Q3 2019 Earnings Call
Greetings and welcome to the Max Smith fiscal 2019 third quarter earnings Conference call.
At this time, all participants are in listen only mode.
Question answer session will follow the formal presentation, if anyone should require operator assistance during the conference. Please press star Zero Wonder telephone keypad.
As a reminder, this conference is being recorded it is my pleasure to introduce Lisa miles Senior Vice President Investor Relations. Please go ahead.
Good morning, and thank you for joining US with me today is Bruce Caswell, President and CEO , and Rick Nadeau, Chief Financial Officer.
I'd like to remind everyone that a number of statements being made today will be forward looking in nature. Please remember that such statements are only predictions.
Actual events and results may differ materially as a result of risks we face, including those discussed in exhibit 99 dot one or SEC filings.
We encourage you to review the information contained in our earnings release today and our most recent forms 10-Q, and 10-K filed with the SEC.
The company does not assume any 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 this information in its internal analysis of results and believes this information may be informative to investors in gauging the quality of our financial performance identifying trends in our results and providing meaningful period to period comparisons.
For a reconciliation of the non-GAAP measures presented in 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 This morning Maximus reported its financial results for the third quarter of fiscal year 2019.
Revenue for the third quarter of fiscal 2019 was $730.7 million.
Which was lower than expected acquired revenue came in below our forecast due to a slower than anticipated ramp on the census questionnaire assistance contract.
Total company revenue was also unfavorably impacted by foreign currency translation of $9.1 million in the quarter.
Nevertheless in the third quarter Maximus continued its track record of solid operational delivery demonstrated by strong margins earnings and cash flow.
Total company operating margin was 11.4% for the third quarter.
Driven by the Us health and human services and Us Federal services segments.
Operating margin in the prior year was 13.8%.
Which benefited from $15.5 million of revenue and operating income tied to change orders.
GAAP diluted earnings per share were 97 cents for the third quarter of fiscal 2019.
In line with company expectations.
I will now speak to our segment results in the third quarter.
As expected third quarter revenue for the US health and human services segment decreased to $291.1 million compared to the same period last year.
In the third quarter revenue was tempered from contracts that were rebid or extended over the past year.
Looking forward, we anticipate revenue will increase as these programs mature and new contracts begin to generate revenue, which is expected to return this segment to organic growth in the fourth quarter.
Operating margin for the segment in the third quarter was 18.6% compared to 21.3% in the same period of the prior year.
Within the US health and human services segment. The prior year benefited from $13.7 million of revenue and operating income tied to change orders.
Excluding this benefit operating margin for the segment would have been 17.7% in the prior year.
We expect operating margin will range between 18 and 19% for fiscal 2019.
Revenue for the third quarter of fiscal 2019 in the US Federal services segment increased to $292.3 million driven both by organic growth and through acquisition.
The acquisition contributed $163.4 million of revenue in the quarter.
Absent the acquisition organic revenue increased by $16.7 million compared to the same period last year driven by new work.
This includes the work we discussed last quarter, which we are performing on behalf of the Universal service administrative company referred to as E rate.
On the bottom line the segment's operating margin was strong at 11.6% and benefited from favorable results on several performance based contracts.
We now expect to finish the fiscal year on that operating margin between 10% and 11% due to a higher mix of revenue from fixed price and performance based contracts as opposed to cost plus contracts.
For the outside the US segment third quarter revenue was $147.3 million.
Revenue was lower compared to the prior year due to the expected decreases on welfare to work contracts in both the United Kingdom, and Australia as well as the unfavorable impact of foreign currency translation of $9.1 million.
The segment's operating margin for the third quarter was 3.4%.
As we disclosed last quarter, the new employment services contracts in the United Kingdom are progressing toward profitability, but they are unfavorable to earnings in the near term.
Operating profit was also negatively impacted by an accretive component of a contract in Canada.
That was unexpectedly discontinued in may as the customer considers a new approach.
As a result of this change we now expect the segment will deliver an operating margin of approximately 3% in fiscal 2019.
Let me speak briefly to the balance sheet and cash flow items.
