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.
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.
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.
Patient management services
Network solutions services
As noted in the table above, the percentage of revenue from patient management services decreased from fiscal year 2024 to fiscal year 2026 and the percentage of revenue from network solutions services grew from fiscal year 2024 to fiscal 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 following table shows the consolidated statements of income for the fiscal years ended March 31, 2026, 2025 and 2024, and the dollar changes, as well as the percentage changes for each fiscal year. The following amounts are in thousands, except per share data and percentages.
Fiscal 2026
Fiscal 2025
Fiscal 2024
Amount Change
from Fiscal 2025
Amount Change
from Fiscal 2024
Percent Change
from Fiscal 2025
Percent Change
from Fiscal 2024
Revenues
Cost of revenues
Gross profit
General and administrative
Income before income taxes
Income tax provision
Net income
Net income per share:
Basic
Diluted
Weighted average shares used in net income per share:
Basic
Diluted
As previously identified in Part I, Item 1A of this Annual Report, “Risk Factors,” the Company’s ability to maintain or grow revenues is subject to several risks including, but not limited to, changes in government regulations, exposure to litigation and the ability to add or retain customers. Any of these, or a combination of all of them, could have a material and adverse effect on the Company’s results of operations going forward.
The following table sets forth, for the periods indicated, the percentage of revenues represented by certain items reflected in the Company’s consolidated statements of income. The Company’s past operating results are not necessarily indicative of future operating results. The percentages for the fiscal years ended March 31, 2026, 2025 and 2024 are as follows:
Income Statement Percentages
Revenues
Cost of revenues
Gross profit
General and administrative
Income before income taxes
Income tax provision
Net income
Revenue
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.
Change in Revenue
Fiscal 2026 Compared to Fiscal 2025
Revenues increased to $959 million in fiscal year 2026 from $896 million in fiscal year 2025, an increase of $63 million, or 7%. Network solutions services revenues increased to $362 million from $314 million, an increase from fiscal year 2025 of 15%. This increase was primarily attributable to growth with existing customers that expanded their use of the Company’s enhanced bill review programs services, resulting in higher revenue per bill. Most of the increase is primarily attributable to the growth with existing customers in enhanced bill review programs services due to expanding the use of our services. Patient management services increased to $596 million from $581 million, an increase from fiscal year 2025 of 3%.
Fiscal 2025 Compared to Fiscal 2024
Revenues increased to $896 million in fiscal 2025 from $795 million in fiscal 2024, an increase of $100 million, or 13%. Patient management services increased to $581 million from $530 million, an increase from fiscal 2024 of 10%. This increase is primarily due to higher revenue from the Company’s TPA and related services. Total new claims increased by 5% during fiscal 2025 compared to fiscal 2024. Network solutions services revenues increased to $314 million from $265 million, an increase from fiscal 2024 of 19%. This increase is primarily due to increases in enhanced bill review programs services, which resulted in higher revenue per bill. Most of the increase is primarily attributable to the growth with new customers in managed care and enterprise companies and, to a lesser extent, growth with existing customers in enhanced bill review programs services.
Cost of Revenue
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 year 2026 and 2025, approximately 33% 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.
Change in Cost of Revenue
Fiscal 2026 Compared to Fiscal 2025
The Company’s cost of revenues increased to $726 million in fiscal year 2026 from $686 million in fiscal year 2025, an increase of $40 million, or 6%. 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.
Fiscal 2025 Compared to Fiscal 2024
The Company’s cost of revenues increased to $686 million in fiscal 2025 from $624 million in fiscal 2024, an increase of $62 million, or 10%. The increase in cost of revenues was primarily due to the increase in total revenues of 13%. Just over half the Company’s cost of revenue is labor cost. Additionally, there was an increase in salaries of 9% resulting from increased average headcount of 6% in field operations and growth in average annual salary increases due to wage inflation. Headcount increased due to an increase in business volume.
General and Administrative Expense
During fiscal years 2026, 2025 and 2024, approximately 45%, 44%, and 51%, respectively, of general and administrative costs consisted 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. The Company includes all IT-related costs managed by the corporate office in general and administrative whereas the field IT-related costs are included in the cost of revenues. The remaining general and administrative costs consist 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
Fiscal 2026 Compared to Fiscal 2025
General and administrative expenses increased to $89.7 million in fiscal year 2026 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.
Fiscal 2025 Compared to Fiscal 2024
General and administrative expenses increased to $88.9 million in fiscal 2025 from $76.6 million in fiscal 2024, an increase of $12.3 million, or 16%. This increase was primarily due to a one-time insurance recovery settlement from a lawsuit in 2011 during fiscal 2024. The Company expects general and administrative expenses to grow at the same rate as revenues.
Income Tax Provision
Fiscal 2026 Compared to Fiscal 2025
The Company’s income tax expense increased to $32.8 million for fiscal year 2026 from $25.7 million for fiscal year 2025, an increase of $7.1 million. Income before income tax provision increased to $143 million in fiscal year 2026 from $121 million in fiscal year 2025, an increase of $22.3 million. The Company’s effective income tax rate was 23% for fiscal year 2026 and 21% for fiscal 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.
Fiscal 2025 Compared to Fiscal 2024
The Company’s income tax expense increased to $25.7 million for fiscal 2025 from $18.8 million for fiscal 2024, an increase of$6.8 million. Income before income tax provision increased to $121 million in fiscal 2025 from $95 million in fiscal 2024, an increase of $25.7 million. The Company’s effective income tax rate was 21% for fiscal 2025 and 20% for fiscal 2024. The effective tax rate is less than the statutory tax rate primarily due to the impact of stock option exercises for both periods.
Net Income
Fiscal 2026 Compared to Fiscal 2025
The Company’s net income was $110.3 million in fiscal year 2026 and $95.2 million in fiscal year 2025, an increase of $15.2 million, or 16%. The increase was primarily due to an increase in revenues and gross profit margin.
Fiscal 2025 Compared to Fiscal 2024
The Company’s net income was $95.2 million in fiscal 2025 and $76.3 million in fiscal 2024, an increase of $18.9 million, or 25%. The increase was primarily due to an increase in revenues and pretax margin.
Earnings per Share
Fiscal 2026 Compared to Fiscal 2025
The Company’s 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%. This was primarily due to an increase in net income.
Fiscal 2025 Compared to Fiscal 2024
The Company’s diluted earnings per share increased to $1.83 per share in fiscal 2025 from $1.47 per share in fiscal 2024, an increase of $0.36 per share, or 24%. This was primarily due to an increase in net income.
Liquidity and Capital Resources
The Company manages its liquidity and financial position in the context of its overall business strategy. The Company continually forecasts and manages its cash, investments, working capital balances and capital structure to meet the short- and long-term obligations of its businesses while seeking to maintain liquidity and financial flexibility. Cash flows generated from operating activities are principally from earnings before non-cash expenses. The risk of decreased operating cash flow from a decline in earnings is partially mitigated by the diversity of the Company’s services, geographies and customers, and the Company has had virtually no interest-bearing debt for the past 35 years.
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 39 to 44 days of average sales for the fiscal years ended March 31, 2026, 2025 and 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 $888 million of its common stock during the past 30 fiscal years, on inception-to-date net earnings of $1 billion. The Company repurchases shares during periods of excess liquidity, which has occurred in all 35 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. This is primarily due to the increase in net income.
