MMS - Earnings call transcript Q1 2018

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Operator

Greetings, and welcome to the MAXIMUS Fiscal 2018 First Quarter Conference Call. [Operator Instructions].

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Lisa Miles, Senior Vice President of Investor Relations for MAXIMUS. Thank you, Ms. Miles.

begin. may You

Lisa Miles

subsequent being to thanks results Rich and XX.X and us. this risks me believes of With and Nadeau, providing in be We company in risks or Good financial may statements presentation of Please nature. Chief results including we in in non-GAAP this to recent its are for the our Executive and is does these revise circumstances. information remember XX-K statements number A Montoni, financial The performance, Financial any quality President; contain information. uses today those internal assume the and a of as Officer; filings. investors reflect analysis materially obligation today informative will to our Chief SEC. forward-looking morning, review forward-looking period-to-period most events discussed Officer. joining made actual comparisons. of Bruce Rick our predictions, such trends gauging differ you not a Exhibit be these results our of or face, encourage SEC Today's information that filed events in only in may update identifying meaningful Management summary with may result to of and statements Caswell,

to earnings For a recent that, see release. press reconciliation call Rick. most of non-GAAP company's With over measures hand presented please in these the documents, I'll the

Richard Nadeau

MAXIMUS morning first This Lisa. Thanks, results. reported solid quarter

MAXIMUS. in As significant for XX United December noted Tax States created of the Cuts and in press the Jobs Act passage the release, the benefits on

Services first had high PowerPoint Part the exchange and of year. declines the reduction XX.X%, strengthening Total #X and favorable States, improved U.S. our in impact This driver company our Overall, earnings quarter offset which for XX.X% conversion driven full Slide majority Jobs income we foreign effective share per in Human tax high-cash favorable rate increased due recognized quarter. period Health and quarter. illustrates was expected reducing with of tax lower cash first Services corporate the to the benefit of fiscal accompanying flow. reform same was earnings, X% operating have XX.X% earnings tax a to have the year. of Services the XX last and profitable Act Cuts U.S. quarter margin Tax other first for XXXX GAAP of will income the last quarter diluted the in of Starting impacts to fiscal fiscal our a was The of the XXXX the rate segment. tax by movements earnings $X.XX. increase rate our company the increase including same blended in benefited presentation how points year. pound primary the the period As British the the of first The compared with segment, total will rate. XXXX basis the revenue, for and the of federal and United a our to revenue the in long-term over MAXIMUS of historically business, Federal to

XXXX, For rate to XX%. be year tax expect XX% the effective our and we full fiscal between

the per XX% reduced reduction income between share earnings our U.S. federal on to deferred our provision tax quarter income GAAP and the items a tax our of XX.X% including federal financial U.S. been to liabilities a Reducing rates liabilities tax deferred of crosswalk the me tax before remeasurement without into the reduction toll million, and tax from tax. recorded account our the assets for impact have of differences of Because reform. the earnings accounting. tax $XX.X million tax by Let due of net tax and lower $X.X reform, reporting tax diluted to we income what nonrecurring in provision the taking would to reversal rate

the We foreign of transitions earnings. as also income analyzed known retained the a is This to and recorded also tax, as a tax for tax increase toll to $X.X taxation system. the million our U.S. territorial provision

the would tax of reform, from diluted XXXX. the Excluding first fiscal impacts been earnings U.S. for $X.XX share per have quarter

some us XXXX. and the important law it to certain executive will deductibility compensation business Lastly, impacts impact related is expenses recognize negative of until that fiscal also the to that creates not

will I starting results segment to speak with Services. Now Health

for The favorable Services driven by XXXX that and U.K. contract by improved increased want HAAS, segment lower includes good This quarter a compared in same year, varying expansion. which contribute margin delivery. exchange helped same last sizable services, in to We or revenue year. penalties of of to fiscal Health contracts better also the the quarter the when this XXXX. maturity margin to a of Assessment stages strong First and last first at rates. point quarter fiscal the segment currency period level Advisory contract compared to out complemented growth of organic the first margins HAAS experienced year-over-year, operating the X% XX.X% to portfolio the service of do Health resulted of for segment efficiency contributed in period contract

maintaining incentives the key now Federal contract is HAAS penalties with targets. U.S. tied address a service-level Segment. Services I will reminder, a to As and cost-reimbursable

revenue to the quarter compared U.S. same year. first last the expected, Federal Services segment As X% period for decreased

principally of including was Department this a contracts for ended some of subcontract to disclosed, in that the due year. Affairs ended, that April last Veterans previously As

operating and line continue year. is the largely prior bottom to in the well delivered Federal which Services On with line, the XX.X%, segment an margin of U.S. execute

these was mentioned this that that contractor work the the support efforts temporary the November, our Services support based wake last and subcontractor a be I in of awarded We reduced hurricanes. last circumstances should U.S. as on time. quarter, the temporary In notified facts forecasted As segment relief in disaster work efforts at year's agency Federal prime late of immediately.

forecasts. for the be initial the full loss will our U.S. from our a with recent year. segment As Services revenue the this This, has for result, a of outlook Federal rebid, coupled changed revenue less than work

revenue will run that Federal for We fiscal to closer from expect $XXX million the Services XXXX. U.S. segment

successfully have contract which vehicles, in spots We long some us secured help run. will the additional on

the for setbacks, steps are some disappointed amplifying committed investments efforts we are taken and we our with make recent of resources to have to While business secure development fresh these initiatives. and

XX% Work the the Programme. exchange expected from the was than For our revenue Services favorable the year. revenue offset rate. This by these segment, operations to quarter Australian a first more and, lesser increased foreign declines over extent, of Human driven Both U.K. wind-down of prior

