- Ongoing Delays Represents Headwinds to
Current Year While Strong Awards Drive Longer-Term Tailwinds
-
Maximus (NYSE: MMS), a leading provider of government services
worldwide, reported financial results for the three and six months
ended March 31, 2022.
Highlights for the second quarter of fiscal year 2022
include:
- Revenue increased 22.7% to $1.18 billion driven by expected
contributions from the U.S. Federal Services Segment acquisitions
and growth from startups ramping in the Outside the U.S.
Segment.
- Operating margin was 6.4%, or 8.3% adjusting for amortization
of intangible assets. Diluted earnings per share were $0.80, or
$1.07 adjusting for amortization of intangible assets.
- The Company is revising earnings guidance for fiscal year 2022,
primarily due to the ongoing Public Health Emergency (PHE) and
other delays. Revenue guidance remains at $4.5 billion to $4.7
billion, while earnings per share are estimated to range between
$3.00 and $3.50 per share, or $4.07 to $4.57 per share adjusting
for amortization of intangible assets.
- Year-to-date signed contract awards at March 31, 2022, totaled
$1.47 billion and contracts pending (awarded but unsigned) totaled
$1.75 billion.
- A quarterly cash dividend of $0.28 per share payable on May 31,
2022, to shareholders of record on May 13, 2022.
"Results for the second quarter reflected our expectations for
the business, which continues to face delays that we firmly believe
to be temporary. As evidenced by strong bookings year-to-date, the
business continues to be well positioned as these policy and
COVID-related delays abate," shared Bruce Caswell, President and
Chief Executive Officer. "Our new awards, virtually all of which
are longer-term in nature, underscore our business model and prove
the durability of Maximus and our ability to use strategic M&A
to grow market share."
Second Quarter Results
Revenue for the second quarter of fiscal year 2022 increased
22.7% to $1.18 billion, compared to $959.3 million for the prior
year period. The $218.0 million increase was principally driven by
anticipated contributions from the U.S. Federal Services Segment
acquisitions and the U.K. Restart Programme in the Outside the U.S.
Segment. These increases were offset by expected declines in
short-term COVID-19 response work. Organic revenue for the second
quarter of fiscal 2022 remained relatively flat while adjusting for
COVID-19 response work, normalized organic growth would be
approximately 20% over the prior year period.
Earnings results in the second quarter of fiscal year 2022
reflected expectations for lower earnings caused primarily by
delays in our core programs returning to pre-pandemic levels as the
COVID-19 response work continues its predicted decline. Operating
income totaled $75.3 million yielding an operating margin of 6.4%,
or 8.3% adjusting for amortization of intangible assets. This
compares to an operating margin of 11.8% for the prior year period,
or 12.3% adjusting for amortization. Diluted earnings per share
were $0.80, or $1.07 adjusting for amortization as compared to
$1.29 per share, or $1.35 adjusting for amortization, for the prior
year period.
U.S. Services Segment
The U.S. Services Segment reported revenue of $398.1 million for
the second quarter of fiscal year 2022 compared to $448.2 million
reported in the prior year period. The revenue decline was due to
the expected reduction in short-term COVID-19 response work.
Adjusting for this work, normalized organic growth in the segment
would be approximately 25% driven by ramping of new work, including
COVID-19 response work that has evolved into longer-term work with
new customers gained during the pandemic.
Operating margin for the second quarter of fiscal year 2022 was
11.7% for the segment compared to 18.5% reported for the prior year
period. Expected declines in profitable, short term COVID-19
response work while the redetermination activities tied to the PHE
remain paused were responsible for the lower comparative
margin.
U.S. Federal Services Segment
U.S. Federal Services Segment revenue for the second quarter of
fiscal year 2022 increased 74% to $573.3 million, compared to
$330.1 million reported for the prior year. Growth was driven by
expected contributions from the acquisitions of Attain Federal,
VES, and Aidvantage. Organic revenue in the segment for the second
quarter of fiscal 2022 increased approximately 9%. Adjusting for
COVID-19 response work, normalized organic growth in the segment
would be approximately 13% over the prior year period.
The segment's operating margin for the second quarter of fiscal
year 2022 was 8.1% as compared to 7.0% reported for the prior year
period. Contributions from the Attain Federal and VES acquisitions
improved margins in the segment but were tempered by impacts from
the Aidvantage business. Costs tied to the transition from the
prior provider were higher than anticipated and the continued delay
in return to repayment resulted in reduced revenue and lower
profitability in the quarter.
