Q4 2020 Maximus Inc Earnings Call
Greetings and welcome to the Maximus fiscal 2000, what the fourth quarter and year end conference call at.
At this time all participants on all of us the only mode.
Brief question and answer session will follow the formal presentation if.
If anyone should require operator assistance during the conference. Please press the star zero on your telephone keypad and.
The remainder this conference is being recorded and it's now my pleasure to introduce your host Ms., Lisa miles senior Vice President of Investor Relations for Maximus.
Thank you Ms miles human though because.
Good morning, and thank you for joining US today with me is Bruce Caswell, President and Chief Executive Officer, and Rick Nadeau, Chief Financial Officer, I'd like to remind everyone that the numbers statements being made today will before looking and nature. Please remember that such statements are only predict.
And actual events or results may differ materially as the result of the risks we face including those discussed in item one day of our annual report on form 10-K, we encourage you to review the information contained in the earnings release today and our most recent forms 10-Q, and 10-K filed with the assay sales the company does not assume and.
The obligation to revise or update these forward looking statements to reflect subsequent events or circumstances, except as required by law. Today's presentation may contain non-GAAP financial information management uses us information and this internal analysis of results and believes this information may be informative to investors and.
Gauging the quality of our financial performance identifying trends and our results and providing meaningful period to period comparisons for a reconciliation on the non-GAAP measures presented and this document. Please see the company's most recent quarterly earnings press release, and with that I'll hand, the call over to Rick.
Thanks, Lisa as you know the COVID-19 pandemic had a significant impact on our operating results for fiscal year Twentytwenty.
Bruce and I would like to thank all of our Maximus teams, who with incredible heart and dedication worked tirelessly to keep us safe.
We are required to work on site and transition staff to work remotely where possible.
We adopted the hybrid operational model in March that enabled our teams to continue to operate a central programs in order to connect citizens the vital services and this pandemic impacted world.
As noted in our press release. This morning total company revenue for fiscal Twentytwenty increased to $3.46 billion compared to $2.89 billion and the prior year abroad.
Approximately $330 million of the revenue increase was attributable to the census questionnaire assistance contract in support of the U.S. Decennial census.
The fiscal Twentytwenty top line also benefited from new work in the U.S. and assisting with Cobot response efforts, where we support governments with their public health responses in areas such as the contact tracing.
Disease investigation.
Test result, supporting.
Cove and information lines unemployment insurance claims processing and other cove and related assistance.
This work contributed to organic growth for fiscal Twentytwenty up 15.7% or 4.6%, excluding the census contract and was tempered by declines and our operations outside the U.S.
[noise] Workover and related revenues increased as a result of the pandemic our fiscal Twentytwenty earnings declined.
Our full year operating margin was 8.3% and diluted earnings per share were $3.39 for fiscal Twentytwenty.
As we have explained previously there are three primary areas of negative impact.
The fiscal Twentytwenty earnings.
One we experienced reduced volumes on several large U.S. programs, where both state and federal government clients instituted temporary program changes in response to cope with 90 day.
This includes but is not limited to the whole thing the Medicaid Redeterminations and our state based business and a pause on the repayment of federal student loans, and our us Federal services segment.
There was a greater mix of cost plus revenue in fiscal Twentytwenty driven by the census contract in the U.S. Federal services segment and three the outside the U.S. segment experienced a significant change and estimates for employment services work and a pause in face to face assessments.
Our fiscal Twentytwenty effective income tax rate was 25.3% compared to 24.2% in the prior year the.
The higher rate. This year was attributable to normal course vesting of stock compensation, which had a reduced benefit tied to a lower share price.
I will start my comments on the segment results with the U.S. services segment previously named US health and human services.
Revenue for the U.S. services segment and fiscal Twentytwenty increased 13% the $1.33 billion compared to $1.18 billion last year.
The growth was organic resulting from new contracts, including those to support COVID-19 response efforts and expansion of existing work.
This allowed us to offset the temporary volume and revenue declines and certain core programs stemming from the pandemic.
We estimate that the covert response work contributed $129 million the revenue to the U.S. services segment and fiscal 2020.
As a reminder, the families first the Corona virus response Act provided states with a temporary increase in us federal matching funds for Medicaid if they meet certain requirements, which includes ensure and continuous care for Medicaid enrollees the.
This means Medicaid redeterminations have been halted so that individuals and families continue to have access the vital health care services. During this global public health crisis.
As a result, we experienced a significant revenue and profit headwind, resulting from lower volumes on some of our largest Medicaid programs.
Furthermore, state budgetary pressures have created the need to work closely with our clients to make adjustments to our scope of work to provide needed relief.
As a result, the segment delivered an operating margin of 17.1% and physical 2020 compared to 18.8% for the prior year.
Revenue for fiscal 2020 in the US Federal services segment increased to $1.63 billion compared to $1.11 billion in the prior year driven most significantly by the 330 million dollar increase.
Of the census contract.
Organic growth, excluding the census contract was 8%.
The physical Twentytwenty the census contract delivered approximately $515 million of revenue compared to $185 million in the prior year.
The segment benefited from new contracts and new work related to cope with response efforts, we estimate that arc over the response work contributed approximately $71 million of revenue to the US Federal services segment, and physical Twentytwenty, which excludes the increases to the census contract tied to the pandemic rich.
