– Pending Change Order Shifts $8.6 Million of Revenue and $0.08 of Earnings From First Quarter to Second Quarter; Company Reiterates Full-Year Revenue and Earnings Guidance –
RESTON, Va.--(BUSINESS WIRE)--MAXIMUS (NYSE: MMS), a leading provider of government services
worldwide, today reported financial results for the three months
ended December 31, 2015.
Highlights for the first quarter of fiscal year 2016 include:
-
Revenue growth of 19% to $556.7 million compared to the same period
last year
-
Diluted earnings per share of $0.40, which reflect programs in the
start-up phase and a pending change order. The change order shifted
approximately $8.6 million of revenue and $0.08 of diluted earnings
per share out of the first quarter and is expected to be signed in the
second quarter, at which time the Company will record the revenue and
income.
-
Year-to-date signed contract awards of $665 million and new contracts
pending (awarded but unsigned) of $285 million at December 31, 2015
For the first quarter of fiscal 2016, revenue increased 19% (22% on a
constant currency basis) to $556.7 million, compared to $467.0 million
reported for the same period last year. The increase in revenue was
primarily driven by the acquisitions of Acentia and Remploy and organic
growth in the Health Services Segment. This growth was partially offset
by a 3% decline from unfavorable foreign currency translation.
For the first quarter of fiscal 2016, net income attributable to MAXIMUS
totaled $26.6 million, or $0.40 per diluted share. This compares to
diluted earnings per share of $0.63 for the first quarter of fiscal
2015. Earnings per share were lower due to the expected impact from
several programs in the start-up phase and the pending change order.
Both revenue and earnings were impacted by the pending change order with
a client in the Health Services Segment. This resulted in $8.6 million
of revenue and $0.08 of diluted earnings per share shifting out of the
first quarter. The Company has already been performing the additional
scope of work under the change order and therefore costs were incurred
in the first quarter. The Company now expects to recognize revenue and
income from the pending change order in its second fiscal quarter when
it is expected to be signed.
“The pending change order shifts revenue and earnings out of our first
quarter and we expect to sign it in our second fiscal quarter. Such a
delay is commonplace in serving governments and the important aspect is
that it has no impact on our full-year guidance and represents a
meaningful expansion of work for a key customer that will represent
future growth. We continue to be focused on progressing the several
start-ups we have in progress to advance them to a normalized level and
to contribute to our expected growth in the rest of our fiscal 2016 and
beyond,” commented MAXIMUS CEO Richard A. Montoni.
Health Services Segment
Health Services Segment revenue for the first quarter of fiscal 2016
increased 20% (22% on a constant currency basis) to $291.9 million,
compared to $243.6 million reported for the same period last year.
Operating income for the first quarter of fiscal 2016 totaled
$26.8 million (9.2% operating margin), compared to $37.8 million (15.5%
operating margin) for the same period last year.
The increase in revenue for the first quarter of fiscal 2016 was driven
principally by new work, as well as the expansion of existing contracts.
Operating margin for the first quarter of fiscal 2016 was lower compared
to the prior-year period due to programs in the start-up phase and the
pending change order. If the aforementioned change order had occurred in
the first quarter of fiscal 2016, operating margin for the Health
Services Segment would have been 11.8%. As expected, new programs in the
start-up phase, including the Health Assessment Advisory Service and the
Fit for Work program in the United Kingdom, also tempered operating
margin in the quarter. As previously disclosed, the prior-year period
benefitted from highly accretive change orders.
Montoni continued, “We are making meaningful, steady progress with the
U.K. Health Assessment Advisory Service contract. The current, positive
trends we are seeing are indicative of our forward momentum to increase
our capacity and boost the number of completed assessments. We remain
cautiously confident that we will have all the pieces in place to get
our productivity at the appropriate levels by the end of summer 2016. We
also remain on track with our longer-term goals to improve the customer
journey, deliver timely and fair assessments, reduce waiting times, and
bring about positive change to the program.”
U.S. Federal Services Segment
U.S. Federal Services Segment revenue for the first quarter of
fiscal 2016 increased 35% to $145.3 million, compared to $107.7 million
reported for the same period last year. Operating income for the first
quarter totaled $10.7 million (7.4% operating margin), compared to
$13.3 million (12.4% operating margin) for the same period last year.
Revenue growth for the first quarter of fiscal 2016 was driven by the
Acentia acquisition, which was a solid contributor in the quarter.
Revenue and operating margin were unfavorably impacted by the expected
closure of one of the Company’s customer contact centers tied to the
Federal Marketplace, as well as lower appeals and assessment volumes
due, in part, to previously disclosed contracts that were lost through
competitive rebid.
