CRVL 10-K & 10-Q changes, risk factors and insider trading

If we are unable to apply technology and data analytics effectively in driving value for our clients through technology-based solutions or gain internal efficiencies and maintain effective financial internal controls through the application of technology and related tools, our operating results, client relationships, growth and compliance programs could be adversely affected.

Our future success depends, in part, on our ability to anticipate and respond effectively to the threatrisk of, and conversely, the opportunity presented by digital disruption, “big data” and data analytics, and other developments in technology. These may include new applications or insurance-related services based on artificial intelligence, machine learning, robotics, blockchain, the metaverse or new approaches to data mining that impact the nature of how we generate revenue. We may be exposed to competitive risks related to the adoption and application of new technologies by established market participants or new entrants such as technology companies, start-up companies and others. These new entrants are focused on using technology and innovation, including artificial intelligence and blockchain, in an attempt to simplify and improve the client experience, increase efficiencies, alter business models and effect other potentially disruptive changes in the industries in which we operate. We must also develop and implement technology solutions and technical expertise among our employees that anticipate and keep pace with rapid and continuing changes in technology, industry standards, client preferences and internal control standards. We may not be successful in anticipating or responding to these developments on a timely and cost-effective basis and our ideas may not be accepted in the marketplace. Data produced by or contained in technology that uses artificial intelligence may contain a degree of inaccuracy and error. Additionally, the effort to gain technological expertise, make use of data analytics, and develop new technologies in our business requires us to incur significant expenses. Investments in technology systems and data analytics capabilities may not deliver the benefits or perform as expected, or may be replaced or become obsolete more quickly than expected, which could result in operational difficulties or additional costs. If we or our third-party vendors fail to effectively implement these new technologies, including, artificial intelligence, we could be subject to additional risks that we do not understand or cannot adequately mitigate, which could have a material adverse effect on our results of operations and financial condition. Further, if we cannot offer new technologies or data analytics solutions as quickly as our competitors, or if our competitors develop more cost-effective technologies, data analytics solutions or other product offerings, we could experience a material adverse effect on our operating results, client relationships, growth and compliance programs.

If we lose several recurring customers in a short period, our results may be materially adversely affected.

Our results may decline if we lose several recurring customers during a short period. Most of our customer contracts permit either party to terminate without cause. If several customers terminate, or do not renew or extend their contracts with us, our results could be materially and adversely affected. Many organizations in the insurance industry have consolidated and this could result in the loss of one or more of our customers through a merger or acquisition. Additionally, we could lose customers due to competitive pricing pressures or other reasons.

We may be vulnerable to damage from severe weather conditions or natural disasters, including hurricanes, fires, floods, earthquakes, power loss, communications failures, and similar events, including the effects of pandemics, war or acts of terrorism. If a disaster were to occur, our ability to operate our business could be seriously or completely impaired or destroyed. The insurance we maintain may not be adequate to cover our losses resulting from disasters or other business interruptions. If there is a resurgence in theglobal COVID-19 pandemic,pandemics, or if any other pandemic arises, it could materially adversely impact our business operations, financial position and results of operations in unpredictable ways that depend on highly-uncertain future developments, such as determining the effectiveness of current or future government actions to address the public health or economic impacts of the pandemic. Any of these risks might have a materially adverse effect on our business operations and our financial position or results of operations.

We rely on information technology to support our business activities. Our business involves the storage and transmission of a significant amount of personal, confidential, or sensitive information, including the personal information of our customers and employees, and our company’s financial, operational and strategic information. As with many businesses, we are subject to numerous data privacy and security risks,risks. whichThese risks may prevent us from maintaining the privacyconfidentiality and integrity of this information, result in the disruption of our business and online systems, and require us to expend significant resources attemptingto attempt to secure and protect such information and respond to incidents, any of which could materially adversely affect our business, financial condition or results of operations. The loss, theft, misuse, unauthorized disclosure, or unauthorized access of such sensitive information could lead to significant reputational or competitive harm, result in litigation or regulatory proceedings, or cause us to incur substantial liabilities, fines, penalties or expenses.

