be required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset.

Subsequently, the FASB issued an amendment to clarify the implementation dates and items that fall within the scope of this pronouncement.

This standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

The Company has adopted this standard as of April 1, 2020.

The adoption did not have a material impact on our consolidated financial statements.

On an ongoing basis, the Company will contemplate forward-looking economic conditions in recording lifetime expected credit losses for the Company’s financial assets measured at cost.

In January 2017, the FASB issued ASU 2017-04 regarding ASC Topic 350, “Simplifying the Test for Goodwill Impairment”.

The pronouncement simplifies the accounting for goodwill impairments by eliminating step two from the goodwill impairment test.

Under this guidance, if the carrying amount of a reporting unit exceeds its estimated fair value, an impairment charge shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.

This standard is effective for fiscal years beginning after December 15, 2019, with early adoption permitted.

The Company has adopted this standard as of April 1, 2020.

The adoption did not have a material impact on our consolidated financial statements.

The Company has evaluated recent accounting pronouncements through the date the financial statements were issued and filed with the Securities and Exchange Commission and believe that there are none that will have a material impact on the Company’s financial statements.

Note 2 – Revenue Recognition

10 unchanged sentences

The transaction price is readily available from the contract and is fixed for each service.

Revenue is recognized over time as services are provided as the performance obligations are satisfied through the effort expended to research, investigate, evaluate, document, and report the claim and control of these services is transferred to the customer.

Revenue is recognized over time as services are provided as the performance obligations are satisfied through the effort expended to research, investigate, evaluate, document, and

report the claim and control of these services is transferred to the customer.

Revenue is recognized based on historical claim closure rates and claim type applied utilizing a portfolio approach based on time elapsed for these claims , generally between three and fifteen months .

The Company believes this approach reasonably reflects the transfer of the claims management services to its customers.

The Company believes this approach reasonably reflects the transfer of the claims management services to its customer s .

The Company’s obligation to manage claims and cases under the patient management service line can range from less than one year to multi-year contracts.

14 unchanged sentences

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.

Medical bill review revenues are variable and generally based on performance metrics set forth in the underlying contracts.

Each period, the Company bases its estimates on a contract-by-contract basis.

5 unchanged sentences

These factors indicate the Company is the principal and, as such, it is required to recognize revenue gross and service partner vendor fees in the operating expense in the Company’s consolidated statements of income.

The following table presents revenues disaggregated by service line for the three and nine months ended December 31, 2020 and 2019:

The following table presents revenues disaggregated by service line for the three months ended June 30, 2021 and 2020:

Three Months Ended

December 31, 2020

December 31, 2019

Patient management services

Network solutions services

Total services

Nine Months Ended

December 31, 2020

December 31, 2019

June 30, 2021

June 30, 2020

Patient management services

12 unchanged sentences

Invoicing requirements vary by customer contract, but substantially all unbilled revenues are billed within one year .

December 31, 2020

June 30, 2021

March 31, 2021

7 unchanged sentences

For all fixed fee service agreements, revenues are recognized over the expected service periods by type of claim.

The table below presents the deferred revenues balance and the significant activity affecting deferred revenues during the nine months ended December 31, 2020:

Nine Months Ended

December 31, 2020

Beginning balance at April 1, 2020 (Note 8)

The table below presents the deferred revenues balance and the significant activity affecting deferred revenues during the three months ended June 30, 2021:

Three Months Ended

June 30, 2021

Beginning balance at April 1, 2021

Revenue recognized from beginning of period

Revenue recognized from additions

Ending balance at December 31, 2020 (Note 8)

Ending balance at June 30, 2021

Remaining Performance Obligations

As of December 31, 2020, the Company had $ 22.5 million of remaining performance obligations related to claims and non-claims services for which the price is fixed.

As of June 30, 2021, the Company had $ 22.1 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.

9 unchanged sentences

Note 3 — Stock-Based Compensation and Stock Options

Under the Company’s Restated Omnibus Incentive Plan (formerly the Restated 1988 Executive Stock Option Plan) (“the Plan”) as in effect at December 31, 2020, options exercisable for up to 20,615,000 shares of the Company’s common stock may be granted over the life of the Plan to key employees, non-employee directors, and consultants at exercise prices not less than the fair market value of the common stock on the date of grant.

