- Updates Full-Year Revenue Guidance and Maintains Earnings Guidance for Fiscal Year 2017 -
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, 2016.
Highlights for the first quarter of fiscal year 2017 include:
-
Revenue growth of 9% to $607.6 million compared to the same period
last year
-
Better-than-expected diluted earnings per share of $0.71
-
Strong cash flows from operations of $71.1 million and free cash flow
of $63.4 million
-
Year-to-date signed contract awards of $462.4 million and new
contracts pending (awarded but unsigned) of $150.4 million
at December 31, 2016
-
Sales pipeline of $4.0 billion at December 31, 2016
-
Revised fiscal 2017 revenue guidance now expected to range between
$2.425 billion and $2.475 billion
For the first quarter of fiscal 2017, revenue increased 9% to $607.6
million compared to $556.7 million reported for the same period last
year driven by the Health Services Segment. Revenue growth was partially
offset by a 3% decline from unfavorable foreign currency translation. On
a constant currency basis, revenue would have increased 12% compared to
the same period last year. Organic revenue grew 11% and acquired growth
was 1%.
Total company operating margin for the first quarter of fiscal 2017 was
12.1%.
For the first quarter of fiscal 2017, net income attributable to MAXIMUS
totaled $46.7 million, or $0.71 of diluted earnings per share, compared
to diluted earnings per share of $0.40 for the first quarter of fiscal
2016. The increase was due to improved income contributions across all
segments, most notably from the Health Services and U.S. Federal
Services Segments. The prior-year period was tempered by programs in
start up, as well as the timing of an $8.6 million delayed change order
where the costs were recorded in the first quarter of fiscal 2016, but
the associated revenue and profit were recognized at the time of
contract execution in the second quarter of fiscal 2016.
Diluted earnings per share for the first quarter of fiscal 2017 were
better than expected due to solid performance across the portfolio. Most
notably, the U.S. Federal Services Segment over-delivered by
approximately $0.04. In addition, restructuring costs related to the
ongoing consolidation and integration of the Company's human services
operations in the U.K. were $0.02 better than previously expected.
"We are pleased with the solid results in the first quarter of fiscal
2017 and the increased contributions and steady progress toward target
operating margins from certain key contracts that were ramping up last
fiscal year. The reduction in fiscal 2017 revenue guidance is
principally due to a contract cancellation in the U.S. Federal Services
Segment. However, the long-term, macro-economic drivers of rising
caseloads and increasing demand for effective government programs remain
unchanged. With $4.0 billion of opportunities in our reported pipeline,
demand for our services remains strong and we are keenly focused on
capturing new organic growth," commented MAXIMUS CEO Richard A. Montoni.
Health Services Segment
Health Services Segment revenue for the first quarter of fiscal 2017
increased 17% to $340.7 million compared to $291.9 million reported for
the same period last year. Most of the growth in the quarter was organic
and driven by the expansion on existing contracts, which was offset by a
5% decline from unfavorable foreign currency translation. On a constant
currency basis, revenue growth would have been 21%.
Operating margin for the first quarter of fiscal 2017 increased to 14.7%
compared to 9.2% reported in the prior-year period. The expansion in
margin was due to forecasted improvements from programs that were
ramping up in the first quarter of fiscal 2016. In addition, operating
margin for the first quarter of fiscal 2016 was also tempered by the
timing of the aforementioned change order.
U.S. Federal Services Segment
U.S. Federal Services Segment revenue for the first quarter of
fiscal 2017 decreased 3% to $141.3 million compared to $145.3 million
reported for the same period last year. The lower revenue was largely a
result of significantly lower volumes on a large health care contract
for the U.S. Department of Veterans Affairs where MAXIMUS is a
subcontractor. MAXIMUS was recently notified that this contract has been
canceled due to insufficient volumes and will now end in April 2017.
Operating margin for the first quarter was 12.7% compared to 7.4%
reported for the prior-year period. The margin expansion was due to
better-than-projected volumes on a couple of transaction-based contracts
and, to a lesser extent, savings from automation initiatives.
