HMS Holdings Corp. (Nasdaq: HMSY) today announced
financial results for the third quarter ended September 30,
2020.
“HMS experienced a solid rebound in top-line
growth with third quarter revenue increasing 15.8% sequentially
from the second quarter and rising 12.5% -- and 5.2% on an organic
basis -- when compared with the same quarter last year. This
is a testament to our organizational agility and our ability to
continue to deliver strong client value to meet the industry's
evolving needs,” said Bill Lucia, Chairman and CEO. “Our
resilient business has significant financial strength and continues
to generate robust cash flows.
“We remain well positioned for strong
performance in the fourth quarter and into 2021 as we believe
strong cost containment and clinical outcome capabilities should
continue to grow in importance both during and after this health
crisis. This may be crucial in helping States close budget
gaps as they deal with fiscal pressures due to lower revenue and
higher Medicaid costs. In addition, we believe increasing
Medicaid enrollment and improving healthcare utilization and other
trends should be beneficial for the HMS business over the coming
months,” Lucia concluded.
Third Quarter
Total revenue in the third quarter of 2020 was
$165.2 million, compared to total revenue of $146.8 million in the
prior year third quarter (+12.5%). Revenue in the third
quarter of 2020 from the Accent business, which was acquired at the
end of 2019, was $10.7 million. Organic revenue in the third
quarter of 2020, excluding Accent, increased 5.2%.
Coordination of Benefits (COB) revenue was
$113.9 million in the third quarter of 2020 compared to $94.6
million in the prior year third quarter (+20.3%). Organic COB
revenue, excluding Accent, was $103.1 million (+9.0%).
Payment Integrity (PI) revenue was $38.0 million
in the third quarter of 2020, compared to $37.0 million in the
prior year third quarter (+2.6%). Population Health
Management (PHM) revenue was $13.4 million in the third quarter of
2020, compared to $15.2 million in the prior year third quarter
(-11.9%).
Net income in the third quarter of 2020 was
$18.0 million, or $0.20 per diluted share, compared to net income
of $21.1 million, or $0.24 per diluted share, in the third quarter
of 2019. Net income in the third quarter of 2019 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 2020 was
$43.8 million, compared to $40.5 million in the third quarter of
2019, which included a net benefit of $7.7 million related to the
3Q 2019 Gain on Investment (+8.1%). Excluding the impact of
the 3Q 2019 Gain on Investment, adjusted EBITDA in the third
quarter of 2020 increased 33.5% compared to the same period in the
prior year.
Adjusted EPS in the third quarter of 2020 was
$0.30 per diluted share, compared to $0.31 per diluted share in the
third quarter of 2019, which included a net benefit of $0.06 per
diluted share related to the 3Q 2019 Gain on Investment.
Excluding the 3Q 2019 Gain on Investment, adjusted EPS in the third
quarter of 2020 was $0.30 per diluted share, compared to $0.25 per
diluted share in the prior year period (+20.0%).
Nine Months Ended
Total revenue for the nine months ended
September 30, 2020 was $479.3 million, compared to $463.0 million
in the prior year period (+3.5%). For the nine months ended
September 30, 2019, total revenue included $10.5 million in
revenue for the second quarter of 2019 as the Company released its
remaining contract-related balance under its original Medicare RAC
Contract (the "2Q 2019 Reserve Release"). Revenue in the nine
months ended September 30, 2020 from the Accent business was $32.4
million. Excluding the 2Q 2019 Reserve Release and revenue
from the Accent business, total revenue decreased 1.2% compared to
the prior year period.
COB revenue for the nine months ended September
30, 2020 was $338.7 million, compared to $305.6 million in the
prior year period (+10.8%). Organic COB revenue for the nine
months ended September 30, 2020, excluding Accent, was $306.2
million (+0.2%).
