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FOR IMMEDIATE RELEASE
 
CONTACT:
Lisa Miles 703.251.8637
 
 
 
lisamiles@maximus.com
Date: February 7, 2019
 
 
 

MAXIMUS Reports Fiscal Year 2019 First Quarter Results
- Company Reiterates Full Year Revenue and Earnings Guidance -

(RESTON, Va. - February 7, 2019) - MAXIMUS (NYSE: MMS), a leading provider of government services worldwide, today reported financial results for the three months ended December 31, 2018.

Highlights for the first quarter of fiscal year 2019 include:

•
Revenue grew 7% to $664.6 million compared to $623.1 million reported for the same period last year, driven by the citizen engagement center acquisition in the U.S. Federal Services Segment

•
Diluted earnings per share of $0.86 were better-than-expected due to strong operational delivery in the U.S. Health and Human Services Segment

•
Cash flows from operations of $59.3 million and free cash flow of $53.9 million

•
Year-to-date signed contract awards of approximately $224 million and contracts pending (awarded but unsigned) of approximately $743 million at December 31, 2018

•
Sales pipeline of $19.9 billion at December 31, 2018, of which 78% is new work

•
Purchased 650,000 shares of MAXIMUS common stock for a total cost of $41.3 million for an average price of $63.52

Bruce Caswell, President and Chief Executive Officer of MAXIMUS, commented, "MAXIMUS delivered solid first quarter results with good performance, most notably in our U.S. Health and Human Services Segment. We continue to make meaningful progress as we transform the customer experience with digital tools, expand our clinical-related services and extend our reach into new markets and customer areas."

For the first quarter of fiscal 2019, revenue totaled $664.6 million as compared to $623.1 million reported for the same period last year. Revenue growth from the acquisition was partially offset by unfavorable foreign currency translation of $7.2 million.

For the first quarter of fiscal 2019, operating income totaled $74.1 million, yielding an operating margin of 11.2% as compared to 12.8% for the same period last year. As expected, operating margin was lower due to the newly acquired citizen engagement center contracts that have cost-plus terms, and therefore generate operating margins in the mid-single digits.

For the first quarter of fiscal 2019, net income attributable to MAXIMUS totaled $55.9 million (or $0.86 of diluted earnings per share) and benefited from solid operational performance in the U.S. Health and Human Services Segment. This compares to first quarter of fiscal 2018 diluted earnings per share of $0.89.


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U.S. Health & Human Services Segment
U.S. Health and Human Services Segment revenue for the first quarter of fiscal 2019 decreased 3.3% to $294.2 million compared to $304.2 million reported for the same period last year. The decrease was principally due to the refresh or rebid of certain larger contracts in the portfolio.

Operating margin for the first quarter of fiscal 2019 was 19.0% compared to 16.2% reported for the prior-year period. Operating margins increased despite a pullback in revenue primarily due to solid operational performance across a number of health services contracts and a seasonally strong quarter in the domestic consulting business. Segment operating margin also benefited from cost synergies as a result of the acquisition in our U.S. Federal Services Segment.

U.S. Federal Services Segment
As expected, U.S. Federal Services Segment revenue for the first quarter of fiscal 2019 increased 63% to $217.0 million compared to $133.0 million reported for the same period last year. Acquired revenue from the citizen engagement center acquisition was $101.3 million. Excluding the acquisition, the Segment's organic revenue decreased primarily due to contracts ending, including temporary work supporting disaster relief efforts that bolstered revenue in the first quarter last year, as well as contracts acquired with the Acentia transaction that ended because they were re-procured under small business set-aside rules which precluded MAXIMUS from bidding.

Operating margin for the first quarter of fiscal 2019 was 9.8% compared to 12.6% reported for the prior-year period. With the newly acquired cost-plus contracts, we now expect operating margins in the Segment to be in the range of 8% to 10%.