The Company is not a party to off-balance sheet arrangements as defined by the SEC. However, from time to time the Company enters into certain types of contracts that contingently require the Company to indemnify parties against third-party claims. The contracts primarily relate to: (i) certain contracts to perform services, under which the Company may provide customary indemnification for the purchases of such services, (ii) certain real estate leases, under which the Company may be required to indemnify property owners for environmental and other liabilities, and other claims arising from the Company’s use of the applicable premises, and (iii) certain agreements with the Company’s officers, directors and employees, under which the Company may be required to indemnify such persons for liabilities arising out of certain actions taken by such persons, acting in their respective capacities within the Company. The terms of such customary obligations vary by contract and in most instances a specific or maximum dollar amount is not explicitly stated therein. Generally, amounts under these contracts cannot be reasonably estimated until a specific claim is asserted. Consequently, no liabilities have been recorded for these obligations on the Company’s balance sheets for any of the periods presented.
The Company believes that cash from operations and funds from exercises of stock options granted to employees are adequate to fund existing obligations, repurchase shares of the Company’s common stock under its current stock repurchase program, introduce new services, and continue to develop the Company’s healthcare related services for at least the next twelve months. 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 have returned to comfortable levels. The Company regularly evaluates cash requirements for current operations, commitments, capital acquisitions, and other strategic transactions. The Company may elect to raise additional funds for these purposes, through debt or equity financings or otherwise, as appropriate. However, additional equity or debt financing may not be available when needed, with terms favorable to the Company or at all.
As of March 31, 2026, the Company had $233 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.
The Company believes that the cash balance at March 31, 2026, along with anticipated internally-generated funds, will be sufficient to meet the Company’s expected cash requirements for at least the next twelve months.
Operating Cash Flows
Fiscal 2026 Compared to Fiscal 2025
Net cash provided by operating activities increased to $155.6 million in fiscal year 2026 from $127.3 million in fiscal year 2025, an increase of $28.3 million. The increase in cash flow from operating activities was primarily due to an increase in net income of $15.2 million during fiscal year 2026. Additionally, accounts receivable decreased compared to the prior fiscal year due to a decrease of five days in days sales outstanding.
Fiscal 2025 Compared to Fiscal 2024
Net cash provided by operating activities increased to $127.3 million in fiscal 2025 from $99.2 million in fiscal 2024, an increase of $28.1 million. The increase in cash flow from operating activities was primarily due to an increase in net income of $18.9 million during fiscal 2025. Additionally, accounts receivable increased at a lesser rate than prior year due to improvement in days sales outstanding.
Investing Activities
Fiscal 2026 Compared to Fiscal 2025
Net cash flow used in investing activities increased to $45.4 million in fiscal year 2026 from $35.8 million in fiscal year 2025, an increase of $9.6 million. This increase in investing activity was primarily due to an increase in software development efforts. The Company expects future expenditures for property and equipment to increase if revenues increase.
Fiscal 2025 Compared to Fiscal 2024
Net cash flow used in investing activities increased to $35.8 million in fiscal 2025 from $29.2 million in fiscal 2024, an increase of $6.5 million. This increase in investing activity was primarily due to an increase in software development efforts. The Company expects future expenditures for property and equipment to increase if revenues increase.
Financing Activities
Fiscal 2026 Compared to Fiscal 2025
Net cash flow used in financing activities increased to $47.8 million in fiscal year 2026 from $26.5 million in fiscal year 2025, an increase of $21.3 million. During fiscal year 2026, the Company spent $56.2 million to repurchase 782,744 shares of its common stock (at an average price of $71.81 per share). During fiscal year 2025, the Company spent $37.6 million to repurchase 377,154 shares of its common stock (at an average price of $99.71 per share).
If the Company continues to generate cash flow from operating activities, the Company may continue to repurchase shares of its common stock on the open market, if authorized by the Company’s Board of Directors pursuant to the Company’s stock repurchase program, or seek to identify other businesses to acquire. 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 some of the cash on the balance sheet at March 31, 2026, to repurchase additional shares of its common stock in the future.
Fiscal 2025 Compared to Fiscal 2024
Net cash flow used in financing activities decreased to $26.5 million in fiscal 2025 from $35.8 million in fiscal 2024, a decrease of $9.2 million. During fiscal 2025, the Company spent $37.6 million to repurchase 377,154 shares of its common stock (at an average price of $99.71 per share). During fiscal 2024, the Company spent $45.7 million to repurchase 645,939 shares of its common stock (at an average price of $70.76 per share).
Litigation
The Company is involved in litigation arising in the ordinary course of business. Management believes that resolution of these matters will not result in any payment that, in the aggregate, would be material to the consolidated financial position or results of operations of the Company.
Inflation
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 year 2026; however, the Company believes inflation could have a material impact on pricing and operating expenses in future years due to the state of the economy and current inflation rates.
Critical Accounting Estimates
Our consolidated financial statements are prepared in accordance with the accounting principles generally accepted in the United States of America (“GAAP”), which require management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. These accounting principles require us to make estimates and assumptions that affect the reported amounts of assets and liabilities and revenues and expenses, and the disclosure of contingent assets and liabilities at the date of our consolidated financial statements.
We periodically evaluate our estimates and assumptions, including those relating to revenue recognition, leases, allowance for uncollectible accounts, goodwill and long-lived assets, accrual for self-insured costs, accounting for income taxes, legal and other contingencies, share-based compensation, and software development costs. We base our estimates on historical experience and various assumptions that we believe to be reasonable based on specific circumstances. Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed herein. We believe the following significant accounting estimates may involve a higher degree of judgment and complexity. The following is not intended to be a comprehensive list of our accounting policies. See Note 1, “Summary of Significant Accounting Policies” in the notes to our consolidated financial statements for other significant accounting policies.
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 the Company expects to receive 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. Each service is priced separately and provides a 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 at the point in time when the results of the medical bill review service are delivered to the customer, with the 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.
In transactions related to third-party service revenue, which includes pharmacy, directed care services and other services provided by the Company’s integrated network solutions services, the Company is considered the principal, as it directs the third party, controls the specified service, performs program utilization review, directs payment to the provider, accepts the financial risk of loss associated with services rendered and combines the services provided into an integrated solution, as specified within the Company’s customer contracts. The Company has the ability to influence contractual fees with customers and possesses the financial risk of loss in certain contractual obligations. These factors indicate the Company is the principal and, as such, it is required to recognize revenue gross and service partner vendor fees in the cost of revenue in the Company’s consolidated income statements.
Leases: The Company determines if an arrangement includes a lease at inception. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term; and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the commencement date of the lease, renewal date of the lease or significant remodeling of the lease space based on the present value of the remaining future minimum lease payments. Leases with a term greater than one year are recognized on the balance sheet as right-of-use assets and short-term and long-term lease liabilities, as applicable.
Operating and financing lease liabilities and their corresponding right-of-use assets are initially recorded based on the present value of lease payments over the expected remaining lease term. The interest rate implicit in lease contracts is typically not readily determinable. As a result, we utilize our incremental borrowing rate to discount lease payments, which reflects the fixed rate at which we could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic environment. The Company’s leases may include options to extend or terminate the lease which are included in the lease term when it is reasonably certain that we will exercise any such options. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
Allowance for Expected Credit Losses : The Company determines its allowance for uncollectible accounts by considering a number of factors, including the length of time trade accounts receivable are past due, the Company’s previous loss history, the customers’ current ability to pay its obligation to the Company, and the condition of the general economy and the industry as a whole. The Company writes off accounts receivable when they become uncollectible.
The Company must make significant judgments and estimates in determining contractual and bad debt allowances in any accounting period. One significant uncertainty inherent in the Company’s analysis is whether its past experience will be indicative of future periods. Although the Company considers future projections when estimating contractual and bad debt allowances, the Company ultimately makes its decisions based on the best information available to it at the time the decision is made. Adverse changes in general economic conditions or trends in reimbursement amounts for the Company’s services could affect the Company’s contractual and bad debt allowance estimates, collection of accounts receivable, cash flows, and results of operations.
