HMS Holdings Corp. (Nasdaq: HMSY) today
announced financial results for the second quarter ended
June 30, 2019.
“HMS delivered another solid quarter of
financial and operating performance as we continue to execute on
our long-term strategy to help our clients reduce costs and improve
health outcomes," said Bill Lucia, Chairman and CEO.
"Excluding the Medicare RAC reserve release, we generated total
revenue growth of 7.4%, with adjusted EBITDA increasing 18.8%
compared to the second quarter last year. These results
clearly demonstrate the strong demand for our solutions and
inherent operating leverage of our business model.”
Second QuarterTotal revenue in
the second quarter of 2019 was $168.2 million, which included $10.5
million from the Company's 2Q 2019 Reserve Release (as defined
below), compared to total revenue of $146.8 million in the prior
year second quarter (+14.6%). Excluding the 2Q 2019 Reserve
Release, total revenue increased 7.4% compared to the prior year
quarter. 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”).
Coordination of Benefits (COB) revenue was
$105.1 million in the second quarter of 2019 compared to $100.8
million in the prior year second quarter (+4.3%).
Analytical Services revenue, which includes
Payment Integrity (PI) and Population Health Management (PHM), was
$63.1 million in the second quarter of 2019, including the 2Q 2019
Reserve Release, compared to $46.0 million in the prior year second
quarter (+37.2%). Excluding the 2Q 2019 Reserve Release,
Analytical Services revenue increased 14.3% from the prior year
second quarter.
PI revenue was $38.6 million in the second
quarter of 2019, excluding the 2Q 2019 Reserve Release, compared to
$31.2 million in the prior year second quarter (+23.7%). PHM
revenue was $14.0 million in the second quarter of 2019, compared
to $14.8 million in the prior year second quarter (-5.4%).
Net income in the second quarter of 2019 was
$29.1 million, or $0.33 per diluted share, compared to a net loss
of $3.4 million, or $(0.04) per diluted share, in the prior year
second quarter. In the second quarter of 2019, net income
included a net benefit of $0.07 per diluted share related to the 2Q
2019 Reserve Release. The net loss for the second quarter of 2018
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 in the second quarter of 2019
was $55.7 million compared to $40.0 million in the prior year
second quarter (+39.3%) that included a net benefit of $8.2 million
related to the 2Q 2019 Reserve Release. Excluding the impact of the
2Q 2019 Reserve Release, adjusted EBITDA in the second quarter of
2019 increased 18.8% compared to the same period in the prior
year.
Adjusted EPS in the second quarter of 2019 was
$0.41 per diluted share, including a net benefit of $0.07 per
diluted share related to the 2Q 2019 Reserve Release, compared to
adjusted EPS of $0.25 per diluted share in the second quarter of
2018. Excluding the 2Q 2019 Reserve Release, adjusted EPS in
the second quarter of 2019 was $0.34 per diluted share, compared to
$0.25 per diluted share in the prior year second quarter
(+36.0%).
Six Months EndedTotal revenue
for the six months ended June 30, 2019 was $316.1 million,
compared to $288.2 million in the prior year (+9.7%). For the six
months ended June 30, 2019, total revenue included $10.5
million from the 2Q 2019 Reserve Release. For the six months ended
June 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 Reserve Releases, total
revenue increased +9.2% compared to the prior year.
COB revenue for the six months ended
June 30, 2019 was $211.0 million, compared to $192.5 million
in the prior year (+9.6%).
Analytical Services revenue, which includes PI
and PHM, was $105.1 million for the six months ended June 30,
2019, compared to $95.7 million in the prior year (+9.8%). For the
six months ended June 30, 2019, Analytical Services revenue
included $10.5 million from the 2Q 2019 Reserve Release. For the
six months ended June 30, 2018, Analytical Services revenue
included $8.4 million from the 1Q 2018 Reserve Release.
Excluding the Reserve Releases, Analytical Services revenue
increased 8.4% from the prior year.
Excluding the Reserve Releases, PI revenue for
the six months ended June 30, 2019 was $66.3 million, compared
to $61.4 million in the prior year (+8.0%). PHM revenue for
the six months ended June 30, 2019 was $28.3 million, compared
to $25.9 million in the prior year (+9.3%).
