HMS Holdings Corp. (Nasdaq: HMSY) today
announced financial results for the third quarter ended
September 30, 2019.
“HMS posted mixed results in the third quarter
compared with last year, with lower revenue and operating earnings,
but continued strong cash flow performance,” said Bill Lucia,
Chairman and CEO. “Our business can experience quarterly ebbs
and flows, as evidenced by our favorable revenue and earnings in
the first two quarters this year. On an annual basis, we continue
to experience top and bottom line growth, which is driven by our
product innovation, application of new technologies and sales
expansion.”
Third Quarter
Total revenue in the third quarter of 2019 was
$146.8 million, compared to total revenue of $154.2 million in the
prior year third quarter (-4.8%).
Coordination of Benefits (COB) revenue was $94.6
million in the third quarter of 2019 compared to $105.7 million in
the prior year third quarter (-10.5%). Analytical Services
revenue, which includes Payment Integrity (PI) and Population
Health Management (PHM), was $52.2 million in the third quarter of
2019, compared to $48.5 million in the prior year third quarter
(+7.6%).
PI revenue was $37.0 million in the third
quarter of 2019, compared to $33.2 million in the prior year third
quarter (+11.4%). PHM revenue was $15.2 million in the third
quarter of 2019, compared to $15.3 million in the prior year third
quarter (-0.7%).
Net income in the third quarter of 2019 was
$21.1 million, or $0.24 per diluted share, compared to net income
of $18.6 million, or $0.22 per diluted share, in the prior year
third quarter. In the third quarter of 2019, net income
included a net benefit of $0.06 per diluted share related to a gain
on the sale of an investment (the "3Q 2019 Gain on
Investment").
Adjusted EBITDA in the third quarter of 2019 was
$38.8 million, which included a net benefit of $7.7 million related
to the 3Q 2019 Gain on Investment, compared to $41.4 million in the
prior year third quarter (-6.3%). Excluding the impact of the
3Q 2019 Gain on Investment, adjusted EBITDA in the third quarter of
2019 decreased 24.9% compared to the same period in the prior
year.
Adjusted EPS in the third quarter of 2019 was
$0.30 per diluted share, which included a net benefit of $0.06 per
diluted share related to the 3Q 2019 Gain on Investment, compared
to adjusted EPS of $0.31 per diluted share in the third quarter of
2018. Excluding the 3Q 2019 Gain on Investment, adjusted EPS
in the third quarter of 2019 was $0.24 per diluted
share.
Nine Months Ended
Total revenue for the nine months ended
September 30, 2019 was $463.0 million, compared to
$442.5 million in the prior year (+4.6%). For the nine months
ended September 30, 2019, total revenue included $10.5 million
from the 2Q 2019 Reserve Release. During the second quarter of
2019, the Company released its remaining contract related balances
under its original Medicare RAC Contract (the “2Q 2019 Reserve
Release”). For the nine months ended September 30, 2018, total
revenue included $8.4 million from the Medicare RAC reserve release
in the first quarter of 2018 (the "1Q 2018 Reserve Release").
Excluding the 2Q 2019 Reserve Release and the 1Q 2018 Reserve
Release, (the "Reserve Releases"), total revenue increased 4.2%
compared to the prior year.
COB revenue for the nine months ended September
30, 2019 was $305.6 million, compared to $298.2 million in the
prior year (+2.5%). Analytical Services revenue, which
includes PI and PHM, was $157.4 million for the nine months ended
September 30, 2019, compared to $144.3 million in the prior year
(+9.1%). For the nine months ended September 30, 2019,
Analytical Services revenue included $10.5 million from the 2Q 2019
Reserve Release. For the nine months ended September 30,
2018, Analytical Services revenue included $8.4 million from the 1Q
2018 Reserve Release. Excluding the Reserve Releases,
Analytical Services revenue increased 8.1% from the prior year.
Excluding the Reserve Releases, PI revenue for
the nine months ended September 30, 2019 was $103.4 million,
compared to $94.8 million in the prior year (+9.1%). PHM
revenue for the nine months ended September 30, 2019 was $43.5
million, compared to $41.1 million in the prior year (+5.8%).
Net income for the nine months ended September
30, 2019 was $69.9 million, or $0.77 per diluted share, compared to
$21.6 million, or $0.25 per diluted share, in the prior year.
