Registrant’s telephone number, including area code: ~~(949) 851-1473~~(817) 390-1416

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes☑ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files).Yes☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes ☐ No ☑

The number of shares outstanding of the registrant's Common Stock, $0.0001 par value per share, as of January ~~31, 2018,~~30, 2023, was ~~18,879,945.~~17,158,985.


	March 31, 2017			December 31, 2017			December 31, 2022			March 31, 2022
				(Unaudited)			(Unaudited)
Assets
Current Assets
Cash and cash equivalents (Note A)	$	28,611,000		$	53,593,000
Cash and cash equivalents							$	78,031,000		$	97,504,000
Customer deposits		32,471,000			41,900,000			82,857,000			69,781,000
Accounts receivable, net		62,841,000			63,487,000			82,791,000			82,586,000
Prepaid taxes and expenses		4,944,000			7,610,000			13,064,000			15,123,000
Total current assets		128,867,000			166,590,000			256,743,000			264,994,000
Property and equipment, net		63,042,000			63,657,000			82,066,000			76,268,000
Goodwill		36,814,000			36,814,000			36,814,000			36,814,000
Other intangibles, net (Note F)		3,851,000			3,524,000
Other intangibles, net								1,350,000			1,669,000
Right-of-use asset, net								29,936,000			35,020,000
Other assets		2,809,000			1,410,000			778,000			481,000
TOTAL ASSETS	$	235,383,000		$	271,995,000		$	407,687,000		$	415,246,000
Liabilities and Stockholders' Equity
Current Liabilities
Accounts and taxes payable (Note I)	$	16,583,000		$	16,907,000
Accrued liabilities (Note I)		73,468,000			92,968,000
Accounts and taxes payable							$	16,616,000		$	14,431,000
Accrued liabilities								169,810,000			156,939,000
Total current liabilities		90,051,000			109,875,000			186,426,000			171,370,000
Deferred income taxes		6,686,000			1,940,000
Deferred income taxes, net								683,000			1,689,000
Long-term lease liabilities								25,773,000			29,792,000
Total liabilities		96,737,000			111,815,000			212,882,000			202,851,000
Commitments and contingencies (Notes G and H)
Commitments and contingencies
Stockholders' Equity
Common stock, $.0001 par value: 120,000,000 shares authorized at March 31, 2017 and December 31, 2017; 53,569,067 shares issued (18,937,233 shares outstanding, net of Treasury shares) and 53,747,103 shares issued (18,866,048 shares outstanding, net of Treasury shares) at March 31, 2017 and December 31, 2017, respectively		3,000			3,000
Common stock, $.0001 par value: 120,000,000 shares authorized at December 31, 2022 and March 31, 2022; 54,891,298 shares issued (17,180,180 shares outstanding, net of Treasury shares) and 54,788,712 shares issued (17,569,087 shares outstanding, net of Treasury shares) at December 31, 2022 and March 31, 2022, respectively								3,000			3,000
Paid-in capital		135,683,000			141,666,000			210,904,000			201,609,000
Treasury Stock (34,631,834 shares at March 31, 2017 and 34,881,055 shares at December 31, 2017)		(419,802,000	)		(430,988,000	)
Treasury stock (37,711,118 shares at December 31, 2022 and 37,219,625 shares at March 31, 2022)								(729,601,000	)		(654,520,000	)
Retained earnings		422,762,000			449,499,000			713,499,000			665,303,000
Total stockholders' equity		138,646,000			160,180,000			194,805,000			212,395,000
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	235,383,000		$	271,995,000		$	407,687,000		$	415,246,000

~~CONSOLIDATED INCOME STATEMENTS~~Consolidated Income Statements – ~~UNAUDITED~~(Unaudited)

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~Consolidated Statements of Stockholders’ Equity – ~~UNAUDITED~~(Unaudited)

Nine Months Ended December 31,

2016

2017

Cash Flows from Operating Activities

NET INCOME

$
21,492,000

$
26,737,000

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

15,617,000

16,013,000

Loss on write down or disposal of property, capitalized software or investment

424,000

1,198,000

Stock compensation expense

1,736,000

2,382,000

Provision for doubtful accounts

1,684,000

1,791,000

Deferred income tax

220,000

(3,772,000
)
Changes in operating assets and liabilities

Accounts receivable

(1,118,000
)

(2,437,000
)
Customer deposits

(4,980,000
)

(9,429,000
)
Prepaid taxes and expenses

(2,000,000
)

(2,666,000
)
Other assets

(137,000
)

237,000

Accounts and taxes payable

(722,000
)

324,000

Accrued liabilities

4,293,000

19,500,000

Net cash provided by operating activities

36,509,000

49,878,000

Cash Flows from Investing Activities

Investment in private equity

(250,000
)

—

Purchase of property and equipment

(17,173,000
)

(16,336,000
)
Net cash (used in) investing activities

(17,423,000
)

(16,336,000
)
Cash Flows from Financing Activities

Purchase of treasury stock

(15,125,000
)

(11,187,000
)
Exercise of common stock options

1,868,000

2,404,000

Exercise of employee stock purchase options

201,000

223,000

Net cash (used in) financing activities

(13,056,000
)

(8,560,000
)
Increase in cash and cash equivalents

6,030,000

24,982,000

Cash and cash equivalents at beginning of period

32,779,000

28,611,000

Cash and cash equivalents at end of period

$
38,809,000

$
53,593,000

Supplemental Cash Flow Information:

Income taxes paid

$
13,929,000

$
9,901,000

Purchase of software license under finance agreement

$
3,492,000

$
—

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Consolidated Statements of Cash Flows – (Unaudited)

Note 2 – Revenue Recognition

Revenue from Contracts with Customers

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 ~~and~~expects to be entitled to in exchange for those services. As the Company completes its ~~subsidiaries. Significant intercompany accounts and transactions have been eliminated in consolidation.~~

~~Use of Estimates:~~ ~~The preparation of financial statements in compliance with GAAP requires management~~performance obligations, which are identified below, it has an unconditional right to ~~make estimates and assumptions that affect the amounts reported~~consideration as outlined in the ~~accompanying unaudited consolidated financial statements. Actual results could differ from those estimates. Significant estimates include~~Company’s contracts. Generally, the ~~values assigned to intangible assets, capitalized software development, allowance for doubtful~~Company’s accounts accruals for income taxes, share-based payments related to performance-based awards, loss contingencies, estimated claims for claims administration revenue recognition, estimates used in stock option valuations, and accruals for self-insurance reserves.

~~Cash and Cash Equivalents:~~ Cash and cash equivalents consist of short-term, highly-liquid, investment-grade, interest-bearing securities with maturities of 90 days or less when purchased. Customer deposits represent cash that isreceivable are expected to be ~~returned or~~collected in 30 days in accordance with the underlying payment terms.

The Company generates revenue through its patient management and network solutions service lines. The Company operates in one reportable operating segment, managed care.

Patient Management Service Line

The patient management service line provides services primarily related to workers’ compensation claims management and case management. This service line also includes additional services such as accident and health claims programs. Each claim referred by the customer is considered an additional optional purchase of claims management services under the agreement with the customer. The transaction price is readily available from the contract and is fixed for each service. Revenue is recognized over time as services are provided as the performance obligations are satisfied through the effort expended to research, investigate, evaluate, document, and report the claim and control of these services is transferred to the customer. Revenue is recognized based on historical claim closure rates and claim type applied ~~towards payment within~~utilizing a portfolio approach based on time elapsed for these claims, generally between three and fifteen months. The Company believes this approach reasonably reflects the transfer of the claims management services to its customers.

Page 8

The Company’s obligation to manage claims and cases under the patient management service line can range from less than one year to multi-year contracts. They are generally one year under the terms of the contract; however, many of these contracts contain auto-renewal provisions and the Company’s customer relationships can span multiple years. Under certain claims management agreements, the Company receives consideration from a customer at contract inception prior to transferring services to the customer, however, the Company would begin performing services immediately. The period between a customer’s payment of consideration and the completion of the promised services is generally less than one year. There is no difference between the amount of promised consideration and 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 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 ~~our provider reimbursement services.~~

~~Fair Value~~the effort expended to manage the medical treatment for claimants and control of ~~Financial Instruments:~~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 at the amount in which the Company has the right to invoice for services performed. The Company ~~applies Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements~~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 ~~Disclosures,” which defines fair value, establishes a framework~~third-party services. Medical bill review services provide an analysis of medical charges for ~~measuring fair value, and expands disclosures about fair value measurements with respect~~customers’ claims to ~~fair value measurements of (i) nonfinancial assets and liabilities that~~identify opportunities for savings. Medical bill review services revenues are recognized ~~or disclosed~~ at ~~fair value~~a point in time when control of the service is transferred to the customer. Revenue is recognized based upon the transfer of the results of the medical bill review service to the customer as this is the most accurate depiction of the transfer of the service to the customer. Medical bill review revenues are variable and 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 when the Company concludes that it is probable that a significant revenue reversal will not occur in future periods.

Third-party services revenue includes pharmacy, directed care services and other services, and includes amounts received from customers compensating the Company for certain third-party costs associated with 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, 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, is required to recognize revenue gross and service partner vendor fees in the operating expense 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~~of income.

The following ~~hierarchy:~~

~~Level 1- Quoted market prices in active markets~~table presents revenues disaggregated by service line 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 amounts of the Company’s financial instruments (i.e. cash equivalents, accounts receivable, accounts payable) are all Level 1, and the Company believes they approximate their fair values at March 31, 2017 and December 31, 2017. The Company has no Level 2 or Level 3 financial instruments, except as described under the caption “Investment in Private Equity.”

~~Page 7~~

~~Investment in Private Equity:~~ The Company has made an investment of $2,250,000 into a private equity limited partnership that invests in start-up companies primarily in the data analytics industry. The Company considers its cost method investments for impairment when the carrying value of such investments exceeds the net asset value. The Company takes into consideration the severity and duration of this excess when determining whether the cost method investment is impaired. The estimated fair value is determined from information provided on the periodic reports from the underlying private equity entity. The Company recorded an impairment to the investment of $284,000 for the year ended March 31, 2017, and an additional $1,169,000 for the nine months ended December 31, 2017. The investment is recorded in other assets on the accompanying consolidated balance sheets.

~~Goodwill:~~ The Company accounts for its business combinations in accordance with the FASB 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 FASB 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 shall be recognized.

~~Revenue Recognition:~~ The Company recognizes revenue when (i) there is persuasive evidence of an arrangement, (ii) the services have been provided to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured. For the Company’s services, the Company’s professional staff is contractually permitted to bill (i) for fees earned for time worked in fraction of an hour increments or (ii) by units of production. The Company recognizes revenue as fees are earned or as units of production are completed, which is when the revenue is earned and realized. Labor costs are recognized as the costs are incurred. The Company derives its revenue from the sale of network solutions and patient management services. Network solutions and patient management services may be sold individually or combined. When a sale combines multiple elements, the Company accounts for such multiple element arrangements in accordance with the guidance included in ASC 605-25.

The multiple element arrangements consist of bundled managed care services, which include various units of accounting such as network solutions and patient management (which includes claims administration). Such elements are considered separate units of accounting due to each element having value to the customer on a stand-alone basis. The selling price for each unit of accounting is determined using the contract price and management estimates. When the Company’s customers purchase several products, the pricing of the products sold is generally the same as if the products were sold on an individual basis. Revenue is recognized as the work is performed in accordance with the Company’s customer contracts. Based upon the nature of the Company’s products, bundled managed care elements are generally delivered in the same accounting period. The Company recognizes revenue for patient management claims administration services over the life of the customer contract. The Company estimates, based upon prior experience in managing claims, the deferral amount based on the average life of a claim.

~~Accounts Receivable:~~ The majority of the Company’s accounts receivable is due from companies in the property and casualty insurance industries, self-insured employers, and government entities. Accounts receivable are generally due within 30 days and are stated as amounts due from customers net of an allowance for doubtful accounts. 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. No one customer accounted for 10% or more of accounts receivable at either March 31, 2017 or December 31, 2017. No one customer accounted for 10% or more of revenue during the three and nine months ended December 31, ~~2016~~2022 and ~~2017.~~2021:

~~Property~~


	Three Months Ended		Three Months Ended
	December 31, 2022		December 31, 2021
Patient management services	$	118,918,000	$	107,711,000
Network solutions services		60,468,000		56,797,000
Total services	$	179,386,000	$	164,508,000


	Nine Months Ended		Nine Months Ended
	December 31, 2022		December 31, 2021
Patient management services	$	353,197,000	$	312,829,000
Network solutions services		179,922,000		162,042,000
Total services	$	533,119,000	$	474,871,000

Arrangements with Multiple Performance Obligations

For many of the Company’s services, the Company typically has one

Page 9

performance obligation; however, the Company also provides the customer with an option to acquire additional services. The Company offers multiple services under its patient management and ~~Equipment:~~ ~~Additions~~network solutions service lines. The Company typically provides a menu of offerings from which the customer may choose to ~~property~~purchase. The price of each service is separate and ~~equipment~~distinct and provides a separate and distinct value to the customer. Pricing is generally consistent for each service irrespective of the other services or quantities requested by the customer.

Contract Balances

The timing of revenue recognition, billings and cash collections results in billed accounts receivables, unbilled receivables, and contract liabilities (reported as deferred revenues) on the Company’s consolidated balance sheets. Unbilled receivables are ~~recorded at cost. Depreciation~~due to the Company unconditionally for services already rendered except for physical invoicing and ~~amortization~~the passage of time. Invoicing requirements vary by customer contract, but substantially all unbilled revenues are billed within one year.


	December 31, 2022			March 31, 2022
Billed receivables	$	56,957,000		$	57,841,000
Allowance for doubtful accounts		(3,043,000	)		(2,562,000	)
Unbilled receivables		28,877,000			27,307,000
Accounts receivable, net	$	82,791,000		$	82,586,000

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 Company’s consolidated balance sheets, which represents a contract liability. Such deferred revenue is included within accrued liabilities on the accompanying consolidated balance sheets.

Certain services, such as claims management, are provided ~~using~~under fixed-fee service agreements and require the ~~straight-line method~~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 contracts. 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 recognized over the ~~estimated useful lives~~expected service periods by type of claim.

The table below presents the related assets, which range from two to seven years or the life of the lease. The Company accounts for internally-developed software costs in accordance with FASB ASC 350-40, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use,” which allows for the capitalization of software developed for internal use. These costs are included within 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~~deferred revenues 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.~~

~~Income Taxes:~~ ~~The Company provides for income taxes in accordance with provisions specified in ASC 740, “Accounting for Income Taxes”. Accordingly,~~significant activity affecting 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

~~Page 8~~

~~tax assets depends on the generation of future taxable income~~revenues 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 provides for income tax issues not yet resolved with federal, state and local tax authorities.

~~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 share-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 decreased in the quarternine months ended December 31, ~~2017 compared~~2022:


	Nine Months Ended
	December 31, 2022
Beginning balance at April 1, 2022	$	25,796,000
Additions		33,686,000
Revenue recognized from beginning of period		(20,193,000	)
Revenue recognized from additions		(12,949,000	)
Ending balance at December 31, 2022	$	26,340,000

Remaining Performance Obligations

As of December 31, 2022, the Company had $26.3 million of remaining performance obligations related to claims and non-claims services for which the price is fixed. Remaining performance obligations consist of deferred revenues. The Company expects to recognize approximately 98% of its remaining performance obligations as revenues within one year and the remaining balance thereafter. See the discussion below regarding the practical expedients elected for the disclosure of remaining performance obligations.

