Q4 2019 Earnings Call
Ladies and gentlemen, thank you for standing by walk through the HMS Q4, 2019 earnings conference call. At this time all participants are in listen only mode. After the speakers presentation there'll be a question answer session West a question during especially the press star one on your telephone. Please be advised todays conference is being recorded if you require further.
Since please press Star then zero I would now introduced filters comes from Mr. Robert works SVP Investor Relations you may begin.
Thank you, Kevin and good morning, everyone.
Joining me are ability, our chairman Chief Executive Officer, and Jeff Sherman, Our Chief Financial Officer. This call is being webcast you'd be accessed via the Investor Relations section of our company website at <unk> Dot com.
Today's press release, highlighting our financial results is also posted on our IR website.
The only job will first provide their perspective, our recent financial operating results and business outlook and then we'll open the line for questions. We ask you. Please limit yourself to one question and one follow ups, we can get through the full two in a timely fashion.
Like I remind you that the financial results reported take today and in this mornings press release, our preliminary and are not final until our form 10-K for the year ended December 31st 2019 as filed some of the statements who will make today are forward looking in nature beaten our current expectations in a view of our business as we see it today.
Such statements, including those related to our full year 2020 guidance future financial operating performance in future business plans objectives are subject to risks uncertainties and may cause actual results may differ materially.
As a result, they should be considered in conjunction with the cautionary statements in today's press release and the risk factors described the company's most recent SEC filings, including our form 10-K.
Finally, we may refer to certain non-GAAP financial measures. This morning reconciliations of these measures are two comparable GAAP measures are included in our press release posted to our website with that I'll now hand, the call over to Bill.
Thank you Robert and good morning, everyone.
Hmm posted solid revenue and profit growth and full year 2019, with total revenue for the year, increasing 4.7% and adjusted EBITDA up 10.6% from the prior year.
We also posted record operating cash flow for the year and this will continue to fuel our ability to further investment or people processes and technology and drive HMS is growth going forward.
The fourth quarter of 2019 was actually the highest revenue quarter in our company's history.
And on an annual basis, we continue to experience top and bottom line growth driven by our product innovation application of new technologies and expansion with both current and new clients.
As we noted in previous quarters, our business can experience quarterly variability.
The sequential 4.2% increase NRC Ob revenue from Q3, Q4 was an improvement but not at the level we had expected.
This was due to the timing of <unk> recoveries related to certain clients as well as yield improvements that did not materialize as quickly as anticipated.
As we've discussed in the past these opportunities are not lost but merely delayed the future quarters.
For example, about $3 million up rather than we expected to recognize in Q4 rolled into January we continuously work with third party carriers to identify and solve delays, including the system processing issues, we discussed last quarter.
We're also enhancing our CRB growth by leveraging machine learning and automation and through new product development and other innovative service capabilities to further address our clients' needs.
In addition, we are benefiting from government policy that is driving growth opportunities for both our steel b and payment integrity solutions.
As an example.
We recently signed an agreement to stay in new Mexico to manage the quality assurance module for their Medicaid enterprise system for Mds.
New Mexico is one of the first states to implement this federally mandated program to replace monolithic Medicaid management information systems with a best in class modular approach.
The Mds program will open up new opportunities for HMS with other states.
This Q way module includes program integrity.
Our party liability detection I'm recovery.
Fraud, and abuse analytics and quality reporting among other services.
Our comprehensive payment accuracy, so accuracy solutions, where a natural fit to lead this Q way module for new Mexico, and we expect this approach will lead to more flexibility drive further efficiency and improve outcomes for the sake.
And while we continue to be the industry leader in Medicaid CLP, we are now expanding our footprint in the commercial insurance and Medicare advantage marketplace to broaden our CLP portfolio.
In late December we completed the acquisition of Pakistan, a leader in commercial and Medicare CLP.
This combination opens up new coordination of benefits markets for HMS with commercial payers.
Offering expanded capabilities and numerous benefits for our clients and significantly expands our total addressable market.
With the acquisition of accent, we're now well positioned to deliver consistent high ROI across all addressable market segments.
Acts that accent expands our range of added an audit solutions and we intend to leverage the best practices from both HMS and back sat across our large client base.