Cybersecurity breachesincidents of any ofaffecting the systems on which we rely may result from circumvention of security systems,measures, denial-of-service attacks or other cyber-attacks, hacking, “phishing” attacks, computer viruses, ransomware, malware, employee or insider error, malfeasance, social engineering, physical breaches or other actions. According to media reports, the frequency, intensity, and sophistication of cyber-attacks, ransomware attacks, and other data security incidents generally has significantly increased around the globeworldwide in recent years.years, including as a result of the increasing sophistication in the development and use of artificial intelligence tools. As with many other businesses, we have experienced, and are continually at risk of being subject to, attacks andthat incidents,result includingin cybersecurity breachesincidents suchcaused asby computer viruses, unauthorized parties gaining access to our information technology systemssystems, and other similar incidents.threats. Cybersecurity breaches could cause us, and inIn some cases, materially,cybersecurity toincidents experiencecould cause reputational harm, loss of customers, loss and/or delay of revenue, loss of proprietary data, loss of licenses, regulatory actions and scrutiny, sanctions or other statutory penalties, litigation, liability for failure to safeguard customers’ information, financial losseslosses, or a drop in our stock price. If we acquire any businesses, the process of integrating the information systems of the businesses we acquire is complex and exposes us to additional risks as we might not adequately identify weaknesses in the acquired company’s information systems, which could expose us to unexpected liabilities or make our own systems more vulnerable to attack. We have invested in and continue to expend significant resources on information technology and datainformation security tools, measures, processes, initiatives, policies and employee training designed to protect our information technology systems, as well as the personal, confidential or sensitive information stored on or transmitted through those systems, and to ensure an effective response to any cyber-attack or datasecurity incident, however, such measures cannot provide absolute security incident.and may fail to operate as intended or be circumvented. These expenditures could also have an adverse impact on our financial condition and results of operations, and divert management’s attention from pursuing our strategic objectives. In addition, the cost and operational consequences of implementing, maintaining and further enhancing furtherour systemsystem’s protective measures could increase significantly as cybersecurity threats increase,increase. and thereThere can be no assurance that the security measures we employ will effectively prevent cybersecurity breachesincidents or otherwise prevent unauthorizedmalicious personsactors from obtaining access to our systems and information.

As these threats evolve, cybersecurity incidents could be more difficult to detect, defend against,prevent, and remediate. Cyber-attacksCybersecurity-attacks or data handling incidents could remain undetected for some period,period of time, which could potentiallynot only result in significant harm to our systems, asbut wellalso aslead to unauthorized access to the information stored on and transmitted by our systems. Further, despite our security efforts and training, our employees may purposefully or inadvertently cause securitycybersecurity breachesincidents. thatAny could harm our systems or result in the unauthorized disclosureoccurrence of orcybersecurity access to information. Any measures we do take to prevent security breaches,incidents, whether caused by employees or third parties, could have the potential to harmadversely impact our relationships with our customers or restrict our ability to meet our customers’ expectations.

If a cyber-attack or other data incident results in the loss, theft, misuse, unauthorized disclosure, or unauthorized access of personal, confidential, or sensitive information belonging to our customers or employees, it could put us at a competitive disadvantage, result in the deterioration of our customers’ confidence in our services, cause our customers to reconsider their relationship with our company orus, impose more onerous contractual provisions, cause us to lose our regulatory licenses, andor subject us to potential litigation, liability, fines and penalties. For example, we could bebecome subject to regulatory or other actions pursuant to privacy laws. This could result in costly investigations and litigation, civil or criminal penalties, operational changeschanges, and negative publicity that could adversely affect our reputation, as well as our results of operations and financial condition.

our customers cannotlose the ability to access our websites and online systems; or we become subject to other unanticipated liabilities, costs, or claims.

We rely largely on ourindustry ownstandard security systems, confidentiality procedures, and employee nondisclosure agreements to maintain the privacy and security of our and our customers’ proprietary information. AccidentalIntentional or willfulunintentional securityincidents, breaches or otherlike unauthorized access by third parties to our information systems, the existenceinfection of computer viruses in our datasystems or software,software with malware, and misappropriation of our proprietary information could expose us to a risk of information loss, litigation, and other possible liabilities which may have a material adverse effect on our business, financial condition, and results of operations. If securitycybersecurity measuresincidents are breachedoccur because of third-party action,actions, employee error,errors, malfeasance, or otherwise, or if design flaws in our software are exposed and exploited, and, as a result, a third party obtains unauthorized access to any customer data, our relationships with our customers and our reputation willcould be significantly damaged, our business may suffer, and we could incur significant liability. Cybersecurity threats are rapidly evolving and those threats and the means for obtaining access to our systems are becoming increasingly sophisticated. Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. The rapid evolution and growing adoption of artificial intelligence technologies may heighten our cybersecurity risks, including through the use of artificial intelligence by malicious actors seeking to identify and exploit vulnerabilities.

Certain aspects of our business are dependent upon our ability to store, retrieve, process, and manage data and to maintain and upgrade our data processing capabilities. InterruptionAn interruption of data processing capabilities for any extended length of time, loss of stored data, programming errors or other system failures could impair our ability to perform for our customers on a timely basis and cause customers to cancel their service and could have a material adverse effect on our business, financial condition, and results of operations.