Human Services Segment
Human Services Segment revenue for the first quarter of fiscal 2017
increased 5% to $125.5 million compared to $119.5 million for the same
period last year. Most of the growth in the quarter was organic and
driven by increased revenue from operations in Australia, which offset
expected decreased revenue from the wind down of the Work Programme in
the United Kingdom. The segment was unfavorably impacted by a 2% decline
in foreign currency translation. On a constant currency basis, revenue
growth would have been 7%.
Operating margin for the first quarter was 9.4% compared to 7.6% for the
same period last year. Operating margin improvement was due to the
expected improvements in the Australia jobactive contract that was in
the start-up phase in the same period last year. This operating margin
excludes the $2.2 million restructuring charge in the United Kingdom.
Sales and Pipeline
Year-to-date signed contract awards at December 31, 2016 totaled $462.4
million. New contracts pending (awarded but unsigned) totaled $150.4
million.
The sales pipeline at December 31, 2016 was $4.0 billion (comprised of
approximately $1.7 billion in proposals pending, $0.2 billion in
proposals in preparation, and $2.0 billion in opportunities tracking).
This compares to a pipeline of $4.3 billion at September 30, 2016. The
decline is due to contracts converting to new awards, procurement delays
mostly due to the transition to the new administration in the United
States, and certain contract losses.
The Company’s reported pipeline only reflects those opportunities where
MAXIMUS expects the request for proposal to be released within the next
six months.
Balance Sheet and Cash Flows
Cash and cash equivalents at December 31, 2016 totaled $69.8 million.
For the three months ended December 31, 2016, cash flows from operations
totaled $71.1 million, with free cash flow of $63.4 million.
At December 31, 2016, Days Sales Outstanding (DSOs) were within the
Company’s expected range at 70, and consistent with the fourth quarter
of fiscal 2016.
On November 30, 2016, MAXIMUS paid a quarterly cash dividend of
$0.045 per share. On January 11, 2017, the Company announced a
$0.045 per share cash dividend, payable on February 28, 2017 to
shareholders of record on February 15, 2017.
During the first quarter of fiscal 2017, MAXIMUS repurchased
approximately 559,000 shares of the Company's common stock for $28.8
million, at a weighted average price of $51.68. At December 31, 2016,
MAXIMUS had an estimated $109 million available for repurchases under
its Board-authorized share repurchase program.
Outlook
The Company is updating its fiscal 2017 revenue guidance most notably as
a result of the canceled contract due to insufficient volumes in the
U.S. Federal Services Segment. MAXIMUS now expects revenue to range
between $2.425 billion and $2.475 billion for fiscal 2017. This compares
to the Company's prior range of $2.475 billion to $2.550 billion.
The Company is reiterating its earnings guidance and continues to expect
GAAP diluted earnings per share to range between $2.90 and $3.10 for
fiscal 2017. The Company is also reiterating its cash flow guidance and
continues to expect cash flows from operations to range between $230
million and $280 million and free cash flow to range between $170
million and $220 million for fiscal 2017. The Company’s guidance does
not include any future acquisitions or future legal expenses or
recoveries.
Website Presentation, Conference Call and Webcast Information
MAXIMUS will host a conference call this morning, February 9, 2017, 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 23, 2017. Callers can access the replay by calling:
877.660.6853 (Domestic)/+1.201.612.7415 (International)
Replay
conference ID number: 13653594
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 18,000 employees
worldwide, MAXIMUS is a proud partner to government agencies in the
United States, Australia, Canada, Saudi Arabia and the United Kingdom.
For more information, visit
maximus.com
.
Non-GAAP Measures
We utilize non-GAAP measures where we believe it will assist the user of
our financial statements in understanding our business. The presentation
of these measures is meant to complement, and not replace, other
financial measures in this document. The presentation of non-GAAP
numbers is not meant to be considered in isolation, nor as alternatives
to revenue growth, cash flows from operations or net income as measures
of performance. These non-GAAP measures, as determined and presented by
us, may not be comparable to related or similarly titled measures
presented by other companies.
In this news release, we use the non-GAAP measures organic revenue
growth, constant currency movement and free cash flow. A description of
these measures, including a description of our use of these measures and
our methodology for calculating them, is included in our most recent
Annual Report on Form 10-K, filed with the Securities and Exchange
Commission on November 21, 2016. We have included a reconciliation of
free cash flow to cash flows from operations in this news release.
