HMSY - Earnings call transcript Q4 2018

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Operator

Good day, ladies and gentlemen, and welcome to the HMS Fourth Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today’s conference Mr. Investor of SVP Borchert, Relations. Robert begin. Sir, you may

Robert Borchert

Thank everyone. you, and good Lauren, morning,

is Chairman Bill Chief Executive call of can our today. are Today's see Relations forward-looking me subject at the and may guidance financial questions. you current accessed perspective Financial results our webcast via be nature, Lucia, IR materially. slide This Company and we'll the the our projections, on Joining section outlook, Sherman, future based Such our Chief a those first information Investor are supplemental and highlighting will of Jeff expectations full-year plans Officer; Officer. then hms.com. financial business website to being press our cause view as I'd results our are containing like and will financial our recent and Jeff well on our presentation website. our operating we [Operator releases objectives that provide business and including their performance as an business investor line XXXX as in and it uncertainties related some differ that to Bill we remind and and risks for future posted and on statements and operating open statements, and of today actual to and to are Instructions] make results

Form earnings filed. in reflect our are results recent they is financial result, and most results Form press today's statements a should factors our As final release today's until release The cautionary described conjunction be in XX-K. in including XXXX not the and the XX-K risk considered filings, SEC Company's preliminary in with

and morning. these over now non-GAAP With accompanying the GAAP Finally, the that, website. to financial to certain release I'll investor in included measures to comparable we our posted presentation Bill. our Reconciliation press may on of this measures are hand measures refer call

William Lucia

while XXXX grew flow revenue at business the was this The Payment a Management operations everyone, Population margins, increasingly to strengthening across revenue growth, and cash leverage our Commercial expanding remained sheet both double-digits, year and in Robert, Total of balance board you, record HMS. revenue strong. joining execution up Thank Integrity XX%. of morning. call in thanks evident solid our from model excess and was were and

As a result, than bottom higher improvement, which the XX% line we previous year. saw adjusted including significant was EBITDA,

contract our ownership. XXXX, up improve implementation during our process developed reached we We Additionally of now continued the activity first commercial of and Eliza and first Elli, to inventory. full-year ramped our customer. analytics our launched in have platform our engagement targeted solution our of internally cross-selling We level and consumer stratification risk

Our customer use employee and of investments dividends, and throughout in maintained the growing focus satisfaction real technologies sharp started a year we advanced on engagement. and paying

Now the years backdrop assets, remains turning engaged analytics, to and market-leading our services macro robust ahead, for an our many continue for growing and key advanced our well customer business come. base favorable, our expansive year to position to us workforce and the we believe data,

that have rising occasions improve receptive high in to more healthcare just as health the increased they costs. and And upward unsustainable. to taken as deductible numerous spending health We on reduce to well plans consumers largely become and growth outreach trajectory in have responsibility pointed out due years, financial as their have deductibles, of recent on is co-pays designed

to combined similar experience in may push the finally have these with digital begin other a Now that to all financial of consumers in healthcare expect grown pressures, direction. industries, self-service

health data could We Healthcare believe advantage to payers, industry providers Management to over and and CMS decade. the significance. estimates believe additional we care behavioral built services TAM reimbursement needs with a future reimbursement address offer trends the to models take determinants contribute the and double are nearly next models positioned focused both and value-based program our Population current market solutions New trends, on these addressing well addressable employers, of Medicaid toward by consumers. will projections total evolution is of of data been HMS, unless is limited value the are care an billion for health settings, The important move it our to easily essential ongoing accurate. treating $XX digital of view, consumer-centric asset and roughly era, ever. we and accessible social more has the whole designs are delivery more and of We person, that performance-based it and curated Medicare and however, this currently in Total including is and acceleration for each accuracy In delivery payment than of actionable. always of

engagement engagement includes For Population and medical, address culturally care management member Central of and example, health identify of: improving member address managed sensitive health a Medicaid plan processes. costs, goals care is future and to member engagement Total be And for member of enrolled this extremely the high-risk actionable reducing individual part and enhancing outcomes science and state can of multimodal health effective is to also and Such It Eliza, platform insights determinants newly critical. key data begin which comprehensive member as early engagement a behavioral analytics high-cost the predictive to as our care employer. solutions, understanding Management members experience. which profile high-risk valuable enrollment our point the quality and solution, that can or individuals. of management to sophisticated social a in successful also agency, for are deploys enable modules the

