CorVel Corporation (CRVL) Q3 2026 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call reveals mixed signals. Financial performance shows moderate growth in revenue and EPS, but management's vague responses about revenue deceleration raise concerns. The significant share repurchase program is a positive factor, but competitive pressures, regulatory risks, and potential inefficiencies are negatives. Considering the company's mid-cap size, these factors suggest a neutral stock price movement in the short term.

Key Financial Performance

Revenue for the 9 months ending December 31, 2025 $710 million, a 7% increase from $664 million at the same period of the previous fiscal year. The increase is attributed to growth among Network Solutions and Patient Management Services.

Earnings per share (EPS) for the 9 months ending December 31, 2025 $1.53, up 16% compared to $1.32 during the 9 months ending December 31, 2024. The increase reflects operational improvements and adjusted comparisons due to a 3-for-1 stock split in December 2024.

Revenue for the December 2025 quarter $236 million, 3% above the $228 million achieved in the December 2024 quarter. The increase is attributed to operational growth.

Earnings per share (EPS) for the December 2025 quarter $0.47, an increase of 2% over the same quarter of the prior year's EPS at $0.46. The increase was tempered by an increase in the effective tax rate.

General and administrative expenses for December quarters (2024 vs. 2025) Decreased from 9.7% to 9.6%, leading to a margin improvement from 23.2% to 23.3%. The improvement reflects better cost management.

Net income for the December 2025 quarter $24.1 million, an increase from $23.8 million in December 2024. The increase is attributed to operational growth and cost management.

Days sales outstanding (DSO) for the December 2025 quarter 39 days, an improvement of 3 days compared to the same period a year ago. The improvement reflects better receivables management.

Quarter ending cash balance for December 2025 $230 million. This reflects strong operating cash flow.

Fiscal year-to-date free cash flow for 2025 $90 million, with $36 million used for capital expenditures. The increase in CapEx compared to $24 million to $27 million in the previous fiscal year is due to spending on proprietary software development and licenses.

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Operating Highlights

AI Initiatives: CorVel is leveraging AI to automate lower-value activities, prioritize high-impact claims, and enhance decision-making in claims management. This includes automating documentation and workflows in case management to improve efficiency and scalability.

Technology-Centric Acquisition: A small acquisition in June 2025 has improved efficiency and effectiveness in health payment integrity services, with realized ROI and impact aligning with expectations.

Workers' Compensation Market Trends: Despite a decline in work-related injuries, there is an increase in injury severity and medical costs per claim. CorVel is focusing on product innovation and effective management to adapt to these trends and leverage growth opportunities.

Health Care Payment Integrity: The CERIS division is addressing rising medical costs and regulatory scrutiny by using AI and automation to improve payment accuracy and reduce improper payments. This has strengthened CorVel's market position and created opportunities for expansion.

Operational Efficiency: AI and automation are reducing service delivery costs, improving client outcomes, and enabling clinicians to manage higher caseloads. This supports margin expansion and productivity gains.

Financial Metrics: CorVel's revenue for the 9 months ending December 31, 2025, was $710 million, a 7% increase from the previous year. Earnings per share increased by 16% year-over-year. The company also repurchased shares worth $13.4 million during the quarter.

Strategic Focus on AI: CorVel is embedding AI into workflows to enhance decision support and operational efficiency. This includes leveraging AI in claims management, case management, and health care payment integrity to deliver scalable and impactful solutions.

Technology Roadmap: CorVel has an accelerated technology roadmap for 2026, focusing on modernizing data exchange, reducing administrative friction, and leveraging AI for efficiency and accuracy.

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Risk or Challenges

Lower volume of work-related injuries: The reduction in work-related injuries equates to a lower volume of workers' compensation claims, which could impact the company's revenue from this segment.

Increasing injury severity and rising medical costs: The average medical and lost time claim severity increased by 6% in 2024, along with rising medical costs due to inflation and higher charges from medical providers. This could increase the cost burden on the company.

Medical inflation: Rising medical costs within a range of 5% to 12% among multiple states due to increased charges and higher payments allowed by state medical fee schedules could impact profitability.

Pricing pressure from AI-driven cost efficiencies: While AI is expected to reduce service delivery costs, there is a likelihood of pricing pressure over time, which could offset cost efficiencies.

Labor market shifts: Increasing job openings in physically demanding occupations could lead to higher susceptibility to work-related injuries, potentially increasing claims complexity and costs.

Regulatory scrutiny and False Claims Act enforcement: The U.S. Department of Justice reported record levels of settlements and judgments in 2025, with $5.7 billion in recoveries in the healthcare sector. This intensifies the need for compliance and exposes the company to potential risks of improper payments.

Competitive pressures and vendor consolidation: Ongoing vendor consolidation is prompting payers to reevaluate partnerships, increasing competition and the need for differentiation.