There has also been increased regulatory scrutiny of the use of “big data” techniques, machine learning, and artificial intelligence. It is likely that we will be subject to new regulations that could materially adversely affect our operations or ability to write business profitably in one or more jurisdictions. The legal and regulatory framework governing artificial intelligence is evolving rapidly and remains highly uncertain. Federal and state agencies are actively proposing or implementing new regulations and guidelines targeting artificial intelligence. With many of these artificial intelligence regulations still in the early stages of development, it is difficult to predict the impact they will have on our business. These regulations may require changes to our implementation of artificial intelligence technology, increase compliance costs, or increase the risk of non-compliance. Any failure to comply with applicable laws or regulations related to artificial intelligence could expose us to investigations, enforcement actions, lawsuits, fines, or other penalties, which could have a material adverse effect on our business, results of operation and financial condition. In addition, regulators have recently requested information from insurers on their use of algorithms, artificial intelligence and machine learning. We have internal policies governing the use of artificial intelligence by our employees designed to protect usthe Company from breaches of data privacy, liability and regulatory enforcement risk; however, if our employees violate these policies, it could expose us to such risks. Our exposure to these risks also could increase if our vendors, suppliers, or other third-party providers employ artificial intelligence in relation to the products or services they provide to us, as we have limited control over such use in third-party products or services. These risks include, among others, the input of confidential information, including material non-public information, in contravention of our policies or contractual restrictions to which any of the foregoing are subject, or in violation of applicable laws or regulations, including those relating to data protection. We cannot predict what, if any, regulatory actions may be taken with regard to “big data,” but any limitations could have a material impact on our business, business processes, financial condition, and results of operations.

In 1996, the Board of Directors authorized a stock repurchase program and, since then, has periodically increased the number of shares authorized for repurchase under the program. The most recent increase occurred in November 2022 and brought the number of shares authorized for repurchase over the life of the program to 117,000,000 shares. There is no expiration date for the repurchase program. The timing and actual number of shares repurchased, if any, will depend on a variety of factors including the timing of open trading windows, trading price, corporate and regulatory requirements, and market conditions. The stock repurchase program does not obligate us to acquire any amount of common stock and may be suspended or discontinued at any time atwithout our discretion.notice. Repurchases pursuant to our stock repurchase program could affect our stock price, increase the volatility of the price of our common stock and reduce the market liquidity for our common stock. Additionally, repurchases under our stock repurchase program will diminish our cash reserves, which could strain our liquidity, impact our ability to pursue future strategic opportunities and acquisitions, and result in lower overall returns on our cash balances. There can be no assurance that any further stock repurchases will enhance stockholder value because the market price of our common stock may decline below the levels at which we repurchased shares of common stock. Although our stock repurchase program is intended to enhance long-term stockholder value, there is no guarantee we will be successful in achieving this objective.

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; the ability of the Company to produce market-competitive software; changesincreases 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; dependenceon onthe 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 continued availability of financing in the amountsamounts, at the times, and aton the terms necessary to support the Company’s future businessbusiness, and the other risks identified in Part I, Item 1A of this annualAnnual report,Report, “Risk Factors.”

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 associatedprovided withto healthcare claims.claimants.

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 annualAnnual reportReport and in the consolidated financial statements contained in this annual report have been retroactively adjusted to reflect the stock split.

As noted in the table above, the percentage of revenue from patient management services decreased from fiscal 2023year 2024 to fiscal 2025year 2026 and the percentage of revenue from network solutions services grew from fiscal 2023year 2024 to fiscal 2025.year 2026. This is primarily due to the Company’s increased focus in enhanced bill review programs services, which are included within network solutions services.

The Company’s cost of revenues consists of direct expenses, costs directly attributable to the generation of revenue, and indirect costs which are incurred to support the operations in the field offices which generate the revenue. Direct expenses primarily include (i) case manager and bill review analysts’ salaries, along with related payroll taxes and fringe benefits, and (ii) costs associated with independent medical examinations (known as IME), prescription drugs, and MRI, physical therapy, and durable medical equipment providers. Most of the Company’s revenues are generated in offices which provide both patient management services and network solutions services. The largest of the field indirect costs are (i) manager salaries and bonuses, (ii) account executive base pay and commissions, (iii) salaries of administrative and clerical support, field systems personnel and PPO network developers, along with related payroll taxes and fringe benefits, and (iv) office rent. During both fiscal 2025year 2026 and 2024,2025, approximately 33% and 34%, respectively, of the costs incurred in the field were considered field indirect costs, which support both the patient management services and network solutions services operations of the Company’s field operations.

The Company’s income tax expense increased to $18.8$32.8 million for fiscal 2024year 2026 from $18.2$25.7 million for fiscal 2023,year 2025, an increase of $0.7$7.1 million. Income before income tax provision increased to $95.1$143 million in fiscal 2024year 2026 from $84.6$121 million in fiscal 2023,year 2025, an increase of $10.5$22.3 million. The Company’s effective income tax rate was 20%23% for fiscal 2024year 2026 and 22%21% for fiscal 2023.year 2025. The effective tax rate is less than the statutory tax rate primarily due to the impact of stock option exercises for both periods. The effective tax rate for fiscal year 2026 increased over fiscal year 2025 primarily due to a decrease in benefit from stock option exercises.

The Company has historically funded its operations and capital expenditures primarily from cash flow from operations, and to a lesser extent, stock option exercises. The Company’s net accounts receivables have ranged from 4139 to 4344 days of average sales for the fiscal years ended March 31, 2025,2026, 20242025 and 2023.2024. The Company expects days sales outstanding (known as DSO) to remain in the low to mid 40-day range. The Company’s historical profit margins and historical ratio of investments in assets used in the business has allowed the Company to generate sufficient cash flow to repurchase $832$888 million of its common stock during the past 2930 fiscal years, on inception-to-date net earnings of $903$1 million.billion. The Company repurchases shares during periods of excess liquidity, which has occurred in all 3435 years that the Company has been public. 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 improved. Working capital increased to $234 million at March 31, 2026, from $183 million at March 31, 2025, from $118 million at March 31, 2024.2025. This is primarily due to the increase in net income, and to a lesser extent, a decrease in spending to repurchase shares of the Company’s common stock under its stock repurchase program.income.

