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HMS Holdings Corp. Announces Q2 2009 Results and Raises 2009 Guidance
Date:7/31/2009

NEW YORK, July 31 /PRNewswire-FirstCall/ -- HMS (Nasdaq: HMSY) today announced its financial results for the second quarter of 2009.

For the quarter ended June 30, 2009 revenue increased 21.8% to $53.8 million, compared with $44.2 million for the same period a year ago. Net income for the quarter was $6.6 million or $0.24 per diluted share compared to net income of $5.0 million or $0.19 per diluted share for the same period a year ago. Adjusted EBITDA for the quarter increased 32.7% to $16.4 million versus $12.4 million for the same period a year ago.

For the first half of 2009, revenue increased 24.8% to $103.8 million versus $83.1 million for the prior year. Net income for the first half was $12.3 million or $0.45 per diluted share versus net income of $8.2 million or $0.31 per diluted share for the prior year. Adjusted EBITDA for the first half of 2009 increased 42.3% to $30.9 million versus $21.7 million for the prior year.

"HMS closed the first half of 2009 strongly, growing in each of our markets," said William Lucia, HMS CEO. "In addition to benefiting from growth in the programs we serve, we've seen increased adoption of our cost containment services, with two new State Medicaid agencies procuring coordination of benefits services for the first time. With the addition of these states, we have won nine consecutive procurements in Medicaid coordination of benefits. We also added 13 new Medicaid managed care plans to our portfolio."

As a result of its performance over the past two quarters, HMS is raising annual 2009 guidance to $222 million in revenue and $1.05 earnings per diluted share. Compared with 2008, the guidance represents revenue growth of 20.3% and earnings growth of 31.3%.

HMS will be hosting its second quarter 2009 conference call with the investment community on Friday, July 31, 2009 at 9:00 am Eastern Time. The conference call number is US/Canada: (866) 394-8630 Int'l/Local Dial-In: (706) 758-0082 Conference ID: 19291772. A slide presentation will accompany the conference call and may be accessed through our website at http://www.hms.com/investor_relations/investors_quarterly_results.asp.

A conference call replay will be available beginning July 31, 2009 11:00 am ET through August 6, 2009 11:59 pm ET. To listen to the replay of the call, dial: US/Canada: 1 (800) 642-1687 Int'l/Local Dial-In: (706) 645-9291 Conference ID: 19291772 or visit our website at http://www.hms.com/investor_relations/investors_quarterly_results.asp.

The HMS Holdings Corp. Form 10-Q for the quarter ended June 30, 2009 will be filed and available on our website www.hms.com on or about August 11, 2009, 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 www.hms.com for at least a 12-month period. Shareholders and interested investors are welcome to contact HMSY Investor Relations at 212-857-5986. Following the filing of the Form 10-Q, corporate executives will be available to respond to inquiries from shareholders and interested investors.

About HMS

HMS (Nasdaq: HMSY) is the nation's leader in coordination of benefits and program integrity services for government healthcare programs. The company's clients include health and human services programs in more than 40 states, 100 Medicaid managed care plans, the Centers for Medicare and Medicaid Services (CMS), and Veterans Administration facilities. HMS helps ensure that healthcare claims are paid correctly and by the responsible party. As a result of the company's services, government healthcare programs recover over $1 billion annually, and avoid billions of dollars more in erroneous payments.

This press release includes presentations of earnings before interest, taxes, depreciation and amortization (EBITDA) and adjusted EBITDA. Adjusted EBITDA represents EBITDA adjusted for share-based compensation expense. EBITDA is a measure commonly used by the capital markets to value enterprises. Interest, taxes, depreciation and amortization can vary significantly between companies due in part to differences in accounting policies, tax strategies, levels of indebtedness and interest rates. Excluding these items provides insight into the underlying results of operations and facilitates comparisons between HMSY and other companies. EBITDA is also a useful measure of the Company's ability to service debt and is one of the measures used for determining debt covenant compliance. In addition, because of the varying methodologies for determining share-based compensation expense, and the subjective assumptions involved in those determinations, we believe excluding share-based compensation expense from EBITDA enhances the ability of management and investors to compare our core operating results over multiple periods with those of other companies. Management believes EBITDA and adjusted EBITDA information is useful to investors for these reasons. Both EBITDA and adjusted EBITDA are non-GAAP financial measures and should not be viewed as an alternative to GAAP measures of performance. Management believes the most directly comparable GAAP financial measure is net income and has provided a reconciliation of EBITDA and adjusted EBITDA to net income in this press release.

