Company Quick10K Filing
HMS Holdings
Price36.70 EPS1
Shares90 P/E32
MCap3,319 P/FCF29
Net Debt-281 EBIT122
TEV3,039 TEV/EBIT25
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-11
10-K 2019-12-31 Filed 2020-02-24
10-Q 2019-09-30 Filed 2019-11-04
10-Q 2019-06-30 Filed 2019-08-05
10-Q 2019-03-31 Filed 2019-05-10
10-K 2018-12-31 Filed 2019-02-25
10-Q 2018-09-30 Filed 2018-11-05
10-Q 2018-06-30 Filed 2018-08-06
10-Q 2018-03-31 Filed 2018-05-07
10-K 2017-12-31 Filed 2018-02-27
10-Q 2017-09-30 Filed 2017-11-08
10-Q 2017-06-30 Filed 2017-08-07
10-Q 2017-03-31 Filed 2017-06-06
10-Q 2016-12-31 Filed 2017-06-06
10-Q 2016-09-30 Filed 2016-11-09
10-Q 2016-06-30 Filed 2016-08-09
10-Q 2016-03-31 Filed 2016-05-10
10-K 2015-12-31 Filed 2016-02-29
10-Q 2015-09-30 Filed 2015-11-09
10-Q 2015-06-30 Filed 2015-08-10
10-Q 2015-03-31 Filed 2015-05-11
10-K 2014-12-31 Filed 2015-03-02
10-Q 2014-09-30 Filed 2014-11-10
10-Q 2014-06-30 Filed 2014-08-11
10-Q 2014-03-31 Filed 2014-05-12
10-K 2013-12-31 Filed 2014-03-03
10-Q 2013-09-30 Filed 2013-11-12
10-Q 2013-06-30 Filed 2013-08-09
10-Q 2013-03-31 Filed 2013-05-13
10-K 2012-12-31 Filed 2013-03-01
10-Q 2012-09-30 Filed 2012-11-09
10-Q 2012-06-30 Filed 2012-08-09
10-Q 2012-03-31 Filed 2012-05-09
10-K 2011-12-31 Filed 2012-02-29
10-Q 2011-09-30 Filed 2011-11-09
10-Q 2011-06-30 Filed 2011-08-08
10-Q 2011-03-31 Filed 2011-05-09
10-K 2010-12-31 Filed 2011-03-01
10-Q 2010-09-30 Filed 2010-11-08
10-Q 2010-06-30 Filed 2010-08-06
10-Q 2010-03-31 Filed 2010-05-07
10-K 2009-12-31 Filed 2010-02-26
8-K 2020-05-27
8-K 2020-05-08
8-K 2020-02-21
8-K 2020-01-16
8-K 2019-12-23
8-K 2019-11-20
8-K 2019-11-01
8-K 2019-10-06
8-K 2019-09-16
8-K 2019-08-02
8-K 2019-06-19
8-K 2019-05-22
8-K 2019-05-03
8-K 2019-02-25
8-K 2019-02-22
8-K 2019-01-09
8-K 2019-01-07
8-K 2018-11-02
8-K 2018-08-03
8-K 2018-06-27
8-K 2018-05-25
8-K 2018-05-04
8-K 2018-02-21
8-K 2018-01-08

HMSY 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 6. Exhibits
EX-31.1 hmsy-20200331xex311.htm
EX-31.2 hmsy-20200331xex312.htm
EX-32.1 hmsy-20200331xex321.htm
EX-32.2 hmsy-20200331xex322.htm

HMS Holdings Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
1.21.00.70.50.20.02012201420172020
Assets, Equity
0.20.10.10.0-0.0-0.12012201420172020
Rev, G Profit, Net Income
0.10.0-0.0-0.1-0.1-0.22012201420172020
Ops, Inv, Fin

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 000-50194
hmsy-20200331_g1.jpg
HMS HOLDINGS CORP.
(Exact name of registrant as specified in its charter)
Delaware11-3656261
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
5615 High Point Drive 75038
Irving,TX
(Address of principal executive offices)(Zip Code)
(214) 453-3000
(Registrant’s telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock $0.01 par valueHMSYThe Nasdaq Stock Market LLC
Nasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes   No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No 

As of May 4, 2020, there were approximately 88,414,262 shares of the registrant’s common stock outstanding.



HMS HOLDINGS CORP. AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
FOR THE THREE MONTHS ENDED MARCH 31, 2020
TABLE OF CONTENTS
Page
March 31, 2020 (unaudited) and December 31, 2019
Three Months Ended March 31, 2020 and 2019 (unaudited)
Three Months Ended March 31, 2020 and 2019 (unaudited)
Three Months Ended March 31, 2020 and 2019 (unaudited)
Three Months Ended March 31, 2020 and 2019 (unaudited)




Glossary
Certain key terms used throughout this Form 10-Q and in our other filings are described below:
ACAPatient Protections and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010
ACOAccountable care organization
ADRAdditional documentation request
AIArtificial intelligence
ASCAccounting Standards Codification
ASOAdministrative service only
ASUAccounting Standards Update
CARES ActCoronavirus Aid, Relief, and Economic Security Act
CHIPChildren's Health Insurance Program
CMSCenters for Medicare & Medicaid Services
CMS NHECMS National Health Expenditures
COBCoordination of Benefits
COSOCommittee of Sponsoring Organizations of the Treadway Commission
Credit AgreementAmended and Restated Credit Agreement dated as of May 3, 2013, as amended by Amendment No. 1 to Amended and Restated Credit Agreement dated as of March 8, 2017, and as further amended by Amendment No. 2 to Amended and Restated Credit Agreement, dated as of December 19, 2017, by and among HMS Holdings Corp. the Guarantors party thereto, the Lenders party thereto and Citibank, N.A. as Administrative Agent
DSODays sales outstanding
ERISAEmployment Retirement Income Security Act of 1974
Exchange ActSecurities Exchange Act of 1934, as amended
FASBFinancial Accounting Standards Board
Form 10-Q
HMS Holdings Corp. Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020
HIPAAHealth Insurance Portability and Accountability Act of 1996
HITECHHealth Information Technology for Economic and Clinical Health Act
IRCInternal Revenue Code
IRSU.S. Internal Revenue Service
LIBOR or LIBO RateIntercontinental Exchange London Interbank Offered Rate (or any successor rate determined in accordance with the Credit Agreement)
MCOManaged care organization
MLMachine learning
NLPNatural language processing
PBMPharmacy benefit manager
PHIProtected health information
PHMPopulation Health Management
PIPayment Integrity
1


