CorVel Corporation Aktie

Thank you for standing by. Welcome to the CorVel Corporation's Quarterly Earnings Release Webcast.

During the course of this webcast, CorVel Corporation may make projections or other forward-looking statements regarding future events or the future financial performances of the company. CorVel wishes to caution you that these statements are only predictions that actual events or results may differ materially. CorVel refers you to the documents that the company files from time to time with the Securities and Exchange Commission, specifically the company's Form 10-K and 10-Q filed for the most recent fiscal year and quarter. These documents contain and identify important factors that could cause the actual results to differ materially from those contained in our projections or forward-looking statements.

I would now like to turn it over to Michael Combs, CorVel's Executive Chairman. Mike?

Thank you. Good morning, and thank you for joining us to review CorVel's June quarter results. Today, in my new role as Executive Chairman, I'm joined by CorVel's President and CEO, Sarah Scott; and our Chief Financial Officer, Brian Nichols.

Before we begin, I'd like to acknowledge that this quarter marks an important milestone in CorVel's leadership. Sarah's appointment as President and CEO is the culmination of more than 18 months of deliberate succession planning by our Board. Throughout that process, we evaluated the leadership capabilities needed to guide CorVel through its next phase of growth, and we are confident Sarah is the right person to lead the company. Her deep understanding of our business, our customers and our culture, combined with the strength of our executive leadership team, provides both continuity and a strong foundation for the future.

Now turning to today's agenda. I'll provide a high-level review of our financial performance. Brian will then discuss the quarter's financial results in greater detail, and Sarah will review business performance, the current operating environment, key market trends and progress across our product and service offerings.

The June quarter revenues were $260 million, 11% over the $235 million in revenue for the June 2025 quarter. The earnings per share for the quarter ended June 30, 2026, were $0.63. That's an increase of 22% over the same quarter of the prior year's EPS of $0.52. These results reflect the strength of our business, the dedication of our associates and the successful execution of our long-term strategy. As Executive Chairman, I look forward to supporting Sarah and our leadership team as they continue building on that momentum and creating long-term value for our customers and our shareholders.

Brian will now provide additional information regarding the quarter. Brian?

Thank you, Michael, and good morning, everyone. Results for the quarter included some onetime items, which can be a normal part of operating our business. Within CERIS, these items increased earnings by approximately $0.07 per share, primarily reflecting a settlement of legacy accounts receivable. Additionally, in the quarter, increases to our effective tax rate did have a slight impact on net income. However, even excluding these items, underlying performance of the business remains strong. Total net income increased 18% in the June 2026 quarter compared to the year prior, with the impact of that result balanced by both our Patient Management and Network Solutions services.

Additionally, Patient Management and Network Solutions were both equal contributors to the increases in total revenue, each growing by approximately $12.5 million. Our CERIS product was the top driver for the Network Solutions increase. Patient Management growth was primarily driven by our enterprise claims TPA program. Claims volume grew by 8% comparing the June 2026 quarter to the June 2025 quarter. This improvement marked the largest annual quarter-over-quarter increase in claims volume since December 2024.

Quarterly year-over-year new customer sales improved by over 60%, with nearly half of the growth occurring in the month of June. Over the last 12 months, new sales posted a 40% increase compared to the prior 12-month period, demonstrating the strength of our sales organization and growing demand for our solutions. Additionally, RFP volume and average opportunity value were significantly improved in this quarter compared to the same quarter of last year.

And now Sarah will discuss the market environment and industry trends shaping our business.

Thank you, Brian, and good morning. Having spent my career at CorVel, I'm pleased to be speaking with you for the first time as President and CEO. I have great confidence in our people, our strategy and the opportunities ahead. CorVel has a strong foundation from which to build for the future, and our direction remains clear. My focus will be on disciplined execution, turning our investments into measurable results and applying what works across the enterprise to create long-term value.

We see meaningful opportunities to strengthen our existing business, expand the value we provide to clients and pursue new areas of growth with the financial discipline that has long defined CorVel. In June, we marked the 35th anniversary of CorVel's NASDAQ listing by ringing the opening bell with members of our executive leadership team. This milestone reflects the dedication of our employees, the confidence of our clients and shareholders and long-standing commitment to innovation and disciplined growth.

Turning to our markets. Workers' compensation continues to be shaped by increasing claim complexity, medical cost inflation, changing workforce demographics and evolving regulatory environment. These conditions reinforce the value of an integrated operating model that combines claims management, clinical expertise, data and technology. This is an important area of differentiation for CorVel. Through CorVel Connected, we bring together workflow and data across claims management, clinical services, pharmacy, bill review, provider networks and ancillary care. This allows us to apply intelligence across the broader claim life cycle rather than to isolated tasks and remains an important source of differentiation for CorVel.

We continue expanding artificial intelligence and automation across selected claims and clinical workflows. Capabilities currently in use include claim summarization, risk identification and clinical decision support. These tools are intended to promote earlier intervention, greater consistency and improve productivity. Our approach is practical, use technology to augment professional judgment while maintaining appropriate transparency, governance and clinical oversight. We have seen encouraging results from individual deployments and as use expands, we are standardizing how we measure adoption, operational impact and client value across the enterprise to guide continued development and investments.