Page 10

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 ~~same quarter of~~Company which provides a future benefit expected to be longer than one year and would meet the ~~prior year primarily due~~criteria to ~~repurchases of shares under~~be capitalized and presented as unbilled receivables on the Company’s ~~share repurchase program. See also Note D.~~consolidated balance sheets.

~~Recent Accounting Pronouncements:~~ ~~On May 28, 2014,~~

Practical Expedients Elected

As a practical expedient, the ~~FASB issued ASU 2014-09 regarding ASC Topic 606, “Revenue from Contracts with Customers”. This standard provides principles~~Company does not adjust the consideration in a contract for ~~recognizing revenue 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 ~~goods or~~ services to ~~customers with~~ the ~~consideration~~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 ~~entity expects~~right to ~~be entitled in exchange~~invoice for ~~those goods or services. In July 2015,~~services performed.

The Company does not disclose the ~~FASB approved a one-year delay~~value of remaining performance obligations for (i) contracts for which it recognizes revenue at the ~~effective date of this new revenue recognition standard. The guidance will now be effective~~amount to which it has the right to invoice for ~~our fiscal year beginning April 1, 2018. We are currently evaluating the accounting, transition~~services performed, and ~~disclosure requirements of the standard. Based on the analyses we have completed thus far, which includes analyzing our standard~~(ii) contracts from which we derive the majority of our revenues, we anticipate that the ASU will not have a significant impact on our consolidated financial statements. However, we are currently reviewing our existing non-standard customer contracts, and as a result, the impact of the ASU adoption on this portion of our revenues cannot yet be reasonably estimated. We expect the new standard will, however, require more extensive revenue-related disclosures.

In January 2016, the FASB issued ASU 2016-01 regarding Subtopic 825-10, “Financials Instruments — Overall: Recognition and Measurements of Financial Assets and Financial Liabilities”. The standard addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. It requires that most equity investments be measured at fair value, with subsequent changes in fair value recognized in net income. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. We are currently evaluating the accounting, transition, and disclosure requirements of the standard and cannot currently estimate the impact of adoption on our consolidated financial statements.

~~In February 2016, the FASB issued ASU No. 2016-02, “Leases”, which sets out the principles for the recognition, measurement, presentation, and disclosure of leases for both parties~~variable consideration allocated entirely to a contract (i.e. lessees and lessors). The standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for using an approach that is similar to the existing guidance for operating leases. The standard is effective April 1, 2019, with early adoption permitted. The standard is to be applied using a modified retrospective transition method. This will place all outstanding lease commitments on our balance sheet as liabilities with an offsetting right to use asset. We are currently evaluating the impact of adoption on our consolidated financial position, results of operations, and cash flows, and believe that the new standard will have a material impact on our consolidated balance sheet.single performance obligation.

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows”, which reduces diversity in the practice of how certain transactions are classified in the statement of cash flows. The new guidance is effective for annual reporting periods beginning after December 15, 2017, with early adoption permitted. The adoption of this guidance will not have a material impact on our consolidated financial statements. We are currently reviewing the standard and anticipates updates to certain disclosures related to restricted cash as a result of implementation.

~~Guidance Adopted in 2017~~

In March 2016, the FASB issued ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting”, which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, statutory tax withholding requirements, as well as classification on the statement of cash flows. For public companies, the new guidance became effective for annual reporting periods, and interim periods within those periods, beginning after December 15, 2016. We have elected to early adopt this standard as of March 31, 2017.

~~Page 9~~

Note B3 — Stock-Based Compensation and Stock Options

Under the Company’s Restated Omnibus Incentive Plan (formerly the Restated 1988 Executive Stock Option Plan) (“the Plan”) as in effect at December 31, ~~2017,~~2022, options exercisable for up to ~~19,365,000~~20,615,000 shares of the Company’s common stock may be granted over the life of the Plan to key employees, non-employee directors, and consultants at exercise prices not less than the fair market value of the common stock on the date of grant. Options granted under the Plan are non-statutory stock options and generally vest ~~25%~~ 25% one year from the date of grant with the remaining ~~75%~~75% vesting ratably each month for the next 36 months. The options granted to employees and the Company’s Board of Directors expire at the end of five years and ten years from the date of grant, respectively. All options granted in the nine months ended December 31, ~~2016~~2022 and ~~2017~~2021 were granted with an exercise price equal to the fair value of the Company’s common stock on the grant date and are non-statutory stock options.

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 with the assumptions included in the table below. The Company uses historical data, among other factors, to estimate the expected volatility, the expected dividend yield ~~the expected forfeiture rate~~ and the expected option life. ~~Upon adoption of ASU No. 2016-09 in the fourth fiscal quarter of 2017, the~~The Company accounts for forfeitures as they occur, rather than ~~estimated~~estimating expected forfeitures. ~~As a result, during the fourth quarter of fiscal 2017, we reclassified the excess tax benefit of $0.5 million from additional paid in capital into the income tax provision line.~~ 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 following assumptions were used to estimate the fair value of options granted during the three months ended December 31, ~~2016~~2022 and ~~2017~~2021 using the Black-Scholes option-pricing model:


	Three Months Ended
	December 31, 2022	December 31, 2021
Risk-free interest rate	4.36%	1.27%
Expected volatility	36%	36%
Expected dividend yield	0.00%	0.00%
Expected weighted average life of option in years	4.3 years	4.4 years

Page 11

Three Months Ended December 31,

2016

2017

Risk-free interest rate

1.26%

2.00%

Expected volatility

42%

40%

Expected dividend yield

0.00%

0.00%

Expected weighted average life of option in years

4.5 years

4.5 years

For the three months ended December 31, ~~2016~~2022 and ~~2017,~~2021, the Company recorded share-based compensation expense of ~~$609,000~~$1,698,000 and ~~$852,000,~~$1,183,000, respectively. For the nine months ended December 31, ~~2016~~2022 and ~~2017,~~2021, the Company recorded share-based compensation expense of ~~$1,736,000~~$4,027,000 and ~~$2,382,000,~~$3,884,000, respectively. The table below shows the amounts recognized in the unaudited consolidated financial statements for stock compensation expense for time-based options and performance-based options during the three and nine months ended December 31, ~~2016~~2022 and ~~2017,~~2021, respectively.

Three Months Ended

December 31, 2016

December 31, 2017

Cost of revenues

$
391,000

$
432,000

General and administrative

218,000

420,000

Total cost of stock-based compensation included in
income before income tax provision

609,000

852,000

Amount of income tax benefit recognized

(234,000
)

(43,000
)
Amount charged against net income

$
375,000

$
809,000

Effect on basic earnings per share

$
(0.02
)

$
(0.04
)
Effect on diluted earnings per share

$
(0.02
)

$
(0.04
)


	Three Months Ended
	December 31, 2022			December 31, 2021
Cost of revenues	$	670,000		$	487,000
General and administrative		1,028,000			696,000
Total cost of stock-based compensation included in income before income tax provision		1,698,000			1,183,000
Amount of income tax benefit recognized		(410,000	)		(256,000	)
Amount charged against net income	$	1,288,000		$	927,000
Effect on basic earnings per share	$	(0.07	)	$	(0.05	)
Effect on diluted earnings per share	$	(0.07	)	$	(0.05	)


	Nine Months Ended
	December 31, 2022			December 31, 2021
Cost of revenues	$	1,879,000		$	1,539,000
General and administrative		2,148,000			2,345,000
Total cost of stock-based compensation included in income before income tax provision		4,027,000			3,884,000
Amount of income tax benefit recognized		(895,000	)		(765,000	)
Amount charged against net income	$	3,132,000		$	3,119,000
Effect on basic earnings per share	$	(0.18	)	$	(0.17	)
Effect on diluted earnings per share	$	(0.18	)	$	(0.17	)

Nine Months Ended

December 31, 2016

December 31, 2017

Cost of revenues

$
1,123,000

$
1,326,000

General and administrative

613,000

1,056,000

Total cost of stock-based compensation included in
income before income tax provision

1,736,000

2,382,000

Amount of income tax benefit recognized

(667,000
)

(628,000
)
Amount charged against net income

$
1,069,000

$
1,754,000

Effect on basic earnings per share

$
(0.05
)

$
(0.09
)
Effect on diluted earnings per share

$
(0.05
)

$
(0.09
)

~~Page 10~~

The following table summarizes information for all stock options for the three and nine months ended December 31, ~~2016~~2022 and ~~2017:~~2021:


	Three Months Ended December 31, 2022					Three Months Ended December 31, 2021
	Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
Options outstanding, beginning		706,728		$	96.14		778,982		$	72.17
Options granted		69,200			155.99		50,200			197.16
Options exercised		(18,210	)		67.63		(25,917	)		62.78
Options cancelled/forfeited		(1,256	)		126.62		(6,407	)		81.62
Options outstanding, ending		756,462		$	102.25		796,858		$	80.27


	Nine Months Ended December 31, 2022					Nine Months Ended December 31, 2021
	Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
Options outstanding, beginning		723,876		$	84.55		937,158		$	64.28
Options granted		149,400			155.69		110,450			163.54
Options exercised		(101,896	)		51.17		(212,588	)		53.27
Options cancelled/forfeited		(14,918	)		128.65		(38,162	)		78.87
Options outstanding, ending		756,462		$	102.25		796,858		$	80.27

Page 12

Three Months Ended December 31, 2016

Three Months Ended December 31, 2017

Shares

Weighted
Average
Exercise Price

Shares

Weighted
Average
Exercise Price

Options outstanding, beginning

1,102,919

$
32.17

1,068,503

$
35.28

Options granted

143,750

32.10

154,500

57.75

Options exercised

(4,256
)

25.86

(51,712
)

31.15

Options cancelled/forfeited

(3,550
)

37.17

(1,420
)

47.11

Options outstanding, ending

1,238,863

$
32.17

1,169,871

$
38.41

Nine Months Ended December 31, 2016

Nine Months Ended December 31, 2017

Shares

Weighted
Average
Exercise Price

Shares

Weighted
Average
Exercise Price

Options outstanding, beginning

1,115,465

$
29.67

1,143,928

$
32.02

Options granted

234,250

36.90

305,550

52.49

Options exercised

(95,472
)

22.05

(263,544
)

26.96

Options cancelled/forfeited

(15,380
)

36.55

(16,063
)

40.90

Options outstanding, ending

1,238,863

$
32.17

1,169,871

$
38.41

The following table summarizes the status of stock options outstanding and exercisable at December 31, ~~2017:~~2022:


Range of Exercise Price	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
$33.16 to $70.24		204,302		2.09	$	52.49		187,542	$	52.17
$70.25 to $87.69		248,327		2.92		83.32		111,749		82.64
$87.70 to $155.99		209,534		4.30		138.56		30,938		108.20
$156.00 to $197.16		94,299		4.85		179.20		7,330		174.40
Total		756,462		3.32	$	102.25		337,559	$	70.05

The following table summarizes the status of all outstanding options at December 31, ~~2017,~~2022, and changes during the three months then ended:

	Number of Options			Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value as of December 31, 2017
Options outstanding at October 1, 2017		1,068,503		$	35.28
										Number of Options			Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value as of December 31, 2022
Options outstanding at October 1, 2022											706,728		$	96.14
Granted		154,500			57.75						69,200			155.99
Exercised		(51,712	)		31.15						(18,210	)		67.63
Cancelled – forfeited		(1,410	)		47.18						(1,225	)		121.76
Cancelled – expired		(10	)		36.93						(31	)		121.96
Ending outstanding		1,169,871		$	38.41		3.43	$	17,693,629		756,462		$	102.25		3.32	$	36,912,256
Ending vested and expected to vest		1,169,871		$	38.41		3.43	$	17,693,629		662,773		$	99.55		3.34	$	33,500,567
Ending exercisable at December 31, 2017		430,321		$	30.90		2.40	$	9,467,047
Ending exercisable at December 31, 2022											337,559		$	70.05		2.54	$	25,647,949

The weighted-average grant-date fair value of options granted during the three months ended December 31, ~~2016~~2022 and ~~2017,~~2021, was ~~$11.99~~$55.15 and ~~$21.55,~~$60.55, respectively.

Included in the above-noted stock option grants and stock compensation expense are performance-based stock options ~~which~~that 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 ~~did not recognize any stock compensation expense for the three months ended December 31, 2016, for performance-based stock options. The Company~~ recognized ~~$230,000~~$749,000 and $481,000 of stock compensation expense for the three months ended December 31, ~~2017,~~2022 and 2021, respectively, for performance-based stock options. The Company recognized ~~($47,000)~~$1,404,000 and ~~$455,000~~$1,702,000 of stock compensation expense for the nine months ended December 31, ~~2016~~2022 and ~~2017,~~2021, respectively, for performance-based stock options.

Note D5 — Weighted Average Shares and Net Income Per Share

Basic weighted average common ~~and common equivalent~~ shares outstanding decreased ~~from 19,426,000~~to 17,245,000 for the quarter ended December 31, ~~2016 to 18,849,000~~2022 from 17,785,000 for the quarter ended December 31, ~~2017.~~2021. Diluted weighted average common and common equivalent shares outstanding decreased ~~from 19,549,000~~to 17,487,000 for the quarter ended December 31, ~~2016 to 19,121,000~~2022 from 18,211,000 for the quarter ended December 31, ~~2017.~~2021. Basic weighted average common and common equivalent shares ~~outstanding~~ decreased ~~from 19,526,000~~to 17,379,000 for the nine months ended December 31, ~~2016 to 18,806,000~~2022 from 17,841,000 for the nine months ended December 31, ~~2017.~~2021. Diluted weighted average common and common equivalent shares ~~outstanding~~ decreased ~~from 19,679,000~~to 17,647,000 for the nine months ended December 31, ~~2016 to 19,029,000~~2022 from 18,221,000 for the nine months ended December 31, 2017. The net decrease in both of these weighted average share calculations is due to the repurchase of common stock as noted above, offset by an increase in shares outstanding due to the exercise of stock options under the Plan.2021.

Net income per common and common equivalent share was computed by dividing net income by the weighted average number of common and common share equivalents outstanding during the ~~quarter.~~ period. The following table sets forth the calculations of the basic and diluted weighted average common shares for the three and nine months ended December 31, ~~2016~~2022 and ~~2017:~~

2021:

Three Months Ended December 31,

2016

2017

Net Income

$
7,049,000

$
9,569,000

Basic:

Weighted average common shares outstanding

19,426,000

18,849,000

Net Income per share

$
0.36

$
0.51

Diluted:

Weighted average common shares outstanding

19,426,000

18,849,000

Treasury stock impact of stock options

123,000

272,000

Total common and common equivalent shares

19,549,000

19,121,000

Net Income per share

$
0.36

$
0.50


	Three Months Ended December 31,
	2022		2021
Net Income	$	16,849,000	$	13,858,000
Basic:
Weighted average common shares outstanding		17,245,000		17,785,000
Net Income per share	$	0.98	$	0.78
Diluted:
Weighted average common shares outstanding		17,245,000		17,785,000
Treasury stock impact of stock options		242,000		426,000
Total common and common equivalent shares		17,487,000		18,211,000
Net Income per share	$	0.96	$	0.76


	Nine Months Ended December 31,
	2022		2021
Net Income	$	48,196,000	$	46,773,000
Basic:
Weighted average common shares outstanding		17,379,000		17,841,000
Net Income per share	$	2.77	$	2.62
Diluted:
Weighted average common shares outstanding		17,379,000		17,841,000
Treasury stock impact of stock options		268,000		380,000
Total common and common equivalent shares		17,647,000		18,221,000
Net Income per share	$	2.73	$	2.57

During fiscal year 1997, the Company’s Board of Directors approved the adoption of a shareholder rights plan (the “Shareholder Rights Plan”). The Shareholder Rights Plan provides for a dividend distribution to the Company’s shareholders of one preferred stock purchase right for each outstanding share of the Company’s common stock held by such shareholder (as used in this Note E, the “right” or the “rights”), only in the event of certain takeover-related events. In November 2008, the Company’s Board of Directors approved an amendment to the Shareholder Rights Plan to extend the expiration date of the rights to February 10, 2022.