health to enterprise care and XXXX increase in and more engagement can and, yield our with then outcomes solutions behavioral to members. do base and boost customer our line and which, again, bottom once a year through technology improvements. healthier change topline continued personalized process to of innovative scale Many at and our penetration, expanding are another satisfied plan are to be can strong consumers, less leveraging retain We likely margins on employing plans. market cost who management provide health will ways to to product plans expect seeking expansive lead turn, growth drive focus for develop change, valued HMS, new at our ability Our clients

does additional We several numbers for the XXXX have our Jeff? needed performance progress into projections in the we improvements over our for investments will years provide quarter last forecasted to have provide we achieve the about made foundation outlook outlook. solid Jeff financial fourth expect as visibility year ahead and in XXXX. a on people, good now and the innovation continued The technology, our execution. focus details and process our

Jeffrey Sherman

and Thank you, Bill, good morning.

Integrity record full-year. in excluding company revenue a with cash for in XXXX and full-year move up of high terms fourth Medicare As revenue, up the Bill of adjusted on mentioned, from increased and XX.X% XX.X% quarter we total flow. finished XXXX quarter was delivered a note, RAC, and the nice fourth and EBITDA Payment a

the generation. we approvals and throughput in implementations expedited greater streamline new applied from increase process, and coder for accelerate As PI productivity edits benefited to revenue customer processes, technology

have revenue move XXXX continue yet PI not a to a our that rollout as through scheduled but rate visibility of strong sold, for we the for good inventory run year. We implemented provides and contracts

full-year. year $XX.X added million back normalized revenue grew we rate a of XX.X% acquisition to completed Eliza April quarter pre-acquisition get approximately Management Remember, was in full-year the last in Population the revenue that XX.X% prior for have to Total and the the compared XXXX, was year. to up growth Our QX so for

generated year XXXX, compared inherent a year, increased the even the for $X.X million combination driven EBITDA and incremental of to that up benefit in revenue, or We solutions XX% our EBITDA a the driven fourth diluted per prior diluted investments to for over Moving our the the XXX the excluding and adjusted had which stage quarter higher COB average Release which benefits by growth profitability, RAC generated The million and double-digit the first XX% had from increasing revenue a evident points improving period fourth adjusted and most and we received significant impact of Reserve the share TPM discrete from of business course actually technology of aggregate quarter. both review of items full-year. of the value. than in related which an to and our Those certain per basis the was in contribution QX, the expansion leverage model negative early share margin in was for $X.XX offered in benefits benefits leverage tax tax $X.XX and rate and margin our quarter the in tax the full-year. growth substantial and PI cost $XX and

the a $X.XX last in have quarter diluted non-cash fourth benefit year share. of We per of tax

to basis, XX% quarter excluding year-over-year both quarterly periods, in adjusted increased from tax in XXXX, to On a per ago. tax XXXX share. the full-year a per Reserve per more than in the the of both benefits share year $X.XX diluted and EPS RAC to XXXX increased Release Excluding compared diluted adjusted benefits the $X.XX XX% share fourth and EPS $X.XX XXXX, diluted

X.Xx compared Our to cash year at cash cash million. of remained the flow strong $XX.X XX.X% total cash trailing begin and strength just are and balance of million we EBITDA, our very of under comfortable liquidity with year for to free flow and with million XXXX. up almost With at the flow prior XX-month debt profile net adjusted as operating $XX.X year $XXX equivalents end sheet and cash we XX.X%

product year ahead and is allocation Total technology capital Management infrastructure capabilities as to to as for focus our IT Population acquisitions Payment primary compliment the continued Our suites. well enhance solutions in and Integrity our investments

our or Our partnership fullest to the existing focus business, so potential rigorous and are principal any to executing is for on standards continue unchanged. acquisition for XXXX our discipline

compared revenue million percentage Medicaid million our Population million, analytical typical and a total for single-digit our to in growth to but our coordination state which none The excludes includes X% growth we total Release the projected which $XXX on based of growth $XXX.X expected be in Medicare growth XX% will to expect now It process. of re-procurements XXXX to of Turning conduct Payment XXXX terms are last based RAC, million. roughly Integrity, low-to-mid Reserve is Medicare the Total on company to RAC double-digit in year benefits. year. RFP business, which TPL $XXX of the services, financial and Management is guidance XX of is top ahead, This of fairly $X.X year number states of revenue for an

revenue generally as the is total year in last year. decline highest from sequential usual fourth it the the each was which quarter, revenue expect quarter We

of to $XX the $XX to First total million fourth quarter than million quarter revenue lower is expected approximately $XXX.X million. be

