FOR IMMEDIATE RELEASE
 
CONTACT:
Lisa Miles 703.251.8637
 
 
 
lisamiles@maximus.com
Date: May 5, 2016
 
 
 

MAXIMUS Reports Second Quarter Results for Fiscal Year 2016
- The Company Narrows Earnings Guidance Range for Fiscal 2016 -


(RESTON, Va. - May 5, 2016) - MAXIMUS (NYSE: MMS), a leading provider of government services worldwide, today reported financial results for the three and six months ended March 31, 2016.

Highlights for the second quarter of fiscal year 2016 include:

•
Revenue growth of 26% (including organic growth of 13%) to $606.5 million compared to the same period last year

•
Diluted earnings per share of $0.74, which included a benefit of approximately $0.08 of diluted earnings per share related to contract modifications from the United Kingdom Health Assessment Advisory Service (HAAS) contract

•
Year-to-date signed contract awards of $1.1 billion and new contracts pending (awarded but unsigned) of $143 million at March 31, 2016

•
An update to earnings guidance with diluted earnings per share now expected to range between $2.50 and $2.70 for fiscal 2016

For the second quarter of fiscal 2016, revenue increased 26% to $606.5 million compared to $481.8 million reported for the same period last year. The increase in revenue was attributable to acquisitions that accounted for growth of 15% and organic growth of 13%, principally from the Health Services Segment. The increase in revenue was partially offset by a 2% decline from unfavorable foreign currency translation.

For the second quarter of fiscal 2016, net income attributable to MAXIMUS totaled $48.8 million, or $0.74 of diluted earnings per share. This compares to diluted earnings per share of $0.58 for the second quarter of fiscal 2015. The second quarter of fiscal 2016 received the benefit of out-of-period revenue and income of approximately $6.6 million, or approximately $0.08 of diluted earnings per share, resulting from contract modifications on the HAAS contract in the U.K.

Total Company operating margin for the second quarter of fiscal 2016 was 12.8%.
“Our financial results for the quarter demonstrate that overall, we have made solid progress on start-up projects, particularly the HAAS contract. Our current trends confirm that we are on track to hit full productivity on this contract by the end of the summer and we have an increased level of confidence that we are on a path to achieve our long-term operational and financial goals over the life of the contract,” commented MAXIMUS CEO Richard A. Montoni.




1891 METRO CENTER DRIVE | RESTON, VIRGINIA 20190 | 703.251.8500 | 703.251.8240 FAX | MAXIMUS.COM

Page 1

Health Services Segment
Health Services Segment revenue for the second quarter of fiscal 2016 increased 22% to $330.6 million compared to $270.9 million reported for the same period last year.

The year-over-year increase in revenue was nearly all organic and principally driven by the U.K. HAAS contract and, to a lesser extent, new work and expansion on existing contracts in the U.S. health business. The Ascend acquisition, which occurred in the quarter, accounted for less than 1% of Segment growth in the quarter. Health Segment growth was offset by a 2% decline from unfavorable foreign currency translation.

Operating margin for the second quarter of fiscal 2016 increased to 17.2% compared to 15.3% reported in the prior-year period. Operating margin in the second quarter benefitted from out-of-period revenue and income related to: 1) a previously disclosed contract change order that was recognized in the second quarter, and 2) modifications on the HAAS contract. Excluding the benefit of out-of-period revenue and income related to contract modifications in the second quarter of 2016, operating margin would have been 13.2% in the quarter.

U.S. Federal Services Segment
U.S. Federal Services Segment revenue for the second quarter of fiscal 2016 increased 51% to $150.2 million compared to $99.5 million reported for the same period last year. All growth in the quarter was acquired and partially offset by expected reductions from the closure of one of the Company’s customer contact centers tied to the Federal Marketplace.

Operating margin for the second quarter was 10.0% compared to 9.7% reported for the prior-year period.

Human Services Segment
Human Services Segment revenue for the second quarter of fiscal 2016 increased 13% to $125.7 million compared to $111.4 million for the same period last year. Year-over-year revenue growth was principally driven by acquisitions. The Segment was unfavorably impacted by a 5% decline in foreign currency translation.

