What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-08-05 compared with 2021-02-04 · 79 added, 126 removed, 117 unchanged (64% of the section changed)

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Representative examples of these factors include (without limitation) the impact of global pandemics, such as COVID-19;

general industry and economic conditions, including a static number of national claims due to a decreasing number of injured workers;

cost of capital and capital requirements;

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;

competition from other managed care companies;

the impact of possible cybersecurity incidents;

existing and possible litigation and legal liability in the course of operations and the Company’s ability to resolve such litigation;

the ability to renew and/or maintain contracts with customers on favorable terms or at all;

growth in the Company’s sale of TPA services;

shifts in customer demands;

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changes in operating expenses including employee wages, benefits, and medical inflation;

governmental and public policy changes, including but not limited to legislative and administrative law and rule implementation or change;

cost of capital and capital requirements;

dependence on key personnel;

the continued availability of financing in the amounts and at the terms necessary to support the Company’s future business;

the impact of possible cybersecurity incidents;

existing and possible litigation and legal liability in the course of operations and the Company’s ability to resolve such litigation;

governmental and public policy changes, including but not limited to legislative and administrative law and rule implementation or change;

the impact of recently issued accounting standards on the Company’s consolidated financial statements;

growth in the Company’s sale of TPA services and the other risks identified in Part II, Item 1A of this report.

CorVel Corporation is an independent nationwide provider of medical cost containment and managed care services designed to address the escalating medical costs of workers’ compensation benefits, mobile insurance claims, and group health insurance benefits.

The Company’s services are provided to insurance companies, third party administrators, or (TPA’s), governmental entities, and self-administered employers to assist them in managing the medical costs and monitoring the quality of care associated with healthcare claims.

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 II, Item 1A of this report.

CorVel Corporation is an independent nationwide provider of medical cost containment and managed care services designed to address the escalating medical costs of workers’ compensation benefits, automobile insurance claims, and group health insurance benefits.

The Company’s services are provided to insurance companies, TPAs, governmental entities, and self-administered employers to assist them in managing the medical costs and monitoring the quality of care associated with healthcare claims.

In November 2020, the Bureau of Labor Statistics reported that the occupational injury and illness incidence rate for 2019 remained unchanged from the prior year.

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Patient Management 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.

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.

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The Company offers these services on a stand-alone basis, or as an integrated component of its medical cost containment services.

Patient management services also include the processing of claims for self-insured payors with respect to property and casualty insurance.

Patient management services include the processing of claims for self-insured payors with respect to property and casualty insurance.

Network Solutions Services

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The economies of the United States and other countries around the world have rapidly contracted as a result of the COVID-19 pandemic.

The decreased level of economic activity is leading to, and is likely to continue to lead to, a decline in exposure units and rising unemployment.

While the full impact of the COVID-19 pandemic cannot be fully assessed at this time, the Company expects that the ongoing global economic slowdown resulting from the COVID-19 pandemic could have a material adverse effect on its business, results of operations, financial condition, and cash flows in one or more future quarters.

Through the December 2020 quarter, the COVID-19 pandemic continued to impact our business, however, the impact was not as significant as it was during the June 2020 quarter.

The decreased level of economic activity and uneven economic recovery is leading to, and is likely to continue to lead to, a decline and/or volatility in exposure units and prolonged and uneven unemployment.

While the full impact of the COVID-19 pandemic cannot be fully assessed at this time, the Company expects that the ongoing global economic slowdown and uneven recovery resulting from the COVID-19 pandemic could continue to have a material adverse effect on its business, results of operations, financial condition, and cash flows in one or more future quarters.

The COVID-19 pandemic impacted our business, most significantly during the June and September 2020 quarters.

We implemented a 10% reduction in headcount that began late in the March 2020 quarter and continued through the June 2020 quarter.

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We reduced discretionary spending, including but not limited to cutting spending in planned capital expenditures, travel, recruiting, consulting and temporary help expenses.

During the December 2020 quarter, we continued to monitor expenses.

Additionally, we temporarily suspended share repurchases under our stock repurchase program, from March 21 through June 14, 2020.

We did not apply for governmental loans to support our operations, but we have evaluated the CARES Act and have taken advantage of certain aspects of the CARES Act such as the deferral of payroll tax deposits through December 31, 2020.