In the nine months ended September 30, 2019, net income included
$0.07 per diluted share related to the 2Q 2019 Reserve Release, net
benefit of $0.06 per diluted share related to the 3Q 2019 Gain on
Investment, and tax benefits recorded in the first quarter totaling
$0.07 per diluted share. For the nine months ended September 30,
2018, net income included a net benefit of $0.05 per diluted share
related to the 1Q 2018 Reserve Release and included an expense of
$20.0 million relating to the settlement of litigation in
connection with an acquisition the Company completed in 2010 (the
"Settlement Expense").
Adjusted EBITDA for the nine months ended
September 30, 2019 was $135.5 million, including a net benefit of
$8.2 million related to the 2Q 2019 Reserve Release and $7.7
million related to the 3Q 2019 Gain on Investment, compared to
$116.3 million in the prior year (+16.5%), including a net benefit
of $6.3 million related to the 1Q 2018 Reserve Release.
Excluding those benefits, Adjusted EBITDA increased 8.7% compared
to the prior year.
Adjusted EPS for the nine months ended September
30, 2019 was $1.02 per diluted share, including $0.07 per diluted
share related to the 2Q 2019 Reserve Release, $0.06 per diluted
share related to the 3Q 2019 Gain on Investment, and tax benefits
recorded in the first quarter totaling $0.07 per diluted share.
Adjusted EPS was $0.79 per diluted share in the comparable prior
year period, including a net benefit of $0.05 related to the 1Q
2018 Reserve Release. Excluding the 2Q 2019 Reserve Release, the 3Q
2019 Gain on Investment and discrete tax item in 2019 and the 1Q
2018 Reserve Release, adjusted EPS for the first nine months of
2019 was $0.82 per diluted share, compared to $0.74 per diluted
share in the prior year (+10.8%).
Cash Flow and Capital
Resources
Net cash provided by operating activities for
the nine months ended September 30, 2019 was $112.9 million
compared to $55.5 million in the first nine months of 2018
(+103.4%). Capital expenditures were $16.6 million for the nine
months ended September 30, 2019, compared to $19.4 million (-14.4%)
in the comparable prior year period.
During the third quarter of 2019, the Company
acquired VitreosHealth, a privately-held company that offers
predictive and prescriptive health insights for population risk
models. HMS acquired VitreosHealth for approximately $36.6 million,
which was funded with cash on hand.
The Company's balance sheet at
September 30, 2019 included $280.6 million of cash and cash
equivalents and $240.0 million in outstanding bank debt, compared
to cash and cash equivalents of $124.3 million and outstanding bank
debt of $240.0 million at September 30, 2018.
Share Repurchase Program
The Company's Board of Directors has authorized
the repurchase of up to $50 million of the Company's common stock,
on a discretionary basis, for a period of up to two years. The new
authorization replaces a program that expires in November 2019.
Financial Guidance
The Company updated its full year 2019 financial
guidance, as follows:
Financial Guidance for
Full Year 2019 |
|
|
|
(in millions) |
Current Guidance |
|
Y - Y % Change |
|
Prior Guidance |
Total Revenue |
$ 630 - 640 |
|
5.4 - 7.0% |
1 |
$ 650 - 660 |
Net Income |
$ 89 - 94 |
|
61.8 - 70.9% |
2 |
$ 85 - 90 |
Adjusted EBITDA |
$ 182 - 187 |
|
12.3 - 15.4% |
3 |
$ 185 - 190 |
(1) Estimated full-year 2019 and actual
full-year 2018 revenue includes $10.5 million and $8.4 million
respectively, related to the Reserve Releases. Including the
Reserve Releases, total revenue growth is expected to be 5.4 - 7.0%
in 2019. Excluding the Reserve Releases, total revenue growth
is expected to be 5.1 - 6.8% in 2019.
(2) Estimated full-year 2019 net income includes
$6.0 million related to the 2Q 2019 Reserve Release and $5.6
million related to the 3Q' 2019 Gain on Investment. Actual
full-year 2018 net income included $4.3 million related to the 1Q
2018 Reserve Release. Including the Reserve Releases and 3Q 2019
Gain on Investment, net income growth is expected to be 61.8 -
70.9% in 2019. Excluding the Reserve Releases and 3Q 2019
Gain on Investment, net income growth is expected to be 57.1 -
67.3% in 2019.
(3) Estimated full-year 2019 adjusted EBITDA
includes $8.2 million related to the 2Q 2019 Reserve Release and
$7.7 million related to the 3Q 2019 Gain on Investment. Actual
full-year 2018 adjusted EBITDA includes $6.3 million related to the
1Q 2018 Reserve Release. Including the Reserve Releases and 3Q 2019
Gain on Investment, adjusted EBITDA growth is expected to be
12.3 - 15.4% in 2019. Excluding the Reserve Releases and 3Q
2019 Gain on Investment, adjusted EBITDA growth is expected to be
6.4 - 9.6% in 2019.
