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MAXIMUS Reports Fiscal Year 2018 Third Quarter Results

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MAXIMUS Reports Fiscal Year 2018 Third Quarter Results

- Company to Increase Quarterly Cash Dividend to $0.25 per Share -

PR Newswire

RESTON, Va., Aug. 9, 2018 /PRNewswire/ -- MAXIMUS (NYSE:MMS), a leading provider of government services worldwide, today reported financial results for the three and nine months ended June 30, 2018.

(PRNewsfoto/MAXIMUS)

Highlights for the third quarter of fiscal year 2018 include:

  • Revenue of $597.9 million compared to $600.4 million reported for the same period last year
  • Diluted earnings per share of $0.91 compared to $0.86 for the same period last year
  • Cash flows from operations of $72.5 million and free cash flow of $64.1 million
  • Year-to-date signed contract awards of $2.0 billion and contracts pending (awarded but unsigned) of $779.4 million at June 30, 2018
  • Sales pipeline of $2.9 billion at June 30, 2018
  • An expansion of the Company's share repurchase program of up to $200 million and the purchase of 995,000 shares in the quarter
  • Today, the Company announced a significant increase to the quarterly cash dividend from the current payout of $0.045 per share to $0.25 per share, which is a yield of approximately 1.5%, effective November 2018.

For the third quarter of fiscal 2018, revenue totaled $597.9 million as compared to $600.4 million reported for the same period last year. Organic growth in the Health Services Segment offset expected revenue declines in the U.S. Federal Services and Human Services Segments.

Financial results in the third quarter benefited from several change orders which provided a $15.5 million uplift to revenue and operating income. The change orders were signed and recorded in the third quarter, but the related costs were incurred in prior periods. The change order benefit was offset by certain large contracts in the Health Services Segment that were recently renewed and reset, as well as by the ongoing startup of contracts in the Human Services Segment.

As a result, for the third quarter of fiscal 2018, operating income totaled $82.6 million, yielding an operating margin of 13.8%.

For the third quarter of fiscal 2018, net income attributable to MAXIMUS totaled $59.9 million (or $0.91 of diluted earnings per share). This compares to fiscal 2017 third quarter diluted earnings per share of $0.86.

Health Services Segment 
Health Services Segment revenue for the third quarter of fiscal 2018 increased 7% to $359.1 million compared to $335.1 million reported for the same period last year. The increase in revenue was driven by organic growth, including $13.7 million from the aforementioned change orders.

Operating margin for the third quarter of fiscal 2018 was 17.8% compared to 15.4% reported for the prior-year period. The accretive change orders were offset by forecasted changes on several sizable contracts that were rebid, extended or the option periods were exercised where the contracts have commenced service and are in the early cycles of program and margin maturity. Excluding the change orders, Health Services Segment operating margin would have been 14.5% in the third quarter of fiscal 2018.

U.S. Federal Services Segment 
As expected, U.S. Federal Services Segment revenue for the third quarter of fiscal 2018 decreased 15% to $112.2 million compared to $131.6 million reported for the same period last year. As previously disclosed, the lower revenue was largely due to contracts that ended.

Operating margin for the third quarter of fiscal 2018 was 13.3% compared to 12.1% reported for the prior-year period. The increase in operating margin was driven by higher volumes on a couple of performance-based contracts.

Human Services Segment 
Human Services Segment revenue for the third quarter of fiscal 2018 decreased 5% to $126.6 million compared to $133.8 million reported for the same period last year due to the wind-down of several contracts both domestically and internationally, including the Work Programme and Work Choice contracts in the U.K. which are set to end in fiscal 2019. Third quarter revenue and operating income benefited from a $1.8 million change order that was disclosed last quarter.

Operating margin for the third quarter of fiscal 2018 was 5.9% compared to 12.2% reported for the prior-year period. As expected, operating margin was tempered by a number of new contracts that are in the start-up phase but performing as expected. On a normalized basis, excluding the benefit of the change order and the unfavorable impact from the contracts in startup, operating margin would have been 6.4% in the third quarter of fiscal 2018.

Sales and Pipeline 
Year-to-date signed contract awards at June 30, 2018, totaled $2.0 billion and contracts pending (awarded but unsigned) totaled $779.4 million.

