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MAXIMUS Reports Fiscal Year 2020 First Quarter Results

02/06/2020

- 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, 2019.

Highlights for the first quarter of fiscal year 2020 include:

  • Revenue grew to $818.2 million compared to $664.6 million reported for the same period last year driven by the U.S. Federal Services and the U.S. Health & Human Services Segments
  • Diluted earnings per share were $0.91 and slightly better than Company expectations
  • Cash flows from operations of $87.3 million and free cash flow of $76.8 million
  • Year-to-date signed contract awards totaled approximately $177 million and contracts pending (awarded but unsigned) of $440 million at December 31, 2019
  • Sales pipeline of $30.6 billion at December 31, 2019, of which 69% is new work

For the first quarter of fiscal 2020, revenue increased to $818.2 million as compared to $664.6 million reported for the same period last year. Top-line growth was driven by the expected increases in the U.S. Federal Services Segment due to a full quarter contribution from the acquired citizen engagement centers business, the expected ramp-up on the Census contract, and organic growth in our U.S. Health & Human Services and U.S. Federal Services Segments. Offsets included reductions in the Outside the U.S. Segment and unfavorable foreign currency translation of $1.8 million in the quarter.

For the first quarter of fiscal 2020, operating income totaled $79.1 million, yielding an operating margin of 9.7%. This compares to 11.2% for the same period last year. As expected, results for the first quarter of fiscal 2020 included a greater mix of cost-plus contracts from the federal acquisition that generate lower operating margins and continued weakness in the employment services business in the Outside the U.S. Segment, which continues to be challenged by market conditions.

For the first quarter of fiscal 2020, net income attributable to MAXIMUS totaled $58.7 million, or $0.91 of diluted earnings per share. This compares to the first quarter of fiscal 2019 diluted earnings per share of $0.86. The current period was better than expectations and benefited from solid operational performance in the U.S. Health & Human Services Segment and timing of revenue and income within the U.S. Federal Services Segment.

Bruce Caswell, President and Chief Executive Officer of MAXIMUS, commented, "MAXIMUS delivered solid first quarter results driven by top-line growth in our U.S. operations. We continue to progress our strategic plan to lead a digital transformation, grow our clinically related services, and expand in priority markets and adjacencies. M&A remains at the heart of our capital deployment initiatives with the aim to supplement our current capabilities, build scale and create new growth platforms in markets with strong long-term fundamentals that enable us to build enduring, sustainable organic growth."

U.S. Health & Human Services Segment

Revenue in the U.S. Health & Human Services Segment for the first quarter of fiscal 2020 increased 6% to $312.3 million compared to $294.2 million reported for the same period last year. All growth in this segment was organic and attributable to new contracts and the expansion of existing work.

Operating margin for the first quarter of fiscal 2020 was 18.6% and stronger than expected, compared to 19.0% reported for the prior-year period. This segment realized solid operational performance across a number of contracts, and cost synergies resulting from the federal citizen engagement centers business acquisition continue to help margins in this segment.

U.S. Federal Services Segment

U.S. Federal Services Segment revenue for the first quarter of fiscal 2020 increased to $366.6 million compared to $217.0 million reported for the same period last year driven both organically and through acquisition. Revenue for this segment exceeded our expectations for the quarter, of which approximately $10 million dollars was accelerated from future periods. The Census contract continued its ramp-up toward peak activity levels and the segment realized a full quarter benefit related to the acquisition of the federal citizen engagement centers business. The Census contract delivered approximately $70 million of revenue in the first quarter.

Operating margin for the first quarter of fiscal 2020 was 8.6% compared to 9.8% reported for the prior-year period. Contract mix throughout fiscal 2020 will be weighted more heavily towards cost-plus contracts which offers less risk at a lower margin.

Outside the U.S. Segment

Outside the U.S. Segment revenue for the first quarter of fiscal 2020 decreased 9% (8% on a constant currency basis) to $139.4 million compared to $153.4 million reported for the same period last year. This segment experienced organic declines primarily in the employment services business. Volumes and caseloads continue to be challenged by the effects of robust full employment economies across our geographies.

Operating loss margin for the first quarter of fiscal 2020 was 0.7% compared to an operating profit margin of 2.9% reported for the prior-year period.

The bush fires in Australia had a slight impact in the first quarter. In January, the government instituted temporary modifications to program requirements which will disrupt employment services case flows, placements, and outcomes in the coming months. In addition, coronavirus is expected to unfavorably impact operations due to the reduced need for job seekers in certain sectors, such as tourism. The effect of these combined events will depend on the duration of impact and length of recovery in the region.