Human Services Segment
Human Services Segment revenue for the first quarter of fiscal 2016
increased 3% (11% on a constant currency basis) to $119.5 million,
compared to $115.7 million for the same period last year. Operating
income for the first quarter totaled $9.1 million (7.6% operating
margin), compared to $16.2 million (14.0% operating margin) for the same
period last year.
The increase in revenue for the first quarter was driven by the
acquisition of Remploy, which helped offset the unfavorable impact of
$9.4 million from foreign currency translation. As expected, operating
margin for the first quarter was lower compared to the prior-year period
due to decreased contributions from the Company’s international
welfare-to-work operations, most notably the ongoing start-up of the new
jobactive contract in Australia. In addition, the prior-year period also
received the benefit of approximately $2.4 million in revenue and income
from a contract extension, as previously disclosed.
Sales and Pipeline
The Company had solid year-to-date signed contract awards at December
31, 2015 that totaled $664.8 million. New contracts pending (awarded but
unsigned) totaled $285.3 million.
The sales pipeline at December 31, 2015 was $2.8 billion (consisting of
approximately $199 million in proposals pending, $316 million in
proposals in preparation, and $2.3 billion in opportunities tracking).
This compares to a pipeline of $3.6 billion for the same period last
year, which included $1.2 billion in rebids. The sales pipeline was down
sequentially as a result of the conversion of opportunities into new
awards, including the Texas Eligibility Support Services contract that
was signed in December 2015.
The Company’s reported pipeline only reflects those opportunities where
MAXIMUS expects that the request for proposal will be released within
the next six months.
Balance Sheet and Cash Flows
Cash and cash equivalents at December 31, 2015 totaled $51.0 million,
most of which was outside the United States. For the first quarter of
fiscal 2016, cash provided by operating activities totaled $1.4 million,
with negative free cash flow of $9.3 million.
At December 31, 2015, Days Sales Outstanding (DSOs) were within the
Company’s expected range at 75 days, compared to 67 days for the prior
quarter. The sequential increase in DSOs was due, in part, to timing of
payments, as well as delayed payments in two states where budgets are
not yet finalized.
On November 30, 2015, MAXIMUS paid a quarterly cash dividend of
$0.045 per share. On January 12, 2016, the Company announced a
$0.045 per share cash dividend, payable on February 29, 2016 to
shareholders of record on February 16, 2016.
During the first quarter of fiscal 2016, MAXIMUS repurchased
approximately 543,000 shares of the Company’s common stock for
$29.1 million (a weighted average price of $53.65). The Company
currently has an estimated $139.4 million available for repurchases
under its Board-authorized share repurchase program.
Outlook
MAXIMUS is reiterating its formal fiscal year 2016 guidance. The Company
still expects revenue to range between $2.4 billion and $2.5 billion and
GAAP diluted earnings per share to range between $2.40 and $2.70 for
fiscal 2016. This guidance does not include any acquisitions or
significant legal expenses or recoveries.
Website Presentation, Conference Call and Webcast Information
MAXIMUS will host a conference call this morning, February 4, 2016, at
9:00 a.m. (ET). The call is open to the public and can be accessed under
the Investor Relations page of the Company’s website at http://investor.maximus.com
or by calling:
877.407.8289 (Domestic)/+1.201.689.8341 (International)
For those unable to listen to the live call, a replay will be available
through February 18, 2016 by calling:
877.660.6853 (Domestic)/+1.201.612.7415 (International)
Replay
conference ID number: 13629051
About MAXIMUS
Since 1975, MAXIMUS has operated under its founding mission of Helping
Government Serve the People®, enabling citizens around
the globe to successfully engage with their governments at all levels
and across a variety of health and human services programs. MAXIMUS
delivers innovative business process management and technology solutions
that contribute to improved outcomes for citizens and higher levels of
productivity, accuracy, accountability and efficiency of
government-sponsored programs. With more than 16,000 employees
worldwide, MAXIMUS is a proud partner to government agencies in the
United States, Australia, Canada, New Zealand, Saudi Arabia and the
United Kingdom. For more information, visit maximus.com.
Non-GAAP Measures
This release refers to non-GAAP financial measures, including free cash
flow, constant currency and days sales outstanding.
We have provided a reconciliation of free cash flow to cash provided by
operating activities. We believe that free cash flow is a useful basis
for investors to compare our performance across periods or against our
competitors. Free cash flow shows the effects of the Company’s
operations and routine capital expenditure and excludes the cash flow
effects of acquisitions, share repurchases, dividend payments and other
financing transactions.
