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CORVEL CORP (CRVL)·Q3 2025 Earnings Summary

Executive Summary

  • September quarter (Q2 FY26; calendar Q3 2025) delivered solid growth: revenue $239.6M (+7% y/y) and diluted EPS $0.54 (+20% y/y). Gross profit rose 15% to $58.2M with 24% gross margin .
  • Sequential progression continued: revenue up vs June quarter ($234.7M) and EPS up vs $0.52, supported by margin discipline and lower direct costs .
  • Management highlighted agentic AI adoption, workforce development via CorVel University, and stronger payment integrity solutions as structural drivers; segment contributions included ~$12M growth in Network Solutions and ~$4M in Patient Management (claims operations) .
  • EPS growth was tempered by one-time items (~9 percentage points), and the company provided no formal quantitative guidance; consensus estimates were not available from S&P Global for this quarter .
  • Balance sheet remains a catalyst: $207M cash, no borrowings; continued buybacks ($12.8M) and improved DSO to 40 days support earnings quality and capital deployment flexibility .

What Went Well and What Went Wrong

What Went Well

  • Durable top-line and margin execution: Revenue +7% y/y to $239.6M; gross profit +15% y/y to $58.2M at 24% margin, with operating income +25% y/y to $35.9M .
  • Strategic wins in AI and efficiency: “Recent AI-driven enhancements have improved both capacity and precision in identifying medical bills and claims with potential savings… enabling us to conduct a greater number of reviews per claim” (Michael Combs) .
  • Strong financial discipline and cash generation: Ending cash $207M, no borrowings; repurchased 143,774 shares for $12.8M; DSO improved to 40 days (−2 days y/y), helping earnings quality and working capital turns .

What Went Wrong

  • EPS uplift muted by one-time items: “The combined effect of one-time events in the September quarter softened the increase in EPS by approximately 9 percentage points” (Brian Nichols) .
  • Commercial health pricing pressure: Service division operating under elevated pricing pressure, necessitating increased savings and efficiency delivery to payers .
  • Industry-wide workforce headwinds: Demographic shift reducing experienced professionals in workers’ comp; CorVel is investing to mitigate but the macro backdrop remains challenging .

Financial Results

MetricQ2 FY25 (Sep 2024)Q4 FY25 (Mar 2025)Q1 FY26 (Jun 2025)Q2 FY26 (Sep 2025)
Revenue ($USD Millions)$224.4 $231.5 $234.7 $239.6
Diluted EPS ($USD)$0.45 $0.51 $0.52 $0.54
Gross Profit ($USD Millions)$50.7 $58.0 $56.8 $58.2
Gross Profit Margin %22.6% (calc: 50.7/224.4) 25% 24% 24%
Operating Income ($USD Millions)$28.7 $33.3 $35.3 $35.9
Net Income ($USD Millions)$23.4 $26.4 $27.2 $27.9

Segment growth contribution (Q2 FY26):

SegmentRevenue Growth Contribution ($USD Millions)
Patient Management (Claims Operations)~$4
Network Solutions (Ancillary Care & Bill Review)~$12

Key KPIs:

KPIQ1 FY26 (Jun 2025)Q2 FY26 (Sep 2025)
Cash & Cash Equivalents ($USD Millions)$202.0 $207.5
DSO (days)—40 (−2 y/y)
Shares Repurchased (Units)—143,774
Share Repurchase ($USD Millions)$9.6 $12.8
BorrowingsNone None
Weighted Diluted Shares (Units)51,912,000 51,723,000
Customer Deposits ($USD Millions)$108.1 $112.3

Vs Wall Street consensus (S&P Global):

MetricConsensus (Q2 FY26)Actual (Q2 FY26)
Revenue ($USD Millions)n/a*$239.6
Primary EPS ($USD)n/a*$0.54

