HMS Holdings Corp. (Nasdaq: HMSY) today
announced financial results for the fourth quarter and full year
ended December 31, 2019.
“HMS posted solid revenue and profit growth in
full year 2019, with revenue increasing 4.7%, net income rising
58.5% and adjusted EBITDA increasing 10.6% from the prior year,
along with record operating cash flow performance,” said Bill
Lucia, Chairman and CEO. “While our business can experience
quarterly variability, on an annual basis we continue to experience
top and bottom line growth driven by our product innovation,
application of new technologies and expansion within both current
and new clients.
“We expect our growth in 2020 will be fueled by
investments in sales talent, technology, data analytics and product
development as well as the strategic acquisitions completed last
year as we deliver increasing value to our expanding client base
this year and in the future,” Lucia concluded.
Fourth Quarter
Total revenue in the fourth quarter of 2019 was
$163.4 million, compared to total revenue of $155.8 million in the
fourth quarter of 2018 (+4.9%).
Coordination of Benefits (COB) revenue was $98.6
million in the fourth quarter of 2019 compared to $98.9 million in
the fourth quarter of 2018 (-0.3%). Payment Integrity (PI) revenue
was $48.4 million in the fourth quarter of 2019, compared to $40.9
million in the fourth quarter of 2018 (+18.3%). Population Health
Management (PHM) revenue was $16.6 million in the fourth quarter of
2019, compared to $16.0 million in the prior year fourth quarter
(+3.8%).
Net income in the fourth quarter of 2019 was
$17.3 million, or $0.20 per diluted share, compared to net income
of $33.4 million, or $0.38 per diluted share, in the fourth quarter
of 2018.
Adjusted EBITDA in the fourth quarter of 2019
was $42.3 million, compared to $46.1 million in the fourth quarter
of 2018 (-8.2%).
Adjusted EPS in the fourth quarter of 2019 was
$0.27 per diluted share, compared to adjusted EPS of $0.48 per
diluted share in the fourth quarter of 2018, which included
discrete tax benefits of $0.17 per diluted share. Excluding the
discrete tax benefits, adjusted EPS in the fourth quarter of 2018
was $0.31 per diluted share.
Full Year
Total revenue for the twelve months ended
December 31, 2019 was $626.4 million, compared to $598.3 million in
the prior year (+4.7%). For the twelve months ended December 31,
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
twelve months ended December 31, 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 4.4% compared to the prior
year.
COB revenue for the twelve months ended December
31, 2019 was $404.1 million, compared to $397.1 million in the
prior year (+1.8%). PI revenue for the twelve months ended December
31, 2019 was $162.2 million, compared to $144.0 million in the
prior year (+12.6%). Excluding the Reserve Releases, PI revenue
increased 11.9% compared to the prior year. PHM revenue for the
twelve months ended December 31, 2019 was $60.1 million, compared
to $57.1 million in the prior year (+5.2%).
Net income for the twelve months ended December
31, 2019 was $87.2 million, or $0.98 per diluted share, compared to
$55.0 million, or $0.64 per diluted share, in the prior year. For
the twelve months ended December 31, 2019, net income included
$0.07 per diluted share related to the 2Q 2019 Reserve Release, 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"), and
discrete tax benefits recorded in the first quarter totaling $0.07
per diluted share. For the twelve months ended December 31,
2018, net income included a net benefit of $0.05 per diluted share
related to the 1Q 2018 Reserve Release, discrete tax benefits
recorded during the year totaling $0.19 per diluted share and 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 twelve months ended
December 31, 2019 was $179.6 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
$162.3 million in the prior year (+10.6%), including a net benefit
of $6.3 million related to the 1Q 2018 Reserve Release. Excluding
those benefits, Adjusted EBITDA increased 4.9% compared to the
prior year.
Adjusted EPS for the twelve months ended
December 31, 2019 was $1.32 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
discrete tax benefits recorded in the first quarter totaling $0.07
per diluted share. Adjusted EPS was $1.28 per diluted share in the
prior year, including a net benefit of $0.05 per diluted share
related to the 1Q 2018 Reserve Release and discrete tax benefits
recorded during the year totaling $0.19 per diluted share.
Excluding the 2Q 2019 Reserve Release, the 3Q 2019 Gain on
Investment, discrete tax items in 2019 and 2018, and the 1Q 2018
Reserve Release, adjusted EPS for the twelve months ended December
31, 2019 was $1.12 per diluted share, compared to $1.04 per diluted
share in the prior year (+7.7%).