Capital expenditures increased in the quarter in comparison to prior periods due to fixed asset additions related to the ramp up on the census contract as well as increased capitalized software expenditures.
We have been focused on investments to continually innovate our technological capabilities and enhance our core service offerings to our customers.
Bruce will provide more detail during his prepared remarks.
Capital expenditures for both the census ramp up and internal capitalized software initiatives are expected to continue through the fourth quarter, but at slightly lower levels.
In the third quarter Maximus delivered cash flow from operations of $136.5 million and free cash flow of $116 million.
Days sales outstanding were 77 at June Thirtyth.
At June 32019, we held cash and cash equivalents of $71.1 million and finished the quarter with no draws on our corporate credit facility.
Maximus maintains a strong track record of operational performance and a history of generating strong consistent cash flows.
Over the years, we have also remained committed to a sensible and disciplined approach to capital deployment.
Our approach is unchanged and we believe we can provide shareholders with reasonable returns while at the same time generate sufficient capital to pursue strategic M&A.
To invest in and grow the business to create long term shareholder value.
As we move into fiscal 2020 , we continue to seek out strategic opportunities in order to achieve some of the goals previously highlighted as part of our strategic market review.
As a reminder, we are keenly interested in building scale, enhancing our clinical capabilities and extending into new adjacent sees with the goal in mind of building long term sustainable organic growth.
And finally guidance.
As I mentioned in my opening comments, we now expect revenue for the full year of fiscal 2019 to range between 2.88.
And $2.9 billion. This was due to the following factors.
First.
Unfavorable foreign currency translation is expected to impact full year revenue by an estimated $15 million second.
Revenue has also been impacted by the slower than anticipated ramp on the census contract.
In the third quarter, the contract was behind forecast by $15 million.
We continue to expect the census contract will progress through the ramp up phase and reach revenue levels in line with previous disclosures.
And lastly, the remaining balance of the revenue shortfall in fiscal 2018 has been due to lower volumes across several contracts in the portfolio.
On the bottom line, we now expect to achieve the top end of our original guidance range. As a result, we are narrowing our earnings range to $3.70 to $3.75 for fiscal 2019.
This is primarily attributable to strong operating performance in our us health and human services segment.
Additionally, we now expect to achieve the top end of our cash flow guidance for both cash flow from operations and free cash flow.
As a reminder, our cash flow can fluctuate depending on the timing of collections.
As we look toward fiscal 2020, we are currently progressing through our strategic planning process.
As a part of the process, we make decisions internally regarding allocation of resources and areas of potential investments with the goal of cultivating future shareholder value.
Along with this process. We are also internally, establishing a preliminary view for fiscal 2020.
Based on what we know today, our early view of fiscal 2020 is generally in line with first call consensus estimates for revenue of $3.18 billion and diluted earnings per share of $4.08.
As you know Maximus operates a large portfolio of contracts and the nature of the business is that we will always have puts and takes in the overall model.
Each quarter, we complete a bottoms up review.
This analysis is the basis of our forecasting model in guidance each quarter.
But significant fluctuations to these model inputs.
Can certainly impact actual financial results.
We work hard to manage those things that are within our control and we have a strong risk mitigation strategy that for the most part allows us to modify certain terms and conditions in contracts within reason.
But the effects of currency or unforeseen changes to a contract such as lower volumes are changing customer priorities can cause erosion that can have a meaningful impact.
Those would be the types of items that are largely outside of our control. Nevertheless, we thought it would be helpful to provide the investment community with some color on our early thinking with regards to fiscal 2020 based on what we know today.
And with that I will turn the call over to Bruce.
Thank you Rick and good morning, everyone.
While we have revised our revenue outlook for fiscal 2019 to reflect the issues. Rick noted we are seeing growth opportunities over the long term to capitalize on this our strategic plan offers multiple paths forward through three key pillars.
First as digital transformation or a cultural shift as we think about digital disruption within the government services market and new models for citizen engagement and operational efficiencies.
Market, leading applications advanced analytics, and digital automation enhance our competitive position enable new solution offerings and improve overall service delivery across our operations.
Second clinical evolution.
As we see macro trends that drive demand for BPM services with a more clinical dimension, we maintain the foundation of our business operating customer engagement centers and providing case management services.