PMPMPer member per month
PMPYPer member per year
RACRecovery Audit Contractor
RFPRequest for proposal
ROURight-of-use
RPARobotic process automation
SECU.S. Securities and Exchange Commission
Securities ActSecurities Act of 1933, as amended
SG&ASelling, general and administrative
TPLThird-party liability
U.S. GAAPUnited States Generally Accepted Accounting Principles
VAU.S. Department of Veterans Affairs
2016 Omnibus PlanHMS Holdings Corp. 2016 Omnibus Incentive Plan
2017 Tax ActTax Cuts and Jobs Act of 2017
2019 Form 10-K
HMS Holdings Corp. Annual Report on Form 10-K for the year ended December 31, 2019
2019 Omnibus PlanHMS Holdings Corp. 2019 Omnibus Incentive Plan
401(k) PlanHMS Holdings Corp. 401(k) Plan

2


For purposes of this Form 10-Q, the terms “HMS,” “Company,” “we,” “us,” and “our” refer to HMS Holdings Corp. and its consolidated subsidiaries unless the context clearly indicates otherwise. 
Cautionary Note Regarding Forward-Looking Statements
Included in this Form 10-Q are “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. From time to time, we also provide forward-looking statements in other materials we release to the public, as well as oral forward-looking statements. Such statements relate to our current expectations, projections and assumptions about our business, the economy and future events or conditions. They do not relate strictly to historical or current facts.
We have tried to identify forward-looking statements by using words such as “aim,” “anticipate,” "assume," “believe,” “estimate,” “expect,” “forecast,” “future,” “intend,” “likely,” “may,” “outlook,” “plan,” “potential,” “project,” “seek,” “strategy,” “target,” “trend,” “will,” “would,” “could,” “should,” and variations of such terms and similar expressions and references to guidance, although some forward-looking statements may be expressed differently. These statements include, among other things, the potential impacts of the novel coronavirus (COVID-19), information concerning our future growth, business strategy, strategic or operational initiatives, our future operating or financial performance, our ability to invest in and utilize our data and analytics capabilities to expand our offerings, the benefits and synergies to be obtained from completed and future acquisitions, investments and strategic relationships, including VitreosHealth, Inc. ("VitreosHealth"), MedAdvisor Limited ("MedAdvisor") and West Claims Recovery Services, LLC ("Accent"), our future expenses, interest rates and tax rates, our ability to meet our future liquidity requirements, the impact of changes to healthcare legislation or healthcare spending affecting Medicare, Medicaid or other publicly funded or subsidized health programs, and other statements regarding our possible future actions, business plans, objectives and prospects.
Forward-looking statements are not guarantees and involve risks, uncertainties and assumptions that are difficult to predict. Actual results may differ materially from past results and from those indicated by such forward-looking statements if known or unknown risks or uncertainties materialize, or if underlying assumptions prove inaccurate. These risks and uncertainties include, among other things:
the course of the COVID-19 pandemic and the responses to the pandemic, and their effects on our business and operations, including those of our customers and partners, and general economic, business and market conditions;
our ability to execute our business plans or growth strategy;
our ability to innovate, develop or implement new or enhanced solutions or services;
the nature of acquisition, investment, strategic relationship and divestiture opportunities we are pursuing, and our ability to successfully execute on such opportunities;
our ability to successfully integrate acquired businesses and operations and realize synergies;
significant and increased competition related to our solutions and services;
variations in our results of operations;
our ability to accurately forecast the revenue under our contracts and solutions;
our ability to protect our systems from damage, interruption or breach, and to maintain effective information and technology systems and networks, including during a catastrophic or extraordinary event, such as COVID-19;
3


our ability to protect our intellectual property rights, proprietary technology, information processes and know-how;
our failure to maintain a high level of customer retention or the unexpected reduction in scope or termination of key contracts with major customers;
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;
our inability to manage our relationships with data sources and suppliers;
our reliance on subcontractors and other third party providers and parties to perform services;
our ability to secure future contracts and favorable contract terms through the competitive bidding process;
pending or threatened litigation;
unfavorable outcomes in legal proceedings;
our success in attracting and retaining qualified employees and members of our management team;
our ability to generate sufficient cash to cover our interest and principal payments under our credit facility;
changes in tax laws, regulations or guidance and unexpected changes in our effective tax rate;
unanticipated increases in the number or amount of claims for which we are self-insured;
accounting changes or revisions;
risks relating to our international operations, including political, regulatory, economic, foreign exchange, tax compliance and other risks;
changes in the healthcare environment or healthcare financing system, including regulatory, budgetary or political actions that affect healthcare spending or the practices and operations of healthcare organizations;
our failure to comply with applicable laws and regulations governing individual privacy and information security, domestically and internationally, or to protect such information from theft and misuse;
our ability to comply with current and future legal and regulatory requirements;
negative results of government or customer reviews, audits or investigations;
state or federal limitations related to outsourcing of certain government programs or functions;
restrictions on bidding or performing certain work due to perceived conflicts of interests;
the market price of our common stock and lack of dividend payments; and
anti-takeover provisions in our corporate governance documents.
These and other risks are discussed in this Form 10-Q and under the headings “Business,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Quantitative and Qualitative Disclosures About Market Risk” of our 2019 Form 10-K, and in other documents we file with the SEC.
4


