- Company Raises Fiscal 2022 Revenue
Guidance -
Maximus (NYSE: MMS), a leading provider of government services
worldwide, reported financial results for the three months ended
December 31, 2021.
Highlights for the first quarter of fiscal 2022 include:
- Revenue increased 21.7% to $1.15 billion driven by expected
contributions from the acquisitions in the U.S. Federal Services
segment and growth from startups ramping in the Outside the U.S.
segment.
- Operating margin was 7.1%, or 9.0% adjusting for amortization
of intangible assets. Diluted earnings per share were $0.85, or
$1.12 adjusting for amortization of intangible assets.
- The Company is raising revenue guidance for fiscal 2022 to $4.5
billion to $4.7 billion and maintaining diluted earnings per share
guidance of $4.00 to $4.30 per share, or $5.07 to $5.37 per share
adjusting for amortization of intangible assets.
- A quarterly cash dividend of $0.28 per share payable on
February 28, 2022, to shareholders of record on February 15,
2022.
"Entering fiscal year 2022, we expected a lower earnings profile
in the first half of the year. More importantly, we continue to
anticipate a solid second half of fiscal year 2022, creating
positive momentum into fiscal year 2023," shared Bruce Caswell,
President and Chief Executive Officer. "While our first quarter
results underscore our continued critical role as a partner to
governments navigating an evolving pandemic, we are particularly
pleased with the integration of our recent acquisitions as we
invest in technology and people, execute on new opportunities and
bids, and position our teams to best serve the longer-term needs of
our clients."
First Quarter Results
Revenue for the first quarter of fiscal year 2022 increased
21.7% to $1.15 billion, compared to $945.6 million for the prior
year period. The $205.3 million increase was principally driven by
anticipated contributions from the acquisitions in the U.S. Federal
Services Segment. Additionally, ramping of the startups in the
Outside the U.S. Segment, including the U.K. Restart Programme,
contributed to growth over the prior year period.
These increases were offset by COVID-19 response work which
declined as expected, delivering an estimated $120 million of
revenue in the first quarter of fiscal 2022, or $40 million less
revenue than the prior year period. As a result, organic revenue
for the first quarter of fiscal 2022 declined 3.5%. Adjusting for
COVID-19 response work and the concluded Census contract,
normalized organic growth would be approximately 9% over the prior
year period.
For the first quarter of fiscal 2022, operating income totaled
$81.5 million yielding an operating margin of 7.1%, or 9.0%
adjusting for amortization of intangible assets. This compares to
an operating margin of 9.3% for the prior year, or 10.0% adjusting
for amortization. Diluted earnings per share were $0.85, or $1.12
adjusting for amortization as compared to $1.03 per share, or $1.11
adjusting for amortization, for the prior year period.
U.S. Services Segment
The U.S. Services Segment reported revenue of $386.4 million for
the first quarter of fiscal year 2022 compared to $384.9 million
reported in the prior year period. COVID-19 response work declined
by an estimated $32 million over the prior year period. Adjusting
for this work, normalized organic growth in the segment would be
approximately 12% driven by new longer-term work.
Operating margin for the first quarter of fiscal year 2022 was
14.1% for the segment compared to 16.0% reported for the prior year
period. COVID-19 response work drove better than expected results
in the quarter while the redetermination activities tied to the
Public Health Emergency (PHE) remain paused.
U.S. Federal Services Segment
U.S. Federal Services Segment revenue for the first quarter of
fiscal year 2022 increased 43.6% to $581.9 million, compared to
$405.2 million reported for the prior year. Growth was driven by
expected contributions from the acquisitions, primarily Attain
Federal and VES, which occurred in the second and third quarter,
respectively, of fiscal 2021. COVID-19 response work declined by an
estimated $8 million as compared to the prior year period. Organic
revenue in the segment for the first quarter of fiscal 2022
declined approximately 13%. Adjusting for COVID-19 response work
and the concluded Census contract, normalized organic growth in the
segment would be approximately 5% over the prior year period.
The operating margin for the first quarter of fiscal year 2022
was 10.6% for the segment as compared to 7.5% reported for the
prior year period. As anticipated, the acquisitions contribute to
improved margins in the segment.