Services margin Human at X.X% pass-through in and new operating segment losses was well in the Australia. some start-up as lower impacted unfavorably revenue higher expected, contracts as by As on

and at balance our we cash cash flow of days in $XX.X the the Days items. flow flow to cash line quarter, cash were equivalents $XX.X delivered on which first outstanding cash sales of In MAXIMUS $XXX.X year. with and from XX operations million. XX, Moving and December free sheet consistent million XX, million. expectations December is XXXX, and prior had with At the of

new also more disciplined already I Irrespective committed This to from people invest expenses The to operating encourage are investments. and new law and capital cash U.S. digital related reform improves flows to The the In in make the of quickly that businesses. returns and law compelling order take will technologies. investing sensibly my of returns includes new U.S. economic our will a more our enhance reform processes returns. more to us the these from guidance. and to comments we of required allocation, types advantage increases up innovative decisions to deployment. cash and approach of be we enhanced with tax U.S. these will uses were of wrap investment committed cash terms tax of law, in

For lower with This of lowered our fiscal U.S. we XXXX, due segment. billion, Federal to from half range. our the $X.XX towards to revenue a is Services billion maintaining of the outlook the bias are $X.XXX guidance

be As segment stronger of be is first operate revenue maintain to to first a the U.S. important Federal now be our that quarter from in first revenue expect compared of remember to We at we and contracts, expect to XXXX. other puts-and-takes second from revenue expected us lower the about will It fiscal revenue that time. the segment the had a there that same total XXXX portfolio reminder, quarter range for second half to of Federal guidance U.S. are and in the allow the model we segment. half fiscal the previously half the company and the this

of income with earlier, the fiscal our estimate the tax mentioned XXXX in be effective tax XX% rate I benefits now to XX%. reform, we to As for range from

share per to our XXXX $X.XX a As $X.XX. earnings we're increasing $X.XX fiscal result, guidance to by diluted

our We the of XXXX it is think for we is rate effective income some it for tax rate range XXXX. to to still estimate, insight in fiscal be tax While early, useful XX%. provide currently XX% should

While federal by is and compensation the the XXXX, business related be XX% unfavorable rate down going in negated of some the executive to will the decrease certain to of deductibility U.S. impacts expenses.

guidance over We I increasing Thank be to we cash from in XXXX, million, XXXX of cash increasing continued $XXX fiscal and cash range you will for $XX million addition now cash by flow operations to flow $XXX In line XXXX. expect $XXX and our for our flow million also flow million. fiscal the Rich. turn bottom between to free your $XXX the are range guidance now to free interest. and call to million for for fiscal

Richard Montoni

everyone. Thanks, good Rick, morning, and

reform for We fiscal And year quarter. result pleased of tax earnings U.S., the XXXX. are our solid another the raised as we with guidance to open a in

today Let off CEO me upcoming start with transition. the

MAXIMUS the move as The for we smooth X, and ensure I is am the work that to am the me and together will confident is will April me person delighted As new I last succeed handing succeed as Bruce that right CEO a as right over month, to to future. CEO, on be transition. XXXX. announced me a we Bruce in I guide time role, to baton

to turn underway. of initiatives me we So the have let over talk Bruce about to some call the

Bruce Caswell

and offer Thank CEO, enterprise incorporating noncore reform tenure last most divesting management Many geographies, governments expanding risk decade. over sincere into accomplishments efforts, you, businesses, manage solutions Rich. leadership implement the skill to major acquired for team, during appreciation implementing On the as and sets. processes structures behalf helping your we were new our and the of your better achieved you including

Your It's honor pre-eminent around to keep we vision team, a transform and focused the forward value. moving momentum continue remarkable highly drive as partner shareholder to this lead the governments helped MAXIMUS into an globe. to

While my areas we've that and more been provide From initial agenda in forward our next some wanted sharing May, X I earnings this about priorities key call to I morning, to on look on the color past future. working perspective, that These our core digital and X changing world. and we over evolution. recognize to big-picture a are in on competitive the years clinical operate are transformation we that

ways clients evolution improved constantly and efficiencies expect more delivery. rightly and continual and innovation, are to Our create service seeking we

briefly So our touch market as shift, today, This meet upon within how and we is let clients. engagement for digital services about disruption already MAXIMUS of cultural me and first The the is think models demands digital efficiencies. government transforming is a transformation. the new to

at We looking pace of digital markets are a implementing the various impact and digital roadmap enablers. across of adoption of our all the

have are digital technology governments other appetites adopt traditionally increase. been their industries, While seeing solutions to slower than we

maturity, leading the of Our stages shaping market. and at various digital and are we are clients

meaningful find We impact technologies a to clients and digital where are operationalize programs. have helping innovation and in their our can

applications, market-leading with momentum and positive have analytics performance technology. We

drive as when digital efforts While voice particularly to our services our this. deliver. us the improve our allows years. an the recognition process delivered engagement Advanced our we've across outcomes an to solutions been automation, we analytics Digital overall our role operations. and competitive continue priority beyond our efficiencies digital service and increasing go next-generation over area last play modeling government, solutions early quality position such shared through optimizing of the in enhance for our interactive automation, centers, has improve which delivery and and two These consumer building been operations

to resources intend benefit in of going the forward. capital implementing reform, U.S. fully our strategy tax more invest digital and we With

will investments innovation for these our bring of next level. Some and delivery to capacity the

streamline and For current to clients, programs most to technologies the them. we to our seek we we operate, that to matter so continue opportunities the improve outcomes achieve introduce digital

innovation, practical through allows offerings and and to new provide base streams pursue drive develop digital our transformation help will protecting revenue growth. that long-term this Beyond also us

interest particular of ongoing referred that's area I second as, The what priority our evolution. is, clinical and to

clients range of demand will a that customer longer, clinical with drive providing management diseases rise. business, are social and chronic operating closely emerge, conditions centers we for such and services supports. While more and United element well-being, further and contact trends to portfolio are years, and and a growing assessment macro when develop struggling there help challenges our preventable of and the that expertise. accelerated allowed at lifestyles. appeals opportunities us costs can a same through foundational Kingdom our long-term the time, and case on we through we five look continue with adding see remain services Ascend clinical our as digital outcomes, disability services health are these with Management dimension. in that BPO related of United the address more are past are strengthened to Further, Health where wide as MAXIMUS well comorbidities. States. health At the our healthier as health people a our conditions, living with assessments People the determinants clinical Healthcare of programs related to Revitalised solutions through acquisitions, and services occupational In to by focused assessments in strategy This evolution