The Company believes that the cash balance at March 31, 2025,2026, along with anticipated internally-generated fundsfunds, will be sufficient to meet the Company’s expected cash requirements for at least the next twelve months and beyond.months.

The Company experiences pricing pressures in the form of competitive prices. The Company is also impacted by rising costs for certain inflation-sensitive operating expenses such as labor, employee benefits, and facility leases. The Company does not believe these impacts were material to its revenues or net income in fiscal 2025year 2026; however, the Company believes inflation could have a material impact toon pricing and operating expenses in future years due to the state of the economy and current inflation rates.

Revenue Recognition: Revenue is recognized when control of the promised services is transferred to the Company’s customers in an amount that reflects the consideration expectedthe Company expects to be entitled toreceive in exchange for those services. As the Company completes its performance obligations, which are identified below, it has an unconditional right to consideration as outlined in the Company’s contracts. Generally, the Company’s billed accounts receivable are expected to be collected in 30 days in accordance with the underlying payment terms. For many of the Company’s services, the Company typically has one performance obligation; however, it also provides the customer with an option to acquire additional services. The Company offers multiple services under its patient management and network solutions service lines. The Company typically provides a menu of offerings from which the customer may choose to purchase. The price of eachEach service is separatepriced and distinctseparately and provides a separate and distinct value to the customer. Pricing is generally consistent for each service irrespective of the other services or quantities requested by the customer. Revenue is recognized based uponat the transferpoint ofin time when the results of the medical bill review service are delivered to the customercustomer, aswith thisthe Company believes is the most accurate depiction of the transfer of the service to the customer. Medical bill review revenues are variable, generally based on performance metrics set forth in the underlying contracts. Each period, the Company bases its estimates on a contract-by-contract basis. The Company makes its best estimate of amounts the Company has earned and expects to be collected using historical averages and other factors to project such revenues. Variable consideration is recognized in the amount that the Company concludes is probable that a significant revenue reversal will not occur in future periods.

The Company estimates the fair value of stock options using the Black-Scholes valuation model. Key input assumptions used to estimate the fair value of stock options include the exercise price of the award, the expected option term, the expected volatility of the Company’s stock over the option’s expected term, the risk-free interest rate over the option’s term, and the Company’s expected annual dividend yield. The Company issues performance-based stock options which vest only upon the Company’s achievement of certain earnings per share targets on a calendar year basis, as determined by the Company’s Board of Directors. These options were valued in the same manner as the time-based options. However, the Company only recognizes stock compensation expense to the extent that the targets are determined to be probable of being achieved, which triggers the vesting of the performance options. The Company’s management believes that this valuation technique and the approach utilized to develop the underlying assumptions are appropriate in calculating the fair values of the Company’s stock options granted in fiscal 2025.year 2026. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by persons who receive equity awards.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, a new accounting standard to enhanceenhances the transparency and decision usefulness of income tax disclosures. The new standard is effective for fiscal years beginning after December 15, 2024, and is required to be applied prospectively, with retrospective application permitted. The Company isadopted currentlythis evaluatingstandard prospectively in the impactfiscal ofyear this2026 guidanceand onprovided itsthe required disclosures in Note 6 - Income Taxes, to the consolidated financial statements.

Past financial performance is not necessarily a reliable indicator of future performance, and investors in our common stock should not use historical performance to anticipate results or future period trends. Investing in our common stock involves a high degree of risk. Investors should consider carefully the following risk factors, as well as the other information in this reportQuarterly Report and our other filings with the SEC, including our consolidated financial statements and the related notes, before deciding whether to invest or maintain an investment in shares of our common stock. If any of the following risks actually occurs, our business, financial condition, and results of operations would suffer. In this case, the trading price of our common stock would likely decline. The risks described below are not the only ones we face. Additional risks that we currently do not know about or that we currently believe to be immaterial may also impair our business operations.

If we are unable to apply technology and data analytics effectively in driving value for our clients through technology-based solutions or gain internal efficiencies and maintain effective financial internal controls through the application of technology and related tools, our operating results, client relationships, growth and compliance programs could be adversely affected.

We are dependent, to a substantial extent, upon the continuing efforts and abilities of certain key management personnel. In addition, we face competition for experienced employees with professional expertise in the workers’ compensation managed care area. The loss of key personnel, especially MichaelSarah Combs,Scott, our Chairman, Chief Executive Officer and President, or the inability to attract qualified employees, could have a material adverse effect on our business, financial condition, and results of operations.

If we lose several recurring customers in a short period, our results may be materially adversely affected.