Any forward-looking statements made by us in this Form 10-Q speak only as of the date on which they are made. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. We caution readers not to place undue reliance upon any of these forward-looking statements. You are advised, however, to consult any further disclosures we make on related subjects in our reports and other filings with the SEC.
Market and Industry Data
This Form 10-Q may include market, industry and government data and forecasts that have been obtained from publicly available information, various industry publications, other published industry sources and our own internal data and estimates. We have not independently verified information from third-party sources and cannot make any representation as to the accuracy or completeness of such information. None of the reports and other materials of third-party sources referred to in this Form 10-Q were prepared for use in, or in connection with, this Form 10-Q. Additionally, our internal data and estimates are based upon information obtained from our customers, our partners, trade and business organizations, publicly available information and other contacts in the markets in which we operate and our management’s understanding of industry conditions. Estimates are difficult to develop and inherently uncertain, and we cannot assure you that they are accurate. Our estimates involve risks and uncertainties and are subject to change based on various factors, including those detailed above and under “Part II, Item 1A. Risk Factors” of this Form 10-Q.
Trademarks and Trade Names
We have a number of registered trademarks, including HMS®, as well as the corresponding HMS + logo design mark, Elli®, Eliza®, Essette®, VitreosHealth® and Accent®. These and other trademarks of ours appearing in this Form 10-Q are our property. Solely for convenience, trademarks and trade names of ours referred to in this Form 10-Q may appear without the ® or ™ symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable licensor to these trademarks and trade names. Other trademarks and trade names appearing in this Form 10-Q are the property of their respective owners. We do not intend our use or display of other companies' trademarks or trade names to imply an endorsement or sponsorship of us by such companies, or any relationship with any of these companies.
5


PART I — FINANCIAL INFORMATION

Item 1. Financial Statements
HMS HOLDINGS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)

March 31,
2020
December 31,
2019
Assets(unaudited)
Current assets:
Cash and cash equivalents$148,033  $139,268  
Accounts receivable, net 234,901  223,443  
Prepaid expenses and other current assets22,231  30,925  
Income tax receivable524  3,210  
Deferred financing costs, net564  564  
Total current assets406,253  397,410  
Property and equipment, net86,764  86,947  
Goodwill597,803  599,351  
Intangible assets, net128,170  131,849  
Operating lease right-of-use assets16,544  17,493  
Deferred financing costs, net968  1,109  
Other assets14,586  10,117  
Total assets$1,251,088  $1,244,276  
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable, accrued expenses and other liabilities$81,242  $97,747  
Liability for appeals3,906  3,570  
Total current liabilities85,148  101,317  
Long-term liabilities:
Revolving credit facility240,000  240,000  
Operating lease liabilities13,839  14,881  
Net deferred tax liabilities26,527  25,587  
Other liabilities7,727  7,626  
Total long-term liabilities288,093  288,094  
Total liabilities373,241  389,411  
Commitments and contingencies
Shareholders' equity:
Preferred stock -- $0.01 par value; 5,000,000 shares authorized; none issued
    
Common stock -- $0.01 par value; 175,000,000 shares authorized;102,073,527 shares issued and 88,410,333 shares outstanding at March 31, 2020; 101,766,468 shares issued and 88,103,566 shares outstanding at December 31, 2019
1,021  1,018  
Capital in excess of par value490,261  479,964  
Retained earnings522,141  509,459  
Treasury stock, at cost: 13,663,194 shares at March 31, 2020 and December 31, 2019
(135,576) (135,576) 
Total shareholders' equity877,847  854,865  
Total liabilities and shareholders' equity$1,251,088  $1,244,276  
See accompanying Notes to the unaudited Consolidated Financial Statements.
7


HMS HOLDINGS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(unaudited)

Three Months Ended
March 31,
20202019
Revenue$171,412  $147,953  
Cost of services:
Compensation67,455  57,452  
Direct project and other operating expenses24,895  20,199  
Information technology14,903  13,105  
Occupancy4,362  4,079  
Amortization of acquisition related software and intangible assets5,505  4,166  
Total cost of services117,120  99,001  
Selling, general and administrative expenses35,839  29,246  
Total operating expenses152,959  128,247  
Operating income18,453  19,706  
Interest expense(2,262) (2,849) 
Interest income234  1,114  
Other income652    
Income before income taxes17,077  17,971  
Income taxes4,395  (1,671) 
Net income$12,682  $19,642  
Basic income per common share:
Net income per common share -- basic$0.14  $0.23  
Diluted income per common share:
Net income per common share -- diluted$0.14  $0.22  
Weighted average shares:
Basic88,202  85,853  
Diluted89,601  88,614  
See accompanying Notes to the unaudited Consolidated Financial Statements.
8


HMS HOLDINGS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
(in thousands, except share amounts)
(unaudited)