As our shift business we've in a seen appeals expanded, assessments our has workforce. and

bring skill and our higher knowledge set service Our a and create healthcare a our and competitive tend position stickier This strengthen professionals tenure. for stability teams of offering clients. to longer

So both. important are We transformation will tomorrow. and to areas from priorities are It's today the excite exclusive. are in digital and not opportunities of expertise these that evolution that mutually my see clinical note perspective, that require us two

clinical area technologies assessment our occupational where infuse digital could into For further offerings. health core example, telehealth and an is MAXIMUS

digital engagement clinical to health This our by independent just help help extend costs living backed Our for address and and clients healthy their we can of example is and governments improve health-related employers of wellness healthcare. technologies expertise the populations. strategies X how rising use

previously to and current to we growth, three-point key markets ahead core clinical adjacent growing strategy, continue a future, growth role continue we move finally, articulated and our new remains long-term for want want heart will platforms play digital incorporate in want to we our at we into that the transformation which first, markets; geographies; growth. the Looking and to envision to evolution in of second,

as that earnings our about naturally I providing so of we future in As of my it long-term with strategy, guiding emerging meet will capitalize and global any look markets. opportunities dynamic evolve, more can clients the on to needs vision part forward calls.

to update you season operations. over brief Care our on We most back Rich, some it turn up give just I the of Act. open Before let Affordable wrapped me a recent enrollment under the

of call As with consumer you bit bang due the with likely may recall, over launched program. of the higher volumes a status it to a confusion

enrollment as as business However, progressed, open usual. it was

there's but of no respect federal to The who under and may prime. to that government as operations, the each on that vehicle, position Moving trusted is government open there a competition. we recognize that on within only U.S. to work vendors opposed Federal already and doubt a hold task our gained know credibility contract procures vehicle the agencies, issues certain contractor the Many done. more those we've a be work as amount and significant bid as vehicles through of full precompeted orders you

the So to it's be important vehicles. right on

Rick secured positions two As federal vehicles. recently mentioned, new government we on acquisition

important The next-generation used first And an the by Alliant/X, IT GSA which widely governmentwide U.S. vehicle the the second the is largest and is is Federal Government. XX, most vehicle.

dedicating to priorities. emerging we're call opportunities by to and resources and federal additional We amplify the longer-term contracts come pause, with some customer challenges firmly the we're the sales with changes, the there need efforts. including and shape further Federal making to driven Rich. business follow meaningful core We've to U.S. position believe that MAXIMUS ongoing segment's disappointments market. turn capabilities the I'll our that, to we more tough Services an player. a that drive We back recognize to environment, continue Federal the U.S. important Given continue have And some remains as some end. to as development the into had And opportunities over

Richard Montoni

Bruce. Thank you,

Let's and awards pipeline. move on new to

another of good fiscal year-to-date on Overall, we're million $X.X billion. contracts. of award the a During approximately XXXX, This $X.X brings and worth and awards quarter for fiscal start awards, billion the notified to quarter first a $XXX XXXX. of total signed we solid of

at December opportunities increased which tied In And group. on Operator? Our is of look of move at reflects appreciation employees. It billion, accomplished XX% offer It such management I work team together. MAXIMUS back across we'll to all talented $X.X to a XX segments pride is geographies. we've pipeline and that has in work the all Q&A. now approximately with our pleasure and major new closing, I great X to been our to to that, what with my with

Operator

[Operator comes the Close question first Genuity. line Instructions]. And of from Canaccord the with Richard

Richard Close

and with all, over pleasure working Rich, a of it's congratulations. these First been you years

Going forward, wish of best the you luck.

Richard Montoni

Richard. Thank you words. kind much, I very do those appreciate

Richard Close

from bit wondering, good Rich, a on we a I'm clinical then you. wondering, about you see was maybe, for improvement on evolution. effort? I there, digital growth introduction talk And if think about you transformation, could there. could you digital clinical margin was transformation in generation It would when And that versus, evolution, and the little think revenue BPO the how revenue

Richard Montoni

you this saying, digital the of, I'd to We've said kind on question. be that been frame by for is and I'd mentioned. MAXIMUS that Richard, to we've prepared of the like and referred transmission for years. this both services, Sure. remarks, the happy had, an in it digital I several you've working thank area as components the

as engagement. it from one of primary to and, relates emphasis in to fact, address to and digital needs the in has our consumer been largely meet hand, customer On front be

for forth mobile and developed do that it's and say a to fair time to programs. the our lot that websites the table stakes, But degree So over more. able and have a power applications that we've to you and in need so some time refining marketplace, of we spent those building to capabilities of become also the be