Third market expansion as we evaluate emerging markets organically grow the portfolio and acquire capabilities and contracts to establish a foothold in these adjacent markets. We also consider our clients longer term visions for reengineering their social programs and delivery models. We aim for expansion that is a natural complement to our core services globally.
Today I will focus my comments on both new work as well as the expansion of our services and market Adjacencies.
With several new wins and a pipeline of developing opportunities in key markets, we are making meaningful progress on strategic execution as we offer integrated solutions across our.
All digital strategy.
Fundamentally to deliver digital solutions, we must also transformed the platforms on which they are delivered and the methods we employ to securely develop and operate these new solutions.
So today I wanted to start with our shift to a micro services architecture platform and the modernization efforts underway as we enhance our technology capabilities.
We continue to make strategic investments to improve our competitiveness by modernizing the applications that underpin our core services, while creating a modular set of new capabilities that can be deployed across our portfolio.
Our evolution towards Microservices means we can better organize our technology delivery around our business capabilities and more quickly respond to customer requirements.
The micro services architecture allows the system to be divided into a number of smaller individual and independent services.
Each service is flexible robust interchangeable and complete.
This architecture means that our GPO services are extremely adaptable for use in multiple context.
This is a key capability as our customers needs evolve and we work to drive organic growth in new adjacent markets.
From a client perspective since services can be selected and assembled in various combinations to satisfy specific user requirements. We can vastly increase the speed with which we tailor our solutions.
As a result, this will dramatically slashed startup times to address clients' unique needs with highly configurable versus customized delivery.
Microservices is not only changing the technology, but also our processes and methodologies.
It enables the entire ecosystem to be faster more adaptable and more responsive through strong standardization.
This is a completely different and innovative model that merges business and technology such innovation is critical to successfully implement our strategic pillar of digital transformation.
This shift supports growth beyond our current markets into adjacencies much more quickly efficiently and effectively.
We have also sought to build on the momentum of our assessments and appeals business by turning our attention to broadening our clinical services capabilities.
In 2013 Maximus developed in adjacent solution to transform California's approach to resolving disputes under its workers compensation program.
Under the state's reform efforts Maximus created a cost effective non judicial independent medical review or Aimar to help control the cost of workers compensation premiums that are charged to employers.
The new clinical Aimar model replaced the previous labor intensive process that had required opposing medical experts to present testimony to Nonclinical judges, who then render decisions.
The new model has produced dramatic results, California is saving more than $1 billion in related workers compensation medical costs every year.
The state has seen a 42% decline in its advisory pure premium rates from which ensure rates are derived since January 2015.
Disputes about the medical treatment of injured workers are resolved in 10 days down from an average of 231 days under the previous approach and according to the state's annual report.
The total amount paid for opioid prescriptions tied to workers comp claims has decreased 80% since 2013, one of the factors in driving this decline includes independent medical reviews, which Max Miss performs.
I'm very pleased to announce that as a result of the solution developed in California. We have further advance this adjacency with the New award by the New York State workers compensation board to serve as their utilization review contractor.
Maximus will perform independent medical reviews for New York's workers compensation program, which is similar to our work in California.
Maximus is uniquely qualified to handle the highly variable volume of independent medical review requests and new drug formulary requirements under this program.
We currently estimate a total contract value of $60 million for this five year performance based contract.
As you May recall, our heritage and independent assessments medical reviews, and Appeals started decades ago with our Medicare Appeals work as a qualified independent contractor or a quick.
The federal team recently picked up a new contract to perform quick appeals for Medicare part B durable medical equipment or DMV.
The four year performance based contract has an estimated total contract value of $100 million.
Maximus will adjudicate the appeals of part B M claims with an estimated 200000 claims per year.
Appeal adjudication includes technical benefit review medical necessity review and precision conferences with appellants.
Quick part B D me is the largest volume Medicare Appeals contract. This adds to our existing Medicare Appeals portfolio that includes Medicare part, a west part C and part D.
This win further demonstrates our ability to deliver an innovative solution and showcases our capability to handle large and complex volumes of appeals and assessments.