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,
|
|
|
|
2016
|
|
2015
|
|
Revenue
|
|
$
|
607,564
|
|
|
$
|
556,722
|
|
Cost of revenue
|
|
462,746
|
|
|
446,507
|
|
Gross profit
|
|
144,818
|
|
|
110,215
|
|
Selling, general and administrative expenses
|
|
65,398
|
|
|
64,234
|
|
Amortization of intangible assets
|
|
3,402
|
|
|
3,149
|
|
Restructuring costs
|
|
2,242
|
|
|
—
|
|
Acquisition-related expenses
|
|
—
|
|
|
46
|
|
Operating income
|
|
73,776
|
|
|
42,786
|
|
Less:
|
|
|
|
|
|
Interest expense
|
|
849
|
|
|
989
|
|
Add:
|
|
|
|
|
|
Other income, net
|
|
263
|
|
|
1,131
|
|
Income before income taxes
|
|
73,190
|
|
|
42,928
|
|
Provision for income taxes
|
|
26,861
|
|
|
16,046
|
|
Net income
|
|
46,329
|
|
|
26,882
|
|
(Loss)/income attributable to noncontrolling interests
|
|
(335
|
)
|
|
273
|
|
Net income attributable to MAXIMUS
|
|
$
|
46,664
|
|
|
$
|
26,609
|
|
Basic earnings per share attributable to MAXIMUS
|
|
$
|
0.71
|
|
|
$
|
0.40
|
|
Diluted earnings per share attributable to MAXIMUS
|
|
$
|
0.71
|
|
|
$
|
0.40
|
|
Dividends paid per share
|
|
$
|
0.045
|
|
|
$
|
0.045
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
Basic
|
|
65,770
|
|
|
65,954
|
|
Diluted
|
|
66,020
|
|
|
66,288
|
|
|
|
|
|
|
|
MAXIMUS, Inc.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
September 30, 2016
|
|
|
|
(unaudited)
|
|
|
|
ASSETS
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
69,767
|
|
|
$
|
66,199
|
|
|
Accounts receivable — billed and billable
|
|
426,372
|
|
|
444,357
|
|
|
Accounts receivable — unbilled
|
|
38,431
|
|
|
36,433
|
|
|
Income taxes receivable
|
|
1,759
|
|
|
17,273
|
|
|
Prepaid expenses and other current assets
|
|
51,126
|
|
|
56,718
|
|
|
Total current assets
|
|
587,455
|
|
|
620,980
|
|
|
Property and equipment, net
|
|
121,799
|
|
|
131,569
|
|
|
Capitalized software, net
|
|
28,172
|
|
|
30,139
|
|
|
Goodwill
|
|
393,480
|
|
|
397,558
|
|
|
Intangible assets, net
|
|
104,809
|
|
|
109,027
|
|
|
Deferred contract costs, net
|
|
17,805
|
|
|
18,182
|
|
|
Deferred compensation plan assets
|
|
23,816
|
|
|
23,307
|
|
|
Deferred income taxes
|
|
8,929
|
|
|
8,644
|
|
|
Other assets
|
|
10,072
|
|
|
9,413
|
|
|
Total assets
|
|
$
|
1,296,337
|
|
|
$
|
1,348,819
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
134,482
|
|
|
$
|
150,711
|
|
|
Accrued compensation and benefits
|
|
68,996
|
|
|
96,480
|
|
|
Deferred revenue
|
|
64,665
|
|
|
73,692
|
|
|
Income taxes payable
|
|
9,166
|
|
|
7,979
|
|
|
Long-term debt, current portion
|
|
240
|
|
|
277
|
|
|
Other liabilities
|
|
11,563
|
|
|
11,617
|
|
|
Total current liabilities
|
|
289,112
|
|
|
340,756
|
|
|
Deferred revenue, less current portion
|
|
36,422
|
|
|
40,007
|
|
|
Deferred income taxes
|
|
22,731
|
|
|
16,813
|
|
|
Long-term debt
|
|
150,292
|
|
|
165,338
|
|
|
Deferred compensation plan liabilities, less current portion
|
|
26,497
|
|
|
24,012
|
|
|
Other liabilities
|
|
8,911
|
|
|
8,753
|
|
|
Total liabilities
|
|
533,965