David extended response period.
On the bottom line the segment delivered and 8.1% operating margin for fiscal Twentytwenty, reflecting multiple sources of downward pressure, including.
A greater mix of cost plus revenue in fiscal Twentytwenty relating to the census contract and the contact center operations contract, which is also known as one 800 Medicare.
Those contracts carry lower margins due to their cost plus nature.
Reductions and volumes revenue and profit from performance based contracts were a result of the pandemic. For example, there was a pause on student loan repayments impacting our department of education contract.
And as I discussed last quarter, we continue to see much lower workers' compensation claims compared to pre co good levels.
Investment and business development and marketing is on going as we further expand into the us federal market.
As you are probably aware there is a lag from the time of investment until we begin to get traction dislike has increased due to the pandemic.
However, we made progress and expanding their scope and certain agencies like the IRS, where we support the agency in responding to general inquiries regarding the Cures Act and.
The payments under the economic impact plan. This.
This is the first time and the IRS has used the public sector partner for citizen engagement at the scale.
Cisco Twentytwenty revenue for the outside the U.S. segment was $498.9 million compared to $599.1 million in the prior year. The segment experienced the most pronounced impact from the pandemic and finished the year in a loss position.
Our employment services businesses realized a significant decline and the number of employment opportunities available to those individuals looking for work, which caused us to take a write down to unbilled receivables of $24 million in the second quarter.
And Stan operating performance for this segment has improved each quarter and the operating loss was less than $1 million in the fourth quarter of fiscal Twentytwenty.
In addition, approximately one third of this segment's revenue is tied to our health assessment Advisory services contract and the United Kingdom were face to face assessments were suspended in March.
As a result, the program is operating at reduced levels of activity.
While the segment continued to operate and reduced activity levels across both our major programs and our emerging market territories.
And the second half the physical Twentytwenty, we currently expect and improved outlook in fiscal Twentytwenty. One based on what we know today, we are forecasting that the segment will deliver top line growth.
In fiscal 2021 of approximately $175 million over the prior year.
This is predominantly driven by rising unemployment and forecasted volume increases and our employment services contracts that support individuals into long term sustained employment.
We are already starting to experience increased volumes in markets that are beginning to emerge from the pandemic.
Such as Australia.
The segment is also expected to benefit from new work wins that will generate revenue and profit and fiscal 2021.
On the bottom line, we expect the segment to remain and the loss position and the first half of fiscal 2021 with a return to profitability in the second half of the year.
Lastly is important to note that our outlook may continue to be impacted by the pandemic, but maximus remains exceptionally poised to help governments navigate significant challenges as the world emerges from the global pandemic.
Let me turn to cash flow items and the balance sheet.
For fiscal Twentytwenty cash flow from operations was $244.6 million and free cash flow was $203.9 million cash from operations was negatively impacted in the year due to the additional investment in working capital required by increases in revenue and the timing of collections.
Dsos were 77 days at September 30, Twentytwenty compared to 72 days for the same day last year, which accounts for $50 million of the increase in our accounts receivable.
There was also an increased level of investment in working capital for increased receivables, resulting from the higher revenues. We had in the fourth quarter this year $924 million compared to the fourth quarter last year $755 million.
Assuming 72 days Dsos that increase in revenue caused an increase in receivables of $130 million we.
We studied the historical relationship of our free cash flow and net income and being the high cash conversion business. These two metrics are closely correlated looking back to fiscal 2014 on a cumulative basis.
We expect lower revenues in the fourth quarter of fiscal 2021 compared to fiscal Twentytwenty and accordingly expect free cash flow to be higher the net income and fiscal 2021.
We finished fiscal Twentytwenty was $71.7 million of cash and cash equivalents down.
During the quarter ended September 30, Twentytwenty, we paid down all of our draws on our corporate credit facility.
Let me touch on capital allocation we.
We continue to manage the business conservatively.
The liquidity is not a concern and while we generally operate under and essential services provider designation, we are keenly aware of budget pressures impacting our customers.
We previously indicated that any large scale M&A was paused, while tuck in transactions would continue.
Given our current financial standing proof of our ability to successfully operate in the pandemic and strong debt markets, we restarted our M&A activities as new prospects come to market.
We do not anticipate a disruption to our future quarterly cash dividends.
Share purchases will continue to be made opportunistically.
We believe it is critical to make ongoing investments and our business, particularly in our people processes and technology to enable uninterrupted delivery to our clients, while maintaining our competitive edge.
In closing we are establishing guidance for fiscal 2021.
Revenue is projected to be between $3.2 billion and $3.4 billion and diluted earnings per share.
Is projected to be between $3.45 and $3.70.
This was a wider range than prior years due to the significant uncertainties, we face and predicting the amount and duration of the code response work and the disruption to core programs across all of our segments.
As a reminder, the census contractors and the wind down phase, we expect approximately $460 million less revenue from this contract in fiscal 2021 compare.
Compared to fiscal Twentytwenty pro forma revenue and fiscal Twentytwenty adjusting for the change in the census contract is approximately $3 billion.
Against the midpoint of fiscal 2021 guidance.
Which is $3.3 billion this implies organic growth of approximately 10% excluding the census contract the.
This anticipated growth is driven by two main factors.