To provide constant currency information, we calculate fiscal year 2016
revenue for all international businesses using the exchange rates used
in the comparative period in fiscal year 2015. We believe constant
currency provides a useful basis for assessing the performance of the
business excluding the unpredictable effects of foreign exchange rate
fluctuations.
Days sales outstanding, or DSO, is a measure of how efficiently we
manage the billing and collection of our receivable balances. We
calculate DSO by dividing billed and unbilled receivable balances at the
end of each quarter by revenue per day for the period. Revenue per day
for a quarter is determined by dividing total revenue by 91 days.
The presentation of these non-GAAP numbers is not meant to be considered
in isolation, nor as alternatives to cash flows from operating
activities, revenue growth or net income as measures of performance.
These non-GAAP financial measures, as determined and presented by us,
may not be comparable to related or similarly titled measures presented
by other companies.
Statements that are not historical facts, including statements about
the Company’s confidence and strategies and the Company’s expectations
about revenues, results of operations, profitability, future contracts,
market opportunities, market demand or acceptance of the Company’s
products are forward-looking statements that involve risks and
uncertainties. These uncertainties could cause the Company’s actual
results to differ materially from those indicated by such
forward-looking statements and include reliance on government clients;
risks associated with government contracting; risks involved in managing
government projects; legislative changes and political developments;
opposition from government unions; challenges resulting from growth;
adverse publicity; and legal, economic, and other risks detailed in
Exhibit 99.1 to the Company’s most recent Annual Report filed with the
Securities and Exchange Commission, found on maximus.com.
|
|
|
|
|
MAXIMUS, Inc.
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(Amounts in thousands, except per share data) (Unaudited)
|
|
|
|
|
|
|
|
Three Months Ended December 31,
|
|
|
2015
|
|
2014
|
|
|
|
|
|
Revenue
|
|
$
|
556,722
|
|
$
|
467,043
|
Cost of revenue
|
|
|
446,507
|
|
|
347,776
|
Gross profit
|
|
|
110,215
|
|
|
119,267
|
Selling, general and administrative expenses
|
|
|
64,234
|
|
|
51,962
|
Amortization of intangible assets
|
|
|
3,149
|
|
|
1,474
|
Acquisition-related expenses
|
|
|
46
|
|
|
600
|
Operating income
|
|
|
42,786
|
|
|
65,231
|
Interest expense
|
|
|
989
|
|
|
—
|
Other income, net
|
|
|
1,131
|
|
|
901
|
Income before income taxes
|
|
|
42,928
|
|
|
66,132
|
Provision for income taxes
|
|
|
16,046
|
|
|
23,782
|
Net income
|
|
|
26,882
|
|
|
42,350
|
Income attributable to noncontrolling interests
|
|
|
273
|
|
|
489
|
Net income attributable to MAXIMUS
|
|
$
|
26,609
|
|
$
|
41,861
|
|
|
|
|
|
Basic earnings per share attributable to MAXIMUS
|
|
$
|
0.40
|
|
$
|
0.63
|
|
|
|
|
|
Diluted earnings per share attributable to MAXIMUS
|
|
$
|
0.40
|
|
$
|
0.63
|
|
|
|
|
|
Dividends paid per share
|
|
$
|
0.045
|
|
$
|
0.045
|
|
|
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
Basic
|
|
|
65,954
|
|
|
65,935
|
Diluted
|
|
|
66,288
|
|
|
66,898
|
|
|
|
|
|
|
|
|
|
|
MAXIMUS, Inc.
