CORVEL CORP (CRVL)

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q for our first fiscal quarter ended June 30, 2026 (this “Quarterly Report”) may include certain forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including (without limitation) statements with respect to anticipated future operating and financial performance, growth and acquisition opportunities and other similar forecasts and statements of expectation. Words such as “expects,” “anticipates,” “intends,” “plans,” “predicts,” “believes,” “seeks,” “estimates,” “potential,” “continue,” “strive,” “ongoing,” “may,” “will,” “would,” “could,” “should,” as well as variations of these words and similar expressions, are intended to identify these forward-looking statements. Forward-looking statements made by the Company and its management are based on estimates, projections, beliefs and assumptions of management at the time of such statements and are not guarantees of future performance.

The Company disclaims any obligations to update or revise any forward-looking statement based on the occurrence of future events, the receipt of new information or otherwise. Actual future performance, outcomes, and results may differ materially from those expressed in forward-looking statements made by the Company and its management as a result of a number of risks, uncertainties and assumptions. Representative examples of these factors include (without limitation): general industry and economic conditions, including a decreasing number of national claims based on the number of injured workers; competition from other managed care companies and third party administrators; the Company’s ability to renew or maintain contracts with its customers on favorable terms or at all; the ability to expand certain areas of the Company’s business; growth in the Company’s sale of third-party administrator (“TPA”) services; shifts in customer demands; increases in operating expenses, including employee wages, benefits and medical inflation; the ability of the Company to produce market-competitive software; cost of capital and capital requirements; the Company’s ability to attract and retain key personnel; the impact of potential cybersecurity incidents on the Company’s business; existing and possible litigation and legal liability in the course of operations and the Company’s ability to resolve such litigation; changes in regulations affecting workers compensation, insurance and healthcare industries in general; governmental and public policy changes, including but not limited to legislative and administrative law and rule implementation or change; the impact of recently issued accounting standards on the Company’s consolidated financial statements; the availability of financing in the amounts, at the times, and on the terms necessary to support the Company’s future business; and the other risks identified in Part II, Item 1A of this Quarterly Report, under the heading “Risk Factors.”

Overview

The Company is an independent nationwide provider of medical cost containment and managed care services designed to address the escalating medical costs of workers’ compensation benefits, automobile insurance claims, and group health insurance benefits. The Company’s services are provided to insurance companies, TPAs, governmental entities, and self-administered employers to assist them in managing the medical costs and monitoring the quality of care associated with healthcare claims. In January 2026, the Bureau of Labor Statistics reported that the occupational injury count for 2024 was 2.34 million compared to 2.37 million in 2023, 2.34 million in 2022, 2.24 million in 2021, 2.11 million in 2020, and 2.69 million in 2019. While the injury count has steadily increased since 2019, it has not returned to pre-pandemic levels. Despite fewer claims to administrate from 2020 to 2024 as compared to 2019, the Company has been able to overcome the decrease with an increase in market share.

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. Patient management services include claims management and all services sold to claims management customers, case management, 24/7 nurse triage, utilization management, vocational rehabilitation, and life care planning. The services are designed to monitor the medical necessity and appropriateness of healthcare services provided to workers’ compensation and other healthcare claimants and to expedite return to work. The Company offers these services on a stand-alone basis, or as an integrated component of its medical cost containment services. Patient management services include the processing of claims for self-insured payors with respect to property and casualty insurance.

Network Solutions Services

The Company’s network solutions services are designed to reduce the price paid by its customers for medical services rendered in workers’ compensation cases, automobile insurance policies, and group health insurance policies. The network solutions services offered by the Company include automated medical fee auditing, preferred provider management and reimbursement services, retrospective utilization review, facility claim review, professional review, pharmacy services, directed care services, Medicare solutions, clearinghouse services, independent medical examinations, and inpatient medical bill review. Network solutions services also include revenue from the Company’s directed care network (known as CareIQ), including imaging, physical therapy, durable medical equipment, translation and transportation.

Page 17

Organizational Structure

The Company’s management is structured geographically. Regional vice presidents are responsible for all services and the operating results within their respective regions, which may span multiple states. These regional vice presidents oversee area and district managers who hold similar responsibilities within their respective areas and districts.