Our results may decline if we lose several recurring customers during a short period. Most of our customer contracts permit either party to terminate without cause. If several customers terminate, or do not renew or extend their contracts with us, our results could be materially and adversely affected. Many organizations in the insurance industry have consolidated and this could result in the loss of one or more of our customers through a merger or acquisition. Additionally, we could lose customers due to competitive pricing pressures or other reasons.

We may be vulnerable to damage from severe weather conditions or natural disasters, including hurricanes, fires, floods, earthquakes, power loss, communications failures, and similar events, including the effects of pandemics, war or acts of terrorism. If a disaster were to occur, our ability to operate our business could be seriously or completely impaired or destroyed. The insurance we maintain may not be adequate to cover our losses resulting from disasters or other business interruptions. If there is a resurgence in theglobal COVID-19 pandemic,pandemics, or if any other pandemic arises, it could materially adversely impact our business operations, financial position and results of operations in unpredictable ways that depend on highly-uncertain future developments, such as determining the effectiveness of current or future government actions to address the public health or economic impacts of the pandemic. Any of these risks might have a materially adverse effect on our business operations and our financial position or results of operations.

A cybersecurity attack or other disruption to our information technology systems could result in the loss, theft, misuse, unauthorized disclosure, or unauthorized access of sensitive customer or Companysensitive information,company information or disruptioncould ofdisrupt our operations, which could damage our relationships with customers or employees, expose us to litigation or regulatory proceedings, or harm our reputation, any of which could materially adversely affect our business, financial condition or results of operations.

We rely on information technology to support our business activities. Our business involves the storage and transmission of a significant amount of personal, confidential, or sensitive information, including the personal information of our customers and employees, and our Company’s financial, operational and strategic information. As with many businesses, we are subject to numerous data privacy and security risks. These risks may prevent us from maintaining the confidentiality and integrity of this information, result in the disruption of our business and online systems, and require us to expend significant resources to attempt to secure and protect such information and respond to incidents, any of which could materially adversely affect our business, financial condition or results of operations. The loss, theft, misuse, unauthorized disclosure, or unauthorized access of such sensitive information could lead to significant reputational or competitive harm, result in litigation or regulatory proceedings, or cause us to incur substantial liabilities, fines, penalties or expenses.

Cybersecurity incidents of any ofaffecting the systems on which we rely may result from circumvention of security measures, denial-of-service attacks or other cyber-attacks, hacking, “phishing” attacks, computer viruses, ransomware, malware, employee or insider error, malfeasance, social engineering, physical breaches or other actions. According to media reports, the frequency, intensity, and sophistication of cyber-attacks, ransomware attacks, and other data security incidents has significantly increased worldwide in recent years.years, including as a result of the increasing sophistication in the development and use of artificial intelligence tools. As with many other businesses, we have experienced, and are continually at risk of being subject to, attacks that result in cybersecurity incidents caused by computer viruses, unauthorized parties gaining access to our information technology systems, and other similar threats. In some cases, cybersecurity incidents could cause reputational harm, loss of customers, loss and/or delay of revenue, loss of proprietary data, loss of licenses, regulatory actions and scrutiny, sanctions or other statutory penalties, litigation, liability for failure to safeguard customers’ information, financial losses, or a drop in our stock price. If we acquire any businesses, the process of integrating the information systems of the businesses we acquire is complex and exposes us to additional risks as we might not adequately identify weaknesses in the acquired company’s information systems, which could expose us to unexpected liabilities or make our own systems more vulnerable to attack. We have invested in and continue to expend significant resources on information technology and information security tools, measures, processes, initiatives, policies and employee training designed to protect our information technology systems, as well as the personal, confidential or sensitive information stored on or transmitted through those systems, and to ensure an effective response to any cyber-attack or security incident.incident, however, such measures cannot provide absolute security and may fail to operate as intended or be circumvented. These expenditures could also have an adverse impact on our financial condition and results of operations, and divert management’s attention from pursuing our strategic objectives. In addition, the cost and operational consequences of implementing, maintaining and further enhancing our system’s protective measures could increase significantly as cybersecurity threats increase. There can be no assurance that the security measures we employ will effectively prevent cybersecurity incidents or otherwise prevent malicious actors from obtaining access to our systems and information.

As these threats evolve, cybersecurity incidents could be more difficult to detect, prevent, and remediate. Cybersecurity-attacks or data handling incidents could remain undetected for some period of time, which could not only result in significant harm to our systems, but also lead to unauthorized access to the information stored on and transmitted by our systems. Further, despite our security efforts and training, our employees may purposefully or inadvertently cause cybersecurity incidents. Any occurrence of cybersecurity incidents, whether caused by employees or third parties, could have the potential to adversely impact our relationships with our customers or restrict our ability to meet our customers’ expectations.

Additionally, as artificial intelligence technologies continue to develop and become more accessible, malicious actors are increasingly leveraging itsuch technologies to carry out advanced cyber-attacks. These artificial intelligence tools can be used to automate and scale attacks, generate phishing or social engineering schemes, employ deepfakes, identity system vulnerabilities, or evade transitional detection methods. Consequently, the use of artificial intelligence by malicious actors may result in an increase in the frequency, speed, and severity of cybercybersecurity threats targeting our systems, networks, and employees.