Three Months Ended
March 31,
20202019
Common Stock and paid-in capital
Balance, beginning of period
$480,982  $426,737  
Exercise of stock options
125  23,139  
Stock-based compensation expense
13,510  10,979  
Vesting of restricted stock units, net of shares withheld for employee tax
(3,335) (6,768) 
Balance, end of period
491,282  454,087  
Retained earnings
Balance, beginning of period
509,459  422,235  
Net income12,682  19,642  
Balance, end of period
522,141  441,877  
Treasury stock
Balance, beginning of period
(135,576) (135,576) 
Purchase of treasury stock
—  —  
Balance, end of period
(135,576) (135,576) 
Total shareholders' equity
$877,847  $760,388  
Shares issued
Balance, beginning of period
101,766,468  98,924,501  
Exercise of stock options
13,561  1,443,685  
Vesting of restricted stock units, net of shares withheld for employee tax
293,498  376,891  
Balance, end of period
102,073,527  100,745,077  
Treasury Stock
Balance, beginning of period
13,663,194  13,663,194  
Purchase of treasury stock
—  —  
Balance, end of period
13,663,194  13,663,194  
See accompanying Notes to the unaudited Consolidated Financial Statements.
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HMS HOLDINGS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended
March 31,
20202019
Operating activities:
Net income
$12,682  $19,642  
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property, equipment and software8,024  7,930  
Amortization of intangible assets3,679  2,339  
Amortization of deferred financing costs141  141  
Stock-based compensation expense13,510  10,979  
Deferred income taxes940  1,225  
Noncash lease expense949  1,196  
Changes in operating assets and liabilities:
Accounts receivable(9,910) 1,977  
Prepaid expenses and other current assets8,694  (2,136) 
Other assets(4,469) (766) 
Income taxes receivable2,686  1,189  
Accounts payable, accrued expenses and other liabilities(19,126) (15,995) 
Operating lease liabilities(1,042) (1,519) 
Liability for appeals336  2,320  
Net cash provided by operating activities17,094  28,522  
Investing activities:
Purchases of property and equipment(1,678) (369) 
Investment in capitalized software(3,339) (3,621) 
Net cash used in investing activities(5,017) (3,990) 
Financing activities:
Proceeds from exercise of stock options125  23,139  
Payments of tax withholdings on behalf of employees for net-share settlements(3,335) (6,768) 
Payments on capital lease obligations(102) 8  
Net cash (used in)/provided by financing activities(3,312) 16,379  
Net increase in cash and cash equivalents8,765  40,911  
Cash and Cash Equivalents
Cash and cash equivalents at beginning of year139,268  178,946  
Cash and cash equivalents at end of period$148,033  $219,857  
Supplemental disclosure of cash flow information:
Cash paid for income taxes/(refunds received), net of refunds$585  $(4,288) 
Cash paid for interest$2,134  $2,771  
Supplemental disclosure of non-cash activities:
Change in balance of accrued property and equipment purchases$(2,824) $(201) 
See accompanying Notes to the unaudited Consolidated Financial Statements.
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HMS HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2020 and 2019
(unaudited)
1.  Business and Summary of Significant Accounting Policies
(a) Business
The terms “HMS,” “Company,” “we,” “us,” and “our” refer to HMS Holdings Corp. and its consolidated subsidiaries unless the context clearly indicates otherwise. HMS is an industry-leading provider of cost containment and analytical solutions in the healthcare marketplace. Our mission is to make healthcare work better for everyone. We use data, technology and analytics to deliver payment accuracy and population health management solutions that help healthcare organizations reduce costs, improve health outcomes and enhance consumer experiences. We currently operate as one business segment with a single management team that reports to the Chief Executive Officer.
The Consolidated Financial Statements and accompanying Notes in this Form 10-Q are unaudited. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. The results reported in these unaudited Consolidated Financial Statements are not necessarily indicative of the results that may be expected for any subsequent interim period or the entire year. These unaudited Consolidated Financial Statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 (“2019 Form 10-K”). The consolidated balance sheet as of December 31, 2019 included herein was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP.
The preparation of the Company’s unaudited Consolidated Financial Statements requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the unaudited Consolidated Financial Statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. These statements include all adjustments (which include only normal recurring adjustments, except as disclosed) that management considers necessary to present a fair statement of the Company’s results for such interim periods.
These unaudited Consolidated Financial Statements include HMS accounts and transactions and those of the Company’s wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
(b) Summary of Significant Accounting Policies
There have been no material changes to the Company’s significant accounting policies that are referenced in the 2019 Form 10-K.


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Recently Adopted Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (“ASU 2016-13”). ASU 2016-13 introduces the current expected credit losses methodology for estimating allowances for credit losses. ASU 2016-13 applies to all financial instruments carried at amortized cost and off-balance-sheet credit exposures not accounted for as insurance, including loan commitments, standby letters of credit, and financial guarantees. The new accounting standard does not apply to trading assets, loans held for sale, financial assets for which the fair value option has been elected, or loans and receivables between entities under common control. ASU 2016-13 is effective for public entities for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company adopted this guidance on January 1, 2020. When developing an estimate of the Company's expected credit losses, the Company considers all relevant information regarding the collectability of cash flows including historical information, customers' credit history and current financial conditions, industry trends and reasonable and supportable forecasts of future economic conditions over the contractual life of the receivable. The adoption of this guidance did not have a material effect on the Company’s consolidated financial statements.
In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract ("ASU 2018-15"). The standard aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal use software. ASU 2018-15 is effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company adopted this guidance on January 1, 2020. The adoption of this guidance did not have a material effect on the Company’s consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurements ("ASU 2018-13"). The objective of the ASU is to improve the disclosures related to fair value measurement by removing, modifying, or adding disclosure requirements related to recurring and non-recurring fair value measurements. ASU 2018-13 is effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company adopted this guidance on January 1, 2020. The adoption of this guidance did not have a material effect on the Company’s consolidated financial statements.
Recently Issued Accounting Pronouncements Not Yet Adopted
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ("ASU 2019-12"). The guidance eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences related to changes in ownership of equity method investments and foreign subsidiaries. The guidance also simplifies aspects of accounting for franchise taxes and enacted changes in tax laws or rates, and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. ASU 2019-12 is effective for public business entities for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted, including adoption in any interim period for which financial statements have not
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been issued. This guidance is not expected to have a material impact on the Company’s financial position, results of operations or internal control framework.