The rights are designed to assure that all shareholders receive fair and equal treatment in the event of a proposed takeover of the Company, and to encourage a potential acquirer to negotiate with the Company’s Board of Directors prior to attempting a takeover. The rights are not exercisable until the occurrence of certain takeover-related events, at which time they can be exercised at an exercise price of $118 per share of common stock which carries the right, subject to subsequent adjustments. The rights trade with the Company’s common stock.

Generally, the Shareholder Rights Plan provides that if a person or group acquires 15% or more of the Company’s common stock without the approval of the Company’s Board of Directors, subject to certain exceptions, the holders of the rights, other than the acquiring person or group, would, under certain circumstances, have the right to purchase additional shares of the Company’s common stock having a market value equal to two times the then-current exercise price of the right.

In addition, if the Company is thereafter merged into another entity, or if 50% or more of the Company’s consolidated assets or earning power are sold, then the right will entitle its holder to buy common shares of the acquiring entity having a market value equal to two times the then-current exercise price of the right. The Company’s Board of Directors may exchange or redeem the rights under certain conditions.

~~The following table summarizes other intangible assets at December 31, 2017:~~

In September 2017, the Company renewed its line of credit agreement with a financial institution, which provides a revolving credit facility with borrowing capacity of up to $10 million. Borrowings under the credit agreement, as amended, bear interest, at the Company’s option, at a fixed LIBOR-based rate plus 1.00% or at a fluctuating rate determined by the financial institution to be 1.00% above the daily one-month LIBOR rate. The loan covenants require the Company to (i) maintain a current assets to liabilities ratio of at least 1.25:1, (ii) maintain a current debt to tangible net worth ratio of not greater than 1.25:1 and (iii) have positive net income. The Company is in compliance with all these covenants under the credit agreement. There were no outstanding revolving loans as of December 31, 2017, but letters of credit in the aggregate amount of $4.5 million have been issued separately from the line of credit, and therefore do not reduce the amount of borrowings available under the revolving credit facility. The renewed credit agreement expires in September 2018.

The Company is involved in litigation arising in the ordinary course of business. ~~Management~~The Company believes that resolution of these matters will not result in any payment that, individually or in the aggregate, would be material to the consolidated financial position or results of operations of the Company.

During the quarter ended September 30, 2017, the Company entered into a purchase agreement to acquire a 32,000 square foot building located in Milwaukie, Oregon at a purchase price of $5.8 million. The Company has paid a deposit of $150,000 towards this purchase during the quarter ended September 30, 2017. The Company expects to finance this purchase with existing cash on hand and expects to close escrow in the first quarter of 2018. This building will be used for the Company’s Symbeo business franchise, which consists of the Company’s provider reimbursement and scanning services.

Note I7 — Accounts and Income Taxes Payable and Accrued Liabilities

The following ~~table sets~~tables set forth accounts payable, income taxes payable, and accrued liabilities at December 31, 2022 and March 31, ~~2017 and December 31, 2017:~~2022:


	March 31, 2017		December 31, 2017		December 31, 2022		March 31, 2022
Accounts payable	$	13,869,000	$	13,330,000	$	14,702,000	$	14,080,000
Income taxes payable and uncertain tax positions		2,714,000		3,577,000		1,914,000		351,000
Total accounts and taxes payable	$	16,583,000	$	16,907,000	$	16,616,000	$	14,431,000

March 31, 2017

December 31, 2017

Payroll, payroll taxes and employee benefits

$
14,465,000

$
19,261,000

Customer deposits

32,471,000

41,900,000

Accrued professional service fees

4,551,000

5,682,000

Self-insurance accruals

2,835,000

3,571,000

Deferred revenue

10,096,000

13,694,000

Accrued rent

5,774,000

5,204,000

Other

3,276,000

3,656,000

Total accrued liabilities

$
73,468,000

$
92,968,000

Page 14


	December 31, 2022		March 31, 2022
Payroll, payroll taxes and employee benefits	$	36,477,000	$	36,066,000
Customer deposits		82,857,000		69,781,000
Accrued professional service fees		8,596,000		8,073,000
Self-insurance accruals		3,032,000		2,798,000
Deferred revenue		26,340,000		25,796,000
Operating lease liabilities		10,687,000		13,348,000
Other		1,821,000		1,077,000
Total accrued liabilities	$	169,810,000	$	156,939,000

Note 8 — Leases

~~Note J – Income Taxes~~

The ~~Company’s quarterly results~~Company determines if an arrangement is or contains a lease at contract inception. These lease agreements have remaining lease terms of operations included the impact of the enactment of the Tax Cuts and Jobs Act that was signed into law on December 22, 2017. Among numerous provisions included in the new law was the reduction of the corporate federal income tax rate from 35%1 to ~~21% effective January 1, 2018. As a result of this federal income tax rate change, during the quarter ended December 31, 2017, the Company reported an effective tax rate of 5%~~15 years. The Company ~~continues to analyze~~recognizes a right-of-use (“ROU”) asset and a lease liability at the ~~provisions~~lease commencement date. The lease liability is initially measured at the present value of the ~~Tax Cuts~~unpaid lease payments as of the lease commencement date. Key estimates and ~~Jobs Act~~judgments include how the Company determines (1) the discount rate it uses to ~~fully assess~~discount the ~~impact~~unpaid lease payments to present value, (2) the lease term, and (3) lease payments.

ASC 842 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 ~~its consolidated~~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 ~~statements.~~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.

The Company’s lease agreements may include options to extend the lease following the initial term. At the time of adopting ASC 842, the Company determined that it was reasonably certain it would exercise the option to renew; accordingly, these options were considered in determining the initial lease term. The Company elected the practical expedient of hindsight in determining the option to renew. During the quarter ended ~~December 31, 2017,~~June 30, 2022, the Company ~~applied~~reassessed the ~~newly enacted corporate federal~~assumption of the renewal term and determined that, as a consequence of the COVID-19 pandemic, the Company is now expecting more of its workforce to be working from home permanently. Therefore, expecting a reduction in overall square footage of office space needs, the Company no longer believes it is reasonably certain it will exercise most of its options to renew, and therefore, has removed the renewal term of several lease obligations. The subsequent re-measurement reduced the right-of-use asset and related lease liability on the consolidated balance sheet, but had an immaterial impact on the income ~~tax rate~~statement.

For lease agreements entered into or reassessed after the adoption of ASC 842, the Company has elected the practical expedient to account for the ~~remeasurement~~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 ~~U.S. deferred tax~~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 months 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 expense are as follows:


	Three Months Ended		Three Months Ended
	December 31, 2022		December 31, 2021
Operating lease expense	$	3,090,000	$	3,580,000
Finance lease expense		23,000		24,000
Short-term lease expense		5,000		3,000
Variable lease expense		213,000		136,000
Total lease expenses	$	3,331,000	$	3,743,000

Page 15


	Nine Months Ended		Nine Months Ended
	December 31, 2022		December 31, 2021
Operating lease expense	$	9,381,000	$	10,519,000
Finance lease expense		70,000		74,000
Short-term lease expense		12,000		10,000
Variable lease expense		577,000		403,000
Total lease expenses	$	10,040,000	$	11,006,000

The following table presents the lease related assets and liabilities ~~resulting in a tax benefit of $3.0 million. The decrease in net deferred tax liabilities was reasonably estimated and based~~recorded on the ~~tax rates at which they~~Company’s consolidated balance sheets related to its operating leases:


	December 31, 2022			March 31, 2022
Right-of-use asset, net	$	29,936,000		$	35,020,000
Short-term lease liability	$	10,687,000		$	13,348,000
Long-term lease liability		25,773,000			29,792,000
Total lease liabilities	$	36,460,000		$	43,140,000
Weighted average remaining operating lease term	4.15 years			4.32 years
Weighted average remaining finance lease term	2.5 years			3.25 years
Weighted average discount rate		2.8	%		2.6	%

Supplemental cash flow information related to operating leases for the nine months ended December 31, 2022 and 2021 was as follows:


	Nine Months Ended		Nine Months Ended
	December 31, 2022		December 31, 2021
Cash paid for amounts included in the measurement of operating lease liabilities	$	10,984,000	$	11,204,000
Operating lease liabilities arising from obtaining ROU assets	$	56,105,000	$	60,420,000
Finance lease liabilities arising from obtaining ROU assets	$	358,000	$	358,000
Reductions to ROU assets resulting from reductions to operating lease liabilities	$	2,217,000	$	6,446,000

As of December 31, 2022, maturities of operating lease liabilities for each of the next five years and thereafter are ~~expected to reverse in the future. The final impact may differ, possibly materially, due to, among other things, changes in interpretations, assumptions made by~~as follows:



2023	$	3,412,000
2024		10,529,000
2025		8,415,000
2026		6,120,000
2027		4,380,000
Thereafter		6,049,000
Total lease payments		38,905,000
Less interest		(2,445,000	)
Total lease liabilities	$	36,460,000

As of December 31, 2022, the Company ~~the issuance~~has approximately $5.5 million of ~~federal tax regulations~~additional operating lease commitments that have not yet commenced. These additional leases commence in 2023 and ~~guidance,~~have lease terms between 2 years and actions the Company may take as a result of the Tax Cuts and Jobs Act. Taking into account the change in the statutory federal rate as well as other permanent items, the Company expects its effective combined federal and state tax rate will be approximately 25% to 26% for the fiscal year beginning April 1, 2018. This expected effective rate assumes projected financial results consistent with recent trends and applies the new statutory rate and the impact of the Tax Cuts and Jobs Act relative to permanent differences between book and tax income.5 years.

Item 2 ~~- MANAGEMENT’S DISCUSSION AND ANALYSIS OF~~ ~~FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~– Management’s Discussion and Analysis of Financial Condition and Results of Operations

This report may include certain forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including (without limitation) statements with respect to anticipated future operating and financial performance, including the impact of COVID-19, 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,” ~~and “should” and~~“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) the ~~Company’s assumption that projected financial results will be consistent with recent trends turns out to be incorrect; changes in interpretations or application~~impact of ~~the Tax Cuts and Jobs Act through regulations and guidance that may be issued by the U.S. Department of the Treasury;~~global pandemics, such as COVID-19; 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; our ability to renew or maintain contracts with our customers on favorable terms or at all; our ability to expand certain areas of our business; growth in our sale of third-party administrator ("TPA") services; shifts in customer demands; increases in operating expenses including employee wages, benefits, and medical inflation; our ability to produce market-competitive software; cost of capital and capital requirements; ~~existing~~our ability to attract and retain key personnel; the impact of possible cybersecurity incidents on our business; possible litigation and legal liability in the course of operations and ~~the Company’s~~our ability to resolve such litigation; competition from other managed care companies; the ability to expand certain areas of the Company’s business; shifts in customer demands; the ability of the Company to produce market-competitive software; changes in ~~operating expenses including employee wages, benefits,~~regulations affecting the workers’ compensation, insurance and ~~medical inflation;~~healthcare industries in general; governmental and public policy changes, including but not limited to legislative and administrative law and rule implementation or change; ~~dependence on key personnel;~~ the impact of recently issued accounting standards on ~~the Company’s~~our consolidated financial ~~statements,~~statements; the availability of financing in the amounts, at the times, and on the terms necessary to support our future business; and the other risks identified in Part II, Item 1A of this report.

CorVel Corporation is an independent nationwide provider of medical cost containment and managed care services designed to address the escalating medical costs of workers’ compensation benefits, ~~mobile~~automobile insurance claims, and group health insurance benefits. The Company’s services are provided to insurance companies, ~~third party administrators, or TPA’s,~~TPAs, governmental entities, and self-administered employers to assist them in managing the medical costs and monitoring the quality of care associated with healthcare claims. In November ~~2017,~~2022, the Bureau of Labor Statistics reported ~~a decrease in~~that the occupational injury count for 2021 was 2.24 million compared to 2.11 million in 2020, and ~~illness incidence rates for 2016. This is a continuance of a long term trend of a decrease~~2.69 million in 2019. While there was an increase in the injury ~~rates in~~count for 2021 compared to 2020, the ~~United States and, therefore, fewer claims could lead~~count has not returned to ~~fewer medical dollars to be reviewed.~~pre-pandemic levels.

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~~professional nurse review, true line item review, expert fee ~~auditing,~~negotiations, specialty networks, preferred provider organization ("PPO") 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.~~repricing, automated adjudication, and electronic reimbursement. Network solutions services also includes revenue from the Company’s directed care network (known as CareIQ), ~~which includes~~including imaging, physical therapy, ~~and~~ durable medical ~~equipment.~~

In addition to its network solutions services, the Company ~~offers~~provides a ~~range of~~unique approach to patient management through the TPA services ~~which involve working one-on-one with injured employees and their various healthcare professionals, employers and insurance company adjusters.~~it offers. Patient management services include claims management and all services sold to claims management customers, as well as case management, the Company's 24/7 virtual care platform with nurse triage, utilization management, vocational rehabilitation, and ~~life care planning. The services are designed~~disability, liability claims, and auto claims management. This integrated service model controls claims costs by advocating medical management at the onset of a claimant's injury to ~~monitor the medical necessity and appropriateness of healthcare services provided to workers’ compensation and other healthcare claimants~~decrease administrative costs and to ~~expedite return~~shorten the duration of the claimant's disability. This automated solution offers a personalized treatment program for each injured worker, using precise treatment protocols to ~~work.~~meet the changing needs of patients on an ongoing basis. The Company offers these services on a stand-alone basis or as an integrated component of its medical cost containment services. ~~Patient management services include the processing of claims for self-insured payors with respect to property and casualty insurance.~~

The Company’s management is structured geographically with regional ~~vice-presidents~~vice presidents who ~~report to the Executive Vice President of the Company. Each of these regional vice-presidents is~~are responsible for all services provided by the Company inwithin his or her particular region and responsible for the operating results of the Company in multiple states. These regional ~~vice-presidents~~vice presidents have area and district managers who are also responsible for all services provided by the Company in their given area and district.

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 ~~or FASB,~~(“FASB”) Accounting Standard Codification ~~or ASC, 280- 10,~~(“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 ~~productions~~production and distribution.

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

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

The Company’s revenues increased ~~by $12.3 million, or 9.6%, from $128.4~~to $179.4 million in the quarter ended December 31, ~~2016 to $140.7~~2022 from $164.5 million in the quarter ended December 31, ~~2017.~~2021, an increase of $14.9 million, or 9.0%. This increase ~~was due~~resulted primarily from both patient management and network solutions activity with existing customers and, to a lesser extent, an increase in ~~patient management services, which was due to an increase in TPA services partially offset by a decrease in case management services to non-TPA~~new customers.

