Corvel (NASDAQ:CRVL) Q2 2027 Earnings Call

0:01 Thank you for standing by. Welcome to the Corvel Corporation quarterly earnings release webcast. During the course of this webcast, Corvel Corporation may make projections or other forward-looking statements regarding future events or the future financial performances of the company. Corvel wishes to caution you that these statements are only predictions and that actual events or results may differ materially. Corvel refers you to the documents that the company files from time to time with the Securities and Exchange Commission, specifically the companies last formed 10-K and 10-Q filed for the most recent fiscal year and quarter. These documents contain and identify important factors that could cause the actual results to differ materially from those contained in our projections or forward-looking statements.

0:50 I would now like to turn it over to Sarah Scott, President and CEO. Ms. Scott, you may begin.

0:55 Good morning. Thank you for joining us to review Corvel's September quarter results. I am joined by Brian Nichols, Corvel's Chief Financial Officer, on the call today.

1:08 Thank you, Sarah, and good morning, everyone.

1:11 Today, we will review operational performance, key growth drivers, and the market trends that are shaping our business. I'll also discuss how we're positioning the company to capture emerging opportunities and manage associated risk. Finally, I'll provide a closer look at our AI initiatives, highlighting the tangible benefits we're already seeing. Brian, let's start with an overview of the quarter's financial results.

1:37 Absolutely, Sarah. Revenue for the quarter ending September 30th, 2026 was $267 million, 11% above the $240 million in September of 2025. September revenue also grew by 2.8% quarter over quarter compared to June 2026, outpacing a 2.6% compounding quarterly growth rate over the past three years. The quarter's revenue total marks an important milestone for Corvel, as our trailing 12-month revenue has now exceeded $1 billion. As a result of increased revenue, along with expansion to gross margin from 24% to 27%, Gross profit reached $72 million during the second quarter of fiscal year 2027, growing by $14 million compared to the same period of the prior year.

2:27 Earnings per share for the September 2026 quarter were 67 cents, a 13 cent increase over September 2025. Corvel delivered strong commercial momentum with quarterly sales closures more than doubling that of September 2025. Sales growth was driven by both new customer wins and expanded relationships with existing clients, reflecting demand for our integrated managed care and claims management solutions. These new and expanded engagements build a foundation of future revenue growth as programs are implemented and mature, while also creating opportunities to broaden service adoption across our customer base. Claims volume increased 11.5% in the September quarter Thank you for joining us.

3:34 highlighting the strength of Corvel's diversified service portfolio and our ability to translate growth into improved profitability. And now Sarah will discuss the market environment and industry trends shaping our business.

3:47 Thank you, Brian. Last quarter, I emphasized disciplined execution and turning our investments into measurable results. That remains my focus. As our business grows, we are concentrating on delivering consistent service and building the capacity to support that growth. The workers' compensation and healthcare markets face increasing medical complexity, rising administrative demands, and greater pressure to demonstrate measurable financial and clinical outcomes. These pressures reinforce the value of integrating clinical expertise with technology that supports the people managing claims and evaluating healthcare payments. Within our workers' compensation and liability businesses, Corvel integrates claim administration, clinical services, provider networks, pharmacy and medical cost containment into a comprehensive service model. As employers and insurers increasingly prioritize total claim outcomes over individual service transactions, this approach differentiates Corvel by bringing these capabilities together to coordinate decisions across the life of a claim with the focus on recovery and total claim costs.

5:06 Medical severity and claim complexity remain significant cost drivers with an aging workforce, comorbidities, and psychosocial factors contributing to longer recovery periods and increased disability costs. We are expanding predictive analytics and clinical decision support to identify emerging risks earlier and help our teams direct interventions where they can have the greatest impact. Connecting information from the first report of injury with utilization management and case management enables more coordinated treatment, better control of unnecessary utilization, and improved return-to-work outcomes. Artificial intelligence is also changing the operating model for claims administration.

5:54 Rather than relying on standalone tools that require professionals to interrupt their work, we have embedded intelligence directly into the claims management process. AI-assisted claim summarization has been deployed to enterprise claims adjusters with additional capabilities under development to support plans of action, reserve analysis, claim documentation, and communication summaries. These capabilities place relevant information and recommendations directly within the adjuster's workflow, strengthening decision-making while reducing time spent reviewing and organizing claim information. This operating model change is a top priority of Corvell, designed to modernize core claims workflows within CAREM-C.

6:48 Integrating communications, documentation, task management, and establishing claim handling standards into a unified operating environment. These enhancements reduce manual activity, improve consistency, and allow adjusters to manage greater claims volumes while maintaining service quality. Additionally, we are expanding digital self-service capabilities through the pilot launch of MyCare. a portal providing injured parties and other stakeholders with more immediate access to claim information. Initial results indicate strong adoption, driving improved communication and transparency, all while reducing the need for transitional claim status inquiries.