2.  Revenue Recognition
The Company’s revenue disaggregated by solution for the three months ended March 31, 2020 and 2019 was as follows (in thousands):
Three Months Ended
March 31,
20202019
Coordination of Benefits$118,056  $105,851  
Payment Integrity39,308  27,726  
Population Health Management14,048  14,376  
Total$171,412  $147,953  
Coordination of benefits revenue is derived from contracts with state governments, Medicaid managed care plans, and commercial entities that can span years with the option to renew. Types of service contracts could include: (a) the identification of erroneously paid claims; (b) the delivery of verified commercial insurance coverage information; (c) the identification of paid claims where another third party is liable; and (d) the identification and enrollment of Medicaid members who have access to employer insurance. Most of these types of service contracts contain multiple promises, all of which are not distinct within the context of the contract. Therefore, the promises represent a single, distinct performance obligation for the types of services we offer. Revenue derived from these performance obligations is largely based on variable consideration where, based on the number of claims or amount of findings the Company identified, a contingent or fixed transaction price/recovery percentage is allocated to each distinct performance obligation. The Company utilizes the expected value method to estimate the variable consideration related to the transaction price for its service contracts. Key inputs and assumptions in determining variable consideration include identified pricing and expected recoveries and/or savings. The expected recoveries and/or savings are based on historical experience of information received from our customers. Revenue is primarily recognized at a point in time when our customers realize economic benefits from our services when our services are completed. However, we have a limited number of fixed fee arrangements where revenue is recognized over time as performance obligations are satisfied within one to three years. Generally, coordination of benefit contract payment terms are not standardized within the respective contract; however, payment is typically due on demand and there is a clear and distinct history of customers making consistent payments.
Payment integrity services revenue is derived from contracts with federal and state governments, commercial health plans and other at-risk entities that can span years with the option to renew. Types of service contracts could include: (a) services designed to ensure that healthcare payments are accurate and appropriate; and (b) the identification of over/under payments or inaccurate charges based on a review of medical records. Most of these types of service contracts contain multiple promises, all of which are not distinct within the context of the contract. Therefore, the promises represent a single, distinct performance obligation for the types of services we offer. Revenue derived from these performance obligations is largely based on variable consideration where, based on the amount of recovery findings the Company identifies, a contingent or fixed transaction price/recovery percentage is allocated to each distinct
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performance obligation. The Company utilizes the expected value method to estimate the variable consideration related to the transaction price for its service contracts. Key inputs and assumptions in determining variable consideration include identified pricing and expected recoveries and/or savings. The expected recoveries and/or savings are based on historical experience of information received from our customers. Revenue is primarily recognized at a point in time when our customers realize economic benefits from our services when our services are completed. However, we have a limited number of fixed fee arrangements where revenue is recognized over time as performance obligations are satisfied within one to three years. Generally, payment integrity contract payment terms are not standardized within the respective contract; however, invoice payment is typically due on demand and there is a clear and distinct history of customers making consistent payments.
Payment accuracy revenue consists of revenue for our coordination of benefits and payment integrity services. 
Population health management revenue is derived from contracts with health plans and other risk-bearing entities that can span years with the option to renew. Types of service contracts could include: (a) programs designed to improve member engagement; and (b) outreach services designed to improve clinical outcomes. Most of these types of service contracts contain multiple promises, all of which are not distinct within the context of the contract. Therefore, the promises represent a single, distinct performance obligation for the types of services we offer. Revenue derived from these services is largely based on consideration associated with prices per order/transfer and PMPM/PMPY fees. The Company believes the output method is a reasonable measure of progress for the satisfaction of our performance obligations, which are satisfied over time, as it provides a faithful depiction of (1) our performance toward complete satisfaction of the performance obligation under the contract and (2) the value transferred to the customer of the services performed under the contract. The Company has elected the right to invoice practical expedient for recognition of revenue related to its performance obligations when the amount we have the right to invoice the customer corresponds directly with the value to the customer. Additionally, we have a limited number of fixed fee arrangements where revenue is recognized over time as performance obligations are satisfied within one to three years. Generally, population health management contract payment terms are stated within the contract and are due within an explicitly stated time period (e.g., 30, 45, 60 days) from the date of invoice. A portion of the payment received may relate to future performance obligations and will result in an increase to deferred revenue until the obligation has been met.
The Company's accounts receivable balance is net of estimated variable consideration of $18.8 million and $17.1 million as of March 31, 2020 and December 31, 2019, respectively, related to revenue recognized based on expected recoveries and/or savings.





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The Company’s revenue disaggregated by market for the three months ended March 31, 2020 and 2019 was as follows (in thousands):
Three Months Ended
March 31,
20202019
Commercial$88,750  $76,259  
State68,669  61,742  
Federal13,993  9,952  
Total$171,412  $147,953  
A portion of the Company’s services are deferred and revenue is recognized at a later time. Deferred revenue was approximately $6.4 million and $4.2 million as of March 31, 2020 and December 31, 2019, respectively, and is included in Accounts payable, accrued expenses and other liabilities in the Consolidated Balance Sheets. Approximately $1.0 million of the December 31, 2019 balance was recognized in revenue during the three months ended March 31, 2020.
Contract modifications are routine in nature and often done to account for changes in the contract specifications or requirements. In most instances, contract modifications are for services that are not distinct, and, therefore, modifications are accounted for as part of the existing contract. The Company has elected to use the practical expedient to expense the incremental costs of obtaining a contract if the amortization period of the asset that the Company would have otherwise recognized is one year or less.
In connection with coordination of benefits and certain payment integrity services, lockboxes and their associated bank accounts are set up to support recoveries and remittances. Generally, these bank accounts are for the benefit of the Company’s customers. Customer cash held in Company bank accounts for the benefit of the customer was approximately $18.0 million and $21.9 million as of March 31, 2020 and December 31, 2019, respectively. This amount is included in cash and cash equivalents and other current liabilities on the accompanying Consolidated Balance Sheet.  
3. Acquisitions
(a)Accent

On December 23, 2019, HMS acquired West Claims Recovery Services, LLC (“Accent”), a payment accuracy and cost containment business, for aggregate consideration of cash in the amount of $158.6 million, which was funded through cash on hand. The purchase price is subject to certain post-closing purchase price adjustments and the initial purchase price allocation as of the date of acquisition was based on a preliminary valuation. Estimates and assumptions for which the Company is still obtaining or evaluating information are subject to change up to one year from the acquisition date as additional information becomes available and adjustments may require a change in the amounts allocated to goodwill during the periods in which the adjustments are determined. As of March 31, 2020, HMS has not finalized the determination of fair values allocated to various assets and liabilities, including, but not limited to: receivables; intangible assets; accounts payable and accrued liabilities; potential loss contracts; and goodwill.