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Company GuidanceQ2 FY26 and forwardNone providedNone providedMaintained at “no formal guidance” (no quantitative guidance found in press release or call)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2)Previous Mentions (Q-1)Current PeriodTrend
AI/Technology InitiativesAcquisition of tech assets and talent to enhance CERIS; targeted R&D in agentic AI Expanded AI in communications, bill review, fraud waste abuse analytics; CERIS platform partner launches Broad agentic AI adoption across claims, payment integrity, dev velocity; responsible AI principles Accelerating adoption and impact
Workforce/CorVel University——Addressing demographic shift via CorVel U; strong retention and talent pipeline Building capacity; mitigating labor constraints
Commercial Health Pricing Pressure——Elevated payer pricing pressure; focus on savings/efficiencies and explainability Persistent pressure; improved automation response
Payment Integrity/CERIS PerformanceStrategic platform partner launch; second agreement; positive transaction volumes Tech/talent acquisition to strengthen CERIS capabilities Continued momentum; AI-powered cost containment distinguishes solutions Strengthening positioning
M&A/PartnershipsPlatform partnerships in health market Tech assets acquisition completed in July; accretive medium-term Adding dedicated M&A resources for synergistic opportunities Increasing strategic activity
Financial Discipline/Capital Returns—Repurchased $9.6M; ended with $202M cash; no borrowings Repurchased $12.8M; $207M cash; DSO 40 days; strong debt-free balance sheet Steady capital deployment and operating efficiency

Management Commentary

  • “The combined effect of one-time events in the September quarter softened the increase in EPS by approximately 9 percentage points.” — Brian Nichols, CFO .
  • “Agentic AI represents the next evolution… By automating multi-step processes, agentic AI can enhance productivity, reduce costs, and accelerate decision-making across the enterprise.” — Michael Combs, CEO .
  • “Recent AI-driven enhancements have improved both capacity and precision in identifying medical bills and claims with potential savings… increasing both partner savings and CorVel’s revenue opportunities.” — Michael Combs .
  • “Revenue growth for the September 2025 quarter was driven by both our patient management and network solution segments… claims operations generated approximately $4 million… Network solutions increased by $12 million.” — Brian Nichols .
  • “CorVel’s day sales outstanding was 40 days… quarter-ending cash balance was $207 million… strong and debt-free balance sheet…” — Brian Nichols .

Q&A Highlights

  • The webcast included no analyst Q&A; the operator concluded without questions, and no guidance range clarifications were provided .

Estimates Context

  • S&P Global consensus for Q2 FY26 (calendar Q3 2025) EPS and revenue was unavailable at time of retrieval; therefore, we cannot assess beat/miss versus Street for this quarter.*
  • Near-term, estimates may need to reflect segment contribution strength (Network Solutions +$12M; Patient Management +$4M), continuing 24% gross margin, and lower direct costs, offset by commercial health pricing pressure and workforce constraints .

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Core execution remains resilient: revenue and EPS up sequentially and y/y, with 24% gross margin and operating income scaling ahead of opex — supportive of earnings durability .
  • Structural drivers are strengthening: agentic AI deployment and workflow automation are expanding partner savings, review throughput, and development velocity — a multi-quarter operating leverage story .
  • Segment momentum offers visibility: Network Solutions and Patient Management both contributed to growth, indicating breadth of demand across offerings .
  • Balance sheet optionality: $207M cash, no debt, improved DSO, and ongoing buybacks provide cushions for M&A and product investments while enhancing per-share metrics .
  • Watch pricing pressure in commercial health: elevated payer demands necessitate continued efficiency and explainability; AI investments are targeted to offset this headwind .
  • EPS normalization potential: one-time items reduced reported EPS growth; absent similar headwinds, EPS trajectory could be stronger, contingent on mix and margin .
  • Trading implications: near-term sentiment likely driven by AI execution updates, segment growth persistence, and capital return cadence; lack of formal guidance elevates the importance of operational KPIs (DSO, margin, cash flows) in setting expectations .