Outside the U.S. Segment
Outside the U.S. Segment revenue for the second quarter of
fiscal year 2022 increased 13.8% to $206.0 million as compared to
$180.9 million reported for the prior year. The primary driver of
growth was ramping of the U.K. Restart Programme.
The segment's operating margin for the second quarter of fiscal
year 2022 was 2.1%. The margin for the prior year period of 8.3%
benefited from above average performance in Australia. Results for
this quarter benefited from stronger than anticipated performance
on the U.K. Restart Programme which achieved profitability ahead of
schedule. This is tempered by future volume reductions on the
largest employment services contract in Australia following a rebid
process.
Sales and Pipeline
Year-to-date signed contract awards at March 31, 2022, totaled
$1.47 billion and contracts pending (awarded but unsigned) totaled
$1.75 billion. The awards are comprised of longer periods of
performance that reflect solid, long-term drivers in the
business.
The sales pipeline at March 31, 2022, was $29.8 billion
(comprised of approximately $7.4 billion in proposals pending, $3.6
billion in proposals in preparation, and $18.8 billion in
opportunities tracking). New work opportunities represent
approximately 55% of the total sales pipeline.
Balance Sheet and Cash Flows
At March 31, 2022, cash and cash equivalents totaled $92.6
million and gross debt was $1.46 billion. The ratio of debt, net of
allowed cash, to pro-forma EBITDA for the quarter ended March 31,
2022, as calculated in accordance with our credit agreement, was
2.4x.
For the second quarter of fiscal year 2022, cash flows were
strong as anticipated. Cash from operating activities totaled
$114.8 million, and free cash flow was $98.2 million.
As of March 31, 2022, Days Sales Outstanding (DSO) were 68 days
and within the Company's typical range of 65 to 80 days.
Purchases of Maximus common stock totaled $24.5 million in the
second quarter of fiscal year 2022.
On April 8, 2022, our Board of Directors declared a quarterly
cash dividend of $0.28 for each share of our common stock
outstanding. The dividend is payable on May 31, 2022, to
shareholders of record on May 13, 2022.
Revised Earnings Guidance
The Company is maintaining revenue guidance for fiscal year 2022
with revenue expected to range between $4.5 billion and $4.7
billion. Earnings guidance is revised following further extensions
of the ongoing PHE and other delays. Diluted earnings per share
(DEPS) is expected to range between $3.00 and $3.50 per share, or
between $4.07 and $4.57 per share adjusting for amortization of
intangible assets.
The reduction to earnings guidance is comprised of three primary
components. First, the PHE has been extended through mid-July,
which is approximately $0.30 DEPS of estimated impact for the
one-quarter delay. The Company has further lowered the bottom end
of earnings guidance to allow for an additional PHE extension
through mid-October, representing an additional $0.30 DEPS of
estimated impact. Second, further delays on ramping of new work in
the U.S. Services and Outside the U.S. segments reduced guidance by
an estimated $0.20 DEPS. These delays are believed to be temporary
and are partly attributable to ongoing COVID-19 disruptions. Third,
the revised expectations for the Australia employment services
rebid result in an estimated DEPS reduction of approximately $0.15;
the impact is outsized in fiscal year 2022 compared to subsequent
periods and includes severance charges in the third quarter.
For fiscal year 2022, cash flows from operations are expected to
range between $225 million and $300 million, and free cash flow to
range between $175 million and $250 million in fiscal year 2022.
The effective income tax rate is expected to range between 24.5%
and 25.5%, weighted average shares outstanding to range between
62.0 million and 62.2 million, absent significant share purchase
activity, and interest expense to range between $40 million and $42
million for fiscal year 2022.
"While pandemic-related delays continue to constrain our fiscal
2022 earnings, I am encouraged by the potential of our business
next fiscal year and beyond once the uncertainties of the pandemic
are behind us. In the meantime, we continue to build momentum for
the business," Caswell continued. "We believe the long-term
macroeconomic drivers favor our business as we continue to be a
valuable partner to government with growing capabilities. I look
forward to sharing more, including our refreshed 3-to-5-year
strategy for Maximus, on our Investor Day on May 24, 2022."