Cash Flow and Capital
Resources
Net cash provided by operating activities for
the twelve months ended December 31, 2019 was a record $133.2
million compared to $96.5 million in the prior year (+38.1%).
Capital expenditures were $21.6 million for the twelve months ended
December 31, 2019, compared to $30.4 million in the prior year
(-28.9%).
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. During the fourth quarter of
2019, the Company acquired Accent, a payment accuracy and cost
containment business. HMS acquired Accent for approximately $158.6
million, which was funded with cash on hand.
The Company's balance sheet at December 31, 2019
included $139.3 million of cash and cash equivalents and $240.0
million in outstanding bank debt, compared to cash and cash
equivalents of $178.9 million and outstanding bank debt of $240.0
million at December 31, 2018.
Financial Guidance
The Company initiated its full year 2020
financial guidance, as follows:
($ in millions) |
Reported FY 2019 |
|
Adjusted FY 2019 |
|
FY 2020 Guidance |
Y - Y % Change from Adjusted FY 2019 |
Total Revenue |
$ |
626 |
|
$ |
616 |
(1 |
) |
$ 705 - 715 |
14.5 - 16.2% |
Net Income |
$ |
87 |
|
$ |
69 |
(2 |
) |
$ 76 - 80 |
10.1 - 15.9% |
Adjusted EBITDA |
$ |
180 |
|
$ |
164 |
(3 |
) |
$ 185 - 192 |
12.8 - 17.1% |
(1) Reported FY 2019 revenue includes $10.5
million related to the 2Q 2019 Reserve Release. Including the 2Q
2019 Reserve Release, total FY 2020 revenue growth is expected to
be 12.6 - 14.2%. Excluding the 2Q 2019 Reserve Release, then
total FY 2020 revenue growth is expected to be 14.5 - 16.2%.
(2) Reported FY 2019 net income includes $6.0
million related to the 2Q 2019 Reserve Release, $5.6 million
related to the 3Q 2019 Gain on Investment and $6.5 million related
to discrete tax benefits. Including the 2Q 2019 Reserve Release, 3Q
2019 Gain on Investment and discrete tax benefits, then FY 2020 net
income growth is expected to be (12.6) - (8.0)%. Excluding the 2Q
2019 Reserve Release and 3Q 2019 Gain on Investment, net
income growth is expected to be 10.1 - 15.9%.
(3) Reported 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. Including the 2Q 2019
Reserve Release and 3Q 2019 Gain on Investment, adjusted
EBITDA growth is expected to be 2.8 - 6.7%. Excluding the 2Q 2019
Reserve Release and 3Q 2019 Gain on Investment, then FY 2020
adjusted EBITDA growth is expected to be 12.8 - 17.1%.
Key assumptions underlying the Company's full
year 2020 financial guidance include:
- Depreciation and amortization of approximately $51 million
- Stock-based compensation expense of approximately $23
million
- Net interest expense of approximately $6 million
- An effective tax rate of 28-30%
- Capital expenditures of approximately $30-35 million
Webcast and Conference Call
Information
HMS will report its preliminary fourth quarter
and full year 2019 financial and operating results via webcast at
7:30 AM CT / 8:30 AM ET on Friday, February 21, 2020. 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-K 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,” variations of such terms 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 full year guidance for 2020. 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, strategic
relationship and divestiture opportunities we are pursuing, and our
ability to execute on such opportunities; our ability to
successfully integrate acquired businesses and realize synergies;
significant and increased 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 secure future 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; changes in tax laws,
