Exhibit 99.1
 
MAXIMUS Reports Second Quarter Results for Fiscal 2015
 
RESTON, Va.--(BUSINESS WIRE)--May 7, 2015--MAXIMUS (NYSE: MMS), a leading provider of government services worldwide, today reported financial results for its second quarter ended March 31, 2015.
 
Highlights for the second quarter of fiscal 2015 include:
 
●
Revenue growth of 10% to $481.8 million, driven by organic growth in the Health Services Segment
 
●
GAAP diluted earnings per share of $0.58 and adjusted diluted earnings per share of $0.60
 
●
Cash and cash equivalents that totaled $114.5 million at March 31, 2015
 
●
A successful rebid and increased market share for the Company’s Australian workforce services operations under the new jobactive and Work for the Dole programs, which begins on July 1, 2015
 
●
Signed year-to-date contract awards of $1.584 billion; new contracts pending of $1.048 billion, which includes the rebid win in Australia; and a robust sales pipeline of $2.6 billion at March 31, 2015
 
●
An amendment to the Company’s credit facility, which now provides for a revolving line of credit up to $400 million and an uncommitted $200 million increase option
 
●
Subsequent to quarter close, the completion of the acquisition of Acentia, a U.S. federal services company
 
For the second quarter of fiscal 2015, revenue increased 10% (12% on a constant currency basis) to $481.8 million, compared to $439.0 million reported for the same period last year. The increase in revenue was driven by organic growth from new work and the expansion of existing contracts, primarily in the Health Services Segment. Both revenue and earnings were better than expected in the second quarter of fiscal 2015 due to contract amendments that were larger than previously anticipated in the Health Services Segment.
 
Fiscal 2015 second quarter net income attributable to MAXIMUS totaled $38.8 million, or $0.58 per diluted share, and included approximately $0.02 per diluted share of acquisition-related expenses. Excluding these acquisition-related expenses, adjusted diluted earnings per share were $0.60 compared to $0.59 per diluted share for the same period last year.
 
“MAXIMUS has experienced many recent positive developments as we continue to grow the business and execute on our existing portfolio. On March 1, 2015, we successfully launched the new U.K. Health Assessment Advisory Service. Subsequent to quarter end, we signed a five-year, $940 million contract to continue to operate under the Australian jobactive program. This important rebid win includes an increase in market share from 12.5% to 15% and confirms our demonstrated success in achieving rigorous performance metrics and delivering the outcomes that matter to our government clients,” commented Richard A. Montoni, MAXIMUS Chief Executive Officer.
 
 
 
 
 
Montoni continued, “We are also keenly focused on strategic cash deployment and the creation of future growth platforms. In April, we completed the acquisition of Acentia and purchased a 70% interest in Remploy with the remaining 30% held by its employees. We believe these events will further support our growth objectives for our federal business in the U.S. and our human services business in the U.K. Our solid second quarter results reinforce our ability to meet our existing operational and financial goals, while laying the groundwork for ongoing, long-term growth.”
 
Health Services Segment
Health Services Segment revenue for the second quarter of fiscal 2015 increased 14% to $370.4 million, driven by organic growth from new work and the expansion of existing contracts. This compares to $323.6 million for the same period last year. The Segment’s second quarter 2015 results were ahead of the Company’s expectations due to certain contract amendments that were larger than previously anticipated.
 
Health Services Segment operating income for the second quarter totaled $51.1 million (13.8% operating margin) compared to operating income of $49.7 million (15.4% operating margin) reported last year. Operating margins were lower in the second quarter of fiscal 2015 compared to last year due to the expected lower volumes in the Company’s Medicare appeals business and certain new contracts in the start-up phase.
 
Human Services Segment
Human Services Segment revenue for the second quarter of fiscal 2015 totaled $111.4 million, compared to $115.4 million for the same period last year. The Segment continued to be impacted by unfavorable currency exchange rates, and on a constant currency basis, revenue would have increased 4%.
 
Human Services Segment operating income for the second quarter totaled $13.9 million (12.5% operating margin) compared to $17.3 million (15.0% operating margin) for the same period last year. The second quarter of fiscal 2014 benefitted from the finalization of a contract in Saudi Arabia and a couple of short-term consulting engagements in the United States that were highly accretive.
 