So improvement. in on operational we've really and primarily, digital operational focused the near-term, efficiency our strategy

category that our enhancement, growth So that which that from growing and first margin the outlined, of that say ability would your our deliver prong the the we're is protecting we speak to ensuring strategy more ensure X-pronged and of on would to base base. we I

since been advanced analytics So advanced the using some using that focused without that attrition, that we've dimension. that like to areas our include, this at solutions, we processes, in we automate advantage processes, develop too will in the examples focused we of from labor giving workforce of where our address the bit as of on our that cost, manage ensuring so of away is way give things a little way largest to over much our we've opportunities flavor we look take analytics

where addressable. other that about, and capabilities into us to not help transformation your would think I is together away markets that solutions the just digital both to markets into ensure second about but talked example expand and digital platforms. is growth or the well-being ability it's we It's to clearly, over evolution where can historically or exactly the many the new you without, can cards offerings, too third even assessments health you being address not And of have growth say monitoring enhancements been that. here, occupational -- so provide something that can again, something strategy, extend even I been or adjacent telehealth time, something prongs that of brings move our giving intent and clinical capabilities, to that the

The revenue-generating. or fiscal we assessments at you that you The in it asked, new capabilities and million at assessments reality about building revenue that's And in to over something time, say the would I that had not second for but our the and appeals becomes see attribute appeals what some priority, to something those -- becoming that's clinical year of and evolution do that to we by is, the us. building can enablers are point business. piece time. been we've last fact, evolved digital the So $XXX

are would robust capability such and medical independent that and well reviews we as the is I of that assessments there. peer to clinical expect the that white of be a grow a from quality nice growth perspective furthermore, have review for The moment mentioned, that, ago. some for focal more there's perspective, clinical will space the and so off our continue out business, monitoring demand my market So and examples that that dynamics And base seek revenue-generation evolution. point just obviously, evaluations I portend the a to of

Richard Close

My follow-up question be Rick. for, would

in we can tracking? you update we us us the startup of first expenses? are initially for update And there, on How give gave that startup think you guidance quarter? was that's that $X.XX the just I year. expenses? the just you said What so know If in when process where an

Richard Nadeau

Yes, time Richard. I quarter. a like the Yes, we number had some And still is yes, last this gave we think you number. good

but I a than will the I be them then that. going back-loaded, be bigger we've year. QX yes, biased think QX incurring more it's throughout be there'll on QX, been think towards to And so

Operator

comes Our CJS of line Charlie Securities. with next from Strauzer question the

Charles Strauzer

same kind sense and entail wanted expand of, of we've the to what years echo has working might just with plans you notes, what are? get been your I you thoughts. that and and, the on on wanted to, a of, It over your more kind wish many together role best, pleasure been next working Rich, the

Richard Montoni

talk been Charlie, that. I to So, commentary. glad I'm mutual. And It's the about do appreciate

it. enjoyed enjoyed it, I You've have

the much for very words. kind you thank So

will is my and that's King CEO. Board of In it remaining this They in of March, I one focus. been the has in really terms the transition affirmative support Board a and to Bruce on capacity addition providing of come transition to very role I process hard Director. up ongoing as with capacity coming an been here And really necessary. say that's assuming an of be is the and to role CEO of MAXIMUS transition Directors' that think -- CEO primary forefront providing part with the plan. succession And much of as planning responsibility in my an vote seamless Advisor with into very, role. under the the is ongoing the and and advice Advisor of will would very Special I optimal on the the Bruce a focus to worked to obviously advice Bruce provide we to the Directors, advisor, title goal In a that support to take that really of as relates up seriously,

In area addition, for to me provide think natural would assistance I a be in area. the M&A

M&A we M&A technology be universities, agencies. technology Most my foreign these to provide I It government with service X,XXX Chairman all nonprofit relationship nation. trade an industry, organizations know, area very of know, have That's an you in And and Bruce expect be strategy. integral this As associations. a think of Virginia growth active value to our that sectors folks program. am where continue would team, you about the part as his It's can value particularly of, Northern I obvious will organization the could provide Council. is serves where council to that, happens I in of Rick cultivating potential some The and the pace I strategic around last the an early continue help target to this involvement CFO in notably, -- to M&A. Bruce of the embassies, as think largest I members, the Technology stages I includes and opportunities. from include accelerate providers, And and perhaps identifying and sort area may it's

Hope and help good a whatever it's connections for that think make helps, I context. to to connectivity relationship I'll helpful that that are MAXIMUS in MAXIMUS So work Charlie.

Charles Strauzer

backlog And just just pipeline. a could, Definitely. switching quick the if to follow-up, I in

that, the but drops, million. it little give the of $XXX starting fair do you about little numbers see You Can by to grew typically bit bit lift pipeline think, more Usually had is us as a flavor in pause actually up there? to amount maybe, you a quarter. signings when the a you

Richard Montoni

team I'm we think One, in has rates able so in work, is, to our industry amount I not are think only really at I what that growth the Now very variables regard of need pipeline, pleased as. what line been win the work. a and good have I with consider pipeline. to recurring level the not going with means, to to be I that win pipeline yes, case, otherwise interface much think liked as and ultimately, question. are work new future the in won. data a losses always we'd with and of deliver, occasional the have -- when then all well other to to it that measure And on this and And growth that's And net-net, pipeline category all that really of I it pipeline only about think look norms. respectable terms have with doing we That's potential. you the when mean the static related and of And I these but we think rebid but think I following very a about thoughts what's dynamics rate

I think issue. a So don't rate it's win

we doing job the a team good to the that been think work new pipeline recurring into converted I has out work work. of or replace

to ability with the pipeline. pleased refill I'm the So

I call in challenge. particularly been I really to pipeline into think been, it real relates conversion has And the real new pipeline, work think, think, the as the rate. challenge what converting, or new work that's I I think that the adjudication you converting rate, might

that underlying the think to root are causes I multiple.

that to it's impact the and in administration the and I there's U.S. new some think states things, clearly regard. one, Federal U.S. the administration trickle-down of side the

work. the cycles just is protest into wins, especially seeing takes we in it's And think, adjudication our in the real we're prolongating impacting which and procurement think opportunities, longer real it to some time industry think are is space convert really what, I Secondly, those this more really win prolonging federal rate. really good also to I new

rate, The did to that's attrits. this and year, we repeat other that that work replace likelihood it's is that work that the what's factor existing and always work the -- attrition have year to consider you the to with going next

and it's And the norm, some it and a been of attrition in work XX% my I we adjudication as that day we've think as that's on a we'd are to going had lost You're It's losses course, and rate. on stay factor the to Those of in know, like see to runoff. minimize have we'd have always well. rate within that and to day pipeline to higher last to work normal like that in but dynamics, the normal And industry. industry the Charlie. you all this years, not thoughts in out couple X% constantly in isolated

Operator

from Jefferies. comes of Our next Styblo Dave question

David Styblo

course, Rich, echo enjoyed I'd spent And time really that we the of too, together.