PI revenue for the nine months ended September
30, 2020 was $101.7 million, compared to $113.9 million in the
prior year period (-10.7%). Excluding the 2Q 2019 Reserve
Release, total PI revenue for the nine months ended September 30,
2020, decreased 1.6% compared to the prior year period. PHM
revenue for the nine months ended September 30, 2020 was $38.9
million, compared to $43.5 million in the prior year period
(-10.5%).
Net income for the nine months ended September
30, 2020 was $37.3 million, or $0.42 per diluted share, compared to
$69.9 million, or $0.77 per diluted share, in the prior year
period. For the nine months ended September 30, 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 the 3Q 2019 Gain on Investment, and discrete tax benefits
recorded in the first quarter of 2019 totaling $0.07 per diluted
share.
Adjusted EBITDA for the nine months ended
September 30, 2020 was $118.7 million, compared to $137.3 million
in the prior year period (-13.5%), which included 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. Excluding
those benefits, Adjusted EBITDA decreased 2.2% compared to the
prior year period.
Adjusted EPS for the nine months ended September
30, 2020 was $0.81 per diluted share. Adjusted EPS was $1.04
per diluted share in the comparable prior year period, 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 of 2019
totaling $0.07 per diluted share. Excluding the 2Q 2019
Reserve Release, the 3Q 2019 Gain on Investment and discrete tax
benefit in 2019, adjusted EPS for the first nine months of 2020 was
$0.81 per diluted share, compared to $0.84 per diluted share in the
prior year period (-3.6%).
Cash Flow and Capital
Resources
Net cash provided by operating activities for
the nine months ended September 30, 2020 was $93.0 million compared
to $112.9 million in the first nine months of 2019. Capital
expenditures were $21.2 million for the nine months ended September
30, 2020, compared to $16.6 million in the comparable prior year
period.
The Company's balance sheet at
September 30, 2020 included $211.0 million of cash and cash
equivalents and $240.0 million in outstanding bank debt, compared
to cash and cash equivalents of $139.3 million and outstanding bank
debt of $240.0 million at December 31, 2019.
Financial Guidance
The Company's full year 2020 financial guidance
was unchanged from its previous quarterly earnings release, as
follows:
($ in
millions) |
Reported FY 2019 |
|
Adjusted FY 2019 |
|
FY 2020 Guidance |
|
Y - Y % Change from Adjusted FY 2019 |
Total Revenue |
$ |
626 |
|
|
$ |
616 |
|
(1) |
$ 680 - 690 |
|
10.5 - 12.1% |
Net Income |
$ |
87 |
|
|
$ |
69 |
|
(2) |
$ 66 - 74 |
|
(4.3) - 7.2% |
Adjusted EBITDA |
$ |
180 |
|
|
$ |
164 |
|
(3) |
$ 177 - 187 |
|
7.9 - 14.0% |
(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 8.6 - 10.2%. Excluding the 2Q 2019 Reserve Release", then
total FY 2020 revenue growth is expected to be 10.5 - 12.1%.
(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 (24.1) - (14.9)%. Excluding the
2Q 2019 Reserve Release" and 3Q 2019 Gain on Investment, net
income growth is expected to be (4.3) - 7.2%.
(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 (1.7) - 3.9%. Excluding the
2Q 2019 Reserve Release" and 3Q 2019 Gain on Investment, then FY
2020 adjusted EBITDA growth is expected to be 7.9 - 14.0%.