Sales and Pipeline
The Company posted record sales at March 31, 2015 with year-to-date signed contract awards totaling $1.584 billion. At March 31, 2015, new contracts pending (awarded but unsigned) totaled $1.048 billion, which includes the jobactive rebid contract in Australia.
 
Sales pipeline at March 31, 2015 was $2.6 billion (consisting of $528 million in proposals pending, $662 million in proposals in preparation, and $1.5 billion in opportunities tracking) and 18% higher than the sales pipeline of $2.2 billion reported at March 31, 2014. As expected, sales pipeline was lower on a sequential basis due to sales opportunities converting into new awards during the second quarter of fiscal 2015.
 
Balance Sheet and Cash Flows
Cash and cash equivalents at March 31, 2015 totaled $114.5 million, of which approximately 33% were held outside the United States. For the second quarter of fiscal 2015, cash provided by operating activities totaled $5.5 million, with negative free cash flow of $27.9 million. In the second quarter of fiscal 2015, the Company increased its capital investments for infrastructure modernization in support of its ongoing growth in the United States and the United Kingdom. At March 31, 2015, Days Sales Outstanding (DSOs) were 70 days and within the Company’s stated range of 65 to 80 days. As expected, both the increase in DSOs and deferred revenue were due, in part, to new contracts in the United Kingdom. The Company expects that DSOs will return to lower levels by the end of fiscal 2015.
 
 
 
 
 
On February 27, 2015, MAXIMUS paid a quarterly cash dividend of $0.045 per share. On April 7, 2015, the Company announced a $0.045 per share cash dividend, payable on May 29, 2015 to shareholders of record on May 15, 2015.
 
On March 9, 2015, MAXIMUS expanded its credit facility for a revolving line of credit up to $400 million and an uncommitted $200 million increase option. The facility is available for general corporate purposes and certain permitted acquisitions.
 
Subsequent to quarter close, the Company completed the acquisition of Acentia, which was an all-cash transaction and funded by cash on hand and $225 million borrowed under the expanded credit facility.
 
Outlook
MAXIMUS is increasing its forecasted fiscal year 2015 revenue range to $2.05 billion to $2.08 billion as a result of the acquisitions of Acentia and Remploy. The Company now expects fiscal year 2015 GAAP diluted earnings per share to range between $2.33 and $2.40, but with a bias towards the upper end of the range.
 
For the full fiscal year, the Company is forecasting that, on a combined basis, Acentia and Remploy will contribute between $0.07 and $0.09 of diluted earnings per share for the second half of fiscal 2015. As expected, this will be offset by the new jobactive program in Australia, with expected start-up losses in the fourth quarter of fiscal 2015, which the Company estimates will be $0.06 to $0.09 of diluted earnings per share.
 
The Company is also establishing preliminary guidance for fiscal 2016. MAXIMUS is forecasting revenue in the range of $2.4 billion to $2.5 billion for fiscal 2016 and estimates that GAAP diluted earnings per share will range from $2.85 to $3.05. The preliminary guidance considers the acquisitions of Acentia and Remploy, the rebid win in Australia and the expected growth from new and existing contracts that were in start-up in fiscal 2015. There are a number of variables that can impact this preliminary guidance, including changes in volumes, outcomes on performance-based contracts, fluctuations in currency and legislative changes.
 
Montoni concluded, “We are very pleased with our year-to-date performance, increased expectations for the full fiscal 2015 year and preliminary view on continued solid growth into fiscal year 2016. Our appreciation is again extended to the many hard-working employees around the globe, who now number approximately 16,000. We also want to extend a special welcome to our colleagues who are joining us from Remploy and Acentia.”
 
Website Presentation, Conference Call and Webcast Information
MAXIMUS will host a conference call this morning, May 7, 2015, 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 21, 2015. Callers can access the replay by calling:
 
877.660.6853 (Domestic)/+1.201.612.7415 (International)
Replay conference ID number: 13607890
 
 
 
 
 
 
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 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 www.maximus.com.
 