Richard Montoni

you, Thank David.

David Styblo

accelerated last months bit calendar -- reform, gross-up mechanics -- actually you Couple one, I perhaps, number might thought. in business calendar tax have guys bet. I and guys about, to benefiting you guidance the of your so I seems that's me, would you are that of talked more 'XX have in just U.S. reform would've tax that would that, actually -- if, leaves like us would understand thought the offsetting want are first with be couple would in I of just That the there, assume $X.XX those making some contemplated is guidance one, higher $X.XX. if you the investments, You that to $X.XX have just that mix reform a give where, from or of year what 'XX a that upside the you than before the as benefit. guess you're is looks as that Bruce bridge given part? are so from you and I the around for for segments? -- little upside X wasn't increase And to so the better understand of low the help which actual me could much or year some of It in questions, not tax

David Walker

of, Rick leave Yes, to got spoke one the the David. do going investments tax clarify pull it, and have we of that Bruce the in up talk going unfortunately, that fact can area about math. down good actually that move forward we're Rick? planned fact also it to to that And Caswell he murky we're to initiatives in and A Nadeau the question to to have you --

Richard Nadeau

Yes, thanks, Dave.

on first comes to thing from don't the they tax international XX% so the think, operations, of you is benefit tax the reform. income about that from reform our got I remember U.S.

act this the is January rate XX% that rate for created tax but X, full tax it's thing blend and starting other on reform -- a The -- a blended year. the

a year So income federal published what tax year-ends. are IRS it's for XX.X% September the companies done, that fiscal XX rate has

you cost the a federal also, so is to point smaller purposes or is rate may federal tax deduction state that that for lower. think, government tax that the one I the going when in get is percentage you be is

do that do And and sense so think can I math, altogether, I if let the the me us. to I on the The we them really number put full or got made it the on quarter. I a either it think for you way year, do quarter but

about figure, say, $X.X And get you that's X. tax the take think your pretax for because XX.X% And of federal the the I off the XX% X year, for you January international. I to state. million, you get think one income, we in on then that help? XX% and for reform you the And the your rate XX% how pick-up you tax if million of -- for That's X look it, benefit on should quarters reform then on take minus $XX.X for Does off, percentage tax at X. act Slide got point that. -- only XX% that's have then kicked act you XX% let's

David Styblo

I think so.

not the contemplate guidance fair? previously thinking. were incremental Is sounds part it guys investments what does like you -- as to not compared are so that incremental making investments you And

Richard Nadeau

that my we think mathematics. believe The built-in. think, I better reform I script, a I firmly to will. But we we said in all get act Well, helps you had investments tax

timing. Federal but earnings and You're return you also get have, there Government's going because have less paybacks your in the you better participation on that investments in also you to U.S. are have

think, were calculus, the tax where we're that staying it's the I after but I impact. guidance and with mean, pretty for complicated think we adjusting we I gave So you comfortable

David Styblo

build-out help you just causes causes I measure you guys on here all in as forth guess but you the curious investments then get bit certainly efforts perhaps, of -- just you've And how return perhaps curious a are are disappointed, may that categories? done of the investments sensed think segment able business subsequent And especially clinical before, of the these investments you you for, explaining against guess, as of too. you've do other around Federal progress to and that that some U.S. about made put the to how on pause. these them of a and that an Because track little can to, ROI some past have more quarters side. the versus Okay. that I I X did you're or But digital you in been job putting certainly, good a you into root years? ones bit here that efforts the little I'm which the the you I'm

Richard Montoni

strong can investments Bruce, I'm in. I and going here, chime It look a think from a I to range past, range very in criteria is many the comment I many, are pure on could I'll of at there attributes. investments, in you think, repeated, But glad and think we do in Ascend, consider be terms acquisition, investments. broad when But have we an but when of criteria to what, and we acquisition. strong it

on, they of does to can have operating be all if I on with firms, As focused can the which hence, our it And it revenue and spoke. the or we is internal-type new -- we cost we look that income it they of revenue investments, of can hires of relates the criteria cost. more be the will that at, as impact they to or these analysis could Bruce and, what the of initiatives above above. earlier, contract, marginal think be move most are initiatives we be focus and Bruce the investments, the form could contract basically, relates -- client-by-client MAXIMUS line where this all line they spoke training, meaningfully to the what's licenses Bruce And operate services would to and mean line. And partnerships, the as digital biggest to -- frankly, the it the clinical

at at So number, very X%, X%, deliver to even our X%, going we have but I look greater is will our don't have that would tell cost and for compelling attention, you, or It's gets ability cost do which any solid. we we that X% reduction promise efficiencies. some a a to lower in impacts rock something services think same move cost. meaningfully I better

be anything to my reaction. like that would add? Bruce, you So

Bruce Caswell

completely. agree, I

ROI In XX Just process the on picking investments it call could to up of I'm where an days well, to where Richard in -- kind one that of you most investment. implementing particular as particular be you cost left transformational of, off. for thinking range it north, expect it's Most the see technologies, would from related them. the -- And digital or internally-facing within of of in automation XXX project the X% implemented to mentioned. improvements deliver would

