MAXIMUS Reports Fourth Quarter and Full Year Results for Fiscal Year 2019

- Establishes Guidance for Fiscal Year 2020 -

RESTON, Va.--()--MAXIMUS (NYSE: MMS), a leading provider of government services worldwide, today reported financial results for the three months and year ended September 30, 2019.

Highlights for fiscal year 2019 include:

  • Revenue increased to $2.89 billion driven by the November 2018 acquisition in the U.S. Federal Services Segment
  • Diluted earnings per share of $3.72
  • Total company operating margin of 11.0%
  • Cash and cash equivalents of $105.6 million at September 30, 2019
  • Solid cash generation with cash flows from operations of $356.7 million and free cash flow of $294.4 million
  • Signed year-to-date contract awards of $2.6 billion, new contracts pending (awarded, but unsigned) of $242 million, and a sales pipeline of $30.2 billion at September 30, 2019

Revenue for the fourth quarter and fiscal 2019 increased to $755.0 million and $2.89 billion, respectively, compared to $558.4 million and $2.39 billion reported for the same periods last year.

For the fourth quarter of fiscal 2019, net income attributable to MAXIMUS totaled $60.1 million, or $0.93 of diluted earnings per share. This compares to $46.3 million and $0.71, respectively, for the fourth quarter of fiscal 2018. For fiscal 2019, net income attributable to MAXIMUS totaled $240.8 million, or $3.72 of diluted earnings per share. This compares to fiscal 2018 reported net income attributable to MAXIMUS of $220.8 million and diluted earnings per share of $3.35.

The year-over-year increase in revenue and earnings was driven by the acquisition of the federal citizen engagement centers business which was completed on November 16, 2018. If the acquisition had occurred on October 1, 2018, revenue and diluted earnings per share would have been approximately $2.985 billion and $3.77, respectively, on a pro-forma basis.

U.S. Health and Human Services Segment

U.S. Health and Human Services Segment revenue for the fourth quarter of fiscal 2019 increased 4% to $300.4 million, compared to $288.9 million reported for the same period last year driven by new work. Operating income for the fourth quarter totaled $53.8 million (17.9% operating margin), compared to $52.2 million (18.1% operating margin) for the same period last year.

For the full fiscal year, U.S. Health and Human Services Segment revenue decreased 3% to $1.18 billion, compared to $1.21 billion for the same period last year. As previously disclosed, revenue was lower due to forecasted changes on several sizable contracts that were rebid and won, extended, or where option periods were exercised. Fiscal 2019 operating income totaled $220.8 million (18.8% operating margin), compared to operating income of $218.6 million (18.0% operating margin) for fiscal 2018.

U.S. Federal Services Segment

As expected, U.S. Federal Services Segment revenue for the fourth quarter of fiscal 2019 increased to $312.2 million, compared to $117.4 million reported for the same period last year. Operating income for the fourth quarter totaled $31.1 million (10.0% operating margin), compared to $16.0 million (13.6% operating margin) for the same period last year.

For the full fiscal year, U.S. Federal Services Segment revenue increased to $1.1 billion, compared to $478.9 million for the same period last year. Fiscal 2019 operating income totaled $115.9 million (10.4% operating margin), compared to operating income of $57.4 million (12.0% operating margin) for fiscal 2018.

Revenue and operating income increases for the fourth quarter and fiscal 2019 were driven by the acquisition of the federal citizen engagement centers business completed in November 2018. The most significant contracts acquired are cost-plus which tend to generate single-digit operating margins but carry lower risk. With more cost-plus contracts in the Segment's portfolio, the operating margin for the Segment was lower in the fourth quarter and fiscal 2019 compared to the prior year periods.

Outside the U.S. Segment

Outside the U.S. Segment revenue for the fourth quarter of fiscal 2019 decreased 6% (2% on a constant currency basis) to $142.4 million, compared to $152.1 million for the same period last year. The Segment had operating income for the fourth quarter of $2.2 million (1.5% operating margin), compared to an operating loss of $0.9 million for the same period last year, which was tempered by the jobactive program that was rebid and launched on July 1, 2018.