This quarter, we also launched Executive Advisory Services, which helps clients evaluate the overall performance of their workers' compensation and liability programs. The offering combines operational expertise, benchmarking, analytics and technology to help clients identify priorities and develop a practical road map for improving outcomes and managing costs. In addition to its potential to provide value as a stand-alone service, it can deepen our understanding of client needs and identify opportunities to expand existing relationships.

As Brian noted, claims volume increased 8% during the quarter, reflecting both new client implementation and tail claim activity. We continue investing in our people, processes and technology to support the growth while maintaining service quality and operational consistency. Medical costs remain a significant component of workers' compensation expense, particularly for out-of-network services and in states with limited fee schedules. We recently introduced a new data-driven medical bill repricing capability that complements our existing bill review and network solutions. The capability is designed to support more informed reimbursement decisions, improve processing efficiency and promote greater consistency in cost containment results.

Turning to the group health market. Health plans continue to face cost pressure, margin compression and increasing regulatory requirements, reinforcing the need for effective payment integrity solutions. CERIS is responding by expanding its capabilities, developing solutions tailored to specialized claims segments and creating additional value with existing client relationships. Industry consolidation and alliances amongst regional health plans are also changing the competitive landscape as organizations seek greater scale and efficiency. At the same time, evolving Medicare and Medicaid requirements are driving focus on sophisticated payment integrity solutions across both commercial and government health care programs.

During the quarter, CERIS continued investing in its teams and expanding its payment integrity capabilities while advancing the implementation of several new payer engagements and deepening relationships with existing clients. We also see meaningful longer-term opportunity to apply CERIS' commercial payment integrity expertise within selected government health care programs.

Capabilities such as line item bill review may be relevant as these programs seek additional ways to improve payment accuracy and manage health care costs. We will evaluate expansion based on market demand, program requirements, the investment required and potential return. Across workers' compensation and group health, our focus remains consistent, applying our operational expertise, integrated technology and data to strengthen client value and position CorVel for sustainable long-term performance.

Brian, would you provide some additional context around our cash flow, balance sheet and capital allocation?

Certainly, Sarah. During the June quarter, CorVel repurchased 377,098 shares at a cost of $21.8 million. From inception to date, the company has repurchased 115.6 million shares for an aggregated total of $910 million. Through this program, the company has now repurchased 70% of the total shares outstanding at an average price of $7.87 per share. The repurchasing of shares continues to be funded from the company's strong operating cash flow.

The company's management of receivables continues to improve and perform well. CorVel's days sales outstanding was 39 days in the June quarter, which is 1 day fewer than the same period of the previous year. At quarter end, the cash balance was $256 million. Free cash flow for the June 2026 quarter was $43.1 million, a $3.5 million increase compared to the June 2025 quarter, which was driven by quarterly year-over-year reduction in net cash flow used in investing activities.

In conclusion, fiscal responsibility remains a central focus of CorVel's financial strategy. As we survey the market spaces in which we compete, it is clear that technological and managerial agility are vital for long-term meaningful growth. To this end, CorVel's strong liquidity and debt-free position assures that we are in the best possible position to invest in our future.

Thank you for your time this morning. I will now invite the operator to open the session for questions.

[Operator Instructions]

Are there any questions?

There are not. And with that, this concludes today's webcast. You may disconnect your lines at this time. Thank you, everyone, for your participation.

Greetings, and welcome to the CorVel quarterly earnings report. [Operator Instructions] As a reminder, this conference is being recorded [Operator Instructions] It's now my pleasure to turn the call over to President and CEO, Michael Combs. Please go ahead, sir.

Thank you. Good morning. Thank you for joining us to review CorVel's March quarter and fiscal year results. Brian Nichols, CorVel's Chief Financial Officer, is on the call with me today. Today, I will review business performance, the current environment and market trends and progress on product and service offerings. So let's start with Brian providing an overview of the March quarter and fiscal year results. Brian?

Thank you, Michael, and good morning, everyone. The March quarter revenues were $249 million, an increase of 7% compared to $232 million in the March 2025 quarter. Earnings per share for the quarter ended March 31, 2026, were $0.61, up from $0.51 in the same period of the previous year.

For the fiscal year 2026, revenues were $959 million, up 7% from $896 million in the prior fiscal year, and earnings per share was $2.14, an increase of 17% compared to $1.83 for the fiscal year ended March 31, 2025. The effective tax rate increased compared to the prior year, which included a discrete benefit from stock option exercises that did not recur at similar levels.

For the fiscal year, Network Solutions delivered strong results with double-digit revenue and profit growth driven by continued momentum across its offerings and solid execution in both Property & Casualty and Commercial Health. Results within Network Solutions included the impact of certain onetime events primarily within CERIS, which contributed in part to elevated revenue and profit during the period and added $0.02 of earnings per share.