I also expands our client value proposition I further strengthening our collections and recovery capabilities and by extending our suffocation services to commercial plans and employers.
The blend of both HMS, an accent expertise create a complete suite of CRB capabilities for cross selling across each respective client base and reach new clients as well.
In addition, we plan to integrate certain machine learning and robotic process automation applications into access to drive greater revenue yield and cost efficiencies overtime.
Overall, we are excited about the growth and expansion opportunities ahead of us as we drive the integration and go to market strategies.
Now our payment integrity business line delivered another strong quarter and we expect a moment momentum to continue in 2020 as we are seeing positive trends in solution adoption within our existing client base.
We're also seeing expansion of our payment integrity client footprint in both the commercial health plan and government markets.
We will continue to develop new innovative solutions to meet the growing demand for payment integrity services and enhance our value proposition and return on investment for our clients.
With respect to our population health management business revenue was up 9.1% sequentially from our third quarter as we refined our go to market approach.
Our new P.H.M. sales leadership in place and we are nearly complete and building out of sales team that's focused solely on this business line.
Our solutions are gaining traction in the market. So we remain optimistic about the growth potential for phs.
This includes continuing to build awareness of these capabilities with our government clients.
As a result of this activity in the fourth quarter, we signed our second state contractor Ellie with the New Jersey State employees Health benefits program, which covers about 815000 lives and generates about 15 million claims each year.
New Jersey wanted a creative innovative suite of solutions that offers data aggregation and analytics as well as pre and post paid medical claims review.
Enabling the state to advance its employee health program.
From a transactional data store toy dynamic predictive data management solution.
This was our first sale combining lease predictive risk analytics and our payment integrity solutions and we are the only partner what solutions and expertise to offer this client the full scope of work.
And earlier this month Aricept platform was named named Best Care management solution for payers by class, a leading health care IP research firm that rank solution providers.
This validates our team's efforts to deliver inefficient comprehensive platform for care managers.
Set as a key component of HMS is configurable PHN solution and was part of a recent integrated solution sale with our Elie analytics platform.
To further strengthen how we deliver develop and sell high impact solutions to solve our clients toughest problems. We made a few organizational changes this year.
We are enhancing our customer centric approach in order to continue to capitalize on the challenging industry trends to help drive HMS is growth.
Our commercial and government sales and client engagement teams are now aligned under our chief growth Officer led by Maria apparent.
Before rejoining HMS, a year ago, as our chief marketing and strategy Officer risks successfully led our market seems during her previous said seven year tenure with each of us.
Our COO, Doug Williams, having handed off sales and client engagement is now leading our technology and product teams to accelerate new product development and delivery.
This move will also help us capitalize on our accent acquisition.
By enabling faster integration of technology into our operations and further drive product performance.
Maria and Emmett O'connor, who leads population health management will closely collaborate to drive HMS is financial and strategic objectives for 2020 and beyond.
In summary, HMS realized another year of top and bottom line growth and strategic advances importantly, we help our clients achieve more than $5 billion in savings and recoveries.
We have sales momentum across all HMS solutions and tremendous opportunities for continued growth and expansion.
Jeff will now provide additional detail on our fourth quarter and full year performance Jeff.
Thank you Bill and good morning.
As Bill mentioned, we delivered our highest quarterly revenue number in our history in Q4, when you adjust for the nonrecurring reserve release from Q2 of 19 with Pi EPA, Jim performing at or above our expectations in the quarter.
However, our financial performance in Q4 was lower than we had expected due to the timing of CMV recoveries related to certain clients as was the timing of anticipate yield improvements.
She will be comprised approximately 65% of total company revenue in 2019 and was up 1.8% for the year.
Payment integrity revenue increased 18.3% in the fourth quarter and was up 12.6% for the full year.
Yeah, Tim revenue increased 3.8% in Q4 and was up 5.2% for full year 2019.
Adjusted EBITDA in the fourth quarter was $42.3 million a decline of 3.8 million from the prior year quarter.
As expected, we did see an increasing costs related to ongoing investments in IP and payment integrity teams, which we expect will drive returns in 2020 as well as incremental costs from the vitriol tenax in acquisitions.