Operating margin for the second quarter was 7.8% compared to 12.5% for the same period last year. The anticipated reduction in margin was principally due to the ongoing ramp up of the new jobactive contract in Australia. The Company now expects that the jobactive contract will operate at the lower end of its target operating margin range of 10-15% in the second half of fiscal 2016 as a result of lower-than-expected volumes in the near term.

Sales and Pipeline
Year-to-date signed contract awards at March 31, 2016 totaled $1.1 billion. New contracts pending (awarded but unsigned) totaled $143.2 million.

The sales pipeline at March 31, 2016 increased to $3.2 billion (comprised of approximately $543 million in proposals pending, $261 million in proposals in preparation, and $2.4 billion in opportunities tracking). The pipeline includes opportunities across all Segments and geographies. This compares to a pipeline of $2.6 billion for the same period last year. Of the $3.2 billion in pipeline at March 31, 2016, more than half is associated with new work.

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 March 31, 2016 totaled $60.8 million. For the three-months ended March 31, 2016, cash provided by operating activities totaled $20.5 million, with free cash flow of $11.3 million.


1891 METRO CENTER DRIVE | RESTON, VIRGINIA 20190 | 703.251.8500 | 703.251.8240 FAX | MAXIMUS.COM

Page 2




At March 31, 2016, Days Sales Outstanding (DSOs) were within the Company’s expected range at 70 days, and lower sequentially by five days compared to DSOs of 75 days in the first quarter.

On February 29, 2016, MAXIMUS paid a quarterly cash dividend of $0.045 per share. On April 19, 2016, the Company announced a $0.045 per share cash dividend, payable on May 31, 2016 to shareholders of record on May 13, 2016.

During the second quarter of fiscal 2016, MAXIMUS did not repurchase any common stock. At March 31, 2016, MAXIMUS had $139.4 million available for repurchases under its Board-authorized share repurchase program.

Outlook
The Company still expects revenue to range between $2.4 billion and $2.5 billion for fiscal 2016. MAXIMUS is narrowing its earnings guidance and now expects GAAP diluted earnings per share to range between $2.50 and $2.70 for fiscal 2016. This compares to the Company’s prior range of $2.40 to $2.70 of GAAP diluted earnings per share. Fiscal year 2016 earnings guidance assumes that certain contracts in start-up will continue to mature and provide increasing contributions in the second half of the year, coupled with the addition of new work. The Company’s guidance does not include any future acquisitions or significant legal expenses or recoveries.

Website Presentation, Conference Call and Webcast Information
MAXIMUS will host a conference call this morning, May 5, 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 May 19, 2016. Callers can access the replay by calling:

877.660.6853 (Domestic)/+1.201.612.7415 (International)
Replay conference ID number: 13636167

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
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.



1891 METRO CENTER DRIVE | RESTON, VIRGINIA 20190 | 703.251.8500 | 703.251.8240 FAX | MAXIMUS.COM

Page 3



During the past twelve months, we have acquired Acentia, Ascend, Assessments Australia and Remploy. We believe users of our financial statements wish to evaluate the performance of our underlying business, excluding changes that have arisen due to businesses acquired. We provide organic revenue growth as a useful basis for assessing this. To calculate organic revenue growth, we compare current year revenue less revenue from these acquisitions to our prior year revenue.

In the first six months of fiscal year 2016, 29% of our business has been generated outside the United States. We believe that users of our financial statements wish to understand the performance of our foreign operations using a methodology which excludes the effect of year-over-year exchange rate fluctuations. We provide constant currency revenue movement as a useful basis for assessing this. To calculate constant currency revenue movement, we determine the current year’s revenue for all foreign businesses using the exchange rates in the prior year.

In order to sustain our cash flows from operations, we require regular refreshing of our fixed assets and technology. We believe that users of our financial statements wish to understand the cash flows that directly correspond with our operations and the investments we must make in those operations using a methodology which combines operating cash flows and capital expenditures. We provide free cash flow to complement our statement of cash flows. 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. We have provided a reconciliation of free cash flow to cash provided by operating activities.

To sustain our operations, our principal source of financing comes from receiving payments from our customers. We believe that users of our financial statements wish to evaluate our efficiency in converting revenue into cash receipts. Accordingly, we provide days sales outstanding, or DSO. 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.

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.