You may recall that Maximus previously supported the department of Veterans Affairs community care network or CCN program as a subcontractor.
Under this program veterans gain access to medical dental and pharmacy services through licensed community healthcare providers. When they are otherwise unable to receive care through local VA medical centers.
This program succeeded the earlier veterans choice program under which Max Miss also provided services.
We have once again been tapped to support the CCN program as a subcontractor part of this work falls under the Mission Act, which seeks to strengthen the nationwide VA healthcare system by empowering veterans with more health care options.
The demands of the program required the assistance of a supplier with demonstrated expertise and customer engagement centers and program administration operations.
Under our contract we will provide services that include Mission Act information support authorization and medical documentation entry and veteran provider and V.A. inquiry support regarding a veterans access to local providers.
The current contract continues through January Onest 2020.
And we are working towards a path supporting this program over the long term.
Within our us health and human services segment, Max misses in the process of launching a new contract in Wisconsin called food share employment and training or F. set for the division of Medicaid services.
The five year award has a total contract value of $70 million. The program provides able bodied adults without dependence on the snap program with opportunities to develop skills training and experience. So they can gain employment avoid reliance on food share benefits and meet federally mandated work requirements.
Under the contract Maximus will provide tailored employment plans case management services business services quality assurance digital solutions, and finance and human resources fulfillment.
As governments continue to see budget constraints with rising needs from beneficiaries Maximus remains a prime partner for our clients to support long term societal trends through efficient effective and cost conscious VPO service offerings.
We anticipate additional integrated approaches for which maximises well suited as governments seek to address emerging policy priorities like the social determinants of health that we discussed last quarter.
Moving overseas to the United Kingdom Maximus was recently awarded contracts in Manchester and London for the adult education budget.
We will deliver a range of education and training services, such as helping individuals gain qualifications progressed their education.
Access and sustained employment opportunities as well as achieve career progression.
These small but strategic wins jointly place Maximus as one of the largest skills providers for the program in the United Kingdom.
They also place us on the ground floor.
Have devolved skills delivery in two of the most significant markets in the country and build upon our existing work and health program infrastructure in London.
Moving onto New awards for fiscal 2019 year to date signed awards were $1.8 billion of total contract value at June Thirtyth.
During the third quarter of fiscal 2019, we were also notified of award on another $687 million worth of contracts that have not yet been signed.
Let's turn our attention to our pipeline of addressable sales opportunities.
As a reminder, we modified our methodology at the beginning of the fiscal year to reflect the nature of the VPO business procurement cycle.
The reported pipeline includes opportunities that we expect to see within the next two years and as measured on total contract value.
Total contract value includes the base contract value specified within the contract and all priced options.
Reporting on total contract value focuses our operations business development and sales teams on long term contracts and accordingly long term value creation.
Our total contract value pipeline at June Thirtyth was $29.6 billion compared to $21.9 billion reported in the second quarter.
68% of this is new work.
Our contact center operations or CCOH contract that was acquired in November was added to the pipeline during the third quarter. This is the largest contract in our portfolio and represents approximately $5 billion of the sequential pipeline increase.
We currently expect the RFP in June of 2021, and this rebid is one of our priorities.
An integral part of returning the company to organic growth is converting our pipeline of addressable new sales opportunities into awards.
Within our control our efforts at marketing and shaping the opportunities strategic partnering and teaming and delivering a compelling and winning proposal.
As I noted last quarter as we expand our pipeline to include new customer departments and agencies, we don't expect to maintain historical win rates, but we are pleased with the volume of opportunities. We are seeing and hopeful that factors outside of our control such as procurement process decisions and protests, we'll keep opportunities moving toward adjudication.
As part of our approach. We also continue to invest and expand our business development resources as well as other areas that provide meaningful support to winning new work.
In closing this quarter, we continued to see evidence that governments require much needed support from organizations like Maximus.
As budgets challenge government and new policy priorities emerge Maximus continues to evolve to meet the demands of our clients by offering an effective and efficient services increasingly underpinned by digital solutions delivered through new technology platforms.
The teams are focused on executing our strategic market plan as seen by our new wins and impressively our expansion into Adjacencies.