Net income for the six months ended
June 30, 2019 was $48.7 million, or $0.55 per diluted share,
compared to $3.0 million, or $0.04 per diluted share, in the prior
year. In the six months ended June 30, 2019, net income
included $0.07 per diluted share related to the 2Q 2019 Reserve
Release and tax benefits recorded in the first quarter totaling
$0.07 per diluted share. For the six months ended June 30,
2018, net income included a net benefit of $0.05 per diluted share
related to the 1Q 2018 Reserve Release and included the Settlement
Expense.
Adjusted EBITDA for the six months ended
June 30, 2019 was $96.7 million, including a net benefit of
$8.2 million related to the 2Q 2019 Reserve Release, compared to
$74.9 million in the prior year (+29.1%), including a net benefit
of $6.3 million related to the 1Q 2018 Reserve Release.
Excluding those benefits, Adjusted EBITDA increased 29.0% compared
to the prior year.
Adjusted EPS for the six months ended
June 30, 2019 was $0.75 per diluted share, including $0.07 per
diluted share related to the 2Q 2019 Reserve Release and tax
benefits totaling $0.07 per diluted share. Adjusted EPS was
$0.46 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 and discrete tax
item in 2019 and the 1Q 2018 Reserve Release, adjusted EPS for the
first six months of 2019 was $0.61 per diluted share, compared to
$0.41 per diluted share in the prior year (+48.8%).
Cash Flow and Capital
ResourcesNet cash provided by operating activities in the
six months ended June 30, 2019 was $78.1 million compared to
$23.7 million in the first six months of 2018 (+229.5%). Capital
expenditures were $8.4 million for the six months ended
June 30, 2019, compared to $12.6 million (-33.3%) in the
comparable prior year period.
The Company's balance sheet at June 30,
2019 included $268.7 million of cash and cash equivalents and
$240.0 million in outstanding bank debt, compared to cash and cash
equivalents of $88.1 million and outstanding bank debt of $240.0
million at June 30, 2018.
Financial GuidanceThe 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 |
$ 650 - 660 |
|
8.6 - 10.3% |
1 |
$ 640 - 650 |
Net Income |
$ 85 - 90 |
|
54.5 - 63.6% |
2 |
$ 64 - 70 |
Adjusted EBITDA |
$ 185 - 190 |
|
14.0 - 17.0% |
3 |
$ 170 - 175 |
(1) Reported year-to-date 2019 and full-year 2018 revenue
included $10.5 million and $8.4 million, respectively, related to
the Reserve Releases. Including the Reserve Releases, total
revenue growth is expected to be 8.6-10.3% in 2019. Excluding
the Reserve Releases, total revenue growth is expected to be
8.4-10.1% in
2019.
(2) Reported year-to-date 2019 and full-year 2018 net income
included $6.0 million and $4.3 million, respectively, related to
the Reserve Releases. Including the Reserve Releases, net
income growth is expected to be 54.6-63.7% in 2019. Excluding
the Reserve Releases, net income growth is expected to be
55.8-65.7% in 2019.
(3) Reported year-to-date 2019 and full-year 2018 adjusted
EBITDA included $8.2 million and $6.3 million, respectively,
related to the Reserve Releases. Including the Reserve
Releases, adjusted EBITDA growth is expected to be 14.0-17.0%
in 2019. Excluding the Reserve Releases, adjusted EBITDA
growth is expected to be 13.3-16.5% in 2019.
Key considerations underlying the Company's
revised full year 2019 financial guidance include:
- Depreciation and amortization of approximately $44 million
- Stock-based compensation expense of approximately $22
million
- Net interest expense of approximately $10 million
- An effective tax rate for the third and fourth quarters of 2019
of 28-30%
- Income taxes of approximately $24 million
- Capital expenditures of $30-35 million
Webcast and Conference Call
InformationHMS will report its preliminary second quarter
2019 financial and operating results via webcast at 7:30 AM CT /
8:30 AM ET on Friday, August 2, 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 HMSHMS 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 follow
us on Twitter at @HMSHealthcare.
TrademarksHMS 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 MeasuresThe
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 StatementThe
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, 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 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; 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; changes in the U.S.