Under the Company’s Restated Omnibus Incentive Plan (formerly the Restated 1988 Executive Stock Option Plan) (“the Plan”) as in effect at June 30, 2021, options exercisable for up to 20,615,000 shares of the Company’s common stock may be granted over the life of the Plan to key employees, non-employee directors, and consultants at exercise prices not less than the fair market value of the common stock on the date of grant.

Options granted under the Plan are non-statutory stock options and generally vest 25 % one year from the date of grant with the remaining 75 % vesting ratably each month for the next 36 months.

The options granted to employees and the Company’s Board of Directors expire at the end of five years and ten years from the date of grant, respectively.

All options granted in the nine months ended December 31, 2020 and 2019 were granted with an exercise price equal to the fair value of the Company’s common stock on the grant date and are non-statutory stock options.

All options granted in the three months ended June 30, 2021 and 2020 were granted with an exercise price equal to the fair value of the Company’s common stock on the grant date and are non-statutory stock options.

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.

3 unchanged sentences

Treasury issue with a term similar to the estimated life of the option.

The following assumptions were used to estimate the fair value of options granted during the three months ended December 31, 2020 and 2019 using the Black-Scholes option-pricing model:

The following assumptions were used to estimate the fair value of options granted during the three months ended June 30, 2021 and 2020 using the Black-Scholes option-pricing model:

Three Months Ended

December 31, 2020

December 31, 2019

June 30, 2021

June 30, 2020

Risk-free interest rate

2 unchanged sentences

Expected weighted average life of option in years

For the three months ended December 31, 2020 and 2019, the Company recorded share-based compensation expense of $ 1,251,000 and $ 1,143,000 , respectively.

For the nine months ended December 31, 2020 and 2019, the Company recorded share-based compensation expenses of $ 3,484,000 and $ 3,566,000 , respectively.

The table below shows the amounts recognized in the unaudited consolidated financial statements for stock compensation expense for time-based options and performance-based options during the three and nine months ended December 31, 2020 and 2019, respectively.

For the three months ended June 30, 2021 and 2020, the Company recorded share-based compensation expense of $ 1,345,000 and $ 995,000 , respectively.

Three Months Ended

December 31, 2020

December 31, 2019

Cost of revenues

General and administrative

Total cost of stock-based compensation included in

income before income tax provision

Amount of income tax benefit recognized

Amount charged against net income

Effect on basic earnings per share

Effect on diluted earnings per share

Nine Months Ended

December 31, 2020

December 31, 2019

June 30, 2021

June 30, 2020

Cost of revenues

6 unchanged sentences

Effect on diluted earnings per share

The following table summarizes information for all stock options for the three and nine months ended December 31, 2020 and 2019:

Three Months Ended December 31, 2020

Three Months Ended December 31, 2019

Exercise Price

Options outstanding, beginning

Options granted

Options exercised

Options cancelled/forfeited

Options outstanding, ending

Nine Months Ended December 31, 2020

Nine Months Ended December 31, 2019

The following table summarizes information for all stock options for the three months ended June 30, 2021 and 2020:

Three Months Ended June 30, 2021

Three Months Ended June 30, 2020

Exercise Price

5 unchanged sentences

Options outstanding, ending

The following table summarizes the status of stock options outstanding and exercisable at December 31, 2020:

The following table summarizes the status of stock options outstanding and exercisable at June 30, 2021:

Range of Exercise Price

4 unchanged sentences

$87.70 to $119.48

The following table summarizes the status of all outstanding options at December 31, 2020, and changes during the three months then ended:

The following table summarizes the status of all outstanding options at June 30, 2021, and changes during the three months then ended:

Exercise Price

Aggregate Intrinsic

Value as of December 31, 2020

Options outstanding at October 1, 2020

Value as of June 30, 2021

Options outstanding at April 1, 2021

Cancelled – forfeited

2 unchanged sentences

Ending vested and expected to vest

Ending exercisable at December 31, 2020

The weighted-average grant-date fair value of options granted during the three months ended December 31, 2020 and 2019, was $ 25.20 and $ 22.23 , respectively.