We also incurred severance costs of $1.5 million in the quarter as we realigned our sales organization.
For the full year adjusted EBITDA increased by $7.7 million with margins, improving 20 basis points. When you exclude the 2019 Q3 investment gain in the reserve releases in both years.
Fourth quarter adjusted EPS was 27 cents per diluted share as lower she'll be revenue growth and higher Q4 expenses impacted our earnings performance.
This compares to adjusted EPS of 31 cents per diluted share in Q4 year ago, excluding 17 cents and discrete tax benefits.
Full year adjusted EPS increased eight cents to $1.12 per diluted share over 2018. When you just for the investment gain in Q3 of 19 as was the reserve releases in discrete tax benefit in both years.
Our cash flow remains strong full year operating cash flow was a record 133.2 million increased 38% from 2018 with free cash flow up 69% year over year to $111.6 million.
We ended the year with cash and cash equivalence of $139.3 million total debt of 240 million at December 30, Onest 29 team.
The leverage ratio 0.6 times, we continue to have a very strong balance sheet and liquidity profile. This is after our acquisition the victory owes for approximately 37 million in September in accident for approximately 159 million in December both of which for funded with cash on hand.
Turning now to our financial guidance for the year ahead.
We expect 2020 total company revenue of $705 million to $715 million, which is 14.5% to 16.2% growth compared to last year. When you exclude the Medicare RAC reserve release from 2019.
This 2020 growth rate is based on projected double digit growth in both payment integrity and population health management.
And low to middle single digit organic growth NRC Ob business, plus the actually accent acquisition revenue.
We typically see a sequential decline in revenue from Q4 to Q1 across our business lines, but this first quarter won't go to full quarterback said as well as some CRB revenue that we expected in Q4.
Therefore, we expect Q1 revenue to be similar with the fourth quarter of 2019 and in a range of $160 million to $165 million.
We are expecting full year, adjusted EBITDA of $185 million to $192 million for 2020, which represents growth of 12.8% to 17.1%.
As with revenue we are normalizing the 2019 adjusted EBITDA for comparison purposes to exclude $8.2 million from Medicare RAC reserve release, as well and $7.7 million investment game.
We do expect increased costs in 2020, as we integrate the active acquisition, which will negatively impact margins in the short term, but we are confident in the long term potential of this acquisition and our ability to leverage and cross pollinate, our solutions to drive revenue and cost efficiencies.
While we expect to see adjusted EBITDA margins expand organically it may be temporary for most of the year by higher than normal IC and operational investments, we plan to make to seamlessly integrate access to HMS.
Cost that are clearly nonrecurring such as duplicate IP and system integration costs will be added back to adjusted EBITDA similar to deal costs in the fourth quarter.
We continue to believe our business model has inherent operating leverage that can drive annual adjusted EBITDA margin expansion of 50 to 100 basis points overtime and the operational and strategic investments. We made in 2019 should have long term benefits to our margin profile.
Moving on the net income we are projecting $76 million to $80 million for 2020, which is expected to be at 10.1, 15.9% increase over the adjusted net income in 2019.
Remember that reported net income in 2018 included $6 million related to the Medicare RAC Reserve release, 5.6 million from an investment gain and six and a half million and discrete tax benefits.
Capital expenditures this year will move somewhat higher to a range of $30 million to $35 million as we continue to invest in our IP infrastructure, including acquisition integrations build out our big data environment and continue to develop innovative solutions for our clients.
We provided some additional details on our outlook for the year ahead in our press release. This morning, which will help address more detailed modeling questions, but the key metrics should tell you that we anticipate another solid year and 2020.
Bill and I'll offer some concluding remarks, and then we'll be ready for questions Bill.
Thank you Jeff.
HMS is well positioned for growth in 2020 and beyond.
We enjoy a longstanding relationships with our clients and have retention rates in excess of 96%, which creates visible long term revenue.
Our large client base and proven track record of helping to bend the health care cost curve continue to offer our greatest growth opportunity and that's cross selling our solutions to expand our footprint across more than 350 managed care plans over 40 state Medicaid agencies and federal agencies.
Just CMS, the CDC and the veterans administration.