For the full fiscal year, Outside the U.S. Segment revenue decreased 14% (9% on a constant currency basis) to $599.1 million, compared to $699.4 million for the same period last year. The year-over-year revenue decrease was driven by: 1) the ending of the Work Programme and Work Choice contracts which accounted for $36 million of the decline; 2) unfavorable currency translation of $35 million and; 3) lower pass-through revenue for support services tied to the jobactive program in Australia totaling $16 million. Fiscal 2019 operating income totaled $16.1 million (2.7% operating margin), compared to operating income of $36.0 million (5.1% operating margin) for fiscal 2018.

The Segment has experienced a slowdown in its employment services business as a result of low unemployment in the countries where we operate which has led to lower caseloads and volumes. The Segment has a handful of new contracts progressing towards profitability but they are unfavorable to earnings in the near-term.

Sales Awards and Pipeline

Year-to-date signed contract awards totaled $2.6 billion at September 30, 2019. The value of new contracts pending at September 30, 2019, (awarded but unsigned) was $242 million.

The sales pipeline at September 30, 2019, was approximately $30.2 billion (comprised of approximately $2.9 billion in proposals pending, $1.2 billion in proposals in preparation and $26.1 billion in opportunities tracking).

Balance Sheet and Cash Flows

Cash, cash equivalents and short-term investments at September 30, 2019, totaled $105.6 million. For the fourth quarter of fiscal 2019, cash flows from operations were $93.0 million, with free cash flow of $65.2 million. For fiscal 2019, cash flows from operations were $356.7 million with free cash flow of $294.4 million.

At September 30, 2019, days sales outstanding (DSO) were 72 days.

On August 30, 2019, MAXIMUS paid a quarterly cash dividend of $0.25 per share. On October 10, 2019, the Company announced a $0.28 per share cash dividend, payable on November 29, 2019, to shareholders of record on November 15, 2019.

Outlook

MAXIMUS is establishing fiscal 2020 guidance. The Company expects revenue to range between $3.15 billion and $3.30 billion. The Company expects diluted earnings per share to range between $3.95 and $4.15. The Company expects cash flows from operations to range between $300 million and $350 million, and free cash flow to range between $275 million and $325 million.

For fiscal 2020, the Company has estimated its effective income tax rate to range between 24.5% and 25.5% and weighted average shares outstanding of approximately 64.9 million.

Bruce Caswell, President and Chief Executive Officer of MAXIMUS, commented, "We finished fiscal 2019 with solid top- and bottom-line growth driven principally by the acquisition of the federal citizen engagement centers business last November. The acquisition enabled us to build scale, expand our customer base, improve our competitive position and bring on new technology platforms in the federal market. As we look into fiscal 2020 and beyond, we are pleased with the substantial progress we have made on our strategic plan to lead a digital transformation, grow our clinically related services, and expand in key priority markets and adjacencies."

Website Presentation, Conference Call and Webcast Information

MAXIMUS will host a conference call this morning, November 19, 2019, 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 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 December 3, 2019, by calling:

877.660.6853 (Domestic)/+1.201.612.7415 (International)
Replay conference ID number: 13695553

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 30,000 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 and Other Measures

This release refers to non-GAAP financial measures, including free cash flow, constant currency, and days sales outstanding.

We have provided a reconciliation of free cash flow to cash flows from operations.

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 Annual Report on Form 10-K.

