Reston, VA – MAXIMUS (NYSE: MMS), a leading provider of government services worldwide recently reported financial results for its fourth quarter and fiscal year ended September 30, 2014.
Highlights for the fourth quarter and the full fiscal year 2014 include:
- Fourth quarter revenue grew 13% to $435.4 million; diluted earnings per share increased 4% to $0.53.
- Fiscal year 2014 revenue grew 28% to $1.7 billion; diluted earnings per share totaled $2.11.
- Cash and cash equivalents totaled $158.1 million at September 30, 2014.
- Backlog totaled $3.8 billion at September 30, 2014 compared to $3.4 billion at September 30, 2013.
- Signed contract awards totaled $2.0 billion for fiscal 2014 and the sales pipeline remained strong at $3.5 billion at September 30, 2014.
For the fourth quarter of fiscal 2014, revenue increased 13% to $435.4 million compared to revenue of $384.3 million reported for the same period last year, driven by growth in the Health Services Segment. Fiscal 2014 fourth quarter net income attributable to MAXIMUS totaled $36.2 million, or $0.53 per diluted share. This represents a 4% increase compared to $0.51 reported for the same period last year.
Revenue for fiscal year 2014 increased 28% to $1.7 billion. This compares to $1.3 billion reported for fiscal 2013, which included approximately $16.0 million in revenue from a terminated contract in the Human Services Segment. Excluding revenue from the terminated contract, fiscal 2014 revenue grew 29%, of which 27% was organic. Revenue increases for the fiscal year were driven by the Health Services Segment and included work tied to the Affordable Care Act and the Health Management acquisition.
For the full fiscal year, net income attributable to MAXIMUS totaled $145.4 million, or $2.11 per diluted share. This compares to $116.7 million, or $1.67 per diluted share, for the same period last year. The prior-year period included a benefit of $10.9 million in pre-tax income ($6.5 million, net of taxes, or $0.09 per diluted share) related to the aforementioned terminated contract. Excluding the terminated contract, fiscal 2014 diluted earnings per share increased 34% to $2.11 compared to adjusted diluted earnings per share of $1.58 reported for fiscal 2013. The year-over-year increase in earnings for the full fiscal year is principally attributable to growth in the Health Services Segment. A reconciliation to non-GAAP measures is included in the accompanying financial schedules.
Fiscal 2014 has been a year of exceptional growth for MAXIMUS, highlighted by solid execution and strong financial results. Year-to-date signed awards reached a record $2.0 billion and contributed to a healthy backlog of $3.8 billion. The Company has made significant progress on our long-term objectives of expanding our operations outside of the United States, as well as continuing to grow our U.S. domestic business, which includes our work serving federal agencies and programs. With a clear demonstrated success that is built upon our ‘land and expand’ strategy over the last several years, we have broadened our reach into new markets, new adjacencies and new clients,” commented Richard A. Montoni, MAXIMUS Chief Executive Officer.
Health Services Segment
Health Services Segment revenue for the fourth quarter of fiscal 2014 increased 19% to $321.7 million compared to the same period last year. As expected, Health Services Segment operating income for the fourth quarter of fiscal 2014 decreased 7% to $42.8 million (13.3% operating margin) compared to $45.9 million (16.9% operating margin) for the same period last year.
For the full fiscal year, Health Services Segment revenue increased 45% to $1.25 billion compared to the same period last year. For fiscal 2014, Health Services Segment operating income increased 35% to $175.4 million (14.0% operating margin) compared to $129.8 million (15.0% operating margin) for fiscal 2013.
For both the fourth quarter and the full year of fiscal 2014, increases to revenue were driven by new work, including contracts supporting the Affordable Care Act in the United States, and expansion on existing programs. During fiscal 2014, the Company also received a full-year’s benefit from the Health Management acquisition, which closed on July 1, 2013. As expected, operating margins for both the fourth quarter and the full fiscal year were lower due to an increase in lower-margin, cost-reimbursable contracts, as well as the expected start-up from new programs that launched in 2014.