regulations or guidance or 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; risks
relating to our international operations, including political,
regulatory, economic, foreign exchange, cybersecurity, tax
compliance and other risks; 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, domestically or internationally, 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 December 31, |
|
Twelve Months Ended December 31, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Revenue |
$ |
163,445 |
|
|
$ |
155,828 |
|
|
$ |
626,395 |
|
|
$ |
598,290 |
|
Cost of services: |
|
|
|
|
|
|
|
Compensation |
59,288 |
|
|
55,438 |
|
|
231,321 |
|
|
224,893 |
|
Direct project and other
operating expenses |
26,376 |
|
|
20,511 |
|
|
90,069 |
|
|
74,346 |
|
Information technology |
14,323 |
|
|
13,946 |
|
|
53,950 |
|
|
53,428 |
|
Occupancy |
4,100 |
|
|
4,071 |
|
|
16,375 |
|
|
15,968 |
|
Amortization of acquisition
related software and intangible assets |
4,509 |
|
|
7,280 |
|
|
16,999 |
|
|
32,975 |
|
Total cost of services |
108,596 |
|
|
101,246 |
|
|
408,714 |
|
|
401,610 |
|
Selling, general and
administrative expenses |
29,151 |
|
|
26,734 |
|
|
114,665 |
|
|
113,442 |
|
Settlement expense |
— |
|
|
— |
|
|
— |
|
|
20,000 |
|
Total operating expenses |
137,747 |
|
|
127,980 |
|
|
523,379 |
|
|
535,052 |
|
Operating income |
25,698 |
|
|
27,848 |
|
|
103,016 |
|
|
63,238 |
|
Interest expense |
(2,634 |
) |
|
(2,748 |
) |
|
(11,013 |
) |
|
(11,310 |
) |
Interest income |
857 |
|
|
489 |
|
|
4,148 |
|
|
1,089 |
|
Other income |
514 |
|
|
— |
|
|
8,211 |
|
|
— |
|
Income before income taxes |
24,435 |
|
|
25,589 |
|
|
104,362 |
|
|
53,017 |
|
Income taxes |
7,089 |
|
|
(7,802 |
) |
|
17,138 |
|
|
(1,972 |
) |
Net income |
17,346 |
|
|
33,391 |
|
|
$ |
87,224 |
|
|
$ |
54,989 |
|
|
|
|
|
|
|
|
|
Basic income per common
share: |
|
|
|
|
|
|
|
Net income per common share —
basic |
$ |
0.20 |
|
|
$ |
0.40 |
|
|
$ |
1.00 |
|
|
$ |
0.66 |
|
Diluted income per common share: |
|
|
|
|
|
|
|
Net income per common share —
diluted |
$ |
0.20 |
|
|
$ |
0.38 |
|
|
$ |
0.98 |
|
|
$ |
0.64 |
|
Weighted average shares: |
|
|
|
|
|
|
|
Basic |
86,328 |
|
|
83,983 |
|
|
87,222 |
|
|
83,625 |
|
Diluted |
87,987 |
|
|
87,521 |
|
|
89,317 |
|
|
86,144 |
|
HMS HOLDINGS CORP. AND
SUBSIDIARIESCONSOLIDATED BALANCE
SHEETS(in thousands, except share and per share
amounts)(unaudited)
|
December 31, 2019 |
|
December 31, 2018 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
139,268 |
|
|
$ |
178,946 |
|
Accounts receivable, net |
223,443 |
|
|
206,772 |
|
Prepaid expenses and other
current assets |
30,925 |
|
|
20,210 |
|
Income tax receivable |
3,210 |
|
|
18,817 |
|
Deferred financing costs,
net |
564 |
|
|
564 |
|
Total current assets |
397,410 |
|
|
425,309 |
|
Property and equipment, net |
86,947 |
|
|
94,435 |
|
Goodwill |
599,351 |
|
|
487,617 |
|
Intangible assets, net |
131,849 |
|
|
67,140 |
|
Operating lease right-of-use
assets |
17,493 |
|
|
— |
|
Deferred financing costs,
net |
1,109 |
|
|
1,673 |
|
Other assets |
10,117 |
|
|
2,344 |
|
Total assets |
$ |
1,244,276 |
|
|
$ |
1,078,518 |
|
|
|
|
|
Liabilities and
Shareholders' Equity |
|
|
|
Current liabilities: |
|
|
|
Accounts payable, accrued
expenses and other liabilities |
$ |
97,747 |
|
|
$ |
74,902 |
|
Liability for appeals |
3,570 |
|
|
21,723 |
|
Total current liabilities |
101,317 |
|
|
96,625 |
|
Long-term liabilities: |
|
|
|
Revolving credit facility |
240,000 |
|
|
240,000 |