Non-GAAP Measures
This release refers to non-GAAP financial measures, including adjusted diluted earnings per share, free cash flow, constant currency and days sales outstanding.
 
We have provided a reconciliation to adjusted diluted earnings per share. We believe that this measure is a useful basis for assessing the Company’s performance excluding the effect of acquisition expenses.
 
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 2015 revenue for all international businesses using the exchange rates used in the comparative period in fiscal year 2014. We believe constant currency provides a useful basis for assessing the performance of the business excluding the unpredictable effects of foreign exchange 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 www.maximus.com.
 
 
 
 
 
MAXIMUS, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
(Unaudited)
   
   
   
Three Months
    
Six Months
  
   
Ended March 31,
    
Ended March 31,
  
   
2015
    
2014
    
2015
    
2014
  
Revenue
   $ 481,794     $ 439,015     $ 948,837     $ 845,607  
Cost of revenue
     357,449       318,343       705,225       619,019  
Gross profit
     124,345       120,672       243,612       226,588  
Selling, general and administrative expenses
     59,392       53,624       111,353       104,889  
Amortization of intangible assets
     1,432       1,468       2,907       2,823  
Acquisition-related expenses
     1,514       —       2,114       —  
Legal and settlement expenses
     —       600       —       600  
Operating income
     62,007       64,980       127,238       118,276  
Interest and other income, net
     219       476       1,120       808  
Income before income taxes
     62,226       65,456       128,358       119,084  
Provision for income taxes
     23,198       23,995       46,980       44,268  
Net income
     39,028       41,461       81,378       74,816  
(Income)/loss attributable to non-controlling interests
     (220 )     (254 )     (709 )     250  
Net income attributable to MAXIMUS
   $ 38,808     $ 41,207     $ 80,669     $ 75,066  
                                 
Basic earnings per share attributable to MAXIMUS
   $ 0.59     $ 0.61     $ 1.22     $ 1.10  
                                 
Diluted earnings per share attributable to MAXIMUS
   $ 0.58     $ 0.59     $ 1.20     $ 1.08  
                                 
Dividends paid per share
   $ 0.045     $ 0.045     $ 0.09     $ 0.09  
                                 
Weighted average shares outstanding:
                                
Basic
     65,862       67,884       65,899       68,143  
Diluted
     66,987       69,307       66,947       69,538  
 
 
 
 
 
MAXIMUS, Inc.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
   
   
   
March 31,
2015
    
September 30,
2014
  
   
(unaudited)
        
ASSETS
            
Current assets:
            
Cash and cash equivalents
   $ 114,535     $ 158,112  
Accounts receivable — billed and billable, net of reserves of $4,004 and $3,138
     339,527       263,011  
Accounts receivable — unbilled
     28,845       26,556  
Deferred income taxes
     32,572       28,108  
Prepaid expenses and other current assets
     54,530       56,673  
Total current assets
     570,009       532,460  
                 
Property and equipment, net
     103,234       80,246  
Capitalized software, net
     35,311       39,734  
Goodwill
     162,214       170,626  
Intangible assets, net
     34,031       39,239  
Deferred contract costs, net
     19,005       12,046  
Deferred compensation plan assets
     21,003       17,126  
Other assets, net
     10,154       9,519  
Total assets
   $ 954,961     $ 900,996  
                 
LIABILITIES AND SHAREHOLDERS’ EQUITY
                
Current liabilities:
                
Accounts payable and accrued liabilities
   $ 126,122     $ 103,181  
Accrued compensation and benefits
     67,765       94,137  
Deferred revenue
     55,096       55,878  
Income taxes payable
     16,887       4,693  
Other liabilities
     6,951       7,432  
Total current liabilities
     272,821       265,321  
Deferred revenue, less current portion
     50,682       32,257  
Deferred income taxes
     15,930       21,383  
Deferred compensation plan liabilities, less current portion
     20,973       18,768  
Other liabilities
     6,326       7,082  
Total liabilities
     366,732       344,811  
                 
Shareholders’ equity:
                
Common stock, no par value
     438,373       429,857  
Accumulated other comprehensive income/(loss)
     (20,803       230  
Retained earnings
     169,802       125,875  
Total MAXIMUS shareholders’ equity
     587,372       555,962  
Non-controlling interests
     857       223  
Total equity
     588,229       556,185  
Total liabilities and equity
   $ 954,961     $ 900,996  
 