General and administrative expense increased ~~by $1.4 million, or 9.6%, from $14.1~~to $18.1 million in the quarter ended December 31, ~~2016 to $15.5~~2022 from $17.5 million in the quarter ended December 31, ~~2017.~~2021, an increase of $0.6 million, or 3.6%. This increase was primarily due to an ~~impairment to the investment in private equity and an~~ increase in ~~non-cash stock-based compensation from performance stock options.~~corporate system costs.

Income tax expense ~~decreased by $3.9 million, or 88.5%, from $4.4~~increased to $5.4 million in the quarter ended December 31, ~~2016 to $0.5~~2022 from $3.8 million in the quarter ended December 31, ~~2017. This decrease was primarily due~~2021. Income before income tax provision increased to ~~the impact of the Tax Cuts and Jobs Act as the Company remeasured its U.S. deferred tax assets and liabilities at lower enacted corporate tax rates.~~

~~Weighted diluted shares decreased by 428,000 shares, or 2.2%, from 19.5~~$22.2 million ~~shares~~ in the quarter ended December 31, ~~2016 to 19.1~~2022 from $17.7 million ~~shares~~ in the quarter ended December 31, ~~2017. This~~2021, an increase of $4.5 million, or 25.6%. The effective tax rate was 24.2% for the quarter ended December 31, 2022 compared to 21.6% in the quarter ended December 31, 2021.

Diluted weighted average common and common equivalent shares decreased to 17.5 million shares for the quarter ended December 31, 2022 from 18.2 million shares for the quarter ended December 31, 2021, a decrease ~~was primarily~~of 724,000 shares, or 4.0%, due to the ~~repurchase~~weighted impact of ~~574,698~~ shares repurchased partially offset by the weighted impact of ~~common stock in the twelve months ended December 31, 2017 under our stock repurchase program.~~options exercised.

Diluted earnings per share increased ~~$0.14 per share, or 38.9%, from $0.36~~to $0.96 per share in the quarter ended December 31, ~~2016 to $0.50~~2022 from $0.76 per share in the quarter ended December 31, ~~2017.~~2021, an increase of $0.20 per share, or 26.3%. The increase in diluted earnings per share was primarily due to an increase in net income, ~~and~~which was slightly offset by a decrease in weighted diluted shares.

Results of Operations for the three months ended December 31, ~~2016~~2022 and ~~2017~~2021

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. The percentages of total revenues attributable to patient management and network solutions services for the quarters ended December 31, ~~2016~~2022 and ~~December 31, 2017~~2021 are as follows:

The following table sets forth, for the periods indicated, the dollar amounts, dollar and percent changes, share changes, and the percentage of revenues represented by certain items reflected in the Company’s unaudited consolidated income statements for the three months ended December 31, ~~2016~~2022 and ~~December 31, 2017.~~2021. The Company’s past operating results are not necessarily indicative of future operating results.


	Three Months Ended			Three Months Ended						Percentage			Three Months Ended			Three Months Ended						Percentage
	December 31, 2016			December 31, 2017			Change			Change			December 31, 2022			December 31, 2021			Change			Change
Revenue	$	128,403,000		$	140,734,000		$	12,331,000			9.6	%	$	179,386,000		$	164,508,000		$	14,878,000			9.0	%
Cost of revenues		102,826,000			115,165,000			12,339,000			12.0	%		139,041,000			129,320,000			9,721,000			7.5	%
Gross profit		25,577,000			25,569,000			(8,000	)		—			40,345,000			35,188,000			5,157,000			14.7	%
Gross profit as percentage of revenue		19.9	%		18.2	%								22.5	%		21.4	%
General and administrative		14,134,000			15,496,000			1,362,000			9.6	%		18,128,000			17,506,000			622,000			3.6	%
General and administrative as percentage of revenue		11.0	%		11.0	%								10.1	%		10.6	%
Income before income tax provision		11,443,000			10,073,000			(1,370,000	)		(12.0	%)		22,217,000			17,682,000			4,535,000			25.6	%
Income before income tax provision as percentage of revenue		8.9	%		7.2	%								12.4	%		10.7	%
Income tax provision		4,394,000			504,000			(3,890,000	)		(88.5	%)		5,368,000			3,824,000			1,544,000			40.4	%
Net income	$	7,049,000		$	9,569,000		$	2,520,000			35.7	%	$	16,849,000		$	13,858,000		$	2,991,000			21.6	%
Weighted Shares
Weighted Average Shares
Basic		19,426,000			18,849,000			(577,000	)		(3.0	%)		17,245,000			17,785,000			(540,000	)		(3.0	%)
Diluted		19,549,000			19,121,000			(428,000	)		(2.2	%)		17,487,000			18,211,000			(724,000	)		(4.0	%)
Earnings Per Share
Basic	$	0.36		$	0.51		$	0.15			41.7	%	$	0.98		$	0.78		$	0.20			25.6	%
Diluted	$	0.36		$	0.50		$	0.14			38.9	%	$	0.96		$	0.76		$	0.20			26.3	%

Change in revenue to the quarter ended December 31, 2022 from the quarter ended December 31, ~~2016 to the quarter ended December 31, 2017~~2021

Revenues increased ~~by $12.3 million, or 9.6%, from $128.4~~to $179.4 million in the quarter ended December 31, ~~2016 to $140.7~~2022 from $164.5 million in the quarter ended December 31, ~~2017. The~~2021, an increase inof $14.9 million, or 9.0%. Patient management services revenues ~~was~~increased to $118.9 million from $107.7 million, an increase of 10.4%. This increase is primarily due to ~~an increase in patient management services, which~~higher revenue from the Company’s TPA and related services. Total new claims increased by ~~11.2%, from $71.4 million~~7% during the December 31, 2022 quarter compared to ~~$79.3 million. The increase in patient management services was due to an increase in TPA services partially offset by a decrease in case management services to non-TPA customers.~~the December 31, 2021 quarter. Network solutions services revenues increased ~~by 7.7%,~~to $60.5 million from ~~$57~~$56.8 million, ~~to $61.4 million. The~~an increase ~~was~~of 6.5%. This increase is primarily due to anincreases in enhanced bill review programs services, which resulted in a higher number of bills reviewed and higher revenue per bill. Most of the increase ~~in pharmacy service revenues, which increased $1.7 million,~~came from growth with existing customers and, ~~an increase in directed care network services revenues, including imaging, physical therapy and durable medical equipment, which increased $1.7 million.~~to a lesser extent, growth with new customers.

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 ~~analyst~~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, and (v) telephone expenses.~~rent. Approximately ~~31%~~36% of the costs incurred in the field are considered field indirect costs, which support both the patient management services and network solutions operations of the Company’s field operations.

Change in cost of revenues to the quarter ended December 31, 2022 from the quarter ended December 31, ~~2016 to the quarter ended December 31, 2017~~2021

Cost of revenues increased ~~by $12.3 million, or 12.0%, from $102.8~~to $139.0 million in the quarter ended December 31, ~~2016 to $115.2~~2022 from $129.3 million in the quarter ended December 31, ~~2017.~~2021, an increase of $9.7 million, or 7.5%. The increase in cost of revenues was primarily due to anthe increase in total revenues of ~~9.6%~~9.0%. Additionally, there was an increase ~~of $2.8 million~~ in salaries of 9.8% resulting from increased average headcount of 9.3% in field operations and growth in average annual salary increases due to wage inflation. Headcount increased due to an increase in ~~headcount in field operations~~new business and volume of 204 employees. Pharmacy service costs increased $2 million due to an increase in pharmacy service revenue. The Company also experienced a $2 million increase in the Company’s self-insured group medical costs for the quarter.business.

For the quarter ended December 31, ~~2017,~~2022, general and administrative expense consisted of approximately ~~52%~~50% of corporate systems costs, which include the corporate systems support, implementation and training, rules engine development, national ~~information technology (“IT”)~~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 expense 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 to the quarter ended December 31, 2022 from the quarter ended December 31, ~~2016 to the quarter ended December 31, 2017~~2021

General and administrative expense increased ~~by $1.4 million, or 9.6%, from $14.1~~to $18.1 million in the quarter ended December 31, ~~2016 to $15.5~~2022 from $17.5 million in the quarter ended December 31, ~~2017. The~~2021, an increase ~~in general and administrative expense~~of $0.6 million, or 3.6%. This increase was primarily due to an increase in ~~the impairment of $0.7 million in the investment in private equity and an increase in non-cash stock-based compensation from performance stock options.~~corporate system costs.

Change in income tax expense to the quarter ended December 31, 2022 from the quarter ended December 31, ~~2016 to the quarter ended December 31, 2017~~2021

Income tax expense ~~decreased by $3.9 million, or 88.5%, from $4.4~~increased to $5.4 million in the quarter ended December 31, ~~2016 to $0.5~~2022 from $3.8 million in the quarter ended December 31, ~~2017. The decrease in~~2021. Income before income tax ~~expense was primarily due~~provision increased to ~~a decrease~~$22.2 million in the quarter ended December 31, 2022 from $17.7 million in the quarter ended December 31, 2021, an increase of $4.5 million, or 25.6%. The effective tax rate was 24.2% for the quarter ended December 31, ~~2017. The rate decreased due~~2022 compared to 21.6% in the ~~impact of~~quarter ended December 31, 2021. For the Tax Cuts and Jobs Act as the Company remeasured its U.S. deferred tax assets and liabilities at lower enacted corporate tax rates. The income tax expense as a percentage of income before income taxes, also known asquarter ended December 31, 2022, the effective tax rate was 38.4% for the quarter ended December 31, 2016 and 5.0% for the quarter ended December 31, 2017. During the quarter ended December 31, 2017, the Company applied the newly enacted corporate federal income tax ratehigher due to ~~the remeasurement of U.S. deferred tax assets and liabilities resulting~~a decrease in a tax benefit of $3.0 million. Taking into account the change in the statutory federal rate as well as other permanent items, the Company expects its effective combined federal and state tax rate will be approximately 25% to 26% for the fiscal year beginning April 1, 2018. This expected effective rate assumes projected financial results consistent with recent trends and applies the new statutory rate and the impact of the Tax Cuts and Jobs Act relative to permanent differences between book and tax income.stock option exercises.

Results of Operations for the nine months ended December 31, ~~2016~~2022 and ~~the nine months ended December 31, 2017~~2021

The following table sets forth, for the periods indicated, the dollar amounts, dollar and percent changes, share changes, and the percentage of revenues represented by certain items reflected in the Company’s consolidated income statements for the nine months ended December 31, ~~2016~~2022 and ~~2017.~~2021. The Company’s past operating results are not necessarily indicative of future operating results.

Nine Months Ended

Nine Months Ended

Percentage

December 31, 2016

December 31, 2017

Change

Change

Revenue

$
385,081,000

$
414,777,000

$
29,696,000

7.7
%
Cost of revenues

308,010,000

334,675,000

26,665,000

8.7
%
Gross profit

77,071,000

80,102,000

3,031,000

3.9
%
Gross profit as percentage of revenue

20.0
%

19.3
%

General and administrative

42,239,000

43,794,000

1,555,000

3.7
%
General and administrative as percentage of revenue

11.0
%

10.6
%

Income before income tax provision

34,832,000

36,308,000

1,476,000

4.2
%
Income before income tax provision as percentage of
revenue

9.0
%

8.8
%

Income tax provision

13,340,000

9,571,000

(3,769,000
)

(28.3
%)
Net income

$
21,492,000

$
26,737,000

$
5,245,000

24.4
%
Weighted Shares

Basic

19,526,000

18,806,000

(720,000
)

(3.7
%)
Diluted

19,679,000

19,029,000

(650,000
)

(3.3
%)
Earnings Per Share

Basic

$
1.10

$
1.42

$
0.32

29.1
%
Diluted

$
1.09

$
1.41

$
0.32

29.4
%

Change in revenue to the nine months ended December 31, 2022 from the nine months ended December 31, ~~2016 to the nine months ended December 31, 2017~~2021

Revenues increased ~~from $385.1~~to $533.1 million for the nine months ended December 31, ~~2016 to $414.8~~2022 from $474.9 million for the nine months ended December 31, ~~2017,~~2021, an increase of ~~$29.7~~$58.2 million, or ~~7.7%~~12.3%. ~~The~~Patient management services revenues increased to $353.2 million from $312.8 million, an increase ~~in revenues was~~of 12.9%. This increase is primarily due to higher revenue from the Company’s TPA and related services. Total new claims increased by 15% during the nine months ended December 31, 2022 compared to the nine months ended December 31, 2021. Network solutions services revenues increased to $179.9 million from $162.0 million, an increase of 11.0%. This increase is primarily due to increases in ~~patient management~~enhanced bill review programs services, which ~~increased by 9.0%, from $214.6 million to $234.0 million, along with~~resulted in a ~~smaller increase in network solutions, which increased by 6.1%, from $170.4 million to $180.8 million. Within patient management services, most~~higher number of bills reviewed and higher revenue per bill. Most of the increase ~~was related~~came from growth with existing customers and, to ~~TPA services, which was partially offset by~~ a ~~decrease in case management services to non-TPA~~lesser extent, growth with new customers.

Change in cost of revenues to the nine months ended December 31, 2022 from the nine months ended December 31, ~~2016 to the nine months ended December 31, 2017~~2021

Cost of revenues increased ~~from $308.0~~to $416.8 million in the nine months ended December 31, ~~2016 to $334.7~~2022 from $365.8 million in the nine months ended December 31, ~~2017,~~2021, an increase of ~~$26.7~~$51.0 million, or ~~8.7%~~13.9%. The increase in cost of revenues was primarily due to ~~revenue increasing in lower margin TPA services and a decrease in case management margins, which was slightly offset by an~~the increase in ~~higher margin network solutions revenue.~~total revenues of 12.3%. Additionally, there was an increase ~~of $6.6 million~~ in salaries of 16.2% resulting from increased average headcount of 12.8% in field operations and growth in average annual salary increases due to wage inflation. Headcount increased due to an increase in ~~headcount~~new business and volume of business.

General and Administrative Expense

Change in ~~field operations of 204 employees. Pharmacy service costs increased $4.9 million due~~administrative expense to ~~an increase in pharmacy service revenues. The Company also experienced a $2.5 million increase in~~ the ~~Company’s self-insured group medical costs due to a few large claims incurred during the quarter~~nine months ended December 31, ~~2017.~~

~~Change in general and administrative expense~~2022 from the nine months ended December 31, ~~2016 to the nine months ended December 31, 2017~~2021

General and administrative expense increased ~~from $42.2~~to $54.3 million in the nine months ended December 31, ~~2016 to $43.8~~2022 from $50.8 million in the nine months ended December 31, ~~2017,~~2021, an increase of ~~$1.6~~$3.5 million, or ~~3.7%~~7.0%. ~~The~~This increase ~~in general and administrative expense~~ was primarily due to an increase in ~~the impairment of $1.2 million in the investment in private equity~~corporate system costs, marketing, and ~~an increase in non-cash stock-based compensation from performance stock options.~~legal expenses.