Goodwill and Long-Lived Assets : Goodwill arising from business combinations represents the excess of the purchase price over the estimated fair value of the net assets of the acquired business. Pursuant to ASC 350-10 through ASC 350-30, “Goodwill and Other Intangible Assets,” goodwill is tested annually for impairment or more frequently if circumstances indicate the potential for impairment. Also, management tests for impairment of its amortizable intangible assets and long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The impairment test is conducted at the company level. The measurement of fair value is based on an evaluation of market capitalization. Management considers industry growth rates and trends and cost structure changes. Based on the Company’s tests and reviews, no impairment of its goodwill, intangible assets, or other long-lived assets existed at March 31, 2026 or March 31, 2025. However, future events or changes in current circumstances could affect the recoverability of the carrying value of goodwill and long-lived assets.
Accrual for Self-insurance Costs : The Company accrues for the group medical costs and workers’ compensation costs of its employees based on claims filed and an estimate of claims incurred but not reported as of each balance sheet date. The Company determines its estimated self-insurance reserves based upon historical trends along with outstanding claims information provided by its claims paying agents. However, it is possible that recorded accruals may not be adequate to cover the future payment of claims. Adjustments, if any, to estimated accruals resulting from ultimate claim payments will be reflected in earnings during the periods in which such adjustments are determined. The Company’s self-insured liabilities contain uncertainties because management is required to make assumptions and judgments to estimate the ultimate cost to settle reported claims and claims incurred but not reported at the balance sheet date.
The Company does not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions used to calculate its self-insured liabilities. However, if actual results are not consistent with these estimates or assumptions, the Company may be exposed to losses or gains that could be material.
Accounting for Income Taxes : The Company records a tax provision for the anticipated tax consequences of its reported results of operations. The provision for income taxes is computed using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently-enacted tax rates that apply to taxable income in effect for the years in which those tax assets are expected to be realized or settled. The Company records a valuation allowance, if necessary, to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
The Company recognizes tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.
Management believes it is more likely than not that forecasted income, including income that may be generated as a result of certain tax planning strategies, together with future reversals of existing taxable temporary differences, will be sufficient to fully recover the deferred tax assets. In the event that the Company determines all or part of the net deferred tax assets are not realizable in the future, the Company will make an adjustment to the valuation allowance that would be charged to earnings in the period such determination is made. In addition, the calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of GAAP and complex tax laws. Resolution of these uncertainties in a manner inconsistent with management’s expectations could have a material impact on the Company’s financial condition and operating results. The significant assumptions and estimates described above are important contributors to our ultimate effective tax rate in each year.
Legal and Other Contingencies : As discussed in Part I, Item 3 of this Annual Report, “Legal Proceedings” and in Note 10, “Contingencies and Legal Proceedings” in the notes to our consolidated financial statements, the Company is subject to various legal proceedings and claims that arise in the ordinary course of business. The Company records a liability when it is probable that a loss has been incurred and the amount is reasonably estimable. There is significant judgment required in both the probability determination and as to whether an exposure can be reasonably estimated. The outcomes of legal proceedings and claims brought against the Company are subject to significant uncertainty.
Share-Based Compensation : The Company accounts for share-based compensation in accordance with the provisions of ASC Topic 718 “Compensation – Stock Compensation”. Under ASC 718, share-based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the employee’s requisite service period (generally the vesting period of the equity grant).
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 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.
The Company does not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use to determine stock-based compensation expense. However, if actual results are not consistent with our estimates or assumptions, we may be exposed to changes in stock-based compensation expense that could be material.
Software Development Costs : Development costs incurred in the research and development of new software products and enhancements to existing software products for internal use are expensed as incurred until technological feasibility has been established. After technological feasibility is established, any additional external software development costs are capitalized and amortized on a straight-line basis over the estimated economic life of the related product, which is typically five years. The Company performs an annual review of the estimated economic life and the recoverability of such capitalized software costs. If a determination is made that capitalized amounts are not recoverable based on the estimated cash flows to be generated from the applicable software, any remaining capitalized amounts are written off. Although the Company believes that its approach to estimates and judgments as described herein is reasonable, actual results could differ and the Company may be exposed to increases or decreases in revenue that could be material.
Recently Issued Accounting Standards
In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software , which replaces the existing stage-based rules for internal-use software with a principles-based framework. Under the new guidance, entities may capitalize eligible costs once management has authorized funding the software, the entity has committed to using the software, and it is probable the project will be completed. Entities may elect to apply the guidance retrospectively, prospectively to software costs incurred after the adoption date or on a modified prospective basis. The update is effective for fiscal years beginning after December 15, 2027, including interim periods within those annual reporting periods, with early adoption permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures , to require disaggregated disclosure of certain income statement expense line items, such as purchases of inventory, employee compensation, and depreciation and amortization. The new standard is effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The amendments should be applied prospectively, but retrospective application is permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures , enhances the transparency and decision usefulness of income tax disclosures. The standard is effective for fiscal years beginning after December 15, 2024, and is required to be applied prospectively, with retrospective application permitted. The Company adopted this standard prospectively in the fiscal year 2026 and provided the required disclosures in Note 6 - Income Taxes, to the consolidated financial statements.
REPORT OF INDEPENDENT REGIS TERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
CorVel Corporation
Opinions on the Consolidated Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of CorVel Corporation (the “Company”) as of March 31, 2026 and 2025, the related consolidated statements of income, stockholders’ equity, and cash flows for each of the years in the three-year period ended March 31, 2026, and the related notes and financial statement schedule (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of March 31, 2026, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). .
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of March 31, 2026 and 2025, and the consolidated results of its operations and its cash flows for each of the years in the three-year period ended March 31, 2026, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 31, 2026, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO .
Basis for Opinion
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB .
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects .
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (Continued)
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions .
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements .
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate .
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which they relate.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (Continued)
Revenue Recognition - Refer to Note 2 to the Consolidated Financial Statements
Critical Audit Matter Description:
The Company recognizes revenue upon transfer of control of promised services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those services. Certain services involve estimation of the related transaction price that, in turn, led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence related to management’s judgments. Revenues that are most significantly impacted by management’s estimates and judgments include (i) bill review services that contain contractual provisions that allow the customer to compensate the Company only for services that it utilizes and (ii) directed care services at period-end for which the Company has not been billed by the related providers.
How the Critical Matter was Addressed in the Audit:
The primary procedures we performed to address this critical audit matter included the following, among others:
We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s process to estimate the most likely amount of consideration to which the Company will be entitled in exchange for transferring the promised services to a customer. We tested the effectiveness of certain controls over revenue recognition, including management’s controls over the methodology used to determine estimated revenues.
We evaluated the reasonableness of management’s estimates through tests of the underlying data used by the Company to determine related bill review revenue estimates. We examined customer contracts and analyzed historical utilization analyses completed by the Company.
We tested assumptions used in management’s calculations of period-end directed care revenues by analyzing historical time lag patterns between the provision of service and provider invoicing. We also examined trends associated with the number of period-end provider referrals and performed gross margin reasonableness analyses to evaluate management’s estimates.
We tested the mathematical accuracy of management’s calculations of revenue and the associated timing of revenue recognized in the consolidated financial statements.
/s/ HASKELL & WHITE LLP
We have served as the Company’s auditor since 2006.