Outside the U.S. Segment
Outside the U.S. Segment revenue for the first quarter of fiscal
year 2022 increased 17.5% to $182.6 million as compared to $155.4
million reported for the prior year. The primary driver of growth
was ramping of the startups in this segment, most notably the U.K.
Restart Programme.
The segment realized an operating loss of $9.5 million for the
first quarter of fiscal 2022 as compared to operating income of
$4.5 million for the prior year period. Startups in this segment,
most notably the U.K. Restart Programme, are currently planned
losses in the first half of fiscal 2022. Additionally, the prior
year period benefited from above average performance in
Australia.
Sales and Pipeline
Year-to-date signed contract awards at December 31, 2021,
totaled $454 million and contracts pending (awarded but unsigned)
totaled $1.16 billion.
The sales pipeline at December 31, 2021, was $33.2 billion
(comprised of approximately $8.9 billion in proposals pending, $2.4
billion in proposals in preparation, and $21.8 billion in
opportunities tracking). New work opportunities represent 62% of
the total sales pipeline.
Balance Sheet and Cash Flows
At December 31, 2021, cash and cash equivalents totaled $181.8
million and gross debt was $1.61 billion. The ratio of debt, net of
allowed cash, to pro-forma EBITDA for the quarter ended December
31, 2021, as calculated in accordance with our credit agreement,
was 2.5x. This compares to 2.3x as of September 30, 2021.
For the first quarter of fiscal year 2022, cash used in
operating activities totaled $2.9 million and free cash flow used
was $9.2 million. This compares to cash provided by operating
activities of $98.1 million and free cash flow of $89.0 million in
the prior year period. Cash flows this quarter reflected the
anticipated increase in working capital requirements, including the
payroll tax deferral, which was contemplated in the Company's
fiscal 2022 cash flow guidance.
As of December 31, 2021, DSO were 67 days and within the
Company's typical range of 65 to 80 days.
On January 7, 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 February 28, 2022, to
shareholders of record on February 15, 2022.
Increased Revenue Outlook
The Company is raising revenue guidance for fiscal year 2022
with revenue expected to range between $4.5 billion and $4.7
billion. The increase is driven by higher than anticipated levels
of COVID-19 response work in the first half of the year.
Diluted earnings per share is expected to range between $4.00
and $4.30 per share, or between $5.07 and $5.37 per share adjusting
for amortization of intangible assets. Cash flows from operations
are expected to range between $275 million and $325 million, and
free cash flow to range between $225 million and $275 million in
fiscal year 2022.
For fiscal year 2022, the effective income tax rate is expected
to range between 25% and 26%, weighted average shares outstanding
to range between 62.5 million and 62.6 million, absent significant
share purchase activity, and interest expense to range between $33
million and $35 million.
While the timing remains uncertain, the Company's outlook for
fiscal year 2022 assumes the PHE will conclude and enable Medicaid
redetermination activities in the U.S. Services Segment to commence
on or around May 1, 2022.
"While our COVID response work is declining as anticipated, we
are seeing positive proof points behind our strategy of evolving
this work into new scope and extended relationships,” Caswell
continued. "We continue to position ourselves as a long-term public
health partner as government, constituents, and businesses learn to
operate in this evolving pandemic. Likewise, Maximus continues to
actively monitor CDC guidance and update our procedures
accordingly, as we have throughout the pandemic, prioritizing the
safety and wellbeing of our colleagues."
Conference Call and Webcast Information
Maximus will host a conference call this morning, February 3,
2022, at 9:00 a.m. (ET).
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 35,000
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
December 31, 2021
December 31, 2020
(in thousands, except per share
amounts)
Revenue
$
1,150,876
$
945,554
Cost of revenue
922,721
739,499
Gross profit
228,155
206,055
Selling, general, and administrative
expenses
124,221
111,967
Amortization of intangible assets
22,405
6,516
Operating income
81,529
87,572
Interest expense
(9,638
)
(206
)
Other (expense)/income, net
(311
)
(775
)
Income before income taxes
71,580
86,591
Provision for income taxes
18,250
22,514
Net income
$
53,330
$
64,077
Earnings per share:
Basic
$
0.86
$
1.03
Diluted
$
0.85
$
1.03
Weighted average shares outstanding:
Basic
62,262
62,038
Diluted
62,445
62,135
Dividends declared per share
$
0.28
$
0.28
Maximus, Inc.
