EX-99.1 2 mms-2021x12x31x8kxex991.htm EX-99.1

FOR IMMEDIATE RELEASE |  | CONTACT: | James Francis 703.251.8526
|  |  | JamesBFrancis@maximus.com
Date: February 3, 2022 |  |  | Madison West 703.251.8443
|  |  | MadisonTWest@maximus.com

Maximus Reports Fiscal Year 2022 First Quarter Results
- Company Raises Fiscal 2022 Revenue Guidance -
(RESTON, Va. - February 3, 2022) - 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.
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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.
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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.
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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.
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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 |

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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 |

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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 |

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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.
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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 |

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