Sales and Pipeline

Year-to-date signed contract awards at December 31, 2019, totaled $176.6 million and contracts pending (awarded but unsigned) of $439.5 million. These awards reflect total contract value.

The sales pipeline at December 31, 2019, was $30.6 billion (comprised of approximately $3.7 billion in proposals pending, $0.7 billion in proposals in preparation and $26.3 billion in opportunities tracking).

Balance Sheet and Cash Flows

Cash and cash equivalents at December 31, 2019, totaled $149.5 million. For the three months ended December 31, 2019, cash flows from operations totaled $87.3 million, with free cash flow of $76.8 million. At December 31, 2019, days sales outstanding (DSO) were 71 days. Restricted cash at December 31, 2019, which is included in the Consolidated Statement of Cash Flows, was $11.4 million.

On January 3, 2020, our Board of Directors declared a quarterly cash dividend of $0.28 for each share of our common stock outstanding. The dividend is payable on February 28, 2020, to shareholders of record on February 14, 2020.

Outlook

MAXIMUS is reiterating its fiscal 2020 revenue and earnings guidance. The Company expects revenue to range between $3.15 billion and $3.30 billion and diluted earnings per share to range between $3.95 and $4.15.

Conference Call and Webcast Information

MAXIMUS will host a conference call this morning, February 6, 2020, at 9:00 a.m. (ET). The call is open to the public and is available by webcast at investor.maximus.com or by phone at:

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 20, 2020. Callers can access the replay by calling:

877.660.6853 (Domestic)/+1.201.612.7415 (International)
Replay conference ID number: 13698335

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 approximately 30,000 employees worldwide, MAXIMUS is a proud partner to government agencies in the United States, Australia, Canada, Saudi Arabia, Singapore 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 flows from operations.

A description of these non-GAAP measures, the reasons why we use and present them and details as to how they are calculated are included in our Annual Report on Form 10-K.

The presentation of these non-GAAP numbers is not meant to be considered in isolation, nor as alternatives to cash flows from operations, 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 risks could cause the Company’s actual results to differ materially from those indicated by such forward-looking statements. A summary of risk factors can be found 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,

 

2019

 

2018

Revenue

$

 

818,229

 

 

$

 

664,619

 

 

Cost of revenue

 

642,779

 

 

 

505,354

 

 

Gross profit

 

175,450

 

 

 

159,265

 

 

Selling, general and administrative expenses

 

87,227

 

 

 

79,671

 

 

Amortization of intangible assets

 

9,088

 

 

 

5,458

 

 

Operating income

 

79,135

 

 

 

74,136

 

 

Interest expense

 

484

 

 

 

625

 

 

Other income, net

 

719

 

 

 

2,045

 

 

Income before income taxes

 

79,370

 

 

 

75,556

 

 

Provision for income taxes

 

20,636

 

 

 

19,833

 

 

Net income

 

58,734

 

 

 

55,723

 

 

Loss attributable to noncontrolling interests

 

 

 

(190

)

 

Net income attributable to MAXIMUS

$

 

58,734

 

 

$

 

55,913

 

 

Basic earnings per share

$

 

0.91

 

 

$

 

0.86

 

 

Diluted earnings per share

$

 

0.91

 

 

$

 

0.86

 

 

Dividends paid per share

$

 

0.28

 

 

$

 

0.25

 

 

Weighted average shares outstanding:

 

 

 

Basic

 

64,597

 

 

 

64,827

 

 

Diluted

 

64,758

 

 

 

64,977

 

 

MAXIMUS, Inc.

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands)

 

 

December 31, 2019

 

September 30, 2019

 

(unaudited)

 

 

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

 

149,515

 

 

 

$

 

105,565

 

 

Accounts receivable — billed and billable

 

511,670

 

 

 

 

476,690

 

 

Accounts receivable — unbilled

 

123,420

 

 

 

 

123,884

 

 

Income taxes receivable

 

6,049

 

 

 

 

20,805

 

 

Prepaid expenses and other current assets

 

53,254

 

 

 

 

62,481

 

 

Total current assets

 

843,908

 

 

 

 

789,425

 

 

Property and equipment, net

 

92,377

 

 

 

 

99,589

 

 

Capitalized software, net

 

32,936

 

 

 

 

32,369

 

 

Operating lease right-of-use assets

 

200,690

 

 

 

 

Goodwill

 

586,659

 

 

 

 

584,469

 

 

Intangible assets, net

 

171,077

 

 

 

 

179,250

 

 

Deferred contract costs, net

 

18,224

 

 

 

 

18,921

 

 

Deferred compensation plan assets

 

35,151

 

 

 

 