Key assumptions underlying the Company's full
year 2020 financial guidance include:
- Depreciation and amortization of approximately $50 million
- Stock-based compensation expense of approximately $24
million
- Integration-related costs of approximately $8-10 million
- Net interest expense of approximately $7 million
- An effective tax rate of 23-25%
- Capital expenditures of approximately $30-35 million
- The anticipated impact of COVID-19 on the Company's revenue
opportunities
Webcast and Conference Call
Information
HMS will report its preliminary third quarter
2020 financial and operating results via webcast at 7:30 AM CT /
8:30 AM ET on Friday, November 6, 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 healthcare by helping 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 payment
accuracy and population health management solutions that help move
healthcare 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,” "assumes," “believes,” “estimates,” “expects,”
“forecasts,” “future,” “intends,” “likely,” “may,” “outlook,”
“plans,” “potential,” “projects,” “seeks,” “strategy,” “targets,”
“trends,” “will,” “would,” “could,” “should,” and 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,
among other things, the possible effects of COVID-19; our future
actions, business plans, objectives and prospects; and our 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: the course of the
COVID-19 pandemic and the responses to the pandemic, and their
effects on our business and operations, including those of our
customers and partners, and general economic, business and market
conditions; 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 acquisition,
investment, strategic relationship and divestiture opportunities we
are pursuing, and our ability to successfully execute on such
opportunities; our ability to successfully integrate acquired
businesses and operations and realize synergies; significant and
increased competition related to 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,
including during a catastrophic or extraordinary event, such as
COVID-19; 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 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, domestically and
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 September
30, |
|
Nine Months Ended September
30, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Revenue |
$ |
165,236 |
|
|
|
$ |
146,815 |
|
|
|
$ |
479,302 |
|
|
|
$ |
462,950 |
|
|
Cost of services: |
|
|
|
|
|
|
|
Compensation |
63,829 |
|
|
|
56,258 |
|
|
|
193,678 |
|
|
|
172,033 |
|
|
Direct project and other
operating expenses |
23,335 |
|
|
|
22,751 |
|
|
|
71,214 |
|
|
|
63,693 |
|
|
Information technology |
15,160 |
|
|
|
14,207 |
|
|
|
45,188 |
|
|
|
39,627 |
|
|
Occupancy |
3,965 |
|
|
|
4,144 |
|
|
|
12,517 |
|
|
|
12,275 |
|
|
Amortization of acquisition related software and intangible
assets |
5,506 |
|
|
|
4,158 |
|
|
|
16,575 |
|
|
|
12,490 |
|
|
Total cost of services |
111,795 |
|
|
|
101,518 |
|
|
|
339,172 |
|
|
|
300,118 |
|
|
Selling, general and
administrative expenses |
26,241 |
|
|
|
28,232 |
|
|
|
88,861 |
|
|
|
85,514 |
|
|
Total operating expenses |
138,036 |
|
|
|
129,750 |
|
|
|
428,033 |
|
|
|
385,632 |
|
|
Operating
income |
27,200 |
|
|
|