possible -- wouldn't agencies, and unrestricted, firms X-year the Alliant/X qualify combined but a a has been $XX is we a And And big in call It's on XX comment it a Had been combination just funding for that's fair vehicles, have in -- Acentia it for are quite those billion were had the on we have plus and contractor XX your with type not it's Acentia. the that they base presence by note, particular, win awarded investments, metric option. to it's federal. contract on give calls IT -- contract. prior So investment. the And Alliant/X substantial. and many all ceiling. quite X-year the we positions, a the and It's made also as the back able and commented with Alliant/X. the to I'd earlier the of the also of

combining be will go-forward-basis. to in contract federal awarded intend choice future, that decade get the in many so for we that had position it the indications traces And pivot full-and-open fact, agencies [indiscernible]. it be so we measure with through agencies and you ROI now to all at Acentia a to on that; was a from fully right? giving what will seen It a some had So critical of on back historically how really on ourselves that, Alliant/X that competition

David Styblo

okay. Right,

So the of as revenue well it like? opportunities, new help margin sounds as on those some

Bruce Caswell

Correct.

Richard Nadeau

Correct.

Operator

W. comes with Our Matthew Gillmor next question Baird. from Robert

Matthew Gillmor

And segment. new Federal roles. to let congrats starting Rich Bruce the me on the and Maybe echo with the

And what other dynamics that to were give that note? us sense there that you was First, that the then in you any ended. the but to was? segment, of mentioned last those some that Was And for Federal you've there also can that year. efforts relief second, sooner, contract lost X, that of to And mentioned around contracts rebid, talked federal activity out or that VA contract the you call disaster outside also there contracts then about was were ending other of ended? bulk the sort

Richard Montoni

Well, Bruce team tag on one. and I are to this going

first X speak in So loss call. don't and the the that one to mentioned you Bruce, the we take why

Bruce Caswell

agency, a incorporate of, expanding work and Yes, a as a piece work that was it's had component lost was we that single It on the to we well. contractor isolated but it to of the that the of actually actually call was interesting. mentioned -- was and another

if loss kind business. So one-for-one will, of it of, you wasn't a existing pure,

on price. awarded was ultimately that Importantly,

workforce to award The buyer ability historical have of as fully criteria workforce. can thought years, that knowledge emphasis have when them on agency has about tremendous so to put essential Subsequent primary with that's composition help our they the of depth an for and procurement them price value, best this a the been client. we caliber forward, the portion of buying at a to write their and going with conversations was the last lower of a Although, dramatically. different in is uncertainty continuity ongoing are those in part had the to that don't and a ways loss, augment less we at agency discontinuity revenue intend changed couple we would budget team this the complete that, but a the resources, recover period that with of of criteria over for very the course of chose that we the instead, and discussions so from

Richard Montoni

commentary the make to relates rate, going we that to to to I'm work you and in and I there talked And rate. that that need talked in attrition situation. things add that are about had drive went and stay-tuned-type this past, a away. that's it as federal several earlier And that mind, contracts we've just represented other the attrition a keep about the

orders, You've in-house, go things know we lower got sometimes rebids -- that rates, got have change situation. at you've you bid you've got

And experienced we cetera. that we the for in you notably, some from we type year have the some last relief normal subcontractor repeat, One disaster the X was hurricane about, related X to losses, most as had work did of there this and a You last we think, work that quarter, doesn't the of fall. et and in in that ebbs have years. course, last start-up FEMA I just, work spoke those -- and flows. Naturally,

fair to relative basically addition, last terminate, to work VA amount a work of year, the lot business related a and program lost we had in decided VA to a that. In of our federal that that we

Matthew Gillmor

Okay. That's helpful.

Sorry, I did sorry. interrupt I'm Didn't... you?

Richard Montoni

No.

Bruce Caswell

No.

Matthew Gillmor

some Okay. get beyond M&A mentioned getting Maybe reform the and environment, could one over call, finish deals the -- I some tax you'd last help that line. think the on

now So get inorganic at? updated the opportunities your finish to if the done? environment the see views line and on that is looking And tax M&A you're opportunities we'd expect curious to reform just some across

Richard Montoni

Yes, holding I been the things reform tax have may perhaps dynamics think up.

tax reform behind is Now the us.

clears I'd say, I'll table the time, have through environment that of I I say up see at prices still flow opportunities average. the interest. We of been, don't is excessive. it point I'd say hardy. think least issue. think deal it's in would say, this I the that, such that is,

I to combination opportunities have overall that are that's need or it's sure active. there real synergies how I we synergistic cost And whether available the But the us, do X. revenue synergies very have make extra we attributes, of to to or describe think So we -- things M&A would are and environment. cautious be

Operator

comes next Fargo. question with Wells Our from Jamie Stockton

James Stockton

and I'd commentary. on focus digital guess the to Congratulations Rich to like Bruce. I

Just start My there that, level is state you opportunities level? question be would think the the very first great. there more at intriguing. or thoughts out see federal I to that's at whether your with

Richard Montoni

All right, Jimmy.

my on the behalf. state or as or we not relative First words, Bruce to And see I'd to opportunity to whether for thank Bruce's going and answer you appreciate to digital level question, federal this the kind behalf the we're in initiative. ask that more