|
CONSOLIDATED BALANCE SHEETS
|
(Amounts in thousands)
|
|
|
|
|
|
|
|
December 31, 2015
|
|
September 30, 2015
|
|
|
(unaudited)
|
|
|
ASSETS
|
|
|
|
|
Current assets:
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
50,958
|
|
$
|
74,672
|
Accounts receivable — billed and billable, net
|
|
|
425,159
|
|
|
396,177
|
Accounts receivable — unbilled
|
|
|
32,799
|
|
|
30,929
|
Prepaid expenses and other current assets
|
|
|
49,201
|
|
|
60,129
|
Total current assets
|
|
|
558,117
|
|
|
561,907
|
Property and equipment, net
|
|
|
138,131
|
|
|
137,830
|
Capitalized software, net
|
|
|
30,740
|
|
|
32,483
|
Goodwill
|
|
|
387,118
|
|
|
376,302
|
Intangible assets, net
|
|
|
99,600
|
|
|
102,358
|
Deferred contract costs, net
|
|
|
18,123
|
|
|
19,126
|
Deferred compensation plan assets
|
|
|
21,187
|
|
|
19,310
|
Deferred income taxes
|
|
|
11,077
|
|
|
11,058
|
Other assets
|
|
|
11,442
|
|
|
11,184
|
Total assets
|
|
$
|
1,275,535
|
|
$
|
1,271,558
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
Current liabilities:
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
161,905
|
|
$
|
155,411
|
Accrued compensation and benefits
|
|
|
67,051
|
|
|
99,700
|
Deferred revenue
|
|
|
76,876
|
|
|
77,642
|
Income taxes payable
|
|
|
3,001
|
|
|
11,709
|
Long-term debt, current portion
|
|
|
340
|
|
|
356
|
Other liabilities
|
|
|
10,103
|
|
|
11,562
|
Total current liabilities
|
|
|
319,276
|
|
|
356,380
|
Deferred revenue, less current portion
|
|
|
50,714
|
|
|
52,954
|
Deferred income taxes
|
|
|
15,531
|
|
|
6,546
|
Long-term debt
|
|
|
244,955
|
|
|
210,618
|
Deferred compensation plan liabilities, less current portion
|
|
|
22,986
|
|
|
20,635
|
Other liabilities
|
|
|
9,331
|
|
|
8,726
|
Total liabilities
|
|
|
662,793
|
|
|
655,859
|
|
|
|
|
|
Total equity
|
|
|
612,742
|
|
|
615,699
|
Total liabilities and equity
|
|
$
|
1,275,535
|
|
$
|
1,271,558
|
|
|
|
|
|
|
|
|
|
|
MAXIMUS, Inc.
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(Amounts in thousands) (Unaudited)
|
|
|
|
|
|
|
|
Three Months Ended December 31,
|
|
|
2015
|
|
2014
|
Cash flows from operating activities:
|
|
|
|
|
Net income
|
|
$
|
26,882
|
|
|
$
|
42,350
|
|
Adjustment to reconcile net income to net cash provided by op.
activities:
|
|
|
|
|
Depreciation/amortization of property, equipment and cap. software
|
|
|
12,947
|
|
|
|
10,967
|
|
Amortization of intangible assets
|
|
|
3,149
|
|
|
|
1,474
|
|
Deferred income taxes
|
|
|
(499
|
)
|
|
|
(925
|
)
|
Stock compensation expense
|
|
|
4,332
|
|
|
|
3,966
|
|
|
|
|
|
|
Change in assets and liabilities:
|
|
|
|
|
Accounts receivable — billed and billable
|
|
|
(29,747
|
)
|
|
|
(4,242
|
)
|
Accounts receivable — unbilled
|
|
|
(1,853
|
)
|
|
|
(4,314
|
)
|
Prepaid expenses and other current assets
|
|
|
5,316
|
|
|
|
(221
|
)
|
Deferred contract costs
|
|
|
764
|
|
|
|
(3,454
|
)
|
Accounts payable and accrued liabilities
|
|
|
8,188
|
|
|
|
13,441
|
|
Accrued compensation and benefits
|
|
|
(21,383
|
)
|
|
|
(23,901
|
)
|
Deferred revenue
|
|
|
(2,886
|
)
|
|
|
3,610
|
|
Income taxes
|
|
|
(3,043
|
)
|
|
|
18,836
|
|
Other assets and liabilities
|
|
|
(801
|
)
|
|
|
(993
|
)
|
Cash provided by operating activities
|
|
|
1,366
|
|
|
|
56,594
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
Purchases of property and equipment
|
|
|
(9,693
|
)
|
|
|
(12,754
|
)
|
Capitalized software costs
|
|
|
(992
|
)
|
|
|
(1,356
|
)
|
Acquisition of businesses, net of cash acquired
|
|
|
(2,606
|
)
|
|
|
—
|
|
Proceeds from note receivable
|
|
|
84
|
|
|
|
160
|
|
Cash used in investing activities
|
|
|
(13,207
|
)
|
|
|
(13,950
|
)
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
Cash dividends paid
|
|
|
(2,941
|
)
|
|
|
(2,962
|
)
|
Repurchases of common stock
|
|
|
(31,138
|
)
|
|
|
(32,616
|
)
|
Tax withholding related to RSU vesting
|
|
|
(11,553
|
)
|
|
|
(12,337
|
)
|
Borrowings under credit facility
|
|
|
47,070
|
|
|
|
—
|
|
Repayment of credit facility and other long-term debt
|
|
|
(12,721
|
)
|
|
|
(39
|
)
|
Cash used in financing activities
|
|
|
(11,283
|
)
|
|
|
(47,954
|
)
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
(590
|
)
|
|
|
(3,606
|
)
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
|
(23,714
|
)
|
|
|
(8,916
|
)
|
|
|
|
|
|
Cash and cash equivalents, beginning of period
|
|
|
74,672
|
|
|
|
158,112
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
50,958
|
|
|
$
|
149,196
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MAXIMUS, Inc.