Consolidated Balance
Sheets
December 31, 2021
September 30, 2021
(unaudited)
(in thousands)
Assets:
Cash and cash equivalents
$
181,790
$
135,061
Accounts receivable, net
849,410
834,819
Income taxes receivable
2,826
5,413
Prepaid expenses and other current
assets
114,303
104,201
Total current assets
1,148,329
1,079,494
Property and equipment, net
53,627
62,627
Capitalized software, net
40,349
42,868
Operating lease right-of-use assets
177,866
179,349
Goodwill
1,776,239
1,774,406
Intangible assets, net
871,761
879,168
Deferred contract costs, net
43,319
36,486
Deferred compensation plan assets
49,376
46,738
Deferred income taxes
1,745
990
Other assets
19,257
16,839
Total assets
$
4,181,868
$
4,118,965
Liabilities and Shareholders' Equity:
Liabilities:
Accounts payable and accrued
liabilities
$
273,289
$
305,565
Accrued compensation and benefits
118,891
186,809
Deferred revenue, current portion
111,578
98,588
Income taxes payable
14,897
6,782
Long-term debt, current portion
78,703
80,555
Operating lease liabilities, current
portion
70,345
76,077
Other current liabilities
43,089
35,057
Total current liabilities
710,792
789,433
Deferred revenue, non-current portion
29,072
35,932
Deferred income taxes
196,144
194,638
Long-term debt, non-current portion
1,515,089
1,429,137
Deferred compensation plan liabilities,
non-current portion
53,013
47,405
Operating lease liabilities, non-current
portion
119,654
121,771
Other liabilities
29,678
20,320
Total liabilities
2,653,442
2,638,636
Shareholders' equity:
Common stock, no par value; 100,000 shares
authorized; 61,936 and 61,954 shares issued and outstanding as of
September 30, 2021 and 2020, respectively (shares in thousands)
543,032
532,411
Accumulated other comprehensive loss
(36,764
)
(39,908
)
Retained earnings
1,022,158
987,826
Total shareholders' equity
1,528,426
1,480,329
Total liabilities and shareholders'
equity
$
4,181,868
$
4,118,965
Maximus, Inc.
Consolidated Statements of
Cash Flows
(Unaudited)
For the Three Months Ended
December 31, 2021
December 31, 2020
(in thousands)
Cash flows from operating activities:
Net income
$
53,330
$
64,077
Adjustments to reconcile net income to
cash flows from operating activities:
Depreciation and amortization of property,
equipment and capitalized software
11,365
11,817
Amortization of intangible assets
22,405
6,516
Amortization of debt issuance costs and
debt discount
649
—
Deferred income taxes
(229
)
1,298
Stock compensation expense
8,248
6,062
Change in assets and liabilities, net of
effects of business combinations
Accounts receivable
(14,114
)
7,809
Prepaid expenses and other current
assets
(5,115
)
4,893
Deferred contract costs
(6,811
)
(205
)
Accounts payable and accrued
liabilities
(32,452
)
11,199
Accrued compensation and benefits
(56,305
)
(35,682
)
Deferred revenue
5,929
5,757
Income taxes
10,321
16,947
Operating lease right-of-use assets and
liabilities
(6,370
)
(4,927
)
Other assets and liabilities
6,230
2,554
Net cash (used in)/provided by operating
activities
(2,919
)
98,115
Cash flows from investing activities:
Purchases of property and equipment and
capitalized software costs
(6,327
)
(9,094
)
Other
—
(159
)
Net cash used in investing activities
(6,327
)
(9,253
)
Cash flows from financing activities:
Cash dividends paid to Maximus
shareholders
(17,347
)
(17,207
)
Purchases of Maximus common stock
(1,379
)
(3,363
)
Tax withholding related to RSU vesting
(9,673
)
(9,818
)
Proceeds from borrowings
100,000
147,852
Principal payments for debt
(16,685
)
(146,188
)
Other
—
(2,763
)
Net cash provided by/(used in) financing
activities
54,916
(31,487
)
Effect of exchange rate changes on cash,
cash equivalents, and restricted cash
372
3,882
Net change in cash, cash equivalents, and
restricted cash
46,042
61,257
Cash, cash equivalents and restricted
cash, beginning of period
156,570
88,561
Cash, cash equivalents and restricted
cash, end of period
$
202,612
$
149,818
Maximus, Inc.
