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Bank of America Merrill Lynch Health Care Conference Transcript

May 16, 2013 11:00 AM ET


Richard Montoni - President and CEO

Lisa Miles - Investor Relations


Kevin Fischbeck - Bank of America Merrill Lynch


Kevin Fischbeck - Bank of America Merrill Lynch

… for joining us early in the morning here. It's my pleasure to introduce MAXIMUS. MAXIMUS is probably the largest government process services company here in the U.S., as well as abroad. They have two main business lines as an enrollment processor on the government programs, but also at welfare to work program both in the U.S. and abroad. Presenting today we have Richard Montoni, President and CEO, as well as Lisa Miles from Investor Relations.

And with that, I'll hand it over to Richard.

Richard Montoni

Oh! Kevin, thank you for the invitation and the opportunity to be here, and I think you folk in the audience for choosing to participate in our presentation. What we are going to try to do here today is get through standard deck for those of you who are new to the story, I’ll give you a background and then I’d like to reserve enough time to get into Q&A.

MAXIMUS is a very unique company. I think we are very well-positioned in health and human services. And as you all can appreciate, this is really the eye of the storm here in the U.S. with health care reform situation, and I’d like to give you an opportunity to ask us questions and share with you some of the dynamics that we are experiencing. And frankly, we believe is a very significant driver behind our growth, not only the last couple of years but I think for many, many years to come.

So, with that, let’s get started. For those of you who don’t know MAXIMUS. We are a leading operator of government, health and human services programs. We do this worldwide. The worldwide is very, very important.

We think when you look at what's happening across many, many countries is that the economic and demographic factors driving social reforms and this would be in large government healthcare programs, large government welfare and welfare-to-work programs, as governments are compelled to take a hard look at their spend, to take a hard look at the efficiency and the efficacy of their program. This is increasing the demand for what MAXIMUS does and I’ll talk a little bit more about that in a bit.

We think we are very well-positioned in healthcare and welfare reform. I’m going to ask Lisa Miles on a couple of slides to present to you, what we do and give you a bit of a drill down in the two major segments, health and human services.

But we’re very well-positioned, whether its running Medicaid programs, with the majority of beneficiaries inside states across the United States well north of 50% of beneficiaries are served by the administrative services of MAXIMUS here in the United States or whether it’s the appeals that we processes for the Medicare program. We are the largest provider of appeals to the Medicare program.

And in the category of late breaking news, this morning we issued a press release where we announced that we’ve launched the appeals process that we will run for the State of California. The form of the work is two separate contracts and we will perform IME, IMR in independent medical reviews and what’s refer to as IBR’s, Independent Billing Reviews for that state for California's workers comp program.

We estimate that over the two-year period you. It will take a little bit time to ramp but over two-year period, we think that’s worth order of magnitude about $40 million in revenue to MAXIMUS. And I think this is one example where we are seeing the demand for what we do increase.

From a financial perspective, we have very healthy balance sheet. We had about $187 million in cash at March 31, ’13. We do have quarterly cash dividend program of which we’re quite proud. We have an opportunistic share buyback program and we have no long-term debt.

In terms of what we think is going to happen in this fiscal year ended September 30, 2013, we are excited and that we think we are going to grow our topline in the vicinity of 19% to 24%, and we think we’ll grow our EPS and this is our adjusted EPS in the vicinity of 27% to 33%.

From a revenue and adjusted earnings per share perspective when we look at history, over last five years we've grown our revenue on a -- at a compound annual growth rate of 12.8%. We are looking for this year to be revenue in the vicinity of $1.250 billion to $1.3 billion.

From an adjusted EPS perspective, our five-year compound annual growth rate 18.8% and we are looking for this year to be in the vicinity of $3 to $3.15.

The next slide I’m going to impose upon Lisa to walk you through the two segments and I’ll be back after few slides.

Lisa Miles

Thanks, Rich, and good morning, everyone. MAXIMUS as Rich noted operates in two segments. Based on fiscal 2012 revenue of just over $1 billion, the health segment was the largest at a contribution of 64% in total revenue and human services at 36%.

Across both segments, typical contracts are long-term in nature, predictable, visible stream of long-term revenue, average contact life is four plus years. Typical contract margins in both health and human services generally range between 10% to 15%, that’s operating margin and again, highly predictable revenue stream.

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