We are EBITDA to rate a than faster to revenue. continue expecting adjusted at grow

full-year adjusted EBITDA are just to X% which million For concluded. at the $XXX over of $XXX XX% we growth year XXXX, million, represents projecting to

adjusted million RAC exclude to Reserve the As purposes with comparison for $X.X revenue, we Medicare the are of normalizing EBITDA Release. the XXXX impact

robotics learning, initiatives continue benefits machine our are also early of One are Data in deploying in amortization our key We of million in to other note to related efficiencies. key that increase yield only the technology our playing process automation a we as and across Insights expense approximately drivers XXXX amortization diminishes solutions expect are business. XXXX. by management our is to technology cost and our and the efforts of innings decline improvements further acquisition-related role The of substantially full-year $XX important Health that acquisition

Moving income. now to net

We million $XX through infrastructure, to projected year. a be in and leverage. the margin through data focus this higher invest expenditures continue million to to and million the are increase our projecting year-over-year somewhat will And on range $XX expansion Big the revenue build to year due of security. Data net growth Capital move for IT environment support operating we million $XX primarily in ever-present our will income $XX as

Bill? to ahead customers. our Additionally, offer full-year will throughout on more strong Bill IR We to develop then the questions. website, investor now capitalized presentation progress remarks in believe modeling innovative we on achieve additional which solutions and some outlook in we incremental detailed this we our release again details we'll We've for concluding will morning and be some questions. software the XXXX objectives. address positions posted for our year our help press continue expenses anticipate for performance ready and provided anticipate the well our made as XXXX us

William Lucia

pillars. Achieving Thanks, rests in financial performance strategic our Jeff. four on goals XXXX includes which a framework

First, of managing use operating improvements, and profitability. and and do is our by continuing broadening diligently robotic enhancements and maintaining expand on such as focus process tools yield We this to learning. product our machine automation technology process margins expenses a

both logos, through of sales extensive another customer increasing cross-selling new our relationships Population Management is strategy. Payment Next expansion capturing our and Integrity the solutions of Total key and is component

the to our call for We first the make solutions will always when looking they face. be challenges seek customers to

where Third, employers, products entities. are serve. introduction the the is markets continuing such also the markets the relatively taking our gross further other next into level and new in strategy penetrated PBMs We'll push and we by as insured to of less development self risk-bearing we

our We And also continue and have acquisitions achieved with with HMS customers team is who at on finally, This the to together supplement leadership the the interact that includes upon on recognize and people our we peak we identify our front organic stakeholders dependent other in that culture levels. diligence to and have conduct built colleagues our lines operations we the nation who keep everything functioning those offices across HMS. growth. and

hard to want everyone their and giving during serve our rewarding recruiting also we focus us opportunity them. talent thank on As entire customers work In best I thank performers grow. want will the top our continue to to we HMS I engaging at retaining result, a to for as workforce, XXXX. and closing, for

last We focus of attention turned are by our the we measure our now on With were year, our achievements goals. have proud any and to continue XXXX to significant which question. I Operator, we our framework full first Board we of Directors. now ready to outlined task. support I’ve strategic are am are and up for just the confident the from the achieving

Operator

you. And [Operator comes first from Jefferies. Sean our Dodge Thank question with Instructions]

open. is line Your

Sean Dodge

and could pipeline with Bill Population in we couple or coming you I you're a the talk quarter, progression commercial now morning. Management Total revenue first client maybe maybe having seeing Total and year then about Population little over a your how coming we should Maybe in place. years? starting think demand there from saw about the revenue mentioned Good some bit ramping Management, more or the of you guess,

William Lucia

base. Thanks, Eliza rest first and for the of was Essette Sean. When the and I large mentioned customer commercial a growing TPM the solutions Elli, client have that commercial

the solution, we HMS’s half was base. into a So area existing customer on really of Eliza first the the over the growth selling TPM and year focused last solutions

our rapid seeing several only risk Essette we're at be but the And we're the that it of pace. the So products It's that line to real fastest entity, the starting we're happening one the then of high TPM put manage there. risk, smaller a engage a to traction adoption is high growing from believe, we market expecting together base, next and in emerging the product And years. product line – types three if identify emerging and the has through and platform. over

together, three So those products integrated we think is one-of-a-kind.

that to fastest-growth our So we're be expecting area.