Conference Call and Webcast Information
Maximus will host a conference call tomorrow, May 5, 2022, at
9:00 a.m. (ET). Shareholders are invited to submit questions for
management’s consideration by emailing IR@maximus.com up to one
hour prior to the call.
The call is open to the public and available by webcast or by
phone at:
877.407.8289 (Domestic) / +1.201.689.8341 (International)
For those unable to listen to the live call, a recording of the
webcast will be available on investor.maximus.com.
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 38,000
employees worldwide, Maximus is a proud partner to government
agencies in the United States, Australia, Canada, Italy, Saudi
Arabia, Singapore, South Korea, Sweden, and the United Kingdom. For
more information, visit maximus.com.
Non-GAAP Measures and Risk Factors
This release refers to non-GAAP measures and other indicators,
including free cash flow, operating income and EPS adjusted for
amortization of intangible assets and other non-GAAP measures.
A description of these non-GAAP measures, the reasons why we use
and present them, and details as to how they are calculated are
included in our forthcoming Form 10-Q.
The presentation of these non-GAAP numbers is not meant to be
considered in isolation, nor as alternatives to cash flows from
operations, 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 risks could cause the Company’s actual results to differ
materially from those indicated by such forward-looking statements.
A summary of risk factors can be found in Item 1A, "Risk Factors"
in our Annual Report on Form 10-K for the year ended September 30,
2021, which was filed with the Securities and Exchange Commission
(SEC) on November 18, 2021. The Company's SEC reports are
accessible on maximus.com.
Maximus, Inc.
Consolidated Statements of
Operations
(Unaudited)
For the Three Months Ended
For the Six Months Ended
March 31, 2022
March 31, 2021
March 31, 2022
March 31, 2021
(in thousands, except per share
amounts)
Revenue
$
1,177,326
$
959,280
$
2,328,202
$
1,904,834
Cost of revenue
948,875
728,622
1,871,596
1,468,121
Gross profit
228,451
230,658
456,606
436,713
Selling, general, and administrative
expenses
130,307
112,402
254,528
224,369
Amortization of intangible assets
22,856
5,070
45,261
11,586
Operating income
75,288
113,186
156,817
200,758
Interest expense
(9,438
)
(756
)
(19,076
)
(962
)
Other income/(expense), net
715
(520
)
404
(1,295
)
Income before income taxes
66,565
111,910
138,145
198,501
Provision for income taxes
16,469
31,296
34,719
53,810
Net income
$
50,096
$
80,614
$
103,426
$
144,691
Earnings per share:
Basic
$
0.81
$
1.30
$
1.66
$
2.33
Diluted
$
0.80
$
1.29
$
1.66
$
2.33
Weighted average shares outstanding:
Basic
62,227
62,026
62,256
62,022
Diluted
62,381
62,294
62,409
62,212
Dividends declared per share
$
0.28
$
0.28
$
0.56
$
0.56
Maximus, Inc.
Consolidated Balance
Sheets
March 31, 2022
September 30, 2021
(unaudited)
(in thousands)
Assets:
Cash and cash equivalents
$
92,638
$
135,061
Accounts receivable, net
885,685
834,819
Income taxes receivable
14,757
5,413
Prepaid expenses and other current
assets
97,420
104,201
Total current assets
1,090,500
1,079,494
Property and equipment, net
57,945
62,627
Capitalized software, net
42,877
42,868
Operating lease right-of-use assets
160,183
179,349
Goodwill
1,780,370
1,774,406
Intangible assets, net
851,564
879,168
Deferred contract costs, net
42,813
36,486
Deferred compensation plan assets
44,773
46,738
Deferred income taxes
2,635
990
Other assets
34,036
16,839
Total assets
$
4,107,696
$
4,118,965
Liabilities and Shareholders' Equity:
Liabilities:
Accounts payable and accrued
liabilities
$
302,912
$
305,565
Accrued compensation and benefits
142,512
186,809
Deferred revenue, current portion
122,070
98,588
Income taxes payable
3,883
6,782
Long-term debt, current portion
59,911
80,555
Operating lease liabilities, current
portion
70,731
76,077
Other current liabilities
51,247
35,057
Total current liabilities
753,266
789,433
Deferred revenue, non-current portion
30,429
35,932
Deferred income taxes
198,848
194,638
Long-term debt, non-current portion
1,387,386
1,429,137
Deferred compensation plan liabilities,
non-current portion
44,923
47,405
Operating lease liabilities, non-current
portion
106,670
121,771
Other liabilities
31,958
20,320
Total liabilities
2,553,480
2,638,636
Shareholders' equity:
Common stock, no par value; 100,000 shares
authorized; 61,610 and 61,954 shares issued and outstanding as of
March 31, 2022 and September 30, 2021, respectively (shares in
thousands)
550,228
532,411
Accumulated other comprehensive loss
(26,098
)
(39,908
)
Retained earnings
1,030,086
987,826
Total shareholders' equity
1,554,216
1,480,329
Total liabilities and shareholders'
equity
$
4,107,696
$
4,118,965
Maximus, Inc.
