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Share Name | Share Symbol | Market | Type |
---|---|---|---|
HMS Holdings Corp | NASDAQ:HMSY | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 36.975 | 34.87 | 37.00 | 0 | 01:00:00 |
☒
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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11-3656261
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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5615 High Point Drive
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Irving
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TX
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75038
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(Address of principal executive offices)
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(Zip Code)
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Title of each class
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Trading Symbol
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Name of each exchange on which registered
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Common Stock $0.01 par value
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HMSY
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The Nasdaq Stock Market LLC
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Nasdaq Global Select Market
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Large accelerated filer
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☒
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Accelerated filer
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☐
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Non-accelerated filer
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☐
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Smaller reporting company
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☐
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Emerging growth company
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☐
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Page
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ACA
|
Patient Protections and Affordable Care Act, as amended by the Health Care and Education
Reconciliation Act
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ACO
|
Accountable Care Organization
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ADR
|
Additional Documentation Request
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ASC
|
Accounting Standards Codification
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ASO
|
Administrative Service Only
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ASU
|
Accounting Standards Update
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CHIP
|
Children's Health Insurance Program
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CMS
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Centers for Medicare & Medicaid Services
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CMS NHE
|
CMS National Health Expenditures
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COB
|
Coordination of benefits
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COSO
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Committee of Sponsoring Organizations of the Treadway Commission
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Credit Agreement
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The Amended and Restated Credit Agreement dated as of May 3, 2013, as amended by Amendment No. 1 to Amended and Restated Credit Agreement dated as of March 8, 2017, and as further amended by Amendment No. 2 to Amended and Restated Credit Agreement, dated as of December 19, 2017, by and among HMS Holdings Corp. the Guarantors party thereto, the Lenders party thereto and Citibank, N.A. as Administrative Agent
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DSO
|
Days sales outstanding
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ERISA
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Employment Retirement Income Security Act of 1974
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Exchange Act
|
Securities Exchange Act of 1934, as amended
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FASB
|
Financial Accounting Standards Board
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Form 10-Q
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HMS Holdings Corp. Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2019
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HIPAA
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Health Insurance Portability and Accountability Act of 1996
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HITECH
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Health Information Technology for Economic and Clinical Health Act
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IRC
|
Internal Revenue Code
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IRS
|
U.S. Internal Revenue Service
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LIBO Rate
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London Interbank Offered Rate (or any successor rate determined in accordance with the Credit Agreement)
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MCO
|
Managed Care Organization
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PBM
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Pharmacy Benefit Manager
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PHI
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Protected health information
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PHM
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Population Health Management
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PI
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Payment Integrity
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PMPM
|
Per Member Per Month
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PMPY
|
Per Member Per Year
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R&D Credit
|
U.S. Research and Experimentation Tax Credit pursuant to IRC Section 41
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RAC
|
Recovery Audit Contractor
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RFP
|
Request for proposal
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ROU
|
Right-of-use
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SEC
|
U.S. Securities and Exchange Commission
|
Securities Act
|
Securities Act of 1933, as amended
|
Section 199 Deduction
|
U.S. Production Activities Deduction pursuant to IRC Section 199
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SG&A
|
Selling, general and administrative
|
TPL
|
Third-party liability
|
U.S. GAAP
|
United States Generally Accepted Accounting Principles
|
2006 Stock Plan
|
HMS Holdings Corp. Fourth Amended and Restated 2006 Stock Plan, as amended by Amendment No. 1 to the HMS Holdings Corp. Fourth Amended and Restated 2006 Stock Plan dated as of February 16, 2017
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2016 Omnibus Plan
|
HMS Holdings Corp. 2016 Omnibus Incentive Plan
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2017 Tax Act
|
Tax Cuts and Jobs Act of 2017
|
2018 Form 10-K
|
HMS Holdings Corp. Annual Report on Form 10-K for the year ended December 31, 2018
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2019 Omnibus Plan
|
HMS Holdings Corp. 2019 Omnibus Incentive Plan
|
401(k) Plan
|
HMS Holdings Corp. 401(k) Plan
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▪
|
our ability to execute our business plans or growth strategy;
|
▪
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our ability to innovate, develop or implement new or enhanced solutions or services;
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▪
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the nature of investment and acquisition opportunities we are pursuing, and the successful execution of such investments and acquisitions;
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▪
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our ability to successfully integrate acquired businesses and realize synergies;
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▪
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significant competition for our solutions and services;
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▪
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variations in our results of operations;
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▪
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our ability to accurately forecast the revenue under our contracts and solutions;
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▪
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our ability to protect our systems from damage, interruption or breach, and to maintain effective information and technology systems and networks;
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▪
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our ability to protect our intellectual property rights, proprietary technology, information processes and know-how;
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▪
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our failure to maintain a high level of customer retention or the unexpected reduction in scope or termination of key contracts with major customers;
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▪
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customer dissatisfaction or our non-compliance with contractual provisions or regulatory requirements;
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▪
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our failure to meet performance standards triggering significant costs or liabilities under our contracts;
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▪
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our inability to manage our relationships with data sources and suppliers;
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▪
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our reliance on subcontractors and other third party providers and parties to perform services;
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▪
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our ability to continue to secure contracts and favorable contract terms through the competitive bidding process;
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▪
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pending or threatened litigation;
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▪
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unfavorable outcomes in legal proceedings;
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▪
|
our success in attracting and retaining qualified employees and members of our management team;
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▪
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our ability to generate sufficient cash to cover our interest and principal payments under our credit facility;
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▪
|
unexpected changes in tax laws, regulations or guidance and unexpected changes in our effective tax rate;
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▪
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unanticipated increases in the number or amount of claims for which we are self-insured;
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▪
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accounting changes or revisions;
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▪
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changes in the U.S. healthcare environment or healthcare financing system, including regulatory, budgetary or political actions that affect healthcare spending or the practices and operations of healthcare organizations;
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▪
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our failure to comply with applicable laws and regulations governing individual privacy and information security or to protect such information from theft and misuse;
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▪
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our ability to comply with current and future legal and regulatory requirements;
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▪
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negative results of government or customer reviews, audits or investigations;
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▪
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state or federal limitations related to outsourcing of certain government programs or functions;
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▪
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restrictions on bidding or performing certain work due to perceived conflicts of interests;
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▪
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the market price of our common stock and lack of dividend payments; and
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▪
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anti-takeover provisions in our corporate governance documents.
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June 30,
2019 |
|
December 31,
2018 |
||||
Assets
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(unaudited)
|
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|
||||
Current assets:
|
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|
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Cash and cash equivalents
|
$
|
268,677
|
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$
|
178,946
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Accounts receivable, net of allowance of $12,808 and $13,683, at June 30, 2019 and December 31, 2018, respectively
|
199,932
|
|
|
206,772
|
|
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Prepaid expenses
|
20,348
|
|
|
19,970
|
|
||
Income tax receivable
|
9,431
|
|
|
18,817
|
|
||
Deferred financing costs, net
|
564
|
|
|
564
|
|
||
Other current assets
|
225
|
|
|
240
|
|
||
Total current assets
|
499,177
|
|
|
425,309
|
|
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Property and equipment, net
|
86,607
|
|
|
94,435
|
|
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Goodwill
|
487,617
|
|
|
487,617
|
|
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Intangible assets, net
|
62,463
|
|
|
67,140
|
|
||
Operating lease right-of-use assets
|
18,940
|
|
|
—
|
|
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Deferred financing costs, net
|
1,391
|
|
|
1,673
|
|
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Other assets
|
3,544
|
|
|
2,344
|
|
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Total assets
|
$
|
1,159,739
|
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$
|
1,078,518
|
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|
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Liabilities and Shareholders' Equity
|
|
|
|
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Current liabilities:
|
|
|
|
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Accounts payable, accrued expenses and other liabilities
|
$
|
71,330
|
|
|
$
|
74,902
|
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Estimated liability for appeals
|
2,948
|
|
|
21,723
|
|
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Total current liabilities
|
74,278
|
|
|
96,625
|
|
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Long-term liabilities:
|
|
|
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Revolving credit facility
|
240,000
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240,000
|
|
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Operating lease liabilities
|
17,245
|
|
|
—
|
|
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Net deferred tax liabilities
|
23,073
|
|
|
18,485
|
|
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Other liabilities
|
7,173
|
|
|
10,012
|
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Total long-term liabilities
|
287,491
|
|
|
268,497
|
|
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Total liabilities
|
361,769
|
|
|
365,122
|
|
||
Commitments and contingencies
|
|
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|
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Shareholders' equity:
|
|
|
|
||||
Preferred stock -- $0.01 par value; 5,000,000 shares authorized; none issued
|
—
|
|
|
—
|
|
||
Common stock -- $0.01 par value; 175,000,000 shares authorized;101,014,406 shares issued and 87,350,498 shares outstanding at June 30, 2019; 98,924,501 shares issued and 85,261,664 shares outstanding at December 31, 2018
|
1,010
|
|
|
989
|
|
||
Capital in excess of par value
|
461,559
|
|
|
425,748
|
|
||
Retained earnings
|
470,977
|
|
|
422,235
|
|
||
Treasury stock, at cost: 13,663,194 shares at June 30, 2019 and December 31, 2018
|
(135,576
|
)
|
|
(135,576
|
)
|
||
Total shareholders' equity
|
797,970
|
|
|
713,396
|
|
||
Total liabilities and shareholders' equity
|
$
|
1,159,739
|
|
|
$
|
1,078,518
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Revenue
|
$
|
168,182
|
|
|
$
|
146,791
|
|
|
$
|
316,135
|
|
|
$
|
288,216
|
|
Cost of services:
|
|
|
|
|
|
|
|
|
|||||||
Compensation
|
58,322
|
|
|
55,188
|
|
|
115,775
|
|
|
111,267
|
|
||||
Direct project and other operating expenses
|
20,742
|
|
|
17,959
|
|
|
40,941
|
|
|
34,607
|
|
||||
Information technology
|
12,316
|
|
|
14,240
|
|
|
25,420
|
|
|
26,503
|
|
||||
Occupancy
|
4,052
|
|
|
4,014
|
|
|
8,131
|
|
|
8,397
|
|
||||
Amortization of acquisition related software and intangible assets
|
4,166
|
|
|
9,621
|
|
|
8,332
|
|
|
17,753
|
|
||||
Total cost of services
|
99,598
|
|
|
101,022
|
|
|
198,599
|
|
|
198,527
|
|
||||
Selling, general and administrative expenses
|
28,036
|
|
|
26,532
|
|
|
57,282
|
|
|
58,530
|
|
||||
Settlement expense
|
—
|
|
|
20,000
|
|
|
—
|
|
|
20,000
|
|
||||
Total operating expenses
|
127,634
|
|
|
147,554
|
|
|
255,881
|
|
|
277,057
|
|
||||
Operating income/(loss)
|
40,548
|
|
|
(763
|
)
|
|
60,254
|
|
|
11,159
|
|
||||
Interest expense
|
(2,853
|
)
|
|
(3,034
|
)
|
|
(5,702
|
)
|
|
(5,682
|
)
|
||||
Interest income
|
966
|
|
|
188
|
|
|
2,080
|
|
|
308
|
|
||||
Income/(loss) before income taxes
|
38,661
|
|
|
(3,609
|
)
|
|
56,632
|
|
|
5,785
|
|
||||
Income taxes
|
9,561
|
|
|
(242
|
)
|
|
7,890
|
|
|
2,761
|
|
||||
Net income/(loss)
|
$
|
29,100
|
|
|
$
|
(3,367
|
)
|
|
$
|
48,742
|
|
|
$
|
3,024
|
|
|
|
|
|
|
|
|
|
|
|||||||
Basic income per common share:
|
|
|
|
|
|
|
|
|
|||||||
Net income/(loss) per common share -- basic
|
$
|
0.34
|
|
|
$
|
(0.04
|
)
|
|
$
|
0.56
|
|
|
$
|
0.04
|
|
Diluted income per common share:
|
|
|
|
|
|
|
|
|
|||||||
Net income/(loss) per common share -- diluted
|
$
|
0.33
|
|
|
$
|
(0.04
|
)
|
|
$
|
0.55
|
|
|
$
|
0.04
|
|
Weighted average shares:
|
|
|
|
|
|
|
|
|
|||||||
Basic
|
85,956
|
|
|
83,231
|
|
|
86,524
|
|
|
83,222
|
|
||||
Diluted
|
87,858
|
|
|
83,231
|
|
|
88,843
|
|
|
84,837
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Common Stock and paid-in capital
|
|
|
|
|
|
|
|
||||||||
Balance, beginning of period
|
$
|
454,087
|
|
|
$
|
376,737
|
|
|
$
|
426,737
|
|
|
$
|
369,686
|
|
Exercise of stock options
|
3,859
|
|
|
2,246
|
|
|
26,998
|
|
|
2,390
|
|
||||
Stock-based compensation expense
|
4,802
|
|
|
4,714
|
|
|
15,781
|
|
|
14,208
|
|
||||
Vesting of restricted stock units, net of shares withheld for employee tax
|
(179
|
)
|
|
(97
|
)
|
|
(6,947
|
)
|
|
(2,684
|
)
|
||||
Balance, end of period
|
462,569
|
|
|
383,600
|
|
|
462,569
|
|
|
383,600
|
|
||||
Retained earnings
|
|
|
|
|
|
|
|
|
|
||||||
Balance, beginning of period
|
441,877
|
|
|
373,982
|
|
|
422,235
|
|
|
366,164
|
|
||||
Net income/(loss)
|
29,100
|
|
|
(3,367
|
)
|
|
48,742
|
|
|
3,024
|
|
||||
Cumulative effect of accounting changes
|
—
|
|
|
—
|
|
|
—
|
|
|
1,427
|
|
||||
Balance, end of period
|
470,977
|
|
|
370,615
|
|
|
470,977
|
|
|
370,615
|
|
||||
Treasury stock
|
|
|
|
|
|
|
|
|
|
||||||
Balance, beginning of period
|
(135,576
|
)
|
|
(135,576
|
)
|
|
(135,576
|
)
|
|
(129,621
|
)
|
||||
Purchase of treasury stock
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,955
|
)
|
||||
Balance, end of period
|
(135,576
|
)
|
|
(135,576
|
)
|
|
(135,576
|
)
|
|
(135,576
|
)
|
||||
Total shareholders' equity
|
$
|
797,970
|
|
|
$
|
618,639
|
|
|
$
|
797,970
|
|
|
$
|
618,639
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Shares issued
|
|
|
|
|
|
|
|
|
|
||||||
Balance, beginning of period
|
100,745,077
|
|
|
96,876,154
|
|
|
98,924,501
|
|
|
96,536,251
|
|
||||
Exercise of stock options
|
242,723
|
|
|
141,991
|
|
|
1,686,408
|
|
|
151,034
|
|
||||
Vesting of restricted stock units, net of shares withheld for employee tax
|
26,606
|
|
|
32,963
|
|
|
403,497
|
|
|
363,823
|
|
||||
Balance, end of period
|
101,014,406
|
|
|
97,051,108
|
|
|
101,014,406
|
|
|
97,051,108
|
|
||||
|
|
|
|
|
|
|
|
|
|
||||||
Treasury Stock
|
|
|
|
|
|
|
|
|
|
||||||
Balance, beginning of period
|
13,663,194
|
|
|
13,663,194
|
|
|
13,663,194
|
|
|
13,279,393
|
|
||||
Purchase of treasury stock
|
—
|
|
|
—
|
|
|
—
|
|
|
383,801
|
|
||||
Balance, end of period
|
13,663,194
|
|
|
13,663,194
|
|
|
13,663,194
|
|
|
13,663,194
|
|
|
Six Months Ended
June 30, |
||||||
|
2019
|
|
2018
|
||||
Operating activities:
|
|
|
|
||||
Net income
|
$
|
48,742
|
|
|
$
|
3,024
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization of property, equipment and software
|
15,989
|
|
|
16,758
|
|
||
Amortization of intangible assets
|
4,677
|
|
|
12,774
|
|
||
Amortization of deferred financing costs
|
282
|
|
|
282
|
|
||
Stock-based compensation expense
|
15,781
|
|
|
14,208
|
|
||
Deferred income taxes
|
4,588
|
|
|
(3,900
|
)
|
||
Noncash lease expense
|
2,366
|
|
|
—
|
|
||
Release of estimated liability for appeals, net
|
(10,478
|
)
|
|
(8,436
|
)
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
(2,062
|
)
|
|
(3,654
|
)
|
||
Prepaid expenses
|
(378
|
)
|
|
63
|
|
||
Other current assets
|
15
|
|
|
570
|
|
||
Other assets
|
(1,200
|
)
|
|
(29
|
)
|
||
Income taxes receivable
|
9,386
|
|
|
(5,324
|
)
|
||
Accounts payable, accrued expenses and other liabilities
|
(7,235
|
)
|
|
(2,546
|
)
|
||
Operating lease liabilities
|
(2,952
|
)
|
|
—
|
|
||
Estimated liability for appeals
|
605
|
|
|
(99
|
)
|
||
Net cash provided by operating activities
|
78,126
|
|
|
23,691
|
|
||
Investing activities:
|
|
|
|
||||
Purchases of property and equipment
|
(945
|
)
|
|
(2,455
|
)
|
||
Investment in capitalized software
|
(7,465
|
)
|
|
(10,173
|
)
|
||
Net cash used in investing activities
|
(8,410
|
)
|
|
(12,628
|
)
|
||
Financing activities:
|
|
|
|
||||
Proceeds from exercise of stock options
|
26,998
|
|
|
2,390
|
|
||
Payments of tax withholdings on behalf of employees for net-share settlements
|
(6,947
|
)
|
|
(2,684
|
)
|
||
Payments on capital lease obligations
|
(36
|
)
|
|
—
|
|
||
Purchases of treasury stock
|
—
|
|
|
(5,955
|
)
|
||
Net cash provided by/(used in) financing activities
|
20,015
|
|
|
(6,249
|
)
|
||
Net increase in cash and cash equivalents
|
89,731
|
|
|
4,814
|
|
||
Cash and Cash Equivalents
|
|
|
|
||||
Cash and cash equivalents at beginning of year
|
178,946
|
|
|
83,313
|
|
||
Cash and cash equivalents at end of period
|
$
|
268,677
|
|
|
$
|
88,127
|
|
|
|
|
|
||||
Supplemental disclosure of cash flow information:
|
|
|
|
||||
Cash (refunds received)/paid for income taxes, net of refunds
|
$
|
(6,509
|
)
|
|
$
|
11,472
|
|
Cash paid for interest
|
$
|
5,524
|
|
|
$
|
4,916
|
|
|
|
|
|
||||
Supplemental disclosure of non-cash activities:
|
|
|
|
||||
Change in balance of accrued property and equipment purchases
|
$
|
250
|
|
|
$
|
1,082
|
|
|
Three Months Ended
|
Six Months Ended
|
||||||||||||
|
June 30, 2019
|
|
June 30, 2018
|
June 30, 2019
|
|
June 30, 2018
|
||||||||
Coordination of Benefits
|
$
|
105,094
|
|
|
$
|
100,755
|
|
$
|
210,945
|
|
|
$
|
192,507
|
|
Payment Integrity
|
49,121
|
|
|
31,192
|
|
76,847
|
|
|
69,833
|
|
||||
Population Health Management
|
13,967
|
|
|
14,844
|
|
28,343
|
|
|
25,876
|
|
||||
Total
|
$
|
168,182
|
|
|
$
|
146,791
|
|
$
|
316,135
|
|
|
$
|
288,216
|
|
|
Three Months Ended
|
Six Months Ended
|
||||||||||||
|
June 30, 2019
|
|
June 30, 2018
|
June 30, 2019
|
|
June 30, 2018
|
||||||||
Commercial
|
$
|
79,044
|
|
|
$
|
80,493
|
|
$
|
155,303
|
|
|
$
|
152,278
|
|
State
|
65,180
|
|
|
58,815
|
|
126,922
|
|
|
113,435
|
|
||||
Federal
|
23,958
|
|
|
7,483
|
|
33,910
|
|
|
22,503
|
|
||||
Total
|
$
|
168,182
|
|
|
$
|
146,791
|
|
$
|
316,135
|
|
|
$
|
288,216
|
|
|
June 30,
2019 |
|
December 31,
2018 |
||||
Accounts receivable
|
$
|
212,740
|
|
|
$
|
220,455
|
|
Allowance
|
(12,808
|
)
|
|
(13,683
|
)
|
||
Accounts receivable, net
|
$
|
199,932
|
|
|
$
|
206,772
|
|
|
June 30,
2019 |
|
December 31,
2018 |
||||
Balance--beginning of period
|
$
|
13,683
|
|
|
$
|
14,799
|
|
Provision
|
7,717
|
|
|
20,453
|
|
||
Charge-offs
|
(8,592
|
)
|
|
(21,569
|
)
|
||
Balance--end of period
|
$
|
12,808
|
|
|
$
|
13,683
|
|
|
Gross Carrying Amount
|
|
Accumulated
Amortization
|
|
Net Carrying Amount
|
|
Weighted Average Amortization Period in Years
|
||||||
June 30, 2019
|
|
|
|
|
|
|
|
||||||
Customer relationships
|
$
|
68,290
|
|
|
$
|
(18,936
|
)
|
|
$
|
49,354
|
|
|
12.5
|
Intellectual property
|
21,700
|
|
|
(8,606
|
)
|
|
13,094
|
|
|
3.7
|
|||
Trade names
|
136
|
|
|
(128
|
)
|
|
8
|
|
|
0.2
|
|||
Restrictive covenants
|
133
|
|
|
(126
|
)
|
|
7
|
|
|
0.2
|
|||
Total
|
$
|
90,259
|
|
|
$
|
(27,796
|
)
|
|
$
|
62,463
|
|
|
|
|
Gross Carrying Amount
|
|
Accumulated
Amortization
|
|
Net Carrying Amount
|
|
Weighted Average Amortization Period in Years
|
||||||
December 31, 2018
|
|
|
|
|
|
|
|
||||||
Customer relationships
|
$
|
156,790
|
|
|
$
|
(104,740
|
)
|
|
$
|
52,050
|
|
|
12.8
|
Intellectual property
|
21,700
|
|
|
(6,670
|
)
|
|
15,030
|
|
|
4.1
|
|||
Trade names
|
16,246
|
|
|
(16,215
|
)
|
|
31
|
|
|
0.7
|
|||
Restrictive covenants
|
263
|
|
|
(234
|
)
|
|
29
|
|
|
0.7
|
|||
Total
|
$
|
194,999
|
|
|
$
|
(127,859
|
)
|
|
$
|
67,140
|
|
|
|
Year ending December 31,
|
Amortization
|
|
|
2019 (excluding the six months ended June 30, 2019)
|
$
|
4,568
|
|
2020
|
7,613
|
|
|
2021
|
7,197
|
|
|
2022
|
7,197
|
|
|
2023
|
4,822
|
|
|
Thereafter
|
31,066
|
|
|
Total
|
$
|
62,463
|
|
|
June 30,
2019 |
|
December 31,
2018 |
||||
Accounts payable, trade
|
$
|
11,774
|
|
|
$
|
12,394
|
|
Accrued compensation and other
|
26,735
|
|
|
42,833
|
|
||
Accrued operating expenses
|
26,301
|
|
|
19,675
|
|
||
Current portion of lease liabilities
|
6,520
|
|
|
—
|
|
||
Total accounts payable, accrued expenses and other liabilities
|
$
|
71,330
|
|
|
$
|
74,902
|
|
|
Original
RAC contract
|
|
RAC 4
contract
|
|
Commercial contracts
|
|
Total
|
||||||||
Balance at December 31, 2018
|
$
|
19,380
|
|
|
$
|
20
|
|
|
$
|
2,323
|
|
|
$
|
21,723
|
|
Provision
|
—
|
|
|
604
|
|
|
5,135
|
|
|
5,739
|
|
||||
Appeals found in providers favor
|
—
|
|
|
(309
|
)
|
|
(4,825
|
)
|
|
(5,134
|
)
|
||||
Release of liability
|
(19,380
|
)
|
|
—
|
|
|
—
|
|
|
(19,380
|
)
|
||||
Balance at June 30, 2019
|
$
|
—
|
|
|
$
|
315
|
|
|
$
|
2,633
|
|
|
$
|
2,948
|
|
▪
|
a base rate determined by reference to the greatest of (a) the prime or base commercial lending rate of the administrative agent as in effect on the relevant date, (b) the federal funds effective rate plus
0.50%
and (c) the one-month London Interbank Offered Rate (or any successor rate determined in accordance with the Credit Agreement) (“LIBO Rate”) plus
1.00%
,
plus
an interest margin ranging from
0.50%
to
1.00%
based on the Company’s consolidated leverage ratio for the applicable period; or
|
▪
|
an adjusted LIBO Rate, equal to the LIBO Rate for the applicable interest period multiplied by the statutory reserve rate (equal to (x) one divided by (y) one minus the aggregate of the maximum reserve percentage (including any marginal, special, emergency or supplemental reserves) established by the Board of Governors of the Federal Reserve System of the United States),
plus
an interest margin ranging from
1.50%
to
2.00%
based on the Company’s consolidated leverage ratio for the applicable period.
|
|
Three Months Ended
June 30, |
Six Months Ended
June 30, |
||||||||||||
|
2019
|
|
2018
|
2019
|
|
2018
|
||||||||
Interest expense
|
$
|
2,524
|
|
|
$
|
2,627
|
|
$
|
5,050
|
|
|
$
|
4,697
|
|
Commitment fees
|
160
|
|
|
239
|
|
316
|
|
|
477
|
|
|
Three Months Ended
June 30, |
Six Months Ended
June 30, |
||||||||||||
|
2019
|
|
2018
|
2019
|
|
2018
|
||||||||
Net income/(loss)
|
$
|
29,100
|
|
|
$
|
(3,367
|
)
|
$
|
48,742
|
|
|
$
|
3,024
|
|
|
|
|
|
|
|
|
||||||||
Weighted average common shares outstanding-basic
|
85,956
|
|
|
83,231
|
|
86,524
|
|
|
83,222
|
|
||||
Plus: net effect of dilutive stock options and restricted stock units
|
1,902
|
|
|
—
|
|
2,319
|
|
|
1,615
|
|
||||
Weighted average common shares outstanding-diluted
|
87,858
|
|
|
83,231
|
|
88,843
|
|
|
84,837
|
|
||||
Net income/(loss) per common share -- basic
|
$
|
0.34
|
|
|
$
|
(0.04
|
)
|
$
|
0.56
|
|
|
$
|
0.04
|
|
Net income/(loss) per common share -- diluted
|
$
|
0.33
|
|
|
$
|
(0.04
|
)
|
$
|
0.55
|
|
|
$
|
0.04
|
|
|
Three Months Ended
June 30, |
Six Months Ended
June 30, |
||||||||||||
|
2019
|
|
2018
|
2019
|
|
2018
|
||||||||
Cost of services-compensation
|
$
|
2,720
|
|
|
$
|
1,673
|
|
$
|
6,843
|
|
|
$
|
4,236
|
|
Selling, general and administrative
|
2,082
|
|
|
3,041
|
|
8,938
|
|
|
9,972
|
|
||||
Total
|
$
|
4,802
|
|
|
$
|
4,714
|
|
$
|
15,781
|
|
|
$
|
14,208
|
|
|
Number of Options
|
|
Weighted
Average
Exercise
Price
|
|
Weighted
Average-
Remaining
Contractual
Terms
|
|
Aggregate
Intrinsic
Value
|
|||||
Outstanding balance at December 31, 2018
|
4,402
|
|
|
$
|
17.07
|
|
|
|
|
|
||
Granted
|
622
|
|
|
38.72
|
|
|
|
|
|
|||
Exercised
|
(1,686
|
)
|
|
16.01
|
|
|
|
|
|
|||
Forfeitures
|
(140
|
)
|
|
19.31
|
|
|
|
|
|
|||
Expired
|
—
|
|
|
—
|
|
|
|
|
|
|||
Outstanding balance at June 30, 2019
|
3,198
|
|
|
$
|
21.79
|
|
|
6.86
|
|
$
|
37,514
|
|
Expected to vest at June 30, 2019
|
1,045
|
|
|
$
|
28.12
|
|
|
8.98
|
|
$
|
7,507
|
|
Exercisable at June 30, 2019
|
1,728
|
|
|
$
|
16.91
|
|
|
5.13
|
|
$
|
26,745
|
|
|
Six Months Ended
June 30, |
||||
|
2019
|
|
2018
|
||
Expected dividend yield
|
0
|
%
|
|
0
|
%
|
Risk-free interest rate
|
2.5
|
%
|
|
2.7
|
%
|
Expected volatility
|
40.9
|
%
|
|
42.4
|
%
|
Expected life (years)
|
6.35
|
|
|
6.00
|
|
|
Number of
Units
|
|
Weighted Average
Grant Date Fair
Value per Unit
|
|||
Outstanding balance at December 31, 2018
|
1,488
|
|
|
$
|
17.60
|
|
Granted
|
460
|
|
|
34.10
|
|
|
Vesting of restricted stock units, net of units withheld for taxes
|
(403
|
)
|
|
16.49
|
|
|
Units withheld for taxes
|
(200
|
)
|
|
16.49
|
|
|
Forfeitures
|
(82
|
)
|
|
18.92
|
|
|
Outstanding balance at June 30, 2019
|
1,263
|
|
|
$
|
25.74
|
|
|
Three Months Ended
June 30, 2019 |
|
Six Months Ended
June 30, 2019 |
||||
|
|
|
|
||||
Operating lease cost
|
$
|
1,658
|
|
|
$
|
3,314
|
|
|
|
|
|
||||
Finance lease cost:
|
|
|
|
||||
Amortization of right-of-use assets
|
$
|
30
|
|
|
$
|
38
|
|
Interest on lease liabilities
|
$
|
4
|
|
|
$
|
5
|
|
Total finance lease cost
|
$
|
34
|
|
|
$
|
43
|
|
|
Six Months Ended
June 30, 2019 |
||
|
|
||
Cash paid for amounts included in measurement of lease liabilities:
|
|
||
Operating cash flows from operating leases
|
$
|
3,700
|
|
Operating cash flows from finance leases
|
$
|
4
|
|
Financing cash flows from finance leases
|
$
|
36
|
|
Right-of-use assets obtained in exchange for new lease liabilities:
|
|
||
Operating leases
|
$
|
163
|
|
Finance leases
|
$
|
331
|
|
|
June 30, 2019
|
||
Operating Leases
|
|
||
Operating lease right-of-use assets
|
$
|
18,940
|
|
|
|
||
Other current liabilities
|
$
|
6,301
|
|
Operating lease liabilities
|
$
|
17,245
|
|
Total operating lease liabilities
|
$
|
23,546
|
|
|
|
||
Finance Leases
|
|
||
Other Assets
|
$
|
656
|
|
|
|
||
Other current liabilities
|
$
|
219
|
|
Other long-term liabilities
|
$
|
440
|
|
Total finance leases liabilities
|
$
|
659
|
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
▪
|
over 40 state Medicaid programs;
|
▪
|
approximately 350 health plans, including 22 of the top 25 health plans nationally (based on membership) in support of their multiple lines of business, including Medicaid managed care, Medicare Advantage and group and individual health;
|
▪
|
over 160 private employers;
|
▪
|
CMS, the Centers for Disease Control and Prevention, and the Department of Veterans Affairs; and
|
▪
|
PBMs, third-party administrators and other risk-bearing entities, including independent practice associations, hospital systems, ACOs and specialty care organizations.
|
▪
|
Revenue of
$168.2 million
increased
$21.4 million
, or
14.6%
over the same quarter in
2018
; and
|
▪
|
Operating income
of
$40.6 million
increased
by
$41.3 million
as compared to
operating loss
of
$0.7 million
in the same quarter of the prior year.
|
|
|
Three Months Ended
|
|
|
|
|
|||||||||
dollars in millions
|
|
June 30,
|
|
$ Change
|
|
% Change
|
|||||||||
|
|
2019
|
|
2018
|
|
2019 vs 2018
|
|||||||||
Revenue
|
|
$
|
168.2
|
|
|
$
|
146.8
|
|
|
$
|
21.4
|
|
|
14.6
|
%
|
Cost of services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Compensation
|
|
58.3
|
|
|
55.2
|
|
|
3.1
|
|
|
5.6
|
|
|||
Direct project and other operating expenses
|
|
20.7
|
|
|
17.9
|
|
|
2.8
|
|
|
15.6
|
|
|||
Information technology
|
|
12.3
|
|
|
14.2
|
|
|
(1.9
|
)
|
|
(13.4
|
)
|
|||
Occupancy
|
|
4.1
|
|
|
4.0
|
|
|
0.1
|
|
|
2.5
|
|
|||
Amortization of acquisition related software and intangible assets
|
|
4.2
|
|
|
9.7
|
|
|
(5.5
|
)
|
|
(56.7
|
)
|
|||
Total cost of services
|
|
99.6
|
|
|
101.0
|
|
|
(1.4
|
)
|
|
(1.4
|
)
|
|||
Selling, general and administrative expenses
|
|
28.0
|
|
|
26.5
|
|
|
1.5
|
|
|
5.7
|
|
|||
Settlement expense
|
|
—
|
|
|
20.0
|
|
|
(20.0
|
)
|
|
(100.0
|
)
|
|||
Total operating expenses
|
|
127.6
|
|
|
147.5
|
|
|
(19.9
|
)
|
|
(13.5
|
)
|
|||
Operating income/(loss)
|
|
40.6
|
|
|
(0.7
|
)
|
|
41.3
|
|
|
5,900.0
|
|
|||
Interest expense
|
|
(2.9
|
)
|
|
(3.1
|
)
|
|
0.2
|
|
|
6.5
|
|
|||
Interest income
|
|
1.0
|
|
|
0.2
|
|
|
0.8
|
|
|
400.0
|
|
|||
Income/(loss) before income taxes
|
|
38.7
|
|
|
(3.6
|
)
|
|
42.3
|
|
|
1,175.0
|
|
|||
Income taxes
|
|
9.6
|
|
|
(0.2
|
)
|
|
9.8
|
|
|
4,900.0
|
|
|||
Net income/(loss)
|
|
$
|
29.1
|
|
|
$
|
(3.4
|
)
|
|
$
|
32.5
|
|
|
955.9
|
%
|
▪
|
By solution, which consists of coordination of benefits and analytical services, and included in analytical services are our payment integrity and population health management solutions:
|
o
|
Coordination of benefits revenue
increased
$4.3 million
or
4.3%
which was attributable to incremental services and yield increases provided to existing customers in our cost avoidance and post payment recovery business.
|
o
|
Payment integrity revenue
increased
$17.9 million
or
57.4%
primarily due to
$10.5 million
increase in revenue from the Company's release of its remaining estimated liability and net receivables relating to the original Medicare RAC contract during the second quarter of 2019. The Company has determined that there is no further contractual obligation to CMS with respect to the original Medicare RAC contract as of June 30, 2019.
|
o
|
Population health management revenue
decreased
$0.8 million
or
5.4%
.
|
▪
|
By market:
|
o
|
Commercial health plan market revenue
decreased
$1.5 million
or
1.9%
, which was primarily attributable to the decrease in Population health management revenue.
|
o
|
Federal government market revenue
increased
$16.5 million
or
220.0%
compared to the prior year quarter primarily due to the
$10.5 million
original Medicare RAC reserve release described above.
|
o
|
State government market revenue
increased
by
$6.4 million
or
10.9%
, which was attributable to expanded scopes and yield improvements.
|
▪
|
Compensation expense
increased
by
$3.1 million
primarily due to a reduction in capitalized software related projects, an increase in variable compensation costs and an increase stock compensation expense.
|
▪
|
Direct project and other operating costs
increased
by
$2.8 million
due to increased labor and services utilized to support revenue generating activities.
|
▪
|
Information technology expense
decreased
by
$1.9 million
due to a decrease in software maintenance and license costs and amortization of internally developed software assets.
|
▪
|
Amortization of acquisition related software and intangible assets
decreased
by
$5.5 million
due to certain intangible assets becoming fully amortized in prior periods.
|
▪
|
Compensation expense in
2019
decreased by $1.1 million primarily due to a decrease in stock compensation expense,which resulted from a reduction in stock options vesting for SG&A related retirement eligible employees.
|
▪
|
Professional and consulting fees increased $1.2 million compared to the prior year as the Company leveraged additional external resources and expertise for certain activities during the
second
quarter of
2019
.
|
▪
|
Revenue of
$316.1 million
increased
$27.9 million
, or
9.7%
over the same period in
2018
; and
|
▪
|
Operating income
of
$60.2 million
increased
by
$49.0 million
as compared to
operating income
of
$11.2 million
in the same period in
2018
.
|
|
|
Six Months Ended
|
|
|
|
|
|||||||||
dollars in millions
|
|
June 30,
|
|
$ Change
|
|
% Change
|
|||||||||
|
|
2019
|
|
2018
|
|
2019 vs 2018
|
|||||||||
Revenue
|
|
$
|
316.1
|
|
|
$
|
288.2
|
|
|
$
|
27.9
|
|
|
9.7
|
%
|
Cost of services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Compensation
|
|
115.8
|
|
|
111.3
|
|
|
4.5
|
|
|
4.0
|
|
|||
Direct project and other operating expenses
|
|
40.9
|
|
|
34.5
|
|
|
6.4
|
|
|
18.6
|
|
|||
Information technology
|
|
25.4
|
|
|
26.5
|
|
|
(1.1
|
)
|
|
(4.2
|
)
|
|||
Occupancy
|
|
8.1
|
|
|
8.4
|
|
|
(0.3
|
)
|
|
(3.6
|
)
|
|||
Amortization of acquisition related software and intangible assets
|
|
8.4
|
|
|
17.8
|
|
|
(9.4
|
)
|
|
(52.8
|
)
|
|||
Total cost of services
|
|
198.6
|
|
|
198.5
|
|
|
0.1
|
|
|
0.1
|
|
|||
Selling, general and administrative expenses
|
|
57.3
|
|
|
58.5
|
|
|
(1.2
|
)
|
|
(2.1
|
)
|
|||
Settlement expense
|
|
—
|
|
|
20.0
|
|
|
(20.0
|
)
|
|
(100.0
|
)
|
|||
Total operating expenses
|
|
255.9
|
|
|
277.0
|
|
|
(21.1
|
)
|
|
(7.6
|
)
|
|||
Operating income
|
|
60.2
|
|
|
11.2
|
|
|
49.0
|
|
|
437.5
|
|
|||
Interest expense
|
|
(5.7
|
)
|
|
(5.7
|
)
|
|
—
|
|
|
—
|
|
|||
Interest income
|
|
2.1
|
|
|
0.3
|
|
|
1.8
|
|
|
600.0
|
|
|||
Income before income taxes
|
|
56.6
|
|
|
5.8
|
|
|
50.8
|
|
|
875.9
|
|
|||
Income taxes
|
|
7.9
|
|
|
2.8
|
|
|
5.1
|
|
|
182.1
|
|
|||
Net income
|
|
$
|
48.7
|
|
|
$
|
3.0
|
|
|
$
|
45.7
|
|
|
1,523.3
|
%
|
▪
|
By solution, which consists of coordination of benefits and analytical services, and included in analytical services are our payment integrity and population health management solutions:
|
o
|
Coordination of benefits revenue
increased
$18.5 million
or
9.6%
which was attributable to incremental services and yield increases provided to existing customers in our cost avoidance and post payment recovery business.
|
o
|
Payment integrity revenue
increased
$7.0 million
or
10.0%
primarily due to a
$9.5 million
increase
in Medicare RAC revenue, which included a
$2.1 million
increase in revenue from the release of the Company's remaining estimated liability and net receivables relating to the original Medicare RAC contract as described above.
|
o
|
Population health management revenue
increased
$2.4 million
or
9.3%
due to year over year growth in the Eliza business.
|
▪
|
By market:
|
o
|
Commercial health plan market revenue
increased
$3.0 million
or
2.0%
, which was primarily attributable to year over year growth in the Eliza business and incremental services and yield increases provided to existing customers in our cost avoidance business.
|
o
|
Federal government market revenue
increased
$11.4 million
or
50.7%
compared to the prior year due to a
$9.5 million
increase
in Medicare RAC revenue, which included an incremental increase in revenue of
$2.1 million
related to the original Medicare RAC contract as described above.
|
o
|
State government market revenue
increased
by
$13.5 million
or
11.9%
, which was attributable to expanded scopes and yield improvements.
|
▪
|
Compensation expense
increased
by
$4.5 million
primarily due to a reduction in capitalized software related projects, an increase in stock compensation expense due to stock option vestings for COS related retirement eligible employees.
|
▪
|
Direct project and other operating costs
increased
by
$6.4 million
due to increased labor and services utilized to support revenue generating activities.
|
▪
|
Information technology expense
decreased
by
$1.1 million
primarily due a reduction in third party data costs and hosting services.
|
▪
|
Amortization of acquisition related software and intangible assets
decreased
by
$9.4
million primarily related to certain intangible assets becoming fully amortized in prior periods, including certain customer relationships, trade names and software related intangibles.
|
▪
|
Compensation expense in
2019
decreased by $3.0 million primarily as a result of a decrease in salaries and benefits, as well as stock compensation expense due to a reduction in stock options vesting for SG&A related retirement eligible employees.
|
▪
|
Professional and consulting fees increased $1.7 million compared to the prior year as the Company leveraged additional external resources and expertise for certain activities during
2019
.
|
|
June 30, 2019
|
|
December 31, 2018
|
||||
Cash and cash equivalents
|
$
|
268,677
|
|
|
$
|
178,946
|
|
Working capital
|
$
|
424,899
|
|
|
$
|
328,684
|
|
Available borrowings under credit facility
|
$
|
253,500
|
|
|
$
|
253,500
|
|
|
Six Months Ended June 30,
|
||||||
2019
|
|
2018
|
|||||
Net cash provided by operating activities
|
$
|
78,126
|
|
|
$
|
23,691
|
|
Net cash used in investing activities
|
(8,410
|
)
|
|
(12,628
|
)
|
||
Net cash provided by/(used in) financing activities
|
20,015
|
|
|
(6,249
|
)
|
||
Net increase in cash and cash equivalents
|
$
|
89,731
|
|
|
$
|
4,814
|
|
▪
|
the working capital requirements of our operations;
|
▪
|
investments in our business;
|
▪
|
business development activities; and
|
▪
|
repurchases of common stock.
|
Exhibit
Number
|
|
Description
|
|
|
|
3.1
|
|
|
|
|
|
3.2
|
|
|
|
|
|
10.1
|
|
|
|
|
|
10.2
|
|
|
|
|
|
10.3
|
|
|
|
|
|
10.4
|
|
|
|
|
|
10.5
|
|
|
|
|
|
31.1
|
|
|
|
|
|
31.2
|
|
|
|
|
|
32.1
|
|
|
|
|
|
32.2
|
|
101.INS
|
|
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
|
101.SCH
|
|
Inline XBRL Taxonomy Extension Schema Document
|
101.CAL
|
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document
|
101.DEF
|
|
Inline XBRL Taxonomy Extension Definition Linkbase Document
|
101.LAB
|
|
Inline XBRL Taxonomy Extension Label Linkbase Document
|
101.PRE
|
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document
|
†
|
Indicates a management contract or compensatory plan, contract or arrangement
|
*
|
The certifications attached hereto as Exhibit 32.1 and Exhibit 32.2 are furnished with this Form 10-Q and shall not be deemed “filed” by the Company for purposes of Section 18 of the Exchange Act
|
Date:
|
August 5, 2019
|
|
HMS HOLDINGS CORP.
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ William C. Lucia
|
|
|
|
|
William C. Lucia
President and Chief Executive Officer
(Principal Executive Officer)
|
|
|
|
|
|
|
|
|
By:
|
/s/ Jeffrey S. Sherman
|
|
|
|
|
Jeffrey S. Sherman
Executive Vice President, Chief Financial Officer and Treasurer
(Principal Financial Officer)
|
1 Year HMS Chart |
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