Our ability to leverage enormous data assets combined with our proprietary advanced analytics are helping our clients to better understand the healthcare consumer end are impacting both outcomes and costs.
As we kick off 2020, we're excited to welcome our new vitriol snacks and employees and clients to the HMS team.
We have a deep bench of health care experts and we expect our strategic investments in people processes and technology.
And with our focus on delivering increasing value for our growing client base will fuel our growth this year and in the future.
In closing, we remain committed to delivering top and bottom line growth and I'm confident the entire HMS organization is up to the task of bringing enhance value to our clients.
I'd like to thank our employees airport and our shareholders for their continued support.
Operator, we're ready now for the first question.
Our first question comes from Ryan Doings with William Blair.
You guys. Thanks for taking the questions and all the detail.
Thanks to the Q4 shortfall I appreciate the 3 million that spilled into January but I'm, a little more curious on the.
Well the improvement you mentioned a few times that did not manifests can you going a little bit more detail about what drove that.
Quickly you think you could advance the yield improvements.
Increase that again.
Sure Ryan So we did see a 4.2% sequential increase in our she'll be product line from Q3.
And we did have discreetly about $3 million.
C of the revenue that we could track that was rolling into the into the first quarter.
He also ramped up some additional resources to capture incremental so you'll be yield and product revenue in Q4, and we do expect those benefits.
Courtesy Ob.
Throughout 2020, I think that opportunity to capture the recovery in your revenue as Bill mentioned is not lost but delayed and as we focused on our yield activities. It sometimes just hard to predict the ultimate timing of when those come through we said last quarter. We expect that we said in Q3, we expect that some of the hitting.
Q4, and some in thrall into Q1 and that certainly how it played out in the quarter.
Okay. That's helpful and then in regards to the population health management.
Business can you give us a little bit more update on the Salesforce investments I know you mentioned some of the restructuring in the quarter, but you said there's still some.
Left to be done so what kind of the to update on how far along you on the hiring process and then maybe a little color on what the pipeline looks like today. Thanks.
Yes. Thanks, Ryan This is bill so we.
We've hired the sales leader, we build the sales team we may have one or two additional positions that are solely dedicated to ph.
We still continue to expand our entire go to market sales and client engagement team. However, so.
But the P.H.M. team is almost fully staffed and the key was building. So we've had pretty soft strong resurgence and the sales Q for PHN.
Really across all of the three unique product segments that that.
Create our integrated suite.
Okay. Thank you.
Our next question comes from you Inder Singh with credit Suisse.
Hi, Thanks, and thanks, a lot up I wanted to clarify on the accent deal how much was contribution from that in fourth quarter and what are you expecting for 2020 on revenue and EBITDA from that transaction and if we can provide any color on how that contribution is spread across b and C. You will be business.
Sure. This is Jeff so so actually it has a solid history of really driving operating profitability and cash flows in Q4, we had a little bit over a million dollars in revenue and we said when we acquired at accent that generates approximately $50 million or.
Revenue and that's what we're expecting in 2020 at this point from a from a.
Reporting perspective, we're putting all the accident revenue NRC Ob product line.
So what is your implied VI business growth just trying to understand what is strong growth in Q4 I'm. Just wondering if you are expecting those kind of growth to continue in 2020 and be I business.
Yes, if you look at a PR revenue I mean, if you average Sargent dollar growth over the last two years, we've averaged 29 million.
And revenue growth over the last two years in the last year.
If you normalize for the reserve release.
We saw almost 12% growth and pie. So the pie number is a clean number does not include any revenue from accident. We are continuing to see good momentum in that business. Both at the commercial level the Medicare RAC level in our state are safe.
So we are seeing strength across the pie product mix.
Okay and my follow up.
All right I do expect for 20 pointed to see double digit PPI growth.
Got it Okay and then my follow up on that has been some confusion around your contract with the United Healthcare industry, you will be business. I know you guys don't want to talk about individual contracts, but can you give any update on in terms of how the school, but that contract has changed over the past 12 months and how do you think of that relationship in the future.
So we don't discuss specific client wins or losses are or revenue contribution, but we can't say that we still work with United Health in Medicaid CRB and we have a number of service lines that we do work for.