Consolidated Statements of
Cash Flows
(Unaudited)
For the Three Months Ended
For the Six Months Ended
March 31, 2022
March 31, 2021
March 31, 2022
March 31, 2021
(in thousands)
Cash flows from operating activities:
Net income
$
50,096
$
80,614
$
103,426
$
144,691
Adjustments to reconcile net income to
cash flows from operating activities:
Depreciation and amortization of property,
equipment and capitalized software
9,834
11,018
21,199
22,835
Amortization of intangible assets
22,856
5,070
45,261
11,586
Amortization of debt issuance costs and
debt discount
648
—
1,297
—
Deferred income taxes
(3,089
)
6,653
(3,318
)
7,951
Stock compensation expense
6,804
7,417
15,052
13,479
Change in assets and liabilities, net of
effects of business combinations
Accounts receivable
(34,950
)
62,408
(49,064
)
70,217
Prepaid expenses and other current
assets
14,884
3,181
9,769
8,074
Deferred contract costs
380
(8,979
)
(6,431
)
(9,184
)
Accounts payable and accrued
liabilities
29,405
1,196
(3,047
)
12,395
Accrued compensation and benefits
28,024
18,921
(28,281
)
(16,761
)
Deferred revenue
12,544
7,539
18,473
13,296
Income taxes
(23,836
)
(13,717
)
(13,515
)
3,230
Operating lease right-of-use assets and
liabilities
5,077
4,513
(1,293
)
(414
)
Other assets and liabilities
(3,899
)
(4,251
)
2,331
(1,697
)
Net cash provided by operating
activities
114,778
181,583
111,859
279,698
Purchases of property and equipment and
capitalized software
(16,571
)
(14,490
)
(22,898
)
(23,584
)
Acquisitions of businesses, net of cash
acquired
(4
)
(413,781
)
(4
)
(413,940
)
Net cash used in investing activities
(16,575
)
(428,271
)
(22,902
)
(437,524
)
Cash flows from financing activities:
Cash dividends paid to Maximus
shareholders
(17,312
)
(17,207
)
(34,659
)
(34,414
)
Purchases of Maximus common stock
(24,464
)
—
(25,843
)
(3,363
)
Tax withholding related to RSU vesting
—
—
(9,673
)
(9,818
)
Proceeds from borrowings
140,000
352,310
240,000
500,162
Principal payments for debt
(287,023
)
(117,650
)
(303,708
)
(263,838
)
Other
—
1
—
(2,762
)
Net cash (used in)/provided by financing
activities
(188,799
)
217,454
(133,883
)
185,967
Effect of exchange rate changes on cash,
cash equivalents, and restricted cash
(48
)
(619
)
324
3,263
Net change in cash, cash equivalents, and
restricted cash
(90,644
)
(29,853
)
(44,602
)
31,404
Cash, cash equivalents and restricted
cash, beginning of period
202,612
149,818
156,570
88,561
Cash, cash equivalents and restricted
cash, end of period
$
111,968
$
119,965
$
111,968
$
119,965
Maximus, Inc.
Consolidated Results of
Operations by Segment
(Unaudited)
For the Three Months Ended
For the Six Months Ended
March 31, 2022
March 31, 2021
March 31, 2022
March 31, 2021
Amount
% (1)
Amount
% (1)
Amount
% (1)
Amount
% (1)
(dollars in thousands)
Revenue:
U.S. Services
$
398,077
$
448,215
$
784,494
$
833,149
U.S. Federal Services
573,288
330,136
1,155,159
735,381
Outside the U.S.