We did not apply for governmental loans to support our operations, but we have taken advantage of certain aspects of the CARES Act such as the deferral of payroll tax deposits through December 31, 2020.

The majority of our workforce continues to work from home.

Thus far, the Company has seen the greatest negative impact during the June 2020 quarter.

The Company began realizing sequential increases in revenues during the September and December 2020 quarters.

Management expects this trend to continue into 2021, especially with the distribution of vaccines, but there can be no assurance that vaccines will be distributed timely or be effective, that there will not be additional surges in COVID-19 and new stay at home mandates, or that the economic recovery will continue.

The Company cannot provide any assurance that the assumptions used to estimate its liquidity requirements will remain accurate due to the unprecedented nature of the disruption to operations and the unpredictability of the COVID-19 global pandemic.

As a consequence, estimates of the duration of the pandemic and the severity of the impact on future earnings and cash flows could change and have a material impact on our results of operations and financial condition.

The ultimate duration and impact of the COVID-19 pandemic on the Company’s business, results of operations, financial condition and cash flows is dependent on future

developments, including the duration of the pandemic, repeat or cyclical outbreaks, and the related length of its impact on the global economy, which are uncertain and cannot be predicted at this time.

Furthermore, the extent to which the Company’s mitigation efforts are successful, if at all, is not presently ascertainable.

However, the Company expects that its results of operations, including revenues, in future periods will continue to be adversely impacted by the COVID-19 pandemic and its negative effects on global economic conditions, which include a global recession.

The Company began realizing sequential increases in revenues during the September and December 2020 quarters, and the March and June 2021 quarters.

Management expects this trend to continue in 2021, especially with the distribution of vaccines, but there can be no assurance that vaccines will be distributed timely or be effective, that there will not be additional surges in COVID-19 and new stay-at-home mandates, or that the economic recovery will continue.

Summary of Quarterly Results

The Company’s revenues decreased to $141.5 million in the quarter ended December 31, 2020 from $148.1 million in the quarter ended December 31, 2019, a decrease of $6.6 million, or 4.4%.

This decrease was due to a decline in revenues in patient management and network solutions services, primarily due to lower bill volume.

Cost of revenues decreased to $110.6 million in the quarter ended December 31, 2020 from $118.8 million in the quarter ended December 31, 2019, a decrease of $8.2 million, or 6.9%.

This decrease was primarily due to the decrease of 4.4% in revenue mentioned above, in connection with which there was a decrease in salaries resulting from decreased headcount of 8% in field operations.

General and administrative expense decreased to $16.9 million in the quarter ended December 31, 2020 from $17.0 million in the quarter ended December 31, 2019, a decrease of $0.1 million, or 0.4%.

This decrease was primarily due to a decrease in information technology and legal costs offset by minor increases in other areas within general and administrative expenses.

Income tax expense decreased to $2.6 million in the quarter ended December 31, 2020 from $2.9 million in the quarter ended December 31, 2019, a decrease of $0.3 million, or 11.2%.

Income before income tax provision increased to $14.0 million in the quarter ended December 31, 2020 from $12.3 million in the quarter ended December 31, 2019, an increase of $1.7 million, or 13.9%.

The effective tax rate was 18.5% for the quarter ended December 31, 2020 compared to 23.7% in the quarter ended December 31, 2019.

Diluted weighted average shares decreased to 18.2 million shares in the quarter ended December 31, 2020 from 18.5 million shares in the quarter ended December 31, 2019, a decrease of 346,000 shares, or 1.9%, due to the weighted impact of options exercised partially offset by the weighted impact of shares repurchased.

Diluted earnings per share increased to $0.63 per share in the quarter ended December 31, 2020 from $0.50 per share in the quarter ended December 31, 2019, an increase of $0.13 per share, or 26.0%.

The Company’s revenues increased to $152.6 million in the quarter ended June 30, 2021 from $129.6 million in the quarter ended June 30, 2020, an increase of $23.0 million, or 17.8%.

This increase was due to an increase in revenues in patient management and network solutions services primarily as a result of the economy recovering from the impact of the economic shutdown due to the COVID-19 pandemic in the United States that started during the June 2020 quarter.

Cost of revenues increased to $115.4 million in the quarter ended June 30, 2021 from $103.1 million in the quarter ended June 30, 2020 , a n in crease of $12.3 million, or 11.9% .