Change in income tax expense to the nine months ended December 31, 2022 from the nine months ended December 31, ~~2016 to the nine months ended December 31, 2017~~2021

Income tax expense ~~decreased from $13.3~~increased to $13.8 million for the nine months ended December 31, ~~2016~~2022 from $11.5 million for the nine months ended December 31, 2021, an increase of $2.3 million, or 19.9%. Income before income tax provision increased to ~~$9.6~~$62.0 million in the nine months ended December 31, ~~2017, a decrease of $3.8~~2022 from $58.3 million ~~or 28.3%. The decrease in income tax expense was primarily due to a decrease~~ in the ~~effective tax rate for the quarter~~nine months ended December 31, 2017. The rate decreased due to the Tax Cuts and Jobs Act as the Company remeasured its U.S. deferred tax assets and liabilities at lower enacted corporate tax rates. Additionally, the rate decreased due to the excess tax benefit from stock options exercised, that resulted from a tax deductible amount that exceeded the stock compensation expense recognized.2021, an increase of $3.7 million, or 6.4%. The income tax expense as a percentage of income before income taxes, also known as the effective tax rate, was ~~38.3%~~22.1% for the nine months ended December 31, ~~2016~~2022 and ~~24.5%~~19.8% for the nine months ended December 31, ~~2017. During~~2021. For the ~~quarter~~nine months ended December 31, ~~2017,~~2022 compared to the ~~Company applied~~nine months ended December 31, 2021, the ~~newly enacted corporate federal income~~effective tax rate ~~to the remeasurement of U.S. deferred tax assets and liabilities resulting in a tax benefit of $3.0 million. Taking into account the change in~~is less than the statutory ~~federal rate as well as other permanent items, the Company expects its effective combined federal and state~~ tax rate will be approximately 25% to 26% for the fiscal year beginning April 1, 2018. This expected effective rate assumes projected financial results consistent with recent trends and applies the new statutory rate andprimarily because of the impact of the ~~Tax Cuts and Jobs Act relative~~stock option exercises, that however had a less significant impact in the current year compared to ~~permanent differences between book and tax income.~~prior year.

The Company has historically funded its operations and capital expenditures primarily from cash flow from operations, and to a lesser extent, proceeds from stock option exercises. Working capital ~~increased $17.9~~decreased to $70.3 million as of December 31, 2022 from ~~$38.8~~$93.6 million as of March 31, ~~2017~~2022, a decrease of $23.3 million. Cash decreased to ~~$56.7~~$78.0 million as of December 31, ~~2017. Cash increased~~2022 from ~~$28.6~~$97.5 million as of March 31, ~~2017 to $53.6 million as~~2022, a decrease of ~~December 31, 2017, an increase of $25.0~~$19.5 million. This is primarily due to anthe increase in ~~net income and proceeds from stock options exercised.~~

~~During the quarter ended September 30, 2017, the Company entered into a purchase agreement~~spending to acquire a 32,000 square foot building located in Milwaukie, Oregon at a purchase price of $5.8 million. The Company has paid a deposit of $150,000 towards this purchase during the quarter ended September 30, 2017. The Company expects to finance this purchase with existing cash on hand and expects to close escrow in the first quarter of 2018. This building will be used for the Company’s Symbeo business franchise, which consists of the Company’s provider reimbursement and scanning services.

~~The Company believes that cash from operations, funds from exercises of stock options granted to employees, and its line of credit 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~~stock. The Company did not apply for governmental loans to ~~develop~~support the Company’s ~~healthcare related services for at least~~operations, but has taken advantage of certain aspects of the ~~next twelve months.~~CARES Act such as the deferral of payroll tax deposits. 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, on terms favorable todeferred a total of $10.4 million in payroll tax deposits, half of which was paid during the ~~Company or at all.~~

~~As of~~ December 31, ~~2017,~~2021 quarter, and the ~~Company had $53.6 million in cash and cash equivalents, invested primarily in short-term, interest-bearing, highly liquid investment-grade securities with maturities~~other half of ~~90 days or less.~~

~~In September 2017,~~which was paid during the Company renewed its line of credit agreement with a financial institution, which provides a revolving credit facility with borrowing capacity of up to $10 million. Borrowings under this credit agreement, as amended, bear interest, at the Company’s option, at a fixed LIBOR-based rate plus 1.00% or at a fluctuating rate determined by the financial institution to be 1.00% above the daily one-month LIBOR rate. The loan covenants require the Company to maintain a current assets to liabilities ratio of at least 1.25:1, maintain a current debt to tangible net worth ratio not greater than 1.25:1 and have positive net income. The Company is in compliance with all these covenants under the credit agreement. There were no outstanding revolving loans as of December 31, 2017, but letters of credit in the aggregate amount of $4.5 million have been issued separate from the line of credit and therefore do not reduce the amount of borrowings available under the revolving credit facility. The renewed credit agreement expires in September 2018.2022 quarter.

~~Nine months ended December 31, 2016 compared to nine months ended December 31, 2017~~

Net cash provided by operating activities increased from $36.5 million in the nine months ended December 31, 2016 to $49.9 million in the nine months ended December 31, 2017, an increase of $13.4 million. The increase in cash flow from operating activities was primarily due to an increase in net income of $5.2 million and an increase of $4.3 million in accrued bonus due to the timing of

~~the annual bonus payment for fiscal year 2017. Additionally, there was an increase of $3.6 million in deferred revenue due to an increase in TPA services revenue.~~

~~Nine months ended December 31, 2016 compared to nine months ended December 31, 2017~~

Net cash flow used in investing activities was $17.4 million in the nine months ended December 31, 2016 and $16.3 million in the nine months ended December 31, 2017. Capital purchases were $17.2 million for the nine months ended December 31, 2016 and $16.3 million for the nine months ended December 31, 2017.

~~Nine months ended December 31, 2016 compared to nine months ended December 31, 2017~~

Net cash flow provided by financing activities was $13.1 million for the nine months ended December 31, 2016 and net cash flow used by financing activities was $8.6 million for the nine months ended December 31, 2017, a decrease of $4.5 million. The change is primarily due to the Company’s stock repurchase program activity.

~~The following table summarizes the Company’s contractual obligations outstanding as of December 31, 2017:~~

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, individually or in the aggregate, would be material to the financial position or results of operations of the Company.

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. However, the Company generally does not believe these impacts are material to its revenues or net income.

The Company is not a party to off-balance sheet arrangements as defined by the rules of 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 material 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 December 31, 2022, the Company had $78.0 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 its cash and cash equivalents, along with cash generated by ongoing operations, will be sufficient to satisfy its cash requirements over the next 12 months and beyond.

Nine months ended December 31, 2022 compared to nine months ended December 31, 2021

Net cash provided by operating activities increased to $69.5 million in the nine months ended December 31, 2022 from $50.4 million in the nine months ended December 31, 2021, an increase of $19.1 million. The increase in cash flow from operating activities was primarily due to the fact that in the nine months ended December 31, 2022, there was a source of cash due to the timing of tax payments versus in the nine months ended December 31, 2021, there was a use of cash due to the timing of the tax payments, which caused a $7.5 million swing.

Investing Activities

Nine months ended December 31, 2022 compared to nine months ended December 31, 2021

Net cash flow used in investing activities increased to $19.2 million in the nine months ended December 31, 2022 from $18.4 million in the nine months ended December 31, 2021, an increase of $0.7 million, which were exclusively capital purchases. The Company increased its spending primarily on developed software and reduced its spending on furniture and leasehold improvements as the Company reduces its lease footprint.

Nine months ended December 31, 2022 compared to nine months ended December 31, 2021

Net cash flow used in financing activities increased to $69.8 million for the nine months ended December 31, 2022 from $56.1 million for the nine months ended December 31, 2021, an increase of $13.7 million. The increase in net cash used in financing activities was primarily due to an increase in spending on share repurchases to $75.1 million for the nine months ended December 31, 2022. The Company spent $65.3 million on share repurchases for the nine months ended December 31, 2021. Additionally, stock option exercises decreased to $4.9 million for the nine months ended December 31, 2022 from $8.9 million for the nine months ended December 31, 2021. 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 December 31, 2022 to repurchase additional shares of its common stock in the future.

From time to time, the Company is involved in litigation arising in the ordinary course of business. The Company believes that resolution of these matters will not result in any payment that, individually, or in the aggregate, would be material to the financial position or results of operations of the Company.

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 believes inflation could have a material impact to pricing and operating expenses in future periods due to the state of the economy and current inflation rates.

The SEC defines critical accounting policies as those that require application of management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.

~~The following is not intended to be a comprehensive list of our accounting policies.~~ The Company’s significant accounting policies which have the greatest potential impact on its financial statements are more fully described in ~~Note A, “Basis~~the “Management’s Discussion and Analysis of ~~Presentation~~Financial Condition and ~~Summary~~Results of ~~Significant Accounting Policies”~~Operations” section of its Annual Report on Form 10-K for the fiscal year ended March 31, 2022, filed with the SEC on May 27, 2022. No changes in critical accounting policies have been made since the ~~notes to our consolidated financial statements.~~filing of that Annual Report on Form 10-K. In many cases, the accounting treatment of a particular transaction is specifically dictated by accounting principles generally accepted in the United States of America (“GAAP”), with no need for management’s judgment in their application. There are also areas in which management’s judgment in selecting an available alternative would not produce a materially different result. Actual results could differ from the estimates we use in applying our critical accounting policies. We are not currently aware of any reasonably likely events or circumstances that would result in materially different amounts being reported.

We have identified the following accounting policies as critical to us: (i) revenue recognition, (ii) allowance for uncollectible accounts, (iii) goodwill and long-lived assets, (iv) accrual for self-insured costs, (v) accounting for income taxes, (vi) legal and other contingencies, (vii) share-based compensation, and (viii) software development costs.Recent Accounting Standards Update

~~Revenue Recognition:~~ ~~The Company recognizes revenue when (i) there is persuasive evidence~~See Note 1 – Summary of ~~an arrangement, (ii) the services have been provided~~Significant Accounting Policies to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured. For the Company’s services, the Company’s professional staff is contractually permitted to bill (i) for fees earned for time worked in fraction of an hour increments or (ii) by units of production. The Company recognizes revenue as fees are earned or as units of production are completed, which is when the revenue is earned and realized. Labor costs are recognized as the costs are incurred. The Company derives the majority of its revenue from the sale of network solutions and patient management services. Network solutions and patient management services may be sold individually or combined with any of the services the Company provides. When a sale combines multiple elements, the Company accounts for such multiple element arrangements in accordance with the guidance included in ASC 605-25.

The multiple elements arrangements consist of bundled managed care which included various units of accounting such as network solutions, and patient management (which includes claims administration). Such elements are considered separate units of accounting as each element has value to the customer on a stand-alone basis. The selling price for each unit of accounting is determined using the contract price and management estimates. When the Company’s customers purchase several products, the pricing of the products sold is generally the same as if the products were sold on an individual basis. Revenue is recognized as the work is performed in accordance with the Company’s customer contracts. Based upon the nature of the Company’s products, bundled managed care elements are generally delivered in the same accounting period. The Company recognizes revenue for patient management claims administration services over the life of the customer contract. The Company estimates, based upon prior experience in managing claims, the deferral amount based on the average life of a claim.

~~Allowance for Uncollectible Accounts:~~ 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. No one customer accounted for 10% or more of accounts receivable at March 31, 2017 or December 31, 2017.

~~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 the Company’s amortizable intangible assets and long-lived assets annually and 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 and is further tested using a multiple of earnings approach. In projecting the Company’s cash flows, management considers industry growth rates and trends and cost structure changes. Based on the Company’s tests and reviews, no indicators of impairment of its goodwill, intangible assets, or other long-lived assets existed at December 31, 2017. However, future events or changes in current circumstances could affect the recoverability of the carrying value of goodwill and long-lived assets. Should an asset be deemed impaired, an impairment loss would be recognized to the extent the carrying value of the asset exceeded its estimated fair value.

~~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 purchases stop loss insurance for large claims. 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 II, Item 1 of this report under the heading “Legal Proceedings” and in Note H, “Contingencies and Legal Proceedings” in the notes to~~accompanying unaudited consolidated financial statements ~~the Company is subject to various legal proceedings~~contained elsewhere in this report for information about recently issued 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. In the opinion of management, there was not at least a reasonable possibility the Company may have incurred a material loss, or a material loss in excess of a recorded accrual, with respect to loss contingencies. However, the outcome 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). Included in the 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. The Company has elected to early adopt ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting” as of March 31, 2017.

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’s management believes that this valuation technique and approach utilized to develop the underlying assumptions are appropriate in calculating the fair values of the Company’s granted stock options. 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 used to determine stock-based compensation expense. However, if actual results are not consistent with these estimates or assumptions, the Company 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 and internal 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.

On May 28, 2014, the FASB issued ASU 2014-09 regarding ASC Topic 606, “Revenue from Contracts with Customers”. This standard provides principles for recognizing revenue for the transfer of promised goods or services to customers with the consideration to which the entity expects to be entitled in exchange for those goods or services. In July 2015, the FASB approved a one-year delay of the effective date of this new revenue recognition standard. The guidance will now be effective for our fiscal year beginning April 1, 2018. We are currently evaluating theadopted accounting transition and disclosure requirements of the standard. Based on the analyses we have completed thus far, which includes analyzing our standard contracts from which we derive the majority of our revenues, we anticipate that the ASU will not have a significant impact on our consolidated financial statements. However, we are currently reviewing our existing non-standard customer contracts, and as a result, the impact of the ASU adoption on this portion of our revenues cannot yet be reasonably estimated. We expect the new standard will, however, require more extensive revenue-related disclosures.pronouncements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases”, which sets out the principles for the recognition, measurement, presentation, and disclosure of leases for both parties to a contract (i.e. lessees and lessors). The standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for using an approach that is similar to the existing guidance for operating leases. The standard is effective April 1, 2019, with early adoption permitted. The standard is to be applied using a modified retrospective transition method. This will place all outstanding lease commitments on our balance sheet as liabilities with an offsetting right to use asset. We are currently evaluating the impact of adoption on our consolidated financial position, results of operations, and cash flows, and believe that the new standard will have a material impact on our consolidated balance sheet.

In March 2016, the FASB issued ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting”, which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification on the statement of cash flows. For public companies, the new guidance became effective for annual reporting periods (including interim periods within those periods) beginning after December 15, 2016. We have elected to early adopt this standard as of March 31, 2017.

Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in interest rates. We do not hold or issue financial instruments for trading purposes.

Our invested assets are primarily held as cash and cash equivalents, which are subject to various market risk exposures such as interest rate risk. The fair value of our portfolio of cash and cash equivalents as of December 31, 2022 approximated its carrying value due to its short-term duration. We estimated market risk as the potential decrease in fair value resulting from a hypothetical one-percentage point increase in interest rates for the instruments contained in the cash and cash equivalents investment portfolio. The resulting fair values were not materially different from their carrying values at December 31, 2022.

As of December 31, ~~2017,~~2022, the Company held no market risk sensitive instruments for trading purposes, and the Company did not employ any derivative financial instruments, other financial instruments, or derivative commodity instruments to hedge any market risk. The Company had no debt outstanding as of December 31, ~~2017,~~2022, and therefore, had no market risk related to debt.

Our management, ~~has evaluated,~~ under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and ~~our~~ Chief Financial Officer ~~have~~ concluded that, as of December 31, ~~2017,~~2022, our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is (i) recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms ~~of the SEC~~ and (ii) accumulated and communicated to our management, including our principal executive and principal accounting officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Effective January 1, 2018, Kenneth S. Cragun replaced Richard J. Schweppe as the Company’s Chief Financial Officer, and a Form 8-K was filed. Certain control responsibilities have been reassigned to certain key personnel within the Company. We have reviewed and will continue to monitor our internal controls to make sure there is no adverse impact. There have been no ~~other~~ changes in our internal ~~controls~~control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) during the three months ended December 31, ~~2017~~2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

~~The Company is~~From time to time, we are involved in litigation arising in the ordinary course of business. ~~Management~~The Company believes that resolution of these matters will not result in any payment that, individually or in the aggregate, would be material to ~~the~~our consolidated financial position or results of ~~operations of the Company.~~operations.