Jeffrey Sherman

Jeff. in is And line is growth not individual I expecting we're driver going I Sean, analytical would growth analytical projections. year, the add TPM the we a grow mean But giving revenue be just certainly to we're said going for is but to XXXX. double-digit this services of product double-digits

Sean Dodge

guidance Okay. guide earned early in points investments expect the to the XXXX, technology the Is EBITDA Are Reserve of trend not be? generate implies Jeff, of of realizing the Thank excluding the basis of a XX look this should there some what what versus then happening longer-term you. at expecting mentioned kind to ramping longer-term? using the over the the that or margin necessarily you're that's that's expansion. year model we being some something the benefits And Release, you to like indicative pace in margins. When I stages drive midpoint of you of

Jeffrey Sherman

year, of we those I benefits the primarily initiatives technology, cost businesses, margins incremental average both margins. our contribution as recent benefits few some including items put a in on place mentioned, expense. think, had at of seen in last expand across years, one-time the in are our the we've amortization the quarters control year of in we've meaningfully just also experiencing in over and big all with than and result I business inherent the revenue and ahead, We higher coming year and last model leverage as just the

EBITDA prepared saw to increase And EBITDA margin would is versus So – that. XXX on any increase expect year. just mentioned we we think for in certainly in we an I of some I the so adjusted margin margins adjusted guidance, it basis do in expansion be my growth a be would finally, EBITDA as thought cleaner adjusted in XXXX, to to remarks, note, guide but giving specific important it point top

investments I toward number EBITDA think the made business some we just line our given we've technology see inherent the more time, but and bottom XXXX think in the takes. and our guide expand, in wanted that is, to over in model the puts will of adjusted leverage margins

Sean Dodge

good. very you. Okay, Thank

Operator

with Leerink. comes question SVB next Our Ana Gupte from

Your line open. is

Anagha Gupte

move Strong strong Hey, to margins, all you to upside you Appreciate the more the any reflects question. on quarter, view. and AI have is throughput. I that? first taking doing where the guidance thanks. margin the The really that's so Good drivers morning. driving machine you Do seen the conservative guidance, learning question expansion, see of

Jeffrey Sherman

Yes.

I think investments with think margins. off a certainly XXXX, we just efficiencies Ana, and I the margins. we to improve to I investments room favorable continue that we technology a made work impact coming to the have could our we expand strong as think Again, do on have have said,

think improve today knowing reflects the process, guidance our XXXX. and on But if very what our there's completed it's budgeting opportunity And think a performance to Our we go I best over know we detailed our expectation year, view bottom-up think today. have way. is, that really for we a certainly, things – what realistic we

Anagha Gupte

performance well, going guide PM. you and in And had solid revenue as very a to Integrity the Payment

as any XXXX and Going well of directional a into from PI perspective. XXXX kind color then into

disruption standpoint and as had potential you talk well might to and upside that the accelerating with of looks you've across Do of I sales or logo for competitors cycle going year see PM a XXXX? there's new you drive where market lot the a it right like is that as lot And it that about in three as strategy. it’s into you growth then opportunity think the What pillars have of a into this change XXXX now? progresses? guide from

Jeffrey Sherman

Yes.

range current for to good based with our into as for I believe think know we we get we we've But us what our And model Medicare end growth would XX% business X% guided double-digits suite capable in our revenue numbers have the the is time. us organic indicated, general, that believe for upon there. guidance we growing Release. we of top Reserve over to after solutions visibility. today And of XXXX adjusting which puts existing

If you of normalize $XX XXXX. in two things, revenue almost growth we had million

you normalized If our things, and XX%. normalize It was revenue for Eliza Medicare two revenue RAC XXXX full-year about the Release growth XX.X%. for XXXX, for Reserve over was

So growth will in revenue get end guidance double-digit and of that our well. top us the certainly organic to range we delivered XXXX as double-digit XXXX in

believe if get have think grow can the throughput we growth, we the company. positions as that in visibility we I earnings we've leverage that to the the which revenue well seeing continue in been line, to good that of achieve XXXX of to and bottom terms

Anagha Gupte

so Appreciated. much. Thanks

Operator

Mohan comes with Our next from Oppenheimer. Naidu question

Your line is open.

