RESTON, Va., Feb. 8, 2018
/PRNewswire/ -- MAXIMUS (NYSE: MMS), a leading provider of
government services worldwide, today reported financial results for
the three months ended December 31, 2017.
Highlights for the first quarter of fiscal year 2018
include:
- Revenue of $623.1 million
- Diluted earnings per share of $0.89 compared to $0.71 for the same period last year
- Cash flows from operations of $37.9
million and free cash flow of $31.4
million
- Year-to-date signed contract awards of $1.2 billion and contracts pending (awarded but
unsigned) of $236.0 million at
December 31, 2017
- Sales pipeline of $3.2 billion at
December 31, 2017
- Updated fiscal 2018 diluted earnings per share guidance to
range between $3.30 and $3.50 due to the benefits from U.S. tax
reform
For the first quarter of fiscal 2018, revenue increased 3% to
$623.1 million compared to
$607.6 million reported for the same
period last year. The increase was driven by revenue increases in
the Health Services and Human Services Segments, including
favorable foreign exchange movements, which offset expected revenue
declines in the U.S. Federal Services Segment in the quarter.
Total company operating margin for the first quarter of fiscal
2018 improved 70 basis points to 12.8% compared to the prior-year
period.
For the first quarter of fiscal 2018, net income attributable to
MAXIMUS totaled $59.1 million (or
$0.89 of diluted earnings per share).
This compares to fiscal 2017 first quarter diluted earnings per
share of $0.71.
The passage of the Tax Cuts and Jobs Act on December 22, 2017 in the United States creates significant benefits
for MAXIMUS. The reduction of the corporate income tax rate in the
U.S. will increase the Company's earnings and cash flow. Excluding
the benefits from U.S. tax reform, diluted earnings per share would
have been $0.78 for the first quarter
of fiscal 2018.
Health Services Segment
Health Services Segment
revenue for the first quarter of fiscal 2018 increased 3% to
$352.1 million compared to
$340.7 million reported for the same
period last year. The increase in revenue was driven by organic
growth and favorable currency exchange movements. On a constant
currency basis, segment revenue growth would have been 2%.
Operating margin for the first quarter of fiscal 2018 was 16.4%
compared to 14.7% reported for the prior-year period. Operating
margin expansion reflects a portfolio of contracts at varying
stages of maturity, as well as improved service delivery on the
Health Assessment Advisory Service contract compared to the
prior-year period.
U.S. Federal Services Segment
U.S. Federal Services
Segment revenue for the first quarter of fiscal 2018 decreased
6% to $133.0 million compared to
$141.3 million reported for the same
period last year. As previously disclosed, the lower revenue was
largely due to some contracts that ended, including the wind down
of the Company's subcontract supporting a program with the U.S.
Department of Veterans Affairs. This subcontract ended in
April 2017.
Operating margin for the first quarter of fiscal 2018 was 12.6%
compared to 12.7% reported for the prior-year period.
Human Services Segment
Human Services Segment revenue
for the first quarter of fiscal 2018 increased 10% to $138.1 million compared to $125.5 million reported for the same period last
year. The increase in revenue was driven by higher levels of
pass-through revenue from the Company's Australian operations, and
to a lesser extent, favorable foreign exchange movements, both of
which offset the expected wind down of the Work Programme in the
United Kingdom.
Operating margin for the first quarter of fiscal 2018 was 5.8%
compared to 9.4% reported for the prior-year period. As
expected, operating margin was unfavorably impacted by a number of
new contracts that are in the start-up phase and the aforementioned
pass-through revenue in Australia.
Sales and Pipeline
Year-to-date signed contract awards
at December 31, 2017 totaled $1.2
billion and contracts pending (awarded but unsigned) totaled
$236.0 million.
The sales pipeline at December 31, 2017 was $3.2 billion (comprised of approximately
$1.0 billion in proposals pending,
$0.2 billion in proposals in
preparation, and $1.9 billion in
opportunities tracking). This compares to a pipeline of
$2.4 billion at September 30, 2017.
Balance Sheet and Cash Flows
Cash and cash equivalents
at December 31, 2017 totaled $196.9
million. For the three months ended December 31, 2017,
cash flows from operations totaled $37.9
million, with free cash flow of $31.4
million.
At December 31, 2017, days sales outstanding (DSO) were 69
and consistent with the prior year.
On November 30, 2017, MAXIMUS paid a quarterly cash
dividend of $0.045 per share. On January 11, 2018, the Company announced a
$0.045 per share cash
dividend, payable on February 28, 2018 to shareholders of
record on February 15, 2018.
Outlook
MAXIMUS continues to expect revenue to range
between $2.475 billion and
$2.550 billion for fiscal 2018 with a
bias toward the lower half of the range due to contracts that are
ending in the U.S. Federal Services Segment, including temporary
work in support of federal disaster relief efforts that came to an
end earlier than expected.