As Weve consistently said, we welcome competition, our clients will evaluate their service provider relationships from time to time, and we believe we should be judge based on our long term performance and ability to execute on our growth opportunities.
In past instances, where we've lost some work to competitors under bidding or some other factor you know many of the clients have returned to HMS given our long term success at delivering greater value at high rates of ROI from their CMV program and added more services.
We also they get at the addition of action in over 500 staff members clearly augments our collection recovery capabilities and we'll continue to help us diversify our revenue both from a market in product perspective.
Okay. Thanks, a lot.
Our next question comes from Matthew Gilmore with Baird.
Hey, Thanks for the question, maybe going back to that the CRB timing issues, either I guess, there's this probably for Jeff, but it can you give us a sense for how much revenue you think was impacted by the timing issues and the delay with the yield improvement.
I guess you got to some of that back in the fourth quarter, There's a couple of million dollars and a third quarter.
I guess ultimately I was curious sort of how you're factoring in.
The revenue that's sort of still tied up into the end of the future guide in the 2020.
Yeah, Matt. So we've said, we're guiding to low to mid single digit CRB revenue growth.
For for 2020.
In the 3 million that we know it was ones were just the clearly we had dollars in our Q revenue in our Q that was not delivered in Q4.
That was going to be delivered in Q1. So that was that was specifically tied down on a client by client basis.
The yield side, we always have yield initiatives, we're working on any given quarter quarter.
And expect to capture more revenue from somebody activities that occurred in Q4 that will be driving into Q1 in future quarters. So the 3 million was just dollars we could discreetly track on it on work that had already been done that was just waiting to be processed from carriers the yield activity is.
Spread out more over time, and Matt I would just I'll add that.
So our early indicators from the activities that we perform more driving our confidence in.
In this growth, but the other thing I'd add is that we've we've had a built of robust so you'll be sales Q. Because we're now also focused on the large dental Medicaid carriers as well as the behavioral health carriers that serve Medicaid under carve outs and then we've been offering seal be service.
As to our clients on their capitated.
Encounters as well as we see a number of these large IP AIDS as potential customers, we're still be in certain markets.
Okay fair enough.
And maybe one on the on the new Mexico announcement.
Can you, maybe just take a step back and sort of remind us how the out of antibiotics approach works with your relationships and how that compares to this Mds program and how that changes how you're contracting with these Medicaid payer. So we can sort of understand that opportunity with this transition.
Yeah. That's a good question so many years ago CMS.
Proposed what was it then called Meda, which is the Medicaid information technology architecture, and it was to build it was meant to build modularity.
So that states could buy.
Best in class solutions and that they would be easily integrated typically through April seven or other interfaces with each each module.
The state the states have now begun to adopt that many years later, it's now called EMEA.
Medicaid enterprise systems, and but it's it's a modular approach to buying new Mexico was one of the first to buys this specific module and they bundled a number of services that we of course, we're well equipped to deliver.
The contracts.
Typically depending on the state and in this case significantly larger overtime.
But what we're planning to do and not every state is planning to carvel typical Medicaid third party liability as a separate module. So some states will continue to procure our services as usual other states will build will.
Actually procure modules that may be just third party liability. They may incorporate a number of services like new Mexico debt.
Net net we see this as a positive for growth because when you're in this model you're selling a much larger contract typically along with implementation fees and the states.
Get paid a higher match rate from the federal government, because it's a technology related sale.
Okay, great. Thanks very much.
Our next question comes from brick from Crimson, we're hopeful with Guggenheim.
Yeah. Thanks for taking the question I just wanted to start off on the margin outlook for 2020, you know if I look at the guidance. It looks like it doesn't really imply much margin expansion year over year and I know in your prepared to much talked about still looking at about 50 to 100 basis points annually from a long term perspective. So maybe you didn't just reconcile that little bit and talk about some of those specific puts and takes the profitability next year that'd be great.
Yes.
Yes, if you look at our you know we looked at the range.
Margins just on the reported EBITDA.
You know you could see a range at or slightly above.
Where we finished 2019, so as I said on the call a couple things number one.