Mohan Naidu

Thanks model year. for on you taking a my risk I to the there. analytics the questions. the Congratulations ask finish to wanted Elli, strong on Bill,

that out And driver commercial what first or for for? what are Elli? the seek they point it was customer, On pain using the customer to the

William Lucia

in was comparison platform members at we I'll care hidden to products people identify. what's Typically year of not the a risk. incurring nurse show were the And risk chronic a do the always managers. management. a of a are that's twice are top a is almost or but the be impactful have hospital managed second did what's advanced and So but to And they're client I in that that in high someone physician market costs, in not visits they analytics admit. market. they ER it at those And would who and the case not with take by costs can ends already needed the queue it in management, sometimes desperately care the have the up manageable, people uses able who – the as not float care show against that this client because high really be just just call absence has disease does to are Yes, through a primary using to the

to that's payer managed are them. what a of plan they a show nice who were Louisiana, care are closing part and is this Medicare able So national of is in large in The that they fact Medicaid, account of we course commercial. while

potential of upward buy tires. so analytics year that, able have per solution was with past, multiple it's per per or basis I as analytics is that pilot on month This our from we Louisiana, at So in we of sold can And and the a system Elli member, customer. to and got to plan on including member, predictive the from early gone solution. plug-in and cost the per the part kick opioid that solutions client use see our no they initial a we're the in state said

Mohan Naidu

on That can pipeline. one unusually the contracts PI the the in this is for that question you Jeff, guidance? on very than year or ask complex larger in details, Anything encouraging. the usual Thanks have implementations if Bill. the I

Jeffrey Sherman

as through level for to segment. said as important a we Eliza, It we is to note, particularly PI XXXX COB worth which on I level side, normalized said both with that quarters get and we'd we're and we we more as TPM mentioned, No, implementations. I roughly and are largest believe normalized is of worked we had exiting the revenue implementations at XXXX, the think we four

days revenue much A We to XX smaller place – or component XX there. business. Eliza the actually have of in sale a take could our implementation conversion on much faster sale

is going be customers. our majority and of pipeline the And to so most COB or implementation PI our for vast

Mohan Naidu

so Okay. questions. taking much for the you Thank

Jeffrey Sherman

Thanks.

Operator

Stockton Fargo. question from Jamie next Our comes with Wells

open. is line Your

Jamie Stockton

business Jeff, and think that $XX first, as the in to Is QX? business down I the COB you million $XX guess, sequentially TPM morning. I maybe well? million said Good basically for just maybe seasonality

Jeffrey Sherman

Yes.

be the year, quarter the strongest general year. revenue builds see the then throughout be QX the our the think QX quarter is to trend, and revenue I lowest in Jaime,

of many commercial as help have We QX results, well. to that tends which for customers are our pushing year-end

gaps On as so Eliza, of pre-Eliza the – model actually that's of half in revenue business more the component the revenue the closing well. pattern of their care TPM happen in side, the tends year, the particularly flowed HMS to with with back

just yes, of see we the seasonality off it builds where and through the in big QX, generally So QX drops the year. rest some then

Jamie Stockton

And to of bounced It Okay. unusual maybe, in think in QX It should a reasonable pretty number felt the XXXX. decent which kind it's for then we the number, that that non-GAAP SG&A a around jumping this quarter, came like is about tight. profitability a on that topline. off basis, in addition amount. I point caused that Anything that to guess a be obviously lower strong relative or really helped

Jeffrey Sherman

I QX, in range. We a think from accrual in QX our we QX of reasonable it's we In see had variability down. comparison a bonus increase in last had adjusted some to some bonus stronger quarter-to-quarter. We so XXXX, week a accrual. recall saw year

reasonable on year-over-year QX because variance was had the catch on impact QX QX the a bonus items at then of in I as are large a component look XXXX. higher XXXX of But of XXXX. year. And some there throughout some obviously So we've QX and one-time is accrual SG&A you think just point up basis, starting versus balance, a big

Jamie Stockton

Okay. Thank you.

Jeffrey Sherman

that as of grants going in million, QX. in our half get is it expense expect mind we're in retirement in to when where about stock eligible, so $XX executives we expecting expense roughly have give keep one hit is plan just to based hit and And for would purposes, that'll XXXX, other QX QX, QX most upon we with I we comp modeling thing our note just

modeling a in from of expect perspective, just half about hit will comp we stock of So XXXX. our QX

Jamie Stockton

Thank you. Okay.

