- MAXIMUS Maintains Revenue Guidance and Lowers Earnings Guidance for Fiscal 2016 -

RESTON, Va.--(BUSINESS WIRE)--November 12, 2015--MAXIMUS (NYSE: MMS), a leading provider of government services worldwide, today reported financial results for the three months and year ended September 30, 2015.

As previously disclosed in an 8-K filing on November 6, 2015, the Company is now reporting information for three segments. All historical segment data in this press release have been reclassified for comparison purposes.

For the fourth quarter of fiscal 2015, revenue increased 33% (38% on a constant currency basis) to $578.7 million, compared to $435.4 million reported for the same period last year. The increase in revenue was driven by organic growth and the acquisitions of Acentia and Remploy. This was offset by a 5% decline related to unfavorable foreign currency translation. For the fourth quarter of fiscal 2015, net income attributable to MAXIMUS totaled $35.4 million, or $0.53 per diluted share. This compares to diluted earnings per share of $0.53 for the fourth quarter of 2014.

Revenue for fiscal year 2015 increased 23% (27% on a constant currency basis) to $2.1 billion, compared to $1.7 billion reported for fiscal 2014. The increase in revenue was driven by organic growth primarily in the Health Services Segment and the U.S. Federal Services Segment, as well as revenue from the acquisitions of Acentia and Remploy. This was offset by a 4% decline from unfavorable foreign currency translation. For fiscal year 2015, net income attributable to MAXIMUS totaled $157.8 million, or $2.35 earnings per diluted share, which included approximately $0.04 per diluted share of acquisition-related expenses. Excluding the acquisition-related expenses, adjusted diluted earnings per share for fiscal year 2015 were $2.39. This compares to GAAP diluted earnings per share of $2.11 for fiscal year 2014.

Health Segment revenue for the fourth quarter of fiscal 2015 increased 29% (32% on a constant currency basis) to $296.2 million, compared to $230.5 million reported for the same period last year. Operating income for the fourth quarter of fiscal 2015 totaled $30.5 million (10.3% operating margin), compared to $31.2 million (13.5% operating margin) for the same period last year.

For the full fiscal year, Health Segment revenue increased 22% (25% on a constant currency basis) to $1.1 billion, compared to $906.7 million for the same period last year. All growth was organic. Fiscal 2015 operating income totaled $154.3 million (13.9% operating margin), compared to operating income of $115.6 million (12.7% operating margin) for fiscal 2014.

The increases in revenue for the fourth quarter and the full fiscal year 2015 were driven by new work and the expansion of existing contracts. Operating margins for the fourth quarter and full fiscal year 2015 were tempered by new programs in start-up, most notably the U.K. Health Assessment Advisory Service contract, which is not performing to the Company’s previous expectations.

U.S. Federal Segment revenue for the fourth quarter of fiscal 2015 increased 70% to $154.3 million, compared to $90.6 million reported for the same period last year. Operating income for the fourth quarter totaled $20.9 million (13.5% operating margin), compared to $12.2 million (13.5% operating margin) for the same period last year.

For the full fiscal year, U.S. Federal Segment revenue increased 47% to $502.5 million, compared to $341.8 million for the same period last year. For fiscal 2015 operating income totaled $59.4 million (11.8% operating margin), compared to operating income of $63.1 million (18.5% operating margin) for fiscal 2014.

Revenue growth for the fourth quarter and full year were driven by new organic growth and the Acentia acquisition. Operating margins were unfavorably impacted by the expected decline in Medicare appeals volumes, which were highly accretive. Offsetting this, the Department of Education debt management contract steadily improved throughout the year and remains on track to achieve breakeven in fiscal 2016. As a result, this helped the year-over-year comparisons in the fourth quarter of fiscal 2015.

Human Services Segment revenue for the fourth quarter of fiscal 2015 increased 12% (23% on a constant currency basis) to $128.2 million, compared to $114.4 million for the same period last year. Operating income for the fourth quarter totaled $13.4 million (10.4% operating margin), compared to $9.9 million (8.7% operating margin) for the same period last year.

For the full fiscal year, Human Services Segment revenue increased 8% (16% on a constant currency basis) to $488.1 million, compared to $452.4 million for the same period last year. For fiscal 2015, Human Services Segment operating income totaled $60.2 million (12.3% operating margin), compared to operating income of $53.2 million (11.7% operating margin) for fiscal 2014.