Business Enterprise Segments

The Company operates in one reportable operating segment: managed care. It generates its revenue through its patient management and network solutions services. Both services are available to customers throughout the United States. Accordingly, the Company’s internal financial reporting is segmented geographically and managed on a geographic rather than service line basis, with virtually all of its operating revenue generated within the United States.

Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 280-10, “Segment Reporting,” establishes standards for the way that public business enterprises report information about operating segments in annual and interim consolidated financial statements. Under FASB ASC 280-10, two or more operating segments may be aggregated into a single operating segment for financial reporting purposes if aggregation is consistent with the objective and basic principles of the accounting guidance, if the segments have similar economic characteristics, and if the segments are similar in each of the following areas: (i) the nature of products and services, (ii) the nature of the production processes, (iii) the type or class of customer for their products and services, and (iv) the methods used to distribute their products or provide their services. The Company believes its patient management and network solutions services meet these criteria because they each provide similar managed care services and products to the same customer base using comparable methods of production and distribution and because each of our regions have similar economic characteristics.

Seasonality

While we are not directly impacted by seasonal shifts, we are affected by the change in working days in a given quarter. There are generally fewer working days for our employees to generate revenue in the third fiscal quarter due to employee vacations, inclement weather, and holidays.

Recent Developments

During the quarter ended September 30, 2025, the Company acquired a privately held technology firm adding proprietary tools and intellectual property for our enhanced bill review process.

Effective July 1, 2026, Michael G. Combs, the Chief Executive Officer, President, and Chairman of the Board of Directors (the “Board”) of the Company transitioned from his role as Chief Executive Officer and President of the Company and has been appointed by the Board to serve as Executive Chair, effective as of the same date. In connection with the leadership transition, the Board appointed Sarah A. Scott to serve as Chief Executive Officer and President of the Company, effective July 1, 2026.

Summary of Quarterly Results

The Company’s revenues increased to $259.9 million in the quarter ended June 30, 2026, from $234.7 million in the quarter ended June 30, 2025, an increase of $25.2 million, or 11%. This increase resulted primarily from an increase in network solutions and patient management activity with existing customers.

Cost of revenues increased to $192.1 million in the quarter ended June 30, 2026, from $178.0 million in the quarter ended June 30, 2025, an increase of $14.2 million, or 8%. This increase was primarily due to the increase of 11% in revenue mentioned above.

General and administrative expense increased to $24.5 million in the quarter ended June 30, 2026, from $21.5 million in the quarter ended June 30, 2025, an increase of $3.0 million, or 14%. General and administrative expense in the quarter ended June 30, 2026 consisted of approximately 11% of revenues. The Company expects the proportion of general and administrative expense in future quarters to be between 9% and 11% of revenues.

Income tax provision increased to $11.1 million in the quarter ended June 30, 2026, from $8.0 million in the quarter ended June 30, 2025, an increase of $3.1 million, or 38%. Income before income tax provision increased to $43.3 million in the quarter ended June 30, 2026, from $35.3 million in the quarter ended June 30, 2025, an increase of $8.1 million, or 23%. The effective tax rate was 26% for the quarter ended June 30, 2026, compared to 23% for the quarter ended June 30, 2025.

Page 18

Diluted weighted average common and common equivalent shares decreased to 50.9 million shares for the quarter ended June 30, 2026 from 51.9 million shares for the quarter ended June 30, 2025, a decrease of 984,000 shares, or 1.9%, due to the weighted impact of shares repurchased partially offset by the weighted impact of options exercised.

Diluted earnings per share increased to $0.63 per share in the quarter ended June 30, 2026, from $0.52 per share in the quarter ended June 30, 2025, an increase of $0.11 per share, or 21%. The increase in diluted earnings per share was primarily due to an increase in net income.

Results of Operations for the three months ended June 30, 2026 and 2025

The Company generates revenues from providing patient management and network solutions services to payors of workers’ compensation benefits, automobile insurance claims, and group health insurance benefits.

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 June 30, 2026 and 2025. The Company’s past operating results are not necessarily indicative of future operating results.

[Excerpt truncated for page length; source filing is linked above.]