17,065 |
|
|
|
51,269 |
|
|
|
77,318 |
|
|
Interest expense |
(1,926 |
) |
|
|
(2,677 |
) |
|
|
(6,135 |
) |
|
|
(8,379 |
) |
|
Interest income |
8 |
|
|
|
1,210 |
|
|
|
266 |
|
|
|
3,291 |
|
|
Other
(expense)/income |
(1,127 |
) |
|
|
7,697 |
|
|
|
1,744 |
|
|
|
7,697 |
|
|
Income before income
taxes |
24,155 |
|
|
|
23,295 |
|
|
|
47,144 |
|
|
|
79,927 |
|
|
Income
taxes |
6,120 |
|
|
|
2,159 |
|
|
|
9,814 |
|
|
|
10,049 |
|
|
Net income |
$ |
18,035 |
|
|
|
$ |
21,136 |
|
|
|
$ |
37,330 |
|
|
|
$ |
69,878 |
|
|
|
|
|
|
|
|
|
|
Basic
income per common share: |
|
|
|
|
|
|
|
Net income per common
share -- basic |
$ |
0.20 |
|
|
|
$ |
0.24 |
|
|
|
$ |
0.42 |
|
|
|
$ |
0.79 |
|
|
Diluted
income per common share: |
|
|
|
|
|
|
|
Net income per common
share -- diluted |
$ |
0.20 |
|
|
|
$ |
0.24 |
|
|
|
$ |
0.42 |
|
|
|
$ |
0.77 |
|
|
Weighted average shares: |
|
|
|
|
|
|
|
Basic |
88,531 |
|
|
|
86,324 |
|
|
|
88,397 |
|
|
|
88,190 |
|
|
Diluted |
90,228 |
|
|
|
88,324 |
|
|
|
89,976 |
|
|
|
90,441 |
|
|
|
HMS HOLDINGS CORP. AND
SUBSIDIARIESCONSOLIDATED BALANCE
SHEETS(in thousands, except share and per share
amounts)
|
September 30, 2020 |
|
December 31, 2019 |
Assets |
(unaudited) |
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
211,034 |
|
|
$ |
139,268 |
|
|
Accounts receivable, net |
234,418 |
|
|
223,443 |
|
|
Prepaid expenses and other
current assets |
19,430 |
|
|
30,925 |
|
|
Income tax receivable |
1,032 |
|
|
3,210 |
|
|
Deferred financing costs,
net |
564 |
|
|
564 |
|
|
Total current assets |
466,478 |
|
|
397,410 |
|
|
Property and equipment,
net |
82,829 |
|
|
86,947 |
|
|
Goodwill |
594,561 |
|
|
599,351 |
|
|
Intangible assets, net |
120,755 |
|
|
131,849 |
|
|
Operating lease right-of-use
assets |
14,725 |
|
|
17,493 |
|
|
Deferred financing costs,
net |
686 |
|
|
1,109 |
|
|
Other
assets |
17,065 |
|
|
10,117 |
|
|
Total assets |
$ |
1,297,099 |
|
|
$ |
1,244,276 |
|
|
|
|
|
|
Liabilities and
Shareholders' Equity |
|
|
|
Current liabilities: |
|
|
|
Accounts payable, accrued
expenses and other liabilities |
$ |
93,956 |
|
|
$ |
97,747 |
|
|
Liability for appeals |
5,179 |
|
|
3,570 |
|
|
Total
current liabilities |
99,135 |
|
|
101,317 |
|
|
Long-term liabilities: |
|
|
|
Revolving credit facility |
240,000 |
|
|
240,000 |
|
|
Operating lease
liabilities |
11,976 |
|
|
14,881 |
|
|
Net deferred tax
liabilities |
25,075 |
|
|
25,587 |
|
|
Other
liabilities |
8,974 |
|
|
7,626 |
|
|
Total
long-term liabilities |
286,025 |
|
|
288,094 |
|
|
Total liabilities |
385,160 |
|
|
389,411 |
|
|
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;102,207,020 shares issued and
88,542,342 shares outstanding at September 30, 2020; 101,766,468
shares issued and 88,103,566 shares outstanding at December 31,
2019 |
1,022 |
|
|
1,018 |
|
|
Capital in excess of par
value |
499,704 |
|
|
479,964 |
|
|
Retained earnings |
546,789 |
|
|
509,459 |
|
|
Treasury stock, at cost: 13,663,194 shares at September 30, 2020
and December 31, 2019 |
(135,576 |
) |
|
(135,576 |
) |
|
Total shareholders' equity |
911,939 |
|
|
854,865 |
|
|
Total liabilities and shareholders' equity |
$ |
1,297,099 |
|
|
$ |
1,244,276 |
|
|
|
HMS HOLDINGS CORP. AND
SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH
FLOWS(in
thousands)(unaudited)
|