MAXIMUS has historically paid a high income tax rate in
the United States and the majority
of its earnings are also derived in the U.S. As a result of the
benefits of tax reform in the U.S., the Company expects that its
fiscal 2018 earnings will benefit by approximately $0.35 of diluted earnings per share and estimates
its effective income tax rate for fiscal 2018 will range between
26% and 28%. As a result, the Company is raising its fiscal 2018
earnings guidance and now expects GAAP diluted earnings per share
to range between $3.30 and
$3.50 for fiscal 2018. This compares
to the Company's prior guidance of $2.95 to $3.15.
The Company's guidance does not include any future acquisitions
or future legal expenses or recoveries.
"In the near-term, MAXIMUS is focusing on the role of digital
technology and clinical expertise to enhance our competitive
position, help drive efficiencies, and improve overall service
delivery. The benefit of U.S. tax reform enables us to invest more
capital and resources to bring our current capacity for innovation
and delivery to the next level. Our long-term growth strategy of
growing in our current core markets, moving into adjacent markets
and geographies, and incorporating new platforms provides us with
multiple paths. This strategy will naturally evolve, but we believe
it provides us with the flexibility to meet the changing needs of
our clients and capitalize on emerging opportunities in dynamic
global markets," commented MAXIMUS CEO Richard A. Montoni.
Conference Call and Webcast Information
MAXIMUS will
host a conference call this morning, February 8, 2018, 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 22, 2018.
Callers can access the replay by calling:
877.660.6853 (Domestic)/+1.201.612.7415
(International)
Replay conference ID number: 13675721
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 20,000 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.
In this news release, we use the non-GAAP measures organic
revenue growth, constant currency movement 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, 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
December 31,
|
|
|
2017
|
|
2016
|
Revenue
|
|
$
|
623,148
|
|
|
$
|
607,564
|
|
Cost of
revenue
|
|
471,188
|
|
|
462,746
|
|
Gross
profit
|
|
151,960
|
|
|
144,818
|
|
Selling, general and
administrative expenses
|
|
69,559
|
|
|
65,398
|
|
Amortization of
intangible assets
|
|
2,718
|
|
|
3,402
|
|
Restructuring
costs
|
|
—
|
|
|
2,242
|
|
Operating income
|
|
79,683
|
|
|
73,776
|
|
Interest
expense
|
|
168
|
|
|
849
|
|
Other income,
net
|
|
287
|
|
|
263
|
|
Income
before income taxes
|
|
79,802
|
|
|
73,190
|
|
Provision for income
taxes
|
|
19,850
|
|
|
26,861
|
|
Net income
|
|
59,952
|
|
|
46,329
|
|
Income/(loss)
attributable to noncontrolling interests
|
|
861
|
|
|
(335)
|
|
Net income
attributable to MAXIMUS
|
|
$
|
59,091
|
|
|
$
|
46,664
|
|
Basic earnings per
share attributable to MAXIMUS
|
|
$
|
0.90
|
|
|
$
|
0.71
|
|
Diluted earnings per
share attributable to MAXIMUS
|
|
$
|
0.89
|
|
|
$
|
0.71
|
|
Dividends paid per
share
|
|
$
|
0.045
|
|
|
$
|
0.045
|
|
Weighted average
shares outstanding:
|
|
|
|
|
Basic
|
|
65,866
|
|
|
65,770
|
|
Diluted
|
|
66,177
|
|
|
66,020
|
|
MAXIMUS, Inc.