This in crease was pri marily due to the in crease of 17.8 % in revenue mentioned above , in connection with which there was an increase in salaries resulting from in crease d headcount of 7 % in field operations.

General and administrative expense increased to $16.6 million in the quarter ended June 30, 2021 from $15.6 million in the quarter ended June 30, 2020, an increase of $1.1 million, or 6.8%.

This increase was primarily due to an increase in marketing, legal, and information technology costs.

Income tax expense increased to $3.7 million in the quarter ended June 30, 2021 from $2.6 million in the quarter ended June 30, 2020, an increase of $1.1 million, or 42.1%.

Income before income tax provision increased to $20.6 million in the quarter ended June 30, 2021 from $10.9 million in the quarter ended June 30, 2020, an increase of $9.6 million, or 88.3%.

The effective tax rate was 18.1% for the quarter ended June 30, 2021 compared to 24.0% in the quarter ended June 30, 2020.

Diluted weighted average shares increased to 18.2 million shares in the quarter ended June 30, 2021 from 18.1 million shares in the quarter ended June 30, 2020, an increase of 106,000 shares, or 0.6%, due to the weighted impact of options exercised partially offset by the weighted impact of shares repurchased under the Company’s stock repurchase program.

Diluted earnings per share increased to $0.92 per share in the quarter ended June 30, 2021 from $0.46 per share in the quarter ended June 30, 2020, an increase of $0.46 per share, or 100.0%.

The increase in diluted earnings per share was primarily due to an increase in net income.

Results of Operations for the three months ended December 31, 2020 and 2019

Results of Operations for the three months ended June 30, 2021 and 2020

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.

The percentages of total revenues attributable to patient management and network solutions services for the quarters ended December 31, 2020 and 2019 are as follows:

December 31, 2020

December 31, 2019

The percentages of total revenues attributable to patient management and network solutions services for the quarters ended June 30, 2021 and 2020 are as follows:

June 30, 2021

June 30, 2020

Patient management services

Network solutions services

The following table sets forth, for the periods indicated, the dollar amounts, dollar and percent changes, share changes, and the percentage of revenues represented by certain items reflected in the Company’s unaudited consolidated income statements for the three months ended December 31, 2020 and 2019.

The Company’s past operating results are not necessarily indicative of future operating results.

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Three Months Ended

December 31, 2020

December 31, 2019

June 30, 2021

June 30, 2020

Cost of revenues

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Earnings Per Share

Change in revenue to the quarter ended December 31, 2020 from the quarter ended December 31, 2019

Revenues decreased to $141.5 million in the quarter ended December 31, 2020 from $148.1 million in the quarter ended December 31, 2019, a decrease of $6.6 million, or 4.4%.

Patient management services revenues decreased to $96.6 million from $98.3 million, a decrease of 1.8%.

Network solutions services revenues decreased to $45.0 million from $49.8 million, a decrease of 9.7%.

The decrease in revenues was primarily due to the lower bill volume.

Bill volume decreased by 20% during the December 31, 2020 quarter compared to the December 31, 2019 quarter, which was offset by an increase in revenue per bill.

Change in revenue to the quarter ended June 30, 2021 from the quarter ended June 30, 2020

Revenues increased to $152.6 million in the quarter ended June 30, 2021 from $129.6 million in the quarter ended June 30, 2020, an increase of $23.0 million, or 17.8%.

Patient management services revenues increased to $100.4 million from $85.2 million, an increase of 17.9%.

This increase is primarily due to higher revenue from the Company’s TPA and related services.

Total new claims increased by 22% during the June 30, 2021 quarter compared to the June 30, 2020 quarter.

Network solutions services revenues increased to $52.2 million from $44.4 million, an increase of 17.6%.

This increase is primarily due to increases in enhanced bill review programs services, which resulted in higher revenue per bill.

Cost of Revenues

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Approximately 36% of the costs incurred in the field are considered field indirect costs, which support both the patient management services and network solutions operations of the Company’s field operations.

Change in cost of revenues to the quarter ended December 31, 2020 from the quarter ended December 31, 2019

Cost of revenues decreased to $110.6 million in the quarter ended December 31, 2020 from $118.8 million in the quarter ended December 31, 2019, a decrease of $8.2 million, or 6.9%.

The decrease in cost of revenues was primarily due to the decrease in total revenues of 4.4%, in connection with which there was a decrease in salaries resulting from decreased headcount of 8% in field operations, due to a reduction in headcount of 10% during the June 2020 quarter, that was slightly offset by hiring employees during the December 2020 quarter due to customer needs.