Significant top line growth from operations outside the us where as I noted earlier, we expect revenue increases of approximately $175 million, primarily due to forecast and volume increases on our employment services contracts and new work coming on line and forecasted resumption of activities.
And volumes.
Core program work within our Us services segment.
Looking forward into fiscal 2021, it is difficult to predict when the code response work rule and and what our core programs may return to previous profitability levels and whether these two will go on side.
Our profit performance for fiscal 2021 as expected the lag revenue performance for all three segments, which reflects the pandemic related challenges such as lower volumes and many large us based programs. For example, Medicaid eligibility redeterminations were suspended to ensure people continue to have in share.
Parents, which is the main driver behind the reduced volumes. However, the modest increases we have experienced and some Medicaid enrollments.
It has not been sufficient to offset the impact from halting Medicaid redeterminations.
All of our Medicaid contracts have different terms, which result in varying revenue impacts as a result of the.
These dynamics.
Fiscal 2021 cash from operations is projected to be between 340 and $390 million and free cash flow is expected to be between 303 hundred $50 million. Our effective income tax rate is expected to be between 25.75% and 26.5% weighted.
The average shares in the fourth quarter of fiscal 2020 were $62.3 million absent share purchases. We would expect the weighted average shares in fiscal 2021 to be between 62.1 and $62.2 million.
We expect the U.S. services segment operating margin to be on the 16.5% to 17.5% range.
We expect the US Federal services segment operating margin to be in the 6% to 7% range.
The outside the us segment.
Is expected to have positive operating income, but this segment continues to be more severely impacted by the pandemic than the two U.S. segments and accordingly operating margins in the low single digits for the full fiscal year is a reasonable expectation as.
As I noted earlier, we expect the outside the US segment profit to be slightly negative and the first half of the year with improvement and occurring in the back half of fiscal 2021.
Predicting the quarterly profile is challenging much of our Cove and response work is scheduled to conclude after our first quarter ending December 31 Twentytwenty.
Based on our current assumptions. This means that the second quarter of fiscal 2021 is likely to experience a significant drop in revenue and earnings.
While it is possible the some of this work will be extended this is not guaranteed.
It is also difficult to predict when the public health emergency declaration will seize.
And the US federal government will permit states to execute Redeterminations and when other core programs were returned to previous levels.
We hope that these remarks provide you with insight into our fiscal 2021 based on what we know today.
And with that I will turn the call over the Bruce.
Thank you Rick and good morning, everyone.
The U.S. 2020 general election is top of mind for us all so I want to start there.
Well some uncertainty remains such as with the Georgia Senate run offs in January we're in a good position to address our perspectives on the Biden Harris administration and congressional results as well and some anticipated implications for Maximus and.
Some expected the projected bluewave did not materialize, creating a likely indicator of the more moderate approach by Congress and the new administration for at least the next two years generally speaking therefore, there are headwinds and Tailwinds as Democrats attended to design and promote more generous social welfare and public health programs while Republicans.
Tend to focus on program integrity as it relates to access coverage and eligibility criteria.
As we've seen through our own history, serving government.
Both parties see value and public private program delivery models often for different reasons. A good example of this develop during the pandemic when the volume of unemployment claims quickly overwhelmed the traditional state resources.
37 states have turned the contractors for unemployment insurance application processing assistance under the authority of the cares Act with 21 under Democratic Governors and 16 Republicans we've been fortunate during this period to secure unemployment insurance work with 17 States, both Democrat and Republican.
As you know our nation continues to face a variety of challenges, including a global pandemic and subsequent high levels of unemployment impacting specific sectors of our economy and straining social welfare and health safety net programs, both Congress and president elect Biden will need to address these challenges and do so in the context of record deficit spending for us.
Decades Maximus has been a partner to government as it navigates the impacts of economic shocks and uncertainty that simultaneously drive greater reliance on program benefits, while challenging budgets, particularly at the state level.
As Rick described our role as a partner to many state Medicaid programs is to ensure policies are quickly and effectively implemented to enable ongoing access to health benefits for vulnerable populations.
In other cases, like our student loan programs and unemployment insurance.
Our role is to help reduce fear and bring hope to many and difficult financial circumstances.
Our view is that the near term headwinds of lower volumes and some programs are far outweighed by the long term tailwinds of being a decades on partner to government and trusted with the administration of some of the most critical social welfare programs and our nation.
So while some of our core programs, maybe along the way from resuming previous operational levels due to the sheer uncertainty of the times, we're managing our cost prudently investing and new capabilities and we'll be ready as the next day equilibrium emerges.
Turning to current events as most of you know the Supreme Court last week heard arguments and California versus Texas.
Rich challenges the affordable care act constitutionality by focusing on the individual mandate we.
We cannot know for certain when the court will issue a decision or what their decision may be however, recent press coverage has pointed to the court signaling its intent to keep the affordable care Act and place.
With health care policy being a top priority and a major platform initiatives for president like Biden, we anticipate actions to address certain aspects of the FDA through a number of levers from executive orders to agency regulations to potential congressional action.
These actions will focus on giving Americans more choice, reducing health care costs, and making the health care system easier to navigate.
And when it comes to understanding the intersection between customers and public health insurance programs Maximus is uniquely positioned.
For years, we have supported the federal government and states with the implementation and ongoing operation of the FDA and subsequent modifications are.