A cyber-attack resultingor inother adata cybersecuritysecurity incident could haveresult ain the significant impactand onprotracted disruption of our business forsuch a prolonged period of time, includingthat:

critical business systems becomingbecome inoperable or requiringrequire a significant amount of time or cost to restore;

key personnel beingare unable to perform their duties or communicate with employees, customers or other third-parties;

it results in the loss, theft, misuse, unauthorized disclosure, or unauthorized access of customer or Company information;

thewe inabilityare toprevented accessfrom accessing information necessary to conduct our business;

thewe requirementare required to make unanticipated investments in equipment, technology or security measures;

our customers losinglose the ability to access our websites and online systems; or becomingwe become subject to other unanticipated liabilities, costs, or claims.

A breach of security breach may cause our customers to curtail or stop using our services.

We rely on industry standard security solutions,systems, confidentiality procedures, and employee nondisclosure agreements to maintain the privacy and security of our and our customers’ proprietary information. Intentional or unintentional incidents, like unauthorized access by third parties to our information systems, the infection of our systems or software with malware, and misappropriation of our proprietary information could expose us to a risk of information loss, litigation, and other possible liabilities which may have a material adverse effect on our business, financial condition, and results of operations. If cybersecurity incidents occur because of third-party actions, employee errors, malfeasance, or otherwise, or if design flaws in our software are exposed and exploited, and, as a result, a third party obtains unauthorized access to any customer data, our relationships with our customers and our reputation could be significantly be damaged, our business may suffer, and we could incur significant liability. Cybersecurity threats are rapidly evolving and those threats and the means for obtaining access to our systems are becoming increasingly sophisticated. Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. The rapid evolution and growing adoption of artificial intelligence technologies may heighten our cybersecurity risks, including through the use of artificial intelligence by malicious actors seeking to identify and exploit vulnerabilities.

Certain aspects of our business are dependent upon our ability to store, retrieve, process, and manage data and to maintain and upgrade our data processing capabilities. InterruptionAn interruption of data processing capabilities for any extended length of time, loss of stored data, programming errors or other system failures could impair our ability to perform for our customers on a timely basis and cause customers to cancel their service and could have a material adverse effect on our business, financial condition, and results of operations.

There has also been increased regulatory scrutiny of the use of “big data” techniques, machine learning, and artificial intelligence. It is likely that we will be subject to new regulations that could materially adversely affect our operations or ability to write business profitably in one or more jurisdictions. The legal and regulatory framework governing artificial intelligence is evolving rapidly and remains highly uncertain. Federal and state agencies are actively proposing or implementing new regulations and guidelines targeting artificial intelligence. With many of these artificial intelligence regulations still in the early stages of development, it is difficult to predict the impact they will have on our business. These regulations may require changes to our implementation of artificial intelligence technology, increase compliance costs, or increase the risk of non-compliance. Any failure to comply with applicable laws or regulations related to artificial intelligence could expose us to investigations, enforcement actions, lawsuits, fines, or other penalties, which could have a material adverse effect on our business andbusiness, results of operation.operation and financial condition. In addition, regulators have recently requested information from insurers on their use of algorithms, artificial intelligence and machine learning. We have internal policies governing the use of artificial intelligence by our employees designed to protect the Company from breaches of data privacy, liability and regulatory enforcement risk; however, if our employees violate these policies, it could expose us to such risks. Our exposure to these risks also could increase if our vendors, suppliers, or other third-party providers employ artificial intelligence in relation to the products or services they provide to us, as we have limited control over such use in third-party products or services. These risks include, among others, the input of confidential information, including material non-public information, in contravention of our policies or contractual restrictions to which any of the foregoing are subject, or in violation of applicable laws or regulations, including those relating to data protection. We cannot predict what, if any, regulatory actions may be taken with regard to “big data,” but any limitations could have a material impact on our business, business processes, financial condition, and results of operations.

We cannot assure our stockholders that our stock repurchase program will enhance long-term stockholder value,value and stock repurchases, if any, could increase the volatility of the price of our common stock,stock and will diminish our cash reserves.

In 1996, the Board of Directors (the “Board”) authorized a stock repurchase program (the “stock repurchase program”) and, since then, has periodically increased the number of shares authorized for repurchase under the program. InThe 2022,most recent increase occurred in November 2022 and brought the Board authorized the repurchase of additional shares under the stock repurchase program, thereby increasing the total number of shares of common stock approvedauthorized for repurchase underover the life of the program to 117,000,000.117,000,000 shares. There is no expiration date for the repurchase program. The timing and actual number of shares repurchased, if any, will depend on a variety of factors including the timing of open trading windows, trading price, corporate and regulatory requirements, and market conditions. The stock repurchase program does not obligate us to acquire any amount of common stock and may be suspended or discontinued at any time atwithout our discretion.notice. Repurchases pursuant to our stock repurchase program could affect our stock price, increase the volatility of the price of our common stock and reduce the market liquidity for our common stock. Additionally, repurchases under our stock repurchase program will diminish our cash reserves, which could strain our liquidity, impact our ability to pursue future strategic opportunities and acquisitions, and result in lower overall returns on our cash balances. There can be no assurance that any further stock repurchases will enhance stockholder value because the market price of our common stock may decline below the levels at which we repurchased shares of common stock. Although our stock repurchase program is intended to enhance long-term stockholder value, there is no guarantee we will be successful in achieving this objective.