Outside the U.S. Segment
Outside the U.S. Segment revenue for the first quarter of fiscal 2019 decreased 17% (14% on a constant currency basis) to $153.4 million compared to $185.9 million reported for the same period last year due to welfare-to-work contracts in Australia and the United Kingdom.

Operating margin for the first quarter of fiscal 2019 was 2.9% compared to 8.7% reported for the prior-year period.

The effects of a robust full employment economy continue to impact the Segment, tempering revenue and margin due to lower volumes in the segment's welfare-to-work business.

Sales and Pipeline
Year-to-date signed contract awards at December 31, 2018, totaled $224 million and contracts pending (awarded but unsigned) totaled $743 million.
 
The sales pipeline at December 31, 2018, was $19.9 billion (comprised of approximately $2.6 billion in proposals pending, $0.3 billion in proposals in preparation and $17.0 billion in opportunities tracking). The Company modified its pipeline reporting methodology beginning October 1, 2018. The three changes are: 1) reporting Total Contract Value (TCV) rather than Base Contract Value (BCV), 2) extending the time horizon for opportunities reported in the pipeline from six months to two years and 3) removing the value cap of $150 million on new work opportunities so that the estimated TCV will now be reported under this new methodology.



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

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Balance Sheet and Cash Flows
Cash and cash equivalents at December 31, 2018, totaled $54.7 million. For the three months ended December 31, 2018, cash flows from operations totaled $59.3 million, with free cash flow of $53.9 million.

At December 31, 2018, days sales outstanding (DSO) were 73 days after normalizing the calculation to include a full three months of revenue from the acquisition.

During the first quarter, MAXIMUS purchased 650,000 shares of MAXIMUS common stock for a total cost of $41.3 million for an average price of $63.52. Subsequent to December 31, 2018, MAXIMUS has purchased another 62,000 shares of common stock for a total cost of $4.1 million for an average price of $66.15.
 
On January 4, 2019, our Board of Directors declared a quarterly cash dividend of $0.25 for each share of our common stock outstanding. The dividend is payable on February 28, 2019, to shareholders of record on February 15, 2019.

Outlook
MAXIMUS is reiterating its fiscal 2019 revenue and earnings guidance. The Company expects revenue to range between $2.925 billion and $3.0 billion and GAAP diluted earnings per share to range from $3.55 to $3.75 for fiscal 2019.

Conference Call and Webcast Information
MAXIMUS will host a conference call this morning, February 7, 2019, at 9:00 a.m. (ET). The call is open to the public and is available by webcast at http://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 21, 2019. Callers can access the replay by calling:

877.660.6853 (Domestic)/+1.201.612.7415 (International)
Replay conference ID number: 13686904

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 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
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 | MAXIMUS.COM

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In this news release, we use the following non-GAAP measures: organic revenue growth, constant currency 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 20, 2017. 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, acquisitions, technology-driven innovations, digital transformation, market demand or acceptance of the Company’s current or future products or services, 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 | MAXIMUS.COM

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

 
Three Months Ended December 31,
 
2018
 
2017
Revenue
$
664,619

 
$
623,148

Cost of revenue
505,354

 
471,188

Gross profit
159,265

 
151,960

Selling, general and administrative expenses
79,671

 
69,559

Amortization of intangible assets
5,458

 
2,718

Operating income
74,136

 
79,683

Interest expense
625

 
168

Other income, net
2,045

 
287

Income before income taxes
75,556

 
79,802

Provision for income taxes
19,833

 
19,850

Net income
55,723

 
59,952

(Loss)/income attributable to noncontrolling interests
(190
)
 
861

Net income attributable to MAXIMUS
$
55,913

 
$
59,091

Basic earnings per share attributable to MAXIMUS
$
0.86

 
$
0.90

Diluted earnings per share attributable to MAXIMUS
$
0.86

 
$
0.89

Dividends paid per share
$
0.25

 
$
0.045

Weighted average shares outstanding:

 
 