Our demonstrated success and supporting state and federal exchange marketplaces under the FDA will enable us to assist the new administration in their efforts to improve access to benefits and streamline the citizen experience.
The Biden administration has already taking steps to prepare their transition team.
As a result, we don't expect the same level of slowdown and federal procurement as we saw with the 2016 transition inside.
In summary, the long term demand for our services remains strong as federal and state agencies turned the companies like Maximus to deliver outcomes that matter for their citizens.
And what's the U.S. election period, the cope and 19 global pandemic continues I'm proud to share that we have hired thousands of new employees in fiscal 2020, despite the pandemic in a small but meaningful way. We are proud to have created new opportunities for many in the face of historic levels of unemployment men.
Many of these positions operate under a work from home model or offer temporary work from home capability throughout the pandemic.
As you May recall, many of our operations were deemed the central by our government clients and while we strive to move as many employees to work from home model as possible not all government programs allowed for this particularly those with strict requirements related to the handling of personally identifiable information or Pi.
At peak, we successfully transitioned 63% of our US work for us to work from home with 32% and an office setting and the remainder on leave.
Outside the US 76% of our employees shifted to a work from home model at peak.
This prompted us to conduct and employee survey of our US employees regarding our Coke 19 response and safeguarding measures.
Of note, 80% of respondents bleed Maximus is protecting their physical health and safety and 80% also believe Maximus has taken the necessary steps to provide appropriate income protections.
Its employee feedback will continue to guide our COVID-19 action Committee and ongoing strategy as we face rising levels of the pandemic again.
Most importantly, we have a sharp focus on managing and executing the business. During this global health crisis, while protecting our employees remains Paramount we aim to meet our contractual obligations achieve our profitability objectives generates strong cash flow and continue to drive organic growth.
During this period, we've capitalized on several new opportunities.
In support of our strategic expansion into clinical BPM services delivered at scale, we formed Maximus public health or mph to provide meaningful support the governments as they respond to cope and 19 and other public health threats.
The team comprises public health clinicians researchers epidemiologists bio statisticians and geospatial analysts.
Mph is collaborating with academic partners conducting research and expanding partnerships with public health agencies health care providers data analytics platforms and industry partners to service the resource to government and developing and executing their public health strategies.
This collaboration focuses on preparedness and effective response to current and future health care crises and.
Initially mph and supporting efforts to contain the spread of COVID-19 and toward the purchasing distribution citizen engagement and administration of vaccines.
As we've grown our array of services has become more robust as a result, we renamed our U.S. health and human services segment to the U.S. services segment. This better represents the breadth of offerings provided by the segment for our government clients.
Our digital transformation and early technology investments enabled us to successfully pivot in the face of the pandemic and effectively serve those most reliant on the public programs we operate.
Earlier, and our digital transformation journey I shared the success as we disrupted the traditional models and developed the tools to meet citizens, where they are through mobile applications robust portals, and omni channel communications that seamlessly integrate chat and text messaging with conventional voice channels internally, we've applied robotic process automation or.
Our PPA at scale and last week, our bots process. There are 2 million at the transaction.
We continue to see strong potential and our PPA to contribute further to operational efficiencies with these accomplishments as our foundation and our customers coming to expect digital capabilities tightly integrated with our VPO solutions now is the time for us to move to our next phase.
We will continue maturing our digital delivery capabilities and driving further automation into routine citizen transactions, while taking the next steps to build on the potential that are moving to the cloud has created in areas like natural language processing AI and cognitive computing.
Our COVID-19 digital responses and early indicator of those efforts and I will share more as we continue along this trajectory I'm.
Im pleased that we successfully cemented our place on the U.S. Department of Education, the office of Federal student aid or FSC next generation processing and servicing environment known as the Nexgen contract vehicle.
As a reminder, Maximus currently provides customer service to more than 7.5 million students as part of the debt management and collection system or DMC US project add up I say.
The next Gen contract vehicle will allow us to bid on task orders that will ultimately provide resources to support all student interactions with FSC.
For example, this would include task orders tied to allocated volumes of the loan portfolio that will be converted to the new servicing model under nexgen.
As EPS eight transitions to the next Gen strategy Maximus will continue to provide ongoing support and delivery for the FSC DMC us.
This work is core to our offerings and illustrates our growth strategy to further expand and us federal government agencies.
Outside of the U. S. Max Mrs secured and industry, leading position on the new UK government commercial agreement for the provision of employment and health related services or cares framework.
When you place and all six areas on which we bid.
The framework will be used by the UK government for contracting national employment support programs. This framework is expected to be the default vehicle for the department for work and pensions are DWP national employment focused program contracts.
Max Mrs already working with the government commissioners in the UK to utilize our expertise to address the labor market challenges caused by COVID-19. For example over recent months Maximus has worked with the DWP to expand our employment focused programs launching new initiatives in Wales, and London, We believe our existing delivery.
The along with a record of performance and strong partnerships puts us in the sound position when procurement for future contracts begin shortly.
The UK is no exception and as Rick noted, we are seeing a substantial rise and demand for employment support programs across all of our markets as governments struggle with rising unemployment. These.
These trends point to a significant increase in revenue outside the us where Maxim is already has the large portfolio of employment services contracts, we have a long and successful track record of achieving employment outcomes and supporting people back into sustainable work during economic downturns. These.