This performance was driven by accelerated post-payment recoveries associated with large payer engagement, reflecting a timing-related benefit. Importantly, this engagement, along with these additional large payer wins, is expected to contribute to ongoing revenue and profit tailwinds as these programs scale and mature.

Patient Management generated low single-digit revenue and profit growth, reflecting a stable demand environment and consistent focus on operational efficiency. The company is making targeted investments to enhance service quality and consistency as a key differentiator, while advancing systems and technology to support more scalable delivery.

Personnel levels increased during the period to support service delivery and implementation activity, reflecting near-term execution priorities. These levels are expected to normalize as deployments mature, and as automation and AI-enabled workflow enhancements are deployed through the remainder of the year and into 2027, the company expects to realize sustained productivity gains, reduce reliance on manual processes and further improve operating leverage.

Overall, the company's balanced portfolio positions us to deliver scalable growth through Network Solutions while driving increased differentiation and future growth in Patient Management through ongoing technology and AI-enabled investments.

New bookings in the March quarter increased 56% year-over-year, reflecting high demand and accelerating commercial momentum across the business. RFP activity rose 20% over the same period, supporting steady pipeline expansion. Importantly, these bookings, primarily multiyear, are expected to contribute meaningfully to revenue and profit growth in the back half of the calendar year as implementation scale.

Thank you, Brian. Now transitioning to market trends. Health care payers are operating in an increasingly complex environment with rising administrative costs, growing claim complexity and continued pressure to improve financial and clinical outcomes. In response, the market is shifting away from reactive correction towards more proactive models of payment accuracy and cost management.

CERIS is well aligned with this shift. Our platform spans both prepay and postpaid solutions, allowing us to improve accuracy earlier in the claims life cycle, while maintaining strong recovery capabilities where needed. This integrated approach enables our customers to reduce downstream work, lower administrative burden and strengthen provider partnerships.

We are seeing increasing demand for these capabilities. In 2026, we are launching 4 large payer programs, including 2 new multiyear partnerships with top 10 national payers. These enterprise scale implementations reinforce the strength of our value proposition and will contribute meaningfully to revenue and profit growth as they mature.

The industry also continues to move upstream with prepayment accuracy becoming an increasingly important strategic priority for payers. CERIS is advancing this transition by expanding prepaid solutions and migrating services historically performed postpaid in more proactive workflows. This evolution supports a more predictable and scalable revenue model while delivering earlier intervention and improved operational efficiency for our customers.

Looking ahead, we see a healthy and growing pipeline as customers prioritize cost containment, payment accuracy and operational efficiency. Supported by long-term contracts and expanding adoption of prepaid solutions, we are influencing a shift towards revenue streams with a shorter realization cycle, typically 1 to 2 months for prepaid compared to 6 months or longer for postpaid, while maintaining comparable margin profiles.

Combined with intentional investment in technology, CERIS is well positioned to deliver sustained scalable growth over time. And technology is a key enabler of this strategy. Our ongoing investment in AI and automation to enhance accuracy, increase throughput and reduce reliance on manual processes. Importantly, our approach focuses on augmenting our teams, providing actionable insights, improving decision-making and enabling clinical and operational professionals to focus on higher-value work.

This combination of technology and domain expertise is a meaningful differentiator and supports both scalability and consistency in outcomes. The workers' compensation and risk management environment continues to evolve in meaningful ways. Across the industry, we are seeing rising claims severity, increased medical costs and greater complexity driven by an aging workforce, increased comorbidities and expanded behavioral health considerations.

At the same time, our partners are navigating provider access constraints, regulatory complexity and ongoing pressure to improve outcomes while controlling costs. These dynamics are accelerating a broader shift in the market from transactional cost management towards integrated, outcome-focused claims management supported by real-time data, automation and clinical insights.

At CorVel, we have aligned our strategy and investments to meet this moment. We are advancing CorVel's connected interface within our CareMC platform, which brings together artificial intelligence, real-time data integration and embedded clinical and claims expertise into a unified operating model. This platform enables earlier risk identification, faster access to care and more informed decision support throughout the claim continuum.

By focusing our use of artificial intelligence on amplifying the work of our teams through workflow automation, predictive insights and next best action guidance, we enable claims and clinical professionals to focus on the most complex and impactful aspects of care. This approach improves outcomes while increasing scalability and productivity in an environment where labor constraints remain a challenge.

One of the key differentiators is the integration of our platform. Rather than operating as a collection of point solutions, CorVel Connected brings together claims, clinical pharmacy and network data in real time. This creates continuous feedback across the life cycle of a claim and supports more consistent outcome-driven decision-making. In effect, we are rearchitecting the claims process around actionable intelligence rather than administrative workflow.

We are also addressing cost pressures, particularly in medical, ancillary and pharmacy spend through clinically driven utilization management, expanded telemedicine capabilities and the development of bundled and episode-based care models. These initiatives are designed to improve both access and quality of care while maintaining appropriate cost control.

At the same time, we are investing in automation, API-driven connectivity and compliance infrastructure to reduce friction, ensure regulatory alignment and enable real-time exchange of data across the ecosystem and with our partners. Taken together, these efforts reflect a consistent strategy to move beyond traditional claims administration and deliver a technology-enabled, clinically integrated model focused on total claims outcomes.