Our accident the Axtone acquisition, we're going to have some costs that are going to impact margins in the short term, but that we believe will certainly help drive long term growth. We also ramped up some cost for IP and some are operation teams and the fourth quarter moving into 2020 is well and so.
The 50 to 100 basis points. We said is on a long term base is what we expect to be able to drive margin performance. We did about 20 basis points in 2019.
And certainly think as we.
Hit the strategic objectives that we're going after we're going to see margin improvement in the year, we'll see it somewhat temporarily depressed from the accent acquisition, but certainly expect the long term trajectory of the of the acquisition to be very positive for the company.
Okay, Great and maybe just a follow up on on the accent acquisition. There I. Appreciate the commentary you gave on on the impact to 2020 and the guidance, but maybe just from a long term perspective as well can you just give us some color on how we should think about the growth rate and the profit profile that business may relative to your steel business and how to think about the trajectory as well that'd be great.
Yes. So we said we acquired the business that had margin profile similar to HMS, we are expecting a little degradation as we do some integration work. This year I can tell you. The management team is very excited we've spent some time with with the leadership of accident and we see a lot of.
Opportunities as Bill noted in his prepared remarks for cross selling.
Activities as well as just using each other's intellectual property in edits on our existing customer base, which will require no incremental selling so we think the long term potential is very positive we'd already identified the commercial and Medicare she'll be market as as an area. We were going after we had arty.
Started that in the third and fourth quarter and some of our ramp up or resources was actually internally going after some of those market the accident acquisition clearly our accelerated our move.
To this space and really helps us address a piece of the market.
That that we weren't addressing and a much more significant weight and finally I would say just from a competitive standpoint axiom brings more collection in recovery expertise.
In resources to HMS that we can use across our customer base as we're looking to recover.
Claims that we've identified youre paid paid by the wrong payer I look there's this add on the margin side. So we.
A few years ago.
We talked a lot about building our engineering team of six Sigma black belts, which run around the company and and over those years have.
Sustained cost growth or actually reduce costs.
Operating costs, we now have built an artificial intelligence machine learning and robotic process automation lab within HMS.
And while we see that having tremendous impact on the accident operations. We are continuing to add that technology to each product area within HMS, which over the long haul will have a significant impact on our ability to grow margins.
Okay, great. Thank you.
Our next question comes from Jamie Stockton from Wells Fargo.
Hi, Good morning, Thanks for taking my questions I guess, maybe just to circle back to see Ob and how that business is performing.
It seems like the first half at 29 team, which very smooth the second half was pretty choppy.
Is there just a ballpark way that you think we should be viewed the productivity of that segment versus what should.
Normally be expected.
You know maybe not the perfection.
If you could call it that that we saw in the first half the 19.
But a normal level I mean is that operating 5% below what should normally be expected door and just anything on that front would be great.
Hi, Jamie this is Jeff so theres a lot of variability nclb and we've tried to give.
Some color on that on a quarter to quarter basis Q1 in Q2 of 19, where two of our strongest CRB quarters.
In the company's history, and we have typically seem to be variability quarter to quarter basis from anywhere between $5 million to $10 million.
Really it is it is because of number one the data we get when we get data and number two third party carriers that are processing claims that were seeing to them.
We don't control and so.
I would say on a quarterly quarterly basis. There is variability that we've talked about how we guided an annual basis. If you look at our C of the revenue if you looked over a three year basis, we've grown it a little bit over $15 million per year over the last three years on a two year basis, that's that's more like $11 million.
I think theres the variability inherent in the business on a quarter to quarter basis is a challenge how thats why we tried to give annual guidance and I'd say continue to focus on the things that are going to drive CRB and as we've said in our prepared remarks, we think we have still have a lot of yield opportunities and CEO b we have.
Sales new sales in the pipeline for areas like dental and behavioral claims that we havent historically gotten as much as well as adding new clients and then I would say further supplementing that with commercial commercial and Medicare CRB. So I'd say, it's it's a mature product line, but the variability quarter to quarter.
There is a challenge we understand that our goal is to just keep driving it as much as we can and over the long term. We continue to see growth in that growth has a positive impact on earnings performance.
Okay.
And then I guess, maybe just one other quick one online.
On the extent.
Business is there any seasonality.