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: Robert Borchert SVP, Investor
Relations robert.borchert@hms.com
469-284-2140 |
Media Contact:Lacey HautzingerSr. Director, External
Communicationslacey.hautzinger@hms.com 469-284-7240 |
|
|
HMS HOLDINGS CORP. AND
SUBSIDIARIESCONSOLIDATED STATEMENTS OF
INCOME(in thousands, except per share
amounts)(unaudited)
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Revenue |
$ |
168,182 |
|
|
$ |
146,791 |
|
|
$ |
316,135 |
|
|
$ |
288,216 |
|
Cost of services: |
|
|
|
|
|
|
|
Compensation |
58,322 |
|
|
55,188 |
|
|
115,775 |
|
|
111,267 |
|
Direct project and other
operating expenses |
20,742 |
|
|
17,959 |
|
|
40,941 |
|
|
34,607 |
|
Information technology |
12,316 |
|
|
14,240 |
|
|
25,420 |
|
|
26,503 |
|
Occupancy |
4,052 |
|
|
4,014 |
|
|
8,131 |
|
|
8,397 |
|
Amortization of acquisition
related software and intangible assets |
4,166 |
|
|
9,621 |
|
|
8,332 |
|
|
17,753 |
|
Total cost of services |
99,598 |
|
|
101,022 |
|
|
198,599 |
|
|
198,527 |
|
Selling, general and
administrative expenses |
28,036 |
|
|
26,532 |
|
|
57,282 |
|
|
58,530 |
|
Settlement expense |
— |
|
|
20,000 |
|
|
— |
|
|
20,000 |
|
Total operating expenses |
127,634 |
|
|
147,554 |
|
|
255,881 |
|
|
277,057 |
|
Operating
income/(loss) |
40,548 |
|
|
(763 |
) |
|
60,254 |
|
|
11,159 |
|
Interest expense |
(2,853 |
) |
|
(3,034 |
) |
|
(5,702 |
) |
|
(5,682 |
) |
Interest income |
966 |
|
|
188 |
|
|
2,080 |
|
|
308 |
|
Income/(loss) before income taxes |
38,661 |
|
|
(3,609 |
) |
|
56,632 |
|
|
5,785 |
|
Income taxes |
9,561 |
|
|
(242 |
) |
|
7,890 |
|
|
2,761 |
|
Net income/(loss) |
$ |
29,100 |
|
|
$ |
(3,367 |
) |
|
$ |
48,742 |
|
|
$ |
3,024 |
|
|
|
|
|
|
|
|
|
Basic income per
common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income/(loss) per common share -- basic |
$ |
0.34 |
|
|
$ |
(0.04 |
) |
|
$ |
0.56 |
|
|
$ |
0.04 |
|
Diluted income per
common share: |
|
|
|
|
|
|
|
Net
income/(loss) per common share -- diluted |
$ |
0.33 |
|
|
$ |
(0.04 |
) |
|
$ |
0.55 |
|
|
$ |
0.04 |
|
Weighted average
shares: |
|
|
|
|
|
|
|
Basic |
85,956 |
|
|
83,231 |
|
|
86,524 |
|
|
83,222 |
|
Diluted |
87,858 |
|
|
83,231 |
|
|
88,843 |
|
|
84,837 |
|
|
|
|
|
|
|
|
|
|
|
|
|
HMS HOLDINGS CORP. AND
SUBSIDIARIESCONSOLIDATED BALANCE
SHEETS(in thousands, except share and per share
amounts)
|
June 30, 2019 |
|
December 31, 2018 |
Assets |
(unaudited) |
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
268,677 |
|
|
$ |
178,946 |
|
Accounts receivable, net of
allowance of $12,808 and $13,683, at June 30, 2019 and December 31,
2018, respectively |
199,932 |
|
|
206,772 |
|
Prepaid expenses |
20,348 |
|
|
19,970 |
|
Income tax receivable |
9,431 |
|
|
18,817 |
|
Deferred financing costs,
net |
564 |
|
|
564 |
|
Other
current assets |
225 |
|
|
240 |
|
Total current assets |
499,177 |
|
|
425,309 |
|
Property and equipment,
net |
86,607 |
|
|
94,435 |
|
Goodwill |
487,617 |
|
|
487,617 |
|
Intangible assets, net |
62,463 |
|
|
67,140 |
|
Operating lease right-of-use
assets |
18,940 |
|
|
— |
|
Deferred financing costs,
net |
1,391 |
|
|
1,673 |
|
Other
assets |
3,544 |
|
|
2,344 |
|
Total assets |
$ |
1,159,739 |
|
|
$ |
1,078,518 |
|
|
|
|
|
Liabilities and
Shareholders' Equity |
|
|
|
Current liabilities: |
|
|
|
Accounts payable, accrued
expenses and other liabilities |
$ |
71,330 |
|
|
$ |
74,902 |
|
Estimated liability for
appeals |
2,948 |
|
|
21,723 |
|
Total current liabilities |
74,278 |
|
|
96,625 |
|
Long-term liabilities: |
|
|
|
Revolving credit facility |