These programs will be essential as governments aim to get their economy is back on track as we emerge from this global pandemic.
Moving on to New awards and pipeline as of September Thirtyth.
For the fourth quarter of fiscal 2020 signed the awards were $2.670 billion of total contract value at September Thirtyth further at September Thirtyth. There were another $744 million worth of contracts that had been awarded but not yet signed.
Let's turn our attention to our pipeline of addressable sales opportunities.
Our total contract value pipeline at September Thirtyth was $33.0 billion compared to $28.9 billion reported and the third quarter of fiscal 2020.
Of our total pipeline and sales opportunities, 69.3% represents new work.
I want to reiterate the difficulty in predicting the impact the global health pandemic the uncertainty around the Senate majority and the new U.S. administration transition may have on our pipeline timing of new work and returned to previous operational levels. However, we fared well through the pandemic and we've worked through presidential transitions with success and the past.
Our earned reputation as a trusted partner offers continued opportunities to assist governments through these extraordinary times.
In fiscal 2020, we demonstrated our ability to respond to the changing needs of our clients by capitalizing on strategic and timely investments.
Using our digital capabilities and leveraging our experience teams to quickly ramp up a qualified workforce.
Our long history of success working with our government clients positioned us to effectively respond to the extraordinary needs of citizens and the wake of the pandemic.
We are cautiously optimistic that fiscal 2021 will be a year of progressive stability across the business strong execution and strong cash flow.
While the global pandemic continues to impact and many of our core programs. They will ultimately return to previous levels in the future. It really is not a question of EPS, but rather a question of when.
Before closing I'd like to reinforce comments I previously made regarding our commitment to diverse the equity and inclusion or D. and I.
We recently hired our senior director of the he and I will focus solely on furthering our strategy and implementation across the business. This includes extensive listening sessions with employees and engaging them in the process of defining future programs and initiatives.
These initiatives will strength and not only our company, but speak further of our commitment to the communities we serve.
While I'm pleased with the progress, we're making I'm reminded that there is more work ahead.
And the U.S. alone in fiscal 2020, we have successfully employed more than 2100 persons with disabilities and more than 71% of our total us hires are female we continue to refine our focus on recruiting people the color and military veterans at all levels of the organization to better reflect the populations we serve ice.
I spoke recently with our newly hired manager of veterans outreach, who is herself the veteran and Paralympian and share her optimism at the progress we've made and the further potential we have to create opportunities for those who have served so honorably.
And lastly for Maximus colleagues, who have been impacted by COVID-19, we remain steadfast and our commitment to provide assistance, where we can for you and your loved ones.
And with that we'll open the line for queuing day operator.
Thank you, ladies and gentlemen, we will now be conducting the question and answer session.
I'd like to ask the question. Please press star one on your telephone keypad.
Information until the indicate the your line is and the question queue.
The press Star two if he would like and with your question from the Q.
We ask that you limit your follow up questions to one so the others may have an opportunity to ask questions. You may reenter the queue by pressing star one again.
For participants using speaker equipment and may be necessary to pick up your handset before pressing the star key.
Our first question today is coming from Charlie Strauzer us.
Securities. Please go ahead.
Hi, good morning.
And maybe as you right.
Maybe you can expand a little bit more on your margin assumptions for next years, specifically in the O. US are you kind of expecting to see a typical ramp of upfront expenses.
For the higher expect the case loads there.
Yes. Good question, Charlie a significant portion of next year's growth as you know and you know US segment is driven by contracts that are currently signed and in the Maximus on track.
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This includes a lot of new programs, such as our job and treat targeted support program called Jets in the UK and.
The climate program that is targeting recently unemployed people due to the pandemic.
Participants on stated net where we must be out of work for three months or more.
Program provides tailored flexible support to get the participants back to work, including specialist based on resumes and interview coach and yes, we're beginning to see the rising case loads and markets certain economies and March emerged from the pandemic that includes Australia.
Yes, you're right Q1, and Q2 are going to be impacted by head count growth as we prepare for those increased volumes Q.
Q2 would also be impacted by seasonality, it's normally a slower period for employment services contracts and as you know pending change orders can always be a factor with respect to timing.
Remember we had right.
Second quarter this year of $24 million as a result of the pandemic and the.
Impact on the pandemic on our employment services future outcomes.
That is not obviously not expected due to the forecasted to repeat.
The question.
That's great. Thank you and just my follow up is probably for Bruce and maybe you can give us a little bit more of your thoughts on about the income.
The incoming administration and some of the the longer term opportunities that you might see.
Funding from the Biden administration. Thank you.
Sure Charlie and.
Well no we get the question a lot.
And the.
Okay, and so we always start by reiterating what we said, there's some language and the Democratic administration and.
And more and outsource less and.
Administration and the obvious but.
But with that with the global pandemic at the back drop we strongly the welfare program.
Grams or like the meaningful increase and funding under a Biden administration.
We also know that.
At the two oral health care.
Priority the buy administration and the price.
And certainly applications and build on.
Era, and we'd expect us.
And do that your number.
The.
Orders are and.
Regulatory muted course the outcome.
The special election.
The next year.
No.
There are two considerations and.
On more broader measures.
Congressional action and John.
On the underlying premise is provide greater coverage for Americans.
Right and.
Okay and about include.
And decreasing and digital.
On the top.