205,961
180,929
388,549
336,304
Revenue
$
1,177,326
$
959,280
$
2,328,202
$
1,904,834
Gross
Profit:
U.S. Services
$
84,971
21.3
%
$
119,440
26.6
%
$
174,670
22.3
%
$
218,442
26.2
%
U.S. Federal Services
115,153
20.1
%
74,133
22.5
%
241,729
20.9
%
156,629
21.3
%
Outside the U.S.
28,327
13.8
%
37,085
20.5
%
40,207
10.3
%
61,642
18.3
%
Gross Profit
$
228,451
19.4
%
$
230,658
24.0
%
$
456,606
19.6
%
$
436,713
22.9
%
Selling, general,
and administrative expenses:
U.S. Services
$
38,273
9.6
%
$
36,593
8.2
%
$
73,375
9.4
%
$
74,049
8.9
%
U.S. Federal Services
68,949
12.0
%
50,978
15.4
%
133,874
11.6
%
103,230
14.0
%
Outside the U.S.
24,011
11.7
%
22,013
12.2
%
45,351
11.7
%
42,045
12.5
%
Other (2)
(926
)
NM
2,818
NM
1,928
NM
5,045
NM
Selling, general, and administrative
expenses
$
130,307
11.1
%
$
112,402
11.7
%
$
254,528
10.9
%
$
224,369
11.8
%
Operating
income/(loss):
U.S. Services
$
46,698
11.7
%
$
82,847
18.5
%
$
101,295
12.9
%
$
144,393
17.3
%
U.S. Federal Services
46,204
8.1
%
23,155
7.0
%
107,855
9.3
%
53,399
7.3
%
Outside the U.S.
4,316
2.1
%
15,072
8.3
%
(5,144
)
(1.3
) %
19,597
5.8
%
Amortization of intangible assets
(22,856
)
NM
(5,070
)
NM
(45,261
)
NM
(11,586
)
NM
Other (2)
926
NM
(2,818
)
NM
(1,928
)
NM
(5,045
)
NM
Operating income/(loss)
$
75,288
6.4
%
$
113,186
11.8
%
$
156,817
6.7
%
$
200,758
10.5
%
(1)
Percentage of respective segment revenue.
Percentages not considered meaningful are marked "NM."
(2)
Other selling, general, and administrative
expenses includes costs that are not allocated to a particular
segment. This includes expenses incurred as part of our
acquisitions, as well as potential acquisitions which have not been
or may not be completed.
Maximus, Inc.
Consolidated Free Cash Flow -
Non-GAAP
(Unaudited)
For the Three Months Ended
For the Six Months Ended
March 31, 2022
March 31, 2021
March 31, 2022
March 31, 2021
(in thousands)
Net cash provided by operating
activities
$
114,778
$
181,583
$
111,859
$
279,698
Purchases of property and equipment and
capitalized software costs
(16,571
)
(14,490
)
(22,898
)
(23,584
)
Free cash flow (Non-GAAP)
$
98,207
$
167,093
$
88,961
$
256,114
Maximus, Inc.
Non-GAAP Adjusted Results
Excluding Amortization of Intangible Assets
(Unaudited)
For the Three Months Ended
For the Six Months Ended
March 31, 2022
March 31, 2021
March 31, 2022
March 31, 2021
(dollars in thousands, except per
share data)
Operating income
$
75,288
$
113,186
$
156,817
$
200,758
Add back: Amortization of intangible
assets
22,856
5,070
45,261
11,586
Adjusted operating income excluding
amortization of intangible assets (Non-GAAP)
$
98,144
$
118,256
$
202,078
$
212,344
Adjusted operating income margin excluding
amortization of intangible assets (Non-GAAP)
8.3
%
12.3
%
8.7
%
11.1
%
Net income
$
50,096
$
80,614
$
103,426
$
144,691
Add back: Amortization of intangible
assets, net of tax
16,884
3,756
33,414
8,578
Adjusted net income excluding amortization
of intangible assets (Non-GAAP)
$
66,980
$
84,370
$
136,840
$
153,269
Diluted earnings per share
$
0.80
$
1.29
$
1.66
$
2.33
Add back: Effect of amortization of
intangible assets on diluted earnings per share
0.27
0.06
0.53
0.13
Adjusted diluted earnings per share
excluding amortization of intangible assets (Non-GAAP)
$
1.07
$
1.35
$
2.19
$
2.46
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220504006149/en/
James Francis 703.251.8526 JamesBFrancis@maximus.com
Madison West 703.251.8443 MadisonTWest@maximus.com
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