 
 
 
 
MAXIMUS, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
   
   
   
Three Months
Ended March 31,
    
Six Months
Ended March 31,
  
   
2015
    
2014
    
2015
    
2014
  
Cash flows from operating activities:
                        
Net income
   $ 39,028     $ 41,461     $ 81,378     $ 74,816  
Adjustments to reconcile net income to net cash provided by operating activities:
                                
Depreciation and amortization of property, equipment and capitalized software
     12,739       10,267       23,706       20,936  
Amortization of intangible assets
     1,432       1,468       2,907       2,823  
Deferred income taxes
     (9,209 )     (9,046 )     (10,134 )     (1,387 )
Non-cash equity based compensation
     4,470       4,480       8,436       8,561  
                                 
Change in assets and liabilities:
                                
Accounts receivable — billed
     (76,641 )     (32,250 )     (80,883 )     (37,516 )
Accounts receivable — unbilled
     2,003       1,245       (2,311 )     (50 )
Prepaid expenses and other current assets
     (5,822 )     2,338       (6,043 )     2,539  
Deferred contract costs
     (3,651       625       (7,105 )     1,979  
Accounts payable and accrued liabilities
     13,833       4,193       27,274       3,627  
Accrued compensation and benefits
     11,638       10,504       (12,263 )     (7,450 )
Deferred revenue
     18,248       (5,168 )     21,858       (6,211 )
Income taxes
     747       4,081       19,583       10,153  
Other assets and liabilities
     (3,343 )     316       (4,337 )     3,640  
Cash provided by operating activities
     5,472       34,514       62,066       76,460  
                                 
Cash flows from investing activities:
                                
Purchases of property and equipment
     (31,472 )     (5,076 )     (44,226 )     (9,516 )
Capitalized software costs
     (1,891 )     (3,733 )     (3,247 )     (7,317 )
Acquisition of business
     —       (2,670 )     —       (2,670 )
Proceeds from note receivable
     122       39       282       154  
Cash used in investing activities
     (33,241 )     (11,440 )     (47,191 )     (19,349 )
                                 
Cash flows from financing activities:
                                
Cash dividends paid
     (2,966 )     (3,053 )     (5,928 )     (6,138 )
Repurchases of common stock
     —       (13,166 )     (32,616 )     (34,696 )
Tax withholding related to RSU vesting and option exercises
     (116       (101 )     (12,453 )     (12,905 )
Stock option exercises
     —       191       —       518  
Expansion of credit facility
     (1,444       —       (1,444       —  
Borrowings under credit facility
     —       15,000       —       15,000  
Repayment of credit facility and other long-term debt
     (35       (15,040 )     (74       (15,082 )
Tax benefit due to option exercises and RSU vesting
     —       2,925       —       2,925  
Cash used in financing activities
     (4,561 )     (13,244 )     (52,515 )     (50,378 )
                                 
Effect of exchange rate changes on cash and cash equivalents
     (2,331 )     909       (5,937 )     (1,027 )
                                 
Net increase/(decrease) in cash and cash equivalents
     (34,661 )     10,739       (43,577 )     5,706  
                                 
Cash and cash equivalents, beginning of period
     149,196       120,584       158,112       125,617  
                                 
Cash and cash equivalents, end of period
   $ 114,535     $ 131,323     $ 114,535     $ 131,323  
 
 
 
 
 
MAXIMUS, Inc.
SEGMENT INFORMATION
(Amounts in thousands)
(Unaudited)
   
   
   
Three Months Ended March 31,
  
Six Months Ended March 31,
   
2015
       %(1)     2014       %(1)     2015       %(1)     2014       %(1)
                                                               
Revenue:
                                                              
Health Services
   $ 370,383       100 %   $ 323,598       100 %   $ 721,682       100 %   $ 622,182       100 %
Human Services
     111,411       100 %     115,417       100 %     227,155       100 %     223,425       100 %
Total
     481,794       100 %     439,015       100 %     948,837       100 %     845,607       100 %
                                                                 