Bruce Caswell

technologies Sure. federal offer the initiatives both Jamie, progressing that BPO that investing sense clients that we're infuse here going clients our our automation initially for doing cross of think call or the for ways of center the a would primary make we examples domestically, the that examples I we're we new think say really solutions And ways of as we're enablers that in we with said that that our be transform are digital is really for operations, I areas. really to distinction and don't the doing objective I and think where health U.S. can and I I earlier, of in that to can clients. of

come go about in live which application, also it's and actually like I populations and together digital teleassessment, that's the like balanced both And length digital crisis trends a some have diabetes something global transformation are talked often you of areas big kind enabling at focus of governments many think global the a in really independently. to crisis think that emphasis we the dimensions, their of, if on face in putting digital countries clinical major there also and because number will, aging transformation, are that public capabilities health hypertension, telehealth, hand-in-hand evolution and a nature. So how and those telemonitoring. We

think is is So big another. or us, -- they become one this specific priorities as they're sector for to this really, hence, why -- I not

Richard Montoni

I that. would to add

this technology very, technologies But out it for of out helping prove see what state, days, advantageous, other governments technology, attention. there early that so Bruce most U.S. are have team we to that most our are to and that talk think identify process as infusing technology identify of our a level and solutions days. getting the and lot excited be to has going a competitive technologies clients, we're in and But technology we technology very that I there's of Federal with advantageous outsourcing are clients, we new it's early be we're out introducing through and and process, think of new into there We're this those the the citizens. these lot that but new it local interesting to some to those will share process and to days to it's not relates international very very all the we've lot existing sort solutions. that early new not for offer to a going universe about gone our reasons, this and of and it's through to there's are will level, a promising. business And you use at new of extensive there that's managed think be

James Stockton

maybe on just And great. X That's follow-up that. Okay. more

centers IVR I there. think with technology, some of trying the stuff you've productivity enhance already with done to choose to your so call the like you're

kind and You have in-house guys you, to it. ability licensed of, so some and it technology, leverage

likely capability, what is clinicians an encounters are telehealth, clients? think to to Or to see for doing in-house also I to use and who're maybe like we have look platform where that more there, As do something you enhance you you're a know about partner able and would whatnot? something third-party

Bruce Caswell

giving away in-house that our of it's to solutions, my they that's When the there's clinicians goal those of again, of years, employees of of that investment have a talking use a relates is because to just, of The delivery of a logical perspective combination well leverage as do is need? clinicians a right, investment and as a security model, requirements functional much it kind telehealth more platforms and think clinicians a to conform Our we platform with countries, perspective then again, of the of capability. some the some full-time of capability. of are for extension. to decisions have would been for you some question a depending here, use the respond. modest case. without on, It, that as ultimately, distinction of last already use what number delivery, that the again, I approved too course there's a the that's been an adjacency, at logical additional and the you so over the market in heart we're And just on in-house have the intelligence generally, from as about, not would delivered. by say, of with of we the the first continues look captive, in Jamie, And primary depends our we couple very how at caveat that answer be XXXXs, I'll to competitive case evolve, we way a to entire dynamic application critical market, of are use terms saying of the the But type

to we if as there to partner opportunities would areas third-parties well. consideration a get our want where we that so give And in into to continue with and certainly are offerings adjacencies, certain enrich other

Operator

Group. Our next Brian Kinstlinger question comes with from Maxim

Brian Kinstlinger

a decade, with to for over want you and Bruce. working pleasure I a was congratulate it and you Rich, both

Richard Montoni

thank opportunity Well, kind worked thanks very you enjoyed together, work words. the to and and much, It's Mutual. We the for Brian.

Brian Kinstlinger

Yes.

the a was happen get year So was but impacted Human a the Can sense on margin cost Services, year the ago, of you you see? on for, the were noted us I X%? point by missed based give the at some that end start-up by cost. call, of you X.X% to you start-up back what that you Does which where

Richard Montoni

that anxious Brian. Rick answer one, to Nadeau is

Richard Nadeau

will year costs into start-up the throughout next those think I Brian, year. and run

add questions. those startup normal start-up losses, that think then and back, the I from that them the talked -- far in we not take costs that if more margins will, your we if you about you are

So coming continue in is. but low But And reason start-up. next and that, as year we good, in the we it those into bit incur I of several will the that's expansion year. the have and contracts is losses as throughout business, little margins the think that to that's

Brian Kinstlinger

busy, Great. I'm you Rick. going to keep

got enough haven't questions. to answer You

if margins the we the any coming should on wondering about And impacts the margins in period? of throughout the think period, upon I'm of business? well the some given how HAAS, that that expectation fluctuate any seasonality option year, there's so how So

Richard Nadeau

I as talked goes And on of through, period think March maturity contract a contract new and question. phase, good start a we XXXX. we've It's X previously, it's

said we margins. think this I our contract previously normal we've that within bid range of

cetera, we the operating the early a contract that into innovations, are expect as the first workforce would period, be have that the income cetera. got rate as you experienced, trained in period, we we of coming so et lower parts introduced then we're workforce, at the end et And have has we as of would more of as contract

we will, we start a new So that process this the have we cycle period, a but as We'll again discussions our stay again, We start did, the contract income as pricing analyzed normal in moderation that with and start margin. range, went operating will the again. through of customer, March. within

Operator

comes question from Our Analysis. with Sparacino next First Frank

Frank Sparacino

call maybe X in size on to the of Bruce, businesses, go back, made appeals terms you questions. I just in comment guess assessments I the the to of wanted and earlier that. the

the know LTSS, the think where when is curious, And assessments, large of the So you on the of is is? I How on in think secondly regards? particularly the assessments. particularly that uncapped majority business out opportunity is large really first that but that of still don't then business today, I how look is, a sort on of, I is, at revenue assessment vast that disability side,

Bruce Caswell

Happy Frank. address Sure, Sure. to those.