Basic
64,827

 
65,866

Diluted
64,977

 
66,177














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

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MAXIMUS, Inc.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
 
December 31, 2018
 
September 30, 2018
 
(unaudited)
 
 
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
54,736

 
$
349,245

Short-term investments
—

 
20,264

Accounts receivable — billed and billable
486,922

 
357,613

Accounts receivable — unbilled
124,385

 
31,536

Income taxes receivable
7,066

 
5,979

Prepaid expenses and other current assets
49,915

 
43,995

Total current assets
723,024

 
808,632

Property and equipment, net
81,352

 
77,544

Capitalized software, net
22,773

 
22,429

Goodwill
585,735

 
399,882

Intangible assets, net
204,553

 
88,035

Deferred contract costs, net
16,049

 
14,380

Deferred compensation plan assets
28,970

 
34,305

Deferred income taxes
209

 
6,834

Other assets
6,637

 
9,959

Total assets
$
1,669,302

 
$
1,462,000

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable and accrued liabilities
$
152,532

 
$
114,378

Accrued compensation and benefits
97,563

 
95,555

Deferred revenue
37,231

 
51,182

Income taxes payable
2,302

 
4,438

Long-term debt, current portion
5,124

 
136

Other liabilities
17,474

 
11,760

Total current liabilities
312,226

 
277,449

Deferred revenue, less current portion
22,275

 
20,394

Deferred income taxes
49,617

 
26,377

Long-term debt
120,321

 
374

Deferred compensation plan liabilities, less current portion
31,769

 
33,497

Other liabilities
15,715

 
17,490

Total liabilities
551,923

 
375,581

Shareholders’ equity:
 
 
 
Common stock, no par value
492,938

 
487,539

Accumulated other comprehensive loss
(42,673
)
 
(36,953
)
Retained earnings
664,332

 
633,281

Total MAXIMUS shareholders’ equity
1,114,597

 
1,083,867

Noncontrolling interests
2,782

 
2,552

Total equity
1,117,379

 
1,086,419

Total liabilities and equity
$
1,669,302

 
$
1,462,000



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

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MAXIMUS, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
 
 
Three Months Ended
December 31,
 
 
2018
 
2017
Cash flows from operations:
 
 
 
 
Net income
 
$
55,723

 
$
59,952

Adjustments to reconcile net income to cash flows from operations:
 
 
 
 
Depreciation and amortization of property, equipment and capitalized software
 
11,231

 
13,719

Amortization of intangible assets
 
5,458

 
2,718

Deferred income taxes
 
16,511

 
5,707

Stock compensation expense
 
4,971

 
5,402

 
 
 
 
 
Change in assets and liabilities:
 
 
 
 
Accounts receivable — billed and billable
 
(69,890
)
 
(44,381
)
Accounts receivable — unbilled
 
20,198

 
5,535

Prepaid expenses and other current assets
 
(5,691
)
 
6,019

Deferred contract costs
 
(1,757
)
 
1,413

Accounts payable and accrued liabilities
 
26,564

 
11,387

Accrued compensation and benefits
 
377

 
(29,588
)
Deferred revenue
 
(372
)
 
(12,405
)
Income taxes
 
(3,848
)
 
9,642

Other assets and liabilities
 
(135
)
 
2,877

Cash flows from operations
 
59,340

 
37,997

 
 
 
 
 
Cash flows from investing activities:
 
 
 
 
Purchases of property and equipment and capitalized software costs
 
(9,973
)
 
(6,514
)
Acquisition of part of noncontrolling interest
 
(421,809
)
 
—

Redemption of short-term investments
 
19,996

 
—

Other
 
47

 
59

Cash used in investing activities
 
(411,739
)
 
(6,455
)
 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
Cash dividends paid to MAXIMUS shareholders
 
(16,033
)
 
(2,930
)
Purchases of MAXIMUS common stock
 
(40,984
)
 
(1,038
)
Tax withholding related to RSU vesting
 
(8,915
)
 