Nine Months Ended September 30, |
|
2020 |
|
2019 |
Operating
activities: |
|
|
|
Net income |
$ |
37,330 |
|
|
$ |
69,878 |
|
|
Adjustments to reconcile net
income to net cash provided by operating activities: |
|
|
|
Depreciation and amortization
of property, equipment and software |
24,121 |
|
|
24,719 |
|
|
Amortization of intangible
assets |
11,094 |
|
|
7,009 |
|
|
Amortization of deferred
financing costs |
423 |
|
|
423 |
|
|
Gain on sale of cost basis
investment |
— |
|
|
(7,697 |
) |
|
Stock-based compensation
expense |
21,083 |
|
|
18,715 |
|
|
Deferred income taxes |
(512 |
) |
|
6,327 |
|
|
Noncash lease expense |
2,768 |
|
|
2,955 |
|
|
Release of estimated liability
for appeals, net |
— |
|
|
(10,478 |
) |
|
Changes in operating assets and liabilities: |
|
|
|
Accounts receivable |
(8,678 |
) |
|
508 |
|
|
Prepaid expenses and other current assets |
11,495 |
|
|
72 |
|
|
Other assets |
(6,948 |
) |
|
(1,746 |
) |
|
Income taxes receivable |
2,178 |
|
|
9,926 |
|
|
Accounts payable, accrued expenses and other liabilities |
(91 |
) |
|
(3,976 |
) |
|
Operating lease liabilities |
(2,905 |
) |
|
(3,927 |
) |
|
Liability for appeals |
1,609 |
|
|
211 |
|
|
Net cash provided by operating activities |
92,967 |
|
|
112,919 |
|
|
Investing
activities: |
|
|
|
|
|
|
|
|
|
|
Acquisition of a business, net
of cash acquired |
1,529 |
|
|
(36,554 |
) |
|
Proceeds from sale of cost
basis investment |
— |
|
|
9,776 |
|
|
Purchases of property and
equipment |
(8,396 |
) |
|
(5,840 |
) |
|
Investment in capitalized software |
(12,766 |
) |
|
(10,763 |
) |
|
Net cash used in investing activities |
(19,633 |
) |
|
(43,381 |
) |
|
Financing
activities: |
|
|
|
Proceeds from exercise of
stock options |
2,145 |
|
|
39,175 |
|
|
Payments of tax withholdings
on behalf of employees for net-share settlements |
(3,484 |
) |
|
(6,970 |
) |
|
Payments on capital lease
obligations |
(229 |
) |
|
(93 |
) |
|
Net cash (used in)/provided by financing
activities |
(1,568 |
) |
|
32,112 |
|
|
Net increase in cash and cash equivalents |
71,766 |
|
|
101,650 |
|
|
Cash and Cash
Equivalents |
|
|
|
Cash
and cash equivalents at beginning of year |
139,268 |
|
|
178,946 |
|
|
Cash and cash equivalents at end of period |
$ |
211,034 |
|
|
$ |
280,596 |
|
|
|
|
|
|
Supplemental
disclosure of cash flow information: |
|
|
|
Cash
paid for income taxes/(refunds received), net of refunds |
$ |
7,035 |
|
|
$ |
(5,303 |
) |
|
Cash
paid for interest |
$ |
3,422 |
|
|
$ |
8,118 |
|
|
|
|
|
|
Supplemental
disclosure of non-cash activities: |
|
|
|
Change
in balance of accrued property and equipment purchases |
$ |
1,159 |
|
|
$ |
2,291 |
|
|
|
HMS HOLDINGS CORP. AND
SUBSIDIARIES(unaudited)
Reconciliation of Net Income to EBITDA and Adjusted
EBITDA
|
Three Months Ended |
(in
thousands, except percentages) |
September 30, 2020 |
|
September 30, 2019 |
Net income |
$ |
18,035 |
|
|
$ |
21,136 |
|
|
|
|
|
Net interest expense |
1,918 |
|
|
1,467 |
|
Income taxes |
6,120 |
|
|
2,159 |
|
Depreciation and amortization of property and equipment and
intangible assets |
11,466 |
|
|
11,062 |
|
Earnings before interest,
taxes, depreciation and amortization (EBITDA) |
37,539 |
|
|
35,824 |
|
Stock-based compensation
expense |
3,133 |
|
|
2,934 |
|
Transaction and integration costs |