Gross Profit:
                                                                
Health Services
     91,887       24.8 %     84,868       26.2 %     177,302       24.6 %     161,374       25.9 %
Human Services
     32,458       29.1 %     35,804       31.0 %     66,310       29.2 %     65,214       29.2 %
Total
     124,345       25.8 %     120,672       27.5 %     243,612       25.7 %     226,588       26.8 %
                                                                 
Selling, general, and administrative expense:
                                                                
Health Services
     40,774       11.0 %     35,133       10.9 %     75,031       10.4 %     69,308       11.1 %
Human Services
     18,523       16.6 %     18,528       16.1 %     36,222       15.9 %     35,602       15.9 %
Other
     95      
NM
       (37 )  
NM
       100    
NM
       (21 )  
NM
  
Total
     59,392       12.3 %     53,624       12.2 %     111,353       11.7 %     104,889       12.4 %
                                                                 
Operating income:
                                                                
Health Services
     51,113       13.8 %     49,735       15.4 %     102,271       14.2 %     92,066       14.8 %
Human Services
     13,935       12.5 %     17,276       15.0 %     30,088       13.2 %     29,612       13.3 %
Amortization of intangible assets
     (1,432 )    
NM
       (1,468 )  
NM
       (2,907 )  
NM
       (2,823 )  
NM
  
Acquisition-related expenses(2)
     (1,514 )    
NM
       —    
NM
       (2,114 )  
NM
       —    
NM
  
Legal and settlement expenses(3)
     —      
NM
       (600 )  
NM
       —    
NM
       (600 )  
NM
  
Other
     (95 )    
NM
       37    
NM
       (100 )  
NM
       21    
NM
  
Total
   $ 62,007       12.9 %   $ 64,980       14.8 %   $ 127,238       13.4 %   $ 118,276       14.0 %

(1)
  
Percentage of respective segment revenue. Changes not considered meaningful are marked “NM.”
     
(2)
  
Acquisition-related expenses are costs directly incurred from the purchases of Acentia and Remploy.
     
(3)
  
Legal and settlement expenses consist of costs related to significant legal settlements and non-routine legal matters, including future probable legal costs expected to be incurred in connection with those matters. Legal expenses incurred in the ordinary course of business are included in their respective operating segments.
 
 
 
 
 
MAXIMUS, Inc.
ADJUSTED DILUTED EARNINGS PER SHARE
(Unaudited)
   
   
 
Quarter Ended
    
Six
Months
Ended
  
 
Dec. 31,
2014
    
Mar. 31,
2015
    
Mar. 31
2015
  
Diluted EPS-GAAP basis
   $ 0.63       $ 0.58       $ 1.22  
Acquisition-related expenses
     –         0.02         0.02  
Adjusted Diluted EPS
   $ 0.63       $ 0.60       $ 1.24  
               
               
 
Quarter Ended
    
Six
Months
Ended
  
 
Dec. 31,
2013
    
Mar. 31,
2014
    
Mar. 31
2014
  
Diluted EPS-GAAP basis
   $ 0.49       $ 0.59       $ 1.08  
                             
Adjustments:
                            
Legal and settlement expenses
     –         0.01         –  
Tax Adjustment
     –         (0.01 )       (0.01 )
Subtotal pro forma adjustments
     –         –         –  
                             
Adjusted Diluted EPS
   $ 0.49       $ 0.59       $ 1.07  

MAXIMUS, Inc.
FREE CASH FLOW
(Amounts in thousands)
(Unaudited)
   
   
 
Three Months
Ended March 31,
    
Six Months
Ended March 31,
  
 
2015
    
2014
    
2015
    
2014
  
Cash provided by operating activities
   $ 5,472       $ 34,514       $ 62,066       $ 76,460  
Purchases of property and equipment
     (31,472 )       (5,076 )       (44,226 )       (9,516 )
Capitalized software costs
     (1,891 )       (3,733 )       (3,247 )       (7,317 )
Free cash flow
   $ (27,891 )     $ 25,705       $ 14,593       $ 59,627  
 
CONTACT:
MAXIMUS, Inc.
Lisa Miles, 703-251-8637
lisamiles@maximus.com