Key considerations underlying the Company's
revised full year 2019 financial guidance include:
- Depreciation and amortization of approximately $43 million
- Stock-based compensation expense of approximately $22
million
- Net interest expense of approximately $8 million
- Capital expenditures of approximately $30 million
Webcast and Conference Call
Information
HMS will report its preliminary third quarter
2019 financial and operating results via webcast at 7:30 AM
CT / 8:30 AM ET on Friday, November 1, 2019. The webcast will
include discussion of HMS developments, forward-looking statements
and other material information about business and financial
matters. The webcast can be accessed via phone at 877-303–7208
(224-357–2389 for international participants), or on the HMS
Investor Relations website at
http://investor.hms.com/events-and-presentations. The webcast will
be archived and available for replay at
http://investor.hms.com/events-and-presentations. This press
release and the financial statements contained herein are also
available on the HMS Investor Relations website at
http://investor.hms.com/press-releases.
About HMS
HMS advances the healthcare system by helping
healthcare organizations reduce costs and improve health outcomes.
Through our industry-leading technology, analytics and engagement
solutions, we save billions of dollars annually while helping
consumers lead healthier lives. HMS provides a broad range of
coordination of benefits, payment integrity and population health
management solutions that help move the healthcare system forward.
Visit us at www.hms.com and follow us on Twitter at
@HMSHealthcare.
Trademarks
HMS and the HMS logo are registered trademarks
of HMS Holdings Corp. and/or its affiliates. Other names may be
trademarks of their respective owners.
Non-GAAP Financial Measures
The Company reports and discusses its operating
results using financial measures consistent with accounting
principles generally accepted in the United States ("GAAP"). From
time to time, in press releases, financial presentations, earnings
conference calls or otherwise, the Company may disclose certain
non-GAAP financial measures. The non-GAAP financial measures
presented in this press release should not be viewed as
alternatives or substitutes for the Company's reported GAAP
results. A reconciliation to the most directly comparable GAAP
financial measure is set forth in the tables that accompany this
release.
The Company believes that the non-GAAP financial
measures presented in this press release are relevant and provide
useful information to the Company's management, investors, and
other interested parties about the Company's operating performance
because the measures allow them to understand and compare the
Company's actual and expected operating results during the prior,
current and future periods in a more consistent manner. The
non-GAAP measures presented in this press release may not be
comparable to similarly titled measures used by other companies.
These non-GAAP financial measures are used in addition to and in
conjunction with results presented in accordance with GAAP and
reflect an additional way of viewing aspects of the Company's
operations that, when viewed with GAAP results and the accompanying
reconciliations to corresponding GAAP financial measures, provides
a more complete understanding of the results of operations and
trends affecting the Company's business. These non-GAAP financial
measures should be considered as a supplement to, and not as a
substitute for, or superior to financial measures calculated in
accordance with GAAP.
Safe Harbor Statement
The financial results in this press release
reflect preliminary, unaudited results, which are not final until
the Company’s Form 10-Q is filed. This press release contains
"forward-looking statements" within the meaning of the U.S. Private
Securities Litigation Reform Act of 1995. Such statements relate to
our current expectations, projections and assumptions about our
business, the economy and future events or conditions. They do not
relate strictly to historical or current facts. Forward‐looking
statements can be identified by words such as “aims,”
“anticipates,” “believes,” “estimates,” “expects,” “forecasts,”
“future,” “intends,” “likely,” “may,” “outlook,” “plans,”
“potential,” “projects,” “seeks,” “strategy,” “targets,” “trends,”
“will,” “would,” “could,” “should,” and similar expressions and
references to guidance, although some forward-looking statements
may be expressed differently. In particular, these include
statements relating to future actions, including potential future
share repurchases, business plans, objectives and prospects, future
operating or financial performance and projections, including our
updated full year guidance for 2019. Factors or events that
could cause actual results to differ may emerge from time to time
and are difficult to predict. Should known or unknown risks or
uncertainties materialize, or should underlying assumptions prove
inaccurate, actual results may differ materially from past results
and those anticipated, estimated or projected. We caution you not
to place undue reliance upon any of these forward-looking
statements.