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 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)

 

 

Three Months Ended September 30,

 

Twelve Months Ended September 30,

 

2019

 

2018

 

2019

 

2018

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

 

Revenue

$

754,966

 

$

558,446

 

$

2,886,815

 

$

2,392,236

Cost of revenue

586,716

 

419,508

 

2,215,631

 

1,797,851

Gross profit

168,250

 

138,938

 

671,184

 

594,385

Selling, general and administrative expenses

81,646

 

73,535

 

321,023

 

285,241

Amortization of intangible assets

9,028

 

2,462

 

33,054

 

10,308

Restructuring costs

 

1,033

 

 

3,353

Operating income

77,576

 

61,908

 

317,107

 

295,483

Interest expense

343

 

590

 

2,957

 

1,000

Other income, net

122

 

798

 

3,170

 

4,726

Income before income taxes

77,355

 

62,116

 

317,320

 

299,209

Provision for income taxes

17,314

 

16,600

 

76,825

 

78,393

Net income

60,041

 

45,516

 

240,495

 

220,816

(Loss)/income attributable to noncontrolling interests

(48)

 

(791)

 

(329)

 

65

Net income attributable to MAXIMUS

$

60,089

 

$

46,307

 

$

240,824

 

$

220,751

Basic earnings per share attributable to MAXIMUS

$

0.93

 

$

0.71

 

$

3.73

 

$

3.37

Diluted earnings per share attributable to MAXIMUS

$

0.93

 

$

0.71

 

$

3.72

 

$

3.35

Dividends per share

$

0.25

 

$

0.045

 

$

1.00

 

$

0.18

Weighted average shares outstanding:

 

 

 

 

 

 

 

Basic

64,397

 

65,034

 

64,498

 

65,501

Diluted

64,848

 

65,402

 

64,820

 

65,932

 

MAXIMUS, Inc.

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands)

 

 

September 30,

 

2019

 

2018

 

(Unaudited)

 

 

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

105,565

 

$

349,245

Short-term investments

 

20,264

Accounts receivable — billed and billable, net

476,690

 

357,613

Accounts receivable — unbilled

123,884

 

31,536

Income taxes receivable

20,805

 

5,979

Prepaid expenses and other current assets

62,481

 

43,995

Total current assets

789,425

 

808,632

Property and equipment, net

99,589

 

77,544

Capitalized software, net

32,369

 

22,429

Goodwill

584,469

 

399,882

Intangible assets, net

179,250

 

88,035

Deferred contract costs, net

18,921

 

14,380

Deferred compensation plan assets

32,908

 

34,305

Deferred income taxes

186

 

6,834

Other assets

8,615

 

9,959

Total assets

$

1,745,732

 

$

1,462,000

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Accounts payable and accrued liabilities

$

177,786

 

$

114,378

Accrued compensation and benefits

106,789

 

95,555

Deferred revenue

43,344

 

51,182

Income taxes payable

13,952

 

4,438

Long-term debt, current portion

9,658

 

136

Other liabilities

12,709

 

11,760

Total current liabilities

364,238

 

277,449

Deferred revenue, less current portion

32,341

 

20,394

Deferred income taxes

46,560

 

26,377

Deferred compensation plan liabilities, less current portion

34,079

 

33,497

Other liabilities

20,313

 

17,864

Total liabilities

497,531

 

375,581

Commitments and contingencies

 

 

 

Shareholders' equity:

 

 

 

Common stock

498,433

 

487,539

Accumulated other comprehensive loss

(45,380)

 

(36,953)

Retained earnings

794,739

 

633,281

Total MAXIMUS shareholders' equity

1,247,792

 

1,083,867

Noncontrolling interests

409

 

2,552

Total equity

1,248,201

 

1,086,419

Total liabilities and equity

$

1,745,732

 

$

1,462,000

 

MAXIMUS, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)

 

 

 

Three Months Ended September 30,

 

Twelve Months Ended September 30,

 

 

2019

 

2018

 

2019

 

2018

Cash flows from operations:

 

 

 

 

 

 

 

 

Net income

 

$

60,041

 

$

45,516

 

$

240,495

 

$

220,816

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization of property, plant, equipment and capitalized software

 

17,816

 

11,982

 

52,404

 

51,884

Amortization of intangible assets

 

9,028

 

2,462

 

33,054

 

10,308

Deferred income taxes

 

1,465

 

(2,153)

 

12,661

 