7:39 Medical cost containment represents another significant opportunity within the workers' compensation business. Provider consolidation, reimbursement variability, and increasing utilization are placing additional pressure on employers and insurers. Corvel expanded its network solutions capabilities with market-wise repricing, a data-driven repricing solution that strengthens reimbursement management for out-of-network medical services. By applying advanced analytics to complex reimbursement decisions, Market-wise repricing enhances Corbel's ability to manage medical spend beyond traditional provider network arraignment, extending the value of the medical cost containment platform.

8:28 Corbel is also expanding our pharmacy benefit management program through expanded network access, improved pricing, and additional clinical oversight capabilities. The program incorporates medication risk insights designed to support appropriate prescribing, patient safety, and more effective pharmacy cost management. These enhancements reflect our core strategy of combining financial and clinical management rather than treating pharmacy as an isolated transaction. So health plans face mounting pressure from rising medical costs, increasing complex provider billing practices, and growing administrative demands.

9:14 These challenges are accelerating the shift towards proactive payment integrity solutions that identify reimbursement inaccuracies before claims are paid. Cirrus is addressing this demand through its integrated prepayment and postpayment platform, combining clinical expertise, advanced analytics and automation to improve payment accuracy, reduce administrative costs and strengthen financial performance for health plans. SEARIS expands our presence amongst the largest healthcare payers during the quarter, successfully launching an additional top 10 national health plan. The implementation demonstrates the scalability of SEARIS' payment integrity platform and its ability to support complex enterprise-level operations.

10:07 SEARIS also established another strategic partnership They extended the distribution reach within the Blue Cross to Blue Shield market. The relationship creates an additional channel to introduce Cirrus payment integrity capabilities to health plans and expanding adoption through established technology platforms. Product development remains a central component of Cirrus' growth strategy. We are broadening the prepayment portfolio through the deployment of two new offerings. Hospital Bill Audit, and Professional Claims Solutions, expanding our ability to address complex reimbursement categories and emerging payment risks. The addition of experienced product leadership further strengthens execution across the portfolio, with an emphasis on accelerating prepayment innovation and scaling established post-payment solutions.

11:05 Together, these developments broaden Cirrus' addressable market, expand access to large national payers, and establish additional channels for revenue growth. Across all of Porzell's business, artificial intelligence is strengthening productivity, expanding operational capacity, and creating opportunity for greater operating leverage as demonstrated by improved margins. By embedding intelligence directly into our proprietary system, we are reducing repetitive administrative activity, improving access to decision-critical information, and enabling employees to focus more on complex work and customer needs.

11:52 The financial impact of these investments is evaluated across a combination of financial and performance measurements. These include revenue per employee, operating margins, and customer outcomes. Within claims management, we measure improvement in claim performance and total cost of care. Within managed care, we focus on the return on investment delivered to customers. And while in payment integrity, we evaluate the effectiveness of identifying and correcting payment inaccuracies. Our approach combines proprietary technology, extensive claims and clinical data, and industry expertise supported by appropriate human oversight and governance.

12:40 This foundation enables Corvel to scale services, strengthen customer relationships, and translate technology investments into measurable business value. while pursuing growth opportunities that align with our long-term financial and operating objectives. Brian, would you provide additional context on our cash flow, balance sheet, and capital allocation?

13:07 Sure. During the September quarter, Corvel repurchased 272,791 shares at a cost of $18.1 million. From inception to date, the company has repurchased 115.9 million shares for an aggregated total of $928 million. Through this program, the company has now repurchased 70% of the total shares outstanding at an average price of $8.01 per share. The repurchasing of shares continues to be funded from the company's strong operating cash flow. Corvell's management of receivables continues to improve and perform well. Corvell's days of sales outstanding was 37 days in the September 2026 quarter, which is three days fewer Thank you for joining us.

14:22 Revenue and earnings. Focused product development and effective operational management enabled us to realize new revenue and margin expansion opportunities, while robust sales performance highlighted our ability to compete within our markets. Revelle's strong commitment to investing in our future, managing with fiscal responsibility, and maintaining a pristine and debt-free balance sheet remain hallmarks of our financial strategies. Thank you for your time this morning. I will now invite the operator to open the session for questions. Thank you. And to answer questions via the web, please type your question in the chat box on the web platform and click enter to submit. There are no questions.

15:30 Since there are no questions, I will turn it back over to management. Brian or Sarah, did you have any closing remarks?

15:39 Thank you for your time this morning. Have a great day. Thank you. And this concludes today's webcast. You may disconnect your lines at this time.