Factors that could cause or contribute to such
differences, include, but are not limited to: our ability to
execute our business plans and growth strategy; our ability to
innovate, develop or implement new or enhanced solutions or
services; the nature of investment, acquisition and strategic
relationship opportunities we are pursuing, and the successful
execution of such investments, acquisitions and strategic
relationships; our ability to successfully integrate acquired
businesses and realize synergies; significant competition for our
solutions and services; variations in our results of operations;
our ability to accurately forecast the revenue under our contracts
and solutions; our ability to protect our systems from damage,
interruption or breach, and to maintain effective information and
technology systems and networks; our ability to protect our
intellectual property rights, proprietary technology, information
processes, and know-how; our failure to maintain a high level of
customer retention or the unexpected reduction in scope or
termination of key contracts with major customers; customer
dissatisfaction or our non-compliance with contractual provisions
or regulatory requirements; our failure to meet performance
standards triggering significant costs or liabilities under our
contracts; our inability to manage our relationships with data
sources and suppliers; our reliance on subcontractors and other
third party providers and parties to perform services; our ability
to continue to secure contracts and favorable contract terms
through the competitive bidding process; pending or threatened
litigation; unfavorable outcomes in legal proceedings; our success
in attracting and retaining qualified employees and members of our
management team; our ability to generate sufficient cash to cover
our interest and principal payments under our credit facility;
unexpected changes in tax laws, regulations or guidance and
unexpected changes in our effective tax rate; unanticipated
increases in the number or amount of claims for which we are
self-insured; accounting changes or revisions; political, economic
and foreign exchange conditions and other risks relating to our
international operations; changes in the healthcare environment or
healthcare financing system, including regulatory, budgetary or
political actions that affect healthcare spending or the practices
and operations of healthcare organizations; our failure to comply
with applicable laws and regulations governing individual privacy
and information security or to protect such information from theft
and misuse; our ability to comply with current and future legal and
regulatory requirements; negative results of government or customer
reviews, audits or investigations; state or federal limitations
related to outsourcing of certain government programs or functions;
restrictions on bidding or performing certain work due to perceived
conflicts of interests; the market price of our common stock and
lack of dividend payments; anti-takeover provisions in our
corporate governance documents; and other factors, risks and
uncertainties described in our most recent Annual Report on Form
10-K and in our other filings with the Securities and Exchange
Commission. Any forward-looking statements are made as of the
date of this press release. Except as may be required by law, we
disclaim any obligation to publicly update forward-looking
statements, whether as a result of new information, future events
or
otherwise.
Investor Contact: |
|
Media Contact: |
Robert Borchert |
|
Lacey Hautzinger |
SVP, Investor Relations |
|
Sr. Director, External Communications |
robert.borchert@hms.com |
|
lacey.hautzinger@hms.com |
469-284-2140 |
|
469-284-7240 |
HMS HOLDINGS CORP. AND
SUBSIDIARIESCONSOLIDATED STATEMENTS OF
INCOME(in thousands, except per share
amounts)(unaudited)
|