Human Services Segment
Human Services Segment revenue for the fourth quarter of fiscal 2014 totaled $113.7 million compared to $113.3 million for the same period last year. The prior-year period included accretive revenue from a large fixed-price contract that came to an end in early 2014 and offset organic revenue growth from the Company’s operations in Australia. Human Services Segment operating income for the fourth quarter of 2014 decreased to $9.0 million (7.9% operating margin) compared to $11.9 million (10.5% operating margin) for the same period last year. Operating margins in the fourth quarter of 2014 were tempered due to the completion of the fixed price contract, a contract change in the U.K. Work Programme, start-up in Australia for the 18 new site locations and higher expenses in preparation for the Job Services Australia (JSA) rebid.
In fiscal year 2013, the Human Services Segment benefitted from a terminated contract that contributed revenue of $16.0 million and pre-tax income of $10.9 million.
Human Services Segment revenue for fiscal year 2014 totaled $450.3 million and, excluding the $16.0 million in revenue from the terminated contract, was comparable to same period last year. Fiscal 2014 revenue was tempered by currency fluctuations and the completion of a large, accretive fixed-price contract that came to an end in early 2014, both of which offset organic revenue growth from operations outside the U.S. For the full fiscal year, operating income from the Human Services Segment totaled $50.5 million (11.2% operating margin).
Backlog, Sales and Pipeline
Backlog reached a record level of $3.8 billion at September 30, 2014. This compares to $3.4 billion at September 30, 2013.
Year-to-date signed contract awards at September 30, 2014 totaled $2.0 billion compared to $1.9 billion reported for the same period last year. New contracts pending (awarded but unsigned) totaled $326.9 million at September 30, 2014 and did not include the new health and disability assessments contract that was awarded subsequent to September 30, 2014.
Sales pipeline at September 30, 2014 was $3.5 billion (consisting of $397 million in proposals pending, $156 million in proposals in preparation, and $2.9 billion in opportunities tracking). The pipeline reflects opportunities in both segments and across multiple geographies.
Balance Sheet and Cash Flows
Cash and cash equivalents at September 30, 2014 totaled $158.1 million, of which approximately $95 million is held outside of the U.S. For the fourth quarter of fiscal 2014, cash provided by operating activities totaled $48.5 million, with free cash flow of $28.9 million. For fiscal year 2014, cash provided by operating activities totaled $213.6 million, with free cash flow of $166.5 million. For the fourth quarter of fiscal 2014, Days Sales Outstanding (DSO) were 61 days, which is below the Company’s previously stated range of 65 to 80 days.
On August 29, 2014, MAXIMUS paid a quarterly cash dividend of $0.045 per share. On October 8, 2014, the Company announced a $0.045 per share cash dividend, payable on November 28, 2014 to shareholders of record on November 14, 2014.
During the fourth quarter of fiscal 2014, MAXIMUS repurchased 1,265,484 shares of the Company’s common stock for $52.2 million (a weighted average price of $41.24). For the full fiscal year, MAXIMUS repurchased 2,672,151 shares for $113.1 million (a weighted average price of $42.34). At September 30, 2014, the Company had $135.2 million available for future repurchases under its Board-authorized share repurchase program. Subsequent to September 30, 2014 and through October 28, 2014, the Company repurchased another 753,010 shares of stock for approximately $30.6 million (a weighted average price of $40.66).
MAXIMUS established its fiscal year 2015 revenue and earnings guidance on October 28, 2014. The Company expects fiscal year 2015 revenue to range between $1.9 billion and $2.0 billion and expects diluted earnings per share to range between $2.25 and $2.40. This guidance does not include any possible mergers and acquisition activity or any significant legal expenses or recoveries.
Montoni continued, “The horizon for fiscal 2015 and beyond is bright, with several large, new contracts that will serve as the underpinnings for growth over the next few years as they ramp into their full run-rate. For fiscal 2015, MAXIMUS is forecasting top-line growth in the range of 12% to 18% and we estimate that approximately 90% of our forecasted 2015 revenue, based upon the midpoint of our revenue guidance range, is already in the form of backlog or option periods.”
The complete earnings release is available here: MAXIMUS Fourth Quarter and Full Year Financial Results for Fiscal 2014