Irvine, California
May 22, 2026
CORVEL CORPORATION
CONSOLIDATED B ALANCE SHEETS
March 31,
ASSETS
Current Assets
Cash and cash equivalents
Customer deposits
Accounts receivable (less allowance for expected credit losses of $ 3,969,000 at March 31,
2026 and $ 7,690,000 at March 31, 2025)
Prepaid expenses and income taxes
Total current assets
Property and equipment, net
Goodwill
Other intangible assets, net
Right-of-use asset, net
Deferred tax asset, net
Other assets
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts and income taxes payable
Accrued liabilities
Total current liabilities
Long-term lease liabilities
Total liabilities
Commitments and contingencies
Stockholders’ Equity
Common stock, $ .0001 par value: 360,000,000 shares authorized at March 31, 2026 and
2025; 166,168,732 shares issued ( 50,909,297 shares outstanding, net of treasury shares)
and 165,836,235 shares issued ( 51,359,544 shares outstanding, net of treasury shares) at
March 31, 2026 and March 31, 2025, respectively
Paid-in-capital
Treasury stock, at cost ( 115,259,435 and 114,476,691 shares at March 31, 2026 and 2025,
respectively)
Retained earnings
Total stockholders’ equity
Total liabilities and stockholders’ equity
See accompanying notes to consolidated financial statements.
CORVEL CORPORATION
CONSOLIDATED STAT EMENTS OF INCOME
Fiscal Years Ended March 31,
Revenues
Cost of revenues
Gross profit
General and administrative
Income before income taxes
Income tax provision
Net income
Net income per share:
Basic
Diluted
Weighted average shares outstanding:
Basic
Diluted
See accompanying notes to consolidated financial statements.
CORVEL CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Common
Shares
Stock
Amount
Paid-in-Capital
Treasury
Shares
Treasury
Stock
Retained
Earnings
Total
Stockholders’
Equity
Balance – March 31, 2023
Stock issued under employee stock
purchase plan
Stock issued under stock option
plan, net of shares repurchased
Stock-based compensation expense
Purchase of treasury stock
Net income
Balance – March 31, 2024
Stock issued under employee stock
purchase plan
Stock issued under stock option
plan, net of shares repurchased
Stock-based compensation expense
Purchase of treasury stock
Adjusted shares outstanding
Net income
Balance – March 31, 2025
Stock issued under employee stock
purchase plan
Stock issued under stock option plan,
net of shares repurchased
Stock-based compensation expense
Stock issuance for asset acquisition
Purchase of treasury stock
Net income
Balance – March 31, 2026
See accompanying notes to consolidated financial statements.
CORVEL CORPORATION
CONSOLIDATED STATEM ENTS OF CASH FLOWS
Fiscal Years Ended March 31,
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization
Loss on write down or disposal of property, capitalized software or
investment
Stock compensation expense
Provision for expected credit losses
Deferred income taxes
Changes in operating assets and liabilities:
Accounts receivable
Customer deposits
Prepaid expenses and income taxes
Other assets
Accounts and income taxes payable
Accrued liabilities
Operating lease liabilities
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Exercise of employee stock purchase options
Exercise of common stock options
Purchase of treasury stock
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
CASH AND CASH EQUIVALENTS AT END OF YEAR
Supplemental cash flow information
Income taxes paid
Accrual of software license purchase
Asset acquisition for stock
See accompanying notes to consolidated financial statements.
CORVEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal Years Ended March 31, 2026, 2025 and 2024
Note 1 — Summary of Significant Accounting Policies
Organization: CorVel Corporation (“CorVel” or “the Company”), incorporated in Delaware in 1987, 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.
Basis of Presentation: The consolidated financial statements include the accounts of CorVel and its wholly-owned subsidiaries. Significant intercompany accounts and transactions have been eliminated in consolidation. These changes had no impact on previously-reported results of operations or shareholders’ equity.
The Company evaluated all subsequent events and transactions through the date of this filing.
Use of Estimates: The preparation of financial statements in compliance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the accompanying consolidated financial statements. Actual results could differ from those estimates. Significant estimates include the values assigned to intangible assets, capitalized software development, the allowance for expected credit losses, work in process, accrual for income taxes, share-based payments related to performance-based awards, loss contingencies, estimated lives of claims for claims administration revenue recognition, estimates used in stock options valuations, and accrual for self-insurance reserves.
Cash and Cash Equivalents: Cash and cash equivalents consist of short-term, interest-bearing highly-liquid investment-grade securities with maturities of 90 days or less when purchased. The carrying amounts of the Company’s financial instruments approximate their fair values at March 31, 2026 and 2025 due to the short-term nature of those instruments. Customer deposits represent cash that is expected to be returned or applied towards payment within one year through the Company’s provider reimbursement services.
Fair Value of Financial Instruments: The Company applies Accounting Standard Codification (“ASC”) 820, “Fair Value Measurements and Disclosures,” which defines fair value, establishes a framework for measuring fair value, and provides for disclosures about fair value measurements, to measure and disclose fair value for (i) nonfinancial assets and liabilities that are recognized or disclosed at fair value in the Company’s consolidated financial statements on a recurring basis, at least annually, and (ii) all financial assets and liabilities. ASC 820 prioritizes the inputs used in measuring fair value into the following hierarchy:
Level 1 - Quoted market prices in active markets for identical assets or liabilities;
Level 2 - Observable inputs other than those included in Level 1 (for example, quoted prices for similar assets in active markets or quoted prices for identical assets in inactive markets); and
Level 3 - Unobservable inputs reflecting management’s own assumptions about the inputs used in estimating the value of the asset.
The carrying amount of the Company’s financial instruments (i.e. cash and cash equivalents, accounts receivable, accounts payable, etc.) approximates their fair values at March 31, 2026 and 2025 , due to the short-term nature of those instruments. The Company has no financial instruments that are measured at fair value on a recurring basis.
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 the Company expects to receive in exchange for those services. As the Company completes its performance obligations which are identified in Note 2, 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. Each service is priced separately and provides distinct value to the customer. Pricing is generally consistent for each service irrespective of the other services or quantities requested by the customer.
Accounts Receivable: The majority of the Company’s accounts receivable are due from companies in the property and casualty insurance industries, self-administered employers and governmental entities. Credit is extended based on evaluation of a customer’s financial condition and, generally, collateral is not required. Accounts receivable are typically due within 30 days and are stated at amounts due from customers net of an allowance for expected credit losses. Those accounts outstanding longer than the contractual payment terms are considered past due. The Company determines its allowance by considering a number of factors, including the length of time trade accounts receivable are past due, the Company’s previous loss history, the customer’s current ability to pay its obligation to the Company, and the condition of the general economy and the industry as a whole. The Company writes off accounts receivable against the reserve when they become uncollectible. Accounts receivable includes $ 37,847,000 and $ 46,493,000 of unbilled receivables at March 31, 2026 and 2025 , respectively. Unbilled receivables represent the amounts expected to be collected for work performed which has not yet been invoiced to the customer. Unbilled receivables are generally invoiced within one year.
Concentrations of Credit Risk: Substantially all of the Company’s customers are payors of workers’ compensation benefits and property and casualty insurance, which include insurance companies, TPAs, self-administered employers and government entities. Credit losses consistently have been within management’s expectations. Virtually all of the Company’s cash is invested at financial institutions in amounts which exceed the FDIC insurance levels. No customer accounte d for 10 % or more of revenue for fiscal 2026, 2025 or 2024. Two customers accounted for 10 % or more of accounts receivable as of March 31, 2026 and 2025 .
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.
Property and Equipment: Additions to property and equipment are recorded at cost. The Company provides for depreciation on property and equipment using the straight-line method by charges to operations in amounts that allocate the cost of depreciable assets over their estimated lives as follows:
Asset Classification
Building
Building Improvements
Land Improvements
Estimated Useful Life
40 years
20 years
20 years
Leasehold Improvements
Shorter of 5 years or the life of lease
Furniture and Equipment
5 to 7 years
Computer Hardware
2 to 5 years
Computer Software
3 to 5 years
The Company accounts for internally-developed software costs in accordance with ASC 350-40, “Internal Use Software.” Capitalized software development costs, intended for internal use, totaled $ 49,581,000 (net of $ 185,936,000 in accumulated amortization) and $ 42,756,000 (net of $ 170,041,000 in accumulated amortization), as of March 31, 2026 and 2025 , respectively. These costs are included in computer software in property and equipment and are amortized over a period of five years .