The increase in revenue for the fourth quarter and the full fiscal year was driven by organic growth and revenue from the Remploy acquisition, but was offset by unfavorable foreign currency translation. Operating margins for the quarter and the full year benefitted from strong delivery across North America, the United Kingdom and Saudi Arabia, which was offset by the expected start-up losses on the Australian jobactive contract that launched on July 1, 2015.

Backlog was $4.6 billion at September 30, 2015. Year-to-date signed contract awards at September 30, 2015 totaled $3.4 billion. New contracts pending (awarded but unsigned) totaled $149.4 million.

The sales pipeline at September 30, 2015 was $3.2 billion (consisting of approximately $771 million in proposals pending, $38 million in proposals in preparation, and $2.4 billion in opportunities tracking). Included in the $3.2 billion sales pipeline is the anticipated rebid for the U.K. Work Programme. This rebid is not expected to be awarded until fiscal year 2017, but the lengthy rebid process is expected to begin in the spring of 2016. 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. This compares to a pipeline of $3.5 billion for the same period last year, which included $1.2 billion in rebids.

Cash and cash equivalents at September 30, 2015 totaled $74.7 million. For the fourth quarter of fiscal 2015, cash provided by operating activities totaled $25.2 million, with negative free cash flow of $6.7 million. For the full fiscal year 2015, cash provided by operating activities totaled $206.2 million, with free cash flow of $101.1 million.

At September 30, 2015, Days Sales Outstanding (DSOs) were within the Company’s expected range at 67 days, compared to 64 days for the prior quarter.

On August 31, 2015, MAXIMUS paid a quarterly cash dividend of $0.045 per share. On October 8, 2015, the Company announced a $0.045 per share cash dividend, payable on November 30, 2015 to shareholders of record on November 13, 2015.

During the fourth quarter of fiscal 2015, MAXIMUS repurchased approximately 865,000 shares of the Company’s common stock for $52.2 million (a weighted average price of $60.20). For the full fiscal year, MAXIMUS repurchased approximately 1.6 million shares for $82.8 million (a weighted average price of $51.11). Subsequent to September 30, 2015, the Company repurchased approximately 103,000 additional shares of stock for $6.1 million (a weighted average price of $59.41). The Company currently has an estimated $162.5 million available for repurchases under its Board-authorized share repurchase program.

MAXIMUS is establishing formal fiscal year 2016 guidance. The Company still expects revenue to range between $2.4 billion and $2.5 billion for fiscal 2016. The Company is updating its preliminary fiscal year 2016 GAAP diluted earnings per share guidance and now expects GAAP diluted EPS to range between $2.40 and $2.70. The lowered earnings outlook is attributable to a slower ramp and hence a reduced contribution from the U.K. Health Assessment Advisory Service contract. This guidance does not include any acquisitions or significant legal expenses or recoveries. The Company estimates that approximately 93% of its fiscal 2016 forecasted revenue is in the form of backlog or option periods.

“There were many positive developments for the Company over the past year. We secured new work and expanded existing contracts across all three of our segments. With the acquisitions of Acentia and Remploy, we introduced new growth platforms that strengthen our position for future opportunities in key markets. We also successfully launched operations under the Australian jobactive contract, a key rebid that included an increase in our market share,” commented MAXIMUS CEO Richard A. Montoni.

Montoni continued, “While the slower-than-expected ramp-up of the U.K. Health Assessment Advisory Service contract resulted in a reduced earnings outlook for fiscal year 2016, we remain confident that we will bring about the necessary changes to put this start-up contract on a path to success, as we have done with many large start-up contracts in the past. This is a single contract in our global portfolio and the overall macro demand trends for our services remain very favorable.”

MAXIMUS will host a conference call this morning, November 12, 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:

For those unable to listen to the live call, a replay will be available through November 25, 2015 by calling:

877.660.6853 (Domestic)/+1.201.612.7415 (International)
Replay conference ID number: 13623294

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.

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 maximus.com.