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management’s Discussion and Analysis of Financial Condition and Results of Operations may include certain forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended, including without limitation statements with respect to anticipated future operating and financial performance, growth and acquisition opportunities and other similar forecasts and statements of expectation. Words such as “expects,” “anticipates,” “intends,” “plans,” “predicts,” “believes,” “seeks,” “estimates,” “potential,” “continue,” “strive,” “ongoing,” “may,” “will,” “would,” “could,” “should,” as well as variations of these words and similar expressions, are intended to identify these forward-looking statements. Forward-looking statements made by the Company and its management are based on estimates, projections, beliefs and assumptions of management at the time of such statements and are not guarantees of future performance.

The Company disclaims any obligations to update or revise any forward-looking statement based on the occurrence of future events, the receipt of new information or otherwise. Actual future performance, outcomes, and results may differ materially from those expressed in forward-looking statements made by the Company and its management as a result of a number of risks, uncertainties and assumptions. Representative examples of these factors include without limitation; general industry and economic conditions, including a decreasing number of national claims due to a decreasing number of injured workers; competition from other managed care companies and third party administrators; the Company’s ability to renew or maintain contracts with its customers on favorable terms or at all; the ability to expand certain areas of the Company’s business; growth in the Company’s sale of TPA services; shifts in customer demands; increases in operating expenses, including employee wages, benefits, and medical inflation; the ability of the Company to produce market-competitive software; cost of capital and capital requirements; on the Company’s ability to attract and retain key personnel; the impact of potential cybersecurity incidents on the Company’s business; existing and possible litigation and legal liability in the course of operations and the Company’s ability to resolve such litigation; changes in regulations affecting the workers’ compensation, insurance and healthcare industries in general; governmental and public policy changes, including but not limited to legislative and administrative law and rule implementation or change; the impact of recently issued accounting standards on the Company’s consolidated financial statements; the availability of financing in the amounts, at the times, and on the terms necessary to support the Company’s future business, and the other risks identified in Part I, Item 1A of this Annual Report, “Risk Factors.”

Overview

The Company is an independent nationwide provider of medical cost containment and managed care services designed to address the escalating medical costs of workers’ compensation benefits, automobile insurance claims, and group health insurance benefits. The Company’s services are provided to insurance companies, TPAs, governmental entities, and self-administered employers to assist them in managing the medical costs of workers’ compensation, group health and auto insurance, and monitoring the quality of care provided to claimants.

Network Solutions Services

The Company’s network solutions services are designed to reduce the price paid by its customers for medical services rendered in workers’ compensation cases, automobile insurance policies, and group health insurance policies. The network solutions services offered by the Company include automated medical fee auditing, preferred provider management and reimbursement services, retrospective utilization review, facility claim review, professional review, pharmacy services, directed care services, Medicare solutions, clearinghouse services, independent medical examinations, and inpatient medical bill review. Network solutions services also include revenue from the Company’s directed care network (known as CareIQ), including imaging, physical therapy, durable medical equipment, and translation and transportation.

Patient Management Services

In addition to its network solutions services, the Company offers a range of patient management services, which involve working one-on-one with injured employees and their various healthcare professionals, employers and insurance company adjusters. Patient management services include claims management and all services sold to claims management customers, case management, 24/7 nurse triage, utilization management, vocational rehabilitation, and life care planning. The services are designed to monitor the medical necessity and appropriateness of healthcare services provided to workers’ compensation and other healthcare claimants and to expedite return to work. The Company offers these services on a stand-alone basis, or as an integrated component of its medical cost containment services. Patient management services include the processing of claims for self-insured payors with respect to property and casualty insurance.

33

Segment Reporting

Based on the Company’s Chief Operating Decision Maker’s ("CODM") review and assessment of the Company’s operations for purposes of performance monitoring and resource allocation, the Company determined that its operations and the decisions to allocate resources and deploy capital are organized and managed on a consolidated basis. Accordingly, management has identified one operating segment, which is its reportable segment, under this organizational and reporting structure

Business Enterprise Segments

The Company operates in one reportable operating segment, managed care. The Company’s services are delivered to its customers through its local offices in each region and financial information for the Company’s operations follows this service delivery model. All regions provide the Company’s patient management and network solutions services to customers. Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 280-10, “Segment Reporting” establishes standards for the way that public business enterprises report information about operating segments in annual and interim consolidated financial statements. The Company’s internal financial reporting is segmented geographically, as discussed above, and managed on a geographic rather than service line basis, with virtually all of the Company’s operating revenue generated within the United States.