1891 METRO CENTER DRIVE | RESTON, VIRGINIA 20190 | 703.251.8500 | 703.251.8240 FAX | MAXIMUS.COM

Page 4



MAXIMUS, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
(Unaudited)

 
Three Months Ended March 31,
 
Six Months Ended March 31,
 
2016
 
2015
 
2016
 
2015
Revenue
$
606,453

 
$
481,794

 
$
1,163,175

 
$
948,837

Cost of revenue
458,786

 
357,449

 
905,293

 
705,225

Gross profit
147,667

 
124,345

 
257,882

 
243,612

Selling, general and administrative expenses
65,976

 
59,392

 
130,210

 
111,353

Amortization of intangible assets
3,262

 
1,432

 
6,411

 
2,907

Acquisition-related expenses
529

 
1,514

 
575

 
2,114

Operating income
77,900

 
62,007

 
120,686

 
127,238

Interest expense
1,273

 
—

 
2,262

 
—

Other income, net
2,209

 
219

 
3,340

 
1,120

Income before income taxes
78,836

 
62,226

 
121,764

 
128,358

Provision for income taxes
29,495

 
23,198

 
45,541

 
46,980

Net income
49,341

 
39,028

 
76,223

 
81,378

Income attributable to noncontrolling interests
556

 
220

 
829

 
709

Net income attributable to MAXIMUS
$
48,785

 
$
38,808

 
$
75,394

 
$
80,669

Basic earnings per share attributable to MAXIMUS
$
0.74

 
$
0.59

 
$
1.14

 
$
1.22

Diluted earnings per share attributable to MAXIMUS
$
0.74

 
$
0.58

 
$
1.14

 
$
1.20

Dividends paid per share
$
0.045

 
$
0.045

 
$
0.09

 
$
0.09

Weighted average shares outstanding:
 
 
 
 
 
 
 
Basic
65,760

 
65,862

 
65,872

 
65,899

Diluted
66,079

 
66,987

 
66,196

 
66,947














1891 METRO CENTER DRIVE | RESTON, VIRGINIA 20190 | 703.251.8500 | 703.251.8240 FAX | MAXIMUS.COM

Page 5



MAXIMUS, Inc.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
 
March 31,
 2016
 
September 30,
 2015
 
(unaudited)
 
 
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
60,783

 
$
74,672

Accounts receivable - billed and billable, net of reserves of $5,080 and $3,385
433,228

 
396,177

Accounts receivable - unbilled
35,777

 
30,929

Income taxes receivable
21,124

 
7,310

Prepaid expenses and other current assets
49,351

 
52,819

Total current assets
600,263

 
561,907

Property and equipment, net
137,493

 
137,830

Capitalized software, net
31,033

 
32,483

Goodwill
401,152

 
376,302

Intangible assets, net
117,732

 
102,358

Deferred contract costs, net
17,782

 
19,126

Deferred compensation plan assets
21,519

 
19,310

Deferred income taxes
5,204

 
11,058

Other assets
10,635

 
11,184

Total assets
$
1,342,813

 
$
1,271,558

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable and accrued liabilities
$
135,704

 
$
155,411

Accrued compensation and benefits
74,975

 
99,700

Deferred revenue
80,429

 
77,642

Income taxes payable
2,577

 
11,709

Long-term debt, current portion
329

 
356

Other liabilities
13,343

 
11,562

Total current liabilities
307,357

 
356,380

Deferred revenue, less current portion
47,873

 
52,954

Deferred income taxes
7,347

 
6,546

Long-term debt
286,017

 
210,618

Deferred compensation plan liabilities, less current portion
21,575

 
20,635

Other liabilities
9,203

 
8,726

Total liabilities
679,372

 
655,859

Shareholders’ equity:
 
 
 
Common stock, no par value; 100,000 shares authorized; 64,906 and 65,437 shares issued and outstanding at March 31, 2016 and September 30, 2015, at stated amount, respectively
455,441

 
446,132

Accumulated other comprehensive income/(loss)
(24,984
)
 
(22,365
)
Retained earnings
228,834

 
188,611

Total MAXIMUS shareholders’ equity
659,291

 
612,378

Noncontrolling interests
4,150

 
3,321

Total equity
663,441

 
615,699

Total liabilities and equity
$
1,342,813

 
$
1,271,558



1891 METRO CENTER DRIVE | RESTON, VIRGINIA 20190 | 703.251.8500 | 703.251.8240 FAX | MAXIMUS.COM

Page 6



MAXIMUS, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
 
 
Three Months
Ended March 31,
 
Six Months
Ended March 31,
 
 
2016
 
2015
 
2016
 
2015
Cash flows from operating activities:
 
 
 