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

	Three Months Ended September 30,					Year Ended September 30,
	2015		2014			2015		2014
Revenue	$	578,683	$	435,406		$	2,099,821	$	1,700,912
Cost of revenue		453,376		322,474			1,587,104		1,248,789
Gross profit		125,307		112,932			512,717		452,123
Selling, general and administrative expenses		60,442		59,597			238,792		220,925
Amortization of intangible assets		3,166		1,527			9,348		5,890
Acquisition-related expenses		172		—			4,745		—
Operating income		61,527		51,808			259,832		225,308
Interest expense		709		—			1,398		—
Other income, net		257		758			1,385		2,061
Income before income taxes		61,075		52,566			259,819		227,369
Provision for income taxes		24,663		16,414			99,770		81,973
Net income		36,412		36,152			160,049		145,396
Income/(loss) attributable to non-controlling interests		975		(84	)		2,277		(44	)
Net income attributable to MAXIMUS	$	35,437	$	36,236		$	157,772	$	145,440

Basic earnings per share	$	0.53	$	0.54		$	2.37	$	2.15

Diluted earnings per share	$	0.53	$	0.53		$	2.35	$	2.11

Dividends per share	$	0.045	$	0.045		$	0.18	$	0.18

Weighted average shares outstanding:
Basic		66,466		66,784			66,682		67,680
Diluted		67,133		68,233			67,275		69,087


MAXIMUS, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)

	September 30,
	2015		2014
ASSETS	(Unaudited)
Current assets:
Cash and cash equivalents	$	74,672	$	158,112
Accounts receivable—billed and billable, net		396,177		263,011
Accounts receivable—unbilled		30,929		26,556
Deferred income taxes		18,992		28,108
Prepaid expenses and other current assets		60,129		56,673
Total current assets		580,899		532,460

Property and equipment, net		137,830		80,246
Capitalized software, net		32,483		39,734
Goodwill		376,302		170,626
Intangible assets, net		102,358		39,239
Deferred contract costs, net		19,126		12,046
Deferred compensation plan assets		19,310		17,126
Other assets		11,863		9,519
Total assets	$	1,280,171	$	900,996

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	155,411	$	103,181
Accrued compensation and benefits		99,700		94,137
Deferred revenue		77,642		55,878
Income taxes payable		11,709		4,693
Long-term debt, current portion		356		157
Other liabilities		11,562		7,275
Total current liabilities		356,380		265,321
Deferred revenue, less current portion		52,954		32,257
Deferred income taxes		15,159		21,383
Long-term debt		210,618		1,060
Deferred compensation plan liabilities, less current portion		20,635		18,768
Other liabilities		8,726		6,022
Total liabilities		664,472		344,811

Total equity		615,699		556,185
Total liabilities and equity	$	1,280,171	$	900,996


MAXIMUS, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands; Unaudited)

	Three Months Ended September 30,						Year Ended September 30,
	2015			2014			2015			2014
Cash flows from operating activities:
Net income	$	36,412		$	36,152		$	160,049		$	145,396
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property, plant, equipment and capitalized software		9,232			10,844			46,849			42,778
Amortization of intangible assets		3,166			1,527			9,348			5,890
Deferred income taxes		9,728			3,475			807			2,898
Stock compensation expense		4,452			4,469			17,237			17,278
Changes in assets and liabilities, net of effects of business combinations and divestitures:
Accounts receivable — billed		(22,344	)		1,218			(103,774	)		(144	)
Accounts receivable — unbilled		(3,120	)		(1,224	)		(911	)		2,056
Prepaid expenses and other current assets		(2,979	)		(1,197	)		(6,475	)		(2,540	)
Deferred contract costs		145			1,698			(7,245	)		2,254
Accounts payable		(713	)		2,758			44,351			(2,928	)
Accrued compensation and benefits		1,389			9,767			(3,157	)		12,277
Deferred revenue		15,524			2,753			47,948			2,841
Income taxes		(28,342	)		(17,136	)		9,134			(10,974	)
Other assets and liabilities		2,687			(6,654	)		(7,944	)		(3,482	)
Cash provided by operating activities		25,237			48,450			206,217			213,600

Cash flows from investing activities:
Acquisition of business, net of cash acquired		400			—			(289,212	)		(2,670	)
Purchases of property and equipment		(30,751	)		(17,873	)		(98,994	)		(36,262	)
Capitalized software costs		(1,231	)		(1,709	)		(6,155	)		(10,886	)
Proceeds from note receivable		83			79			489			429
Cash used in investing activities		(31,499	)		(19,503	)		(393,872	)		(49,389	)