Under FASB ASC 280-10, two or more operating segments may be aggregated into a single operating segment for financial reporting purposes if aggregation is consistent with the objective and basic principles, if the segments have similar economic characteristics, and if the segments are similar in each of the following areas: (i) the nature of products and services; (ii) the nature of the production processes; (iii) the type or class of customer for their products and services; and (iv) the methods used to distribute their products or provide their services. The Company believes each of its regions meet these criteria as each provides similar services and products to similar customers using similar methods of production and distribution.

Because we believe we meet each of the criteria set forth above and each of our regions have similar economic characteristics, we aggregate our results of operations in one reportable operating segment, managed care.

Number of Working Days

We are affected by the change in working days in a given quarter. There are generally fewer working days for our employees to generate revenue in the third fiscal quarter due to employee vacations, inclement weather and holidays.

Company Stock Split

During fiscal year 2025, the Company effected a three-for-one forward stock split of its common stock. All prior period share, equity award and per share amounts and calculations in this Annual Report and in the consolidated financial statements have been retroactively adjusted to reflect the stock split.

Summary of Fiscal 2026 Annual Results

The Company's revenues increased to $959 million in fiscal year 2026 from $896 million in fiscal year 2025, an increase of $63 million, or 7%. This increase was due to an increase in revenues primarily from network solutions activity with existing customers due to utilizing additional services with the Company.

During fiscal year 2026, the Company’s gross profit increased to $233 million from $210 million in fiscal year 2025, an increase of $23 million, or 11%. This increase was primarily due to the increase of 7% in revenue mentioned above, secondarily, a significant part of the growth was from the higher margin services of network solutions.

During fiscal year 2026, the Company’s general and administrative expenses increased to $89.7 million from $88.9 million in fiscal year 2025, an increase of $0.8 million, or 1%. Historically, general and administrative expenses have been between 9% and 10% of revenues.

During fiscal year 2026, the Company’s net income before tax increased to $143.1 million from $120.8 million in fiscal year 2025, an increase of $22.3 million, or 18%. The increase was primarily due to an increase in revenues and gross profit margin.

During fiscal year 2026, the Company’s income tax expense increased to $32.8 million from $25.7 million in fiscal year 2025, an increase of $7.1 million, or 28%. The increase was due to an increase in income before income taxes. The Company’s effective income tax rate was 23% for fiscal year 2026 and 21% for fiscal year 2025.

34

Diluted weighted average shares were 51.6 million shares in fiscal year 2026 and 52.0 million shares in fiscal year 2025, with a decrease of 369,000 shares, or 0.7%. This decrease was primarily due to the repurchase of 782,744 shares of common stock in fiscal year 2026 under the Company’s stock repurchase program. Since commencing this program in the fall of 1996, the Company has repurchased 115,259,435 shares of its common stock through March 31, 2026, at a cost of $888 million. These repurchases were funded primarily from the Company’s operating cash flows.

Diluted earnings per share increased to $2.14 per share in fiscal year 2026 from $1.83 per share in fiscal year 2025, an increase of $0.31 per share, or 17%. The increase in diluted earnings per share was primarily due to an increase in net income.

Results of Operations

The Company derives its revenues from providing patient management and network solutions services to payors of workers’ compensation benefits, automobile insurance claims, and group health insurance benefits. Patient management services include claims management and all services sold to claims management customers, case management, 24/7 nurse triage, utilization management, vocational rehabilitation, and life care planning. Network solutions services include fee schedule auditing, hospital bill auditing, pharmacy, independent medical examinations, directed care services, diagnostic imaging review services and preferred provider referral services. The percentages of total revenues attributable to patient management and network solutions services for the fiscal years ended March 31, 2026, 2025 and 2024 are listed below.

As noted in the table above, the percentage of

[Excerpt truncated for page length; the complete text is on the linked full-MD&A page.]