A restated description of the risk factors associated with our business is set forth below. This description includes any and all changes (whether or not material) to, and supersedes, the description of the risk factors associated with our business previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended March 31, ~~2017,~~2022, filed with the SEC on ~~June 9, 2017.~~May 27, 2022.

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

~~If we fail~~Risks Related to ~~grow our business internally or through strategic acquisitions we may be unable to execute our business plan, maintain high levels of service, or adequately address competitive challenges.~~Our Business and Industry

Our strategy is to continue internal growth and, as strategic opportunities arise in the workers’ compensation managed care industry, to consider acquisitions of, or relationships with, other companies in related lines of business. As a result, we are subject to certain growth-related risks, including the risk that we will be unable to retain personnel or acquire other resources necessary to service such growth adequately. Expenses arising from our efforts to increase our market penetration may have a negative impact on operating results. In addition, there can be no assurance that any suitable opportunities for strategic acquisitions or relationships will arise or, if they do arise, that the transactions contemplated could be completed. If such a transaction does occur, there can be no assurance that we will be able to integrate effectively any acquired business. In addition, any such transaction would be subject to various risks associated with the acquisition of businesses, including, but not limited to, the following:

There can be no assurance that we will be able to identify or consummate any future acquisitions or other strategic relationships on favorable terms, or at all, or that any future acquisition or other strategic relationship will not have an adverse impact on our business or results of operations. If suitable opportunities arise, we may finance such transactions, as well as internal growth, through debt or equity financing. There can be no assurance, however, that such debt or equity financing would be available to us on acceptable terms when, and if, suitable strategic opportunities arise.

~~If we are unable to increase our market share among national and regional insurance carriers and large, self-funded employers, our results may be adversely affected.~~

Our business strategy and future success depend in part on our ability to capture market share with our cost containment services as national and regional insurance carriers and large, self-funded employers look for ways to achieve cost savings. We cannot assure you that we will successfully market our services to these insurance carriers and employers or that they will not resort to other means to achieve cost savings. Additionally, our ability to capture additional market share may be adversely affected by the decision of potential customers to perform services internally instead of outsourcing the provision of such services to us. Furthermore, we may not be able to demonstrate sufficient cost savings to potential or current customers to induce them not to provide comparable services internally or to accelerate efforts to provide such services internally.

The markets for our network services and patient management services are also fragmented and competitive. Our competitors include national managed care providers, preferred provider networks, smaller independent providers and insurance companies. Companies that offer one or more workers’ compensation managed care services on a national basis are our primary competitors. We also compete with many smaller vendors who generally provide unbundled services on a local level, particularly companies with an established relationship with a local insurance company adjuster. In addition, several large workers’ compensation insurance carriers offer managed care services for their customers, either by performance of the services in-house or by outsourcing to organizations like ours. If these carriers increase their performance of these services in-house, our business may be adversely affected. In addition, consolidation in the industry may result in carriers performing more of such services in-house.

Our sequential revenue may not increase and may decline. As a result, we may fail to meet or exceed the expectations of investors or analysts which could cause our common stock price to decline.

Our sequential revenue growth may not increase and may decline in the future as a result of a variety of factors, many of which are outside of our control. If changes in our sequential revenue fall below the expectations of investors or analysts, the price of our common stock could decline substantially. Fluctuations or declines in sequential revenue growth may be due to a number of factors, including, but not limited to, those listed below and identified throughout this “Risk Factors” section: the decline in manufacturing employment, the decline in workers’ compensation claims, the decline in healthcare expenditures, the considerable price competition in a flat-to-declining workers’ compensation market, litigation, the increase in competition, and the changes and the potential changes in state workers’ compensation and automobile-managed care laws which can reduce demand for our services. These factors create an environment where revenue and margin growth is more difficult to attain and where revenue growth is less certain than historically experienced. Additionally, our technology and preferred provider network face competition from companies that have more resources available to them than we do. Also, some customers may handle their managed care services in-house and may reduce the amount of services which are outsourced to managed care companies such as us. These factors could cause the market price of our common stock to fluctuate substantially. There can be no assurance that our growth rate in the future, if any, will be at or near historical levels.

Our results of operations have been adversely affected and could in the future be materially adversely affected by the COVID-19 coronavirus pandemic, or other pandemics or incidents of disease.

The global spread of the COVID-19 coronavirus has created significant volatility, uncertainty, unemployment and economic disruption. The extent to which the COVID-19 pandemic impacts our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict, including:

The closure of offices or restrictions inhibiting our employees’ ability to travel or interact with claimants and access claim sites, has disrupted, and could in the future disrupt, our ability to provide our services and solutions to our customers. The majority of our workforce continues to work from home, which in the long run could have material adverse impact on our level of service. This may result in, among other things, decreased demand for our services, terminations of customer contracts, delays in our ability to perform services, an altering of the mix of services requested by customers and claimants, and other losses of revenue. Customers may also slow down decision making, delay planned work or seek to terminate existing agreements. Any of these events could cause or contribute to the risks ~~discussed~~and uncertainties enumerated in this report ~~investors should~~and could materially adversely affect our business, financial condition, results of operations and/or stock price.

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

If we fail to grow our business internally or through strategic acquisitions we may be unable to execute our business plan, maintain high levels of service, or adequately address competitive challenges.

There can be no assurance that ~~the market price of our common stock~~we will be able to identify or consummate any future acquisitions or other strategic relationships on favorable terms, or at all, or that any future acquisition or other strategic relationship will not ~~fluctuate~~have an adverse impact on our business or ~~decline significantly in the future.~~results of operations. If suitable opportunities arise, we may finance such transactions, as well as internal growth, through debt or equity financing. There can be no assurance, however, that such debt or equity financing would be available to us on acceptable terms when, and if, suitable strategic opportunities arise.

If we are unable to increase our ~~stockholders that~~market share among national and regional insurance carriers and large, self-funded employers, our ~~stock repurchase program will enhance long-term stockholder value and stock repurchases, if any, could increase the volatility of the price of our common stock and will diminish our cash reserves.~~

In 1996, our Board of Directors authorized a stock repurchase program and since then, has periodically increased the number of shares authorized for repurchase under the repurchase program. The most recent increase occurred in February 2017 and brought the number of shares authorized for repurchase over the life of the program to 36,000,000 shares. There is no expiration date for the repurchase program. The timing and actual number of shares repurchased, if any, depend on a variety of factors including the timing of open trading windows, price, corporate and regulatory requirements, and other market conditions. The programresults may be ~~suspended or discontinued at any time without prior notice. Repurchases pursuant to our stock repurchase program could affect our stock price~~adversely affected.

Our business strategy and ~~increase its volatility. The existence of a stock repurchase program could also cause our stock price to be higher than it would be~~future success depend in the absence of such a program and could potentially reduce the market liquidity for our stock. Additionally, repurchases under our stock repurchase program will diminish our cash reserves, which could impactpart on our ability to ~~pursue possible future strategic opportunities~~capture market share with our cost containment services as national and ~~acquisitions~~regional insurance carriers and ~~could result in lower overall returns on our cash balances.~~large, self-funded employers look for ways to achieve cost savings. There can be no assurance that ~~any further stock repurchases~~we will ~~enhance stockholder value because~~successfully market our services to these insurance carriers and employers or that they will not resort to other means to achieve cost savings. Additionally, our ability to capture additional market share may be adversely affected by the ~~market price~~decision of potential customers to perform services internally instead of outsourcing the provision of such services to us. Furthermore, we may not be able to demonstrate sufficient cost savings to potential or current customers to induce them not to provide comparable services internally or to accelerate efforts to provide such services internally.

If competition increases, our ~~common stock~~growth and profits may ~~decline below~~decline.

The markets for our network services and patient management services are fragmented and competitive. Our competitors include national managed care providers, preferred provider networks, smaller independent providers, and insurance companies. Companies that offer one or more workers’ compensation managed care services on a national basis are our primary competitors. We also compete with many smaller vendors who generally provide unbundled services on a local level, particularly companies with an established relationship with a local insurance company adjuster. In addition, several large workers’ compensation insurance carriers offer managed care services for their customers, either by performance of the ~~levels at which we repurchased shares~~services in-house or by outsourcing to organizations like ours. If these carriers increase their performance of ~~stock. Although~~these services in-house, our ~~stock repurchase program is intended to enhance long-term stockholder value, short-term stock price fluctuations could reduce~~business may be adversely affected. In addition, consolidation in the ~~program’s effectiveness.~~industry may result in carriers performing more of such services in-house.

If the referrals for our patient management services decline, our business, financial condition and results of operations would be materially adversely affected.

In some years, we have experienced a general decline in the revenue and operating performance of patient management services. We believe that the performance decline has been due to the following factors: the decrease of the number of workplace injuries that have become longer-term disability cases; increased regional and local competition from providers of managed care services; a possible reduction by insurers on the types of services provided by our patient management business; the closure of offices and continuing consolidation of our patient management operations; and employee turnover, including management personnel, in our patient management business. In the past, these factors have all contributed to the lowering of our long-term outlook for our patient management services. If some or all of these conditions continue, we believe that revenues from our patient management services could decrease.

Declines in workers’ compensation claims may materially harm our results of operations.

Within the past few years, as the labor market ishas become less labor intensive and more service oriented, ~~and~~ there are ~~fewer~~declining work-related injuries. Additionally, employers are being more proactive to prevent injuries. If declines in workers’ compensation costs occur in many states and persist over the long-term, it would have a material adverse impact on our business, financial condition and results of operations.

We provide an outsource service to payors of workers’ compensation benefits, automobile insurance claims, and group health insurance benefits. These payors include insurance companies, TPAs, municipalities, state funds, and self-insured, self-administered employers. If these payors reduce the amount of work they outsource, our results of operations would be materially adversely affected.

Healthcare providers are becoming increasingly resistant to the application of certain healthcare cost containment techniques; this may cause revenue from our cost containment operations to decrease.

Healthcare providers have become more active in their efforts to minimize the use of certain cost containment techniques and are engaging in litigation to avoid application of certain cost containment practices. Recent litigation between healthcare providers and insurers has challenged certain insurers’ claims adjudication and reimbursement decisions. ~~Although these lawsuits do not directly involve us or any services we provide, these~~These cases may affect the use by insurers of certain cost containment services that we provide and may result in a decrease in revenue from our cost containment business.

Matters relating to the Tax Cuts and Jobs Act, including future changes in tax laws, rules and regulations, disagreements with taxing authorities and imposition of new taxes, could adversely affect our results of operations and financial condition.

On December 22, 2017, the Tax Cuts and Jobs Act was enacted into law. Among numerous provisions included in the new law was the reduction of the corporate federal income tax rate from 35% to 21% effective January 1, 2018. As a result of this federal income tax rate change, during the quarter ended December 31, 2017, we reported an effective tax rate of 5%. However, we continue to analyze and assess the impact of the Tax Cuts and Jobs Act and believe that its impact on our business may not be fully known for some time. During the quarter ended December 31, 2017, we applied the newly enacted corporate federal income tax rate to the remeasurement of U.S. deferred tax assets and liabilities resulting in a tax benefit of $3.0 million. The decrease in net deferred tax liabilities was reasonably estimated and based on the tax rates at which they are expected to reverse in the future. The final impact may differ, possibly materially, due to, among other things, changes in interpretations, assumptions made by us, the issuance of federal tax regulations and guidance, and actions we may take as a result of the Tax Cuts and Jobs Act. Taking into account the change in the statutory federal rate as well as other permanent items, we expect our effective combined federal and state tax rate will be approximately 25% to 26% for the fiscal year beginning April 1, 2018. This expected effective rate assumes projected financial results consistent with recent trends and applies the new statutory rate and the impact of the Tax Cuts and Jobs Act relative to permanent differences between book and tax income. If our assumption that projected financial results will be consistent with recent trends turns out to be incorrect, our effective combined federal and state tax rate could be higher for the fiscal year beginning April 1, 2018. In the absence of guidance on various uncertainties and ambiguities in the application of certain provisions of the Tax Cuts and Jobs Act, we will use what we believe are reasonable interpretations and assumptions in applying the Tax Cuts and Jobs Act, but it is possible that the U.S. Department of Treasury could issue subsequent rules and regulations, or the Internal Revenue Service could issue subsequent guidance or take positions on audit, that differ from our prior interpretations and assumptions, which could have a material adverse effect on our cash, tax assets and liabilities, results of operations, and financial condition.

Our failure to compete successfully could make it difficult for us to add and retain customers and could reduce or impede the growth of our business.

We face competition from PPOs, TPAs, and other managed healthcare companies. We believe that as managed care techniques continue to gain acceptance in the workers’ compensation marketplace, our competitors will increasingly consist of nationally-focused workers’ compensation managed care service companies, insurance companies, HMOs and other significant providers of managed care products. Legislative reform in some states has been considered, but not enacted, to permit employers to designate health plans such as HMOs and PPOs to cover workers’ compensation claimants. Because many health plans have the ability to manage medical costs for workers’ compensation claimants, such legislation may intensify competition in the markets served by us. Many of our current and potential competitors are significantly larger and have greater financial and marketing resources than we do, and there can be no assurance that we will continue to maintain our existing customers, maintain our past level of operating performance, or be successful with any new products or in any new geographical markets we may enter.

If the utilization by healthcare payors of early intervention services continues to increase, the revenue from our later-stage network and healthcare management services could be negatively affected.

The performance of early intervention services, including injury occupational healthcare, first notice of loss, and telephonic case management services, often result in a decrease in the average length of, and the total costs associated with, a healthcare claim. By successfully intervening at an early stage in a claim, the need for additional cost containment services for that claim often can be reduced or even eliminated. As healthcare payors continue to increase their utilization of early intervention services, the revenue from our later stage network and healthcare management services will decrease.

We face competition for staffing, which may increase our labor costs and reduce profitability.

We compete with other healthcare providers in recruiting qualified management and staff personnel for the day-to-day operations of our business, including nurses and other case management professionals. In some markets, the scarcity of nurses and other medical support personnel has become a significant operating issue to healthcare providers. This shortage may require us to enhance wages to recruit and retain qualified nurses and other healthcare professionals. Our failure to recruit and retain qualified management, nurses, and other healthcare professionals, or to control labor costs could have a material adverse effect on profitability.

Sustained increases in the cost of our employee benefits could materially reduce our profitability.

The cost of our current employees’ medical and other benefits substantially affects our profitability. In the past, we have occasionally experienced significant increases in these costs as a result of macro-economic factors beyond our control, including increases in healthcare costs. There can be no assurance that we will succeed in limiting future cost increases, and continued upward pressure in these costs could materially reduce our profitability.

The introduction of software products incorporating new technologies and the emergence of new industry standards could render our existing software products less competitive, obsolete, or unmarketable.

There can be no assurance that we will be successful in developing and marketing new software products that respond to technological changes or evolving industry standards. If we are unable, for technological or other reasons, to develop and introduce new software products cost-effectively, in a timely manner and in response to changing market conditions or customer requirements, our business, results of operations, and financial condition may be adversely affected.