Change in cost of revenues to the quarter ended June 30, 2021 from the quarter ended June 30, 2020

Cost of revenues increased to $115.4 million in the quarter ended June 30, 2021 from $103.1 million in the quarter ended June 30, 2020, an increase of $12.3 million, or 11.9%.

The increase in cost of revenues was primarily due to the increase in total revenues of 17.8%, in connection with which there was an increase in salaries resulting from increased headcount of 7% in field operations.

General and Administrative Expense

For the quarter ended December 31, 2020, general and administrative expense consisted of approximately 49% 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.

For the quarter ended June 30, 2021, general and administrative expense consisted of approximately 51% 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 expense 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 to the quarter ended December 31, 2020 from the quarter ended December 31, 2019

General and administrative expense decreased to $16.9 million in the quarter ended December 31, 2020 from $17.0 million in the quarter ended December 31, 2019, a decrease of $0.1 million, or 0.4%.

This decrease was primarily due to a decrease in information technology and legal costs offset by minor increases in other areas within general and administrative expenses.

Income Tax Provision

Change in income tax expense to the quarter ended December 31, 2020 from the quarter ended December 31, 2019

Income tax expense decreased to $2.6 million in the quarter ended December 31, 2020 from $2.9 million in the quarter ended December 31, 2019, a decrease of $0.3 million, or 11.2%.

Income before income tax provision increased to $14.0 million in the quarter ended December 31, 2020 from $12.3 million in the quarter ended December 31, 2019, an increase of $1.7 million, or 13.9%.

The effective tax rate was 18.5% for the quarter ended December 31, 2020 compared to 23.7% in the quarter ended December 31, 2019.

The effective tax rate is less than the statutory tax rate primarily due to the impact of the stock option exercises and due to the Company’s resolutions of previously uncertain tax positions.

Results of Operations for the nine months ended December 31, 2020 and 2019

The following table sets forth, for the periods indicated, the dollar amounts, dollar and percent changes, share changes, and the percentage of revenues represented by certain items reflected in the Company’s consolidated income statements for the nine months ended December 31, 2020 and 2019.

The Company’s past operating results are not necessarily indicative of future operating results.

Nine Months Ended

December 31, 2020

December 31, 2019

Cost of revenues

Gross profit as percentage of revenue

General and administrative

General and administrative as percentage of revenue

Income before income tax provision

Income before income tax provision as

percentage of revenue

Income tax provision

Weighted Average Shares

Earnings Per Share

Change in revenue to the nine months ended December 31, 2020 from the nine months ended December 31, 2019

Revenues decreased to $407.1 million for the nine months ended December 31, 2020 from $445.2 million for the nine months ended December 31, 2019, a decrease of $38.1 million, or 8.6%.

The decrease in revenues was primarily due to the economic impact of the COVID-19 pandemic in the United States.

Patient management services revenues decreased to $272.0 million from $293.5 million, a decrease of 7.3%.

Network solutions services revenues decreased to $135.1 million from $151.7 million, a decrease of 10.9%.

Due to the COVID-19 pandemic and economic shutdown, an increase in the number of employees working remotely and fewer people leaving the house to seek medical care, the Company saw a decrease in the number of claims in both patient management and network solutions services.

The number of new claims decreased by 12%.

Cost of Revenues

Change in cost of revenues to the nine months ended December 31, 2020 from the nine months ended December 31, 2019

Cost of revenues decreased to $319.2 million in the nine months ended December 31, 2020 from $350.0 million in the nine months ended December 31, 2019, a decrease of $30.8 million, or 8.8%.

The decrease in cost of revenues was primarily due to the decrease in total revenues of 8.6%, in connection with which there was a decrease in salaries resulting from decreased headcount of 8% in field operations, due to a reduction in headcount of 10% during the June 2020 quarter, that was slightly offset by hiring employees during the December 2020 quarter due to customer needs.

General and Administrative Expense

Change in general and administrative expense to the nine months ended December 31, 2020 from the nine months ended December 31, 2019

General and administrative expense decreased to $48.1 million in the nine months ended December 31, 2020 from $49.3 million in the nine months ended December 31, 2019, a decrease of $1.2 million, or 2.4%.