Operator

with Our Erin Suisse. next Wright question comes Credit from

Your open. line is

Erin Wright

Great. Thanks.

to as deployment how talked pipeline could Thanks. look potential as speak you partnerships up? is like and your part or Can acquisitions You the to what strategy. capital shaping acquisitions potential

Jeffrey Sherman

we to for think I acquisitions. look continue Yes,

across on And it's our think acquisition. we’re active really Population fairly a of in predict, focused very analytical companies hard We've to I my help timing Total had and said businesses. remarks, disciplined I taken or Payment As rigorous of drive pipeline, a and performance that prepared our approach. Management can have we the Integrity all

that Essette move time. expect together, years position we'll over space We're aggressively. two up the the and Company into do TPM and acquisition I think acquisitions more Eliza. doing to since our coming we And almost So well be of Eliza last now

think as we out XXXX, our are for but timing, on focused opportunities as deploying acquisitions into hard we So our maintain free there's it's our but good execution to go going flow to focus ultimately said helped we're there, again, predict results core we we to XXXX strategy. also fund the in operating in we're on that business sure make delivering MNA cash that

Erin Wright

of umbrella. that are or could fit under member perspective? thinking Great. sort of capabilities And seems management And face Okay. of assets there capabilities in? population the biggest from are then gaps just engagement about population there that What a you're customers health to some be interested lot a your that

William Lucia

is, solutions an and we Eliza are We've to are challenge and solutions acquired us the integrated the a that why in for because elegant plugged four is and analytics which then looking Elli, now. think solutions, opioid I and nurse screens. with an really We challenge built driver analytics. have we solution was predictive the together more three panel. have manager building face the Well, build the case at suite they And customers different that integrated acquired built, our Essette much don't that

the analytic services. out to our build suites Management Total Population under of to continue roll will We additional umbrella

year well help that working cost make it. this we'll and science number perform market knows then course analytics But boost of at as a we'll entire an as brand I think entire of be that that us knew engagement products as design our leader other engagements into the containment as that engagement built us which can company, a lot to company. suite, on more they be of as sure previously terms solution we that's as both is probably multimodal the the the well the behavioral looking in

So XXXX. that'll be big a in push

Jeffrey Sherman

looking think more that Yes. access And helps companies effectively, could cost have bend that we're I capabilities care I help patients, which curve. ultimately add, would for the

the amount So fair that there's in do technology helping a ecosystem. to type of companies

William Lucia

focused Yes. we than be care a just enablement We'll little management. on bit more call what care

Erin Wright

That’s great. Thank you.

Operator

Canaccord Richard comes question from next with Our Genuity. Close

Your is line open.

Richard Close

thanks. Great,

First year on and to a then welcome Bill I'll Robert. congratulations Jeff, offer great – a

Jeffrey Sherman

Thank you.

Richard Close

respect next on you products you maybe a potential pipeline details about talked maybe more comments in Can I grow terms newer Is level the guidance markets, Bill, a currently? should into dig other PBMs, new is bit and customers or on any to these anything an little risk-bearing there in mentioned just of And employers, with timing? baked markets, revenue the to entities. So say? you new this Curious bit? then on little your new active

William Lucia

ask – self-insured – answer let of we the I'll large Jeff are have question, an but active we pipeline the employers.

have We now closed set employers. We're engagement commercial and of our Total smaller COB with Integrity a launching Population that there. work resonate some both Eliza particularly Management, Payment the campaigns

products who we benefit advisory We've with So employers the large firms large but did solely. primary distribution last system the to are our research. market year worked for not

do some also sales. direct We

that little that PBM while so many we've then then which have Eliza, for those bearing, for audits And already expanding opportunity sales entire any users about on a through best tangential and searched years we employer who platform, users do those the is payers and So those And get be, services believe could the of we the payers, some of is the and been Essette risk entity because really engagement change many, ACOs other already marketplace. we Eliza market, like a to think this I really includes providers, are to to PBMs to comp say member we dependent of any workers' services would broadly are in doing focusing the potential pipeline now. a – have thing. greater we're are healthcare larger the IPAs, next

– their a going care that change service continuum. for do and behavior So and preventative to them to done, path something along get them something get but get service, to that's either to a

platforms have the traditionally lastly, pipe for that than today, a something, broader state concerned considered of That's think buyers So who gearing expect what and year. would do governments do be wants payers. marketplace or and will member strong to then why to commercial that. the anybody incent that we is this TPM are government we much a that have it's about we while isn't same there a up we And solutions to