|
Operating lease
liabilities |
14,881 |
|
|
— |
|
Net deferred tax
liabilities |
25,587 |
|
|
18,485 |
|
Other liabilities |
7,626 |
|
|
10,012 |
|
Total long-term liabilities |
288,094 |
|
|
268,497 |
|
Total liabilities |
389,411 |
|
|
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;101,766,468, shares issued and
88,103,566 shares outstanding at December 31, 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 |
479,964 |
|
|
425,748 |
|
Retained earnings |
509,459 |
|
|
422,235 |
|
Treasury stock, at cost:
13,663,194 shares at December 31, 2019 and 13,663,194 shares at
December 31, 2018 |
(135,576 |
) |
|
(135,576 |
) |
|
|
|
|
Total shareholders' equity |
854,865 |
|
|
713,396 |
|
|
|
|
|
Total liabilities and shareholders' equity |
$ |
1,244,276 |
|
|
$ |
1,078,518 |
|
HMS HOLDINGS CORP. AND
SUBSIDIARIESCONSOLIDATED STATEMENT OF CASH
FLOWS(in thousands, unaudited)
|
Years Ended December 31, |
|
2019 |
|
2018 |
|
2017 |
Operating activities: |
|
|
|
|
|
Net income |
$ |
87,224 |
|
|
$ |
54,989 |
|
|
$ |
40,054 |
|
Adjustments to reconcile net
income to net cash provided by operating activities: |
|
|
|
|
|
Depreciation and amortization of
property, equipment and software |
33,293 |
|
|
33,254 |
|
|
27,724 |
|
Amortization of intangible
assets |
9,691 |
|
|
24,342 |
|
|
22,555 |
|
Amortization of deferred
financing costs |
564 |
|
|
564 |
|
|
2,258 |
|
Gain on sale of cost basis
investment |
(7,697 |
) |
|
— |
|
|
— |
|
Stock-based compensation
expense |
21,901 |
|
|
21,507 |
|
|
24,143 |
|
Deferred income taxes |
7,290 |
|
|
(3,504 |
) |
|
(20,409 |
) |
Noncash lease expense |
4,133 |
|
|
— |
|
|
— |
|
Change in fair value of
contingent consideration |
— |
|
|
(35 |
) |
|
(2,865 |
) |
Release of estimated liability
for appeals, net |
(10,478 |
) |
|
(8,436 |
) |
|
— |
|
Changes in operating assets and
liabilities: |
|
|
|
|
|
Accounts receivable |
(16,292 |
) |
|
(17,312 |
) |
|
(6,976 |
) |
Prepaid expenses and other
current assets |
(10,487 |
) |
|
(2,785 |
) |
|
(1,298 |
) |
Other assets |
(2,173 |
) |
|
245 |
|
|
124 |
|
Income taxes receivable /
(payable) |
15,607 |
|
|
(16,925 |
) |
|
1,462 |
|
Accounts payable, accrued
expenses and other liabilities |
4,744 |
|
|
11,181 |
|
|
(340 |
) |
Operating lease liabilities |
(5,315 |
) |
|
— |
|
|
— |
|
Liability for appeals |
1,227 |
|
|
(628 |
) |
|
32 |
|
Net cash provided by operating activities |
133,232 |
|
|
96,457 |
|
|
86,464 |
|
Investing activities: |
|
|
|
|
|
Acquisition of businesses, net of
cash acquired |
(185,790 |
) |
|
— |
|
|
(171,321 |
) |
Proceeds from sale of cost basis
investment |
9,776 |
|
|
— |
|
|
— |
|
Investment in common stock |
(7,421 |
) |
|
— |
|
|
— |
|
Purchases of property and
equipment |
(8,276 |
) |
|
(11,264 |
) |
|
(17,318 |
) |
Investment in capitalized
software |
(13,348 |
) |
|
(19,149 |
) |
|
(15,725 |
) |
Net cash used in investing activities |
(205,059 |
) |
|
(30,413 |
) |
|
(204,364 |
) |
Financing activities: |
|
|
|
|
|
Proceeds from credit
facility |
— |
|
|
— |
|
|
42,204 |
|
Payments for deferred financing
costs |
— |
|
|
— |
|
|
(2,269 |
) |
Proceeds from exercise of stock
options |
39,332 |
|
|
38,362 |
|
|
2,720 |
|
Payments of tax withholdings on
behalf of employees for net-share settlements |
(6,988 |
) |
|
(2,818 |
) |
|
(3,161 |
) |
Payments on capital lease
obligations |
(195 |
) |
|
— |
|
|
(143 |
) |
Purchases of treasury stock |
— |
|
|
(5,955 |
) |
|
(14,137 |
) |
Net cash provided by financing activities |
32,149 |
|
|
29,589 |
|
|
25,214 |
|