Developing or implementing new or updated software products and services may take longer and cost more than expected. We rely on a combination of internal development, strategic relationships, licensing and acquisitions to develop our software products and services. The cost of developing new healthcare information services and technology solutions is inherently difficult to estimate. Our development and implementation of proposed software products and services may take longer than originally expected, require more testing than originally anticipated and require the acquisition of additional personnel and other resources. If we are unable to develop new or updated software products and services cost-effectively on a timely basis and implement them without significant disruptions to the existing systems and processes of our customers, we may lose potential sales and harm our relationships with current or potential customers.

We may not be able to develop or acquire necessary IT resources to support and grow our business, and disruptive technologies could impact the volume and pricing of our products, which could materially adversely affect our business, results of operations, and financial condition.

We have made substantial investments in software and related technologies that are critical to the core operations of our business. These IT resources will require future maintenance and enhancements, potentially at substantial costs. Additionally, these IT resources may become obsolete in the future and require replacement, potentially at substantial costs. We may not be able to develop, acquire replacement resources or identify new technology resources necessary to support and grow our business.

In addition, we could face changes in our markets due to disruptive technologies that could impact the volume and pricing of our products, or introduce changes to the claims management processes which could negatively impact our volume of case referrals. Our failure to address these risks, or to do so in a timely manner, or at a cost considered reasonable by us, could materially adversely affect our business, results of operations, and financial condition.

The failure to attract and retain qualified or key personnel may prevent us from effectively developing, marketing, selling, integrating, and supporting our services.

We are dependent, to a substantial extent, upon the continuing efforts and abilities of certain key management personnel. In addition, we face competition for experienced employees with professional expertise in the workers’ compensation managed care area. The loss of key personnel, especially V. Gordon Clemons, our Chairman, and Michael Combs, our Chief Executive Officer and

President, or the inability to attract qualified employees, could have a material adverse effect on our business, financial condition, and results of operations.

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

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

Our acquisition of other businesses may result in significant increases in our intangible assets and goodwill. We regularly evaluate whether events and circumstances have occurred indicating that any portion of our intangible assets and goodwill may not be recoverable. When factors indicate that intangible assets and goodwill should be evaluated for possible impairment, we may be required to reduce the carrying value of these assets. We cannot currently estimate the timing and amount of any such charges.

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

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

Cybersecurity breaches of any of the systems on which we rely may result from circumvention of security systems, denial-of-service attacks or other cyber-attacks, hacking, “phishing” attacks, computer viruses, ransomware, malware, employee or insider error, malfeasance, social engineering, physical breaches or other actions. According to media reports, the frequency, intensity, and sophistication of cyber-attacks, ransomware attacks, and other data security incidents generally has significantly increased around the globe in recent years. As with many other businesses, we have experienced, and are continually at risk of being subject to, attacks and incidents, including cybersecurity breaches such as computer viruses, unauthorized parties gaining access to our information technology systems and similar incidents. Cybersecurity breaches could cause us, and in some cases, materially, to experience reputational harm, loss of customers, loss and/or delay of revenue, loss of proprietary data, loss of licenses, regulatory actions and scrutiny, sanctions or other statutory penalties, litigation, liability for failure to safeguard customers’ information, financial losses or a drop in our stock price. We have invested in and continue to expend significant resources on information technology and data security tools, measures, processes, initiatives, policies and employee training designed to protect our information technology systems, as well as the personal, confidential or sensitive information stored on or transmitted through those systems, and to ensure an effective response to any cyber-attack or data security incident. These expenditures could have an adverse impact on our financial condition and results of operations, and divert management’s attention from pursuing our strategic objectives. In addition, the cost and operational consequences of implementing, maintaining and enhancing further system protective measures could increase significantly as cybersecurity threats increase, and there can be no assurance that the security measures we employ will effectively prevent cybersecurity breaches or otherwise prevent unauthorized persons from obtaining access to our systems and information.

As these threats evolve, cybersecurity incidents could be more difficult to detect, defend against, and remediate. Cyber-attacks or data incidents could remain undetected for some period, which could potentially result in significant harm to our systems, as well as unauthorized access to the information stored on and transmitted by our systems. Further, despite our security efforts and training, our employees may purposefully or inadvertently cause security breaches that could harm our systems or result in the unauthorized disclosure of or access to information. Any measures we do take to prevent security breaches, whether caused by employees or third parties, could have the potential to harm relationships with our customers or restrict our ability to meet our customers' expectations.

If a cyber-attack or other data incident results in the loss, theft, misuse, unauthorized disclosure, or unauthorized access of personal, confidential, or sensitive information belonging to our customers or employees, it could put us at a competitive disadvantage, result in the deterioration of our customers’ confidence in our services, cause our customers to reconsider their relationship with our company or impose more onerous contractual provisions, cause us to lose our regulatory licenses, and subject us to potential litigation, liability, fines and penalties. For example, we could be subject to regulatory or other actions pursuant to privacy laws. This could result in costly

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

We rely largely on our own security systems, confidentiality procedures, and employee nondisclosure agreements to maintain the privacy and security of our and our customers’ proprietary information. Accidental or willful security breaches or other unauthorized access by third parties to our information systems, the existence of computer viruses in our data or software, and misappropriation of our proprietary information could expose us to a risk of information loss, litigation, and other possible liabilities which may have a material adverse effect on our business, financial condition, and results of operations. If security measures are breached because of third-party action, employee error, malfeasance, or otherwise, or if design flaws in our software are exposed and exploited, and, as a result, a third party obtains unauthorized access to any customer data, our relationships with our customers and our reputation will be damaged, our business may suffer, and we could incur significant liability. Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures.

An interruption in our ability to access critical data may cause customers to cancel their service and/or may reduce our ability to effectively compete.

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

In addition, we expect that a considerable amount of our future growth will depend on our ability to process and manage claims data more efficiently and to provide more meaningful healthcare information to customers and payors of healthcare. There can be no assurance that our current data processing capabilities will be adequate for our future growth, that we will be able to efficiently upgrade our systems to meet future demands, or that we will be able to develop, license or otherwise acquire software to address these market demands as well or as timely as our competitors.

If we are unable to leverage our information systems to enhance our outcome-driven service model, our results may be adversely affected.

To leverage our knowledge of workplace injuries, treatment protocols, outcomes data, and complex regulatory provisions related to the workers’ compensation market, we must continue to implement and enhance information systems that can analyze our data related to the workers’ compensation industry. We frequently upgrade existing operating systems and are updating other information systems that we rely upon in providing our services and financial reporting. We have detailed implementation schedules for these projects that require extensive involvement from our operational, technological, and financial personnel. Delays or other problems we might encounter in implementing these projects could adversely affect our ability to deliver streamlined patient care and outcome reporting to our customers.

Exposure to possible litigation and legal liability may adversely affect our business, financial condition, and results of operations.

We, through our utilization management services, make recommendations concerning the appropriateness of providers’ medical treatment plans offor patients throughout the country, and as a result, could be exposed to claims for adverse medical consequences. We do not grant or deny claims for payment of benefits and we do not believe that we engage in the practice of medicine or the delivery of medical services. There can be no assurance, however, that we will not be subject to claims or litigation related to the authorization or denial of claims for payment of benefits or allegations that we engage in the practice of medicine or the delivery of medical services.

In addition, there can be no assurance that we will not be subject to other litigation that may adversely affect our business, financial condition or results of operations, including but not limited to being joined in litigation brought against our customers in the managed care industry. We maintain professional liability insurance and such other coverages as we believe are reasonable in light of our experience to date. If such insurance is insufficient or unavailable in the future at reasonable cost to protect us from liability, our business, financial condition, or results of operations could be adversely affected.

We provide to insurers and other payors of healthcare costs managed care programs that utilize preferred provider organizations and computerized bill review programs. ~~Health care~~Healthcare providers have brought, against us and our customers, individual and class action lawsuits challenging such programs. If such lawsuits are successful, we may incur significant liabilities.

We make recommendations about the appropriateness of providers’ proposed medical treatment plans for patients throughout the country. As a result, we could be subject to claims arising from any adverse medical consequences. Although plaintiffs have not, to date, subjected us to any claims or litigation relating to the granting or denial of claims for payment of benefits or allegations that we engage in the practice of medicine or the delivery of medical services, we cannot assure you that plaintiffs will not make such claims in future litigation. We also cannot assure you that our insurance will provide sufficient coverage or that insurance companies will make insurance available at a reasonable cost to protect us from significant future liability.

~~If the utilization by healthcare payors of early intervention services continues to increase, the revenue from our later-stage network and healthcare management services could be negatively affected.~~

~~An interruption in our ability to access critical data may cause customers to cancel their service and/or may reduce our ability to effectively compete.~~

assurance that our current data processing capabilities will be adequate for our future growth, that we will be able to efficiently upgrade our systems to meet future demands, or that we will be able to develop, license or otherwise acquire software to address these market demands as well or as timely as our competitors.

~~We face competition for staffing, which may increase our labor costs and reduce profitability.~~

The increased costs of professional and general liability insurance may have an adverse effect on our profitability.

The cost of commercial professional and general liability insurance coverage has risen significantly for us in the past several years, and this trend may continue. In addition, if we were to suffer a material loss, our costs may increase over and above the general increases in the industry. If the costs associated with insuring our business continue to increase, it may adversely affect our business. We believe our current level of insurance coverage is adequate for a company of our size engaged in our business. Additionally, we may have difficulty getting carriers to pay under coverage in certain circumstances.

Changes in government regulations could increase our costs of operations and/or reduce the demand for our services.

Many states, including a number of those in which we transact business, have licensing and other regulatory requirements applicable to our business. Approximately half of the states have enacted laws that require licensing of businesses which provide medical review services such as ours. Some of these laws apply to medical review of care covered by workers’ compensation. These laws typically establish minimum standards for qualifications of personnel, confidentiality, internal quality control, and dispute resolution procedures. These regulatory programs may result in increased costs of operation for us, which may have an adverse impact upon our ability to compete with other available alternatives for healthcare cost control. In addition, new laws regulating the operation of managed care provider networks have been adopted by a number of states. These laws may apply to managed care provider networks ~~having~~we have contracts with us or to provider networks which we may organize. To the extent we are governed by these regulations, we may be subject to additional licensing requirements, financial and operational oversight and procedural standards for beneficiaries and providers.

Regulation in the healthcare and workers’ compensation fields is constantly evolving. We are unable to predict what additional government initiatives, if any, affecting our business may be promulgated in the future. Our business may be adversely affected by failure to comply with existing laws and regulations, failure to obtain necessary licenses and government approvals, or failure to adapt to new or modified regulatory requirements. Proposals for healthcare legislative reforms are regularly considered at the federal and state levels. To the extent that such proposals affect workers’ compensation, such proposals may adversely affect our business, financial condition, and results of operations.

In addition, changes in workers’ compensation, automobile insurance, and group healthcare laws or regulations may reduce demand for our services, which would require us to develop new or modified services to meet the demands of the marketplace, or reduce the fees that we may charge for our services.

Increasing regulatory focus on privacy issues and expanding privacy laws could impact our business models and expose us to increased liability.

U.S. privacy and data security laws apply to our various businesses. Governments, privacy advocates and class action attorneys are increasingly scrutinizing how companies collect, process, use, store, share and transmit personal data. Globally, new laws, such as the General Data Protection Regulation in Europe, the California Consumer Privacy Act in California, and industry self-regulatory codes have been enacted and more are being considered that may affect our ability to respond to customer requests under the laws, and to implement our business models effectively. These requirements, among others, may force us to bear the burden of more onerous obligations in our contracts. Any perception of our practices, products or services as a violation of individual privacy rights may subject us to public criticism, class action lawsuits, reputational harm, or investigations or claims by regulators, industry groups or other third parties, all of which could disrupt our business and expose us to increased liability. Additionally, we store information on behalf of our customers and if our customers fail to comply with contractual obligations or applicable laws, it could result in litigation or reputational harm to us.

The ~~introduction~~market price and trading volume of ~~software products incorporating new technologies~~our common stock may be volatile, which could result in rapid and substantial losses for our stockholders.

The market price of our common stock may be highly volatile and could be subject to wide fluctuations. In addition, the ~~emergence~~trading volume in our common stock may fluctuate and cause significant price variations to occur. The stock market has in the past experienced price and volume fluctuations that have particularly affected companies in the healthcare and managed care markets resulting in changes in the market price of ~~new industry standards could render our existing software products less competitive, obsolete, or unmarketable.~~

the stock of many companies, which may not have been directly related to the operating performance of those companies. There can be no assurance that wethe market price of our common stock will ~~be successful~~not fluctuate or decline significantly in ~~developing~~the future.

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

In 1996, our Board of Directors authorized a stock repurchase program and, since then, has periodically increased the number of shares authorized for repurchase under the repurchase program. The most recent increase occurred in May 2021 and brought the number of shares authorized for repurchase over the life of the program to ~~technological changes or evolving industry standards. If we are unable,~~38,000,000 shares. There is no expiration date for ~~technological or~~the repurchase program. The timing and actual number of shares repurchased, if any, depend on a variety of factors including the timing of open trading windows, price, corporate and regulatory requirements, and other ~~reasons, to develop and introduce new software products cost-effectively, in a timely manner and in response to changing~~ market ~~conditions or customer requirements, our business, results of operations, and financial condition~~conditions. The program may be ~~adversely affected.~~

~~Developing~~suspended or ~~implementing new or updated software products~~discontinued at any time without prior notice. Repurchases pursuant to our stock repurchase program could affect our stock price and ~~services may take longer~~increase its volatility. The existence of a stock repurchase program could also cause our stock price to be higher than it would be in the absence of such a program and ~~cost more than expected. We rely on a combination of internal development,~~could potentially reduce the market liquidity for our stock. Additionally, repurchases under our stock repurchase program will diminish our cash reserves, which could strain our liquidity, could impact our ability to pursue possible future strategic ~~relationships, licensing~~opportunities and acquisitions ~~to develop our software products~~ and services. The cost of developing new healthcare information services and technology solutions is inherently difficult to estimate. Our development and implementation of proposed software products and services may take longer than originally expected, require more testing than originally anticipated and require the acquisition of additional personnel and other resources. If we are unable to develop new or updated software products and services cost-effectively on a timely basis and implement them without significant disruptions

~~to the existing systems and processes of our customers, we may lose potential sales and harm our relationships with current or potential customers.~~

~~The failure to attract and retain qualified or key personnel may prevent us from effectively developing, marketing, selling, integrating, and supporting our services.~~

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

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

Our results may decline if we lose several customers during a short period. Most of our customer contracts permit either party to terminate without cause. If several customers terminate, or do not renew or extend their contracts with us, our results could be materially and adversely affected. Many organizations in the insurance industry have consolidated and this could result in lower overall returns on our cash balances. There can be no assurance that any further stock repurchases will enhance stockholder value because the ~~loss of one or more~~market price of our ~~customers through a merger or acquisition. Additionally,~~common stock may decline below the levels at which we ~~could lose customers due to competitive pricing pressures or other reasons.~~

~~We are subject to risks associated with acquisitions~~repurchased shares of ~~intangible assets.~~

~~Our acquisition of other businesses may result in significant increases in~~stock. Although our intangible assets and goodwill. We regularly evaluate whether events and circumstances have occurred indicating that any portion of our intangible assets and goodwill may not be recoverable. When factors indicate that intangible assets and goodwill should be evaluated for possible impairment, we may be required to reduce the carrying value of these assets. We cannot currently estimate the timing and amount of any such charges.