That business that we should expect I mean, if we look at.
You know see Ob historically, it's obviously been stronger seasonally in the second half a year than the first half just anything on that front would be great.
I'd say, there's a little bit similar little bit of seasonality, but not not been area, it's going to move the number materially on a quarterly core basis, but I I think it's fair to say you'd probably see a little bit stronger in the second half in the first half, but but not.
Not dramatic.
Great. Thank you.
Our next question comes Mcdonald Tucker with Keybanc.
Great Great good morning.
So I guess as I'm thinking about your guidance here. It seems like 2020 sort of a reset year little bit for EBITDA margins were going to resettle at a new level.
Little bit lower because of some of these investments that are gonna grow the business. After 2020, So I guess when I hear you, saying 50 to 100 basis points of EBITDA margin expansion.
Can I induced from that that 2021, and 22, we're going to see that type of.
Margin expansion right away or they're going to ongoing costs to integrate to go into 2021.
Well first to be clear I mean, we've given a range of both adjusted EBITDA in revenue. If you took our high adjusted EBITDA range over our low revenue range that we provided you'd have 60 or 70 basis points of margin improvement. So we're not guiding to specific margin improvement, we think 50 to 100 basis point.
It is achievable over time.
And thats being impacted in 2020 because of some of the acquisition cost that we are making so I think we still believe is achievable goal, we're not giving specific.
Arjun guidance this year, we're giving a range of EBITDA at a range of revenue and then I think on a go forward basis, we still believe that that number is a number we can achieve overtime.
Okay, and then maybe my follow up would be on the accent acquisition.
It sounds like it gets you guys into some new interesting markets for some of your businesses here would be and others.
What is a realistic expectation for investors with respect to when there might be some revenue synergies. When you can start walking your services into a new client base is it a couple of years out is it we start to see it maybe towards the end of this coming year can you walk us through your thinking there.
Yes, I think our view is probably.
Within six months or the back half of this year, we expect to see some synergies again I think we're not we're not.
Baking allow those into two our thoughts right now as we think about revenue, but we still think theres a lot of opportunity there for synergies and are already starting our game planning on that.
The accident management team all of which have come over by the way and the HMS legacy CLP management teams.
Okay. Thank you.
Our next question comes from Richard close with Canaccord Genuity.
Great. Thanks for the questions. So if I back out the 50 million from the revenue.
Regarding.
For 2020, you guys would have come in below our expectations. So as I think about your 2020 guidance you know what's the level of conservatism there.
You know, obviously 2019 was a little bit more challenging with some revenue guidance adjustment. So just trying to see where are you guys stand in terms of taking a more conservative nature based on timing and yield as you say and just see where you know potential upside might exist.
Sure Richard So again, if you start with the range of 705 to 715 billion.
And that gives you told growth of 90 to 100 million. So as you say if you back out accident at 50 million that leaves your organic revenue growth of $40 million to $50 million, which is roughly 6.5% to 8% no already noted that our CRB revenue growth has averaged 17 million.
Three year basis year over year 11 million on a two year basis, and our pie growth is average.
$29 million a year over the last two years, so I'll, let you.
Pine on on the Conservative side of it we grew organically look over 4%. This year. So that's definitely it's definitely step off inorganic revenue growth.
We've got a lot of initiatives in place both from a sales side, a product product development side and a yield side that we believe can can generate this revenue growth and also you know we were ramping up the sales efforts on our ph, Jim we're starting to see some cross pollination of sales.
With PJM and some of our products.
So I think we think we believe these are revenue numbers that are realistic in that we can achieve.
Okay, and then with respect the P. H M. And then just thought process there maybe the growth hasn't been is.
Is robust is a you know maybe we all have thought since the acquisition so.
What's your confidence level in terms of you know a double digit type a growth rate going forward and just thoughts in and around.
The uptake of that offering.
Well I think.
We identified the sales issue really as as kind of our bigger our biggest challenge we're continuing to see good adoption and good receptivity of the product in the marketplace. We are seeing more government sale. We came in to 2019, saying Elie was not going to be material for the.
A year and that these are long longer sales cycles for the government client base, we're starting to get traction there as well. So you know as Bill noted our SEC care management platform was was a key IP was was awarded best in class by class Chaos.