Ending exercisable at June 30, 2021

The weighted-average grant-date fair value of options granted during the three months ended June 30, 2021 and 2020, was $ 34.43 and $ 15.19 , respectively.

Included in the above-noted stock option grants and stock compensation expense are performance-based stock options that 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.

1 unchanged sentence

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 recognized $ 513,000 and $ 400,000 of stock compensation expense for the three months ended December 31, 2020 and 2019, respectively, for performance-based stock options.

The Company recognized $ 1,316,000 and $ 1,413,000 of stock compensation expense for the nine months ended December 31, 2020 and 2019, respectively, for performance-based stock options.

The Company recognized $ 605,000 and $ 294,000 of stock compensation expense for the three months ended June 30, 2021 and 2020, respectively, for performance-based stock options.

Note 4 — Treasury Stock

The Company’s Board of Directors approved the commencement of a stock repurchase program in the fall of 1996.

In February 2019, the Company’s Board of Directors approved a 1,000,000 share expansion to the Company’s existing stock repurchase program, increasing the total number of shares of the Company’s common stock approved for repurchase over the life of the program to 37,000,000 shares.

In May 2021, the Company’s Board of Directors approved a 1,000,000 share expansion to the Company’s existing stock repurchase program, increasing the total number of shares of the Company’s common stock approved for repurchase over the life of the program to 38,000,000 shares.

Since the commencement of the stock repurchase program, the Company has spent $ 579 million on the repurchase of 36,772,445 shares of its common stock, equal to 67 % of the outstanding common stock had there been no repurchases.

1 unchanged sentence

These repurchases were funded primarily by the net earnings of the Company, along with proceeds from the exercise of common stock options.

The Company had temporarily suspended share repurchases under its stock repurchase program from March 21 through June 14, 2020.

During the three and nine months ended December 31, 2020, the Company repurchased 82,157 shares of its common stock for $ 7.7 million at an average price of $ 93.54 per share and 267,120 shares of its common stock for $ 22.1 million at an average price of $ 82.83 , respectively.

The Company had 17,887,043 shares of common stock outstanding as of December 31, 2020, net of the 36,552,711 shares in treasury.

During the period subsequent to the quarter ended December 31, 2020, the Company repurchased 28,664 shares of its common stock for $ 3.0 million at an average price of $ 104.62 per share under the Company’s stock repurchase program.

During the three months ended June 30, 2021, the Company repurchased 118,893 shares of its common stock for $ 14.2 million at an average price of $ 119.40 per share.

The Company had 17,870,307 shares of common stock outstanding as of June 30, 2021, net of the 36,772,445 shares in treasury.

During the period subsequent to the quarter ended June 30, 2021, the Company repurchased 63,984 shares of its common stock for $ 8.8 million at an average price of $ 137.50 per share under the Company’s stock repurchase program.

Note 5 — Weighted Average Shares and Net Income Per Share

Basic weighted average common shares outstanding decreased to 17,899,000 for the quarter ended December 31, 2020 from 18,253,000 for the quarter ended December 31, 2019.

Diluted weighted average common and common equivalent shares outstanding decreased to 18,180,000 for the quarter ended December 31, 2020 from 18,526,000 for the quarter ended December 31, 2019.

Basic weighted average common shares outstanding decreased to 17,939,000 for the nine months ended December 31, 2020 from 18,410,000 for the nine months ended December, 2019.

Diluted weighted average common and common equivalent shares outstanding decreased to 18,156,000 for the nine months ended December 31, 2020 from 18,695,000 for the nine months ended December 31, 2019.

Basic weighted average common shares outstanding decreased to 17,897,000 for the quarter ended June 30, 2021 from 17,983,000 for the quarter ended June 30, 2020.

Diluted weighted average common and common equivalent shares outstanding increased to 18,220,000 for the quarter ended June 30, 2021 from 18,114,000 for the quarter ended June 30, 2020.