CorVel is well positioned not only to navigate the current environment but also to gain market share as partners increasingly prioritize scalable, intelligent platforms that deliver both clinical and financial results with greater consistency and transparency.

As we further advance automation and AI-enabled capabilities across our platform, the broader operating environment is also evolving rapidly. The increasing sophistication and speed of AI-driven vulnerability discovery and exploitation are reshaping cybersecurity and operational risk dynamics across the industry.

In response, management is further enhancing governance framework, strengthening controls and investing in resilience initiatives designed to support more proactive risk identification and mitigation. These efforts align with growing customer demand for solutions that are adaptive, auditable and durable under heightened operational and regulatory scrutiny.

Brian, would you now provide additional texture on the financial results?

Certainly, Michael, CorVel's net income for fiscal year 2026 is $110 million, nearly a 14% increase over fiscal year 2025 at $95 million. The fourth quarter contributed $31 million to this year's income total, which is $5 million higher than the same quarter of fiscal year 2025.

While the increase in our effective tax rate did temper growth to earnings, much of that increase was offset by business growth among various Network Solutions products referenced earlier, along with the reduced general and administrative costs.

During the fourth quarter, general and administrative expenses decreased by $1.3 million compared to the same quarter of fiscal year 2025, bringing G&A down from 10.6% of revenue to 9.4%. CorVel's operating margin for the fiscal year 2026 was 15%, which was an improvement of 1.4% over 2025.

During the 2026 fiscal year, CorVel repurchased 872,744 shares at a cost of $56 million. 366,306 of the shares were repurchased during the fourth quarter at a cost of $20 million. From inception to date, the company has repurchased 115.3 million shares for an aggregated total of $868 million.

Through this program, the company has now repurchased 69% of total shares outstanding at an average price of $7.70 per share. The repurchasing of shares continues to be funded from the company's strong operating cash flow.

CorVel's days sales outstanding was 37 days in the March 2026 quarter, which is an improvement of 4 days compared to the same period of the previous year. At fiscal year-end, the cash balance was $233 million. Free cash flow was $66 million, which is $7 million increase compared to fiscal year 2025.

CorVel's robust and debt-free balance sheet uniquely positions us for accelerating strategic product expansion, technological advancement and acquisition opportunities. Our fiscal strategy remains committed to responsible management of financial risks to protect our agility for investing in development.

Thank you for your time this morning. I will now invite the operator to open the session for questions.

[Operator Instructions]

Thank you so much, Kevin. We're going to go ahead and return the call to the operator.

Thank you. There are no questions at this time. Ladies and gentlemen, that does conclude today's teleconference and webcast. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.

Thank you for standing by. Welcome to CorVel Corporation Quarterly Earnings Release Webcast. During the course of this webcast, CorVel Corporation will make projections or other forward-looking statements regarding future events or future financial performances of the company. CorVel wishes to caution you that these statements are only predictions and that actual events or results may differ materially.

CorVel refers you to the documents in the company's files from time to time with the Securities and Exchange Commission, specifically the company's last Form 10-K and 10-Q filed for the most recent fiscal year and quarter. These documents contain and identify important factors that could cause actual results to differ materially from those contained in our projections and forward-looking statements. I would now like to turn the call over to Michael Combs President and Chief Executive Officer. Mike, you may proceed.

Thank you. Good morning, and thank you for joining us to review CorVel's December quarter results. I'm very pleased to have Brian Nichols, Corvel's Chief Financial Officer on the call to take.

Thank you, Michael, and good morning, everyone. It's a pleasure to join the call this morning. Today, we're going to review operational performance, including 2025 highlights, a deeper dive into the value AI is bringing to our business model, key growth drivers and the market trends that are shaping our business.

Brian, let's start with an overview of the quarter's financial results.

Absolutely, Michael. CorVel's revenue for the 9 months ending December 31, 2025, were $710 million, a 7% increase from $664 million at the same period of the previous fiscal year. Fiscal year-to-date earnings per share were $1.53 up 16% compared to $1.32 during the 9 months ending December 31, 2024. The December 2025 quarter ended with revenues at $236 million, 3% above the $228 million achieved in the December 2024 quarter.

Earnings per share for the December 2025 quarter were $0.47, an increase of 2% over the same quarter of the prior year's EPS at $0.46. I would like to remind our listeners that the earnings per share results from the quarter and annual comparisons have been adjusted to account for the 3-for-1 stock split reported in December 2024. In comparing the 2024 and 2025 December quarters, the allocation of general and administrative expenses decreased from 9.7% to 9.6%, and margin had a commensurate improvement of 23.2% to 23.3%.

However, an increase to the effective tax rate did temper earnings results. Overall, CorVel's operations netted income of $24.1 million in the December 2025 quarter which was an increase from $23.8 million in December of 2024. Throughout the fiscal year, products highlighting the growth among network solutions and patient management services were independent medical evaluations, Sirius ancillary care solutions, medical bill view and claims management.