|
|
|
595,679
|
|
|
Shareholders’ equity:
|
|
|
|
|
|
Common stock, no par value
|
|
466,656
|
|
|
461,679
|
|
|
Accumulated other comprehensive loss
|
|
(45,851
|
)
|
|
(36,169
|
)
|
|
Retained earnings
|
|
338,460
|
|
|
323,571
|
|
|
Total MAXIMUS shareholders’ equity
|
|
759,265
|
|
|
749,081
|
|
|
Noncontrolling interests
|
|
3,107
|
|
|
4,059
|
|
|
Total equity
|
|
762,372
|
|
|
753,140
|
|
|
Total liabilities and equity
|
|
$
|
1,296,337
|
|
|
$
|
1,348,819
|
|
|
|
|
|
|
MAXIMUS, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
|
|
|
|
|
|
|
|
Three Months Ended December 31,
|
|
|
|
2016
|
|
2015
|
|
Cash flows from operations:
|
|
|
|
|
|
Net income
|
|
$
|
46,329
|
|
|
$
|
26,882
|
|
|
Adjustments to reconcile net income to cash flows from operations:
|
|
|
|
|
|
Depreciation and amortization of property, equipment and capitalized
software
|
|
14,562
|
|
|
12,947
|
|
|
Amortization of intangible assets
|
|
3,402
|
|
|
3,149
|
|
|
Deferred income taxes
|
|
5,910
|
|
|
(499
|
)
|
|
Stock compensation expense
|
|
4,889
|
|
|
4,332
|
|
|
|
|
|
|
|
|
Change in assets and liabilities:
|
|
|
|
|
|
Accounts receivable — billed and billable
|
|
14,687
|
|
|
(29,747
|
)
|
|
Accounts receivable — unbilled
|
|
(1,998
|
)
|
|
(1,853
|
)
|
|
Prepaid expenses and other current assets
|
|
6,245
|
|
|
5,316
|
|
|
Deferred contract costs
|
|
44
|
|
|
764
|
|
|
Accounts payable and accrued liabilities
|
|
(14,575
|
)
|
|
8,188
|
|
|
Accrued compensation and benefits
|
|
(17,237
|
)
|
|
(21,383
|
)
|
|
Deferred revenue
|
|
(10,096
|
)
|
|
(2,886
|
)
|
|
Income taxes
|
|
16,902
|
|
|
(3,043
|
)
|
|
Other assets and liabilities
|
|
2,076
|
|
|
(801
|
)
|
|
Cash flows from operations
|
|
71,140
|
|
|
1,366
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
Purchases of property and equipment and capitalized software costs
|
|
(7,768
|
)
|
|
(10,685
|
)
|
|
Acquisition of businesses, net of cash acquired
|
|
—
|
|
|
(2,606
|
)
|
|
Proceeds from the sale of a business
|
|
385
|
|
|
—
|
|
|
Other
|
|
43
|
|
|
84
|
|
|
Cash used in investing activities
|
|
(7,340
|
)
|
|
(13,207
|
)
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
Cash dividends paid to MAXIMUS shareholders
|
|
(2,920
|
)
|
|
(2,941
|
)
|
|
Repurchases of common stock
|
|
(28,767
|
)
|
|
(31,138
|
)
|
|
Tax withholding related to RSU vesting
|
|
(9,255
|
)
|
|
(11,553
|
)
|
|
Borrowings under credit facility
|
|
65,000
|
|
|
47,070
|
|
|
Repayment of credit facility and other long-term debt
|
|
(80,067
|
)
|
|
(12,721
|
)
|
|
Other
|
|
(1,145
|
)
|
|
—
|
|
|
Cash (used in)/provided by financing activities
|
|
(57,154
|
)
|
|
(11,283
|
)
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
(3,078
|
)
|
|
(590
|
)
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
3,568
|
|
|
(23,714
|
)
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of period
|
|
66,199
|
|
|
74,672
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
69,767
|
|
|
$
|
50,958
|
|
|
|
|
|
|
MAXIMUS, Inc.