Jeffrey Sherman

we then new should as into a expect move you side, have we from into close pending certainly not we our perspective, regards revenue millions new tens with just those perspective, employer a visibility And in Richard, have millions, but incorporated we XXXX where revenue the for products, to revenue XXXX. sales, or product the into of and from guidance

Richard Close

in not your above thoughts, anticipating? did curious this come you’re any Okay. in And did quarter. XX% that that and maybe expectation? Was anything or quarter your that? in hit there around below at, the just just I'm thoughts the question Just Management, on think a was in follow-up, I looking you it Health Sean’s earlier whether I Population on guess growth said

Jeffrey Sherman

we bit I I earlier moving again, And time. are recurring the in talked the products, a in There Yes, our I'd what for more QX anything would are ramp we line we with that model our was I in Essette TPM we about both say expectations unusual say on remind little revenue our expected think average that a other to – with everyone over call. than analyze wasn't quarter. would

subscription time. a PMPY customer. to PMPM PMPM So have model selling, into more don't and more to our to driving on over that. Essette, we the see and that's a much PMPM going PMPM model, to growth in we new model. where perpetual going a of We're to and was start take historically time. on evolve in traction We're we Eliza we a – be transactional or going but did XXXX focused are model believe, not we're saw move that it certainly a But license side,

us I TPM with think do more our more and believe predictability that we time. will So give revenue more visibility, over stickiness

Richard Close

again. Congratulations Okay. Thank you.

Jeffrey Sherman

you. Thank

Operator

from with Matthew Baird. Robert comes question Gillmor next Our

open. Your line is

Matthew Gillmor

getting Hey, I in priorities the And and really follow-up It to like talk early with the round I Can the thanks us about in you're other you of for technology these investments? seems investments mentioned on I for great investment maybe you you're was the next returns question. if you innings. provide the think you've going on But just help wanted discussion. the it. beneath of to examples what's claims conceptualize selection curious provide you example talked the there's could hoping us PI. And to help on an past, can improving sort about understand surface. still

William Lucia

take TPM and Well, solution. the color. can some guess additional then add Jeff I'll start I'll I

the we've we've that in tune and done we over continue will outreaches. the is that to XX of embedded on learning some to have outreach – done probably technology solution we machine million because So –

every attributes, million many fact, more determinants gathered a we In we've then But in mode their a continue many consumer their time, say the outreaches. from the change demographics to have and is let's call that. them XX and propensity of way, to We used best people, to learning learn the to specific social that more behavior, about determine across health about outreach machine which nation, than consumer, the which engage to and engage. consumers

And years many continue the our engage particularly the products a is area that so TPM, where yield, in a management we've learning. improve talked up Eliza, yield yield or for to through containment we to propensity there is to in cost tune machine component like

do to add continue to that? engage propensity about and engage clients. sciences for provides outcomes us on which want to to you'll So with best do that raise more that see learning and our better behavioral consumers technology Jeff, the our you ways them the to anything the

Jeffrey Sherman

will data Yeah, a data streamlining the platforms, variety our to the challenges that conduct We which I our environment also achieve of in sophisticated complexity order think had wide investing enterprise benefits, we're of do data sheer Big had the analytics. given just in allow size our in more to and analytics. past Data to robust us we

speed yield, also purposes. data aggregate us group can large payers of So with to analyze across and amounts now the of data productivity is to customers we with of we're and working which improve allowing increase the for a variety

improve So cost help think Big including and side, productivity have from also revenue, some process a to in robotic investments perspective, help automation. on we've the technology the we of investments the Data streamline continued made other drive

XXXX are really as and have on sophisticated more we that and becoming line go believe in capitalizing are our yielding I we go bottom just think and opportunities approach both we out to and really us. XXXX so of beyond those the And more there runway top investments line

Matthew Gillmor

Great. follow-up, this was sequentially was It front? or dialog sort anything on the I terms that little And bit ask of then And if RAC curious that a any report of was Medicare quarter. there in revenue. up I wanted about the to CMS a as improvement in with

Jeffrey Sherman

double-digits the expect in grow the exclude we RAC revenue release. We when to reserve XXXX

expect I think more continue our think to Fund. we'll X% We the over do X% continuing get savings even to and meaningful X.X% would but approved Trust still to work have they to to that the edits pushing were to we're will X.X% we're increase, to limits from ability ADR or provide increased. moving or time historically also where Medicare

well, is expect as good there's and government program. away growth go something getting as have That not see I relation in think RAC still a standpoint. but savings stepped is to Medicare that we down under significant from, number approved, the going we're it's and there. up more we to from We that think So XXXX

Matthew Gillmor

Got it. Thanks very much.