3,106 |
|
|
1,744 |
|
Adjusted EBITDA |
$ |
43,778 |
|
|
$ |
40,502 |
|
% of Revenue |
26.5 |
% |
|
27.6 |
% |
Adjusted EBITDA, excluding 3Q 2019 Gain on Investment |
$ |
43,778 |
|
|
$ |
32,802 |
|
% of Revenue |
26.5 |
% |
|
22.3 |
% |
|
|
|
Nine Months Ended |
(in
thousands, except percentages) |
September 30, 2020 |
|
September 30, 2019 |
Net income |
$ |
37,330 |
|
|
$ |
69,878 |
|
|
|
|
|
Net interest expense |
5,869 |
|
|
5,088 |
|
Income taxes |
9,814 |
|
|
10,049 |
|
Depreciation and amortization of property and equipment and
intangible assets |
35,215 |
|
|
31,728 |
|
Earnings before interest,
taxes, depreciation and amortization (EBITDA) |
88,228 |
|
|
116,743 |
|
Stock-based compensation
expense |
21,083 |
|
|
18,715 |
|
Transaction and integration
costs |
9,346 |
|
|
1,851 |
|
Adjusted EBITDA |
$ |
118,657 |
|
|
$ |
137,309 |
|
% of Revenue |
24.8 |
% |
|
29.7 |
% |
Adjusted EBITDA, excluding 2Q 2019 Reserve Release and 3Q 2019 Gain
on Investment |
$ |
118,657 |
|
|
$ |
121,409 |
|
% of Revenue |
24.8 |
% |
|
26.8 |
% |
|
HMS HOLDINGS CORP. AND
SUBSIDIARIES(unaudited)
Reconciliation of Net Income to EPS (Diluted) and
Adjusted EPS (Diluted)
|
Three Months Ended |
(in
thousands, except per share amounts) |
September 30, 2020 |
|
September 30, 2019 |
Net income |
$ |
18,035 |
|
|
|
$ |
21,136 |
|
|
|
|
|
|
Stock-based compensation
expense |
3,133 |
|
|
|
2,934 |
|
|
Transaction and integration
costs |
3,106 |
|
|
|
1,744 |
|
|
Amortization of acquisition
related software and intangible assets |
5,506 |
|
|
|
4,158 |
|
|
Income tax related to
adjustments¹ |
(2,960 |
) |
|
|
(2,412 |
) |
|
|
|
|
|
Adjusted net income |
$ |
26,820 |
|
|
|
$ |
27,560 |
|
|
|
|
|
|
Weighted average common shares, diluted |
90,228 |
|
|
|
88,324 |
|
|
|
|
|
|
Diluted
EPS² |
$ |
0.20 |
|
|
|
$ |
0.24 |
|
|
Diluted
adjusted EPS² |
$ |
0.30 |
|
|
|
$ |
0.31 |
|
|
|
|
|
|
3Q 2019 Gain on Investment³ |
$ |
— |
|
|
|
$ |
0.06 |
|
|
Diluted
adjusted EPS excluding 3Q 2019 Gain on Investment |
$ |
0.30 |
|
|
|
$ |
0.25 |
|
|
|
|
Nine Months Ended |
(in
thousands, except per share amounts) |
September 30, 2020 |
|
September 30, 2019 |
Net income |
$ |
37,330 |
|
|
|
$ |
69,878 |
|
|
|
|
|
|
Stock-based compensation
expense |
21,083 |
|
|
|
18,715 |
|
|
Transaction and integration
costs |
9,346 |
|
|
|
1,851 |
|
|
Amortization of acquisition
related software and intangible assets |
16,575 |
|
|
|
12,490 |
|
|
Income tax related to
adjustments¹ |
(11,845 |
) |
|
|
(9,024 |
) |
|
|
|
|
|
Adjusted net income |
$ |
72,489 |
|
|
|
$ |
93,910 |
|
|
|
|
|
|
Weighted average common shares, diluted |
89,976 |
|
|
|
90,441 |
|
|
|
|
|
|
Diluted
EPS² |
$ |
0.42 |
|
|
|
$ |
0.77 |
|
|
Diluted
adjusted EPS² |
$ |
0.81 |
|
|
|
$ |
1.04 |
|
|
|
|
|
|
Discrete tax benefits |
$ |
— |
|
|
|
$ |
0.07 |
|
|
2Q 2019
Reserve Release benefit³ |
$ |
— |
|
|
|
$ |
0.07 |
|
|
3Q 2019
Gain on Investment³ |
$ |
— |
|
|
|
$ |
0.06 |
|
|
Diluted
adjusted EPS excluding 2Q 2019 Reserve Release, 3Q 2019 Gain on
Investment, and discrete tax benefits |
$ |
0.81 |
|
|
|
$ |
0.84 |
|
|
|
(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 2Q 2019 Reserve Release
benefit for the nine months ended September 30, 2019 and (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.