Three Months Ended September
30, |
|
Nine Months Ended September
30, |
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
Revenue |
$ |
146,815 |
|
|
$ |
154,246 |
|
|
$ |
462,950 |
|
|
$ |
442,462 |
|
Cost of services: |
|
|
|
|
|
|
|
Compensation |
56,258 |
|
|
58,188 |
|
|
172,033 |
|
|
169,455 |
|
Direct project and other
operating expenses |
22,751 |
|
|
19,228 |
|
|
63,693 |
|
|
53,835 |
|
Information technology |
14,207 |
|
|
12,979 |
|
|
39,627 |
|
|
39,482 |
|
Occupancy |
4,144 |
|
|
3,500 |
|
|
12,275 |
|
|
11,897 |
|
Amortization of acquisition
related software and intangible assets |
4,158 |
|
|
7,942 |
|
|
12,490 |
|
|
25,695 |
|
Total cost of services |
101,518 |
|
|
101,837 |
|
|
300,118 |
|
|
300,364 |
|
Selling, general and
administrative expenses |
28,232 |
|
|
28,178 |
|
|
85,514 |
|
|
86,708 |
|
Settlement expense |
— |
|
|
— |
|
|
— |
|
|
20,000 |
|
Total operating expenses |
129,750 |
|
|
130,015 |
|
|
385,632 |
|
|
407,072 |
|
Operating income |
17,065 |
|
|
24,231 |
|
|
77,318 |
|
|
35,390 |
|
Interest expense |
(2,677 |
) |
|
(2,880 |
) |
|
(8,379 |
) |
|
(8,562 |
) |
Interest income |
1,210 |
|
|
292 |
|
|
3,291 |
|
|
600 |
|
Other income |
7,697 |
|
|
— |
|
|
7,697 |
|
|
— |
|
Income before income taxes |
23,295 |
|
|
21,643 |
|
|
79,927 |
|
|
27,428 |
|
Income taxes |
2,159 |
|
|
3,069 |
|
|
10,049 |
|
|
5,830 |
|
Net income |
$ |
21,136 |
|
|
$ |
18,574 |
|
|
$ |
69,878 |
|
|
$ |
21,598 |
|
|
|
|
|
|
|
|
|
Basic income per common
share: |
|
|
|
|
|
|
|
Net income per common share -- basic |
0.24 |
|
|
0.22 |
|
|
0.79 |
|
|
0.26 |
|
Diluted income per common
share: |
|
|
|
|
|
|
|
Net income per common share -- diluted |
0.24 |
|
|
0.22 |
|
|
0.77 |
|
|
0.25 |
|
Weighted average shares: |
|
|
|
|
|
|
|
Basic |
86,324 |
|
|
83,509 |
|
|
88,190 |
|
|
83,373 |
|
Diluted |
88,324 |
|
|
85,144 |
|
|
90,441 |
|
|
85,241 |
|
HMS HOLDINGS CORP. AND
SUBSIDIARIESCONSOLIDATED BALANCE
SHEETS(in thousands, except share and per share
amounts)
|
September 30, 2019 |
|
December 31, 2018 |
Assets |
(unaudited) |
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
280,596 |
|
|
$ |
178,946 |
|
Accounts receivable, net of
allowance of $16,316 and $13,683, at September 30, 2019 and
December 31, 2018, respectively |
197,455 |
|
|
206,772 |
|
Prepaid expenses |
20,035 |
|
|
19,970 |
|
Income tax receivable |
8,891 |
|
|
18,817 |
|
Deferred financing costs,
net |
564 |
|
|
564 |
|
Other current assets |
202 |
|
|
240 |
|
Total current assets |
507,743 |
|
|
425,309 |
|
Property and equipment,
net |
84,028 |
|
|
94,435 |
|
Goodwill |
517,460 |
|
|
487,617 |
|
Intangible assets, net |
66,131 |
|
|
67,140 |
|
Operating lease right-of-use
assets |
18,351 |
|
|
— |
|
Deferred financing costs,
net |
1,250 |
|
|
1,673 |
|
Other assets |
2,100 |
|
|
2,344 |
|
Total assets |
$ |
1,197,063 |
|
|
$ |
1,078,518 |
|
|
|
|
|
Liabilities and
Shareholders' Equity |
|
|
|
Current liabilities: |
|
|
|
Accounts payable, accrued
expenses and other liabilities |
$ |
73,434 |
|
|
$ |
74,902 |
|
Liability for appeals |
2,554 |
|
|
21,723 |
|
Total current liabilities |
75,988 |
|
|
96,625 |
|
Long-term liabilities: |
|
|
|
Revolving credit facility |
240,000 |
|
|
240,000 |
|
Operating lease
liabilities |
16,269 |
|
|
— |
|
Net deferred tax
liabilities |
24,280 |
|
|
18,485 |
|
Other liabilities |
6,332 |
|
|
10,012 |
|
Total long-term liabilities |
286,881 |
|
|
268,497 |
|
Total liabilities |
362,869 |
|
|
365,122 |
|
Commitments and contingencies |
|
|
|
Shareholders' equity: |
|
|
|
Preferred stock -- $0.01 par
value; 5,000,000 shares authorized; none issued |
— |
|
|
— |
|
Common stock -- $0.01 par
value; 175,000,000 shares authorized;101,756,679 shares issued and
88,092,640 shares outstanding at September 30, 2019; 98,924,501
shares issued and 85,261,664 shares outstanding at December 31,
2018 |
1,018 |