The decrease in general and administrative expense was primarily due to a decrease in information systems costs.

Change in general and administrative expense to the quarter ended June 30, 2021 from the quarter ended June 30, 2020

General and administrative expense increased to $16.6 million in the quarter ended June 30, 2021 from $15.6 million in the quarter ended June 30, 2020, an increase of $1.1 million, or 6.8%.

This increase was primarily due to an increase in marketing as corporate marketing events are starting to occur again in 2021 after being cancelled in 2020 due to the COVID-19 pandemic.

Additionally, legal and information technology costs also increased.

Income Tax Provision

Change in income tax expense to the nine months ended December 31, 2020 from the nine months ended December 31, 2019

Income tax expense decreased to $8.3 million for the nine months ended December 31, 2020 from $10.3 million for the nine months ended December 31, 2019, a decrease of $2.0 million, or 19.3%.

Income before income tax provision decreased to $39.8 million in the nine months ended December 31, 2020 from $45.9 million in the nine months ended December 31, 2019, a decrease of $6.1 million, or 13.2%.

The income tax expense as a percentage of income before income taxes, also known as the effective tax rate, was 21% for the nine months ended December 31, 2020 and 22.4% for the nine months ended December 31, 2019.

The effective tax rate is less than the federal and state statutory tax rate primarily because of the impact of the stock option exercises.

Change in income tax expense to the quarter ended June 30, 2021 from the quarter ended June 30, 2020

Income tax expense increased to $3.7 million in the quarter ended June 30, 2021 from $2.6 million in the quarter ended June 30, 2020, an increase of $1.1 million, or 42.1%.

Income before income tax provision increased to $20.6 million in the quarter ended June 30, 2021 from $10.9 million in the quarter ended June 30, 2020, an increase of $9.6 million, or 88.3%.

The effective tax rate was 18.1% for the quarter ended June 30, 2021 compared to 24.0% in the quarter ended June 30, 2020.

The effective tax rate is less than the statutory tax rate primarily due to the impact of stock option exercises.

Liquidity and Capital Resources

The Company has historically funded its operations and capital expenditures primarily from cash flow from operations, and to a lesser extent, proceeds from stock option exercises.

Working capital increased to $100.4 million as of December 31, 2020 from $75.3 million as of March 31, 2020, an increase of $25.1 million primarily due to an increase in cash and cash equivalents.

Cash increased to $128.8 million as of December 31, 2020 from $83.2 million as of March 31, 2020, an increase of $45.6 million.

This is primarily due to steps the Company took in response to the COVID-19 pandemic, which included reducing its planned capital expenditures and reducing its work force.

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

The Company did not apply for governmental loans to support the Company’s operations, but has evaluated the CARES Act and has taken advantage of certain aspects of the CARES Act such as the deferral of payroll tax deposits.

Working capital increased to $114.6 million as of June 30, 2021 from $106.5 million as of March 31, 2021, an increase of $8.1 million.

Cash decreased to $138.7 million as of June 30, 2021 from $139.7 million as of March 31, 2021, a decrease of $1.1 million.

This is primarily due to an increase in net income and proceeds from stock options exercised, partially offset by cash used to repurchase shares of the Company’s common stock.

The Company did not apply for governmental loans to support the Company’s operations, but has taken advantage of certain aspects of the CARES Act such as the deferral of payroll tax deposits.

The Company deferred a total of $10.4 million in payroll tax deposits, half of which will be paid back by the end of calendar year 2021 and the other half will be paid back by the end of calendar year 2022.

The Company believes that, after the steps it took in response to the COVID-19 pandemic described above, 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

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.

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However, additional equity or debt financing may not be available when needed, with terms favorable to the Company or at all.

As of December 31, 2020, the Company had $128.8 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 December 31, 2020 along with anticipated internally-generated funds will be sufficient to meet the Company’s expected cash requirements for at least the next twelve months.

As of June 30, 2021, the Company had $138.7 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 June 30, 2021 along with anticipated internally-generated funds will be sufficient to meet the Company’s expected cash requirements for at least the next twelve months.

Consequently, estimates of the duration of the pandemic and the severity of the impact on future earnings and cash flows could change and have a material impact on our results of operations and financial condition.

The ultimate duration and impact of the COVID-19 pandemic on the Company’s business, results of operations, financial condition and cash flows is dependent on future developments, including the duration of the pandemic, the distribution and effectiveness of vaccines, repeat or cyclical outbreaks, and the related length of its impact on the global economy, which are uncertain and cannot be predicted at this time.

