February 20, 2020
Brandon T. O'Brien
Chief Financial Officer
CorVel Corporation
2010 Main Street, Suite 600
Irvine, California 92614
Re: CorVel Corporation
Form 10-K for the Fiscal Year Ended March 31, 2019
Filed June 7, 2019
Form 10-Q for the Quarterly Period Ended December 31, 2019
Filed February 7, 2020
File No. 000-19291
Dear Mr. O'Brien:
We have reviewed your filing and have the following comments. In some of
our
comments, we may ask you to provide us with information so we may better
understand your
disclosure.
Please respond to these comments within 10 business days by providing
the requested
information or advise us as soon as possible when you will respond. If you do
not believe our
comments apply to your facts and circumstances, please tell us why in your
response.
After reviewing your response to these comments, we may have additional
comments.
Form 10-K for the Fiscal Year Ended March 31, 2019
Notes to Consolidated Financial Statements
Note 2: Revenue Recognition
Contract Balances, page 54
1. In the second table in this section you disclose that you recognized
$16,372,000 of
revenue in fiscal 2019 from the beginning of the period. Please address
the following:
Tell us how you could recognize $16,372,000 of revenue from the
beginning of the
period when your deferred revenue at that time was only $15,316,000.
Tell us how your disclosure complies with the guidance in ASC
606-10-50-8b.
Tell us whether the difference in the first bullet above relates to a
cumulative catch-
up adjustment or to a change in transaction price and, if so, your
consideration for
disclosing this information under ASC 606-10-50-10b or 50-12A,
respectively.
Brandon T. O'Brien
FirstName LastNameBrandon T. O'Brien
CorVel Corporation
Comapany NameCorVel Corporation
February 20, 2020
Page 2
February 20, 2020 Page 2
FirstName LastName
Remaining Performance Obligations, page 54
2. You disclose that your remaining performance obligations of $34.7
million at March 31,
2019 consist of your deferred revenues as well as certain unbilled
receivables that are
considered contract assets. As by definition, contract assets
represent the right to
consideration in exchange for goods or services already transferred to
a customer, please
tell us how your "certain unbilled receivables" can relate to
remaining incomplete
performance obligations at any given time. In your response describe
for us which
unbilled receivables are included in your remaining performance
obligations.
Form 10-Q for the Quarterly Period Ended December 31, 2019
Item 1A - Risk Factors
"A cybersecurity attack or other disruption to our information technology
systems...", page 27
3. We note that you have greatly expanded this risk factor from that
provided on page 17 of
your 2019 Form 10-K and that you specifically removed the statement
that cybersecurity
breaches through the date of your Form 10-K filing did not have a
material impact on your
business while acknowledging that you have experienced and are
continually at risk of
cybersecurity attacks and incidents. We also note that you "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" 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." In light of the security incident in July 2019 that
appears to have resulted in
continuing impacts to both your revenue and costs at least through
December 31, 2019, it
appears that cybersecurity risk may be material to your business.
Please provide us the
following:
Tell us the nature of your July 2019 security incident. In your
response, tell us:
o The systems breached;
o How they were breached;
o The actions you took to cure the breach;
o The impact on revenue related to the breach in each of your
second and third
quarters of fiscal 2020;
o The costs incurred during each of your second and third
quarters of fiscal 2020
to cure the breach; and
o The actions and costs incurred to prevent similar breaches
in the future.
Tell us your consideration for disclosing the information requested
above in your
filings. In your response tell us why you addressed the security
breach in your
prepared remarks of your earnings conference calls for each of
your quarterly
earnings conference calls for fiscal 2020 but do not provide any
specific disclosures
Brandon T. O'Brien
CorVel Corporation
February 20, 2020
Page 3
in the related Forms 10-Q. If you believe the impact of this
incident is not material,
tell us why you removed the related statement from your risk
factor disclosure.
On page 19 you attribute your increase in general and administrative
expenses
primarily to an increase in legal costs. Tell us the nature of
these legal costs and
whether they relate to this security breach. In any regard,
represent to us that you will
disclose the underlying cause for the increase in legal costs in
your upcoming Form
10-K.
Tell us how you considered the potential impact of operational risks
on your controls
testing and your evaluation of disclosure controls and procedures.
Refer to Corporation Finance Disclosure Guidance Topic No. 2.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
You may contact Bonnie Baynes at (202) 551-4924 or Mark Brunhofer at
(202) 551-
3638 if you have any questions.
FirstName LastNameBrandon T. O'Brien Sincerely,
Comapany NameCorVel Corporation
Division of
Corporation Finance
February 20, 2020 Page 3 Office of
Finance
FirstName LastName