Consolidated Results of
Operations by Segment
(Unaudited)
For the Three Months Ended
December 31, 2021
December 31, 2020
Amount (1)
% (2)
Amount (1)
% (2)
(dollars in thousands)
Revenue:
U.S. Services
$
386,417
$
384,934
U.S. Federal Services
581,871
405,245
Outside the U.S.
182,588
155,375
Revenue
$
1,150,876
$
945,554
Gross
Profit:
U.S. Services
$
89,699
23.2
%
$
99,002
25.7
%
U.S. Federal Services
126,576
21.8
%
82,496
20.4
%
Outside the U.S.
11,880
6.5
%
24,557
15.8
%
Gross Profit
$
228,155
19.8
%
$
206,055
21.8
%
Selling, general,
and administrative expenses:
U.S. Services
$
35,102
9.1
%
$
37,456
9.7
%
U.S. Federal Services
64,925
11.2
%
52,252
12.9
%
Outside the U.S.
21,340
11.7
%
20,032
12.9
%
Other (3)
2,854
NM
2,227
NM
Selling, general and administrative
expenses
$
124,221
10.8
%
$
111,967
11.8
%
Operating
income:
U.S. Services
$
54,597
14.1
%
$
61,546
16.0
%
U.S. Federal Services
61,651
10.6
%
30,244
7.5
%
Outside the U.S.
(9,460
)
(5.2
) %
4,525
2.9
%
Amortization of intangible assets
(22,405
)
NM
(6,516
)
NM
Other (3)
(2,854
)
NM
(2,227
)
NM
Operating income
$
81,529
7.1
%
$
87,572
9.3
%
(1)
Expenses that are not specifically
included in the segments are included in other categories,
including amortization of intangible assets and the direct costs of
acquisitions. These costs are excluded from measuring each
segment's operating performance.
(2)
Percentage of respective segment revenue.
Percentages not considered meaningful are marked "NM."
(3)
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 Flows -
Non-GAAP
(Unaudited)
For the Three Months Ended
December 31, 2021
December 31, 2020
(in thousands)
Net cash (used in)/provided by
operations
$ (2,919
)
$ 98,115
Purchases of property and equipment and
capitalized software costs
(6,327
)
(9,094
)
Free cash flow (Non-GAAP)
$ (9,246
)
$ 89,021
Maximus, Inc.
Non-GAAP Adjusted Results
Excluding Amortization of Intangible Assets
(Unaudited)
For the Three Months Ended
December 31, 2021
December 31, 2020
(dollars in thousands, except per
share data)
Operating income
$
81,529
$
87,572
Add back: Amortization of intangible
assets
22,405
6,516
Adjusted operating income excluding
amortization of intangible assets (Non-GAAP)
$
103,934
$
94,088
Adjusted operating income margin excluding
amortization of intangible assets (Non-GAAP)
9.0
%
10.0
%
Net income
$
53,330
$
64,077
Add back: Amortization of intangible
assets, net of tax
16,530
4,822
Adjusted net income excluding amortization
of intangible assets (Non-GAAP)
$
69,860
$
68,899
Diluted earnings per share
$
0.85
$
1.03
Add back: Effect of amortization of
intangible assets on diluted earnings per share
0.27
0.08
Adjusted diluted earnings per share
excluding amortization of intangible assets (Non-GAAP)
$
1.12
$
1.11
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220203005279/en/
James Francis 703.251.8526 JamesBFrancis@maximus.com
Madison West 703.251.8443 MadisonTWest@maximus.com
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