Operational inefficiencies in claims management: Transitions in Adjuster assignments and large portfolios of open claims create inefficiencies, which could impact service quality and operational costs.

Dependence on technology and AI: The company's reliance on AI and automation for operational efficiency and cost reduction introduces risks related to technology implementation, maintenance, and potential failures.

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Guidance & Outlook

AI and Automation: CorVel is leveraging AI and automation to reduce service delivery costs, improve client outcomes, and enhance operational efficiency. Specific initiatives include automating lower-value activities, prioritizing high-value claims, and augmenting adjuster decision-making. These efforts are expected to result in meaningful cost efficiencies and margin expansion.

Technology Roadmap for 2026: CorVel has a compelling software development roadmap for 2026, focusing on modernizing data exchange, reducing administrative friction, and leveraging AI to improve efficiency and accuracy in claims and case management systems.

CERIS Division Growth: The CERIS division is positioned to address rising medical costs and payer pressures through advanced analytics, AI, and automation. The division aims to expand its role in payment integrity solutions, leveraging technology to prevent improper payments and recover overpayments. Integration of a recent acquisition is progressing ahead of plan, enhancing capabilities and innovation.

Market Trends in Workers' Compensation: CorVel anticipates growth opportunities in the workers' compensation market despite declining work-related injury volumes. Increasing injury severity, rising medical costs, and labor market shifts are expected to drive demand for managed workers' compensation services.

Health Care Payment Integrity: CorVel is focusing on proactive, technology-enabled payment integrity solutions to address regulatory scrutiny and financial pressures on payers. The company aims to reduce improper payments and improve compliance, creating sustained value for partners.

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Shareholder Return Plan

Share Repurchase Program: During the quarter, CorVel repurchased 185,559 shares at a cost of $13.4 million. From inception to date, the company has repurchased 114.9 million shares for an aggregated total of $868 million. Through this program, the company has now repurchased 69% of the total shares outstanding at an average price of $7.55 per share. The repurchasing of shares continues to be funded from the company's strong operating cash flow.

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Key Q&A

Q:Can you provide more detail on the deceleration of year-over-year revenue growth for each segment? What drove the end of the long track record of quarter-over-quarter revenue growth this quarter?

A:Michael Combs stated that revenue growth over the company's history has not been a straight line and emphasized the organization's focus on investment in technology, reputation, and momentum. He suggested that the historical growth pattern is expected to continue and downplayed the significance of the current small cycle change as an indicator of future results.

Q:Can you please provide more context around segment growth rate?

A:Brian Nichols explained that CorVel operates within a single segment, encompassing Patient Management Network and Network Solutions services. He stated that the company does not break up or report various products separately, as all products operate through one single segment.

Q:Review of Unclear Management Responses

A:Management avoided providing specific details on the deceleration of year-over-year revenue growth for each segment and did not directly address the reasons behind the end of the quarter-over-quarter revenue growth streak. Additionally, they did not provide detailed context around segment growth rates, citing a policy of not breaking up or reporting products separately.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

CRVL Transcript

CorVel Corporation (CRVL) Q3 2026 Earnings Call Transcript

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CorVel Corporation (CRVL) Q2 2026 Earnings Call Prepared Remarks Transcript

Positive11-4

The earnings call summary highlights strong revenue growth, improved EPS, and a robust financial position with no debt. The company is leveraging AI for efficiency and has a strategic focus on M&A. Despite risks in labor market challenges and pricing pressure, the share repurchase program and strong cash flow indicate confidence in future prospects. The overall sentiment is positive, with potential for stock price increase, especially given the company's market cap of approximately $4.3 billion.

Earnings call transcript: CorVel Corp Q4 2025 shows revenue growth, stock dips

Positive5-23

The earnings call summary shows strong financial performance with significant increases in revenue and EPS, a robust share repurchase program, and investment in AI and technological innovation. Despite macroeconomic uncertainties, management reports minimal direct impact, and the company is leveraging AI for operational efficiency. The Q&A section did not reveal significant negative concerns, although some management responses lacked detail. Overall, the strong financial results, AI advancements, and shareholder returns indicate a positive outlook, suggesting a likely stock price increase of 2% to 8%.

Earnings call transcript: CorVel Q4 2024 sees strong EPS growth, stock surges

Positive2-10

The earnings call reveals strong financial performance with a 13% revenue increase and 39% EPS growth. The company is leveraging AI for efficiency, which is positively received by analysts. Share repurchase indicates confidence in financial health. Despite regulatory and competitive risks, the optimistic guidance and strategic use of technology suggest a positive market reaction. The market cap suggests moderate volatility, likely resulting in a 2% to 8% stock price increase.

CRVL Report

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