 
 
 
 
 
Net income
 
$
49,341

 
$
39,028

 
$
76,223

 
$
81,378

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
 
 
 
Depreciation and amortization of property, equipment and capitalized software
 
12,912

 
12,739

 
25,859

 
23,706

Amortization of intangible assets
 
3,262

 
1,432

 
6,411

 
2,907

Deferred income taxes
 
172

 
(9,209
)
 
(327
)
 
(10,134
)
Non-cash equity based compensation
 
4,819

 
4,470

 
9,151

 
8,436

 
 
 
 
 
 
 
 
 
Change in assets and liabilities:
 
 
 
 
 
 
 
 
Accounts receivable - billed
 
(5,304
)
 
(76,641
)
 
(35,051
)
 
(80,883
)
Accounts receivable - unbilled
 
(2,998
)
 
2,003

 
(4,851
)
 
(2,311
)
Prepaid expenses and other current assets
 
127

 
(5,822
)
 
5,443

 
(6,043
)
Deferred contract costs
 
46

 
(3,651
)
 
810

 
(7,105
)
Accounts payable and accrued liabilities
 
(28,137
)
 
13,833

 
(19,949
)
 
27,274

Accrued compensation and benefits
 
7,172

 
11,638

 
(14,211
)
 
(12,263
)
Deferred revenue
 
877

 
18,248

 
(2,009
)
 
21,858

Income taxes
 
(19,554
)
 
747

 
(22,597
)
 
19,583

Other assets and liabilities
 
(2,237
)
 
(3,343
)
 
(3,038
)
 
(4,337
)
Cash provided by operating activities
 
20,498

 
5,472

 
21,864

 
62,066

 
 
 
 
 
 
 
 
 
Cash flows from investing activities:
 
 
 
 
 
 
 
 
Purchases of property and equipment and capitalized software costs
 
(9,151
)
 
(33,363
)
 
(19,836
)
 
(47,473
)
Acquisition of business
 
(39,206
)
 
—

 
(41,812
)
 
—

Other
 
126

 
122

 
210

 
282

Cash used in investing activities
 
(48,231
)
 
(33,241
)
 
(61,438
)
 
(47,191
)
 
 
 
 
 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
 
 
 
 
Cash dividends paid
 
(2,919
)
 
(2,966
)
 
(5,860
)
 
(5,928
)
Repurchases of common stock
 
—

 
—

 
(31,138
)
 
(32,616
)
Tax withholding related to RSU vesting and option exercises
 
(44
)
 
(116
)
 
(11,597
)
 
(12,453
)
Expansion of credit facility
 
—

 
(1,444
)
 
—

 
(1,444
)
Borrowings under credit facility
 
83,493

 
—

 
130,563

 
—

Repayment of credit facility and other long-term debt
 
(42,498
)
 
(35
)
 
(55,219
)
 
(74
)
Cash provided by/(used in) financing activities
 
38,032

 
(4,561
)
 
26,749

 
(52,515
)
 
 
 
 
 
 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
 
(474
)
 
(2,331
)
 
(1,064
)
 
(5,937
)
 
 
 
 
 
 
 
 
 
Net increase/(decrease) in cash and cash equivalents
 
9,825

 
(34,661
)
 
(13,889
)
 
(43,577
)
 
 
 
 
 
 
 
 
 
Cash and cash equivalents, beginning of period
 
50,958

 
149,196

 
74,672

 
158,112

 
 
 
 
 
 
 
 
 
Cash and cash equivalents, end of period
 
$
60,783

 
$
114,535

 
$
60,783

 
$
114,535



1891 METRO CENTER DRIVE | RESTON, VIRGINIA 20190 | 703.251.8500 | 703.251.8240 FAX | MAXIMUS.COM

Page 7



MAXIMUS, Inc.
SEGMENT INFORMATION
(Amounts in thousands)
(Unaudited)
 
 
Three Months Ended March 31,
 
Six Months Ended March 31,
 
 
2016
 
% (1)
 
2015
 
% (1)
 
2016
 
% (1)
 
