HMS Holdings Corp. Announces Third Quarter 2012 Results and 2013 Guidance *Revenue Increased 22.6% y/y to $113.2M *GAAP EPS of $0.12; Adjusted EPS of $0.20 Business Wire NEW YORK -- October 26, 2012 HMS Holdings Corp. (NASDAQ: HMSY) today announced its financial results for the third quarter of 2012. For the quarter ended September 30, 2012, revenue increased 22.6% to $113.2 million, compared to $92.4 million for the same period a year ago. Net income for the quarter was $10.5 million or $0.12 per diluted common share compared to net income of $14.4 million or $0.17 per diluted common share for the same period a year ago, a decrease of 27.1%. Fully diluted GAAP earnings per share (EPS) for the quarter decreased 29.4% y/y to $0.12 and adjusted EPS increased 5.3% y/y to $0.20. For the nine months ended September 30, 2012, revenue increased 28.9% to $340.6 million, compared to $264.2 million for the same period a year ago. Net income for the nine months ended September 30, 2012 was $30.5 million or $0.35 per diluted common share, compared to net income of $36.7 million or $0.42 per diluted common share for the same period a year ago, a decrease of 16.7%. Fully diluted GAAP EPS for the first nine months decreased 16.7% y/y to $0.35 and adjusted EPS increased16.0% y/y to $0.58. “We continue to lay the groundwork for growth in 2013 and beyond,” said Bill Lucia, President and Chief Executive Officer. “We are focused on implementing numerous Medicaid RACs, continuing to deliver a high level of Medicare RAC performance, preparing for the Medicare coordination of benefits contract award that was recently announced, bringing innovative eligibility verification solutions to state agencies, and increasing our presence in the commercial market.” 2013 Guidance The Company also announced its full-year guidance for 2013. The Company now expects revenue in the range of $570.0 - $600.0 million, fully diluted GAAP EPS is projected to increase to a range of $0.63 - $0.70 , and adjusted EPS is projected to increase to a range of $0.95 - $1.02 . Q3 2012 Conference Call HMS will report its third quarter 2012 financial and operating results at 9:00 a.m. ET on Friday, October 26, 2012. Individuals can access the webcast at http://investor.hms.com/events.cfm or listen to the call at (877) 303-7208. International participants can listen to the call at (224) 357-2389. The webcast will be archived on the website at http://investor.hms.com/events.cfm. Individuals can listen to the replay at (855) 859-2056. International participants can listen to the replay at (404) 537-3406. The passcode is 37726759. The replay will be available at Noon ET on October 26 through 11:59 p.m. ET on November 3, 2012. The HMS Form 10-Q for the quarter September 30, 2012 will be filed and available on our website at http://investor.hms.com on or about November 8, 2012, and will contain additional information about our results of operations for the fiscal year-to-date. This press release and the interim financial statements herein will be available at http://investor.hms.com for at least a 12-month period. Shareholders and interested investors are welcome to contact Investor Relations at 212-857-5986. About HMS Holdings Corp. HMS Holdings Corp., through its subsidiaries, is the nation's leader in coordination of benefits and program integrity services for healthcare payers. HMS's clients include health and human services programs in more than 40 states; commercial programs, including commercial plans, employers, and over 140 Medicaid managed care plans; the Centers for Medicare and Medicaid Services (CMS); and Veterans Administration facilities. As a result of the Company's services, clients recovered over $2.5 billion in 2011, and saved nearly $7 billion through the prevention of erroneous payments. Use of Non-GAAP Financials This press release includes presentations of earnings before interest, taxes, depreciation and amortization (EBITDA) and adjusted EBITDA. Adjusted EBITDA represents EBITDA adjusted for stock-based compensation expense. EBITDA is a measure commonly used by the capital markets to value enterprises. EBITDA is a non-GAAP financial measure and is reconciled to income before income taxes, which the Company's management believes to be the most comparable generally accepted accounting principles ("GAAP") measure. Adjusted EBITDA results are calculated by adjusting GAAP income before income taxes to exclude the effects of depreciation, amortization of intangible assets, stock-based compensation expense, and net interest expense. This press release also includes presentations of adjusted EPS. Adjusted EPS represents EPS adjusted for stock-based compensation expense and amortization of intangibles and for the related taxes for these adjustments. Adjusted EPS is a non-GAAP financial measure and is reconciled to EPS, which the Company’s management believes to be the most comparable GAAP measure. The Company uses these non-GAAP financial measures for internal management purposes, when publicly providing guidance on possible future results, and as a means to evaluate period-to-period comparisons. The Company's management believes that these non-GAAP financial measures are a common measure used by investors and analysts to evaluate its performance. 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, income before income taxes in accordance with GAAP. Safe Harbor Statement This press release contains “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Such statements give our expectations or forecasts of future events; they do not relate strictly to historical or current facts. Forward-looking statements can be identified by words such as “anticipates,” “estimates,” “expects,” “projects,” “intends,” “plans,” “believes,” “will,” “target,” “seeks,” “forecast” and similar expressions and references to guidance. In particular, these include statements relating to future actions, business plans, objects and prospects, and future operating or financial performance. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could differ materially from past results and those anticipated, estimated or projected. We caution you therefore against relying on any of these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to: regulatory actions, budgetary pressures and political influences that could affect the procurement practices and operations of healthcare organizations and agencies, reducing demand for our services; our ability to continue to secure contracts through the competitive bidding process and any related protests and to accurately predict the cost and time to complete such contracts; our ability to retain clients or the loss of one or more major clients; client dissatisfaction or early termination of contracts triggering significant costs or liabilities; the development by competitors of new or superior products or services; the emergence of new competitors, or the development by our clients of in-house capacity to perform the services we offer; all the risks inherent in the development, introduction, and implementation of new products and services; our ability to manage our growth and its demands on our resources and infrastructure; our ability to successfully integrate our acquisitions; our compliance with the covenants and obligations under the terms of our credit facility and our ability to generate sufficient cash to cover our interest and principal payments thereunder; variations in our results of operations; negative results of government reviews, audits or investigations to verify our compliance with contracts and applicable laws and regulations; changing conditions in the healthcare industry which could simplify the payment process and reduce the need for and price of our services; our ability to continue to secure contracts through the competitive bidding process and to accurately predict the cost and time to complete such contracts; our failure to comply with laws and regulations governing health data or to protect such data from theft and misuse; and, our ability to maintain effective information systems and protect them from damage or interruption. A further description of these and other risks, uncertainties, and related matters can be found in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011, which is available at www.hms.com under the “Investor Relations” tab. Any forward-looking statements made by us in this press release speak only as of the date of this press release. Factors or events that could cause actual results to differ may emerge from time to time and it is not possible for us to predict all of them. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. HMS HOLDINGS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME For the the Three and Nine months Ended September 30, 2012 ( in thousands, except per share amounts) ( unaudited) Three months ended Nine months ended September30, September30, 2012 2011 2012 2011 Revenue $ 113,217 $ 92,356 $ 340,600 $ 264,159 Cost of services: Compensation 40,170 31,762 119,489 94,604 Data processing 7,871 5,973 22,791 16,607 Occupancy 4,428 3,794 12,742 11,328 Direct project 14,530 9,893 40,573 30,546 costs Other operating 3,198 4,637 14,311 13,448 costs Amortization of acquisition related 8,149 1,660 24,447 5,048 software and intangibles Total cost of 78,346 57,719 234,353 171,581 services Selling, general & 14,158 10,560 43,897 31,932 administrative expenses Total operating 92,504 68,279 278,250 203,513 expenses Operating 20,713 24,077 62,350 60,646 income Interest (4,125 ) (19 ) (12,488 ) (65 ) expense Other income, 27 165 346 714 net Interest income 13 14 17 50 Income before 16,628 24,237 50,225 61,345 income taxes Income taxes 6,121 9,822 19,695 24,691 Net income and comprehensive $ 10,507 $ 14,415 $ 30,530 $ 36,654 income Basic income per common share Net income per $ 0.12 $ 0.17 $ 0.35 $ 0.43 share -basic Weighted average common shares 86,405 84,159 86,010 84,372 outstanding, basic Diluted income per share Net income per $ 0.12 $ 0.17 $ 0.35 $ 0.42 share- diluted Weighted average common shares 88,744 86,869 88,399 87,233 outstanding, diluted HMS HOLDINGS CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ( in thousands, except per share and per share amounts) ( unaudited) September 30, December 31, 2012 2011 Assets Current assets: Cash and cash equivalents $ 127,952 $ 97,003 Accounts receivable, net of allowance of $811 at September 30, 2012 and $1,158 at December 115,854 112,505 31, 2011 Prepaid expenses 11,528 6,602 Prepaid income taxes 9,467 2,418 Current portion of deferred financing costs 3,431 3,689 Other current assets 434 5,793 Net deferred tax asset 2,029 2,198 Total current assets 270,695 230,208 Property and equipment, net 124,435 127,177 Goodwill, net 361,642 361,786 Intangible assets, net 116,006 132,740 Deferred financing costs 6,668 9,203 Other assets 3,949 837 Total assets $ 883,395 $ 861,951 Liabilities and Shareholders' Equity Current liabilities: Accounts payable, accrued expenses and other $ 31,711 $ 40,546 liabilities Acquisition related contingent consideration - 2,300 Current portion of term loan 30,625 17,500 Total current liabilities 62,336 60,346 Long-term liabilities: Deferred rent 545 1,085 Term loan 306,250 332,500 Other liabilities 2,778 2,423 Deferred tax liabilities 68,419 74,360 Total long-term liabilities 377,992 410,368 Total liabilities 440,328 470,714 Shareholders' equity: Preferred stock - $.01 par value; 5,000,000 - - shares authorized; none issued Common stock - $.01 par value; 125,000,000 shares authorized; 92,098,493 shares issued and 86,673,646 shares 921 906 outstanding at September 30, 2012; 90,575,837 shares issued and 85,587,299 shares outstanding at December 31, 2011 Capital in excess of par value 272,143 240,241 Retained earnings 190,017 159,487 Treasury stock, at cost; 5,424,847 shares at September 30, 2012 and 4,988,538 shares at (20,014 ) (9,397 ) December 31, 2011 Total shareholders' equity 443,067 391,237 Total libilities and shareholders' equity $ 883,395 $ 861,951 HMS HOLDINGS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS For the Nine Months Ended September 30, 2012 and 2011 ( in thousands) ( unaudited) Nine months ended September30, 2012 2011 Operating activities: Net income $ 30,530 $ 36,654 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 40,929 14,930 Stock-based compensation expense 10,194 5,884 Excess tax benefit from exercised stock (11,859 ) (8,157 ) options Deferred income taxes (5,772 ) 1,508 Decrease in allowance for doubtful debts (347 ) (149 ) Change in fair value of contingent (2,300 ) 391 consideration Loss on disposal of fixed assets 62 5 Changes in assets and liabilities: Accounts receivable (3,002 ) (10,371 ) Prepaid expenses (4,926 ) (839 ) Prepaid income taxes 4,810 11,690 Other current assets 550 (388 ) Other assets (88 ) 57 Accounts payable, accrued expenses and other liabilities (3,861 ) (2,125 ) Net cash provided by operating activities 54,920 49,090 Investing activities: Investment in certificate of deposit - (4,809 ) Proceeds from redemtion of certificate of 4,809 - deposit Purchases of property and equipment (20,323 ) (13,092 ) Investment in common stock (3,024 ) - Acquisitions, net (1,605 ) (339 ) Investment in capitalized software (1,559 ) (1,502 ) Net cash used in investing activities (21,702 ) (19,742 ) Financing activities: Repayment of term loan (13,125 ) - Purchases of Treasury Stock (10,617 ) - Payments on contingent consideration (250 ) - Proceeds from exercise of stock options 10,991 9,013 Payments of tax withholdings on behalf of employees for net-share settlement for stock-based (1,127 ) (903 ) compensation Excess tax benefit from exercised stock 11,859 8,157 options Net cash (used in)/provided by financing (2,269 ) 16,267 activities Net increase in cash and cash equivalents 30,949 45,615 Cash and cash equivalents at beginning of 97,003 94,836 year Cash and cash equivalents at end of year $ 127,952 $ 140,451 Supplemental disclosure of cash flow information: Cash paid for income taxes $ 20,762 $ 11,547 Cash paid for interest $ 10,093 $ 89 Supplemental disclosure of noncash investing activities: Accrued property and equipment purchases $ 267 $ 438 Accrued acquisition related contingent $ - $ 351 consideration HMS HOLDINGS CORP. AND SUBSIDIARIES ( in thousands, except per share amounts) ( unaudited) Reconciliation of Net income to EBITDA and adjusted EBITDA Three Months Ended Nine Months Ended September 30, September 30, 2012 2011 2012 2011 Net income $ 10,507 $ 14,415 $ 30,530 $ 36,654 Net interest expense 4,112 5 12,471 15 Income taxes 6,121 9,822 19,695 24,691 Depreciation and amortization, net of deferred 12,884 5,125 38,136 14,930 financing costs, included in net interest expense (income) Earnings before interest, taxes, depreciation and 33,624 29,367 100,832 76,290 amortization ( EBITDA) Stock-based compensation 3,099 1,918 10,194 5,884 expense $ 36,723 $ 31,285 $ 111,026 $ 82,174 Reconciliation of Net income to GAAP EPS and Adjusted EPS Three Months Ended Nine Months Ended September 30, September 30, 2012 2011 2012 2011 Net income $ 10,507 $ 14,415 $ 30,530 $ 36,654 Stock-based compensation 1,959 1,141 6,198 3,519 expense, net of tax Amortization of 5,150 988 14,864 3,019 intangibles, net of tax Subtotal $ 17,616 $ 16,544 $ 51,592 $ 43,192 Weighted average common 88,744 86,869 88,399 87,233 shares, diluted Diluted GAAP EPS $ 0.12 $ 0.17 $ 0.35 $ 0.42 Diluted adjusted EPS $ 0.20 $ 0.19 $ 0.58 $ 0.50 Contact: HMS Holdings Corp. Christine Rogers Saenz, 212-857-5986 (investor relations) email@example.com Francesca Marraro, 212-857-5442 (media relations) firstname.lastname@example.org
HMS Holdings Corp. Announces Third Quarter 2012 Results and 2013 Guidance
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