Long-Lived Assets: The carrying amount of all long-lived assets is evaluated periodically to determine if adjustment to the depreciation and amortization period or to the unamortized balance is warranted. Such evaluation is based principally on the expected utilization of the long-lived assets and the projected, undiscounted cash flows of the operations in which the long-lived assets are deployed.
Leases: The Company determines if an arrangement includes a lease at inception. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term; and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the commencement date of the lease, renewal date of the lease or significant remodeling of the lease space based on the present value of the remaining future minimum lease payments. Leases with a term greater than one year are recognized on the balance sheet as right-of-use assets and short-term and long-term lease liabilities, as applicable.
Operating and financing lease liabilities and their corresponding right-of-use assets are initially recorded based on the present value of lease payments over the expected remaining lease term. The interest rate implicit in lease contracts is typically not readily determinable. As a result, we utilize our incremental borrowing rate to discount lease payments, which reflects the fixed rate at which we could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic environment. The Company’s leases may include options to extend or terminate the lease which are included in the lease term when it is reasonably certain that we will exercise any such options. Operating lease expense for lease payments is recognized on a straight-line basis over the lease term.
Goodwill and Indefinite Lived Long-Lived Assets: The Company accounts for its business combinations in accordance with the ASC 805-10 through ASC 805-50, “Business Combinations,” which (i) requires that the purchase method of accounting be applied to all business combinations and (ii) addresses the criteria for initial recognition of intangible assets and goodwill. In accordance with ASC 350-10 through ASC 350-30, goodwill and other intangible assets with indefinite lives are not amortized but are tested for impairment annually, or more frequently if circumstances indicate the possibility of impairment. If the carrying value of goodwill or an intangible asset exceeds its fair value, an impairment loss will be recognized. Based on the Company’s tests and reviews, no impairment of its goodwill, intangible assets or other long-lived assets existed at March 31, 2026 and 2025 . However, future events or changes in current circumstances could affect the recoverability of the carrying value of goodwill and long-lived assets.
Cost of Revenues: Cost of revenues consists primarily of the compensation and fringe benefits of field personnel, including managers, medical bill analysts, field case managers, telephonic case managers, systems support, administrative support, account managers and account executives, and related facility costs including rent, telephone and office supplies. Historically, the costs associated with these additional personnel and facilities have been the most significant factor driving increases in the Company’s cost of revenues.
Income Taxes: The Company provides for income taxes in accordance with provisions specified in ASC 740, “Accounting for Income Taxes.” Accordingly, deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities. These differences will result in taxable or deductible amounts in the future, based on tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences become deductible. In making an assessment regarding the probability of realizing a benefit from these deductible differences, management considers the Company’s current and past performance, the market environment in which the Company operates, tax-planning strategies and the length of carry-forward periods for loss carry-forwards, if any. Valuation allowances are established when necessary to reduce deferred tax assets to amounts that are more likely than not to be realized. Further, the Company accrues for income tax issues not yet resolved with federal, state and local tax authorities, when it appears more likely than not that a tax liability has been incurred.
Share-Based Compensation: The Company accounts for share-based compensation in accordance with the provisions of ASC Topic 718 “Compensation – Stock Compensation.” Under ASC 718, share-based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the requisite service period (generally the vesting period of the equity grant). 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.
Accrual for Self-insurance Costs: The Company self-insures for the group medical costs and workers’ compensation costs of its employees. Management believes that the self-insurance reserves are appropriate; however, actual claims costs may differ from the original estimates requiring adjustments to the reserves. The Company determines its estimated self-insurance reserves based upon historical trends along with outstanding claims information provided by its claims paying agents.
Earnings per Share: Earnings per common share-basic is based on the weighted average number of common shares outstanding during the period. Earnings per common shares-diluted is based on the weighted average number of common shares and common share equivalents outstanding during the period. In calculating earnings per share, earnings are the same for the basic and diluted calculations. Weighted average shares outstanding is greater for diluted earnings per share due to the effect of stock options.
The difference between the basic weighted average shares and the diluted weighted average shares for each of the fiscal years ended March 31, 2026, 2025 and 2024 is as follows:
Fiscal 2026
Fiscal 2025
Fiscal 2024
Basic weighted average shares
Treasury stock impact of stock options
Diluted weighted average shares
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 these consolidated financial statements and elsewhere in this Annual Report have been retroactively adjusted to reflect the stock split.
Recently Issued Accounting Standards
In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software , which replaces the existing stage-based rules for internal-use software with a principles-based framework. Under the new guidance, entities may capitalize eligible costs once management has authorized funding the software, the entity has committed to using the software, and it is probable the project will be completed. Entities may elect to apply the guidance retrospectively, prospectively to software costs incurred after the adoption date or on a modified prospective basis. The update is effective for fiscal years beginning after December 15, 2027, including interim periods within those annual reporting periods, with early adoption permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures , to require disaggregated disclosure of certain income statement expense line items, such as purchases of inventory, employee compensation, and depreciation and amortization. The new standard is effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The amendments should be applied prospectively, but retrospective application is permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures , enhances the transparency and decision usefulness of income tax disclosures. The standard is effective for fiscal years beginning after December 15, 2024, and is required to be applied prospectively, with retrospective application permitted. The Company adopted this standard prospectively in the fiscal year 2026 and provided the required disclosures in Note 6 - Income Taxes, to the consolidated financial statements.
Note 2 – Revenue Recognition
Revenue from Contracts with Customers
The Company operates in one reportable operating segment: managed care. The Company generates revenue through its patient management and network solutions service lines. Revenue generated from the patient management service line is recognized over time as services are provided and performance obligations are satisfied. Revenue generated from the network solutions service line is recognized when control of the promised services is transferred to the Company’s customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. As the Company completes its performance obligations, which are described in greater detail below, it has an unconditional right to consideration pursuant to the Company’s contracts. Generally, the Company’s accounts receivable are expected to be collected within 30 days, in accordance with the underlying payment terms.
Patient Management Service Line
The patient management service line provides services primarily related to workers’ compensation claims management and case management, as well as additional services such as accident and health claims programs. Each claim referred by the customer is considered an optional purchase of additional claims management services under the customer agreement. The transaction price is fixed for each service and readily determinable from the contract. The Company recognizes revenue over time as services are provided and performance obligations are satisfied. These performance obligations are satisfied as the Company researches, investigates, evaluates, documents, and reports on each claim, and control of the services transfers to the customer. The Company recognizes revenue using a portfolio approach based on historical claim closure rates, claim type, and the passage of time, which claims generally remaining open between three and fifteen months . The Company believes this approach reasonably reflects the transfer of the claims management services to its customers.
The Company’s obligation to manage claims and cases under patient management service line contracts range from less than one year to multiple years. These contracts typically have one year terms; however, many include auto-renewal provisions leading the Company’s customer relationships to span multiple years. Under certain claims management agreements, the Company receives consideration from a customer at contract inception before services are transferred to the customer, however, the Company begins performing services immediately. The period between the customer’s payment of consideration and the completion of the promised services is generally less than one year. The amount of promised consideration is no different than the cash selling price of the promised
services. The fee is billed upfront by the Company in order to provide customers with simplified and predictable ways of purchasing the Company’s services.