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The intangible assets are valued using various methods which require several judgments, including growth rates, discount rates, customer attrition rates, and expected levels of revenues, earnings, cash flows and tax rates. The intangible assets are amortized over their estimated useful lives on a straight-line basis. Goodwill was determined based on the difference between the purchase price and the fair values of the tangible and intangible assets acquired. Goodwill recognized from the acquisition was the result of synergies to be realized from future revenue growth. Goodwill is deductible for tax purposes, has an indefinite useful life and will be included in the Company’s annual impairment testing or between annual tests if an indicator of impairment exists.

The preliminary allocation of the purchase price to the fair value of the assets acquired and the liabilities assumed as of December 23, 2019, the effective date of the acquisition, was as follows (in thousands):

Cash and cash equivalents$9,400  
Accounts receivable10,736  
Prepaid expenses129  
Property and equipment2,878  
Intangible assets68,400  
Goodwill79,997  
Other assets489  
Accounts payable and accrued liabilities(13,395) 
Total purchase price$158,634  

As of the period ended March 31, 2020, the Company made refinements to the December 23, 2019 preliminary purchase price allocation as reported at December 31, 2019. These refinements resulted in an increase in accounts receivable and a decrease to goodwill of approximately $1.5 million. Substantially all the receivables acquired are expected to be collectible.

The purchase price allocated to the intangible assets acquired was as follows (in thousands, except for useful life):

Useful Life
(in years)
Customer relationships12$67,000  
Trade name31,400  
Fair value of intangibles acquired$68,400  


We incurred $2.1 million of acquisition related costs related to the Accent acquisition for the year ended December 31, 2019. The costs include consulting, legal and transaction costs, and have been recorded in selling, general and administrative expenses.

The financial results of Accent's operations since the date of acquisition have been included in the Company’s consolidated financial statements. Accent contributed approximately $10.9 million in revenue to HMS results of operations for the three months ended March 31, 2020.



(b) VitreosHealth
On September 16, 2019, HMS acquired VitreosHealth, Inc. ("VitreosHealth"), a company that offers predictive and prescriptive health insights utilized by population risk models, for aggregate consideration of $36.6 million, which was funded with cash on hand. The purchase price was subject to certain post-closing purchase price adjustments and the initial purchase price allocation as of the date of acquisition was based on a preliminary valuation.
The Company's allocation of consideration exchanged to the net tangible and intangible assets acquired and liabilities assumed in the acquisition is based on estimated fair values as of September 16, 2019. The Company allocated the purchase price, net of cash acquired, to the following significant assets: intellectual property subject to amortization of $6.0 million, and goodwill of $30.2 million which represents the excess purchase price over the net identifiable tangible and intangible assets. There were no additional material allocations to assets and liabilities. The intangible assets are valued using various methods which require several judgments, including growth rates, discount rates, expected levels of revenues, earnings, cash flows and tax rates. The intangible assets are amortized over their estimated useful lives on a straight-line basis and are not expected to be deductible for tax purposes. The goodwill recognized from the acquisition was a result of expected synergies to be realized from future revenue growth, is not expected to be deductible for tax purposes, has an indefinite useful life and will be included in the Company’s annual impairment testing.
The results of VitreosHealth's operations since the date of acquisition have been included in the Company's consolidated financial statements and are not considered material.

4.  Intangible Assets, Goodwill and Other Assets
(a) Intangible Assets
Intangible assets consisted of the following (in thousands, except for weighted average amortization period):
Gross Carrying AmountAccumulated
Amortization
Net Carrying AmountWeighted Average Amortization Period in Years
March 31, 2020
Customer relationships$125,423  $(14,172) $111,251  11.8
Trade names1,400  (128) 1,272  2.7
Intellectual property27,700  (12,053) 15,647  3.8
Total$154,523  $(26,353) $128,170  




Gross Carrying AmountAccumulated
Amortization
Net Carrying AmountWeighted Average Amortization Period in Years
December 31, 2019
Customer relationships$135,290  $(21,637) $113,653  12.1
Trade names1,536  (147) 1,389  3.0
Intellectual property27,700  (10,893) 16,807  3.7
Total$164,526  $(32,677) $131,849  
Amortization expense of intangible assets is expected to approximate the following (in thousands):
Year ending December 31,Amortization
2020 (excluding the three months ended March 31, 2020)$11,016  
202114,247  
202214,197  
202311,405  
202410,330  
Thereafter66,975  
Total$128,170  
For the three months ended March 31, 2020 and 2019, amortization expense related to intangible assets was $3.7 million and $2.3 million, respectively.
(b) Goodwill
As a result of the Accent acquisition, the changes in the carrying amount of goodwill were as follows (in thousands):
Balance at December 31, 2019$599,351  
Accent acquisition(1,548) 
Balance at March 31, 2020$597,803  

(c) Other Assets
Included in Other assets are Level 1 equity investments with a cost basis of $7.4 million. As of March 31, 2020 and December 31, 2019, the fair value measurement of the equity instrument was $8.6 million and $7.9 million, respectively. There were no sales, settlements issuances or transfers related to this level 1 instrument.
The Company recorded net unrealized gains of $0.7 million for the three months ended March 31, 2020. There were no realized or unrealized gains in the three months ended March 31, 2019. These gains are reflected as a component of Other income in the accompanying Consolidated Statements of Income.
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5.  Accounts Payable, Accrued Expenses and Other Liabilities
Accounts payable, accrued expenses and other liabilities consisted of the following (in thousands):
March 31,
2020
December 31,
2019
Accounts payable, trade
$14,474  $12,246  
Accrued compensation and other
19,533  36,827  
Accrued operating expenses
40,704  42,045  
Current portion of lease liabilities
6,531  6,629  
Total accounts payable, accrued expenses and other liabilities
$81,242  $97,747  