The sales pipeline at June 30, 2018, was $2.9 billion (comprised of approximately $0.5 billion in proposals pending, $0.7 billion in proposals in preparation, and $1.6 billion in opportunities tracking). This compares to a pipeline of $3.0 billion at March 31, 2018. The sequential decline reflects the conversion of pipeline into new awards during the quarter.

Balance Sheet and Cash Flows 
Cash and cash equivalents at June 30, 2018, totaled $229.0 million. The Company also has $20.2 million in short-term investments that mature in October 2018. For the three months ended June 30, 2018, cash flows from operations totaled $72.5 million, with free cash flow of $64.1 million.

At June 30, 2018, days sales outstanding (DSO) were 66 and consistent with the prior year.

On June 25, 2018, the Company announced an expansion to its board-authorized share repurchase program with an increase of up to $200 million. During the third quarter, MAXIMUS repurchased 995,000 shares of common stock for $61.6 million.

On May 31, 2018, MAXIMUS paid a quarterly cash dividend of $0.045 per share. On July 12, 2018, the Company announced a $0.045 per share cash dividend, payable on August 31, 2018, to shareholders of record on August 15, 2018.

The Board of Directors also announced today its intent to increase the Company's quarterly cash dividend effective in November 2018. The quarterly cash dividend will increase to $0.25 per share or $1.00 per share per year which is an approximate yield of 1.5%.

Outlook 
MAXIMUS is reiterating its fiscal 2018 revenue and earnings guidance. The Company expects revenue to range between $2.400 billion and $2.440 billion and GAAP diluted earnings per share to range from $3.30 to $3.40 for fiscal 2018.

Bruce Caswell, President and Chief Executive Officer of MAXIMUS, commented, "With several recent new wins and new programs in the start-up phase, we are focused on excellent execution and strong cash generation, driving innovation through digital solutions to simplify citizen engagement with critical programs and effectively balancing resources in geographies where full employment has reduced volumes in certain programs we operate. We have made meaningful progress on our strategic initiatives and execution against our long-term plan. As with any guiding strategy, it will continue to evolve so that we can meet the needs of our clients and capitalize on emerging opportunities."

Conference Call and Webcast Information 
MAXIMUS will host a conference call this morning, August 9, 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 August 23, 2018. Callers can access the replay by calling:

877.660.6853 (Domestic)/+1.201.612.7415 (International)

Replay conference ID number: 13681729

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 following 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, acquisitions, technology-driven innovations, digital transformation, market demand or acceptance of the Company's current or future products or services, 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 June 30,


Nine Months Ended June 30,


2018


2017


2018


2017

Revenue

$

597,855



$

600,447



$

1,833,790



$

1,830,058


Cost of revenue

443,171



448,258



1,378,343



1,380,734


Gross profit

154,684



152,189



455,447



449,324


Selling, general and administrative expenses

69,588



68,308



211,706



202,302


Amortization of intangible assets

2,525



2,720



7,846



9,508


Restructuring costs





2,320



2,242


Gain on sale of a business



650





650


  Operating income

82,571



81,811



233,575



235,922


Interest expense

85



458



410



2,051


Other income, net

2,249



1,306



3,928



1,986


  Income before income taxes

84,735



82,659



237,093



235,857


Provision for income taxes

24,493



24,871



61,793



78,643


Net income

60,242



57,788



175,300



157,214


Income attributable to noncontrolling interests

381



870



856



1,117


Net income attributable to MAXIMUS

$

59,861



$

56,918



$

174,444



$

156,097


Basic earnings per share attributable to MAXIMUS

$

0.91



$

0.87



$

2.65



$

2.38


Diluted earnings per share attributable to MAXIMUS

$

0.91



$

0.86



$

2.64



$

2.36


Dividends paid per share

$

0.045



$

0.045



$

0.135



$

0.135


Weighted average shares outstanding:








Basic

65,630



65,571



65,777



65,637


Diluted

65,925



66,082



66,131



66,023


 

 

 

MAXIMUS, Inc.