SEGMENT INFORMATION
(Amounts in thousands)
(Unaudited)
|
|
|
|
|
|
|
|
Three Months Ended December 31,
|
|
(Amounts in thousands)
|
|
2016
|
|
% (1)
|
|
2015
|
|
% (1)
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
Health Services
|
|
$
|
340,729
|
|
|
100
|
%
|
|
$
|
291,903
|
|
|
100
|
%
|
|
U.S. Federal Services
|
|
141,298
|
|
|
100
|
%
|
|
145,285
|
|
|
100
|
%
|
|
Human Services
|
|
125,537
|
|
|
100
|
%
|
|
119,534
|
|
|
100
|
%
|
|
Total
|
|
$
|
607,564
|
|
|
100
|
%
|
|
$
|
556,722
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit:
|
|
|
|
|
|
|
|
|
|
Health Services
|
|
$
|
78,234
|
|
|
23.0
|
%
|
|
$
|
51,972
|
|
|
17.8
|
%
|
|
U.S. Federal Services
|
|
37,576
|
|
|
26.6
|
%
|
|
28,238
|
|
|
19.4
|
%
|
|
Human Services
|
|
29,008
|
|
|
23.1
|
%
|
|
30,005
|
|
|
25.1
|
%
|
|
Total
|
|
$
|
144,818
|
|
|
23.8
|
%
|
|
$
|
110,215
|
|
|
19.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general, and administrative expense:
|
|
|
|
|
|
|
|
|
|
Health Services
|
|
$
|
28,107
|
|
|
8.2
|
%
|
|
$
|
25,164
|
|
|
8.6
|
%
|
|
U.S. Federal Services
|
|
19,695
|
|
|
13.9
|
%
|
|
17,522
|
|
|
12.1
|
%
|
|
Human Services
|
|
17,239
|
|
|
13.7
|
%
|
|
20,898
|
|
|
17.5
|
%
|
|
Other (2)
|
|
357
|
|
|
NM
|
|
650
|
|
|
NM
|
|
Total
|
|
$
|
65,398
|
|
|
10.8
|
%
|
|
$
|
64,234
|
|
|
11.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Operating income:
|
|
|
|
|
|
|
|
|
|
Health Services
|
|
$
|
50,127
|
|
|
14.7
|
%
|
|
$
|
26,808
|
|
|
9.2
|
%
|
|
U.S. Federal Services
|
|
17,881
|
|
|
12.7
|
%
|
|
10,716
|
|
|
7.4
|
%
|
|
Human Services
|
|
11,769
|
|
|
9.4
|
%
|
|
9,107
|
|
|
7.6
|
%
|
|
Amortization of intangible assets
|
|
(3,402
|
)
|
|
NM
|
|
(3,149
|
)
|
|
NM
|
|
Restructuring costs (3)
|
|
(2,242
|
)
|
|
NM
|
|
—
|
|
|
NM
|
|
Acquisition-related expenses
|
|
—
|
|
|
NM
|
|
(46
|
)
|
|
NM
|
|
Other (2)
|
|
(357
|
)
|
|
NM
|
|
(650
|
)
|
|
NM
|
|
Total
|
|
$
|
73,776
|
|
|
12.1
|
%
|
|
$
|
42,786
|
|
|
7.7
|
%
|
|
(1)
|
|
Percentage of respective segment revenue. Percentages not considered
meaningful are marked “NM.”
|
|
(2)
|
|
During the three months ended December 31, 2016, we accrued $0.4
million of legal-related costs pertaining to a matter that occurred
prior to 2009. During the three months ended December 31, 2015, we
incurred $0.7 million of legal costs related to a matter that
occurred in fiscal year 2014. Both items are classified within other
selling general and administrative expense.
|
|
(3)
|
|
During the three months ended December 31, 2016, we incurred costs
in restructuring our United Kingdom Human Services business.
|
|
|
|
|
|
MAXIMUS, Inc.
FREE CASH FLOW
(Non-GAAP measure)
(Amounts in thousands)
(Unaudited)
|
|
|
|
|
|
|
|
Three Months Ended December 31,
|
|
|
|
2016
|
|
2015
|
|
Cash flows from operations
|
|
$
|
71,140
|
|
|
$
|
1,366
|
|
|
Purchases of property and equipment and capitalized software costs
|
|
(7,768
|
)
|
|
(10,685
|
)
|
|
Free cash flow
|
|
$
|
63,372
|
|
|
$
|
(9,319
|
)
|