Certain statements in this press release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform Act"). Such forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause the actual results, performance, or achievements of HMSY, or industry results, to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. The important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include, but are not limited to (i) the information being of a preliminary nature and therefore subject to further adjustment; (ii) the uncertainties of litigation; (iii) HMSY's dependence on significant customers; (iv) changing conditions in the healthcare industry which could simplify the reimbursement process and adversely affect HMSY's business; (v) government regulatory and political pressures which could reduce the rate of growth of healthcare expenditures and/or discourage the assertion of claims for reimbursement against and delay the ultimate receipt of payment from third party payors; (vi) competitive actions by other companies, including the development by competitors of new or superior services or products or the entry into the market of new competitors; (vii) all the risks inherent in the development, introduction, and implementation of new products and services; and (viii) other risk factors described from time to time in HMSY's filings with the SEC, including HMSY's Form 10-K for the year ended December 31, 2008. HMSY assumes no responsibility to update the forward-looking statements contained in this release as a result of new information, future events or otherwise. When/if used in this release, the words "focus," "believe," "confident," "anticipate," "expected," "strong," "potential," and similar expressions are intended to identify forward-looking statements, and the above described risks inherent therein.

                          HMS HOLDINGS CORP. AND SUBSIDIARIES
                           CONSOLIDATED STATEMENTS OF INCOME
           For the Three and Six-Month Periods Ended June 30, 2009 and 2008
                       (In thousands, except per share amounts)
                                    (unaudited)


                                           Three months         Six months
                                           ended June 30,      ended June 30,
                                         2009        2008      2009      2008
                                         ----        ----      ----      ----

    Revenue                           $53,814     $44,183  $103,755   $83,126
                                      -------     -------  --------   -------

    Cost of services:

      Compensation                     17,815      14,374    35,346    28,098
      Data processing                   3,491       2,512     6,637     5,229
      Occupancy                         2,495       2,406     5,229     4,767
      Direct project costs              7,399       6,395    13,724    12,439
      Other operating costs             3,215       3,114     6,213     5,259
      Amortization of acquisition
       related software and intangibles 1,216       1,162     2,432     2,325
                                        -----       -----     -----     -----

       Total cost of services          35,631      29,963    69,581    58,117

    Selling, general &
     administrative expenses            6,743       5,378    12,874    10,478
                                        -----       -----    ------    ------
       Total operating expenses        42,374      35,341    82,455    68,595
                                       ------      ------    ------    ------
      Operating income                 11,440       8,842    21,300    14,531

    Interest expense                     (278)       (351)     (565)     (766)
    Interest income                        56         132       153       329
                                           --         ---       ---       ---

      Income before income taxes       11,218       8,623    20,888    14,094
    Income taxes                        4,580       3,622     8,545     5,920
                                        -----       -----     -----     -----
       Net income                      $6,638      $5,001   $12,343    $8,174
                                       ======      ======   =======    ======

    Basic income per share data:
       Net income per basic share       $0.26       $0.20     $0.48     $0.33
                                        =====       =====     =====     =====

      Weighted average common
       shares outstanding, basic       26,009      24,985    25,813    24,906
                                       ======      ======    ======    ======

    Diluted income per share data:
       Net income per diluted share     $0.24       $0.19     $0.45     $0.31
                                        =====       =====     =====     =====

      Weighted average
       common shares, diluted          27,472      26,712    27,345    26,782
                                       ======      ======    ======    ======



                          HMS HOLDINGS CORP. AND SUBSIDIARIES
                            Consolidated Balance Sheets
                 (In thousands, except share and per share amounts)
                                    (unaudited)


                                                         June 30, December 31,
                                                           2009      2008
                                                         -------  -----------

                               Assets
    Current assets:
     Cash and cash equivalents                           $56,886      $49,216
     Accounts receivable, net of allowance
       of $652 at June 30, 2009
       and $664 at December 31, 2008                      55,127       45,155
     Prepaid expenses and other current
       assets, including deferred tax assets
       of $1,296 at June 30, 2009 and $1,697
       at December 31, 2008                                8,554        5,541
                                                           -----        -----
       Total current assets                              120,567       99,912

    Property and equipment, net                           17,533       17,757
    Goodwill, net                                         82,342       82,342
    Deferred income taxes, net                             2,050        2,040
    Intangible assets, net                                17,696       19,823
    Other assets                                             552          639
                                                             ---          ---
     Total assets                                       $240,740     $222,513
                                                        ========     ========

               Liabilities and Shareholders' Equity

    Current liabilities:
     Accounts payable, accrued
      expenses and other liabilities                     $18,479      $22,859
     Current portion of long-term debt                     6,300        6,300
                                                           -----        -----
      Total current liabilities                           24,779       29,159
                                                          ------       ------