6,721

Stock compensation expense

 

5,451

 

4,525

 

20,774

 

20,238

Changes in assets and liabilities, net of effects of business combinations:

 

 

 

 

 

 

 

 

Accounts receivable — billed and billable

 

47,818

 

40,822

 

(60,313)

 

34,033

Accounts receivable — unbilled

 

(31,354)

 

4,608

 

14,818

 

4,920

Prepaid expenses and other current assets

 

(12,650)

 

(552)

 

(15,583)

 

4,954

Deferred contract costs

 

3,472

 

(402)

 

(4,670)

 

1,838

Accounts payable and accrued liabilities

 

(5,882)

 

15,971

 

47,580

 

(7,725)

Accrued compensation and benefits

 

(6,994)

 

7,040

 

2,288

 

(8,795)

Deferred revenue

 

8,631

 

(1,311)

 

16,488

 

(27,039)

Income taxes

 

(7,859)

 

1,349

 

(4,720)

 

7,262

Other assets and liabilities

 

4,033

 

(1,399)

 

1,451

 

(2,641)

Cash flows from operations

 

93,016

 

128,458

 

356,727

 

316,774

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment and capitalized software costs

 

(27,813)

 

(4,968)

 

(66,846)

 

(26,520)

Acquisition of businesses, net of cash acquired

 

(14,790)

 

 

(436,839)

 

Acquisition of noncontrolling interests

 

(647)

 

 

(647)

 

(157)

Maturities/(purchases) of short-term investments

 

 

 

19,996

 

(19,996)

Other

 

73

 

238

 

453

 

1,436

Cash used in investing activities

 

(43,177)

 

(4,730)

 

(483,883)

 

(45,237)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Cash dividends paid to MAXIMUS shareholders

 

(15,951)

 

(2,891)

 

(63,887)

 

(11,692)

Purchases of MAXIMUS common stock

 

(1,378)

 

(4,932)

 

(47,446)

 

(66,919)

Tax withholding related to RSU vesting

 

 

 

(8,915)

 

(8,529)

Borrowings under credit facility and other loan agreements

 

94,616

 

1,949

 

414,664

 

136,632

Repayment of credit facility and other long-term debt

 

(88,545)

 

(1,983)

 

(405,142)

 

(136,769)

Other

 

 

(545)

 

(133)

 

(4,603)

Cash used in financing activities

 

(11,258)

 

(8,402)

 

(110,859)

 

(91,880)

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash

 

(1,058)

 

(1,111)

 

(2,052)

 

(2,825)

 

 

 

 

 

 

 

 

 

Net increase/(decrease) in cash and cash equivalents

 

37,523

 

114,215

 

(240,067)

 

176,832

 

 

 

 

 

 

 

 

 

Cash, cash equivalents and restricted cash, beginning of period

 

78,969

 

242,344

 

356,559

 

179,727

 

 

 

 

 

 

 

 

 

Cash, cash equivalents and restricted cash, end of period

 

$

116,492

 

$

356,559

 

$

116,492

 

$

356,559

 

MAXIMUS, Inc.

SEGMENT INFORMATION

(Amounts in thousands)

(Unaudited)

 

 

 

Three Months Ended September 30,

 

Twelve Months Ended September 30,

 

 

2019

 

% (1)

 

2018

 

% (1)

 

2019

 

% (1)

 

2018

 

% (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Health & Human Services

 

$

300,406

 

100 %

 

$

288,944

 

100 %

 

$

1,176,488

 

100 %

 

$

1,213,911

 

100 %

U.S. Federal Services

 

312,179

 

100 %

 

117,375

 

100 %

 

1,111,197

 

100 %

 

478,911

 

100 %

Outside the U.S.