The one thing is the density and the age balance ability or Medicare and Medicare and option for individual centers.
Other factors that you might the.
The.
And then the X.
Ex credit eligibility on.
Horrible.
And is now at 100%.
Operating income as a reminder, on a percentage.
About 100 us.
In addition to that.
And last talked about increasing on access.
Access to.
And the AIDS that don't presently on access Medicaid or Medicaid expansion and net.
9 million individually.
Yes.
So then the question is what role Maximus.
And I view that the president elect really gross.
The formal era and.
And he's very experienced the government executive is bringing together a team we're government.
A lot of us our stations and a likely will be great.
Thank you.
And our brands and again the program.
Right.
On the option, so private and partners like Maximus I believe will continue to be on us.
Or do you agree I quality and government programs like this and.
And finally as I mentioned in my prepared remarks, and talk a little bit about master policies. The continued extraordinary investments and.
Public health as we've seen over the past loans now turning to the distribution the administration and access consumers about the.
And why the I mean.
Great and.
And all those factors together and all on us.
Yes.
Four years under GAAP.
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Thank you very much.
The next question please.
Thank you. Our next question is coming from Donald Hooker of Keybanc capital markets. Please go ahead.
Hi, great. Good morning, Thank you for the questions.
I wanted the dive into the sort of the Medicaid challenges that you're facing.
And try to understand the dynamics here I understand the.
The redeterminations.
Does this sort of is there is some is this going to snap back perhaps next year. How does this work is this all linked to the public health the emergency so at some point that lifted and then you guys see sort of a snap back and work maybe even catch up work.
Relating to the sort of the Medicaid redeterminations that had been suspended and.
The walking through that.
Sure.
I don't know on.
But the answer to that and part of your question, Yes, we believe that.
The Redeterminations that are building up now and backlog will have to be addressed at some point in the future. So like we said during my prepared remarks, and it's really not a question.
Let's now and do things quickly on on the determination the.
The and other work this is and make efforts to maintain their level and effort on Medicaid and that's.
Yes.
The.
During this call the belt the merchants and.
And interesting nuance is that yes, yes, federal matching money the 6.2% the states are getting during this call is health emergencies extends through the end.
The order.
Order in which the public health emergency so presently sector aydar.
Announced the 90 day renewal at the declaration that ill health emergency through the end of January actually the January 20, and 21. The funding therefore would be available the states through the end of March the maintenance and effort Department, However, and in the month, and which I will have health merchants. So it would and in January of 2020, once they get the additional funding.
Resumed redeterminations and that or.
And the question is what's happening with Medicaid enrollment.
And we talk about the as you work on we and.
Very closely the delays.
On the Medicaid enrollment and calling on it.
And that enrollment and Inc.
The August 29 E and in July.
Good day.
The new Bill by.
4.2 million individuals.
And just saying we'd for adults and day.
The markers and so we have already at the moment increases in our state Medicaid contracts on but as we indicated during our remarks the tailwind is enrolled.
All mens, which nationally and it's been about 1.6% to 1.2% per month.
Not yet insufficient to overcome the headwinds from the reduction I'd rather call. It the temporary suspension redeterminations, but there will come a point, where that flips and redetermination backlogs are there that need to be once the us.
Yes, I guess maybe.
For just can you give us a sense as to maybe the.
Roughly quantify the all is there going to be sort of a step up that occurs and the who knows when the public health emergency and but is there.
If what what was the headwind from that pause and Redeterminations.
It just feels like a mothers day.
Yes, well, we I would point you just back on the guidance that we just provided we we.
And our our new price 20.
On the one day.
Based on price.
And the merger.
Pardon.
And so.
Yes, there's going to be Inc.
And the work related to Redeterminations and further eligibility enrollment or that would be operated and obviously.
Fair enough.
Sure.
Okay.
Thank you.
Thank you. Our next question is coming from Richard close of Canaccord Genuity. Please go ahead.
Great. Thanks, congratulations on the year, given everything that's been going on.
First question, maybe the died and a little bit deeper on the outside the us.
Rick.
I appreciate your comments on the profitability there, but as we think about.
Employment services, whether its the UK or Australia has been challenging it on may.
Maybe over the last five years or so.
With that program's changing in the end and what not.
Can you just talk a little bit about your confidence.
With respect to.
The new contracts that you're seeing and and the opportunity.
On the employment services, you mentioned and Australia, improving some just trying to gauge what your confidence level is with respect to that business.
Richard and all good questions and and yes, you're right we have struggled.
With the high on them.
Oh, hi, employment rates and the low unemployment rates historically the contracts. The we have 50% of our work outside the US is in that employment services area.
And as you know their volume based contracts, where we get paid for outcomes on you have low unemployment rates, you're going to be struggling with the level of activity and volumes and so that has been our historical issue.
Unemployment rates are rising now, but that's as a result, the pandemic and Weve had closed the economies. We are beginning to see the volumes up here and we're beginning to.
Do our hiring and advance those unemployment volumes. So yes. I mean these are these are contracts and are in the portfolio and signed today and we're beginning to see the signs of the on the volume's up hearing and we are starting to do the hiring that we're going to need to service those volumes.
The answer your question.
Yes.
Moving on.
Give me a fall and give me a follow up.
Well I.
I mean, I can get with the yeah, I mean, the the contracts the.