|
|
989 |
|
Capital in excess of par
value |
476,639 |
|
|
425,748 |
|
Retained earnings |
492,113 |
|
|
422,235 |
|
Treasury stock, at cost:
13,663,194 shares at September 30, 2019 and December 31, 2018 |
(135,576 |
) |
|
(135,576 |
) |
Total shareholders' equity |
834,194 |
|
|
713,396 |
|
Total liabilities and shareholders' equity |
$ |
1,197,063 |
|
|
$ |
1,078,518 |
|
HMS HOLDINGS CORP. AND
SUBSIDIARIESCONSOLIDATED STATEMENT OF CASH
FLOWS(in
thousands)(unaudited)
|
Nine Months Ended September 30, |
|
2019 |
|
|
2018 |
|
Operating activities: |
|
|
|
Net
income |
$ |
69,878 |
|
|
$ |
21,598 |
|
Adjustments to reconcile net
income to net cash provided by operating activities: |
|
|
|
Depreciation and amortization
of property, equipment and software |
24,719 |
|
|
24,331 |
|
Amortization of intangible
assets |
7,009 |
|
|
18,889 |
|
Amortization of deferred
financing costs |
423 |
|
|
423 |
|
Gain on sale of cost basis
investment |
(7,697 |
) |
|
— |
|
Stock-based compensation
expense |
18,715 |
|
|
17,645 |
|
Deferred income taxes |
6,327 |
|
|
(7,582 |
) |
Noncash lease expense |
2,955 |
|
|
— |
|
Change in fair value of
contingent consideration |
— |
|
|
(35 |
) |
Release of estimated liability
for appeals, net |
(10,478 |
) |
|
(8,436 |
) |
Changes in operating assets and liabilities: |
|
|
|
Accounts receivable |
508 |
|
|
(13,038 |
) |
Prepaid expenses and other current assets |
72 |
|
|
285 |
|
Other assets |
(1,746 |
) |
|
(66 |
) |
Income taxes receivable |
9,926 |
|
|
(2,705 |
) |
Accounts payable, accrued expenses and other liabilities |
(3,976 |
) |
|
4,394 |
|
Operating lease liabilities |
(3,927 |
) |
|
— |
|
Liability for appeals |
211 |
|
|
(167 |
) |
Net cash provided by operating activities |
112,919 |
|
|
55,536 |
|
Investing activities: |
|
|
|
Acquisition of a business, net
of cash acquired |
(36,554 |
) |
|
— |
|
Proceeds from sale of cost
basis investment |
9,776 |
|
|
— |
|
Purchases of property and
equipment |
(5,840 |
) |
|
(4,333 |
) |
Investment in capitalized
software |
(10,763 |
) |
|
(15,100 |
) |
Net cash used in investing activities |
(43,381 |
) |
|
(19,433 |
) |
Financing activities: |
|
|
|
Proceeds from exercise of
stock options |
39,175 |
|
|
13,633 |
|
Payments of tax withholdings
on behalf of employees for net-share settlements |
(6,970 |
) |
|
(2,797 |
) |
Payments on capital lease
obligations |
(93 |
) |
|
— |
|
Purchases of treasury
stock |
— |
|
|
(5,955 |
) |
Net cash provided by financing activities |
32,112 |
|
|
4,881 |
|
Net increase in cash and cash equivalents |
101,650 |
|
|
40,984 |
|
Cash and Cash Equivalents |
|
|
|
Cash and cash equivalents at
beginning of year |
178,946 |
|
|
83,313 |
|
Cash and cash equivalents at end of period |
$ |
280,596 |
|
|
$ |
124,297 |
|
|
|
|
|
Supplemental
disclosure of cash flow information: |
|
|
|
Cash (refunds received)/paid
for income taxes, net of refunds |
$ |
(5,303 |
) |
|
$ |
15,501 |
|
Cash paid for interest |
$ |
8,118 |
|
|
$ |
7,769 |
|
|
|
|
|
Supplemental
disclosure of non-cash activities: |
|
|
|
Change
in balance of accrued property and equipment purchases |
$ |
2,291 |
|
|
$ |
538 |
|
HMS HOLDINGS CORP. AND
SUBSIDIARIES(unaudited)
Reconciliation of Net Income to EBITDA and Adjusted
EBITDA
|
Three Months Ended |
(in thousands, except
percentages) |
September 30, 2019 |
|
September 30, 2018 |
Net income |
$ |
21,136 |
|
$ |
18,574 |
|
|
|
|
Net interest expense |
1,467 |
|
2,588 |
Income taxes |
2,159 |
|
3,069 |
Depreciation and amortization of
property and equipment and intangible assets |
11,062 |
|
13,688 |
Earnings before interest, taxes, depreciation and
amortization (EBITDA) |
35,824 |
|
37,919 |
Stock-based compensation
expense |
2,934 |
|
3,437 |
Adjusted EBITDA |
$ |
38,758 |
|
$ |
41,356 |
% of Revenue |
26.4% |
|
26.8% |
Adjusted EBITDA, excluding 3Q 2019 Gain on Investment |