In addition to financial results, I would like -- also like to discuss noteworthy trends in the workers' compensation market. These trends include lower volume of work-related injuries, increasing injury severity, rising medical costs and shifts within the labor market. The U.S. Department of Labor recently reported a small decline in total work-related injuries from 2023 to 2024. While this report result reflects results from more than a year ago, the trend is consistent with what has been occurring over the past decade and was magnified at the onset of the global pandemic in 2020.

It is no secret that a reduction in work related injuries equates to a lower volume of workers' compensation claims. CorVel certainly recognizes this trend. However, we also recognize the past declining volume of work-related injuries alone may not gauge the viability and value of the managed workers' compensation market and other changes throughout the industry may be pointing toward growth opportunities.

While work-related injuries have been moving in a decreasing pattern, the inverse response is occurring for injury severity and medical cost per claim. According to the National Council on Compensation Insurance, average medical and lost time claim severity increased by 6% in 2024. And resulting in elevated medical costs and extended duration to injury claims.

Further, the report indicated 5 consecutive years with an increase. The cost of medical compensation claims are also being impacted by medical inflation. The Workers' Compensation Research Institute noted rising medical costs within a range of 5% to 12% among multiple states. The inflationary change can be attributed to increased build charges for medical providers an allowance of higher payments among multiple states medical fee schedules.

Labor market shifts, such as increasing job openings among allocations requiring moderate to heavy levels of physical demand can also be important to consider when valuing the managed workers' compensation industry. According to the U.S. Bureau of Labor Statistics, new job openings are expected to maintain or exceed current growth averages among several physically demanding occupations, including transportation, construction, maintenance, food service, child care, recreation, hospitality and health care. These occupations are likely to be more susceptible to work-related injuries than those with sedentary or less physically to manage job functions.

Collectively, the trend I've shared support the argument that the workers' compensation market is a growing industry for organizations equipped to address its challenges.

CorVel's focus on product innovation, savings through clinical outcomes and effective management allow us to not only adapt to these industry shifts, but also leverage them for continued market share gains. And with that overview of our financial performance, I'll now turn the call over to our CEO, Michael Combs, to discuss operational progress and strategic priorities.

Thank you, Brian. The December quarter results were modest relative to expectations, primarily reflecting short-term operational factors rather than a change in fundamentals, including, as Brian mentioned, the normalization of our effective tax rate after an extended period of lower than average levels. I want to transition to highlights from 2025. The net revenue retention for business was 107%. We had a 44% close rate on new business opportunities, and we experienced strong incremental growth with existing partners.

On the AI front, increased traction with our AI initiatives and following our thematically the areas of focus, augmenting the development process, increasing operational efficiency elevating the work of our team members and enhancing outcomes achieved for our partners.

In addition, there was a technology-centric acquisition that we closed at the end of June. While relatively small, we're realizing meaningful increases in efficiency and effectiveness in the health payment integrity services for the commercial health segment through the integration of related logic and functionality through the acquisition. The realized ROI and impact are consistent with optimistic expectations.

Continuing on AI and have worked harnessing AI and automation opportunities across our business, this is a little more detail in specific projects. As lower value activities are increasingly automated, we expect meaningful reductions in service delivery costs while simultaneously improving client outcomes. Although pricing pressure is likely over time, we expect cost efficiencies to more than offset any associated fee adjustments.

The near-term implications of AI on our business are becoming clearer and focus they are broad, spanning our products, services and software development processes and following are a few specific examples. In the commercial health business, we routinely receive medical claim volumes that surpass processing capacity.

While some claims present limited savings potential, others offer significant higher value for our partners. Because each claim we select incurs a cost of process regardless of its ultimate savings, disciplined selection is critical. We are increasingly leveraging technology to prioritize those claims where we can deliver the greatest impact while also generating the strongest return on investment for CorVel.

In claims management, transitions and adjustor assignments often create inefficiencies as adjusters take on large portfolios of owned claims. With roughly 125 active cases achieving timely visibility into risk, complexity and required actions for assigned plans can be challenging. We are deploying technology to augment attend adjust our decision-making providing rapid understanding of claiming nuances and clear prioritization of those tasks requiring immediate attention.

Also in claims management, there are many stakeholders, partners, health care providers, clinical team members all requiring information. We're leveraging technology to provide a seamless interface, which allows stakeholders to self-service, obtaining real-time information for many even complex inquiries.

In case management, AI is enhancing the efficiency and scalability of our team's operations. We're using AI to automate documentation, data synthesis and routine workflows which will allow clinicians to manage higher caseloads and focus on complex high-impact interventions.

Financially, this supports margin expansion through productivity gains, while maintaining an outcome-driven service model. Strategically, AI strengthens our platform by embedding decision support into workflows that are difficult to replicate without CorVel's data, clinical expertise and regulatory experience.

And finally, Agentic AI is transforming the software development process from ideation to deployment, enabling us to accomplish more quickly. We have a very compelling software development road map for 2026 and this is certainly not a comprehensive list, but a few representative examples of areas of focus.