(8,529
)
Borrowings under credit facility
 
195,100

 
59,683

Repayment of credit facility and other long-term debt
 
(70,033
)
 
(48,156
)
Other
 
(133
)
 
—

Cash used in financing activities
 
59,002

 
(970
)
 
 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
 
(1,068
)
 
203

 
 
 
 
 
Net increase in cash, cash equivalents and restricted cash
 
(294,465
)
 
30,775

 
 
 
 
 
Cash, cash equivalents and restricted cash, beginning of period (1)
 
356,559

 
179,727

 
 
 
 
 
Cash, cash equivalents and restricted cash, end of period (1)
 
$
62,094

 
$
210,502

 
 
 
 
 

(1)
As we noted in a Current Report on Form 8-K filed on December 14, 2018, we have made changes in our cash flow statements to comply with new accounting requirements. Most notably, we now include our restricted cash balances in the totals identified above. Our restricted cash is included in our balance sheet under the heading "prepaid expenses and other current assets" and totaled $7.4 million and $7.3 million at December 31, 2018, and September 30, 2018, respectively.


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

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MAXIMUS, Inc.
SEGMENT INFORMATION
(Amounts in thousands)
(Unaudited)
 
Three Months Ended December 31,
 
2018
 
% (1)
 
2017
 
% (1)
Revenue:
 
 
 
 
 
 
 
U.S. Health & Human Services
$
294,213

 


 
$
304,241

 


U.S. Federal Services
216,987

 


 
132,983

 


Outside the U.S.
153,419

 


 
185,924

 


Total
$
664,619

 


 
$
623,148

 


 
 
 
 
 
 
 
 
Gross Profit:
 
 
 
 
 
 
 
U.S. Health & Human Services
$
88,031

 
29.9
%
 
$
84,231

 
27.7
%
U.S. Federal Services
47,985

 
22.1
%
 
33,358

 
25.1
%
Outside the U.S.
23,249

 
15.2
%
 
34,371

 
18.5
%
Total
$
159,265

 
24.0
%
 
$
151,960

 
24.4
%
 
 
 
 
 
 
 
 
Selling, general, and administrative expense:
 
 
 
 
 
 
 
U.S. Health & Human Services
$
32,139

 
10.9
%
 
$
34,805

 
11.4
%
U.S. Federal Services
26,632

 
12.3
%
 
16,648

 
12.5
%
Outside the U.S.
18,808

 
12.3
%
 
18,106

 
9.7
%
Other (2)
2,092

 
NM

 
—

 
NM

Total (3)
$
79,671

 
12.0
%
 
$
69,559

 
11.2
%
 
 
 
 
 
 
 
 
Operating income:
 
 
 
 
 
 
 
U.S. Health & Human Services
$
55,892

 
19.0
%
 
$
49,426

 
16.2
%
U.S. Federal Services
21,353

 
9.8
%
 
16,710

 
12.6
%
Outside the U.S.
4,441

 
2.9
%
 
16,265

 
8.7
%
Amortization of intangible assets
(5,458
)
 
NM

 
(2,718
)
 
NM

Other (2)
(2,092
)
 
NM

 
—

 
NM

Total
$
74,136

 
11.2
%
 
$
79,683

 
12.8
%

(1)    Percentage of respective segment revenue. Percentages not considered meaningful are marked “NM.”
(2)
Other selling, general & administrative expenses includes credits and costs not directly allocated to a particular segment. In the three month period ended December 31, 2018, these include $2.7 million of costs directly related to the acquisition of the citizen engagement centers business.




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

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

 
Three Months Ended December 31,
 
2018
 
2017
Cash flows from operations
$
59,340

 
$
37,997

Purchases of property and equipment and capitalized software costs
(9,973
)
 
(6,514
)
Capital expenditure as a result of acquisition (1)
4,542

 
—

Free cash flow
$
53,909

 
$
31,483

 
 
 
 

(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.


-XXX-


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