$ |
31,058 |
|
$ |
41,356 |
% of Revenue |
21.2% |
|
26.8% |
|
Nine Months Ended |
(in thousands, except
percentages) |
September 30, 2019 |
|
September 30, 2018 |
Net income |
$ |
69,878 |
|
$ |
21,598 |
|
|
|
|
Net interest expense |
5,088 |
|
$ |
7,962 |
Income taxes |
10,049 |
|
$ |
5,830 |
Depreciation and amortization
of property and equipment and intangible assets |
31,728 |
|
43,220 |
Earnings before interest, taxes, depreciation and
amortization (EBITDA) |
116,743 |
|
78,610 |
Stock-based compensation
expense |
18,715 |
|
17,645 |
Settlement Expense |
— |
|
20,000 |
Adjusted EBITDA |
$ |
135,458 |
|
$ |
116,255 |
% of Revenue |
29.3% |
|
26.3% |
Adjusted EBITDA, excluding Reserve Releases and 3Q 2019 Gain on
Investment |
$ |
119,558 |
|
$ |
109,955 |
% of Revenue |
26.4% |
|
25.3% |
HMS HOLDINGS CORP. AND
SUBSIDIARIES(unaudited)
Reconciliation of Net Income to GAAP EPS (Diluted) and
Adjusted EPS (Diluted)
|
Three Months Ended |
(in thousands, except per
share amounts) |
September 30, 2019 |
|
September 30, 2018 |
Net income |
$ |
21,136 |
|
|
$ |
18,574 |
|
|
|
|
|
Stock-based compensation
expense |
2,934 |
|
|
3,437 |
|
Amortization of acquisition
related software and intangible assets |
4,158 |
|
|
7,942 |
|
Income tax related to
adjustments¹ |
(1,936 |
) |
|
(3,186 |
) |
|
|
|
|
Adjusted net income |
$ |
26,292 |
|
|
$ |
26,767 |
|
|
|
|
|
Weighted average common shares, diluted |
88,324 |
|
|
85,144 |
|
|
|
|
|
Diluted GAAP EPS² |
$ |
0.24 |
|
|
$ |
0.22 |
|
Diluted adjusted EPS² |
$ |
0.30 |
|
|
$ |
0.31 |
|
|
|
|
|
3Q 2019 Gain on Investment³ |
$ |
0.06 |
|
|
$ |
— |
|
Diluted adjusted EPS excluding 3Q Gain on Investment |
$ |
0.24 |
|
|
$ |
0.31 |
|
|
Nine Months Ended |
(in thousands, except per
share amounts) |
September 30, 2019 |
|
September 30, 2018 |
Net income |
$ |
69,878 |
|
|
$ |
21,598 |
|
|
|
|
|
Stock-based compensation
expense |
18,715 |
|
|
17,645 |
|
Settlement expense |
— |
|
|
20,000 |
|
Amortization of acquisition
related software and intangible assets |
12,490 |
|
|
25,695 |
|
Income tax related to
adjustments¹ |
(8,519 |
) |
|
(17,735 |
) |
|
|
|
|
Adjusted net income |
$ |
92,564 |
|
|
$ |
67,203 |
|
|
|
|
|
Weighted average common shares, diluted |
90,441 |
|
|
85,241 |
|
|
|
|
|
Diluted GAAP EPS² |
$ |
0.77 |
|
|
$ |
0.25 |
|
Diluted adjusted EPS² |
$ |
1.02 |
|
|
$ |
0.79 |
|
|
|
|
|
Discrete tax benefits |
$ |
0.07 |
|
|
$ |
— |
|
Reserve Releases benefit³ |
$ |
0.07 |
|
|
$ |
0.05 |
|
3Q 2019 Gain on Investment³ |
$ |
0.06 |
|
|
$ |
— |
|
Diluted adjusted EPS excluding Reserve Releases, 3Q Gain on
Investment, and discrete tax benefits |
$ |
0.82 |
|
|
$ |
0.74 |
|
(1) Tax effect of adjustments is computed as the
pre-tax effect of the adjustments multiplied by the adjusted annual
effective tax rate at period end.
(2) Diluted GAAP EPS and Diluted Adjusted EPS
included (i) discrete tax benefits of $0.07 per diluted share
primarily related to the exercise of employee stock options and
$0.07 per diluted share related to the Reserve Releases benefit for
the nine months ended September 30, 2019. (ii) a $0.06 per diluted
share benefit related to the 3Q 2019 Gain on Investment
benefit for the three and nine months ended September 30,
2019 and $0.05 per diluted share related to the Reserve Releases
benefit for the nine months ended September 30, 2018.
(3) The Reserve Releases benefit of $0.07 per
diluted share for the nine months ended September 30, 2019 is net
of income tax of approximately $0.03 per diluted share and the 3Q
2019 Gain on Investment benefit of $0.06 per diluted share for the
three and nine months ended September 30, 2019 is net of income tax
of approximately $0.02 per diluted share. The Reserve
Releases benefit of $0.05 per diluted share for the nine months
ended September 30, 2018 is net of income tax of approximately
$0.02 per diluted share.
HMS HOLDINGS CORP. AND
SUBSIDIARIES(unaudited)
Reconciliation of Net Income to EBITDA and Adjusted
EBITDA (Trailing twelve months)
|
Trailing Twelve Months Ended |
(in thousands) |
September 30, 2019 |
|
September 30, 2018 |
Net income |
$ |
103,269 |
|
$ |
47,321 |
|
|
|
|
|
Net interest expense |
7,348 |
|
11,006 |
|
Income taxes |
2,247 |
|
(3,671 |
) |
Depreciation and amortization
of property and equipment and intangible assets |
46,104 |
|
56,744 |
|
Earnings before interest, taxes, depreciation and
amortization (EBITDA) |
158,968 |
|
111,400 |
|
Stock-based compensation
expense |
22,577 |
|
25,027 |
|
Settlement expense |
— |
|
20,000 |
|
Adjusted EBITDA |
$ |
181,545 |
|
$ |
156,427 |
|
Reconciliation of Total Debt to Net Leverage
Ratio
(in thousands, except
ratios) |
September 30, 2019 |
|
September 30, 2018 |
Total Debt (revolving credit facility) |
$ |
240,000 |
|
|
$ |
240,000 |
|
Cash and cash
equivalents |
(280,596 |
) |
|
(124,297 |
) |
Total net debt⁴ |
$ |
(40,596 |
) |
|
$ |
115,703 |
|
|
|
|
|
Net income⁵ |
$ |
103,269 |
|
|
$ |
47,321 |
|
Adjusted EBITDA⁶ |
$ |
181,545 |
|
|
$ |
156,427 |
|
Net leverage ratio⁷ |
(0.22 |
) |
|
0.74 |
|
(4) Total Debt consists of the outstanding principal under our
senior secured revolving credit facility(5) Trailing twelve months
Net income(6) Trailing twelve months Adjusted EBITDA(7) The
Company's net leverage ratio is calculated by dividing total net
debt by trailing twelve months' Adjusted EBITDA
HMS HOLDINGS CORP. AND
SUBSIDIARIES(unaudited)
Reconciliation of Net Cash Provided by Operating
Activities to Free Cash Flow
|
Three Months Ended |
(In thousands) |
September 30, 2019 |
|
September 30, 2018 |
Net cash provided by operating activities |
$ |
34,793 |
|
|
$ |
31,845 |
|
Purchases of property and
equipment |
(4,895 |
) |
|
(1,878 |
) |
Investment in capitalized
software |
(3,298 |
) |
|
(4,927 |
) |
|
|
|
|
Non-GAAP free cash flow |
$ |
26,600 |
|
|
$ |
25,040 |
|
The Company believes that the non-GAAP free cash
flow financial measures presented in this press release provide
useful information regarding how much cash flow is available, after
purchases of property and equipment and investment in capitalized
software, to be used for working capital needs or for other
opportunities. It should not be inferred that the entire non-GAAP
free cash flow amount is available for discretionary expenditures.
These non-GAAP measures may not be comparable to similarly titled
measures used by other
companies.
Reconciliation of Revised Financial Guidance for Full
Year 2019 Net Income to Projected 2019 EBITDA and Adjusted
EBITDA
|
Twelve Months Ended December 31,
2019 |
|
Estimated Range |
|
Current Guidance |
|
Prior Guidance |
(unaudited; in millions) |
Low |
|
High |
|
Low |
|
High |
Net Income |
$ |
89 |
|
$ |
94 |
|
$ |
85 |
|
$ |
90 |
|
|
|
|
|
|
|
|
Net interest expense |
$ |
8 |
|
$ |
8 |
|
$ |
10 |
|
$ |
10 |
Income taxes |
$ |
20 |
|
$ |
20 |
|
$ |
24 |
|
$ |
24 |
Depreciation and amortization
of property and equipment and intangible assets |
$ |
43 |
|
$ |
43 |
|
$ |
44 |
|
$ |
44 |
Earnings before interest, taxes, depreciation and
amortization (EBITDA) |
$ |
160 |
|
$ |
165 |
|
$ |
163 |
|
$ |
168 |
Stock-based compensation
expense |
$ |
22 |
|
$ |
22 |
|
$ |
22 |
|
$ |
22 |
Adjusted EBITDA |
$ |
182 |
|
$ |
187 |
|
$ |
185 |
|
$ |
190 |
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