Programs I should say have changed over the years and.
Yes, maybe especially in the UK and.
Yeah, just trying to gauge.
Are we going to start this program and then after a year or so and they're going to say, yes, we're moving on to something there for and there's just been a lot of changes and it seems like it's created a lot of noise over the last four or five years.
Yes, Okay, what 2.1 by the way in the United Kingdom, We are on cost reimbursement at this particular point, which was good for us.
You know, we typically prefer pave the pay for results, but obviously in the pandemic world that was that was helpful to us.
And they didn't change the payment structure and Australia to help us. So those are a little less payment results oriented so as we go forward and I think.
If we if we continue with reasonably high unemployment rates and the programs that we have are going to be required and I think that we're going to be called upon to serve the stops if we get back into low unemployment rates and you know 2023 2024.
And the you've seen history history told the the.
Had the government's tell us to begin to work on the other types of things and harder just show the populations and so it will be more challenging for us.
Okay. That's helpful do I get to ask a follow up or did I use that sure.
Yes.
Okay.
So on that.
Maybe not the being negative but on the Maximus public health. The obviously, that's a great opportunity for you guys think given everything that's going on and vaccines and whatnot, but.
But you know.
If I look at the census, obviously, there was some and and investor interest and the drop off the.
Sets us one SAP program comes to us and so as I think about Max Smith public health you know at some point hopefully the scope it situation comes to and and Bruce I'm curious your thoughts in terms of investing in the build up the.
And P H.
And the opportunities that exists there and then thoughts of.
What happens after you.
So the waters under the bridge or over the bridge what whatnot.
With respect to the need for.
The Maximus public health business.
Absolutely and Richard and I'd say, you're characterizing and frankly, the water right now is over the bridge and hopefully will come back down.
Our net.
And then and not and making this investment is that it is actually a component of our long term strategy the more clinical us company and.
Yes, the question because its not and knee jerk reaction to a one time crisis.
Rather and investment that gives us the team has an incredibly diverse set of skills and backgrounds.
Hello.
Good day, not only attack the current.
And then.
One of the the less concern and this and that but.
A lot of people.
And so.
We do need to be mindful that there could be further pandemic situations.
Really not as I said, we're seeing presently but over the course of the next couple of decades number two.
The team that has tremendous experience and background and a lot of areas the public health and ill.
Our significant around the world in particular on the percentage of populations with non communicable disease states on it.
The morbidities.
And so we've actually we're we're having this public health team the resident within our federal organization, but it's really an asset to the entire company and as I've spent the last few days on our business development all going around the world, We bat representatives from the public health.
On the phone talking with folks and our Asia Pacific region, and our outreach and and so forth about the public health on crises and lot. Those governments are based on weather in Canada.
Candidly during the current period access the appropriate mental health services are large population is becoming more and more important and then there are also countries the app.
Significant public health issues as it relates to the diabetes and obesity and other chronic conditions. So this is on an organization that is incredibly well equipped and the near term because for example, the leader Dr. Andrew Somers previously worked in the Us policy.
Eric planning and evaluation HHS and work on things like the boat buyer and decks, but the team is broad enough and their experience is deep enough and.
Certainly help us.
On the broader public health mission that we're executing on which is part of our solutions.
Yes.
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That's a great answer thank you very much for allowing me to ask that question.
Congratulations.
Hi, its head and neck.
The question planes.
Thank you once again, ladies and gentlemen, if you would like to ask the question you may do so by pressing star one on your telephone keypad. Our next question is coming from Dave Styblo of Jefferies. Please go ahead.
Hi, there good morning.
Got to see Richard Guatemala, and and that's that's fair.
[laughter].
First question I had and I missed the first 40 minutes I apologize if you've covered this already but to circle back to the guidance. The the revenue outlook $3.3 billion at the midpoint seems quite a bit higher than than what you're signaling during the last call.
Although the EPS seem pretty consistent and you were trying to talk that down from the consensus was and consensus listened to some extent so I'm curious what why aren't we seeing the the same EPS flow through as we are on on.
Revenue being higher than what we were thinking it should be it sounds like maybe there was some investments.
Is that sort of the.
The the overhang right now or are there other explanations for that.
The brick page on.
Yes, it's a good question and.
We are looking and obviously the answer is the is many different factors. We are seeing some revenue reductions on performance based contracts, resulting from the coding.
And dynamic.
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As I indicated in my prepared remarks.
We have seen some pause and student loan repayments, which has impacted our debt management contract last quarter I provided. The example of the impact on Workers' compensation claims and California on our independent Medical Records review on the workers compensation claims.
We did talk about the suspension of Redeterminations in and.
And the United States on on the Medicaid.
You know when we do we are filling in a lot of things with the Kogan response work that is accretive work, but it's coming in and margins that are less than and our average and put some downward pressure on us there.
You've talked previously and continue to put effort on business development and marketing.
Particularly on our US Federal segment, which we believe can be a growth area for us and we also previously talked about developing technical capabilities that are tied to those growth initiatives. So I think what you're seeing is just lower margins with with better revenue and I really blame the it on the on the pressure on some of our.
Yeah.
Core work due to the pandemic and then us filling in the top line with that over the response work, which really does have as good a margin, but it's accretive.
As those core programs.