32,908

 

 

Deferred income taxes

 

191

 

 

 

 

186

 

 

Other assets

 

8,578

 

 

 

 

8,615

 

 

Total assets

$

 

1,989,791

 

 

 

$

 

1,745,732

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Accounts payable and accrued liabilities

$

 

174,707

 

 

 

$

 

177,786

 

 

Accrued compensation and benefits

 

104,263

 

 

 

 

106,789

 

 

Deferred revenue

 

42,756

 

 

 

 

43,344

 

 

Income taxes payable

 

5,563

 

 

 

 

13,952

 

 

Current portion of long-term debt and other borrowings

 

7,009

 

 

 

 

9,658

 

 

Operating lease liabilities

 

85,625

 

 

 

 

Other liabilities

 

12,785

 

 

 

 

12,709

 

 

Total current liabilities

 

432,708

 

 

 

 

364,238

 

 

Deferred revenue, less current portion

 

32,105

 

 

 

 

32,341

 

 

Deferred income taxes

 

47,344

 

 

 

 

46,560

 

 

Deferred compensation plan liabilities, less current portion

 

37,298

 

 

 

 

34,079

 

 

Operating lease liabilities, net of current portion

 

121,620

 

 

 

 

Other liabilities

 

19,711

 

 

 

 

20,313

 

 

Total liabilities

 

690,786

 

 

 

 

497,531

 

 

Shareholders’ equity:

 

 

 

Common stock, no par value

 

504,184

 

 

 

 

498,433

 

 

Accumulated other comprehensive loss

 

(38,487

)

 

 

 

(45,380

)

 

Retained earnings

 

833,308

 

 

 

 

794,739

 

 

Total MAXIMUS shareholders’ equity

 

1,299,005

 

 

 

 

1,247,792

 

 

Noncontrolling interests

 

 

 

409

 

 

Total equity

 

1,299,005

 

 

 

 

1,248,201

 

 

Total liabilities and equity

$

 

1,989,791

 

 

 

$

 

1,745,732

 

 

MAXIMUS, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)

 

 

 

Three Months Ended
December 31,

 

 

2019

 

2018

Cash flows from operations:

 

 

 

 

Net income

 

$

 

58,734

 

 

 

$

 

55,723

 

 

Adjustments to reconcile net income to cash flows from operations:

 

 

 

 

Depreciation and amortization of property, equipment and capitalized software

 

 

15,318

 

 

 

 

11,231

 

 

Amortization of intangible assets

 

 

9,088

 

 

 

 

5,458

 

 

Deferred income taxes

 

 

422

 

 

 

 

16,511

 

 

Stock compensation expense

 

 

5,397

 

 

 

 

4,971

 

 

 

 

 

 

 

Change in assets and liabilities net of effects of business combinations:

 

 

 

 

Accounts receivable — billed and billable

 

 

(31,016

)

 

 

 

(69,890

)

 

Accounts receivable — unbilled

 

 

2,013

 

 

 

 

20,198

 

 

Prepaid expenses and other current assets

 

 

4,063

 

 

 

 

(5,691

)

 

Deferred contract costs

 

 

848

 

 

 

 

(1,757

)

 

Accounts payable and accrued liabilities

 

 

2,403

 

 

 

 

26,564

 

 

Accrued compensation and benefits

 

 

6,842

 

 

 

 

377

 

 

Deferred revenue

 

 

(1,345

)

 

 

 

(372

)

 

Income taxes

 

 

13,984

 

 

 

 

(3,848

)

 

Operating lease right-of-use assets and liabilities

 

 

(1,622

)

 

 

 

Other assets and liabilities

 

 

2,138

 

 

 

 

(135

)

 

Cash flows from operations

 

 

87,267

 

 

 

 

59,340

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

Purchases of property and equipment and capitalized software costs

 

 

(10,487

)

 

 

 

(9,973

)

 

Acquisitions of businesses, net of cash acquired

 

 

 

 

(421,809

)

 

Maturities of short-term investments

 

 

 

 

19,996

 

 

Other

 

 

25

 

 

 

 

47

 

 

Cash used in investing activities

 

 

(10,462

)

 

 

 

(411,739

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

Cash dividends paid to MAXIMUS shareholders

 

 

(17,913

)

 

 

 

(16,033

)

 

Purchases of MAXIMUS common stock

 

 

(1,898

)

 

 

 

(40,984

)

 

Tax withholding related to RSU vesting

 

 

(10,614

)

 

 

 

(8,915

)

 

Borrowings under credit facility and other loan agreements

 

 

83,419

 

 

 

 

195,100

 

 

Repayment of credit facility and other long-term debt

 