For the year. So we think that be inherent overall product mix that we have is very strong.
We are continuing to invest in technology to integrate the three technology platforms, Allysa OSAT and alley into one configurable platform. So that that works should be done in the first half of this year.
And so I think we're definitely optimistic that we have a lot of opportunity there yes on the pipeline has been building, particularly.
You know the nice thing about the blend of the product lines as well realize is still has a significant amount of transactional revenue. We are attempting to sell more water more hsas are PMPM type deals, but both Ali and OSAT are typically SaaS solutions.
Sometimes within implementation fee for its sports or it's basically spread out in the.
PMPM or PMP why fee, but the sales opportunities, we're seeing in both OSAT and and Ellie our with larger entities.
We're really we're really optimistic about that.
Okay. Thank you.
Our next question comes from Charlie Strauzer of CJS Securities.
Good morning. This is Brendan on for Charlie That's one ask about the cadence for your guidance just looking at you did you mentioned a little revenue that role in from Fourq, but just looking at each quarter and specifically.
The first quarter two just how how should we should think about the guidance.
Play across quarters, I'm sure that the a pretty typical year regardless of that thanks.
Yes, So we gave a range of 160 to 165 million for Q1.
Again, we've typically seen.
Fairly significant drop from Q4 in Q1, and then I would expect the remainder of the year to play out as it typically does without building more revenue back half of the year versus the first half the year.
Okay. Thank you.
Last question comes from David Windley with Jefferies.
Hi, Good morning, Fox on for Dave.
I guess real quick on C., you'll be you know, there's there's been the shortfall now for a couple of quarters last quarter. You indicated that you expected most of that to come in for Q, but you might recoup a little in fiscal 20 and now it seems like that's pushed out a bit. So I guess the question is.
To what extent is this just don't rolling effect of these delays I mean, how do you how do you get passed this bottleneck and what's kind of your time outlook for that.
Well, we as we have given guidance for the year, we've said low to mid single digit no revenue guidance. So you know our view is.
What we certainly have the discrete role or we talked about from Q4 to Q1 at all the things that we're working on to drive CRB yield.
And you know, including new new product enhancements and new client sale, we believe will allow us to achieve that revenue growth.
In 2020 again, a lot of moving parts and this year will be business on a quarter to quarter basis.
And certainly we've seen good growth over time, our growth was a little bit lower and we're certainly lower in 29 paying than we expected. We think with this things initiatives. We have in place we will get back to kind of a more normalized low to mid single digit revenue growth in 2020.
Gotcha, that's helpful and then real quick on all the between accent and vitreous on the hiring and ph.
I think you'd mentioned over 500 staff members just from accent can you kind of speak to your labor investments in nominal terms, both in DNA indirect costs kind of year over year and what's embedded in guidance.
Yes, most most of the increase is really coming and the kind of a couple of buckets.
Thing putting access aside for a second and just the incremental costs of adding that SAP. Most of the increase is coming in our operational areas CRB payment integrity and then in IP.
And very little on the ASG 20 sites or most of the increase really is in the operational side to both delivered product deliver as well as.
Improve yield and position the company for Fry team investments even on the T.I.s side, we we have ramped up staffing and we still have a lot of a lot of and it's that are awaiting client approval. So we haven't we have findings identified edits in our Q.
That are just a waiting for a customer approval for us to actually deliver the savings. So that's another thing that gives us.
Confidence on the pie side that we're going to see continued to see the strong growth we've seen there.
Gotcha, and then and then kind of the rapid DNA from accent as a result of of hiring bringing on 500 people.
Well most of those most of the cost there will not be in G.A. Most of the cost there will be in our operating cost line gotcha. Okay. Thank you.
Vast majority is really is that is operational.
<unk> costs in.
Above yesterday line into total operating costs line.
Very helpful. Thank you.
Ladies and gentlemen, does conclude the Q and a portion of today's conference electric Quebec, whatever switch here for closing remarks.
Well. Thank you all for attending our call and we look forward to speaking to you again on our Q1 earnings call.
Ladies and gentlemen. This concludes today's presentation. You may now disconnect can have a wonderful there.