We are building upon our operational strength, providing clinical services to new customers and enhancing our technology platform to enable new digital solutions.
We are winning new work and further developing our pipeline.
Max Mis is an integral partner for our customers as they shape policy and subsequent program designed to address long term macro trends, reflecting aging populations labor skills and demand asymmetry public health priorities and the integration of historically silo to employment and health programs.
We remain focused on delivering solid operational execution, which in turn provides strong cash generation best positioning us to respond to these emerging market opportunities.
And with that we will open up the line for Q an operator.
Thank you, we'll now be conducting a question and answer session.
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You May press star two if you'd like to have a question from the Q.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing star one.
We do ask that you. Please ask one question and one follow up then return to the queue.
One moment, please while we poll for questions.
Our first question today is coming from Dave Styblo from Jefferies. Your line is now live.
Hi, good morning, Thanks for the questions and appreciate the color on some of the contract wins that you guys have had so congratulations on those.
My first question is about organic growth I'm wondering if you could share with us what the consolidated organic growth was for fiscal Threeq I think it was down about 8.4% in the first quarter and then that was only down 6.5% in the second quarter wasn't sure. If I heard some of the pieces of what that would be for the third quarter and as part of that when you're looking forward. What are you guys assuming for the fiscal year 20 organic growth.
Now that your blessings streets.
Three now.
Over $3 billion of revenue.
Great Hey, Dave Good morning, It's Bruce I hope you're doing well.
I'm going to ask Rick to take the first question there related to the.
Organic growth in the quarter, yes.
Dave we're going to file a Form 10-Q here.
Today.
Later today, we do have a table that we do inside the.
And issuance discussion the mdna when we actually walkley.
Revenue from the respective comparative period in the prior year to what it is this year.
And what you'll see in that is that currency the $9.1 million is actually 1.5%.
Of erosion to that the acquired revenue was 163.4 I think that was in my.
Remarks, and so the difference is the net organic impact, which is about 3.6% for the quarter overall for the company.
Was that your question, Dave that does for the third quarter and then can you speak to what you guys are thinking about for next year.
Well I think that in my my prepared remarks, I did talk about.
The fact that we thought that as we started our look into next year.
That.
What that was in the first call consensus is generally in line with what we believe at this particular time now. It's also early days and we have a lot more analysis to do we will do the.
Formal guidance in November .
And that is what.
Three more months away. So we will continue to go through the annual.
Process of planning.
We have to also recognize that in this particular.
And environment currency fluctuation has been pretty heavy and I think that will be one of the real wild cards that we will have I mean that British pound has bounced around a lot.
Recently, and and we have generally suffered from erosion not benefited but that will be a key element to this.
Also.
Okay, Yes that I guess I was trying to get out was just the organic growth component of what what you're seeing so far for next year, including the FX, yes.
Well, it's a great question, Dave Let me help you with a little bit of math, there I think if you look at the guidance that we've.
The guidance that we gave for this year and you look at 2.8 to 2.90. If you took the midpoint of that that would be to eight nine O. I think we've also disclosed that we think the census contract will give us about a $150 million tailwind.
And I think that we've also and its going it will be in the 10-Q, when we file it today.
The revenue that we estimate that general dynamic site PGTI T. had for the one and a half months prior to the acquisition was about 90 $800 million. So if you put all those together that gives you a pro forma.
For fiscal year 19 of about three 140, so when we look at the first call consensus at 318.
No thats about a $40 million net organic pick up now that is obviously net of.
What we expect to see from currency and from erosion that we have naturally from our existing contracts, but yes. We do project that we will begin having modest organic growth.
In fiscal 2020.
Got it that's great. Thanks.
And then just real quick on.
The new work in the pipeline that we can back into using the math it looks like by my math that was up about 24% sequentially can you speak to what is coming into the pipeline, which which business line that might be in is that a smattering of just a bunch of opportunities that the business development team has been working on or is there some larger contracts that seem to have kind of slipped into that two year horizon now.
Let me start and then Bruce will pick up.
But I think it's it's in our us federal.