|
SEGMENT INFORMATION
|
(Amounts in thousands) (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31,
|
|
|
2015
|
|
% (1)
|
|
2014
|
|
% (1)
|
|
|
|
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
Health Services
|
|
$
|
291,903
|
|
|
100
|
%
|
|
$
|
243,570
|
|
|
100
|
%
|
U.S. Federal Services
|
|
|
145,285
|
|
|
100
|
%
|
|
|
107,729
|
|
|
100
|
%
|
Human Services
|
|
|
119,534
|
|
|
100
|
%
|
|
|
115,744
|
|
|
100
|
%
|
Total
|
|
$
|
556,722
|
|
|
100
|
%
|
|
$
|
467,043
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
Gross Profit:
|
|
|
|
|
|
|
|
|
Health Services
|
|
$
|
51,972
|
|
|
17.8
|
%
|
|
$
|
59,847
|
|
|
24.6
|
%
|
U.S. Federal Services
|
|
|
28,238
|
|
|
19.4
|
%
|
|
|
25,568
|
|
|
23.7
|
%
|
Human Services
|
|
|
30,005
|
|
|
25.1
|
%
|
|
|
33,852
|
|
|
29.2
|
%
|
Total
|
|
$
|
110,215
|
|
|
19.8
|
%
|
|
$
|
119,267
|
|
|
25.5
|
%
|
|
|
|
|
|
|
|
|
|
Selling, general, and administrative expense:
|
|
|
|
|
|
|
|
|
Health Services
|
|
$
|
25,164
|
|
|
8.6
|
%
|
|
$
|
22,007
|
|
|
9.0
|
%
|
U.S. Federal Services
|
|
|
17,522
|
|
|
12.1
|
%
|
|
|
12,250
|
|
|
11.4
|
%
|
Human Services
|
|
|
20,898
|
|
|
17.5
|
%
|
|
|
17,700
|
|
|
15.3
|
%
|
Other
|
|
|
650
|
|
|
NM
|
|
|
|
5
|
|
|
NM
|
|
Total
|
|
$
|
64,234
|
|
|
11.5
|
%
|
|
$
|
51,962
|
|
|
11.1
|
%
|
|
|
|
|
|
|
|
|
|
Operating income:
|
|
|
|
|
|
|
|
|
Health Services
|
|
|
26,808
|
|
|
9.2
|
%
|
|
|
37,840
|
|
|
15.5
|
%
|
U.S. Federal Services
|
|
|
10,716
|
|
|
7.4
|
%
|
|
|
13,318
|
|
|
12.4
|
%
|
Human Services
|
|
|
9,107
|
|
|
7.6
|
%
|
|
|
16,152
|
|
|
14.0
|
%
|
Amortization of intangible assets
|
|
|
(3,149
|
)
|
|
NM
|
|
|
|
(1,474
|
)
|
|
NM
|
|
Acquisition-related expenses (2)
|
|
|
(46
|
)
|
|
NM
|
|
|
|
(600
|
)
|
|
NM
|
|
Other
|
|
|
(650
|
)
|
|
NM
|
|
|
|
(5
|
)
|
|
NM
|
|
Total
|
|
$
|
42,786
|
|
|
7.7
|
%
|
|
$
|
65,231
|
|
|
14.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Percentage of respective segment revenue. Percentages not considered
meaningful are marked “NM.”
|
|
|
|
(2)
|
|
Acquisition-related expenses are costs directly incurred from the
purchase of Assessments Australia in the first quarter of fiscal
year 2016 and the purchase of Acentia in fiscal year 2015, as well
as other transaction-related activity.
|
|
|
|
|
|
|
|
|
MAXIMUS, Inc.
|
FREE CASH FLOW
|
(Non-GAAP measure) (Amounts in thousands) (Unaudited)
|
|
|
|
|
|
|
|
Three Months Ended December 31,
|
|
|
2015
|
|
2014
|
Cash provided by operating activities
|
|
$
|
1,366
|
|
|
$
|
56,594
|
|
Purchases of property and equipment
|
|
|
(9,693
|
)
|
|
|
(12,754
|
)
|
Capitalized software costs
|
|
|
(992
|
)
|
|
|
(1,356
|
)
|
Free cash flow
|
|
$
|
(9,319
|
)
|
|
$
|
42,484
|
|
|
|
|
|
|
