HMS Holdings Corp. Announces First Quarter 2008 Financial Results

NEW YORK, May 5, 2008 /PRNewswire-FirstCall via COMTEX News Network/ ----HMS Holdings Corp. (Nasdaq: HMSY) today announced its financial results for the first quarter ended March 31, 2008.

For the first quarter of 2008, revenue increased 20.8% to $38.9 million, compared with $32.2 million for the same period a year ago. Net income for the quarter was $3.2 million or $0.12 per fully diluted share compared to net income of $3.0 million or $0.11 per fully diluted share for the same period a year ago. Adjusted EBITDA for the quarter increased 6.6% to $9.3 million versus $8.8 million for the first quarter of 2007.

"We are pleased that 2008 has gotten off to a fast start and are reaffirming our full year guidance of revenues of $170 million (+16%), adjusted EBITDA of $49 million (+21%), and EPS of $0.73 (+28%)," said Robert Holster, Chairman and CEO of HMS Holdings Corp.

HMSY will be hosting its first quarter 2008 results conference call with the investment community on Monday, May 5, 2008 at 9:00 am Eastern Time. The conference call number is US/Canada: 1 (877) 272-8465 Int'l/Local Dial-In: (706) 634-1355 Participant Code: 43873156. A slide presentation will accompany the conference call and may be accessed through our website at http://www.hmsholdings.com/news/quarterly_reports.asp.

A conference call replay will be available beginning 5/5/2008 1:00 PM EDT through 5/12/2008 11:00 PM EDT. To listen to the replay of the call, dial: US/Canada: 1 (800) 642-1687 Int'l/Local Dial-In: (706) 645-9291 Participant Code: 43873156 or visit our website at http://www.hmsholdings.com/news/quarterly_reports.asp.

The HMS Holdings Corp. Form 10-Q for the year ended March 31, 2008 will be filed and available on our website http://www.hmsholdings.com on or about May 15, 2008, and will contain additional information about our results of operations for the fiscal year to date. This press release and the financial statements herein will be available at http://www.hmsholdings.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 Holdings Corp.

HMS Holdings Corp. (Nasdaq: HMSY) is the nation's leader in cost management, coordination of benefits, and program integrity services for government healthcare programs. HMS serves the Medicaid programs of 40 states, 74 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 $1.0 billion annually, and obtain access to data that helps them prevent 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, 2007. 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 (In Thousands, Except Per Share Amounts) (unaudited)
   Three months ended March 31, 2008 2007 Revenue $38,943 $32,238 Cost of services: Compensation 16,556 13,073 Data processing
   2,966 2,147 Occupancy 2,590 1,981 Direct project costs 5,493 5,157 Other operating costs 4,487 2,843 Amortization of acquisition
   related software and intangibles 1,162 1,163 Total cost of services 33,254 26,364 Operating income 5,689 5,874 Interest expense
   (415) (709) Interest income 197 105 Income before income taxes 5,471 5,270 Income taxes 2,298 2,298 Net income $3,173 $2,972
   Basic income per share data: Net income per basic share $0.13 $0.13 Weighted average common shares outstanding, basic 24,826
   23,436 Diluted income per share data: Net income per diluted share $0.12 $0.11 Weighted average common shares, diluted 26,834
   25,903 HMS HOLDINGS CORP. AND SUBSIDIARIES Consolidated Balance Sheets (In Thousands, Except Share and Per Share Amounts)
   (unaudited) March 31, December 31, 2008 2007 Assets Current Assets: Cash and cash equivalents $16,704 $21,275 Accounts receivable,
   net allowance of $694 and $662 at March 31, 2008 and December 31, 2007, respectively 41,956 39,704 Prepaid expenses 2,608
   3,266 Other current assets, including deferred tax assets of $633 and $657 at March 31, 2008 and December 31, 2007, respectively
   661 704 Total current assets 61,929 64,949 Property and equipment, net 16,866 16,496 Goodwill, net 80,242 80,242 Deferred
   income taxes, net 3,088 3,111 Intangible assets, net 21,485 22,495 Other assets 764 807 Total assets $184,374 $188,100 Liabilities
   and Shareholders' Equity Current Liabilities: Accounts payable, accrued expenses and other liabilities $13,525 $21,535 Amounts
   due to Public Consulting Group, Inc. 180 4 Current portion of long term-debt 6,300 6,300 Total current liabilities 20,005
   27,839 Long-term liabilities: Long-term debt 15,750 17,325 Accrued deferred rent 3,446 3,378 Other liabilities 771 809 Total
   long-term liabilities 19,967 21,512 Total liabilities 39,972 49,351 Shareholders' Equity: Preferred Stock - $. 01 par value;
   5,000,000 shares authorized; none issued - - Common Stock - $ .01 par value; 45,000,000 shares authorized; 26,602,035 shares
   issued and 24,939,189 shares outstanding at March 31, 2008; 26,409,035 shares issued and 24,746,189 shares outstanding at
   December 31, 2007 266 264 Capital in excess of par value 130,495 127,887 Retained earnings 23,360 20,187 Treasury stock, at
   cost; 1,662,846 shares at March 31, 2008 and December 31, 2007 (9,397) (9,397) Accumulated other comprehensive loss (322)
   (192) Total Shareholders' Equity 144,402 138,749 Total liabilities and shareholders' equity $184,374 $188,100 HMS HOLDINGS
   CORP. AND SUBSIDIARIES Consolidated Statements of Cash Flows For the Three months ended March 31, 2008 and 2007 (in Thousands)
   (unaudited) Three months ended March 31, 2008 2007 Operating activities: Net income $3,173 $2,972 Adjustments to reconcile
   net income to net cash provided by operating activities: Loss on disposal of fixed assets - 3 Depreciation and amortization
   2,911 2,532 Share-based compensation expense 798 551 Changes in assets and liabilities: Increase in accounts receivable (2,252)
   (1,706) Decrease (increase) in prepaid expenses and other current assets 677 (71) Decrease in deferred tax asset 47 1,950
   Increase in other assets (4) (101) Decrease in accounts payable, accrued expenses and other liabilities (7,934) (5,285) Net
   cash (used in) provided by operating activities (2,584) 845 Investing activities: Purchases of property and equipment (2,044)
   (2,245) Investment in software (180) (157) Net cash used in investing activities (2,224) (2,402) Financing activities: Proceeds
   from exercise of stock options 754 650 Repayment of long-term debt (1,575) (3,150) Tax benefit of disqualifying dispositions
   1,058 - Net cash provided by (used in) financing activities 237 (2,500) Net decrease in cash and cash equivalents (4,571)
   (4,057) Cash and cash equivalents at beginning of period 21,275 12,527 Cash and cash equivalents at end of period $16,704
   $8,470 Supplemental disclosure of cash flow information: Cash paid for income taxes $38 $31 Cash paid for interest $383 $610
   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 $9.3 million for the first quarter of 2008, an increase
   of 6.6% over the same period a year ago. Reconciliation of net income to EBITDA and adjusted EBITDA Three Months Ended March
   31, 2008 2007 Net Income $3,173 $2,972 Net interest expense 218 604 Income taxes 2,298 2,298 Depreciation and amortization,
   net of deferred financing costs, included in net interest expense (income) 2,860 2,346 Earnings before interest, taxes, depreciation
   and amortization (EBITDA) 8,549 8,220 Share-based compensation expense 798 551 Adjusted EBITDA $9,347 $8,771 

SOURCE HMS Holdings Corp.

http://www.hmsholdings.com 

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