Stock-Based Compensation and Stock Options

9 Months Ended

Dec. 31, 2025

Share-Based Payment Arrangement [Abstract]

Stock-Based Compensation and Stock Options

Note 3 — Stock-Based Compensation and Stock Options

Under the Company’s Restated Omnibus Incentive Plan (formerly the Restated 1988 Executive Stock Option Plan) (the “Omnibus Plan”) as of March 31, 2025, there were 1,185,727 stock options outstanding and 1,775,459 shares available for issuance. Under the Omnibus Plan, shares of common stock were granted 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 Omnibus Plan generally vest as to 25% of the shares one year from the date of grant, and as to the remaining 75% of the shares ratably each month over the following 36 months. The options granted to employees and directors expire at the end of five years and ten years, respectively, from the date of grant. All options granted in the three months ended December 31, 2025 and 2024 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. After August 7, 2025, no further grants may be under the Omnibus Plan.

On August 7, 2025, the Company’s stockholders approved the 2025 Stock Incentive Plan (the “2025 SIP”) replacing the Omnibus Plan, which expires on June 30, 2026. Consistent with the Omnibus Plan, the primary purpose of the 2025 SIP is to continue to attract and retain qualified personnel. The 2025 SIP initially reserves 1,775,459 shares of common stock for issuance to employees, directors, consultants, independent contractors and advisors. The 2025 SIP permits the issuance of stock options, restricted stock, stock appreciation rights, restricted stock units and performance awards.

The Company will not grant any further equity awards under the Omnibus Plan. Outstanding awards under the Omnibus Plan will remain outstanding, unchanged and subject to the terms of the Omnibus Plan and their respective award agreements. Shares subject to awards that are forfeited, expire or are otherwise terminated without shares being issued, or shares withheld to pay the exercise price of

an award or to satisfy tax withholding obligations, including shares subject to awards granted under the Omnibus Plan that are outstanding after June 30, 2026, will be returned to the pool of shares available for grant and issuance under the 2025 SIP.

The Company records compensation expense for employee stock options based on the estimated fair value of the options on the date of grant using the Black-Scholes option-pricing model based on the assumptions included in the table below. The risk-free rate is based on the interest rate paid on a U.S. Treasury issue with a term similar to the estimated life of the option. The Company uses historical data, among other factors, to estimate the expected volatility, dividend yield and option life. The Company accounts for forfeitures as they occur, rather than estimating expected forfeitures. No options were granted during the three months ended December 31, 2024. The following assumptions were used to estimate the fair value of stock options granted during the three months ended December 31, 2025, using the Black-Scholes option-pricing model:


		Three Months Ended
		December 31, 2025
Risk-free interest rate		3.69%
Expected volatility		31%
Expected dividend yield		0.00%
Expected weighted average life of option in years		4 years

For the three months ended December 31, 2025 and 2024, the Company recorded stock-based compensation expense of $1,362,000 and $1,823,000, respectively. For the nine months ended December 31, 2025 and 2024, the Company recorded stock-based compensation expense of $4,177,000 and $4,376,000, respectively. The table below shows the amounts recognized in the unaudited consolidated financial statements for stock-based compensation expense for all stock options during the three and nine months ended December 31, 2025 and 2024, respectively.


	Three Months Ended
	December 31, 2025			December 31, 2024
Cost of revenues	$	639,000		$	685,000
General and administrative		723,000			1,138,000
Total cost of stock-based compensation included in income before income tax provision		1,362,000			1,823,000
Amount of income tax benefit recognized		(340,000	)		(416,000	)
Amount charged against net income	$	1,022,000		$	1,407,000
Effect on basic earnings per share	$	(0.02	)	$	(0.03	)
Effect on diluted earnings per share	$	(0.02	)	$	(0.03	)


	Nine Months Ended
	December 31, 2025			December 31, 2024
Cost of revenues	$	1,988,000		$	2,123,000
General and administrative		2,189,000			2,253,000
Total cost of stock-based compensation included in income before income tax provision		4,177,000			4,376,000
Amount of income tax benefit recognized		(974,000	)		(938,000	)
Amount charged against net income	$	3,203,000		$	3,438,000
Effect on basic earnings per share	$	(0.06	)	$	(0.07	)
Effect on diluted earnings per share	$	(0.06	)	$	(0.07	)

The following table provides summary information for all stock options outstanding and exercisable at December 31, 2025:


Range of Exercise Price	Outstanding Options – Number of Outstanding Options		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
$14.44 to $49.63		320,540		1.63	$	31.32		308,483	$	30.60
$49.64 to $54.54		281,325		2.53		52.43		198,306		52.40
$54.55 to $73.36		341,586		2.93		69.14		149,263		66.79
$73.37 to $110.18		162,320		4.74		103.02		20,097		92.59
Total		1,105,771		2.72	$	58.90		676,149	$	46.83

The following table provides summary information regarding all stock options outstanding at December 31, 2025, 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, 2025
Options outstanding at October 1, 2025		1,071,486		$	56.73
Granted		83,000			75.32
Exercised		(43,467	)		35.52
Cancelled – forfeited		(4,670	)		68.27
Cancelled – expired		(578	)		85.05
Ending outstanding		1,105,771		$	58.90		2.72	$	16,338,984
Ending vested and expected to vest		993,674		$	58.28		2.72	$	15,367,233
Ending exercisable at December 31, 2025		676,149		$	46.83		2.08	$	14,733,744

There were no options granted during the three months ended December 31, 2024. The weighted-average grant-date fair value of stock options granted during the three months ended December 31, 2025 was $21.90.

The stock option grants and stock-based compensation expense reflected above include time-based stock options, which vest based on the satisfaction of time-based service conditions, and performance-based stock options, which vest based on the Company’s achievement of certain pre-determined earnings per share targets that are assessed on a calendar year basis by the Company’s Board of Directors (the “Board”). Performance-based stock options are generally valued in the same manner as the time-based stock options except the Company only recognizes stock-based compensation expense to the extent it is probable the targets will be achieved. The Company recognized stock-based compensation expense for performance-based stock options of $427,000 and $819,000 for the three months ended December 31, 2025 and 2024, respectively, and $1,281,000 and $1,354,000 for the nine months ended December 31, 2025 and 2024, respectively.

CORVEL CORP 10-Q