Segment, primarily but all segments are participating in that in that pickup in the pipeline and yes, you're right that new work pipeline is about $20 billion. At this point, we don't comment on specific items for competitive reasons that are inside that pipeline, but it's across all segments and across all geographies with a bias toward that us federal.
Segment produced absolutely the only other color I provided that we are starting to doubt to announce the opportunities in the United Kingdom that are a little larger in nature that would contribute to up by 21 come into the pipeline get picked up in the tracking so and 20 122 fiscal year impact for those opportunities.
Thanks.
Thanks, Dave next question. Please our next question is coming from Donald Hooker from Keybanc. Your line is now live.
Great.
In the U.S. health and human services segment, the operating margins continued to be lofty and impressive and I know you're doing a lot of work there with AARP and you're going through a data center migration, which I think is still early stage I'm not sure but can you.
How are you thinking on this theme of looking into next year.
What is the right margin there I mean are those efficiencies.
Going to remain going into next year or how do we think about the U.S. health and human services segment operating margin.
Sure I'm going to Don I want to start with a comment or two on the efforts that we're making as you've noted and the timing of those and then ask Britt to kind of pick up from there I think we've said that for this year, we're expecting 18% to 19% in that segment.
As we close out Fynineteen and you're right. We're we're really trying to step on the gas pedal as it relates to our RP program. The last I checked we had about 12 thoughts that were in production and another 49 or so that were.
Actually in the shop being worked on and getting ready to get deployed and so we should see a bit of an uptick in terms of their contribution to the operational efficiency of the business next year.
And at the same time.
No we're going to we are in the early days as you know in terms of our.
Data Center migration project as we move to the cloud across the business.
And we're also as I said in my prepared remarks in the early days of the completion of our micro services initiative and the deployment of that new micro services platform across the business. So all of those.
We see as helpful. Tailwinds in keeping that business able to deliver high operating income margin recognizing that as we in any business cycle in any fiscal year right. We're going to have rebids or we're going to have opportunities to extend current contracts, where we will have to give back to our clients and that can provide a bit of a headwind in the process. So I think when you balance all that out we're pretty comfortable as you said and very pleased with the performance of that that segment, but I'll turn it to Rick further comment.
Yes.
Remember that we give formal guidance in November we'll be doing a lot of work between now and then I think earlier in the year. We also explained that when we had this acquisition come and that gave US. Some good operating income margin lift across all of the segments. What you're really doing is you're taking your SGN your fixed as gionee and you're spreading it over a bigger base. So although the acquisition fell into the US Federal segment. It gave a list of all of them were also as I said previously getting another lift in F y 20.
In that sense as contract another $100 million of incremental.
Revenue no.
As we look forward I mean, we're also spending wisely as Bruce said on RPC and we're trying to spend wisely on micro services and things like that but we're also going to be spending on.
Selling type of expenses and and making sure that we're putting enough into the growth engine. So with all that said I mean, I don't think you're going to talk about a big deterioration in those margins I think they should stay pretty strong, but we will be able to give you more.
Tangible and concrete guidance on that in November .
Okay and maybe on the.
Just.
Continuing on this theme of margins.
Hi, Andrew I think we all understand why the outside the U.S segment margins are low.
I think in the past and correct me, if I'm wrong, you've talked about margins, they're getting into the 5% to 10% range at sort of the goal over time I believe.
I guess my question would be like what is the timeframe there.
Is that all going I mean, I assume ethanol next year.
How should we think about walking our margins up in that segment over the next couple of years.
This is Rick.
The outside the U.S. segment, we are striving to achieve 5% plus align margins in that slide 20, and then we want to continue to improve those margins in future years.
I talked about in my prepared remarks, the ramp down of the accretive component of one of our primary contracts in Canada has negatively impacted the margin outlook for outside the United States segment.
As we head into slide 20.
I've also indicated we are making investments in business development across the portfolio. We're working on a large a lot of large newer procurements as Bruce mentioned.
So I think that the nature of those sales opportunities or longer.
Run in nature, So I think that those will be things that will keep us from.
Springing back too fast and that outside the U.S segment, we should see margin improvements in the occupational health business in the United Kingdom, We've made a lot of investments.