Got it Okay and then my one follow up would be on the new work and the pipeline looks like to me is and some back on level of math, there that it's up about 17% sequentially from the from the fiscal third quarter looks.
It looks like most of that is an RFP that that haven't dropped yet, but I'm curious just the one confirm that and to understand if you can provide any color if.
That's related to maybe just a couple of contracts that are that have larger dollar revenue opportunities or if there was just a series of contracts that are that are now coming to market and the RFP.
Our.
David This is why don't I start and then ask Rick.
Color commentary as well so.
We provide a little bit of color on the.
Fine and Newpark and our presentation, obviously and the.
And the press release, as well and I would say that if I look at kind of the composition of the pipeline.
It's interesting there is.
The four months ago, I would and told you that the.
The pipeline was largely caught and unchanged yields are flowing through most of the disruptions if anywhere at the state level because.
Hard to do kind of merger and then related experiments.
And in addition to that outside the us and we saw us and slowdowns and some particular areas and otherwise kind of moving ahead. The the answer now is that the federal government agencies.
Agencies and prioritize the endemic themselves and so if I look at CMS.
Some of the deals that we would have seen and the pipeline. This year are being pushed out at least a year and now that's good to hear the income and you're just getting contract extensions, but if you're hoping to go after it it's not on.
Their agencies, it's a little bit more little bit more mix like at the IRS on one hand, we benefited from the procurement and the customer contact center environment, which is the first kind of first of the kind that the IRS and.
And and agency that we've been hoping to serve the years or perhaps are down but there are the procurement that were delayed as well so.
At the federal level.
I guess the.
Final point I'd make would be it's been good to see that some of the transformational procurements that are the larger and longer term ones have continued apace and the EPS a next gen. One the probably the best example on that we've recently one of the seat on.
So with that as a bit and the bat backdrop. The the composition of the pipeline still remains strong we've seen.
I would say additional RFP opportunities still coming out as it relates to contact tracing work.
And the second wave has hit at the US services level. It seems like there have been the mark that were developed and kind of waiting to be launched that are now coming out that have the potential to extend the contract pacing back tracing work further in the year than we might have anticipated and then from an outside the US perspective, I guess the key point I'd make.
There's a number of geographies like the Gulf region, and Australia us are in much better condition on compare and there obviously, the UK and the United States as it relates to the.
And so procurements the actually moved ahead Ed.
Nicely and and the pipeline is on.
Interestingly on quite robust I will also say on.
Finally on the outside the US there are customers that seemed the pandemic as an opportunity to rethink and reshape their programs and they thought and a very transformational way about it and said we're going to move to more digital solutions are going to change the way, we deliver our programs and we even have examples where our piece of and accelerated because they want to capitalize on the moment.
That provides a bit more color recognizing and get US no sure I just want to just make sure that we say again. The mean all of this has been built into our guidance the.
Non of uncertainty and that we face at this particular time.
The unprecedented in our recent history and that's both upside and downside so no on the best we can and you.
But all of that our guidance.
Good day.
That's great. Thanks, I'll, let others GAAP.
And.
Okay and.
Operator next question. Thank you. Our next question is coming from Richard close the Canaccord Genuity. Please go ahead.
Yes, thanks, So I'll keep it quick here with us.
Respect and the employees I think on slide 12, 80% survey.
Yeah on your employees can you talk a little bit about who is required to be in the office and maybe just give us a little bit of the an update with respect to that and the 80% and do you do the surveys on a regular basis and any thoughts in and around.
Those metrics.
All right. Thank you.
And during my prepared remarks at our peak, we were able to transition 63% of our us or smart.
And the outside the us is actually 76%.
Not all customers on.
Our able to have us working to model with everybody working from home so and.
In some instances for example, supervisors needs to be and the office.
To remotely monitor and manage the employees and working from home and other factor is training we found that over time.
And a number of our programs training is best deliver it initially and an on site manner and that gives individuals opportunity to learn the material, but ask questions and then go through what we call and net process, where they're taking their initial calls and a very closely monitored environment and then they and developed and where they may be able to them going work.
So in every instance, we've obviously been super careful to maintain the appropriate articles and all the facilities. So that we are staffing at appropriate levels, given local conditions and rules as off and local government site limit the on the kind of percentage occupancy and facilities and so forth and ensure that we're keeping our employees day.
You had asked about how frequently we survived survey our employees, we surveyed more frequently during the day.
Maybe historically, because we really want to get a sense of how we're doing by that we want to make sure. That's a deal that Eric Inc.
And the workspace and that the income is being protected appropriately as well and hence the statistics that we offered during the call on.
We're moving as the company bought toward and annual employee survey, where we'll look at effectively kind of the net promoter score number that will give us an indication.
Well the satisfaction with what we're doing and the began this actually shortly after my day.
No and we really work hard to address factors that are so critical to our employees like the appealing.
Whether they are supported by the supervisor, whether theyre getting adequate opportunities or development or so and.
Engagement is a very important factor and I.
Close cousin to that of course is in the area of the first the equity and version that I mentioned during my remarks.
Okay. Thank you.
Yes.
Richard.
And you have any further questions.
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We cannot have question at the.
Hi.
Ladies and gentlemen, we have reached the end of the question and answer session and are out of time for today's call Maximus. Thank you for your time and participation and you may disconnect your lines at the time.
Good bye.
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Oh.
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