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Operating Activities

Nine months ended December 31, 2020 compared to nine months ended December 31, 2019

Net cash provided by operating activities increased to $73.8 million in the nine months ended December 31, 2020 from $66.3 million in the nine months ended December 31, 2019, an increase of $7.5 million.

The increase in cash flow from operating activities was primarily due to the payroll taxes deferral provided by the CARES Act offset by a decrease in net income.

Three months ended June 30, 2021 compared to three months ended June 30, 2020

Net cash provided by operating activities decreased to $14.5 million in the three months ended June 30, 2021 from $15.4 million in the three months ended June 30, 2020, a decrease of $1.0 million.

The decrease in cash flow from operating activities was primarily due to the fact that the Company had a prior year deferral of payroll taxes provided by the CARES Act that was no longer available during the current quarter.

Investing Activities

Nine months ended December 31, 2020 compared to nine months ended December 31, 2019

Net cash flow used in investing activities decreased to $13.3 million in the nine months ended December 31, 2020 from $27.7 million in the nine months ended December 31, 2019, a decrease of $14.4 million.

Capital purchases were $13.3 million for the nine months ended December 31, 2020 and $27.7 million for the nine months ended December 31, 2019.

This decrease was due to the Company reducing its planned capital expenditures due to the COVID-19 pandemic.

The Company expects to see its office space, and the associated capital expenditures, decrease over time due to more employees switching to working from home.

Three months ended June 30, 2021 compared to three months ended June 30, 2020

Net cash flow used in investing activities increased to $6.5 million in the three months ended June 30, 2021 from $3.6 million in the three months ended June 30, 2020, an increase of $2.9 million.

Capital purchases were $6.5 million for the three months ended June 30, 2021 and $3.6 million for the three months ended June 30, 2020.

This increase was due to the Company returning their capital spend to a more consistent amount while during the three months ended June 30, 2020, the Company reduced its planned capital expenditures due to the COVID-19 pandemic.

Financing Activities

Nine months ended December 31, 2020 compared to nine months ended December 31, 2019

Net cash flow used in financing activities decreased to $14.9 million for the nine months ended December 31, 2020 from $40.6 million for the nine months ended December 31, 2019, a decrease of $25.7 million.

The decrease in net cash used in financing activities was primarily due to a decrease in spending on share repurchases to $22.1 million for the nine months ended December 31, 2020, when we temporarily suspended share repurchases under our stock repurchase program, from $47.5 million for the nine months ended December 31, 2019.

Three months ended June 30, 2021 compared to three months ended June 30, 2020

Net cash flow used in financing activities increased to $9.1 million for the three months ended June 30, 2021 from $0.9 million for the three months ended June 30, 2020, an increase of $8.1 million.

The increase in net cash used in financing activities was primarily due to an increase in spending on share repurchases to $14.2 million for the three months ended June 30, 2021.

Company spent $2.4 million on share repurchases for the three months ended June 30, 2020, when the stock repurchase program was temporarily suspended due to the COVID-19 pandemic.

Contractual Obligations

The following table summarizes the Company’s contractual obligations outstanding as of December 31, 2020:

The following table summarizes the Company’s contractual obligations outstanding as of June 30, 2021:

Payments Due by Period

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Operating and finance leases

Software licenses

Operating leases are rents for the Company’s physical locations.

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The SEC defines critical accounting policies as those that require application of management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.

The Company’s significant accounting policies which have the greatest potential impact on its financial statements are more fully described in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of its Annual Report on Form 10-K for the fiscal year ended March 31, 2020, filed with the SEC on June 10, 2020.

No changes in critical accounting policies have been made since the filing of that Annual Report on Form 10-K.

Additional information related to adoption of accounting standards is provided in Notes 1 and 9 to the accompanying unaudited consolidated financial statements contained in this Quarterly Report on Form 10-Q.

Additional information related to adoption of accounting standards is provided in Note 1 to the accompanying unaudited consolidated financial statements contained in this Quarterly Report on Form 10-Q.

In many cases, the accounting treatment of a particular transaction is specifically dictated by accounting principles generally accepted in the United States of America (“GAAP”), with no need for management’s judgment in their application.

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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 2. Management’s Discussion and Analysis