~~If we are unable to leverage our information systems~~stock repurchase program is intended to enhance ~~our outcome-driven service model, our results may be adversely affected.~~

~~Our Internet-based services are dependent on the development and maintenance of the Internet infrastructure.~~

The Internet has experienced a variety of outages and other delays as a result of damages to portions of its infrastructure, and it could face outages and delays in the future. These outages and delayslong-term stockholder value, short-term stock price fluctuations could reduce the level of Internet usage, as well as the availability of the Internet to us for delivery of our Internet-based services. In addition, our customers who use our Web-based services depend on Internet service providers, online service providers, and other website operators for access to our website. All of these providers have experienced significant outages in the past and could experience outages, delays, and other difficulties in the future due to system failures unrelated to our systems. Any significant interruptions in our services or increases in response time could result in a loss of potential or existing users, and, if sustained or repeated, could reduce the attractiveness of our services.program’s effectiveness.

~~We are sensitive to regional weather conditions that may adversely affect our operations.~~

Our operations are directly affected in the short term by the weather conditions in certain regions of operation. Therefore our business is sensitive to the weather conditions of these regions. Unusually inclement weather, including significant rain, snow, sleet, freezing rain, or ice can temporarily affect our operations if clients are forced to close operational centers. Accordingly, our operating results may vary from quarter to quarter, depending on the impact of these weather conditions.

There were no sales of unregistered equity securities orduring the period covered by this report. The following table sets forth the repurchases of the Company’s common stock made by or on behalf of the Company in open-market transactions for the quarter ended December 31, 2022 pursuant to its publicly announced stock repurchase plan.

In 1996, the Company’s Board of Directors authorized a stock repurchase program for up to 100,000 shares of the Company’s common stock. The Company’s Board of Directors has periodically increased the number of shares authorized for repurchase under the repurchase program. In November 2022, the Company’s Board of Directors increased the number of shares of common stock authorized to be repurchased over the life of the program by 1,000,000 shares of common stock to 39,000,000 shares of common stock. There is no expiration date for the repurchase program. The Company repurchased 491,493 shares of its common stock for $75.1 million at an average price of $152.76 per share during the ~~quarter covered by this report.~~nine months ended December 31, 2022. As of December 31, 2022, the Company had repurchased 37,711,118 shares of its common stock over the life of the program.

On November 2, 2017, we granted performance options to our President, Michael G. Combs, our Chief Marketing Officer, Diane J. Blaha, our Senior Vice President of Risk Management Services, Michael D. Saverien, and our Chief Information Officer, Maxim Shishin, to purchase 17,000 shares, 5,000 shares, 10,000 shares and 8,000 shares, respectively, of our common stock under and pursuant to the terms of our Restated Omnibus Incentive Plan (Formerly the Restated 1988 Executive Stock Option Plan). These performance stock options will vest based on the achievement of certain performance criteria, approved by our Board of Directors and Compensation Committee, relating to certain earnings per share targets in calendar years 2018, 2019 and 2020. The exercise price of the options equaled the closing price of our common stock as quoted by the Nasdaq Global Select Market on the date of grant.

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


~~2010 Main Street,~~ 5128 Apache Plume Road, Suite ~~600~~400
~~Irvine, CA~~Fort Worth, TX		~~92614~~76109
(Address of principal executive offices)		(Zip Code)


Large accelerated filer	☐☑	Accelerated filer		☑☐

Non-accelerated filer	☐ ~~(Do not check if a smaller reporting company)~~	Smaller reporting company		☐

		Emerging growth company	☐		☐


		Page

PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements	3

	Consolidated Balance Sheets – December 31, 2022 (unaudited) and March 31, ~~2017 and December 31, 2017 (unaudited)~~2022	3

	Consolidated Income Statements (unaudited) – Three months ended December 31, ~~2016~~2022 and ~~2017~~2021	4

	Consolidated Income Statements (unaudited) – Nine months ended December 31, ~~2016~~2022 and ~~2017~~2021	5
	Consolidated Statements of Stockholders’ Equity (unaudited) – Three and nine months ended December 31, 2022 and 2021	6
	Consolidated Statements of Cash Flows (unaudited) – Nine months ended December 31, ~~2016~~2022 and ~~2017~~2021	67

	Notes to Consolidated Financial Statements (unaudited) – December 31, ~~2017~~2022	78

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	1617

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2624

Item 4.	Controls and Procedures	2624

PART ~~II.~~II - OTHER INFORMATION

Item 1.	Legal Proceedings	26

Item 1A.	Risk Factors	26

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33

Item 3.	Defaults Upon Senior Securities	3334

Item 4.	Mine Safety Disclosures	3334

Item 5.	Other Information	3334

Item 6.	Exhibits	3435

	Signatures	3536


	Nine Months Ended December 31,
	2022			2021
Cash Flows from Operating Activities
NET INCOME	$	48,196,000		$	46,773,000
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		18,864,000			17,901,000
Gain on write down or disposal of property, capitalized software or investment		95,000			34,000
Stock compensation expense		4,027,000			3,884,000
Provision for doubtful accounts		1,073,000			146,000
Deferred income tax		(1,006,000	)		(971,000	)
Changes in operating assets and liabilities
Accounts receivable		(1,278,000	)		(4,969,000	)
Customer deposits		(13,076,000	)		(13,666,000	)
Prepaid taxes and expenses		2,059,000			(5,422,000	)
Other assets		(298,000	)		(241,000	)
Accounts and taxes payable		(3,088,000	)		(662,000	)
Accrued liabilities		12,871,000			9,304,000
Operating lease liabilities		1,065,000			(1,716,000	)
Net cash provided by operating activities		69,504,000			50,395,000
Cash Flows from Investing Activities
Purchase of property and equipment		(19,164,000	)		(18,441,000	)
Net cash used in investing activities		(19,164,000	)		(18,441,000	)
Cash Flows from Financing Activities
Purchase of treasury stock		(75,081,000	)		(65,291,000	)
Proceeds from exercise of common stock options		4,922,000			8,888,000
Proceeds from purchases under employee stock purchase plan		346,000			271,000
Net cash used in financing activities		(69,813,000	)		(56,132,000	)
Decrease in cash and cash equivalents		(19,473,000	)		(24,178,000	)
Cash and cash equivalents at beginning of period		97,504,000			139,716,000
Cash and cash equivalents at end of period	$	78,031,000		$	115,538,000
Supplemental Cash Flow Information:
Income taxes paid	$	14,981,000		$	17,879,000
Purchase of software license under finance agreement	$	5,273,000		$	—

Range of Exercise Price	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
$12.71 to $32.10		332,432		2.84	$	25.04		197,354	$	20.21
$32.11 to $34.78		251,836		2.91	$	34.51		79,609	$	34.34
$34.79 to $45.55		242,755		2.96	$	41.96		140,076	$	42.60
$45.56 to $57.75		342,848		4.74	$	52.29		13,282	$	22.87
Total		1,169,871		3.43	$	38.41		430,321	$	30.90


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Three Months Ended December 31,				Three Months Ended December 31,
	2016		2017		2022		2021
REVENUES	$	128,403,000	$	140,734,000	$	179,386,000	$	164,508,000
Cost of revenues		102,826,000		115,165,000		139,041,000		129,320,000
Gross profit		25,577,000		25,569,000		40,345,000		35,188,000
General and administrative expenses		14,134,000		15,496,000		18,128,000		17,506,000
Income before income tax provision		11,443,000		10,073,000		22,217,000		17,682,000
Income tax provision		4,394,000		504,000		5,368,000		3,824,000
NET INCOME	$	7,049,000	$	9,569,000	$	16,849,000	$	13,858,000
Net income per common and common equivalent share
Basic	$	0.36	$	0.51	$	0.98	$	0.78
Diluted	$	0.36	$	0.50	$	0.96	$	0.76
Weighted average common and common equivalent shares
Basic		19,426,000		18,849,000		17,245,000		17,785,000
Diluted		19,549,000		19,121,000		17,487,000		18,211,000


	Three Months Ended December 31, 2022
	Common Shares		Stock Amount		Paid-in- Capital			Treasury Shares			Treasury Stock			Retained Earnings		Total Stockholders' Equity
Balance – September 30, 2022		54,873,202	$	3,000	$	207,986,000			(37,559,016	)	$	(706,806,000	)	$	696,650,000	$	197,833,000
Stock issued under stock option plan, net of shares repurchased		18,096		—		1,220,000			—			—			—		1,220,000
Stock-based compensation expense		—		—		1,698,000	��		—			—			—		1,698,000
Purchase of treasury stock		—		—		—			(152,102	)		(22,795,000	)		—		(22,795,000	)
Net income		—		—		—			—			—			16,849,000		16,849,000
Balance – December 31, 2022		54,891,298	$	3,000	$	210,904,000			(37,711,118	)	$	(729,601,000	)	$	713,499,000	$	194,805,000


	Three Months Ended December 31, 2021
	Common Shares		Stock Amount		Paid-in- Capital			Treasury Shares			Treasury Stock			Retained Earnings		Total Stockholders' Equity
Balance – September 30, 2021		54,701,476	$	3,000	$	196,174,000			(36,937,900	)	$	(604,190,000	)	$	631,808,000	$	223,795,000
Stock issued under stock option plan, net of shares repurchased		25,917		—		1,627,000			—			—			—		1,627,000
Stock-based compensation expense		—		—		1,183,000			—			—			—		1,183,000
Purchase of treasury stock		—		—		—			(135,734	)		(25,536,000	)		—		(25,536,000	)
Net income		—		—		—			—			—			13,858,000		13,858,000
Balance – December 31, 2021		54,727,393	$	3,000	$	198,984,000			(37,073,634	)	$	(629,726,000	)	$	645,666,000	$	214,927,000

	Three Months Ended December 31, 2016					Three Months Ended December 31, 2017
	Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
Options outstanding, beginning		1,102,919		$	32.17		1,068,503		$	35.28
Options granted		143,750			32.10		154,500			57.75
Options exercised		(4,256	)		25.86		(51,712	)		31.15
Options cancelled/forfeited		(3,550	)		37.17		(1,420	)		47.11
Options outstanding, ending		1,238,863		$	32.17		1,169,871		$	38.41

	Nine Months Ended December 31, 2016					Nine Months Ended December 31, 2017
	Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
Options outstanding, beginning		1,115,465		$	29.67		1,143,928		$	32.02
Options granted		234,250			36.90		305,550			52.49
Options exercised		(95,472	)		22.05		(263,544	)		26.96
Options cancelled/forfeited		(15,380	)		36.55		(16,063	)		40.90
Options outstanding, ending		1,238,863		$	32.17		1,169,871		$	38.41

								Cost, Net of
				Fiscal 2017		Accumulated		Accumulated
				Amortization		Amortization at		Amortization at
Item	Life	Cost		Expense		March 31, 2017		March 31, 2017
Covenants Not to Compete	5 Years	$	775,000	$	—	$	775,000	$	—
Customer Relationships	18-20 Years		7,922,000		423,000		4,144,000		3,778,000
TPA Licenses	15 Years		204,000		14,000		131,000		73,000
Total		$	8,901,000	$	437,000	$	5,050,000	$	3,851,000

	Payments Due by Period
			Within One		Between One and		Between Three and		More than
	Total		Year		Three Years		Five Years		Five Years
Operating leases	$	57,823,000	$	14,527,000	$	20,780,000	$	14,289,000	$	8,227,000
Uncertain tax positions		1,539,000		1,539,000		—		—		—
Commitment to purchase building		5,790,000		5,790,000		—		—		—
Software licenses		1,746,000		1,746,000		—		—		—
Total	$	66,898,000	$	23,602,000	$	20,780,000	$	14,289,000	$	8,227,000


					Total Number of
					Shares Purchased		Maximum Number
					as Part of Publicly		of Shares that may
	Total Number of		Average Price Paid		Announced		yet be Purchased
Period	Shares Purchased		Per Share		Program		Under the Program
October 1 to October 31, 2022		55,904	$	150.21		55,904		385,080
November 1 to November 30, 2022		53,084	$	152.52		53,084		1,331,996
December 1 to December 31, 2022		43,114	$	146.06		43,114		1,288,882
Total		152,102	$	149.84		152,102		1,288,882


3.1		Fourth Amended and Restated Certificate of Incorporation of the Company. Incorporated herein by reference to Exhibit 3.1 to the Company’s ~~Current~~Quarterly Report on Form ~~8-K~~10-Q for the quarterly period ended June 30, 2020 filed with the SEC on August ~~10, 2011~~6, 2020 (File No. 000-19291).

3.2		Second Amended and Restated Bylaws of the Company. Incorporated herein by reference to Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly report period ended June 30, ~~2006~~2020 filed with the SEC on August ~~14, 2006~~6, 2020 (File No. 000-19291).

~~3.3~~ 31.1		Certification of Designation Increasing the Number of Shares of Series A Junior Participating Preferred Stock. Incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on November 24, 2008 (File No. 000-19291).

~~10.1†~~		~~Stock Option Agreement dated November 2, 2017 by and between CorVel Corporation and Michael G. Combs, providing for performance vesting.~~

~~10.2†~~ ~~10.3†~~ ~~10.4†~~		~~Stock Option Agreement dated November 2, 2017 by and between CorVel Corporation and Diane J. Blaha, providing for performance vesting.~~ ~~Stock Option Agreement dated November 2, 2017 by and between CorVel Corporation and Michael D. Saverien, providing for performance vesting.~~ ~~Stock Option Agreement dated November 2, 2017 by and between CorVel Corporation and Maxim Shishin, providing for performance vesting.~~

~~31.1~~		Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a) Promulgated under the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a) Promulgated under the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

~~32.1~~ 32.1*		Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

~~32.2~~ 32.2*		Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

~~101.0~~ †101.INS		Inline XBRL Instance Document.

101.SCH		Inline XBRL Taxonomy Extension Schema Document.

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

*		The ~~following materials from the Company’s~~certifications attached as Exhibit 32.1 and Exhibit 32.2 accompany this Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2017, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of December 31, 2017, and March 31, 2017; (ii) Consolidated Statements of Income for the three and nine months ended December 31, 2016 and 2017; (iii) Consolidated Statements of Cash Flows for the nine months ended December 31, 2016 and 2017; and (iv) Notes to Consolidated Financial Statements. ~~Confidential treatment has been requested for certain confidential portions of this exhibit~~ pursuant to ~~Rule 24b-2~~18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed “filed” by the registrant for purposes of Section 18 of the Exchange Act and are not to be incorporated by reference into any of the registrant’s filings under the Securities Act or the Exchange Act, irrespective of ~~1934. In accordance with Rule 24b-2, these confidential portions have been omitted from this exhibit and filed separately with the Securities and Exchange Commission.~~any general incorporation language contained in any such filing.


	CORVEL CORPORATION

~~By:~~Dated: February 2, 2023	By:	/s/ ~~V. Gordon Clemons~~Michael G. Combs
~~V. Gordon Clemons, Chairman of the Board and~~	Michael G. Combs, Chief Executive Officer and President

~~By:~~Dated: February 2, 2023	By:	/s/ ~~Kenneth S. Cragun~~Brandon T. O’Brien
~~Kenneth S. Cragun, Chief Financial Officer~~	Brandon T. O’Brien,
	Chief Financial Officer (Principal Financial Officer)