In the Property and Casualty business by intentionally applying technology across our claims and case management systems, introducing intelligence earlier in the process, reducing administrative friction, modernizing data exchange and leveraging automation and AI, we deliver a fundamentally simpler, more efficient and more accurate experience.

As buyers prioritize efficiency, transparency outcomes and cost, CorVel is well positioned to generate differentiated results while scaling in 2026 and beyond. On the health care payment integrity front, this is our Ceris division. The market continues to evolve as medical costs rise while reimbursement rates remain flat, intensifying pressure on payers to control costs.

In response, health plans are increasingly turning to technology, particularly AI and automation to improve accuracy, identifying errors earlier in the claims life cycle and strengthening financial performance. At the same time, ongoing vendor consolidation is prompting payers to reevaluate their partnerships. With a growing preference for proven scalable vendors, it can consistently deliver measurable results, operational stability and long-term value.

Those combines deeper clinical expertise and efficient proven workflows to identify issues before claims are paid. We continue to advance the use of AI, machine learning and predictive analytics to deliver solutions that are more accurate, scalable and impactful, driving increased business and value for our partners. This momentum is reflected in the operating results.

We have strengthened our market position, created opportunities to expand across additional products and lines of business and seen heightened interest in CERIS from large industry players seeking differentiated data-driven capabilities -- we also accelerated our technology road map through the strategic acquisition mentioned earlier on the call, integration is progressing ahead of plan, and we are already seeing the benefits from faster innovation and enhanced capabilities.

Of note, the U.S. Department of Justice recently released its False Claims Act enforcement statistics which reported that settlements and judgments reached record levels in 2025 with recoveries exceeding $6.8 billion. Of that, $5.7 billion in total recoveries were in the health care sector. Services payment integrity and fraud waste and abuse services help partners address this risk by utilizing prepaid services to prevent in profit payments before they occur and identifying avert billing patterns early while postpaid services can recoup dollars due to the same issues -- these capabilities reduce exposure to false claims and deliver measurable financial impact through avoided or reclaimed over payments and lower medical cost trends.

Taken together, these dynamics underscore the growing importance of proactive technology-enabled payment integrity solutions. CERIS is well positioned to meet this need by combining the advanced analytics, clinical rigor the scalable operations to help partners reduce risk, improve compliance and meaningful impact to medical costs.

As regulatory scrutiny intensifies and financial pressure on payers continue our ability to prevent improper payments before they occur while efficiently recovering dollars post payment create sustained value for our partners. With strong operational momentum, an accelerated technology road map and increasing interest from larger industry participants CERIS remains focused on expanding its role as a trusted differentiated partner in an increasingly complex health care landscape.

Brian, would you provide the additional financial metrics for the quarter?

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

CorVel's days sales outstanding was 39 days in the December 2025 quarter which is an improvement of 3 days compared to the same period a year ago. The quarter ending cash balance was $230 million. Fiscal year-to-date free cash flow is $90 million, with $36 million having been used for capital expenditures. In the same period of the previous fiscal year, capital expenditures were $24 million to $27 million. This change in CapEx is a result of increased spending on our proprietary software development and software licenses.

CorVel financial strategy will remain committed to responsible management of financial risk. Conversely, many competing organizations throughout the market spaces in which we operate are faced with the costs and challenges of considerable debt obligations and consequently, may lack the financial agility needed for service integration and innovation.

We believe that our strong and debt-free balance sheet uniquely positions CorVel for continued strategic product expansion, technological advancement and acquisition opportunities.

Thank you for your time this morning. I will now invite the operator to open the session for questions.

[Operator Instructions]

We will pause for a brief moment to see if the questions come in.

You have a web question from Adam -- can you provide more detail on the deceleration of year-over-year revenue growth for each segment. There's been a long track record of quarter-over-quarter revenue growth that ended this quarter, what drove that.

And we're live, yes? Yes, I would say we look at the principles and fundamentals on which the organization was structured. And revenue growth over our history. Certainly, if you look at the last 10 years, it isn't a straight line necessarily. So we believe that the focus we have with the investment in technology, our reputation in the business and the trajectory, the momentum we have indicates that the historical pattern will continue.

So we're not looking at a small cycle change, if you will, as an indication of future results.

Online from Jesse, can you please provide more context around segment growth rate.

CorVel operates within a single segment and the services that we provide within that segment are patient management, network and network solutions. As a policy, we do not break up the various products and report those separately. Rather, our entire company and all of our products operate through 1 single segment.

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

Thank you for joining the call today.

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

Thank you for standing by. Welcome to the CorVel Corporation Quarterly Earnings Release Webcast. During the course of this webcast, CorVel Corporation may make projections or other forward-looking statements regarding future events or the future financial performances of the company. CorVel wishes to caution you that these statements are only predictions and that actual events or results may differ materially. CorVel refers you to the documents that the company files from time to time with the Securities and Exchange Commission, specifically the company's last Form 10-K and 10-Q filed for the most recent fiscal year and quarter. These documents contain and identify important factors that could cause the actual results to differ materially from those contained in our projections or forward-looking statements.