 

(86,301

)

 

 

 

(70,033

)

 

Other

 

 

(493

)

 

 

 

(133

)

 

Cash (used in)/provided by financing activities

 

 

(33,800

)

 

 

 

59,002

 

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

 

1,452

 

 

 

 

(1,068

)

 

 

 

 

 

 

Net increase/ (decrease) in cash, cash equivalents and restricted cash

 

 

44,457

 

 

 

 

(294,465

)

 

 

 

 

 

 

Cash, cash equivalents and restricted cash, beginning of period

 

 

116.492

 

 

 

 

356,559

 

 

 

 

 

 

 

Cash, cash equivalents and restricted cash, end of period

 

$

 

160,949

 

 

 

$

 

62,094

 

 

 

 

 

 

 

MAXIMUS, Inc.

SEGMENT INFORMATION

(Amounts in thousands)

(Unaudited)

 

 

 

Three Months Ended December 31,

 

 

2019

 

% (1)

 

2018

 

% (1)

Revenue:

 

 

 

 

 

 

 

 

U.S. Health & Human Services

 

$

 

312,281

 

 

 

 

 

$

 

294,213

 

 

 

 

U.S. Federal Services

 

 

366,571

 

 

 

 

 

 

216,987

 

 

 

 

Outside the U.S.

 

 

139,377

 

 

 

 

 

 

153,419

 

 

 

 

Total

 

$

 

818,229

 

 

 

 

 

$

 

664,619

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit:

 

 

 

 

 

 

 

 

U.S. Health & Human Services

 

$

 

89,590

 

 

 

28.7

 

%

 

$

 

88,031

 

 

 

29.9

%

U.S. Federal Services

 

 

70,821

 

 

 

19.3

 

%

 

 

47,985

 

 

 

22.1

%

Outside the U.S.

 

 

15,039

 

 

 

10.8

 

%

 

 

23,249

 

 

 

15.2

%

Total

 

$

 

175,450

 

 

 

21.4

 

%

 

$

 

159,265

 

 

 

24.0

%

 

 

 

 

 

 

 

 

 

Selling, general, and administrative expense:

 

 

 

 

 

 

 

 

U.S. Health & Human Services

 

$

 

31,398

 

 

 

10.1

 

%

 

$

 

32,139

 

 

 

10.9

%

U.S. Federal Services

 

 

39,239

 

 

 

10.7

 

%

 

 

26,632

 

 

 

12.3

%

Outside the U.S.

 

 

16,053

 

 

 

11.5

 

%

 

 

18,808

 

 

 

12.3

%

Other

 

 

537

 

 

 

NM

 

 

 

2,092

 

 

 

NM

Total

 

$

 

87,227

 

 

 

10.7

 

%

 

$

 

79,671

 

 

 

12.0

%

 

 

 

 

 

 

 

 

 

Operating income:

 

 

 

 

 

 

 

 

U.S. Health & Human Services

 

$

 

58,192

 

 

 

18.6

 

%

 

$

 

55,892

 

 

 

19.0

%

U.S. Federal Services

 

 

31,582

 

 

 

8.6

 

%

 

 

21,353

 

 

 

9.8

%

Outside the U.S.

 

 

(1,014

)

 

 

(0.7

)

%

 

 

4,441

 

 

 

2.9

%

Amortization of intangible assets

 

 

(9,088

)

 

 

NM

 

 

 

(5,458

)

 

 

NM

Other

 

 

(537

)

 

 

NM

 

 

 

(2,092

)

 

 

NM

Total

 

$

 

79,135

 

 

 

9.7

 

%

 

$

 

74,136

 

 

 

11.2

%

(1)

Percentage of respective segment revenue. Percentages not considered meaningful are marked “NM.”

MAXIMUS, Inc.

FREE CASH FLOW

(Non-GAAP measure)

(Amounts in thousands)

(Unaudited)

 

 

 

Three Months Ended
December 31,

 

 

2019

 

2018

Cash flows from operations

 

$

 

87,267

 

 

 

$

 

59,340

 

 

Purchases of property and equipment and capitalized software costs

 

 

(10,487

)

 

 

 

(9,973

)

 

Capital expenditure as a result of acquisition (1)

 

 

 

4,542

 

 

Free cash flow

 

$

 

76,780

 

 

 

$

 

53,909

 

 

 

 

 

 

 

(1)

 

Purchases of property and equipment and capitalized software costs included $4.5 million in one-time payments to cover software licenses required for employees joining us through the citizen engagement centers acquisition.

 

Lisa Miles 703.251.8637
lisamiles@maximus.com

Source: MAXIMUS

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