This reportQuarterly 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 fluctuationsa in thedecreasing 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 possiblepotential 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 report,Quarterly Report, under the heading “Risk Factors.”

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 in each of 2024, 2023, 2022, 2021 andfrom 2020 to 2024 as compared to 2019, the Company has been able to overcome the decrease with an increase in market share.

In addition to its network solutions services, theThe 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.

The Company’s management is structured geographicallygeographically. with regionalRegional vice presidents who are responsible for all services provided by the Company within his or her particular region and the operating results ofwithin thetheir Companyrespective inregions, which may span multiple states. In addition, theThese regional vice presidents oversee area and district managers who arehold alsosimilar responsibleresponsibilities for all services provided by the Company inwithin their givenrespective areaareas and district.districts.

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,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;services, (ii) the nature of the production processes;processes, (iii) the type or class of customer for their products and services;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 asbecause they each providesprovide similar managed care services and products to similarthe customerssame customer base using similarcomparable methods of production and distribution.distribution and because each of our regions have similar economic characteristics.

The Company’s revenues increased to $235.6$259.9 million in the quarter ended DecemberJune 31,30, 2025,2026, from $228.0$234.7 million in the quarter ended DecemberJune 31,30, 2024,2025, an increase of $7.7$25.2 million, or 3%.11%. This increase resulted primarily from an increase in network solutions and patient management activity with existing customers.

Cost of revenues increased to $180.7$192.1 million in the quarter ended DecemberJune 31,30, 2025,2026, from $175.1$178.0 million in the quarter ended DecemberJune 31,30, 2024,2025, an increase of $5.6$14.2 million, or 3%.8%. This increase was primarily due to the increase of 3%11% in revenue mentioned above.

General and administrative expense increased to $22.7$24.5 million in the quarter ended DecemberJune 31,30, 2025,2026, from $22.1$21.5 million in the quarter ended DecemberJune 31,30, 2024,2025, an increase of $0.6$3.0 million, or 3%.14%. General and administrative expense in the quarter ended DecemberJune 31,30, 20252026 consisted of approximately the increase of 3%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 $8.1$11.1 million in the quarter ended DecemberJune 31,30, 2025,2026, from $7.0$8.0 million in the quarter ended DecemberJune 31,30, 2024,2025, an increase of $1.0$3.1 million, or 15%.38%. Income before income tax provision increased to $32.2$43.3 million in the quarter ended DecemberJune 31,30, 2025,2026, from $30.8$35.3 million in the quarter ended DecemberJune 31,30, 2024,2025, an increase of $1.4$8.1 million, or 5%.23%. The effective tax rate was 25%26% for the quarter ended DecemberJune 31,30, 2025,2026, compared to 22.8%23% for the quarter ended DecemberJune 31,30, 2024.2025.

Diluted weighted average common and common equivalent shares decreased to 51.650.9 million shares for the quarter ended DecemberJune 31,30, 20252026 from 52.051.9 million shares for the quarter ended DecemberJune 31,30, 2024,2025, a decrease of 456,000984,000 shares, or 0.9%,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 $0.47$0.63 per share in the quarter ended DecemberJune 31,30, 2025,2026, from $0.46$0.52 per share in the quarter ended DecemberJune 31,30, 2024,2025, an increase of $0.01$0.11 per share, or 2%.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 DecemberJune 31,30, 20252026 and 20242025

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 DecemberJune 31,30, 20252026 and 2024.2025. The Company’s past operating results are not necessarily indicative of future operating results.

Change in revenue for the three months ended DecemberJune 31,30, 20252026 from the three months ended DecemberJune 31,30, 20242025

Revenues increased to $235.6$259.9 million in the three months ended DecemberJune 31,30, 2025,2026, from $228.0$234.7 million in the three months ended DecemberJune 31,30, 2024,2025, an increase of $7.7$25.2 million, or 3%.11%. Network solutions services revenues increased to $89.6$100.6 million from $82.1$87.9 million, an increase of $7.5$12.7 million, or 9%.14%. The increase in revenue was primarily with existing customers in network solutions, as well as an increase in enhanced billed review dueservices. Patient management services revenues increased to a$159.3 growthmillion withfrom existing$146.8 customers.million, an increase of $12.5 million, or 9%. Total new claims increased by 8% during the June 30, 2026 quarter compared to the June 30, 2025 quarter.