|
CONSOLIDATED
BALANCE SHEETS
|
(Amounts in
thousands)
|
|
|
December 31,
2017
|
|
September 30,
2017
|
|
(unaudited)
|
|
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
196,905
|
|
|
$
|
166,252
|
|
Accounts receivable —
billed and billable
|
438,995
|
|
|
394,338
|
|
Accounts receivable —
unbilled
|
30,944
|
|
|
36,475
|
|
Income taxes
receivable
|
2,086
|
|
|
4,528
|
|
Prepaid expenses and
other current assets
|
49,919
|
|
|
55,649
|
|
Total
current assets
|
718,849
|
|
|
657,242
|
|
Property and
equipment, net
|
95,931
|
|
|
101,651
|
|
Capitalized software,
net
|
24,629
|
|
|
26,748
|
|
Goodwill
|
403,261
|
|
|
402,976
|
|
Intangible assets,
net
|
96,138
|
|
|
98,769
|
|
Deferred contract
costs, net
|
14,901
|
|
|
16,298
|
|
Deferred compensation
plan assets
|
29,826
|
|
|
28,548
|
|
Deferred income
taxes
|
7,679
|
|
|
7,691
|
|
Other
assets
|
10,316
|
|
|
10,739
|
|
Total
assets
|
$
|
1,401,530
|
|
|
$
|
1,350,662
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts payable and
accrued liabilities
|
$
|
133,408
|
|
|
$
|
122,083
|
|
Accrued compensation
and benefits
|
67,304
|
|
|
105,667
|
|
Deferred
revenue
|
63,185
|
|
|
71,722
|
|
Income taxes
payable
|
2,794
|
|
|
4,703
|
|
Other
liabilities
|
12,565
|
|
|
12,091
|
|
Total
current liabilities
|
279,256
|
|
|
316,266
|
|
Deferred revenue,
less current portion
|
24,264
|
|
|
28,182
|
|
Deferred income
taxes
|
25,914
|
|
|
20,106
|
|
Long-term
debt
|
12,050
|
|
|
527
|
|
Deferred compensation
plan liabilities, less current portion
|
34,162
|
|
|
30,707
|
|
Other
liabilities
|
18,232
|
|
|
9,106
|
|
Total
liabilities
|
393,878
|
|
|
404,894
|
|
Shareholders'
equity:
|
|
|
|
Common stock, no par
value
|
481,261
|
|
|
475,592
|
|
Accumulated other
comprehensive loss
|
(27,304)
|
|
|
(27,619)
|
|
Retained
earnings
|
547,151
|
|
|
492,112
|
|
Total
MAXIMUS shareholders' equity
|
1,001,108
|
|
|
940,085
|
|
Noncontrolling
interests
|
6,544
|
|
|
5,683
|
|
Total
equity
|
1,007,652
|
|
|
945,768
|
|
Total
liabilities and equity
|
$
|
1,401,530
|
|
|
$
|
1,350,662
|
|
MAXIMUS, Inc.
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
(Amounts in
thousands)
|
(Unaudited)
|
|
|
|
Three Months
Ended
December
31,
|
|
|
2017
|
|
2016
|
Cash flows from
operations:
|
|
|
|
|
Net income
|
|
$
|
59,952
|
|
|
$
|
46,329
|
|
Adjustments to
reconcile net income to cash flows from operations:
|
|
|
|
|
Depreciation and
amortization of property, equipment and capitalized
software
|
|
13,719
|
|
|
14,562
|
|
Amortization of
intangible assets
|
|
2,718
|
|
|
3,402
|
|
Deferred income
taxes
|
|
5,707
|
|
|
5,910
|
|
Stock compensation
expense
|
|
5,402
|
|
|
4,889
|
|
|
|
|
|
|
Change in assets and
liabilities:
|
|
|
|
|
Accounts receivable —
billed and billable
|
|
(44,381)
|
|
|
14,687
|
|
Accounts receivable —
unbilled
|
|
5,535
|
|
|
(1,998)
|
|
Prepaid expenses and
other current assets
|
|
6,019
|
|
|
6,245
|
|
Deferred contract
costs
|
|
1,413
|
|
|
44
|
|
Accounts payable and
accrued liabilities
|
|
11,387
|
|
|
(14,575)
|
|
Accrued compensation
and benefits
|
|
(29,588)
|
|
|
(17,237)
|
|
Deferred
revenue
|
|
(12,405)
|
|
|
(10,096)
|
|
Income
taxes
|
|
9,642
|
|
|
16,902
|
|
Other assets and
liabilities
|
|
2,748
|
|
|
2,076
|
|
Cash flows from
operations
|
|
37,868
|
|
|
71,140
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
Purchases of property
and equipment and capitalized software costs
|
|
(6,514)
|
|
|
(7,768)
|
|
Proceeds from the
sale of a business
|
|
—
|
|
|
385
|
|
Other
|
|
45
|
|
|
43
|
|
Cash used in
investing activities
|
|
(6,469)
|
|
|
(7,340)
|
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
Cash dividends paid
to MAXIMUS shareholders
|
|
(2,930)
|
|
|
(2,920)
|
|
Repurchases of common
stock
|
|
(1,038)
|
|
|
(28,767)
|
|
Tax withholding
related to RSU vesting
|
|
(8,529)
|
|
|
(9,255)
|
|
Borrowings under
credit facility
|
|
59,683
|
|
|
65,000
|
|
Repayment of credit
facility and other long-term debt
|
|
(48,156)
|
|
|
(80,067)
|
|
Other
|
|
—
|
|
|
(1,145)
|
|
Cash used in
financing activities
|
|
(970)
|
|
|
(57,154)
|
|
|
|
|
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
|
224
|
|
|
(3,078)
|
|
|
|
|
|
|
Net increase in cash
and cash equivalents
|
|
30,653
|
|
|
3,568
|
|
|
|
|
|
|
Cash and cash
equivalents, beginning of period
|
|
166,252
|
|
|
66,199
|
|
|
|
|
|
|
Cash and cash
equivalents, end of period
|
|
$
|
196,905
|
|
|
$
|
69,767
|
|
|
|
|
|
|
MAXIMUS,
Inc.