(3) The 2Q 2019 Reserve Release 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. 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.
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, 2020 |
|
September 30, 2019 |
Net income |
$ |
54,676 |
|
|
$ |
103,269 |
|
|
|
|
|
Net interest expense |
7,646 |
|
|
7,348 |
|
Income taxes |
16,903 |
|
|
2,247 |
|
Depreciation and amortization of property and equipment and
intangible assets |
46,471 |
|
|
46,104 |
|
Earnings before interest,
taxes, depreciation and amortization (EBITDA) |
125,696 |
|
|
158,968 |
|
Stock-based compensation
expense |
24,269 |
|
|
22,577 |
|
Transaction and integration
costs |
10,984 |
|
|
1,851 |
|
Adjusted EBITDA |
$ |
160,949 |
|
|
$ |
183,396 |
|
|
Reconciliation of Total Debt to Net Leverage
Ratio
(in
thousands, except ratios) |
September 30, 2020 |
|
September 30, 2019 |
Total Debt (revolving credit facility)⁴ |
$ |
240,000 |
|
|
$ |
240,000 |
|
|
Cash and cash equivalents |
(211,034 |
) |
|
(280,596 |
) |
|
Total
net debt |
$ |
28,966 |
|
|
$ |
(40,596 |
) |
|
|
|
|
|
Net
income⁵ |
$ |
54,676 |
|
|
$ |
103,269 |
|
|
Adjusted EBITDA⁶ |
$ |
160,949 |
|
|
$ |
183,396 |
|
|
Net
leverage ratio⁷ |
0.18 |
|
|
(0.22 |
) |
|
|
(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, 2020 |
|
September 30, 2019 |
Net cash provided by operating activities |
$ |
27,206 |
|
|
$ |
34,793 |
|
Purchases of property and
equipment |
(5,253 |
) |
|
(4,895 |
) |
Investment in capitalized software |
(4,407 |
) |
|
(3,298 |
) |
|
|
|
|
Non-GAAP free cash flow |
$ |
17,546 |
|
|
$ |
26,600 |
|
|
The Company believes 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 Financial Guidance for Full Year 2020
Net Income to Projected 2020 EBITDA and Adjusted
EBITDA
|
Twelve Months Ended December 31,
2020 |
|
Estimated Range |
(in
millions) |
Low |
|
High |
Net Income |
$ |
66 |
|
|
$ |
74 |
|
|
|
|
|
Net interest expense |
$ |
7 |
|
|
$ |
7 |
|
Income taxes |
20 |
|
|
24 |
|
Depreciation and amortization of property and equipment and
intangible assets |
50 |
|
|
50 |
|
Earnings before interest,
taxes, depreciation and amortization (EBITDA) |
$ |
143 |
|
|
$ |
155 |
|
Stock-based compensation
expense |
24 |
|
|
24 |
|
Transaction and Integration costs |
10 |
|
|
8 |
|
Adjusted EBITDA |
$ |
177 |
|
|
$ |
187 |
|
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