240,000 |
|
|
240,000 |
|
Operating lease
liabilities |
17,245 |
|
|
— |
|
Net deferred tax
liabilities |
23,073 |
|
|
18,485 |
|
Other liabilities |
7,173 |
|
|
10,012 |
|
Total long-term liabilities |
287,491 |
|
|
268,497 |
|
Total liabilities |
361,769 |
|
|
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;101,014,406 shares issued and
87,350,498 shares outstanding at June 30, 2019; 98,924,501 shares
issued and 85,261,664 shares outstanding at December 31, 2018 |
1,010 |
|
|
989 |
|
Capital in excess of par
value |
461,559 |
|
|
425,748 |
|
Retained earnings |
470,977 |
|
|
422,235 |
|
Treasury stock, at cost:
13,663,194 shares at June 30, 2019 and December 31, 2018 |
(135,576 |
) |
|
(135,576 |
) |
Total shareholders' equity |
797,970 |
|
|
713,396 |
|
Total liabilities and shareholders' equity |
$ |
1,159,739 |
|
|
$ |
1,078,518 |
|
|
|
|
|
|
|
|
|
HMS HOLDINGS CORP. AND
SUBSIDIARIESCONSOLIDATED STATEMENT OF CASH
FLOWS(in
thousands)(unaudited)
|
Six Months Ended June 30, |
|
2019 |
|
2018 |
Operating
activities: |
|
|
|
Net
income |
$ |
48,742 |
|
|
$ |
3,024 |
|
Adjustments to reconcile net
income to net cash provided by operating activities: |
|
|
|
Depreciation and amortization
of property, equipment and software |
15,989 |
|
|
16,758 |
|
Amortization of intangible
assets |
4,677 |
|
|
12,774 |
|
Amortization of deferred
financing costs |
282 |
|
|
282 |
|
Stock-based compensation
expense |
15,781 |
|
|
14,208 |
|
Deferred income taxes |
4,588 |
|
|
(3,900 |
) |
Noncash lease expense |
2,366 |
|
|
— |
|
Release of estimated liability
for appeals, net |
(10,478 |
) |
|
(8,436 |
) |
Changes in operating assets
and liabilities: |
|
|
|
Accounts receivable |
(2,062 |
) |
|
(3,654 |
) |
Prepaid expenses |
(378 |
) |
|
63 |
|
Other current assets |
15 |
|
|
570 |
|
Other assets |
(1,200 |
) |
|
(29 |
) |
Income taxes receivable |
9,386 |
|
|
(5,324 |
) |
Accounts payable, accrued
expenses and other liabilities |
(7,235 |
) |
|
(2,546 |
) |
Operating lease
liabilities |
(2,952 |
) |
|
— |
|
Estimated liability for appeals |
605 |
|
|
(99 |
) |
Net cash provided by operating activities |
78,126 |
|
|
23,691 |
|
Investing
activities: |
|
|
|
Purchases of property and
equipment |
(945 |
) |
|
(2,455 |
) |
Investment in capitalized software |
(7,465 |
) |
|
(10,173 |
) |
Net cash used in investing activities |
(8,410 |
) |
|
(12,628 |
) |
Financing
activities: |
|
|
|
Proceeds from exercise of
stock options |
26,998 |
|
|
2,390 |
|
Payments of tax withholdings
on behalf of employees for net-share settlements |
(6,947 |
) |
|
(2,684 |
) |
Payments on capital lease
obligations |
(36 |
) |
|
— |
|
Purchases of treasury stock |
— |
|
|
(5,955 |
) |
Net cash provided by/(used in) financing
activities |
20,015 |
|
|
(6,249 |
) |
Net increase in cash and cash equivalents |
89,731 |
|
|
4,814 |
|
Cash and Cash
Equivalents |
|
|
|
Cash
and cash equivalents at beginning of year |
178,946 |
|
|
83,313 |
|
Cash and cash equivalents at end of period |
$ |
268,677 |
|
|
$ |
88,127 |
|
|
|
|
|
Supplemental
disclosure of cash flow information: |
|
|
|
Cash
(refunds received)/paid for income taxes, net of refunds |
$ |
(6,509 |
) |
|
$ |
11,472 |
|
Cash
paid for interest |
$ |
5,524 |
|
|
$ |
4,916 |
|
|
|
|
|
Supplemental
disclosure of non-cash activities: |
|
|
|
Change
in balance of accrued property and equipment purchases |
$ |
250 |
|
|
$ |
1,082 |
|
|
|
|
|
|
|
|
|
HMS HOLDINGS CORP. AND
SUBSIDIARIES(unaudited)
Reconciliation of Net Income to EBITDA and Adjusted
EBITDA
|
Three Months Ended |