6.  Income Taxes
The Company’s effective tax rate increased to 25.7% for the three months ended March 31, 2020 from (9.3)% for the three months ended March 31, 2019. The effective tax rate for the three months ended March 31, 2020 includes immaterial discrete tax benefits related to net equity compensation deductions. For the three months ended March 31, 2020, the differences between the federal statutory rate and our effective tax rate are tax expense items related to state taxes, equity compensation impacts, unrecognized tax benefits, including interest, officer compensation deduction limits, research and development tax credits, and other permanent differences. The Company has current period foreign income tax expense and includes global intangible low-taxed income as current period income tax expense, both of which are not material to the overall financial statements.
Included in Other liabilities on the Consolidated Balance Sheets, are the total amount of unrecognized tax benefits (net of the federal benefit for state issues) of approximately $4.4 million and $4.2 million, as of March 31, 2020 and December 31, 2019, respectively, that, if recognized, would favorably affect the Company’s future effective tax rate. Also included in Other liabilities on the Consolidated Balance Sheets, are accrued liabilities for interest expense and penalties related to unrecognized tax benefits of $0.8 million and $0.7 million as of March 31, 2020 and December 31, 2019, respectively. HMS includes interest expense and penalties in the provision for income taxes in the unaudited Consolidated Statements of Income. The amount of interest expense (net of federal and state income tax benefits) and penalties in the unaudited Consolidated Statements of Income for the three months ended March 31, 2020 and 2019 was $0.1 million and $0.2 million, respectively. The Company believes it is reasonably possible that the amount of unrecognized tax benefits may decrease by $1.6 million over the next twelve months, due to the expiration of the statute of limitations in federal and various state jurisdictions.
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HMS files income tax returns with the U.S. Federal government and various state and local jurisdictions and will file income tax returns in certain foreign jurisdictions in future periods as a result of its acquisition of VitreosHealth. HMS is generally no longer subject to U.S. Federal income tax examinations for years before 2016. HMS operates in a number of state, local and foreign jurisdictions. Accordingly, HMS is subject to state, local and foreign income tax examinations based on the various statutes of limitations in each jurisdiction.
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") was enacted in response to the novel coronavirus (COVID-19) pandemic. The CARES Act includes numerous provisions relating to, among other things, refundable payroll tax credits, deferment of the employer portion of certain payroll taxes, net operating loss amounts and carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. Due to the recent enactment of the CARES Act, the Company is currently analyzing the potential impacts of this legislation on its financial position and results of operations.

7. Liability For Appeals
Under the Company’s contracts with certain commercial health plan customers and its Medicare Recovery Audit Contractor (“RAC”) contract with the Centers for Medicare & Medicaid Services (“CMS”) (included within the Company’s payment integrity services revenue), providers have the right to appeal HMS claim findings and to pursue additional appeals if the initial appeal is found in favor of HMS’s customer. To the extent the amount to be returned to providers following a successful appeal exceeds or is less than the amount recorded, revenue in the applicable period would be reduced or increased by such amount. The liability for appeals balance was approximately $3.9 million and $3.6 million as of March 31, 2020 and December 31, 2019, respectively.

8.  Credit Agreement
In May 2013, we entered into a credit agreement (as amended and restated, the "Credit Agreement") with certain lenders and Citibank, N.A. as administrative agent. The Credit Agreement originally provided for an initial $500 million five-year revolving credit facility maturing on May 3, 2018.
On December 19, 2017, the Company entered into an amendment to the Credit Agreement, which, among other things, extended the maturity of its then existing $500 million revolving credit facility by five years to December 2022 (the "Amended Revolving Facility").The availability of funds under the Amended Revolving Facility includes sublimits for (a) up to $50 million for the issuance of letters of credit and (b) up to $25 million for swingline loans. In addition, the Company may increase the commitments under the Amended Revolving Facility and/or add one or more incremental term loan facilities, provided that such incremental facilities do not exceed in the aggregate the sum of (i) the greater of $120 million and 100% of Consolidated EBITDA (as defined in the Credit Agreement) and (ii) an additional amount so long as our first lien leverage ratio (as defined in the Credit Agreement) on a pro forma basis is not greater than 3.00:1.00, subject to obtaining commitments from the lenders and meeting certain other conditions.
As of March 31, 2020 and December 31, 2019, the outstanding principal balance due on the Amended Revolving Facility was $240 million. No principal payments were made against the Amended Revolving Facility during the three months ended March 31, 2020.
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Borrowings under the Amended Revolving Facility bear interest at a rate equal to, at the Company’s election (except with respect to swingline borrowings, which will accrue interest based only at the base rate), either:
a base rate determined by reference to the greatest of (a) the prime or base commercial lending rate of the administrative agent as in effect on the relevant date, (b) the federal funds effective rate plus 0.50% and (c) the one-month London Interbank Offered Rate (or any successor rate determined in accordance with the Credit Agreement) (“LIBO Rate”) plus 1.00%, plus an interest margin ranging from 0.50% to 1.00% based on the Company’s consolidated leverage ratio for the applicable period; or
an adjusted LIBO Rate, equal to the LIBO Rate for the applicable interest period multiplied by the statutory reserve rate (equal to (x) one divided by (y) one minus the aggregate of the maximum reserve percentage (including any marginal, special, emergency or supplemental reserves) established by the Board of Governors of the Federal Reserve System of the United States), plus an interest margin ranging from 1.50% to 2.00% based on the Company’s consolidated leverage ratio for the applicable period.
In addition to paying interest on the outstanding principal, the Company is required to pay unused commitment fees on the Amended Revolving Facility during the term of the Credit Agreement ranging from 0.375% to 0.250% per annum based on the Company’s consolidated leverage ratio and letter of credit fees equal to 0.125% per annum on the aggregate face amount of each letter of credit, as well as customary agency fees. As part of a contractual agreement with a customer, the Company has an outstanding irrevocable letter of credit for $6.5 million, which is issued against the Amended Revolving Facility and expires June 30, 2020.
The Amended Revolving Facility is secured, subject to certain customary carve-outs and exceptions, by a first priority lien and security interest in substantially all tangible and intangible assets of the Company and certain subsidiaries of the Company. The Amended Revolving Facility contains certain restrictive covenants, which affect, among other things, the ability of the Company and its subsidiaries to incur indebtedness, create liens, make investments, sell or otherwise dispose of assets, engage in mergers or consolidations with other entities, and pay dividends or repurchase stock. The Company is also required to comply, on a quarterly basis, with two financial covenants: (i) a minimum interest coverage ratio of 3:00:1:00, and (ii) a maximum consolidated leverage ratio of 4.25:1.00 from and after January 2020. The consolidated leverage ratio is subject to a step-up to 5.25:1.00 for four full consecutive fiscal quarters following a permitted acquisition or similar investment. As of March 31, 2020, the Company was in compliance with all terms of the Credit Agreement.
Interest expense and the commitment fees on the unused portion of the Company’s Amended Revolving Facility were as follows (in thousands):
Three Months Ended
March 31,
20202019
Interest expense$1,925  $2,526  
Commitment fees160  156  
As of March 31, 2020 and December 31, 2019, the unamortized balance of deferred origination fees and debt issuance costs was $1.6 million and $1.7 million, respectively. For the three month
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periods ended March 31, 2020 and 2019, HMS amortized $0.1 million and $0.1 million, respectively, of interest expense related to the Company’s deferred origination fees and debt issue costs.