|
SEGMENT
INFORMATION
|
(Amounts in
thousands)
|
(Unaudited)
|
|
|
|
Three Months Ended
December 31,
|
|
|
2017
|
|
%
(1)
|
|
2016
|
|
%
(1)
|
Revenue:
|
|
|
|
|
|
|
|
|
Health
Services
|
|
$
|
352,090
|
|
|
100
|
%
|
|
$
|
340,729
|
|
|
100
|
%
|
U.S. Federal
Services
|
|
132,983
|
|
|
100
|
%
|
|
141,298
|
|
|
100
|
%
|
Human
Services
|
|
138,075
|
|
|
100
|
%
|
|
125,537
|
|
|
100
|
%
|
Total
|
|
$
|
623,148
|
|
|
100
|
%
|
|
$
|
607,564
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
Gross
Profit:
|
|
|
|
|
|
|
|
|
Health
Services
|
|
$
|
91,056
|
|
|
25.9
|
%
|
|
$
|
78,234
|
|
|
23.0
|
%
|
U.S. Federal
Services
|
|
33,358
|
|
|
25.1
|
%
|
|
37,576
|
|
|
26.6
|
%
|
Human
Services
|
|
27,546
|
|
|
20.0
|
%
|
|
29,008
|
|
|
23.1
|
%
|
Total
|
|
$
|
151,960
|
|
|
24.4
|
%
|
|
$
|
144,818
|
|
|
23.8
|
%
|
|
|
|
|
|
|
|
|
|
Selling, general,
and administrative expense:
|
|
|
|
|
|
|
|
|
Health
Services
|
|
$
|
33,416
|
|
|
9.5
|
%
|
|
$
|
28,107
|
|
|
8.2
|
%
|
U.S. Federal
Services
|
|
16,648
|
|
|
12.5
|
%
|
|
19,695
|
|
|
13.9
|
%
|
Human
Services
|
|
19,495
|
|
|
14.1
|
%
|
|
17,239
|
|
|
13.7
|
%
|
Other (3)
|
|
—
|
|
|
NM
|
|
357
|
|
|
NM
|
Total
|
|
$
|
69,559
|
|
|
11.2
|
%
|
|
$
|
65,398
|
|
|
10.8
|
%
|
|
|
|
|
|
|
|
|
|
Operating
income:
|
|
|
|
|
|
|
|
|
Health
Services
|
|
$
|
57,640
|
|
|
16.4
|
%
|
|
$
|
50,127
|
|
|
14.7
|
%
|
U.S. Federal
Services
|
|
16,710
|
|
|
12.6
|
%
|
|
17,881
|
|
|
12.7
|
%
|
Human
Services
|
|
8,051
|
|
|
5.8
|
%
|
|
11,769
|
|
|
9.4
|
%
|
Amortization of
intangible assets
|
|
(2,718)
|
|
|
NM
|
|
(3,402)
|
|
|
NM
|
Restructuring costs
(2)
|
|
—
|
|
|
NM
|
|
(2,242)
|
|
|
NM
|
Other (3)
|
|
—
|
|
|
NM
|
|
(357)
|
|
|
NM
|
Total
|
|
$
|
79,683
|
|
|
12.8
|
%
|
|
$
|
73,776
|
|
|
12.1
|
%
|
|
(1)
|
Percentage of
respective segment revenue. Percentages not considered meaningful
are marked "NM."
|
(2)
|
During fiscal year
2017, we incurred costs in restructuring our United Kingdom Human
Services business.
|
(3)
|
Other costs and
credits relate to SG&A balances that do not relate directly to
segment business activities. During the three months ended
December 31, 2016, we incurred $0.4 million of legal costs
related to a matter that occurred in fiscal year 2009. This matter
was settled in the third quarter of fiscal year 2017.
|
MAXIMUS,
Inc.
|
FREE CASH
FLOW
|
(Non-GAAP
measure)
|
(Amounts in
thousands)
|
(Unaudited)
|
|
|
|
Three Months
Ended
December
31,
|
|
|
2017
|
|
2016
|
Cash flows from
operations
|
|
$
|
37,868
|
|
|
$
|
71,140
|
|
Purchases of property
and equipment and capitalized software costs
|
|
(6,514)
|
|
|
(7,768)
|
|
Free cash
flow
|
|
$
|
31,354
|
|
|
$
|
63,372
|
|
|
|
|
|
|
CONTACT:
|
Lisa Miles
703.251.8637
|
|
lisamiles@maximus.com
|
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SOURCE MAXIMUS