The patient management service line also offers the services of case managers who provide administration services by proactively managing medical treatment for claimants while also facilitating an understanding of, and participation in, their rehabilitation process. Revenue for case management services is recognized over time as the performance obligations are satisfied through the effort expended to manage the medical treatment for claimants and control of these services is transferred to the customer. Case management services are generally billed based on time incurred, are considered variable consideration, and revenue is recognized for the amount in which the Company has the right to invoice for services performed. The Company believes this approach reasonably reflects the transfer of the case management service to the customer.
Network Solutions Service Line
The network solutions service line consists primarily of medical bill review and third-party services. Medical bill review services analyze medical charges for customers’ claims to identify potential savings opportunities. The Company recognizes revenue from medical bill review services at the point in time when control of the service transfers to the customer, which occurs when the results of the medical bill review service are delivered to the customer. Medical bill review revenue is variable and is generally based on performance metrics set forth in the underlying contracts. Each period, the Company bases its revenue estimates on a contract-by-contract basis. The Company makes its best estimate using amounts the Company has earned and expects to be collected using historical averages and other factors to project such revenues. Variable consideration is recognized when the Company concludes it is probable that a significant revenue reversal will not occur in future periods.
Third-party services revenue includes revenue from pharmacy, directed care services and other services, including amounts received from customers to reimburse the Company for certain third-party costs incurred in providing its integrated network solutions services. The Company is considered the principal in these transactions as it directs the third-party, controls the specified service and pricing, performs program utilization review, directs payment to the provider, assumes the financial risk of loss associated with services rendered, and combines the services provided into an integrated solution, as specified within its customer contracts. The Company has the ability to influence contractual fees with customers and assumes the financial risk of loss in certain contractual obligations. These factors indicate that the Company is the principal and therefore required to recognize gross revenue and operating expense from service-partner fees within its consolidated statements of income.
The following table presents revenues disaggregated by service line for the fiscal years ended March 31, 2026, 2025 and 2024:
Patient management services
Network solutions services
Total services
Arrangements with Multiple Performance Obligations
The Company offers a suite of services under its patient management and network solutions service lines. Although customers can select from a variety of services, the Company typically has one performance obligation per customer. The Company always provides its customers with an option to contract additional services. The price of each service is separate and distinct to each customer. Pricing is generally consistent for each service irrespective of the other services or quantities requested by the customer.
Contract Balances
Due to the timing of revenue recognition, billings and cash collections, the Company’s consolidated balance sheets include billed accounts receivables, unbilled receivables, and contract liabilities (reported as deferred revenues). Unbilled receivables represent amounts due are due for services that have been performed but not yet billed , except for physical invoicing and the passage of time. Invoicing requirements vary by customer contract, but substantially all unbilled revenues are billed within one year .
March 31, 2026
March 31, 2025
Billed receivables
Allowance for expected credit losses
Unbilled receivables
Accounts receivable, net
When the Company receives consideration from a customer prior to transferring services to the customer under the terms of certain claims management agreements, it records deferred revenues on the consolidated balance sheets, which represents a contract liability.
Certain services, such as claims management, are provided under fixed-fee service agreements and require the Company to manage claims over a contract period, typically for one year with the option for auto renewal, with the fixed fee renewing on the anniversary date of such contract. The Company recognizes deferred revenues as revenues when it performs services and transfers control of the services to the customer and satisfies the performance obligation, which it determines utilizing a portfolio approach. For all fixed fee service agreements, revenues are straight-lined and recognized over the expected service periods by type of claim.
The table below presents the deferred revenues balance and the significant activity affecting deferred revenues during the fiscal year ended March 31, 2026:
March 31, 2026
Beginning balance at April 1, 2025
Additions
Revenue recognized from beginning of period
Revenue recognized from additions
Ending balance at March 31, 2026
Remaining Performance Obligations
Remaining performance obligations consist of deferred revenues. As of March 31, 2026 , the Company had approximately $ 32.2 million of remaining performance obligations related to claims and non-claims services for which the price is fixed. The Company expects to recognize approximately 98 % of its remaining performance obligations as revenues within one year and expects to recognize the remaining balance as revenues thereafter . See the discussion below regarding the practical expedients elected for the disclosure of remaining performance obligations.
Costs to Obtain a Contract
The Company has an internal sales force compensation program where remuneration is based solely on the revenues recognized in the period and does not represent an incremental cost to the Company, which provides a future benefit expected to be longer than one year and would meet the criteria to be capitalized and presented on the consolidated balance sheets.
Practical Expedients Elected
As a practical expedient, the Company does not adjust the consideration in a contract for the effects of a significant financing component. It expects, at contract inception, that the period between a customer’s payment of consideration and the transfer of promised services to the customer will be one year or less .
For patient management services that are billed on a time-and-expense incurred or per unit basis and for which revenue is recognized over time, the Company recognizes revenue at the amount to which it has the right to invoice for services performed.
The Company does not disclose the value of remaining performance obligations for (i) contracts under which revenue is recognized in the amount the Company has the right to invoice for services performed, or (ii) contracts in which variable consideration is allocated entirely to a single performance obligation.
Note 3 — Stock Options and Stock-Based Compensation
As of March 31, 2025, 1,185,727 stock options were outstanding and 1,775,459 shares were available for issuance under the Company’s Restated Omnibus Incentive Plan (formerly the Restated 1988 Executive Stock Option Plan) (the “Omnibus Plan”) . Under the Omnibus Plan, the Company granted shares of common stock to key employees, non-employee directors, and consultants at exercise prices equal to or greater than the fair market value of the common stock on the grant date. Options granted under the Omnibus Plan generally vested as to 25 % of the underlying shares one year after the grant date, with the remaining 75 % vesting ratably each month over the following 36 months. O ptions granted to employees expire five years from the grant date, and options granted to directors expire ten years from the date of grant. All options granted in fiscal year 2026 and 2025 had an exercise price equal to the fair value of the Company’s common stock on the grant date and are non-statutory stock options. After August 7, 2025, the Company will not grant any further equity awards under the Omnibus Plan. Outstanding awards under the Omnibus Plan will remain outstanding, unchanged and subject to the terms of the Omnibus Plan and their respective award agreements.
On August 7, 2025, the Company’s stockholders approved the 2025 Stock Incentive Plan (the “2025 SIP”) replacing the Omnibus Plan, which expires on June 30, 2026. Consistent with the Omnibus Plan, the primary purpose of the 2025 SIP is to attract and retain qualified personnel. The 2025 SIP has 1,775,459 shares of common stock reserved for issuance to employees, directors, consultants, independent contractors and advisors. The 2025 SIP permits the issuance of stock options, restricted stock, stock appreciation rights, restricted stock units and performance awards.
Shares subject to awards that are forfeited, expire or are otherwise terminated without shares being issued, or shares withheld to pay the exercise price of an award or to satisfy tax withholding obligations, including shares subject to awards granted under the Omnibus Plan that are outstanding after June 30, 2026, will be returned to the pool of shares available for grant and issuance under the 2025 SIP. As of March 31, 2026 , 1,447,857 shares of common stock remained available for future issuance under the 2025 SIP, subject to adjustment for future stock splits, stock dividends, and similar changes in capitalization.
The Company records compensation expense for employee stock options based on the estimated fair value of the options on the date of grant using the Black-Scholes option-pricing model based on the assumptions included in the table below. The risk-free rate is based on the interest rate paid on a U.S. Treasury issue with a term similar to the estimated life of the option. The Company uses historical data, among other factors, to estimate the expected volatility, dividend yield and option life. The Company accounts for forfeitures as they occur, rather than estimating expected forfeitures.