that the correct obviously always subset of in disability the and do going to are the is of a appeal, in the assessments that outweighs generates you Kingdom. about is You done business think appeals Volumes for the an are if United revenue assessments revenue but one not particular in way, by appeals One reasons. we ultimately a assessments every it. assessments assessments be X weighted

and a serve, care, services to kind of, guess it So are say primarily, populations -- duals with Northeast, say, little of continue that is the that of, as growth care, long-term into managed to assessments the, market move in to two And as and really care, the is I've I'd which support, to evolution related you long-term that continue their in There's will, what long-term that pleased market. to been there related if Special to long-term is, we and going move market more the relates grow. are, managed duals, components. a I the traditional, opportunity states would also Medicaid Programs. kind on to presently. expect Needs care And This I'm bit more we

a a demand that the And to want that under from our extensively stays we they there and years, is providing. programs. recall population Eligibles, the you prior serve federal we that would to be will to On into similarly pretty that of a shift assessments of for the the types capitated may the be managed-care Demonstration that Dual model, population degree government the drive continue capable

aggregated the multiple providers. done well companies smaller, across there's interest strengths like company because has together in done marketplace that we would of, plays it of The through Services I the of other of comment individual, do into like That's more Supports have assessments and subsidiary. assessments, preadmission screening ours that review, relates a sports course, business, of the with that and kind the just a a And kind our local a pipeline our dimension Long-Term in capabilities When specialized that aggregated been might component, the We've of, vehicles. pleased MAXIMUS assessment assessments, but general that's progress residency Ascend with to work for they where seems we've and intensity that are scale pipeline the pipeline converting I bringing benefits niche-y not in into, been trend, robust single types new very important, overall single, of, contract pleased to get that seen there's and saying, assessments business. a am by -- it a types. it to historically kind

hope gives that that more in little depth Anything So a area. Frank? I further

Operator

Our final Genuity. is question a from follow-up Close Canaccord with Richard

Richard Close

the I respect of, evolution, to see increase comment any digital in of Bruce, Jamie's telehealth. question terms the there can But you do of CapEx? that you asked think and clinical through into already, should on terms significant in this maybe the in was investment may we level terms be sort Rick to have of with if partnering of

Richard Nadeau

and go Richard, I'll up. let first then follow will Bruce

answer the think I that. is no to

to the impact pretty appreciate also this we it's make area, we I just investments I investment, when operating it's be can expenses that some circumstances. CapEx, in think And not that. you think that talk need also when I paybacks think in also quick

You're them doing significant process commitment reengineering. and as the processes a make specific the It's working Bruce? not the just they mechanized, spending workforce money, it's the reengineer part on will. contract you actually of if more on

Bruce Caswell

platform Revitalised we I think to I the as earlier, that add that dimension acquired is said gives when we to to some pleased to investments, adjacent that with think get year, us would we And looking, the do we we how they see the last only as we're so -- the that's put commented I capabilities markets spoken in if will. category, have only as earlier, an areas. bring market. always it not augment make have enable with then in to the ability the obviously, enable into opportunity adjacent that combine because are adjacent I overall that opportunities well. you into well-being guess program investment, but address I you investments, And an would M&A address to area, obviously seek example That CapEx, our further doesn't we've the can us movement fit adjacencies, of to some an so of the but they lastly, and

Richard Montoni

Rick I would both Good. is not CapEx. commentary. closing and likely and Rich, the of answer amount I This involve Bruce, And the following agree additional add will is significant Richard. with a

However, long-term to could there a are more pretty company. pursue think it it comfortably situations, knowing additional would be that we require CapEx, where represents And fair growth capital, it the they're I frankly, amount significant additional did of opportunities if opportunity-specific. some there situation-specific,

as it view news. would I good So

Operator

next from comes Rohan question Our with Abrol KeyBanc Markets. Capital

Rohan Abrol

legislative around or right you're dawn of specifically any Broadband to Just more guess pertinent the wanted there as be parts. telehealth specifics role of would I is ask Care I the Act, focused Act CONNECT amount on that any Act, those? commentary on Are specifically the some of perhaps moving the CHRONIC on, now

Bruce Caswell

in I budget Bruce. and that specific a direct prior commentary, the anything, no say. the effect some focused optimism If state and reached acts, federal situation. -- marketplace. very evening well of on those we've will some that, have And it's certainty the agreement likelihood guess, trickle-down X-year with good as our this not that space have I Around here quit as would clients a stability the those to being been to provide Around to we'll

Medicare managed-care extended through there's coverage As a Medicare. Senate, have be It vehicle, we that of was the beneficiaries will extended addition handle covered. That's and have or the And that to to been the since that, appeals funded six extension C, for the to is part CHIP And about be which tea to for XX CHIP it you days things. may are competent will familiar visibility years will. passed that in leaves years, reauthorized week. about early read be nice X relates stability bill Special in if nice has still that on that's every the for and million to in talking you some provides Programs, what. SNPs, to The Medicare that that Needs interesting But as program the more bit area. a It's not try previously to X-year obviously,

the indicators Some Administration, stabilization about efforts of budget the example, Veterans for bill of there's in other mean the might and there some in there. discussions

to continue we'll So watch.

little overall. to anything it's good now and if visibility for think a certainty stability. more I have agencies and

where are that I there areas some if they've you're so some think helps. have And in to Hope area. not see transformation RFPs likely more holding back And now that major been or they movement progressing certainty, budget initiatives.

Rohan Abrol

as exposures, that, is countries applied in your in telehealth for given well Understood. fair strategy guess, guess, then outside operate to could lastly be the I U.S.? extrapolate appreciate this, I international the it is, and digital me that I you

Bruce Caswell

remarkably answer me short is, yes. from The

Operator

Ladies have MAXIMUS and your time thanks time today's end for out participation. of and for our of are reached the question-and-answer session gentlemen, and call. we

day. wonderful a have and time, this at lines your disconnect may You

Maximus (MMS) 8 Feb 182018 Q1 Earnings call transcript