Change in cost of revenues for the three months ended DecemberJune 31,30, 20252026 from the three months ended DecemberJune 31,30, 20242025

Cost of revenues increased to $180.7$192.1 million in the three months ended DecemberJune 31,30, 2025,2026, from $175.1$178.0 million in the three months ended DecemberJune 31,30, 2024,2025, an increase of $5.6$14.2 million, or 3%.8%. The increase in cost of revenues was primarily due to the increase in total revenues of 3%.11%. Additionally, there was an increase in salaries of 3%9% resulting from increased average headcount of 1%.5%. Headcount increased to help manage the increase in business volume from existing customers.

For the three months ended DecemberJune 31,30, 2025,2026, general and administrative expense consisted of approximately 46%44% 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. All IT-related costs managed by the corporate office are recorded under general and administrative expense whereas the field IT-related costs are included in the cost of revenues. The remaining general and administrative expense consists 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 for the three months ended DecemberJune 31,30, 20252026 from the three months ended DecemberJune 31,30, 20242025

General and administrative expense increased to $22.7$24.5 million in the three months ended DecemberJune 31,30, 2025,2026, from $22.1$21.5 million in the three months ended DecemberJune 31,30, 2024,2025, an increase of $0.6$3.0 million, or 3%.14%. General and administrative expense in the quarter ended DecemberJune 31,30, 2025,2026, equaledconsisted of approximately the increase of 3%11% of revenues. The increase was due to an increase in corporate system costs due to an increase in spending on developed software. Additionally, there was an increase in marketing and insurance costs. The Company expects future quarters of general and administrative expense will remain at approximately 9% to 11% of revenues.

Change in income tax provision for the three months ended DecemberJune 31,30, 20252026 from the three months ended DecemberJune 31,30, 20242025

Income tax provision increased to $8.1$11.1 million in the three months ended DecemberJune 31,30, 2025,2026, from $7.0$8.0 million in the three months ended DecemberJune 31,30, 2024,2025, an increase of $1.0$3.1 million, or 15%.38%. Income before income tax provision increased to $32.2$43.3 million in the three months ended DecemberJune 31,30, 20252026 from $30.8$35.3 million in the same period in the prior year, an increase of $1.4$8.1 million, or 5%.23%. The effective tax rate was 25%26% for the quarter ended DecemberJune 31,30, 20252026 and 22.8%23% for the quarter ended DecemberJune 31,30, 2024.2025. The increase in the effective tax rate was due to a decrease in stock option exercises.

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 $213.5$244.7 million as of DecemberJune 31,30, 20252026 from $182.7$234.2 million as of March 31, 2025,2026, an increase of $30.8$10.5 million. Cash and cash equivalents increased to $230.0$255.9 million as of DecemberJune 31,30, 20252026 from $170.6$233.1 million as of March 31, 2025,2026, an increase of $59.4$22.8 million. This was primarily due to the increase in net income.

As of DecemberJune 31,30, 2025,2026, the Company had $230.0$255.9 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.

NineThree months ended DecemberJune 31,30, 20252026 compared to ninethree months ended DecemberJune 31,30, 20242025

Net cash provided by operating activities increaseddecreased to $126.2$49.9 million in the ninethree months ended DecemberJune 31,30, 2025,2026, from $104.4$55.0 million in the ninethree months ended DecemberJune 31,30, 2024,2025, ana increasedecrease of $21.8$5.1 million. The increasedecrease in cash flow from operating activities was primarily due to the increase in netaccounts incomereceivable anddue anto improvementa 11% increase in accounts receivable.revenues.

NineThree months ended DecemberJune 31,30, 20252026 compared to ninethree months ended DecemberJune 31,30, 20242025

Net cash flow used in investing activities increaseddecreased to $36.2$6.8 million in the ninethree months ended DecemberJune 31,30, 2025,2026, from $27.1$15.5 million in the ninethree months ended DecemberJune 31,30, 2024,2025, ana increasedecrease of $9.1$8.6 million. TheIn the prior year, the Company increased its spending primarily on developed software and on the purchase of software licenses under athe finance agreement.

NineThree months ended DecemberJune 31,30, 20252026 compared to ninethree months ended DecemberJune 31,30, 20242025

Net cash flow used in financing activities increased to $30.5$20.3 million for the ninethree months ended DecemberJune 31,30, 2025,2026, from $19.9$8.1 million for the ninethree months ended DecemberJune 31,30, 2024,2025, an increase of $10.6$12.2 million. The increase in net cash used in financing activities was primarily due to an increase in spending on share repurchases to $36.0$22.0 million for the ninethree months ended DecemberJune 31,30, 20252026 from $28.6$9.6 million for the ninethree months ended DecemberJune 31,30, 2024.2025. Additionally,This thewas increaseslightly inoffset net cash used in financing activities can be attributeddue to the decrease in stock option exercises increasing to $5.0$1.7 million for the ninethree months ended DecemberJune 31,30, 2025,2026 from $8.3$1.5 million for the ninethree months ended DecemberJune 31,30, 2024.2025. The Company has historically used cash provided by operating activities and from the exercise of stock options to repurchase stock. The Company expects that it may use a portion of its cash balance to repurchase additional shares of its common stock under its stock repurchase program in the future; however, there can be no assurance that any further stock repurchases will be made.