1Q’20 Total Revenue of $171.4 Million, (+15.9%) vs. 1Q’191Q’20 Net income of $12.7 Million vs. $19.6 Million in 1Q’191Q’20 EPS of $0.14 Per Diluted Share vs. $0.22 per Diluted Share in 1Q’191Q’20 Adjusted EPS of $0.32 Per Diluted Share vs. $0.28 per Diluted Share in 1Q’19 excluding discrete tax benefits1Q’20 Adjusted EBITDA of $47.1 Million, (+15.0%) vs. 1Q’19IRVING, Texas, May 08, 2020 (GLOBE NEWSWIRE) — HMS Holdings Corp. (Nasdaq: HMSY) today announced financial results for the first quarter ended March 31, 2020.
“HMS delivered solid top-line growth with first quarter revenue increasing 15.9% compared with the same period last year, driven by strong organic growth of 8.5% plus a full quarter of the Accent business acquired at the end of 2019,” said Bill Lucia, Chairman and CEO. “Net income declined 35.4% year-over year in the quarter, due primarily to Accent-related integration costs this year and discrete tax benefits in the first quarter of 2019. Adjusted EBITDA increased 15.0% and cash and cash equivalents topped $148 million at quarter end. With healthy cash flows and low leverage, HMS continues to be well positioned to invest in our talent, technology and product development to support our business growth and clients’ needs.“Given the circumstances surrounding COVID-19 and its broad impact on our nation and the world, the entire HMS organization moved swiftly to enact our business continuity plan to ensure we remained fully operational. By the end of March, essentially 100% of our employees were working from home with the necessary tools to accomplish their day-to-day work in a secure environment to support clients,” Lucia added. “We also implemented several measures to address organizational agility, client support and health and safety, including helping employees avoid exposure to the novel coronavirus and care for their families.“First and foremost, we are working diligently to protect our employees and business operations, and help clients actively communicate at scale with millions of individuals. Given the challenges currently facing the healthcare system, we believe strong cost containment and clinical outcome capabilities are going to be more important than ever when this health crisis subsides,” Lucia concluded.First QuarterTotal revenue in the first quarter of 2020 was $171.4 million, compared to total revenue of $148.0 million in the prior year first quarter (+15.9%). Revenue from the Accent business in the first quarter of 2020 was $10.9 million. Organic revenue growth in the first quarter of 2020, excluding Accent, was 8.5%.Coordination of Benefits (COB) revenue was a record $118.1 million in the first quarter of 2020 compared to the previous record of $105.9 million in the prior year first quarter (+11.5%). Organic COB revenue, excluding Accent, was $107.2 million (+1.2%).Payment Integrity (PI) revenue was $39.3 million in the first quarter of 2020, compared to $27.7 million in the prior year first quarter (+41.8%). Population Health Management (PHM) revenue was $14.0 million in the first quarter of 2020, compared to $14.4 million in the prior year first quarter (-2.3%).Net income in the first quarter of 2020 was $12.7 million, or $0.14 per diluted share, compared to net income of $19.6 million, or $0.22 per diluted share, in the first quarter of 2019. Net income in the first quarter of 2019 included $0.07 per diluted share of discrete tax items primarily related to the exercise of employee stock options.Adjusted EBITDA in the first quarter of 2020 was $47.1 million, compared to $41.0 million in the prior year first quarter (+15.0%).Adjusted EPS in the first quarter of 2020 was $0.32 per diluted share, compared to $0.28 per diluted share in the first quarter of 2019 excluding discrete tax benefits of $0.07 per diluted share (+14.3%). Cash Flow and Capital ResourcesNet cash provided by operating activities for the three months ended March 31, 2020 was $17.1 million compared to $28.5 million in the first three months of 2019. Capital expenditures were $5.0 million for the three months ended March 31, 2020, compared to $4.0 million in the comparable prior year period. The Company’s balance sheet at March 31, 2020 included $148.0 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 GuidanceThe Company revised its full year 2020 financial guidance, as follows:(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 10.2 – 12.6%. Excluding the 2Q 2019 Reserve Release, then total FY 2020 revenue growth is expected to be 12.1 – 14.5%.(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 (28.7) – (14.9)%. Excluding the 2Q 2019 Reserve Release and 3Q 2019 Gain on Investment, net income growth is expected to be (10.1) – 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 revised full year 2020 financial guidance include:Depreciation and amortization of approximately $50 million
Stock-based compensation expense of approximately $23 million
Integration-related costs of approximately $5-10 million
Net interest expense of approximately $6 million
An effective tax rate of 28-30%
Capital expenditures of approximately $30-35 millionWebcast and Conference Call InformationHMS will report its preliminary first quarter 2020 financial and operating results via webcast at 7:30 AM CT / 8:30 AM ET on Friday, May 8, 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 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 payment accuracy 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.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,” “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 updated 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.
HMS HOLDINGS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(unaudited)
HMS HOLDINGS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
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HMS HOLDINGS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
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HMS HOLDINGS CORP. AND SUBSIDIARIES
(unaudited)Reconciliation of Net Income to EBITDA and Adjusted EBITDAReconciliation of Net Income to EPS (Diluted) and Adjusted EPS (Diluted)(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 EPS and Diluted Adjusted EPS included a $0.07 per diluted share discrete tax benefit primarily related to the exercise of employee stock options for the three months ended March 31, 2019.HMS HOLDINGS CORP. AND SUBSIDIARIES
(unaudited)Reconciliation of Net Income to EBITDA and Adjusted EBITDA (Trailing twelve months)
Reconciliation of Total Debt to Net Leverage Ratio(3) Total Debt consists of the outstanding principal under our senior secured revolving credit facility
(4) Trailing twelve months Net income
(5) Trailing twelve months Adjusted EBITDA
(6) 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 FlowThe 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 2020 Net Income to Projected 2020 EBITDA and Adjusted EBITDA
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