    Long-term liabilities:
     Long-term debt                                        7,875       11,025
     Other liabilities                                     3,579        3,967
                                                           -----        -----
      Total long-term liabilities                         11,454       14,992
                                                          ------       ------
     Total liabilities                                    36,233       44,151
                                                          ------       ------

    Shareholders' equity:
    Preferred stock - $.01 par value;
     5,000,000 shares authorized; none issued                  -            -
    Common stock - $.01 par value;
     45,000,000 shares authorized;
      27,836,864 shares issued and 26,174,018
      shares outstanding at June 30, 2009;
      27,174,875 shares issued and 25,512,029
      shares outstanding at December 31, 2008                278          272
      Capital in excess of par value                     159,806      146,145
      Retained earnings                                   53,905       41,562
      Treasury stock, at cost; 1,662,846 shares
       at June 30, 2009 and December 31, 2008             (9,397)      (9,397)
      Accumulated other comprehensive loss                   (85)        (220)
       Total shareholders' equity                        204,507      178,362
                                                         -------      -------

        Total liabilities and
         shareholders' equity                           $240,740     $222,513
                                                        ========     ========



                            HMS HOLDINGS CORP. AND SUBSIDIARIES
                          Consolidated Statements of Cash Flows
                       For the Six Months Ended June 30, 2009 and 2008
                                    (in thousands)
                                     (unaudited)

                                                            Six months ended
                                                                June 30,
                                                          -------------------
                                                          2009           2008
                                                          ----           ----

    Operating activities:
     Net income                                        $12,343         $8,174
      Adjustments to reconcile net income to
       net cash provided by operating activities:
        Loss on disposal of fixed assets                     3              8
        Depreciation and amortization                    6,764          5,771
        Share-based compensation expense                 2,920          1,518
        Decrease in deferred tax asset                     391            390
        Changes in assets and liabilities:
         Increase in accounts receivable                (9,972)        (5,149)
         Decrease in prepaid expenses and
          other current assets                          (3,414)           412
         (Increase)/decrease in other assets                 1            (18)
         Decrease in accounts payable, accrued
          expenses and other liabilities                (3,886)        (6,748)
                                                        -------        -------
           Net cash provided by
            operating activities                         5,150          4,358
                                                         -----          -----

    Investing activities:
     Purchases of property and equipment                (4,290)        (3,690)
     Investment in software                               (787)          (477)
                                                          ----           ----

       Net cash used in investing activities            (5,077)        (4,167)
                                                        ------         ------

    Financing activities:
     Proceeds from exercise of stock options             4,487          1,020
     Repayment of long-term debt                        (3,150)        (3,150)
     Income tax benefit from stock transactions          6,260          5,550
                                                         -----          -----
       Net cash provided by financing activities         7,597          3,420
                                                         -----          -----

      Net increase in cash and cash equivalents          7,670          3,611

    Cash and cash equivalents at beginning of period    49,216         21,275
                                                        ------         ------
    Cash and cash equivalents at end of period         $56,886        $24,886
                                                       =======        =======

    Supplemental disclosure of cash flow information:
     Cash paid for income taxes                         $6,196           $388
                                                        ======           ====
     Cash paid for interest                               $458           $690
                                                          ====           ====

    Supplemental disclosure of noncash
     investing activities:
     Accrued property and equipment purchases           $1,151             $-
                                                        ======             ==



                            HMS HOLDINGS CORP. AND SUBSIDIARIES
                  Reconciliation of net income to EBITDA and adjusted EBITDA
                    (In thousands, except share and per share amounts)
                                      (unaudited)


    As summarized in the following table, earnings before interest, taxes,
    depreciation and amortization, and share-based compensation expense
    (adjusted EBITDA) was $16.4 million for the second quarter of 2009, an
    increase of 32.7% over the same period a year ago.


    Reconciliation of net income to           Three Months         Six months
     EBITDA and adjusted EBITDA                  Ended               Ended
                                                June 30,            June 30,
                                            2009        2008     2009     2008
                                            ----        ----     ----     ----
     Net Income                           $6,638      $5,001  $12,343   $8,174

     Net interest (income) expense           222         219      412      437
     Income taxes                          4,580       3,622    8,545    5,920
     Depreciation and amortization,
      net of deferred financing
      costs, included in net interest
      expense (income)                     3,364       2,809    6,678    5,669
                                           -----       -----    -----    -----

       Earnings before interest,
        taxes, depreciation
        and amortization (EBITDA)         14,804      11,651   27,978   20,200
     Share-based compensation expense      1,612         721    2,920    1,518
                                           -----         ---    -----    -----
      Adjusted EBITDA                    $16,416     $12,372  $30,898  $21,718
                                         =======     =======  =======  =======


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SOURCE HMS Holdings Corp.
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