HMS Holdings Corp. Reports Q2 Results

“With commercial health plan revenue up 20% in the first half of this year, compared to the comparable period in 2015, we are on course to achieve our full-year growth target of 18-20%. The addition this quarter of approximately 15 million new commercial lives and the sale of incremental products to current health plan customers covering approximately 3.1 million of their members resulted in a record quarter for our sales team. Of particular significance,  the new lives are a combination of commercial at-risk and administrative services only (ASO) lives and virtually all sales in the quarter were for payment integrity products," said Bill Lucia, Chairman and CEO. "Up to this point nearly all of our work for health plan customers has been for their Medicaid managed care and Medicare Advantage populations, with a focus primarily on our coordination of benefits product line. As many of the larger national and regional plans address ongoing cost challenges, we expect there will be a growing opportunity to sell our payment integrity cost containment solutions for their commercial at-risk and ASO populations - which presents a significant growth opportunity for HMS."

Total revenue in the second quarter of 2016 of $123.6 million was approximately 5.7% higher than the prior year second quarter. Commercial health plan revenue in the quarter was $55.2 million, a 12.0% increase compared to $49.3 million in the prior year second quarter and a $0.8 million decline from the first quarter of 2016. State government revenue in the quarter was $57.6 million, compared to $57.2 million in the prior year second quarter, and an increase of $6.9 million compared to the first quarter of 2016.

Non-Medicare RAC Federal and other revenue was $6.7 million in the second quarter of 2016, a $0.2 million increase compared to the prior year second quarter and an increase of $1.9 million from the first quarter of 2016. Medicare RAC revenue in quarter was $4.1 million, compared to $3.9 million in the prior year second quarter and $8.3 million in the first quarter of 2016.

Coordination of Benefits (COB) revenue, which continues to be our largest product line across both the state government and commercial health plan sectors, was $89.7 million in the second quarter of 2016 compared to $83.0 million in the prior year second quarter and $82.9 million in the first quarter of 2016. COB revenue accounted for 73% of total revenue in the quarter, compared to 71% in the prior year second quarter and 69% in the first quarter of 2016. Payment integrity revenue (excluding Medicare RAC) was $29.8 million in the quarter, a $0.2 million or 0.7% decline from the second quarter of last year and a $1.2 million or 4.2% increase from the first quarter of 2016.

"Cash flow from operations of $45.1 million was particularly strong in the second quarter, as cash collections accelerated and accounts receivable declined. Quarter end cash on the balance sheet at June 30, 2016 increased to nearly $188 million and we are on track to reach our full year operating cash flow target in the $80 -100 million range," said Jeff Sherman, Chief Financial Officer. "As we have indicated previously, the primary capital allocation focus for our increasingly strong balance sheet is acquisitions to complement our core business; expand our data analytics capabilities to assist customers with member health management and/or member engagement; and add to our capacity to detect fraud, waste and abuse."

Webcast and Conference Call Information

HMS will report its second quarter 2016 financial and operating results via webcast at 7:30 AM CT / 8:30 AM ET on Friday, August 5, 2016. The webcast may also include discussion of HMS developments, and forward-looking and other material information about business and financial matters.  The webcast can be accessed via phone at (877) 303–7208 or (224) 357–2389 for international participants, or at http://investor.hms.com/events.cfm on the HMS Investor Relations website. The webcast will also be archived and available for replay beginning at approximately 11:00 AM CT / 12:00 PM ET on August 5, 2016 at http://investor.hms.com/events.cfm. This press release and the financial statements contained herein are also available at http://investor.hms.com/releases.cfm.

The HMS Quarterly Report on Form 10-Q for the period ended June 30, 2016 is expected to be filed and available on the HMS website at http://investor.hms.com/financials.cfm and at www.sec.gov on August 9, 2016 and will contain additional information about our results of operations for the fiscal year to date.

About HMS

HMS Holdings Corp., through its subsidiaries, provides coordination of benefits and payment integrity services for payers. The Company serves state Medicaid programs; health plans, including Medicaid managed care, Medicare Advantage and group and individual health lines of business; federal government health agencies, including the Centers for Medicare & Medicaid Services and the Veterans Health Administration; government and private employers; and other healthcare payers and sponsors, including child support agencies. As a result of the Company’s services, our customers recover billions of dollars annually and save billions more through the prevention of improper payments.

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 provide useful information to the Company's management, investors, and other interested parties about the Company's operating performance because they allow them to understand and compare the Company's operating results during the current periods to the prior year 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  

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 projections or forecasts of future events and are based on our current expectations and assumptions regarding our business, the economy and other future conditions; they do not relate strictly to historical or current facts. Forward?looking statements can be identified by words such as “aims,” “anticipates,” “believes,” “estimates,” “expects,” “forecasts,” “intends,” “likely,” “may,” “plans,” “projects,” “seeks,” “targets,” “will,” “would,” “could,” “should,” and similar expressions and references to guidance, although some forward-looking statements may be expressed differently. In particular, these include statements relating to future actions, business plans, objectives and prospects, future operating or financial performance. 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. 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:  changes in the U.S. healthcare environment or healthcare financing system; negative or reduced growth rate of spending on Medicaid/Medicare; our ability to retain customers or the loss of one or more major customers; the unexpected reduction in scope or termination of a significant contract; 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; emergence of new competitors or competitors’ introduction of new or superior products or services; intellectual property rights, confidential and proprietary information; the cancellation or delay of procurements or contract implementation due to protests or challenges to government awards; regulatory, budgetary or political actions that affect procurement practices; our ability to continue to secure contracts or favorable contract terms through the competitive bidding process; our ability to execute our business plans or growth strategy; variations in our results of operations; development and implementation of new product solutions or new process improvements; the risk that guidance may not be achieved; our ability to maintain effective information and technology systems and networks, and to protect them from damage, interruption or breach, including cyber-security breaches and other disruptions; our failure to comply with applicable laws and regulations governing the conduct of certain electronic health transactions and the confidentiality of individually identifiable health information or to protect such information from theft and misuse; the nature of investment and acquisition opportunities we are pursuing, and the successful execution or integration of such investments and acquisitions; the failure to realize the full value of goodwill or intangible assets from acquisitions; negative results of government or customer reviews, audits or investigations; state or federal limitations related to the outsourcing of certain government programs or functions; our reliance on subcontractors, vendors or other third party providers and sources to perform services; pending or threatened litigation; unfavorable outcomes in legal proceedings; restrictions on bidding or performing certain work due to perceived conflicts of interests; our ability to attract and retain qualified employees and key personnel and to manage leadership transitions effectively; our cash flows from operations, available cash and ability to generate sufficient cash to cover our interest and principal payments under our credit facility or to borrow or use credit; unanticipated changes in our effective tax rates; unanticipated increases in the number or amount of claims for which we are self-insured; the market price of our common stock and lack of dividend payments; risks related to internal control over financial reporting; 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 subsequent 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.