Cash flows from financing activities:
Cash dividends paid		(2,961	)		(3,006	)		(11,927	)		(12,187	)
Repurchases of common stock		(50,171	)		(51,787	)		(82,787	)		(111,141	)
Stock compensation tax benefit		10,682			6,740			9,474			9,665
Tax withholding related to RSU vesting		—			—			(12,451	)		(14,681	)
Stock option exercises		347			217			868			1,362
Issuance of debt		75,000			—			330,993			15,000
Repayment of debt		(31,499	)		(40	)		(121,611	)		(15,162	)
Expansion of credit facility		—			—			(1,444	)		—
Cash provided by/(used in) financing activities		1,398			(47,876	)		111,115			(127,144	)

Effect of exchange rate changes on cash and cash equivalents		(2,341	)		(5,901	)		(6,900	)		(4,572	)

Net increase/(decrease) in cash and cash equivalents		(7,205	)		(24,830	)		(83,440	)		32,495

Cash and cash equivalents, beginning of period		81,877			182,942			158,112			125,617

Cash and cash equivalents, end of period	$	74,672		$	158,112		$	74,672		$	158,112


MAXIMUS, Inc.
SEGMENT INFORMATION 2015
(Amounts in thousands)
(Unaudited)

	Quarter Ended																				Year Ended
	Dec. 31,			% ⁽¹⁾		Mar. 31,			% ⁽¹⁾		Jun. 30,			% ⁽¹⁾		Sept. 30,			% ⁽¹⁾		Sept. 30, 2015			% ⁽¹⁾
	2014					2015					2015					2015

Health Services	$	243,570				$	270,918				$	298,549				$	296,201				$	1,109,238
U.S. Federal Services		107,729					99,465					141,011					154,279					502,484
Human Services		115,744					111,411					132,741					128,203					488,099
Revenue		467,043					481,794					572,301					578,683					2,099,821

Health Services		183,723					201,045					228,736					241,626					855,130
U.S. Federal Services		82,161					77,451					106,231					117,995					383,838
Human Services		81,892					78,953					93,536					93,755					348,136
Cost of revenue		347,776					357,449					428,503					453,376					1,587,104

Health Services		59,847		24.6	%		69,873		25.8	%		69,813		23.4	%		54,575		18.4	%		254,108		22.9	%
U.S. Federal Services		25,568		23.7	%		22,014		22.1	%		34,780		24.7	%		36,284		23.5	%		118,646		23.6	%
Human Services		33,852		29.2	%		32,458		29.1	%		39,205		29.5	%		34,448		26.9	%		139,963		28.7	%
Gross profit		119,267		25.5	%		124,345		25.8	%		143,798		25.1	%		125,307		21.7	%		512,717		24.4	%

Health Services		22,007		9.0	%		28,397		10.5	%		25,343		8.5	%		24,068		8.1	%		99,815		9.0	%
U.S. Federal Services		12,250		11.4	%		12,377		12.4	%		19,244		13.6	%		15,381		10.0	%		59,252		11.8	%
Human Services		17,699		15.3	%		18,523		16.6	%		22,402		16.9	%		21,095		16.5	%		79,719		16.3	%
Other / Corporate		5					95					8					(102	)				6
SG&A		51,961		11.1	%		59,392		12.3	%		66,997		11.7	%		60,442		10.4	%		238,792		11.4	%

Health Services		37,840		15.5	%		41,476		15.3	%		44,470		14.9	%		30,507		10.3	%		154,293		13.9	%
U.S. Federal Services		13,318		12.4	%		9,637		9.7	%		15,536		11.0	%		20,903		13.5	%		59,394		11.8	%
Human Services		16,153		14.0	%		13,935		12.5	%		16,803		12.7	%		13,353		10.4	%		60,244		12.3	%
Other / Corporate		(5	)				(95	)				(8	)				102					(6	)
Amortization of intangible assets		(1,475	)				(1,432	)				(3,275	)				(3,166	)				(9,348	)
Acquisition-related expenses		(600	)				(1,514	)				(2,459	)				(172	)				(4,745	)
Total operating income	$	65,231		14.0	%	$	62,007		12.9	%	$	71,067		12.4	%	$	61,527		10.6	%	$	259,832		12.4	%


MAXIMUS, Inc.
SEGMENT INFORMATION 2014
(Amounts in thousands)
(Unaudited)

	Quarter Ended																				Year Ended
	Dec. 31,			% ⁽¹⁾		Mar. 31,			% ⁽¹⁾		Jun. 30,			% ⁽¹⁾		Sept. 30,			% ⁽¹⁾		Sept. 30, 2014			% ⁽¹⁾
	2013					2014					2014					2014