Net income per common and common equivalent share was computed by dividing net income by the weighted average number of common and common share equivalents outstanding during the period.

The following table sets forth the calculations of the basic and diluted weighted average common shares for the three and nine months ended December 31, 2020 and 2019:

Three Months Ended December 31,

Weighted average common shares outstanding

Net Income per share

Weighted average common shares outstanding

Treasury stock impact of stock options

Total common and common equivalent shares

Net Income per share

Nine Months Ended December 31,

The following table sets forth the calculations of the basic and diluted weighted average common shares for the three months ended June 30, 2021 and 2020:

Three Months Ended June 30,

Weighted average common shares outstanding

17 unchanged sentences

Management believes that resolution of these matters will not result in any payment that, individually or in the aggregate, would be material to the consolidated financial position or results of operations of the Company.

Note 8 — Accounts and Taxes Payable and Accrued Liabilities

The following table sets forth accounts payable, income taxes payable, and accrued liabilities at December 31, 2020 and March 31, 2020:

December 31, 2020

Note 8 — Accounts and Income Taxes Payable and Accrued Liabilities

The following table sets forth accounts payable, income taxes payable, and accrued liabilities at June 30, 2021 and March 31, 2021:

June 30, 2021

March 31, 2021

2 unchanged sentences

Total accounts and taxes payable

December 31, 2020

June 30, 2021

March 31, 2021

18 unchanged sentences

The Company’s lease agreements may include options to extend the lease following the initial term.

In most instances, the Company has determined that it is reasonably certain to exercise the option to renew;

accordingly, these options are considered in determining the initial lease term.

The Company has elected the practical expedient of hindsight in determining the option to renew.

At the time of adopting ASC 842, the Company determined that it was reasonably certain it would exercise the option to renew;

accordingly, these options were considered in determining the initial lease term.

The Company elected the practical expedient of hindsight in determining the option to renew.

The Company has since reassessed the assumption of the renewal term and determined that due to the COVID-19 pandemic, the Company is now expecting more of its workforce to be working from home permanently.

Therefore, expecting a reduction in overall square footage of office space needs, the Company no longer believes it is reasonably certain it will exercise most of its options to renew, and therefore, has removed the renewal term of several lease obligations.

The subsequent re-measurement reduced the right-of-use asset and related lease liability on the consolidated balance sheet, but had an immaterial impact on the income statement.

For lease agreements entered into or reassessed after the adoption of ASC 842, the Company has elected the practical expedient to account for the lease and non-lease components as a single lease component.

6 unchanged sentences

Three Months Ended

December 31, 2020

December 31, 2019

Operating lease expense

Finance lease expense

Short-term lease expense

Variable lease expense

Total lease expenses

Nine Months Ended

December 31, 2020

December 31, 2019

June 30, 2021

June 30, 2020

Operating lease expense

4 unchanged sentences

The following table presents the lease related assets and liabilities recorded on the Company’s consolidated balance sheets related to its operating leases:

December 31, 2020

June 30, 2021

March 31, 2021

6 unchanged sentences

Weighted average discount rate

Supplemental cash flow information related to operating leases for the nine months ended December 31, 2020 and 2019 was as follows:

Nine Months Ended

December 31, 2020

December 31, 2019

Supplemental cash flow information related to operating leases for the three months ended June 30, 2021 and 2020 was as follows:

Three Months Ended

June 30, 2021

June 30, 2020

Cash paid for amounts included in the measurement of operating

4 unchanged sentences

lease liabilities

As of December 31, 2020, maturities of operating lease liabilities for each of the next five years and thereafter are as follows:

As of June 30, 2021, maturities of operating lease liabilities for each of the next five years and thereafter are as follows:

Total lease payments

1 unchanged sentence

Total lease liabilities

As of December 31, 2020, the Company has approximately $ 6.1 million of additional operating lease commitments that have not yet commenced.

These leases commence in 2021 and have lease terms between 2 years and 8 years.

As of June 30, 2021, the Company has approximately $ 5.4 million of additional operating lease commitments that have not yet commenced.

These additional leases commence in 2021 and have lease terms between 2 years and 5 years.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements