HMS Holdings Corp. (NASDAQ:HMSY) today announced financial
results for the first quarter of 2017. Net income for the quarter
ended March 31, 2017 was $0.9 million or $0.01 per diluted share,
compared to net income of $11.0 million or $0.13 per diluted share
in the fourth quarter of 2016 and $4.6 million or $0.05 per diluted
share in the prior year first quarter. Adjusted EPS in the first
quarter was $0.14 per diluted share, compared to adjusted EPS of
$0.20 per diluted share in the fourth quarter of 2016 and adjusted
EPS of $0.14 per diluted share in the prior year first quarter.
Total revenue in the first quarter was $114.5 million, compared to
total revenue of $128.1 million in the fourth quarter of 2016 and
$119.8 million in the prior year first quarter.
"We are excited about the acquisition of Eliza
Corporation, which we announced in March and closed in April. We
currently anticipate approximately $35 million of revenue from
Eliza this year, beginning in the second quarter, which will raise
full year projected total Company revenue growth to approximately
15% compared to the prior year," said Bill Lucia, Chairman and CEO.
“The addition of Eliza significantly enhances our suite of health
management and member engagement solutions. We believe there is now
a substantial cross-sell opportunity with our existing
customer base, particularly as they seek to improve the
health outcomes for the small percentage of their population that
account for the majority of healthcare spending."
Commercial health plan revenue in the first
quarter of 2017 was $56.2 million, a 0.4% increase compared to
$56.0 million in the prior year first quarter and $8.1 million
lower than the fourth quarter of 2016. State government revenue was
$53.3 million in the first quarter, a 5.1% increase compared to
$50.7 million in the prior year first quarter and $4.4 million
lower than the fourth quarter of 2016. Federal (excluding Medicare
RAC) and Other revenue was $5.0 million in the first quarter, a
$0.2 million increase compared to the prior year first quarter and
$0.3 million lower than the fourth quarter of 2016. There was no
Medicare RAC revenue in the quarter, compared to $8.3 million in
the prior year first quarter and $0.7 million in the fourth quarter
of 2016.
Coordination of Benefits (“COB”) revenue was
$88.5 million in the first quarter of 2017, compared to $82.9
million in the prior year first quarter and $95.0 million in the
fourth quarter of 2016. COB accounted for 77.3% of total revenue in
the first quarter, compared to 69.0% in the prior year first
quarter and 74.2% in the fourth quarter of 2016. Payment Integrity
("PI") revenue (excluding Medicare RAC) was $26.0 million in the
first quarter of 2017, compared to $28.6 million in the prior year
first quarter and $32.4 million in the fourth quarter of 2016.
“The lower than expected revenue in the quarter
was not linked to one customer or a single product, but primarily
relates to execution of internal plans to more quickly implement
payment integrity business sold last year. We have action plans in
place to accelerate our PI revenue growth over the balance of
2017,” said Jeff Sherman, CFO. “On the cost side, first quarter
SG&A included professional fees of approximately $1.5 million
relating to the Eliza acquisition and audit work related to the
10-K. We also made growth oriented investments in the big data
technology solutions and related personnel needed to onboard
massive amounts of data, particularly for newly sold payment
integrity business, which we expect will pay off later this year,”
added Sherman.
For additional information about the Company’s
preliminary first quarter 2017 financial results and the Company’s
2017 updated guidance reflecting the Eliza acquisition, see
the Company’s Q1 2017 Investor Presentation available at:
http://investor.hms.com/events.cfm.
Webcast and Conference Call
Information
HMS will report its preliminary first quarter
2017 financial and operating results via webcast at 7:30 AM CT /
8:30 AM ET on Wednesday, May 10, 2017. The numbers are preliminary
as there are still open audit items. The webcast may also 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 or (224)
357–2389 for international participants, or on the HMS Investor
Relations website at http://investor.hms.com/events.cfm. The
webcast will also be archived and available for replay beginning at
approximately 11:00 AM CT / 12:00 PM ET on May 10, 2017 at
http://investor.hms.com/events.cfm. This press release and the
financial statements contained herein are also available on the HMS
Investor Relations website at
http://investor.hms.com/releases.cfm.
About HMS
HMS provides a broad range of integrated
solutions for entities taking risk - to help improve health
outcomes, reduce costs and achieve regulatory compliance. We
deliver coordination of benefits, payment integrity, health
management and member engagement services to health plans, state
government agencies, federal programs, at-risk providers, PBMs and
employers. We use proven technology, innovation and powerful
analytics to save our customers billions of dollars annually.
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 provide useful information
to the Company's management, investors, and other interested
parties about the Company's operating performance because they
allow them to understand and compare the Company's operating
results during the current periods to the prior year 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 results, which are not final until the
Company’s Form 10-K and Form 10-Q are filed. This press release
contains "forward-looking statements" within the meaning of the
U.S. Private Securities Litigation Reform Act of 1995. Such
statements reflect 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,” “intends,” “likely,” “may,” “plans,” “projects,”
“seeks,” “targets,” “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,
business plans, objectives and prospects, future operating or
financial performance. 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 or growth strategy; our ability to
innovate, develop or implement new or enhanced solutions or
services; the nature of investment and acquisition opportunities we
are pursuing, and the successful execution of such investments and
acquisitions; our ability to successfully integrate acquired
businesses and realize synergies; 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; significant competition for
our solutions and services; 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, 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 information and data
sources and suppliers; 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 and to prevail in protests or
challenges to contract awards; pending or threatened litigation;
unfavorable outcomes in legal proceedings; our success in
attracting 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 or to borrow or use
credit; unexpected changes in our effective tax rates;
unanticipated increases in the number or amount of claims for which
we are self-insured; changes in the U.S. healthcare environment or
healthcare financing system, including regulatory, budgetary or
political actions that affect procurement practices and healthcare
spending; our failure to comply with applicable laws and
regulations governing individual privacy and information security
or to protect such information from theft and misuse; negative
results of government or customer reviews, audits or
investigations; state or federal limitations related to outsourcing
or 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; and 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.
|
|
|
|
|
|
|
|
HMS HOLDINGS CORP. AND
SUBSIDIARIESCONSOLIDATED STATEMENTS OF
INCOME(in thousands, except per share
amounts) (unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months EndedMarch
31, |
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
|
|
2016 |
|
|
Revenue |
|
|
|
$ |
114,501 |
|
|
$ |
119,763 |
|
|
Cost of
services: |
|
|
|
|
|
|
Compensation |
|
|
|
48,920 |
|
|
|
46,401 |
|
|
Data processing |
|
|
|
9,783 |
|
|
|
9,624 |
|
|
Occupancy |
|
|
|
3,547 |
|
|
|
3,627 |
|
|
Direct project expenses |
|
|
10,443 |
|
|
|
14,483 |
|
|
Other operating expenses |
|
|
7,203 |
|
|
|
5,776 |
|
|
Amortization of acquisition related software and
intangible assets |
|
6,286 |
|
|
|
7,013 |
|
|
Total cost of services |
|
|
86,182 |
|
|
|
86,924 |
|
|
Selling,
general and administrative expenses |
|
25,281 |
|
|
|
22,930 |
|
|
Total operating expenses |
|
|
111,463 |
|
|
|
109,854 |
|
|
Operating income |
|
|
|
3,038 |
|
|
|
9,909 |
|
|
Interest
expense |
|
|
|
(2,286 |
) |
|
|
(2,091 |
) |
|
Interest income |
|
|
|
155 |
|
|
|
47 |
|
|
Income before income taxes |
|
|
907 |
|
|
|
7,865 |
|
|
Income taxes |
|
|
|
36 |
|
|
|
3,305 |
|
|
Net income |
|
|
$ |
871 |
|
|
$ |
4,560 |
|
|
|
|
|
|
|
|
|
|
Basic income per common share: |
|
|
|
|
Net income per common share -- basic |
$ |
0.01 |
|
|
$ |
0.05 |
|
|
Diluted income per common share: |
|
|
|
|
Net income per common share -- diluted |
$ |
0.01 |
|
|
$ |
0.05 |
|
|
Weighted average
shares: |
|
|
|
|
|
Basic |
|
|
|
|
83,617 |
|
|
|
84,033 |
|
|
Diluted |
|
|
|
85,580 |
|
|
|
84,479 |
|
|
|
|
|
|
|
|
|
HMS HOLDINGS CORP. AND
SUBSIDIARIES CONSOLIDATED
BALANCE SHEETS(in thousands, except per share
amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,2017 |
|
December31, 2016 |
|
|
Assets |
|
|
|
|
|
(unaudited) |
|
|
|
|
Current
assets: |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
$ |
168,289 |
|
|
$ |
175,999 |
|
|
|
Accounts receivable, net of allowance for doubtful accounts of
$10,890 and $10,772, |
|
|
|
|
|
at March 31, 2017 and December 31, 2016, respectively |
|
165,699 |
|
|
|
173,582 |
|
|
|
Prepaid expenses |
|
|
|
|
|
16,376 |
|
|
|
13,699 |
|
|
|
Income
tax receivable |
|
|
|
|
|
|
4,088 |
|
|
|
3,354 |
|
|
|
Other current assets |
|
|
|
|
568 |
|
|
|
1,001 |
|
|
|
Total current assets |
|
|
|
|
355,020 |
|
|
|
367,635 |
|
|
|
Property
and equipment, net |
|
|
|
|
93,176 |
|
|
|
92,167 |
|
|
|
Goodwill |
|
|
|
|
|
|
379,716 |
|
|
|
379,716 |
|
|
|
Intangible
assets, net |
|
|
|
|
33,470 |
|
|
|
37,797 |
|
|
|
Deferred
financing costs, net |
|
|
|
|
2,269 |
|
|
|
2,790 |
|
|
|
Other assets |
|
|
|
|
|
2,566 |
|
|
|
2,650 |
|
|
|
Total assets |
|
|
|
|
$ |
866,217 |
|
|
$ |
882,755 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders' Equity |
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
|
|
Accounts payable, accrued expenses and other liabilities |
$ |
38,593 |
|
|
$ |
59,402 |
|
|
|
Estimated liability for appeals |
|
|
|
|
31,544 |
|
|
|
30,755 |
|
|
|
Total current liabilities |
|
|
|
|
70,137 |
|
|
|
90,157 |
|
|
|
Long-term
liabilities: |
|
|
|
|
|
|
|
|
|
Revolving credit facility |
|
|
|
|
197,796 |
|
|
|
197,796 |
|
|
|
Net deferred tax liabilities |
|
|
|
|
22,650 |
|
|
|
22,717 |
|
|
|
Deferred rent |
|
|
|
|
|
5,265 |
|
|
|
5,427 |
|
|
|
Other liabilities |
|
|
|
|
|
10,108 |
|
|
|
10,048 |
|
|
|
Total long-term liabilities |
|
|
|
|
235,819 |
|
|
|
235,988 |
|
|
|
Total liabilities |
|
|
|
|
|
305,956 |
|
|
|
326,145 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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; |
|
|
|
|
|
96,299,517 shares issued and 83,885,439 shares outstanding at
March 31, 2017; |
|
|
|
|
|
95,966,852 shares issued and 83,552,774 shares outstanding at
December 31, 2016 |
|
959 |
|
|
|
959 |
|
|
|
Capital in
excess of par value |
|
|
|
|
347,805 |
|
|
|
345,025 |
|
|
|
Retained
earnings |
|
|
|
|
|
326,981 |
|
|
|
326,110 |
|
|
|
Treasury
stock, at cost: 12,414,078 shares at March 31, 2017 and December
31, 2016 |
|
(115,484 |
) |
|
|
(115,484 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders' equity |
|
|
|
|
560,261 |
|
|
|
556,610 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders'
equity |
|
|
$ |
866,217 |
|
|
$ |
882,755 |
|
|
|
|
|
|
|
|
|
|
|
|
|
HMS HOLDINGS CORP. AND
SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH
FLOWS(in thousands)
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months EndedMarch
31, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
|
|
2016 |
|
|
|
Operating activities: |
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
$ |
871 |
|
|
$ |
4,560 |
|
|
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
|
Depreciation and amortization of property and equipment |
|
6,235 |
|
|
|
6,577 |
|
|
|
Amortization of intangible assets |
|
|
|
4,327 |
|
|
|
5,043 |
|
|
|
Amortization of deferred financing costs |
|
|
521 |
|
|
|
521 |
|
|
|
Stock-based compensation expense |
|
|
5,386 |
|
|
|
4,240 |
|
|
|
Deferred income taxes |
|
|
|
|
(67 |
) |
|
|
1,308 |
|
|
|
Loss on disposal of assets |
|
|
|
- |
|
|
|
10 |
|
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
Accounts receivable |
|
|
|
|
7,883 |
|
|
|
3,350 |
|
|
|
Prepaid expenses |
|
|
|
|
(2,677 |
) |
|
|
(2,362 |
) |
|
|
Other current assets |
|
|
|
|
433 |
|
|
|
328 |
|
|
|
Other assets |
|
|
|
|
|
84 |
|
|
|
51 |
|
|
|
Income taxes receivable / (payable) |
|
|
(734 |
) |
|
|
(3,589 |
) |
|
|
Accounts payable, accrued expenses and other
liabilities |
|
(19,665 |
) |
|
|
(16,963 |
) |
|
|
Estimated liability for appeals |
|
|
|
789 |
|
|
|
(2,465 |
) |
|
|
Net cash provided by operating
activities |
|
|
3,386 |
|
|
|
609 |
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
Purchases of land, property and equipment |
|
|
(6,282 |
) |
|
|
(570 |
) |
|
|
Investment in capitalized software |
|
|
|
(2,206 |
) |
|
|
(1,185 |
) |
|
|
Net cash used in investing
activities |
|
|
(8,488 |
) |
|
|
(1,755 |
) |
|
|
Financing activities: |
|
|
|
|
|
|
|
|
Proceeds from exercise of stock options |
|
|
2 |
|
|
|
26 |
|
|
|
Payments of tax withholdings on behalf of employees for
net-share settlement for stock-based compensation |
|
(2,608 |
) |
|
|
(1,002 |
) |
|
|
Payments on capital lease obligations |
|
|
|
(2 |
) |
|
|
(37 |
) |
|
|
Net cash used in financing
activities |
|
|
(2,608 |
) |
|
|
(1,013 |
) |
|
|
Net decrease in cash and cash
equivalents |
|
|
(7,710 |
) |
|
|
(2,159 |
) |
|
|
Cash and Cash Equivalents |
|
|
|
|
|
|
|
|
Cash and
cash equivalents at beginning of year |
|
|
175,999 |
|
|
|
145,610 |
|
|
|
Cash and cash equivalents at end of
period |
|
$ |
168,289 |
|
|
$ |
143,451 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow
information: |
|
|
|
|
|
|
Cash paid for income taxes |
|
|
|
$ |
734 |
|
|
$ |
5,052 |
|
|
|
Cash paid for interest |
|
|
|
$ |
1,686 |
|
|
$ |
1,446 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of non-cash
activities: |
|
|
|
|
|
|
Change in balance of accrued property and equipment
purchases |
$ |
(1,244 |
) |
|
$ |
122 |
|
|
|
|
|
|
|
|
|
|
|
|
|
HMS HOLDINGS CORP. AND
SUBSIDIARIES (in thousands, except per share
amounts)(unaudited) |
|
|
|
Reconciliation of Net Income to EBITDA and Adjusted
EBITDA |
|
|
|
As
summarized in the following table, earnings before interest, taxes,
depreciation and amortization, stock-based compensation, and
non-recurring legal expense (adjusted EBITDA) was $19.0 million for
the first quarter of 2017. |
|
|
|
|
|
|
|
|
|
|
|
Three months
endedMarch
31, |
|
|
|
|
|
|
|
|
|
2017 |
|
|
|
2016 |
|
|
|
Net
Income |
|
$ |
871 |
|
|
$ |
4,560 |
|
|
|
|
|
|
|
|
|
|
Net interest
expense |
|
|
2,131 |
|
|
|
2,044 |
|
|
|
Income taxes |
|
|
36 |
|
|
|
3,305 |
|
|
|
Depreciation and
amortization of property and equipment and intangible assets, |
|
|
|
|
|
|
net of
deferred financing costs |
|
|
10,562 |
|
|
|
11,620 |
|
|
|
|
|
|
|
|
|
|
Earnings before
interest, taxes, depreciation and amortization (EBITDA) |
|
|
13,600 |
|
|
|
21,529 |
|
|
|
Stock based
compensation expense |
|
|
5,386 |
|
|
|
4,240 |
|
|
|
Non-recurring legal
fees |
|
|
- |
|
|
|
1,248 |
|
|
|
Adjusted EBITDA |
|
$ |
18,986 |
|
|
$ |
27,017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Net Income to GAAP EPS and
Adjusted EPS |
|
|
|
As summarized in the following table, diluted earnings
per share adjusted for stock-based compensation expense,
non-recurring legal expense, amortization of acquisition related
software and intangible assets and for the related taxes (adjusted
EPS) was $0.14 for the first quarter of 2017. |
|
|
|
|
|
|
|
|
|
Three months
endedMarch
31, |
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
|
|
2016 |
|
|
|
Net
Income |
|
$ |
871 |
|
|
$ |
4,560 |
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation expense |
|
|
5,386 |
|
|
|
4,240 |
|
|
|
Non-recurring legal
fees |
|
|
- |
|
|
|
1,248 |
|
|
|
Amortization of
acquisition related software and intangible assets |
|
|
6,286 |
|
|
|
7,013 |
|
|
|
Income
tax related to adjustments (1) |
|
|
(362 |
) |
|
|
(5,253 |
) |
|
|
|
|
|
|
|
|
|
Adjusted net income |
|
$ |
12,181 |
|
|
$ |
11,808 |
|
|
|
|
|
|
|
|
|
|
Weighted average common shares, diluted |
|
|
85,580 |
|
|
|
84,479 |
|
|
|
|
|
|
|
|
|
|
Diluted GAAP EPS |
|
$ |
0.01 |
|
|
$ |
0.05 |
|
|
|
Diluted
adjusted EPS |
|
$ |
0.14 |
|
|
$ |
0.14 |
|
|
|
|
|
|
|
|
|
1 Tax effect of adjustments is computed as the pre-tax
effect of the adjustments multiplied by the annual effective tax
rate for the period. |
|
|
|
|
|
|
|
|
Investor Contact:
Dennis Oakes
SVP, Investor Relations
dennis.oakes@hms.com
212-857-5786
Media Contact:
Francesca Marraro
VP, Marketing and Communications
fmarraro@hms.com
212-857-5442
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