I would now like to turn it over to Michael Combs, President and Chief Executive Officer.

Good morning. Thank you for joining us to review CorVel's September quarter results. I'm very pleased to welcome Brian Nichols, CorVel's Chief Financial Officer to the call today.

Thank you, Michael, and good morning, everyone. It's a pleasure to join the call this morning.

Today, we're going to review our operational performance, key growth drivers and the market trends that are shaping our business. I'll also discuss how we're positioning the company to capture emerging opportunities and manage associated risks. Finally, I'll provide a closer look at our AI initiatives, highlighting the tangible benefits we're already seeing as well as the road map ahead. Brian, let's start with an overview of the quarter's financial results. After that, would you please share a bit about your journey at CorVel and your perspective on the opportunities you see in your new role to further strengthen the organization.

Certainly. The September quarter revenues were $240 million, 7% above the $224 million in the September 2024 quarter. The earnings per share for the quarter ending September 30, 2025 were $0.54, an increase of 20% over the same quarter of the prior year's EPS of $0.45. As a reminder to our listeners, the earnings per share results from the quarter and annual comparisons have been adjusted to account for the 3-for-1 stock split reported in the December 2024. It's not unusual to have onetime events. Sometimes they work in our favor. Other times, like the September quarter results, they do not. The combined effect of onetime events in the September quarter softened the increase in EPS by approximately 9 percentage points.

Overall, the organization's fundamentals are strong. Regarding my journey at CorVel, I've been with the company for 15 years, much of that time spent with our ancillary care program. I started as a patient care coordinator providing administrative support for physical therapy cases. Towards the end of my first year, I was promoted to Manager and then the Director over ancillary care operations a few years later. In 2016, I accepted the Vice President Network Solutions role, which included all product and operational management of our ancillary care services.

Subsequently, pharmacy, IME and PPO programs were added to my span of management, giving me an opportunity to oversee a large portion of our network solutions and patient management services. One of my goals now as CFO is to leverage my past CorVel product and operations experience in building resources and tools that will empower our business managers for maximizing growth opportunities.

Thank you, Brian. I want to dive into some market trends. There are 3 key trends that I'll discuss this morning: the first, our challenges in the workers' compensation labor market; the second, in the Commercial Health segment, our CERiS division is operating in an environment of elevated pricing pressure, driving an increased focus on delivering savings and operational efficiencies; and the third market trend, the most significant of the 3 I will review is the emergence of Agentic AI and its implications for our business. Specifically, how we're leveraging this technology to implement enhancements to our systems more quickly, how we're leveraging it to generate optimized results for our partners and also to ameliorate the impact of the first 2 trends, the workers' compensation labor market and the commercial health pricing pressure.

But let's start with the labor market. The workers' compensation field is experiencing what I define as a demographic shift. The industry is losing experienced professionals faster than it's attracting the replacements. Many entered the field in the '80s and '90s, that's in 1980s and '90s, when workers' compensation legislation was evolving rapidly, and they're now approaching retirement age. Meanwhile, workers' compensation has not, let's say, traditionally been due to the destination industry for new graduates. It receives little exposure in business, insurance or health care educational programs.

As a result, it has become increasingly challenging to recruit and retain experienced claims management, underwriting professionals. So what's CorVel's response? Well, we're investing in people, while this is an industry-wide challenge, we see the opportunity in it through CorVel University. Now in its fourth class, we are bringing new professionals into both the industry and into CorVel itself. The program has delivered exceptional retention rates and continues to build the next generation of experts who serve our partners. Although, we'll acknowledge, we can't single handily solve the workforce challenges across the entire industry, CorVel U is making a measurable difference for our company and for our clients.

At the same time, we're experiencing these labor challenges. Technological innovation is arriving and what I would say is just the right moment to augment and accelerate workforce development. Generative AI and now Agentic AI are maturing rapidly, enabling us to rethink how work gets done across our business. Agentic AI represents the next evolution in artificial intelligence. Systems did not only analyze data, but also take actions to complete tasks and deliver outcomes. By automating multistep processes, Agentic AI can enhance productivity, reduce costs and accelerate decision-making across the enterprise.

And I would say, parenthetically, that Agentic AI is going to have a greater impact than we've seen in the last couple of years with Generative AI, unless I'm entirely accurate. The brain underlying Agentic AI is, in fact, Generative AI. At a very high level, we are leveraging Agentic AI to simplify the work of our claims professionals as one example, allowing them to focus on high-value judgment and care coordination rather than the administrative tasks. Agentic AI is also transforming the development of software itself rather than coding every line manually, developers can now orchestrate and audit intelligent, task-specific AI agents that execute components of a software build, what once took weeks can now in many cases, be completed in days.

For CorVel, this shift means faster feature delivery within our business systems, greater agility in applying system enhancements that improve outcomes for our partners, improved system interoperability across the care continuum. And overall, we'll see increased operating leverage. And I want to point out that while the pace of AI innovation is accelerating, it is essential to note that our commitment to responsible AI principles remains unchanged, including continuous evaluation for bias, ensuring model accuracy and promoting transparency and how AI supports our processes or approach centers on human expertise directing AI, not the other way around, we use Agentic AI to enhance creativity, decision-making and efficiency, always with people at the core.