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands)



June 30, 2018


September 30, 2017


(unaudited)



ASSETS




Current assets:




Cash and cash equivalents

$

229,021



$

166,252


Short-term investments

20,166




Accounts receivable — billed and billable

398,751



394,338


Accounts receivable — unbilled

36,155



36,475


Income taxes receivable

5,480



4,528


Prepaid expenses and other current assets

49,703



55,649


  Total current assets

739,276



657,242


Property and equipment, net

84,944



101,651


Capitalized software, net

22,379



26,748


Goodwill

400,904



402,976


Intangible assets, net

90,693



98,769


Deferred contract costs, net

14,025



16,298


Deferred compensation plan assets

33,184



28,548


Deferred income taxes

7,502



7,691


Other assets

8,152



10,739


Total assets

$

1,401,059



$

1,350,662


LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:




Accounts payable and accrued liabilities

$

98,486



$

122,083


Accrued compensation and benefits

80,049



105,667


Deferred revenue

50,739



71,722


Income taxes payable

3,595



4,703


Other liabilities

11,177



12,091


  Total current liabilities

244,046



316,266


Deferred revenue, less current portion

22,601



28,182


Deferred income taxes

29,090



20,106


Deferred compensation plan liabilities, less current portion

32,354



30,707


Other liabilities

17,221



9,633


Total liabilities

345,312



404,894


Shareholders' equity:




Common stock, no par value

491,852



475,592


Accumulated other comprehensive loss

(34,894)



(27,619)


Retained earnings

594,901



492,112


  Total MAXIMUS shareholders' equity

1,051,859



940,085


Noncontrolling interests

3,888



5,683


  Total equity

1,055,747



945,768


  Total liabilities and equity

$

1,401,059



$

1,350,662



 

 

 

MAXIMUS, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)




Three Months Ended
June 30,


Nine Months Ended
June 30,



2018


2017


2018


2017

Cash flows from operations:









Net income


$

60,242



$

57,788



$

175,300



$

157,214


Adjustments to reconcile net income to cash flows from operations:









Depreciation and amortization of property, equipment and capitalized software


12,828



13,449



39,902



43,416


Amortization of intangible assets


2,525



2,720



7,846



9,508


Deferred income taxes


18,053



14,335



8,874



8,614


Stock compensation expense


4,389



5,588



15,713



15,822


Gain on sale of a business




(650)





(650)











Change in assets and liabilities:









Accounts receivable — billed and billable


11,733



57,993



(6,789)



68,023


Accounts receivable — unbilled


5,042



(3,822)



312



(7,267)


Prepaid expenses and other current assets


(3,020)



(1,568)



5,506



5,944


Deferred contract costs


446



116



2,240



1,114


Accounts payable and accrued liabilities


(20,525)



(19,694)



(23,696)



(37,413)


Accrued compensation and benefits


(444)



4,590



(15,835)



(1,703)


Deferred revenue


(1,939)



(417)



(25,728)



(16,270)


Income taxes


(12,721)



(15,345)



5,913



5,370


Other assets and liabilities


(4,118)



166



(498)



375


Cash flows from operations


72,491



115,249



189,060



252,097











Cash flows from investing activities:









Purchases of property and equipment and capitalized software costs


(8,377)



(6,113)



(21,552)



(19,088)


Acquisition of part of noncontrolling interest






(157)




Proceeds from the sale of a business




650





1,035


Purchases of short-term investments


(19,996)





(19,996)




Other


92



267



275



485


Cash used in investing activities


(28,281)



(5,196)



(41,430)



(17,568)











Cash flows from financing activities:









Cash dividends paid to MAXIMUS shareholders


(2,936)



(2,917)



(8,801)



(8,754)


Repurchases of common stock


(60,949)





(61,987)



(28,858)


Tax withholding related to RSU vesting






(8,529)



(9,267)


Borrowings under credit facility


10,000



20,000



134,683



155,000


Repayment of credit facility and other long-term debt


(10,034)



(120,074)



(134,786)



(304,902)


Stock option exercises




370





370


Other


(1,928)



(80)



(4,058)



(1,225)


Cash used in financing activities


(65,847)



(102,701)



(83,478)



(197,636)











Effect of exchange rate changes on cash and cash equivalents


(2,569)



2,164



(1,383)



1,286











Net increase in cash and cash equivalents


(24,206)



9,516



62,769



38,179











Cash and cash equivalents, beginning of period


253,227



94,862



166,252



66,199











Cash and cash equivalents, end of period


$

229,021



$

104,378



$

229,021



$

104,378












 

 

 

MAXIMUS, Inc.