The fair value of each grant is estimated on the date of grant using the Black-Scholes option-pricing model. The following weighted average assumptions were used for the fiscal years ended March 31, 2026, 2025 and 2024:
Fiscal 2026
Fiscal 2025
Fiscal 2024
Expected volatility
Risk free interest rate
Dividend yield
Weighted average option life
3.9 to 4.0 years
3.9 to 4.0 years
4.0 to 4.1 years
For the fiscal years ended March 31, 2026, 2025 and 2024 , the Company recorded share-based compensation expense of $ 5,411,000 , $ 5,714,000 , and $ 4,982,000 , respectively. The table below shows the amounts recognized in the financial statements for the fiscal years ended March 31, 2026, 2025 and 2024.
Fiscal 2026
Fiscal 2025
Fiscal 2024
Cost of revenue
General and administrative
Total cost of stock-based compensation
included in income before income taxes
Amount of income tax benefit recognized
Amount charged to net income
Effect on basic earnings per share
Effect on diluted earnings per share
The following table summarizes the status of stock options outstanding and exercisable at March 31, 2026:
Range of
Exercise Prices
Number of
Outstanding
Options
Weighted
Average
Remaining
Contractual
Life
Outstanding
Options –
Weighted
Average
Exercise Price
Exercisable
Options –
Number of
Exercisable
Options
Exercisable
Options –
Weighted
Average
Exercise Price
Total
The following table summarizes the status of all outstanding options at March 31, 2026, and changes during the fiscal year then ended:
Number of
Options
Weighted
Average
Exercise
Price per
Share
Weighted Average
Remaining
Contractual Life
(Years)
Aggregate
Intrinsic Value
as of March 31, 2026
Options outstanding, March 31, 2025
Granted
Exercised
Cancelled – forfeited
Cancelled – expired
Options outstanding, March 31, 2026
Options vested and expected to vest
Ending exercisable
The weighted average fair value of options granted during fiscal 2026, 2025 and 2024 was $ 20.89 , $ 33.64 , and $ 25.16 , respectively. The total intrinsic value of options exercised during fiscal years 2026, 2025 and 2024 was $ 15,963,000 , $ 24,182,000 , and $ 29,230,000 respectively.
Included in the above-noted stock option grants and stock compensation expense are 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. During the fiscal years ended March 31, 2026, 2025 and 2024 , the Company recognized stock compensation expense for performance-based options in the amount of $ 1,564,000 , $ 1,715,000 , and $ 1,199,000 , respectively.
The Company received $ 7,562,000 , $ 10,317,000 , and $ 9,266,000 of cash receipts from the exercise of stock options during fiscal 2026, 2025 and 2024, respectively. As of March 31, 2026 , $ 9,009,000 of total unrecognized compensation costs related to stock options is expected to be recognized over a weighted average period of 3 years.
Note 4 — Property and Equipment
Property and equipment, net consisted of the following at March 31, 2026 and 2025:
Computer software
Office equipment and computers
Land, building and improvements
Leasehold improvements
Less: accumulated depreciation and amortization
Depreciation expense totaled $ 31,589,000 , $ 29,152,000 and $ 25,829,000 for the fiscal years ended March 31, 2026, 2025 and 2024 , respectively.
Note 5 — Accounts and Income Taxes Payable and Accrued Liabilities
Accounts and income taxes payable consisted of the following at March 31, 2026 and 2025:
Accounts payable
Income taxes payable
Accrued liabilities consisted of the following at March 31, 2026 and 2025:
Payroll, payroll taxes and employee benefits
Customer deposits
Accrued professional service fees
Self-insurance accruals
Deferred revenue
Operating lease liabilities
Other
Note 6 — Income Taxes
The income tax provision consisted of the following for the fiscal years ended March 31, 2026, 2025 and 2024:
Current — Federal
Current — State
Subtotal
Deferred — Federal
Deferred — State
Subtotal
The Company adopted ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures , on a prospective basis. As a result, disclosures for fiscal year 2026 reflect the requirements of ASU 2023-09, including the reconciliation of the statutory federal income tax rate and disaggregated tax payment information. The disclosures for fiscal years 2025 and 2024 are presented under the prior disclosure requirements.
The following is a reconciliation of the income tax provision from the statutory federal income tax rate to the effective rate for the fiscal year ended March 31, 2026:
Income taxes at federal statutory rate
State income taxes, net of federal benefit (1)
Tax credits
Change in valuation allowance
Nondeductible items:
Stock-based compensation
§162(m) limitation and permanent items
Worldwide changes in unrecognized tax benefits
Other:
Deferred tax adjustment
State taxes in the following states made up the majority of the tax effect in this category: California, Georgia, Illinois, Pennsylvania and Texas.
The following is a reconciliation of the income tax provision from the statutory federal income tax rate to the effective rate for the fiscal years ended March 31, 2025 and 2024:
Income taxes at federal statutory rate
State income taxes, net of federal benefit
Uncertain tax positions
Stock-based compensation and §162(m) limitation
Permanent items and tax credits
Adjustments to returns as filed
Valuation allowance
The cash paid for income taxes (net of refunds) during the fiscal year 2026 was as follows:
Federal
State and local:
California
Texas
Georgia
New York
Pennsylvania
Illinois
Other
State and local total
Foreign:
Puerto Rico
Foreign total
Total
Net cash payments for income taxes were $ 28,095,000 and $ 22,874,000 in 2025 and 2024, respectively.
Deferred tax assets and liabilities at March 31, 2026 and 2025 are, as follows:
Deferred tax assets:
Accrued liabilities not currently deductible
Allowance for expected credit losses
Stock-based compensation
Deferred lease liability
Capitalized research and development expenditures
Other
Deferred tax assets
Deferred tax liabilities:
Excess of book over tax basis of fixed assets
Intangible assets
Right-of-use asset
Accrued revenue
Other
Total deferred tax liabilities
Valuation allowance
Deferred tax liabilities
Net deferred tax assets (liabilities)
Prepaid income taxes are $ 1,287,000 at March 31, 2026, and $ 0 at March 31, 2025.
A reconciliation of the financial statement recognition and measurement of uncertain tax positions during the current fiscal year is as follows:
Balance as of March 31, 2025
Additions based on tax positions related to the current year
Additions for tax positions of prior years
Reductions for tax positions related to the current year
Reductions for tax positions of prior years
Balance as of March 31, 2026
The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. During the fiscal years ended March 31, 2026, 2025 and 2024 , the Company recognized approximately $( 8,000 ), $( 9,000 ) and $( 14,000 ) in interest and
penalties, respectively. As of March 31, 2026, 2025 and 2024 , accrued interest and penalties related to uncertain tax positions were $ 23,000 , $ 31,000 and $ 40,000 , respectively.
The tax fiscal years from 2023-2025 remain open to examination by the major taxing jurisdictions to which the Company is subject.
Note 7 — Employee Stock Purchase Plan
The Company maintains an Employee Stock Purchase Plan, as amended (the “ESPP”) which allows employees of the Company and its subsidiaries to purchase shares of common stock on the last day of two six-month purchase periods (i.e. March 31 and September 30) at a purchase price that is 95 % of the closing sale price of shares as quoted on NASDAQ on the last day of such purchase period. Employees are allowed to contribute up to 20 % of their gross pay. A maximum of 8,550,000 shares have been authorized for issuance under the ESPP. As of March 31, 2026 , 7,531,826 shares had been issued pursuant to the ESPP. Summarized ESPP information is as follows:
Employee contributions
Shares acquired
Average purchase price
Note 8 — Treasury Stock
During each of the three fiscal years ended March 31, 2026, 2025 and 2024 , the Company continued to repurchase shares of its common stock under a program originally approved by the Company’s Board of Directors in 1996. Including a 3,000,000 share expansion authorized in November 2022 by the Company’s Board of Directors, the total number of shares of common stock authorized to be repurchased over the life of the program is 117,000,000 shares of common stock. During the fiscal year 2025, the Company effected a three-for-one forward stock split. All prior period share, equity award and per share amounts and calculations in these consolidated financial statements and elsewhere in this Annual Report have been retroactively adjusted to reflect the stock split. Purchases may be made from time to time depending on market conditions and other relevant factors. The share repurchases for the fiscal years ended March 31, 2026, 2025 and 2024 and cumulatively since inception of the authorization, are as follows:
Cumulative
Shares repurchased
Cost
Average price
During the period subsequent to March 31, 2026, through the date of filing this Annual Report, the Company repurchased 240,933 shares for $ 13.6 million, or an average of $ 56.44 per share. The repurchased shares were recorded as treasury stock, at cost, and are available for general corporate purposes. The repurchases were primarily financed from cash generated from operations and from cash proceeds from the exercise of stock options.