In a clinically related technology platforms to enhance the customer experience and the clinician experience also.
And to improve our competitive position. We've also worked hard with our UK human services employment services contracts that have been in the startup in the UK they are getting better.
And so we should expect to see that I think that the.
The outside the U.S segment will improve I think as I said, we're going to be working harder to get them to 5% plus.
In F Y 20, and then we want to move them up for in flight 21 in future periods.
Super Thank you for the color.
Yes. Thank you. Our next question. Our next question today is coming from troubling Strauzer from CJS Securities. Your line is now live.
Hi, good morning.
Good morning, Charlie.
So just two quick questions. The first on the ramp of the census contract. We do feel like in other words kind of into Q4, that's starting to kind of ramp more in line with expectations originally and then.
Any additional color that would be great and then my follow up is more for Bruce or you look at the pipeline and just.
Nice sequential build in the total pipeline and kind of what's your confidence level in being able to convert that network.
Great Charlie I'll ask Rick to take the first one and then I'm happy to take the second Charlie it's about the CQ a revenue.
Your question.
Yes.
Thats correct.
All right.
Yes so.
The.
Census, questionnaire assistance contract as a reminder, what we're doing is we're offering telephone assistance to citizens.
And using multi lingual customer contact centers and really providing assistance to the respondents with respect to specific questions and items that they have.
With respect to that 2020 census.
I think our miss in the quarter was due to a number of factors, including the timing of the facility build out on those contact centers.
And some staffing ramp we also incurred less than to pass through expenses that yielded lower revenue in the period, but as you know those are really low or no margin type of things.
I think as I said in my prepared remarks, we still expect to achieve revenue over the life of that.
CQ a contract in line with the disclosures that we made last quarter.
Bruce.
So and probably regarding your question on pipeline confidence just to go back with you. The statistics as I said in my prepared remarks.
68% of our pipeline of 29.6 billion is new work.
$5 billion of it is though that rebid for the CCOH contract that came out is coming out as expected for the in June of 2021. We also noted in our press release that up that $29.6 billion contract about 1.8 billion, our proposals pending and $1.9 billion, our proposals and preparation. So then to frame. It obviously, we've got a significant component of that two year view contract sitting in the.
Zero to six months and further we don't really disclose the specific categories across that pipeline, but I think as a general comment I would say I'm pleased with the first of all the volume of the pipeline that we're seeing and the benefits and the effect of the investments that we've made in business development, particularly in our federal organization.
Number two I'm pleased with the progression of the opportunities that we are starting to see across that pipeline.
We always talk about if we're seeing a lot of what we call BRC. Our business Review Committee meetings I hear managements is a good thing because that means people are bringing their deals through for review and discussion and approval.
So we like the volumes that I also get the sense just from talking to folks in the industry that it's a busy summer here in Washington, all around the government contracting community I think that as we've commented before the government slowdown or shutdown that 38 day.
Shutdown that we had didnt really affect us from a revenue perspective that certainly affected a lot of agencies as it relates to.
RFP progression and.
Seen some statistics, where.
There are a number of RFP that got pushed out at least six months, we'll now we're getting to a point where with the budget year.
Shifting.
As we come to the end of September agencies are moving to get Reprocurements completed and so it's a fairly busy season I think all those are fairly positive indicators I will say at the same time.
For the very largest deals you always have to keep your eye on.
Whether there are protests either kind of pre protest that precede the award of the deal or obviously protests afterward and.
For the biggest deals in the pipeline that's always the dynamic that we have to follow so while the agency for example might have you complete your proposals and get them submitted that can happen in a context, where there is still outstanding court cases that have to be resolved to determine whether that procurement will advance. So the boxcar size deals always have that dynamic because they.
They attract obviously that kind of attention and there's a lot at stake so hopefully that provides a bit more color for you.
That's great. Thank you very much.
Thanks, Charlie next question. Please. Thank you. Our final question today is coming from Frank Sparacino from final analysis first analysis. Your line is now live.
Good morning.
Hi, guys.
Maybe just following up on that Bruce.
Commentary around the pipeline I know you guys.
Were approved as part of at least one or two large government the vehicle contracts.