SEGMENT INFORMATION

(Amounts in thousands)

(Unaudited)




Three Months Ended June 30,


Nine Months Ended June 30,



2018


% (1)


2017


% (1)


2018


% (1)


2017


% (1)

Revenue:

















Health Services


$

359,050



100

%


$

335,090



100

%


$

1,076,773



100

%


$

1,024,813



100

%

U.S. Federal Services


112,226



100

%


131,589



100

%


361,536



100

%


418,257



100

%

Human Services


126,579



100

%


133,768



100

%


395,481



100

%


386,988



100

%

Total


$

597,855



100

%


$

600,447



100

%


$

1,833,790



100

%


$

1,830,058



100

%


















Gross Profit:

















Health Services


$

97,254



27.1

%


$

83,269



24.8

%


$

286,517



26.6

%


$

247,957



24.2

%

U.S. Federal Services


32,276



28.8

%


33,627



25.6

%


93,008



25.7

%


107,774



25.8

%

Human Services


25,154



19.9

%


35,293



26.4

%


75,922



19.2

%


93,593



24.2

%

Total


$

154,684



25.9

%


$

152,189



25.3

%


$

455,447



24.8

%


$

449,324



24.6

%


















Selling, general, and administrative expense:

















Health Services


$

33,472



9.3

%


$

31,716



9.5

%


$

102,078



9.5

%


$

89,737



8.8

%

U.S. Federal Services


17,399



15.5

%


17,757



13.5

%


51,587



14.3

%


56,379



13.5

%

Human Services


17,685



14.0

%


18,925



14.1

%


57,009



14.4

%


55,827



14.4

%

Other (2)


1,032



NM



(90)



NM



1,032



NM



359



NM


Total (3)


$

69,588



11.6

%


$

68,308



11.4

%


$

211,706



11.5

%


$

202,302



11.1

%


















Operating income:

















Health Services


$

63,782



17.8

%


$

51,553



15.4

%


$

184,439



17.1

%


$

158,220



15.4

%

U.S. Federal Services


14,877



13.3

%


15,870



12.1

%


41,421



11.5

%


51,395



12.3

%

Human Services


7,469



5.9

%


16,368



12.2

%


18,913



4.8

%


37,766



9.8

%

Amortization of intangible assets


(2,525)



NM



(2,720)



NM



(7,846)



NM



(9,508)



NM


Restructuring costs (4)




NM





NM



(2,320)



NM



(2,242)



NM


Gain on sale of a business (5)




NM



650



NM





NM



650



NM


Other (2)


(1,032)



NM



90



NM



(1,032)



NM



(359)



NM


Total


$

82,571



13.8

%


$

81,811



13.6

%


$

233,575



12.7

%


$

235,922



12.9

%



(1)

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

(2)

Other costs and credits relate to selling, general and administrative expenses (SG&A) that do not relate directly to segment business activities. The majority of charges recorded in the periods above relate to two proposed disallowances by the Centers for Medicare and Medicaid Services.

(3)

During fiscal year 2018, we updated our methodology for allocation of costs which resulted in certain costs which had been within cost of revenue now being classified as SG&A. If we had utilized the same methodology in fiscal year 2018 as we had in fiscal year 2017, we estimate that SG&A would have been lower by approximately $1.0 million and $3.5 million during the three and nine months ended June 30, 2018, respectively.

(4)

During fiscal years 2018 and 2017, we incurred costs in restructuring our United Kingdom human services business.

(5)

In May 2016, we sold our K-12 Education business. In June 2017, we finalized the sale price and recognized a corresponding gain on sale.


 

 

MAXIMUS, Inc.

FREE CASH FLOW

(Non-GAAP measure)

(Amounts in thousands)

(Unaudited)




Three Months Ended
June 30,


Nine Months Ended
June 30,



2018


2017


2018


2017

Cash flows from operations


$

72,491



$

115,249



$

189,060



$

252,097


Purchases of property and equipment and capitalized software
costs


(8,377)



(6,113)



(21,552)



(19,088)


Free cash flow


$

64,114



$

109,136



$

167,508



$

233,009











 

CONTACT:

Lisa Miles 703.251.8637


lisamiles@maximus.com

 

 

Cision View original content with multimedia:http://www.prnewswire.com/news-releases/maximus-reports-fiscal-year-2018-third-quarter-results-300694510.html

SOURCE MAXIMUS

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