2015
 
% (1)
Revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Health Services
 
$
330,567

 
100
%
 
$
270,918

 
100
%
 
$
622,470

 
100
%
 
$
514,488

 
100
%
U.S. Federal Services
 
150,191

 
100
%
 
99,465

 
100
%
 
295,476

 
100
%
 
207,194

 
100
%
Human Services
 
125,695

 
100
%
 
111,411

 
100
%
 
245,229

 
100
%
 
227,155

 
100
%
Total
 
$
606,453

 
100
%
 
$
481,794

 
100
%
 
$
1,163,175

 
100
%
 
$
948,837

 
100
%
Gross profit:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Health Services
 
$
82,717

 
25.0
%
 
$
69,873

 
25.8
%
 
$
134,689

 
21.6
%
 
$
129,720

 
25.2
%
U.S. Federal Services
 
33,421

 
22.3
%
 
22,014

 
22.1
%
 
61,659

 
20.9
%
 
47,582

 
23.0
%
Human Services
 
31,529

 
25.1
%
 
32,458

 
29.1
%
 
61,534

 
25.1
%
 
66,310

 
29.2
%
Total
 
$
147,667

 
24.3
%
 
$
124,345

 
25.8
%
 
$
257,882

 
22.2
%
 
$
243,612

 
25.7
%
Selling, general and administrative expense:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Health Services
 
$
25,803

 
7.8
%
 
$
28,397

 
10.5
%
 
$
50,967

 
8.2
%
 
$
50,404

 
9.8
%
U.S. Federal Services
 
18,438

 
12.3
%
 
12,377

 
12.4
%
 
35,960

 
12.2
%
 
24,627

 
11.9
%
Human Services
 
21,735

 
17.3
%
 
18,523

 
16.6
%
 
42,633

 
17.4
%
 
36,222

 
15.9
%
Other
 
—

 
NM

 
95

 
NM

 
650

 
NM

 
100

 
NM

Total
 
$
65,976

 
10.9
%
 
$
59,392

 
12.3
%
 
$
130,210

 
11.2
%
 
$
111,353

 
11.7
%
Operating income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Health Services
 
$
56,914

 
17.2
%
 
$
41,476

 
15.3
%
 
$
83,722

 
13.4
%
 
$
79,316

 
15.4
%
U.S. Federal Services
 
14,983

 
10.0
%
 
9,637

 
9.7
%
 
25,699

 
8.7
%
 
22,955

 
11.1
%
Human Services
 
9,794

 
7.8
%
 
13,935

 
12.5
%
 
18,901

 
7.7
%
 
30,088

 
13.2
%
Amortization of
intangible assets
 
(3,262
)
 
NM

 
(1,432
)
 
NM

 
(6,411
)
 
NM

 
(2,907
)
 
NM

Acquisition-related expenses (2)
 
(529
)
 
NM

 
(1,514
)
 
NM

 
(575
)
 
NM

 
(2,114
)
 
NM

Other
 
—

 
NM

 
(95
)
 
NM

 
(650
)
 
NM

 
(100
)
 
NM

Total
 
$
77,900

 
12.8
%
 
$
62,007

 
12.9
%
 
$
120,686

 
10.4
%
 
$
127,238

 
13.4
%


(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.



1891 METRO CENTER DRIVE | RESTON, VIRGINIA 20190 | 703.251.8500 | 703.251.8240 FAX | MAXIMUS.COM

Page 8



MAXIMUS, Inc.
FREE CASH FLOW
(Non-GAAP measure)
(Amounts in thousands)
(Unaudited)

 
 
Three Months
Ended March 31,
 
Six Months
Ended March 31,
 
 
2016
 
2015
 
2016
 
2015
Cash provided by operating activities
 
$
20,498

 
$
5,472

 
$
21,864

 
$
62,066

Purchases of property and equipment and capitalized software costs
 
(9,151
)
 
(33,363
)
 
(19,836
)
 
(47,473
)
Free cash flow
 
$
11,347

 
$
(27,891
)
 
$
2,028

 
$
14,593

 
 
 
 
 
 
 
 
 



-XXX-


1891 METRO CENTER DRIVE | RESTON, VIRGINIA 20190 | 703.251.8500 | 703.251.8240 FAX | MAXIMUS.COM

Page 9