Note 9 – Leases
The Company determines if an arrangement contains a lease at contract inception. The Company’s current lease agreements have remaining lease terms between one and seven year s. The Company recognizes a right-of-use (“ROU”) asset and a lease liability at the lease commencement date. The lease liability is initially measured based on the present value of the unpaid lease payments as of the lease commencement date. Key estimates and judgments used in determining the liability include the (1) discount rate the Company uses to discount the unpaid lease payments to present value, (2) lease term, and (3) lease payments .
ASC 842, “Leases,” requires a lessee to discount its unpaid lease payments using the interest rate implicit in the lease or, if that rate cannot be readily determined, its incremental borrowing rate. Generally, the Company cannot determine the interest rate implicit in the lease because it does not have access to the lessor’s estimated residual value or the amount of the lessor’s deferred initial direct costs. Therefore, the Company generally uses its incremental borrowing rate as the discount rate for the lease. The Company’s incremental borrowing rate for a lease is the rate of interest it would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. Because the Company does not generally borrow on a collateralized basis, it uses quoted interest rates obtained from financial institutions as an input to derive an appropriate incremental borrowing rate, adjusted for the amount of the lease payments, the lease term, and the effect on that rate of designating specific collateral with a value equal to the unpaid lease payments for that lease.
Some of the Company’s lease agreements include options to extend the lease following the initial term. The Company elected the practical expedient of hindsight in determining the option to renew. Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheets. The Company recognizes lease expense for these leases on a straight-line basis over the lease term.
For lease agreements entered into or reassessed after the adoption of ASC 842, “Leases,” the Company has elected the practical expedient to account for the lease and non-lease components as a single lease component. Therefore, for those leases, the lease payments used to measure the lease liability include all of the fixed consideration in the contract.
Variable lease payments associated with the Company’s leases are recognized upon occurrence of the event, activity, or circumstance in the lease agreement on which those payments are assessed.
Leases with an initial term of 12 month s or less are not recorded on the balance sheet. The Company recognizes lease expense for these leases on a straight-line basis over the lease term.
The components of lease expenses are as follows:
March 31, 2026
March 31, 2025
March 31, 2024
Operating lease expense
Finance lease expense
Short-term lease expense
Variable lease expense
Total lease expenses
The following table presents the lease related assets and liabilities recorded on the Company’s consolidated balance sheets related to its operating leases at March 31, 2026 and March 31, 2025:
March 31, 2026
March 31, 2025
Right-of-use asset, net
Short-term lease liability
Long-term lease liability
Total lease liabilities
Weighted average remaining lease term
4.23 years
4.01 years
Weighted average finance lease term
0.25 years
Weighted average discount rate
Supplemental cash flow information related to operating leases for fiscal years ended March 31, 2026 and 2025 were as follows:
March 31, 2026
March 31, 2025
Cash paid for amounts included in the measurement
of operating lease liabilities
Operating lease liabilities arising from obtaining ROU assets
Finance lease liabilities arising from obtaining ROU assets
Additions to ROU assets resulting from additions to
operating lease liabilities
As of March 31, 2026, maturities of operating lease liabilities for each of the next five years and thereafter are as follows:
Thereafter
Total lease payments
Less interest
Total lease liabilities
As of March 31, 2026 , the Company has approximately $ 1.5 million of additional operating lease commitments that have not yet commenced. This lease will commence in 2026 and has lease terms of 10 years.
Note 10 — Contingencies and Legal Proceedings
From time to time, the Company is involved in litigation arising in the ordinary course of business. Although the results of these ordinary course matters cannot be predicted with certainty, we believe that the resolution of these matters will not, individually or in the aggregate, have a material adverse effect on our financial position or results of operations.
Note 11 — Retirement Savings Plan
The Company maintains a retirement savings plan for its employees, which is a qualified plan under Section 401(k) of the Internal Revenue Code. Full-time employees that meet certain requirements are eligible to participate in the plan. Employer contributions are made annually, primarily at the discretion of the Company’s Board of Directors. Contributions of $ 3,294,000 , $ 1,696,000 and $ 1,505,000 were charged to operations for the fiscal years ended March 31, 2026, 2025 and 2024 , respectively.
Note 12 — Segment Reporting
The Company operates within one operating segment. The Company’s Chief Operating Decision Maker (“CODM”) is its Chief Executive Officer. The CODM reviews segment financial information presented on a consolidated basis, including revenue, gross profit and operating expenses, and considers budget-to-actual variances for the purposes of making operating decisions, assessing financial performance and allocating resources.
The Company derives its revenues from providing patient management and network solutions services. Patient management services include claims administration, utilization review, medical case management, and vocational rehabilitation. Network solutions services include fee schedule auditing, hospital bill auditing, coordination of independent medical examinations, diagnostic imaging review services and preferred provider referral services. The percentages of revenues attributable to patient management and network solutions services for the fiscal years ended March 31, 2026, 2025 and 2024 are listed below.
Patient management services
Network solutions services
The Company’s management is structured geographically with regional vice presidents who are responsible for all services provided by the Company and the operating results of the Company within their respective regions. Area and district managers support the regional vice presidents by overseeing all services provided by the Company within their given areas and districts. All revenues are derived from customers within the United States, and all long-lived assets are located in the United States.
Under 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 as they provide similar managed care services to similar customers using similar methods of production and distribution. All of the Company’s regions perform both patient management and network solutions services.
The following table presents the financial information for the Company’s one reportable and operating segment for fiscal years ended March 31, 2026, 2025 and 2024:
Revenues
Less:
Labor expenses
Direct product expenses
Income tax provision
Depreciation and amortization expenses
Occupancy Expense
Other items (1)
Net income
Includes other operating costs (such as marketing and maintenance expenses), net gain (loss) on asset sales and disposals and other costs.
Note 13 — Other Intangible Assets
Other intangible assets consisted of the following at March 31, 2026:
Item
Life
Cost
Fiscal 2026 Amortization
Expense
Accumulated
Amortization at
March 31, 2026
Cost, Net of
Accumulated
Amortization at
March 31, 2026
Covenant Not to Compete
5 years
Customer Relationships
18 - 20 years
Third Party Administrator Licenses
15 years
Total
Other intangible assets consisted of the following at March 31, 2025:
Item
Life
Cost
Fiscal 2025 Amortization
Expense
Accumulated
Amortization at
March 31, 2025
Cost, Net of
Accumulated
Amortization at
March 31, 2025
Covenant Not to Compete
5 years
Customer Relationships
18 - 20 years
Third Party Administrator Licenses
15 years
Total
Amortization expense is expected to be $ 174,000 in fiscal 2027, $ 42,000 in fiscal 2028, $ 18,000 in fiscal 2029, $ 18,000 in fiscal 2030, and $ 11,000 in fiscal 2031.