Net (decrease)/increase in cash and cash
equivalents |
(39,678 |
) |
|
95,633 |
|
|
92,686 |
|
Cash and Cash Equivalents |
|
|
|
|
|
Cash and cash equivalents at
beginning of year |
178,946 |
|
|
83,313 |
|
|
175,999 |
|
Cash and cash equivalents at end of period |
$ |
139,268 |
|
|
$ |
178,946 |
|
|
$ |
83,313 |
|
Supplemental disclosure of cash flow
information: |
|
|
|
|
|
Cash (refunds received)/paid for
income taxes, net of refunds |
$ |
(5,298 |
) |
|
$ |
22,225 |
|
|
$ |
17,995 |
|
Cash paid for interest |
$ |
10,457 |
|
|
$ |
10,326 |
|
|
$ |
9,944 |
|
Supplemental disclosure of non-cash
activities: |
|
|
|
|
|
Change in balance of accrued property and equipment purchases |
$ |
(1,303 |
) |
|
$ |
1,305 |
|
|
$ |
51 |
|
HMS HOLDINGS CORP. AND
SUBSIDIARIES(unaudited)
Reconciliation of Net Income to EBITDA and Adjusted
EBITDA
|
Three Months Ended |
(in thousands, except
percentages) |
December 31, 2019 |
|
December 31, 2018 |
Net income |
$ |
17,346 |
|
|
$ |
33,391 |
|
|
|
|
|
|
Net interest expense |
1,777 |
|
|
2,259 |
|
|
Income taxes |
7,089 |
|
|
(7,802 |
) |
|
Depreciation and amortization
of property and equipment and intangible assets |
11,256 |
|
|
14,376 |
|
|
Earnings before interest, taxes, depreciation and amortization
(EBITDA) |
37,468 |
|
|
42,224 |
|
|
Stock-based compensation
expense |
3,186 |
|
|
3,862 |
|
|
Transaction and integration
costs |
1,638 |
|
|
— |
|
|
Adjusted EBITDA |
$ |
42,292 |
|
|
$ |
46,086 |
|
|
% of Revenue |
25.9 |
% |
|
29.6 |
|
% |
|
Twelve Months Ended |
(in thousands, except
percentages) |
December 31, 2019 |
|
December 31, 2018 |
Net income |
$ |
87,224 |
|
|
$ |
54,989 |
|
|
|
|
|
|
Net interest expense |
6,865 |
|
|
10,221 |
|
|
Income taxes |
17,138 |
|
|
(1,972 |
) |
|
Depreciation and amortization
of property and equipment and intangible assets |
42,984 |
|
|
57,596 |
|
|
Earnings before interest, taxes, depreciation and amortization
(EBITDA) |
154,211 |
|
|
120,834 |
|
|
Stock-based compensation
expense |
21,901 |
|
|
21,507 |
|
|
Transaction and integration
costs |
3,489 |
|
|
— |
|
|
Settlement Expense |
— |
|
|
20,000 |
|
|
Adjusted EBITDA |
$ |
179,601 |
|
|
$ |
162,341 |
|
|
% of Revenue |
28.7 |
% |
|
27.1 |
|
% |
Adjusted EBITDA, excluding
Reserve Releases and 3Q 2019 Gain on Investment |
$ |
163,701 |
|
|
$ |
156,041 |
|
|
% of Revenue |
26.6 |
% |
|
26.4 |
|
% |
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) |
December 31, 2019 |
|
December 31, 2018 |
Net income |
$ |
17,346 |
|
|
$ |
33,391 |
|
|
|
|
|
Stock-based compensation
expense |
3,186 |
|
|
3,862 |
|
Transaction and integration
costs |
1,638 |
|
|
— |
|
Amortization of acquisition
related software and intangible assets |
4,509 |
|
|
7,280 |
|
Income tax related to adjustments¹ |
(2,595 |
) |
|
(2,262 |
) |
|
|
|
|
Adjusted net income |
$ |
24,084 |
|
|
$ |
42,271 |
|
|
|
|
|
Weighted average common shares, diluted |
87,987 |
|
|
87,521 |
|
|
|
|
|
Diluted GAAP EPS² |
$ |
0.20 |
|
|
$ |
0.38 |
|
Diluted adjusted EPS² |
$ |
0.27 |
|
|
$ |
0.48 |
|
|
|
|
|
Discrete tax benefits |
$ |
— |
|
|
$ |
0.17 |
|
Diluted adjusted EPS excluding discrete tax benefits |
$ |
0.27 |
|
|
$ |
0.31 |
|
|
Twelve Months Ended |
(in thousands, except per
share amounts) |
December 31, 2019 |
|
December 31, 2018 |
Net income |
$ |
87,224 |
|
|
$ |
54,989 |
|
|
|
|
|
Stock-based compensation
expense |
21,901 |
|
|
21,507 |
|
Transaction and integration
costs |
3,489 |
|
|
— |
|
Settlement expense |
— |
|
|
20,000 |
|
Amortization of acquisition
related software and intangible assets |
16,999 |
|