Health Services	$	216,544				$	230,953				$	228,703				$	230,450				$	906,650
U.S. Federal Services		82,040					92,645					76,550					90,605					341,840
Human Services		108,008					115,417					114,646					114,351					452,422
Revenue		406,592					439,015					419,899					435,406					1,700,912

Health Services		168,350					179,337					173,803					171,432					692,922
U.S. Federal Services		53,728					59,393					51,918					66,008					231,047
Human Services		78,598					79,613					81,575					85,034					324,820
Cost of revenue		300,676					318,343					307,296					322,474					1,248,789

Health Services		48,194		22.3	%		51,616		22.3	%		54,900		24.0	%		59,018		25.6	%		213,728		23.6	%
U.S. Federal Services		28,312		34.5	%		33,252		35.9	%		24,632		32.2	%		24,597		27.1	%		110,793		32.4	%
Human Services		29,410		27.2	%		35,804		31.0	%		33,071		28.8	%		29,317		25.6	%		127,602		28.2	%
Gross profit		105,916		26.0	%		120,672		27.5	%		112,603		26.8	%		112,932		25.9	%		452,123		26.6	%

Health Services		22,650		10.5	%		21,907		9.5	%		25,747		11.3	%		27,868		12.1	%		98,172		10.8	%
U.S. Federal Services		11,525		14.0	%		13,226		14.3	%		10,586		13.8	%		12,358		13.6	%		47,695		14.0	%
Human Services		17,074		15.8	%		18,528		16.1	%		19,470		17.0	%		19,372		16.9	%		74,444		16.5	%
Other / Corporate		17					563					35					(1	)				614
SG&A		51,266		12.6	%		54,224		12.4	%		55,838		13.3	%		59,597		13.7	%		220,925		13.0	%

Health Services		25,544		11.8	%		29,709		12.9	%		29,153		12.7	%		31,150		13.5	%		115,556		12.7	%
U.S. Federal Services		16,787		20.5	%		20,026		21.6	%		14,046		18.3	%		12,239		13.5	%		63,098		18.5	%
Human Services		12,336		11.4	%		17,276		15.0	%		13,601		11.9	%		9,945		8.7	%		53,158		11.7	%
Other / Corporate		(17	)				(563	)				(35	)				1					(614	)
Amortization of intangible assets		(1,353	)				(1,468	)				(1,542	)				(1,527	)				(5,890	)
Total operating income	$	53,297		13.1	%	$	64,980		14.8	%	$	55,223		13.2	%	$	51,808		11.9	%	$	225,308		13.2	%


MAXIMUS, Inc.
Non-GAAP Measures

ADJUSTED DILUTED EPS
FY 2015
(Unaudited)

	Quarter Ended								Year Ended
	Dec. 31, 2014		Mar. 31, 2015		Jun. 30, 2015		Sept. 30, 2015		Sept. 30, 2015
Diluted EPS - GAAP basis	$	0.63	$	0.58	$	0.62	$	0.53	$	2.35

Acquisition-related expenses		–		0.02		0.02		–		0.04

Adjusted Diluted EPS	$	0.63	$	0.60	$	0.64	$	0.53	$	2.39


ADJUSTED DILUTED EPS
FY 2014
(Unaudited)

	Quarter Ended								Year Ended
	Dec. 31, 2013		Mar. 31, 2014		Jun. 30, 2014		Sept. 30, 2014		Sept. 30, 2014
Diluted EPS - GAAP basis	$	0.49	$	0.59	$	0.49	$	0.53	$	2.11

Acquisition-related expenses		–		–		–		–		–

Adjusted Diluted EPS	$	0.49	$	0.59	$	0.49	$	0.53	$	2.11


FREE CASH FLOW
(Dollars in thousands; Unaudited)

	Three Months Ended September 30,						Year Ended September 30,
	2015			2014			2015			2014

Cash provided by operating activities	$	25,237		$	48,450		$	206,217		$	213,600
Purchases of property and equipment		(30,751	)		(17,873	)		(98,994	)		(36,262	)
Capitalized software costs		(1,231	)		(1,709	)		(6,155	)		(10,886	)
Free cash flow	$	(6,745	)	$	28,868		$	101,068		$	166,452

(1)		Percentage of respective segment revenue.

(1)		Percentage of respective segment revenue.