Has there been any movement yet in those.
Yes.
We referenced the alliant to contract and we also reference the GSA is 77 contract which is.
Perhaps not as it sounds to actually the contact center procurement it is.
I'll give you a little color on that Alliant too.
As I said I think in prior prepared remarks fee. It has both both offensive and defensive component it.
There are agencies that have historically used other contract field goes like particularly the tips vehicle.
At the IRS that we understand are going to shift into alliant to procurements in the future. It was important to be on the bus and able to respond to procurements through that that.
That vehicle.
Secondly, you know.
It was a couple of quarters ago agencies were still kind of preparing their procurement strategy is getting those submitted I would say, we're pretty pleased with the volume of deal flow through Alliant to and are also fairly pleased with our win rate so far.
I wouldn't call it a torrent, but at the same time I would say.
It's kind of delivering as expected at this stage in its lifecycle.
Did you guys say is 77.
We were the initial awardee on that and we're the only one which is not a bad position to be in if their agency the merger requirements that need to get something procured they've continued to add some additional companies to that Stan and I will say our teams are using it as a very effective marketing tool to go to customers now that we've got the.
Assets that we acquired as part of the GDP transaction, we are the largest provider of customer engagement center services in the us Federal government and one could argue to government in the world.
And with that vehicle available to us as a prime contractor, it's a very attractive.
Tool to use in our marketing so I'm pleased with how the teams are positioning deals and trying to shape and steer those deals into that vehicle as well.
That helps.
It does thank you and then maybe just following up on the workers.
Comp.
Programs you guys are involved with.
Trying to get a sense I mean, if you looked at that on a large scale basis, how big that opportunity is.
I don't know how many states you are working with currently outside of California, and New York, which you just alluded to but just trying to get a sense of the opportunity there.
Sure.
That is I will say not the first time, we've heard that question Frank.
So first of all a couple of things we do work somewhat similar to this in.
Several other states, but its not of the volume or magnitude of the programs in New York or California kind of 0.1 0.2.
This is an area, where we see there to be a real opportunity because I mean look at the statistics alone from California. The savings that have been generated as it relates to workers comp related medical costs.
The decrease in the in the prescription or over prescription of opioids in sitting in the setting of worker workers compensation setting the decline in the.
Advisory rates, they're used to set insurance carrier rates. So it's very attractive there have been some white papers published by independent entities, Florida tax watch being one example that really all is very positive commentary on this program. We have stepped up our game by hiring a new vice president in this area, that's leading our sales and business development efforts.
Taking a higher profile role at industry conferences and.
And really ensuring that the message is getting out there.
This is an area that plays really to the strength of Max Miss in a number of dimensions. One is the independence that's required in order to complete these reviews and the other and I don't want to get too wonky here, but is you really have to be.
URAC accredited independent review organization and.
Thats a designation that doesn't come easily and it's something that speaks to your ability to provide independent and conflict free review services. So I'm really pleased with the way. These programs have developed and in New York in particular.
The reason this opportunity came around was back in 2010, they implemented new medical treatment guidelines that really change the delivery of health care two injured workers in those medical treatment guidelines had provisions that allow for Preauthorization reviews, and then subsequent reviews, depending on the care. That's been authorized. They also then in 2017, we're required to establish this new drug formulary that I mentioned in my prepared remarks that has a component for prior authorization for non formulary drugs in particular and given these two dynamics the state's facing a highly variable volume of requests and they need to ensure they have a partner that can really handle the volumes about their their current capabilities.
And so we as an independent review organization can perform these reviews. So we can look at prior offs for drug formulary requests for prior approval under these medical treatment guidelines.
And other types of authorizations related to that program importantly, our our review really just leads to a recommendation to the workers compensation board on how to how to resolve the requested the recommended resolution that we provide.
So it's I think it's just a custom fit for the services that we have as a company and we're optimistic that we can take this two additional states.
Hope that helps.
That's great. Thank you Bruce.
Thank you Weve reached the end of our question and answer session, ladies and gentlemen that does conclude today's teleconference. You may disconnect. Your lines at this time and have a wonderful day, we thank you for your participation today.