The expertise of our teams is foundational to our success and the investments in training, development and tools amplify the capabilities and the quality of service we deliver. Now transitioning to the different segments within the organization, the CERiS continues to innovate under increasing pricing pressure from its payer partners as well as the expectation to deliver incremental additional savings each and every year. Recent AI-driven enhancements have improved both capacity and precision in identifying medical bills and claims with potential savings. By automating and augmenting review selection, we can now review more claims and identify savings more effectively.

Our adoption of advanced automation, analytics and one-touch processing enables us to conduct a greater number of reviews per claim, thereby increasing both partner savings and CorVel's revenue opportunities. We've also prioritized transparency and explainability in our results, and this is incredibly important in the industry. This supports our strong acceptance rate amongst payers and medical partners.

Finally, AI integration has strengthened our agility in adapting to regulatory and coding rule changes, keeping CERiS at the forefront of the industry and compliance innovation -- industry compliance and innovation. Now moving to the Property and Casualty space. We've implemented supervisory quality and compliance agents that enhance claims accuracy and ensure the timely completion of tasks. Additionally, we've added an enhanced claims workflow that minimizes context switching, thereby improving efficiency and throughput across teams. We are also building a new digital communication platform for injured workers, integrated into our proprietary claims CareMC platform. The portal supports AI-powered summarization of communications, data extraction from transcripts and the creation of intelligent alerts, all designed to augment the work of claims professional, supervisors and managers.

In summary, CorVel is addressing industry challenges and leveraging emerging technology to its vantage. Through CorVel University, we're developing new talent, through Agentic AI we're empowering that talent with more intelligent systems, faster processes, optimize results and deeper insights. Together, these initiatives are positioning CorVel to continue delivering superior outcomes for our partners and the patients we serve.

And regarding our product development organization, effectively leveraging technology is perhaps now more critical than at any point in CorVel's history. We're intensely focused on building our competency with AI, particularly now Agentic AI and expanding our capacity to enhance our systems and deliver optimized results to our partners.

Now moving to sales management. Expansion of business with existing partners has been a key driver of growth this year. We are proud of the consistently high-quality results our operation team delivers. Organic growth with our existing partners by the addition of new services and offerings only occurs when we're delivering quality results for the services we already offer. Momentum in CorVel's Payment Integrity Health Solution has also continued during the September quarter.

Our growing customer base, strategic positioning within each partnership and enhanced capabilities and cost containment services powered by AI, distinguish CERiS in the market and provide a strong foundation to build upon. Brian, would you please provide an update on the acquisition completed in June, the additional focus on mergers and acquisitions as well as further details on the quarter's results.

As reviewed in the August earnings release, CorVel completed the acquisition of assets and key talent from a privately held technology firm at the end of the June quarter. The assets acquired and the talent now engaged with CorVel's existing AI team, are driving the progress outlined on today's call. We're pleased with the current trajectory, the meaningful impact already realized and the pipeline of additional enhancement. To further progress our activity in the M&A space, we will add dedicated resources to focus on synergistic opportunities. The priority is to expand our suite of offerings to current partners and further enhance our existing team's technological expertise and capacity.

And finally, I would like to review some additional financial items. Revenue growth for the September 2025 quarter was driven by both our Patient Management and Network Solutions segment. As Michael noted earlier, organic growth and expanded activity with existing partners contribute meaningfully to performance across both areas. Within patient management services, claims operations generated approximately $4 million in revenue growth. Network Solutions increased by $12 million, primarily reflecting higher utilization of our CERiS, Ancillary Care and Bill Review Solutions.

The quarter also resulted in improved gross margin and net income, reaching $28 million, up from $23 million in the previous year. Ongoing product enhancements and strong operational management have generated lower direct costs. Those efficiencies along with sustained responsible management of general and administrative expenses have placed CorVel in a position where revenue growth has outpaced expenses.

During the quarter, CorVel repurchased 143,774 shares at a cost of $12.8 million. From inception to date, the company has repurchased 114.7 million shares for an aggregated total of $854 million. Through this program, the company has now repurchased 69% of the total shares outstanding. The repurchasing of shares continues to be funded from the company's strong operating cash flow. CorVel's days sales outstanding was 40 days in the September quarter, an improvement of 2 days compared to the same period a year ago. The quarter ending cash balance was $207 million, and in contrast to many other organizations in the industry who are facing increasing debt loads and associated interest costs. CorVel remains able to manage operational risk. The strong and debt-free balance sheet generates improved earnings and positions CorVel well for continued product expansion and acquisition opportunities.

Thank you for your time this morning. I will now invite the operator to open the session for questions.

[Operator Instructions]

Thank you. Ladies and gentlemen, this concludes our Q&A session. And thus, concludes our call today. We thank you for your interest and participation. You may now disconnect your lines.