9.  Earnings Per Share
The following table reconciles the basic to diluted weighted average common shares outstanding using the treasury stock method (in thousands, except per share amounts):
Three Months Ended
March 31,
20202019
Net income$12,682  $19,642  
Weighted average common shares outstanding-basic88,202  85,853  
Plus: net effect of dilutive stock options and restricted stock units1,399  2,761  
Weighted average common shares outstanding-diluted89,601  88,614  
Net income per common share -- basic$0.14  $0.23  
Net income per common share -- diluted$0.14  $0.22  
For the three months ended March 31, 2020 and 2019, (i) 1,015,141 and 215,353 stock options, respectively, and (ii) restricted stock units representing 5,053 and 120,516 shares of the Company's common stock, respectively, were not included in the diluted earnings per share calculation because the effect would have been anti-dilutive.
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10.  Stock-Based Compensation
(a) Long-Term Incentive Award Plans
The Company grants stock options and restricted stock units to HMS employees and non-employee directors of the Company under the HMS Holdings Corp. 2019 Omnibus Incentive Plan (the “2019 Omnibus Plan”), as approved by the Company’s shareholders on May 22, 2019. The 2019 Omnibus Plan replaces and supersedes the HMS Holdings Corp. 2016 Omnibus Incentive Plan.
(b) Stock-Based Compensation Expense
Total stock-based compensation expense in the Company’s unaudited Consolidated Statements of Income related to the Company’s long-term incentive award plans was as follows (in thousands):
Three Months Ended
March 31,
20202019
Cost of services-compensation$3,849  $4,124  
Selling, general and administrative9,661  6,855  
Total$13,510  $10,979  
(c) Stock Options
For the three months ended March 31, 2020 and 2019, stock-based compensation expense related to stock options was approximately $5.6 million and $4.8 million, respectively.
Presented below is a summary of stock option activity for the three months ended March 31, 2020 (in thousands, except for weighted average exercise price and weighted average remaining contractual terms):
Number of OptionsWeighted
Average
Exercise
Price
Weighted
Average-
Remaining
Contractual
Terms
Aggregate
Intrinsic
Value
Outstanding balance at December 31, 20192,411  $23.43  
Granted
1,028  27.34  
Exercised
(14) 8.97  
Forfeitures
    
Expired
    
Outstanding balance at March 31, 20203,425  $24.68  7.93$12,430  
Expected to vest at March 31, 20201,363  $28.72  9.34$1,267  
Exercisable at March 31, 20201,613  $20.31  6.42$10,612  
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During the three months ended March 31, 2020 and 2019, the Company received proceeds of $0.1 million and $23.1 million, respectively, for the issuance of 13,561 and 1,443,685 shares of common stock upon the exercise of outstanding stock options, respectively. The total intrinsic value of stock options exercised during the three months ended March 31, 2020 and 2019 was $0.2 million and $25.8 million, respectively.
As of March 31, 2020, there was approximately $7.9 million of total unrecognized compensation cost related to stock options outstanding, which is expected to be recognized over a weighted average period of 1.6 years.
The weighted-average grant date fair value per share of the stock options granted during the three months ended March 31, 2020 and 2019 was $8.91 and $13.82, respectively. HMS estimated the fair value of each stock option grant on the date of grant using a Black-Scholes option pricing model and weighted–average assumptions set forth in the following table:
 Three Months Ended
March 31,
 20202019
Expected dividend yield0 %0 %
Risk-free interest rate1.2 %2.5 %
Expected volatility41.1 %40.9 %
Expected life (years)6.36.4
The total tax benefits recognized on stock-based compensation related to stock options for the three months ended March 31, 2020 and 2019 was $2.6 million and $11.3 million, respectively. 
(d) Restricted Stock Units
For the three months ended March 31, 2020 and 2019, stock-based compensation expense related to restricted stock units was approximately $7.9 million and $6.1 million, respectively.
Presented below is a summary of restricted stock units activity for the three months ended March 31, 2020 (in thousands, except for weighted average grant date fair value per unit):
 Number of
Units
Weighted Average
Grant Date Fair
Value per Unit
Outstanding balance at December 31, 20191,239  $21.37  
Granted693  23.78  
Vesting of restricted sto