(in
thousands, except percentages) |
June 30, 2019 |
|
June 30, 2018 |
Net income/(loss) |
$ |
29,100 |
|
|
$ |
(3,367 |
) |
|
|
|
|
Net interest expense |
1,887 |
|
|
2,846 |
|
Income taxes |
9,561 |
|
|
(242 |
) |
Depreciation and amortization of property and equipment and
intangible assets |
10,397 |
|
|
16,066 |
|
Earnings before interest,
taxes, depreciation and amortization (EBITDA) |
50,945 |
|
|
15,303 |
|
Stock-based compensation
expense |
4,802 |
|
|
4,714 |
|
Settlement expense |
— |
|
|
20,000 |
|
Adjusted EBITDA |
$ |
55,747 |
|
|
$ |
40,017 |
|
% of Revenue |
33.1 |
% |
|
27.3 |
% |
Adjusted EBITDA, excluding 2Q 2019 Reserve Release |
$ |
47,547 |
|
|
$ |
40,017 |
|
% of Revenue |
30.1 |
% |
|
27.3 |
% |
|
Six Months Ended |
(in
thousands, except percentages) |
June 30, 2019 |
|
June 30, 2018 |
Net income |
$ |
48,742 |
|
|
$ |
3,024 |
|
|
|
|
|
Net interest expense |
3,622 |
|
|
$ |
5,374 |
|
Income taxes |
7,890 |
|
|
$ |
2,761 |
|
Depreciation and amortization of property and equipment and
intangible assets |
20,666 |
|
|
29,532 |
|
Earnings before interest,
taxes, depreciation and amortization (EBITDA) |
80,920 |
|
|
40,691 |
|
Stock-based compensation
expense |
15,781 |
|
|
14,208 |
|
Settlement expense |
— |
|
|
20,000 |
|
Adjusted EBITDA |
$ |
96,701 |
|
|
$ |
74,899 |
|
% of Revenue |
30.6 |
% |
|
26.0 |
% |
Adjusted EBITDA, excluding Reserve Releases |
$ |
88,501 |
|
|
$ |
68,599 |
|
% of Revenue |
29.0 |
% |
|
24.5 |
% |
|
|
|
|
|
|
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) |
June 30, 2019 |
|
June 30, 2018 |
Net income/(loss) |
$ |
29,100 |
|
|
$ |
(3,367 |
) |
|
|
|
|
Stock-based compensation
expense |
4,802 |
|
|
4,714 |
|
Settlement expense |
— |
|
|
20,000 |
|
Amortization of acquisition
related software and intangible assets |
4,166 |
|
|
9,621 |
|
Income tax related to
adjustments¹ |
(2,385 |
) |
|
(10,404 |
) |
|
|
|
|
Adjusted net income |
$ |
35,683 |
|
|
$ |
20,564 |
|
|
|
|
|
Weighted average common shares, diluted |
|
87,858 |
|
|
|
83,231 |
|
|
|
|
|
Diluted GAAP EPS² |
$ |
0.33 |
|
|
$ |
(0.04 |
) |
Diluted adjusted EPS² |
$ |
0.41 |
|
|
$ |
0.25 |
|
|
|
|
|
Reserve release benefit³ |
$ |
0.07 |
|
|
$ |
— |
|
Diluted adjusted EPS excluding 2Q 2019 Reserve Release |
$ |
0.34 |
|
|
$ |
0.25 |
|
|
Six Months Ended |
(in thousands, except per
share amounts) |
June 30, 2019 |
|
June 30, 2018 |
Net income |
$ |
48,742 |
|
|
$ |
3,024 |
|
|
|
|
|
Stock-based compensation
expense |
15,781 |
|
|
14,208 |
|
Settlement expense |
— |
|
|
20,000 |
|
Amortization of acquisition
related software and intangible assets |
8,332 |
|
|
17,753 |
|
Income tax related to
adjustments¹ |
(6,414 |
) |
|
(15,744 |
) |
|
|
|
|
Adjusted net income |
$ |
66,441 |
|
|
$ |
39,241 |
|
|
|
|
|
Weighted average common shares, diluted |
|
88,843 |
|
|
|
84,837 |
|
|
|
|
|
Diluted GAAP EPS² |
$ |
0.55 |
|
|
$ |
0.04 |
|
Diluted adjusted EPS² |
$ |
0.75 |
|
|
$ |
0.46 |
|
|
|
|
|
Discrete tax benefits |
$ |
0.07 |
|
|
$ |
— |
|
Reserve release benefit³ |
$ |
0.07 |
|
|
$ |
0.05 |
|
Diluted adjusted EPS excluding Reserve Releases and discrete tax
benefits |
$ |
0.61 |
|
|
$ |
0.41 |
|
(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 discrete
tax benefits of $0.07 per diluted share for the six months ended
June 30, 2019 primarily related to the exercise of employee stock
options, and $0.07 related to the reserve release benefit for the
three and six months ended June 30, 2019 and $0.05 related to the
reserve release benefit for the six months ended June 30, 2018.