Operator

you. Thank

from next with Our CJS comes Securities. Charlie Strauzer question

Your is line open.

Peter Lukas

I Yes, hi. It's apologize. Pete Lukas for Charlie.

of covered questions. guys You the most have

move along. I'll you So let

William Lucia

Thanks.

Operator

Demko question with next Our Citi. Stephanie from comes

Your line is open.

Stephanie Demko

some taking missing? been Hey, one safe had one peers a share seen another shift on happened of I of is Is row or your now in a two questions. I'm that a quick reversal. has while strong guys. It's has assume my driver Thank very it just to for sort quarters there PI. you

William Lucia

that. think I it's too early to say

and to focus able of focus going into execution. we've in what be to – [indiscernible] XXXX the do this continues course a is and think said XXXX, we been I on

a So we're better in of the job product PI executing doing line.

and mentioned, false new focused have to abrasion. to there positives, so provider on that. adding Jeff automation team that an As is continue we're edits And entire reduce we and build our less algorithms

and So where some course of execution, performance seen I that's sales really you've that the and added think sales strong was have that. expansion to improvement,

Jeffrey Sherman

companies. billion to addressable private we this look Payment there's total to had Stephanie, a $X on today Yes. considerable probably whitespace at about as what $X the billion we think roughly $X.X of based be it billion know being still is and And side. We and we market, in captured Integrity think public

better and of so think is job base. capitalizing customer that a there with addressable our And just total opportunity I capturing a market doing we're existing

Stephanie Demko

Understood.

move that these ranks to are add payers kind or these product in up analytics, PI of you talk you're your book some new as in? as the seeing of on your So expand for of you in capabilities you

William Lucia

off, up Edits I is another we providers there's movement thing on on that off, always and down are think and across. turned closely and turned which monitor.

to hard say So going upstream. to move we're it's really that definitely

sometimes we'll for still third and In better dollars. or the fees finding pass it's fact, significant to doing that get even that because be second of

more So customers. PI is stable, our of still kind growth opportunity movement sell been to it's but into I a less COB the a – for think much think significant I have little us, we

our of for focuses that's one So biggest XXXX.

Stephanie Demko

me, this times. But out do of Got margin it. I EBITDA didn't conservatism, asked versus the bunch also. I been this has is expansions I saw planned if on one left year? of much something as assuming it a of you out know how Last not investment much ask

Operator

[Operator your Ms. Instructions] if And pardon wanted Demko, repeat to me, you question.

Stephanie Demko

about a you. Thank of sorry that. good Hi, That question.

last one the is on But ask want margin. guys. Just good to one I on Hey, bit a the the connectivity Hope little margin. side. on just everything more

chunkier year-to-date. investments them expansion guidance? have XXXX, a preventing you times. guys do planned or Is into just the mentioned significant is margin this that's few a built some have greater expansion you just But seen seeing pretty some in planned conservatism you've from investment You there

Jeffrey Sherman

We we I revenue of a said, Stephanie, as in think, gave XXXX. EBITDA. I Well, big margin range saw and improvement

don't You low revenue the the EBITDA necessarily range range. have with take low to

EBITDA as do outcomes adjusted So moving expect in to a with at But the of and range there looked strong margin we given more the we our and we gave. guiding that see performance EBITDA XXXX, expansion range revenue guidance comfortable just for XXXX. in revenue and XXXX. the parts, felt is to We

Stephanie Demko

Got right. you, All it. guys. Thank

Jeffrey Sherman

Thanks.

Operator

Thank you. questions in any the showing And not I’m further queue.

William Lucia

Lauren into one queue…? to if wait you can pops anyone we Yes, back see second, wanted the

Operator

any [Operator showing Instructions] questions further And I’m still. not

William Lucia

your XXXX everybody call. want for All you in first on right. conference Have speaking interest look and Well, wonderful we quarter our day. thank HMS, continued I forward to a to to

Operator

Ladies and conference. today's participating have Everyone, program you disconnect. conclude day. all in and thank may for wonderful today’s gentlemen, you a This does

HMS (HMSY) 22 Feb 192018 Q4 Earnings call transcript