HMS Holdings Corp. to Acquire Leading Medicare Recovery Audit Contractor HealthDataInsights, Inc. for $400 Million
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HDI, a technology-enabled healthcare services company whose mission is
to ensure claims integrity, identifies and recoups improper payments for
health plans and government payers. Applying rules approved by the
After applying HMS's revenue recognition methodology, HDI is projected
to contribute approximately
"We believe this acquisition aligns perfectly with our long-term plan and is significantly positive for HMS and all our stakeholders," added Lucia. "The HMS/HDI combination will create the nation's premier provider of improper payment identification services for Federal, State, and commercial health benefit programs."
Lucia added, "We expect that HDI's assets will accelerate our multi-year
strategy of investing in new but related products and markets, and
program integrity in particular. As the Medicare RAC with the highest
recoveries and highest accuracy scores, HDI has best-in-class processes
and technology, purpose-built for recovery auditing. Like HMS, HDI's
services are primarily offered on a contingency-fee basis. In addition
to expanding our
"The acquisition of HDI will also extend our reach into the commercial
health plan market, and in addition, provides us with an opportunity to
expand service offerings to our existing
"I'm delighted that HDI is joining HMS," said
"Fraud, waste and abuse losses account for approximately
Deal Structure and Timing
HMS will pay a total of
HDI will become a wholly owned subsidiary of
Revised Guidance for 2011 and 2012
| Without HDI Transaction | With HDI Transaction | |||||||||||||||
| Revised 2011 | Initial 2012 | Revised 2011 | Revised 2012 | |||||||||||||
| $ | % Y/Y | $ | % Y/Y | $ | % Y/Y | $ | % Y/Y | |||||||||
| Revenue |
|
19.9% |
|
19.8% |
|
19.9% |
|
43.3% | ||||||||
| GAAP EPS |
|
27.7% |
|
23.3% |
|
21.3% |
|
14.0% | ||||||||
| Adjusted EPS |
|
23.7% |
|
21.4% |
|
18.4% |
|
46.3% | ||||||||
|
* includes |
||||||||||||||||
The above chart shows the changes to guidance for 2011 and 2012. For
2011, due to transaction-related expenses in connection with the
acquisition of HDI, the Company will take an estimated pre-tax charge of
After adjusting for the acquisition of HDI, HMS's 2012 guidance is for
revenue of
Morgan Stanley acted as financial advisor to HDI.
Conference Call with the Investment Community
HMS will be hosting a conference call and webcast with the investment
community on
The webcast will be archived on the website. Individuals can listen to
the replay at (855) 859-2056. International participants can listen to
the replay at (404) 537-3406. The conference ID is 25614296. The replay
will be available at
About
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, net of tax and amortization of intangibles, net of tax. 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 measure 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 and earnings per share, as presented, 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: our ability to satisfy the closing conditions of the
HDI acquisition, including receiving regulatory approval, and close the
acquisition in the timeframe that we anticipate; our ability to
successfully integrate HDI's operations; the development by competitors
of new or superior services or products or the entry into the market of
new competitors; all the risks inherent in the development,
introduction, and implementation of new products and services; the loss
of a major customer, customer dissatisfaction or early termination of
customer contracts triggering significant costs or liabilities;
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 reimbursement process
and reduce the need for and price of our services; government
regulatory, political and budgetary pressures that could affect the
procurement practices and operations of healthcare organizations,
reducing the demand for our services; our failure to comply with laws
and regulations governing health data or to protect such data from theft
and misuse. A further description of risks, uncertainties, and other
matters can be found in the Company's Annual Report on Form 10-K for the
fiscal year ended
|
(In thousands, except share and per share amounts) (unaudited) |
||||||||||||||||||||
| Reconciliation of net income to EBITDA and adjusted EBITDA |
Without HDI |
With HDI
|
||||||||||||||||||
| 2011 | 2012 | 2011 | 2012 | |||||||||||||||||
| Net Income | $ | 52,113 | $ | 65,650 | $ | 49,124 | $ | 57,681 | ||||||||||||
| Net interest (income)/expense | (860 | ) | (100 | ) | (860 | ) | 15,277 | |||||||||||||
| Income taxes | 35,040 | 43,767 | 33,030 | 38,454 | ||||||||||||||||
| Depreciation and amortization, net of deferred | ||||||||||||||||||||
| financing costs included in net interest expense | 20,050 | 24,944 | 20,050 | 53,707 | ||||||||||||||||
| Earnings before interest, taxes, depreciation | ||||||||||||||||||||
| and amortization (EBITDA) | 106,343 | 134,261 | 101,344 | 165,119 | ||||||||||||||||
| Stock-based compensation expense | 8,202 | 9,927 | 8,202 | 17,658 | ||||||||||||||||
| Adjusted EBITDA | $ | 114,545 | $ | 144,188 | $ | 109,546 | $ | 182,777 | ||||||||||||
| Reconciliation of GAAP EPS to Adjusted EPS |
Without HDI
|
With HDI
|
||||||||||||||
| 2011 | 2012 | 2011 | 2012 | |||||||||||||
| Net Income | $ | 52,113 | $ | 65,650 | $ | 49,124 | $ | 57,681 | ||||||||
| Weighted average common shares, diluted | 86,916 | 88,700 | 86,916 | 89,353 | ||||||||||||
| Diluted GAAP EPS | $ | 0.60 | $ | 0.74 | $ | 0.57 | $ | 0.65 | ||||||||
| Net Income | $ | 52,113 | $ | 65,650 | $ | 49,124 | $ | 57,681 | ||||||||
| Stock-based compensation expense, net of tax | 4,900 | 6,000 | 4,900 | 10,600 | ||||||||||||
| Amortization of intangibles, net of tax | 4,000 | 4,000 | 4,000 | 19,375 | ||||||||||||
| Subtotal | $ | 61,013 | $ | 75,650 | $ | 58,024 | $ | 87,656 | ||||||||
| Weighted average common shares, diluted | 86,916 | 88,700 | 86,916 | 89,353 | ||||||||||||
| Diluted adjusted EPS | $ | 0.70 | $ | 0.85 | $ | 0.67 | $ | 0.98 | ||||||||
HMS Holdings Corp.
Investor Relations:
csaenz@hms.com
or
Media
Relations:
fmarraro@hms.com
Source:
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