(3) The reserve release benefit of $0.07 for the three and six
months ended June 30, 2019 are net of income tax of approximately
$0.03, and the reserve release benefit of $0.05 for the six months
ended June 30, 2018 is net of income tax of approximately
$0.02.
HMS HOLDINGS CORP. AND
SUBSIDIARIES(unaudited)
Reconciliation of Net Income to EBITDA and Adjusted
EBITDA (Trailing twelve months)
|
Trailing Twelve Months Ended |
(in
thousands, except percentages) |
June 30, 2019 |
|
June 30, 2018 |
Net income |
$ |
100,707 |
|
|
$ |
35,119 |
|
|
|
|
|
Net interest expense |
8,469 |
|
|
11,513 |
|
Income taxes |
3,157 |
|
|
(3,346 |
) |
Depreciation and amortization of property and equipment and
intangible assets |
48,730 |
|
|
56,935 |
|
Earnings before interest,
taxes, depreciation and amortization (EBITDA) |
161,063 |
|
|
100,221 |
|
Stock-based compensation
expense |
23,080 |
|
|
28,971 |
|
Settlement expense |
— |
|
|
20,000 |
|
Adjusted EBITDA |
$ |
184,143 |
|
|
$ |
149,192 |
|
|
|
|
|
|
|
|
|
Reconciliation of Total Debt to Net Leverage
Ratio
(in
thousands) |
June 30, 2019 |
|
June 30, 2018 |
Total Debt (revolving credit facility) |
$ |
240,000 |
|
|
$ |
240,000 |
|
Cash and cash
equivalents |
(268,677 |
) |
|
(88,127 |
) |
Total net debt 4 |
$ |
(28,677 |
) |
|
$ |
151,873 |
|
|
|
|
|
Net
income 5 |
$ |
100,707 |
|
|
$ |
35,119 |
|
Adjusted EBITDA 6 |
$ |
184,143 |
|
|
$ |
149,192 |
|
Net
leverage ratio 7 |
(0.16 |
) |
|
|
1.02 |
|
(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) |
June 30, 2019 |
|
June 30, 2018 |
Net cash provided by operating activities |
$ |
49,604 |
|
|
$ |
8,954 |
|
Purchases of property and
equipment |
(576 |
) |
|
(1,664 |
) |
Investment in capitalized software |
(3,844 |
) |
|
(5,210 |
) |
|
|
|
|
Non-GAAP free cash flow |
$ |
45,184 |
|
|
$ |
2,080 |
|
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 |
$ |
85 |
|
|
$ |
90 |
|
|
$ |
64 |
|
|
$ |
70 |
|
|
|
|
|
|
|
|
|
Net interest expense |
$ |
10 |
|
|
$ |
10 |
|
|
$ |
12 |
|
|
$ |
12 |
|
Income taxes |
$ |
24 |
|
|
$ |
24 |
|
|
$ |
28 |
|
|
$ |
27 |
|
Depreciation and amortization of property and equipment and
intangible assets |
$ |
44 |
|
|
$ |
44 |
|
|
$ |
44 |
|
|
$ |
44 |
|
Earnings before interest,
taxes, depreciation and amortization (EBITDA) |
$ |
163 |
|
|
$ |
168 |
|
|
$ |
148 |
|
|
$ |
153 |
|
Stock-based compensation
expense |
$ |
22 |
|
|
$ |
22 |
|
|
$ |
22 |
|
|
$ |
22 |
|
Adjusted EBITDA |
$ |
185 |
|
|
$ |
190 |
|
|
$ |
170 |
|
|
$ |
175 |
|
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