|
32,975 |
|
Income tax related to adjustments¹ |
(11,784 |
) |
|
(19,216 |
) |
|
|
|
|
Adjusted net income |
$ |
117,829 |
|
|
$ |
110,255 |
|
|
|
|
|
Weighted average common shares, diluted |
89,317 |
|
|
86,144 |
|
|
|
|
|
Diluted GAAP EPS² |
$ |
0.98 |
|
|
$ |
0.64 |
|
Diluted adjusted EPS² |
$ |
1.32 |
|
|
$ |
1.28 |
|
|
|
|
|
Discrete tax benefits |
$ |
0.07 |
|
|
$ |
0.19 |
|
Reserve Releases benefit³ |
$ |
0.07 |
|
|
$ |
0.05 |
|
3Q 2019 Gain on Investment³ |
$ |
0.06 |
|
|
$ |
— |
|
Diluted adjusted EPS excluding Reserve Releases, 3Q 2019 Gain on
Investment, and discrete tax benefits |
$ |
1.12 |
|
|
$ |
1.04 |
|
(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 $0.17 per diluted share for the
fourth quarter of 2018. 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, $0.07
per diluted share related to the Reserve Releases benefit and a
$0.06 per diluted share benefit related to the 3Q 2019 Gain on
Investment benefit for the twelve months ended December 31, 2019,
and (ii) discrete tax benefits of $.0.19 per diluted share and
$0.05 per diluted share related to the Reserve Releases benefit for
the twelve months ended December 31, 2018. The discrete tax
benefits recorded in the three months and twelve months ended
December 31, 2018 primarily related to state tax apportionments,
the closure of routine outstanding prior year tax audits, the
exercise of employee stock options, the abandonment of subsidiary
stock related to a 2010 acquisition, and year-end federal and state
tax adjustments or provision true ups.
(3) The Reserve Releases benefit of $0.07 per
diluted share for the twelve months ended December 31, 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
twelve months ended December 31, 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 twelve months ended December 31,
2018 is net of income tax of approximately $0.02 per diluted
share.
HMS HOLDINGS CORP. AND
SUBSIDIARIES(unaudited)
Reconciliation of Total Debt to Net Leverage
Ratio
(in thousands, except
ratios) |
December 31, 2019 |
|
December 31, 2018 |
Total Debt (revolving credit facility) |
$ |
240,000 |
|
|
$ |
240,000 |
|
Cash and cash equivalents |
(139,268 |
) |
|
(178,946 |
) |
Total net debt⁴ |
$ |
100,732 |
|
|
$ |
61,054 |
|
|
|
|
|
Net income⁵ |
$ |
87,224 |
|
|
$ |
54,989 |
|
Adjusted EBITDA⁶ |
$ |
179,601 |
|
|
$ |
162,341 |
|
Net leverage ratio⁷ |
0.56 |
|
|
0.38 |
|
(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
Reconciliation of Net Cash Provided by Operating
Activities to Free Cash Flow
|
Twelve Months Ended |
(In thousands) |
December 31, 2019 |
|
December 31, 2018 |
Net cash provided by operating activities |
$ |
133,232 |
|
|
$ |
96,457 |
|
Purchases of property and
equipment |
(8,276 |
) |
|
(11,264 |
) |
Investment in capitalized
software |
(13,348 |
) |
|
(19,149 |
) |
|
|
|
|
Non-GAAP free cash flow |
$ |
111,608 |
|
|
$ |
66,044 |
|
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 Projected 2020 Net Income to Projected
2020 EBITDA and Adjusted EBITDA
|
Twelve Months Ended December 31, 2020 |
|
Estimated Range |
( in millions) |
Low |
|
High |
Net Income |
$ |
76 |
|
$ |
80 |
|
|
|
|
Net interest expense |
6 |
|
6 |
Income taxes |
29 |
|
32 |
Depreciation and amortization
of property and equipment and intangible assets |
51 |
|
51 |
Earnings before interest, taxes, depreciation and amortization
(EBITDA) |
$ |
162 |
|
$ |
169 |
Stock-based compensation
expense |
23 |
|
23 |
Adjusted EBITDA |
$ |
185 |
|
$ |
192 |
|
|
|
|
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