 

142,381

 

100 %

 

152,127

 

100 %

 

599,130

 

100 %

 

699,414

 

100 %

Total

 

$

754,966

 

100 %

 

$

558,446

 

100 %

 

$

2,886,815

 

100 %

 

$

2,392,236

 

100 %

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Health & Human Services

 

$

83,154

 

27.7 %

 

$

87,382

 

30.2 %

 

$

344,109

 

29.2 %

 

$

359,624

 

29.6 %

U.S. Federal Services

 

66,586

 

21.3 %

 

33,690

 

28.7 %

 

242,070

 

21.8 %

 

126,698

 

26.5 %

Outside the U.S.

 

18,510

 

13.0 %

 

17,866

 

11.7 %

 

85,005

 

14.2 %

 

108,063

 

15.5 %

Total

 

$

168,250

 

22.3 %

 

$

138,938

 

24.9 %

 

$

671,184

 

23.2 %

 

$

594,385

 

24.8 %

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Health & Human Services

 

$

29,322

 

9.8 %

 

$

35,187

 

12.2 %

 

$

123,275

 

10.5 %

 

$

140,990

 

11.6 %

U.S. Federal Services

 

35,496

 

11.4 %

 

17,725

 

15.1 %

 

126,128

 

11.4 %

 

69,312

 

14.5 %

Outside the U.S.

 

16,353

 

11.5 %

 

18,811

 

12.4 %

 

68,944

 

11.5 %

 

72,095

 

10.3 %

Other

 

475

 

NM

 

1,812

 

NM

 

2,676

 

NM

 

2,844

 

NM

Total

 

$

81,646

 

10.8 %

 

$

73,535

 

13.2 %

 

$

321,023

 

11.1 %

 

$

285,241

 

11.9 %

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Health & Human Services

 

$

53,832

 

17.9 %

 

$

52,195

 

18.1 %

 

$

220,834

 

18.8 %

 

$

218,634

 

18.0 %

U.S. Federal Services

 

31,090

 

10.0 %

 

15,965

 

13.6 %

 

115,942

 

10.4 %

 

57,386

 

12.0 %

Outside the U.S.

 

2,157

 

1.5 %

 

(945)

 

(0.6) %

 

16,061

 

2.7 %

 

35,968

 

5.1 %

Amortization of intangible assets

 

(9,028)

 

NM

 

(2,462)

 

NM

 

(33,054)

 

NM

 

(10,308)

 

NM

Restructuring costs

 

 

NM

 

(1,033)

 

NM

 

 

NM

 

(3,353)

 

NM

Acquisition-related expenses (2)

 

 

NM

 

(947)

 

NM

 

(2,691)

 

NM

 

(947)

 

NM

Other (3)

 

(475)

 

NM

 

(865)

 

NM

 

15

 

NM

 

(1,897)

 

NM

Total

 

$

77,576

 

10.3 %

 

$

61,908

 

11.1 %

 

$

317,107

 

11.0 %

 

$

295,483

 

12.4 %

(1)

 

Percentage of respective segment revenue. Percentages considered not meaningful are marked “NM.”

(2)

 

Acquisition-related expenses include costs for the acquisition of the citizen engagement centers business.

(3)

 

"Other" relates to various expenses which are not directly attributable to our segments, including litigation costs.

 

MAXIMUS, Inc.

FREE CASH FLOW

(Non-GAAP measure)

(Amounts in thousands)

(Unaudited)

 

 

 

Three Months Ended September 30,

 

Twelve Months Ended September 30,

 

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

Cash provided by operations

 

$

93,016

 

$

128,458

 

$

356,727

 

$

316,774

Purchases of property and equipment and capitalized software costs

 

(27,813)

 

(4,968)

 

(66,846)

 

(26,520)

Capital expenditure as a result of the acquisition

 

 

 

4,542

 

Free cash flow

 

$

65,203

 

$

123,490

 

$

294,423

 

$

290,254

 

 

 

 

 

 

 

 

 

 

Contacts

Lisa Miles 703.251.8637
lisamiles@maximus.com

Release Summary

MAXIMUS today reported financial results for the three months and year ended September 30, 2019

Contacts

Lisa Miles 703.251.8637
lisamiles@maximus.com