Slide 1: Fiscal 2015 Fourth Quarter & Full Year Earnings
Fiscal 2015 Fourth Quarter & Full Year Earnings Richard J. Nadeau Chief Financial Officer November 12, 2015
Slide 2: Forward-looking Statements & Non-GAAP Information
Forward-looking Statements & Non-GAAP Information These slides should be read in conjunction with the Company’s most recent quarterly earnings press release, along with listening to or reading a transcript of the comments of Company management from the Company’s most recent quarterly earnings confer
Slide 3: Revision to Fiscal Year 2016 Earnings Guidance
Revision to Fiscal Year 2016 Earnings Guidance •Earnings guidance revision is a result of a single program in start-up: U.K. Health Assessment Advisory Service −While we have made substantial progress in effecting positive change to program, the ramp-up to contract volume targets has been slower tha
Slide 4: Total Company Results – Full Fiscal Year 2015
Revenue Health Segment $ 1,109.2 $ 906.7 22% Federal Segment 502.5 341.8 47% Human Segment 488.1 452.4 8% Total $ 2,099.8 $ 1,700.9 23% Operating Income Health Segment $ 154.3 $ 115.6 33% Federal Segment 59.4 63.1 (6%) Human Segment 60.2 53.2 13% Segment Income $ 273.9 $ 231.8 18% Acquisition (4.7)
Slide 5: Total Company Results – Fourth Quarter of FY 2015
Revenue Health Segment $ 296.2 $ 230.5 29% Federal Segment 154.3 90.6 70% Human Segment 128.2 114.4 12% Total $ 578.7 $ 435.4 33% Operating Income Health Segment $ 30.5 $ 31.2 (2%) Federal Segment 20.9 12.2 71% Human Segment 13.4 9.9 35% Segment Income $ 64.8 $ 53.3 22% Acquisition (0.2) - Intangibl
Slide 6: Health Services Segment
Revenue Health Services $ 296.2 $ 230.5 29% $ 1,109.2 $ 906.7 22% Operating Income Health Services $ 30.5 $ 31.2 (2%) $ 154.3 $ 115.6 33% Operating Margin % 10.3% 13.5% 13.9% 12.7% ($ in millions) Q4 FY15 Q4 FY14 % Change FY15 FY14 % Change Health Services Segment Revenue • Another solid year of str
Slide 7: U.S. Federal Services Segment
Revenue U.S. Federal Services $ 154.3 $ 90.6 70% $ 502.5 $ 341.8 47% Operating Income U.S. Federal Services $ 20.9 $ 12.2 71% $ 59.4 $ 63.1 (6%) Operating Margin % 13.5% 13.5% 11.8% 18.5% ($ in millions) Q4 FY15 Q4 FY14 % Change FY15 FY14 % Change U.S. Federal Services Segment Revenue • U.S. Federal
Slide 8: Human Services Segment
Revenue Human Services $ 128.2 $ 114.4 12% $ 488.1 $ 452.4 8% Operating Income Human Services $ 13.4 $ 9.9 35% $ 60.2 $ 53.2 13% Operating Margin % 10.4% 8.7% 12.3% 11.7% ($ in millions) Q4 FY15 Q4 FY14 % Change FY15 FY14 % Change Human Services Segment Revenue • Top-line increases driven by acquisi
Slide 9: Cash Flows & Balance Sheet
Cash Flows & Balance Sheet Reconciliation to free cash flow can be found in financial tables in the Q4 FY15 earnings press release. $ in millions Q4 FY15 FY15 Cash provided by operating activities $25.2 $206.2 Cash paid for property, equipment and capitalized software ($32.0) ($105.1) Free cash flow
Slide 10: Share Repurchases & Other Uses of Cash
Share Repurchases & Other Uses of Cash •Approximately $162.5M remaining for repurchases under Board-authorized program Uses of Cash •Believe we can sufficiently address our cash needs in 2016 •Currently expect that spending on capital expenditures will decrease significantly in FY16 •Committed to se
Slide 11: Establishing Formal FY16 Guidance
Establishing Formal FY16 Guidance Fiscal 2016 Guidance Revenue $2.4B - $2.5B Diluted EPS $2.40 - $2.70 •Revenue range between $2.4B & $2.5B driven by growth across all segments, predominantly in Health & U.S. Federal Services, & to a lesser extent, Human Services •At September 30, 2015, we had $4.6B
Slide 12: Reasons for the reduced FY16 earnings guidance
Reason for the reduced FY16 earnings guidance is the slower ramp & resulting lower operating income contribution of U.K assessment contract. Guidance assumes a wide range of potential outcomes on this contract. •Contract also has a stop loss provision that restricts loss to 5% of allowable costs – p
Slide 13: Fiscal 2015 Fourth Quarter & Full Year Earnings
Fiscal 2015 Fourth Quarter & Full Year Earnings Richard Montoni Chief Executive Officer November 12, 2015
Slide 14: Introduction
Introduction •Challenges we face with U.K. assessment contract result in a reduced earnings outlook for FY16; this is a single contract in our global portfolio •Over past twelve months, introduced several new growth platforms that strengthened our position for future opportunities in key markets •Ma
Slide 15: Three Main Challenges Today
Three Main Challenges Today Falling short of achieving initial volume targets; ability to hit targets is tied to three areas: 1.Number of Health Care Professionals (HCPs) we recruit 2.Number of HCPs that complete training & graduate 3.Productivity of these new HCP recruits Three Main Challenges With
Slide 16: Productivity; Training & Support
Productivity •Once new staff begin performing assessments, there is a learning curve; may take them 6-8 months to achieve full productivity levels •In the meantime, have efforts underway to increase productivity with our current workforce: −Optimized work schedules of our staff & offered voluntary o
Slide 17: Meaningful Progress on Program Improvements
Meaningful Progress on Program Improvements Enhanced Stakeholder Engagement: Customer Representative Group •Representatives from 25+ nonprofits & disability advocacy groups; group provides practical feedback that we incorporate to areas such as clinical training, assessment interview, facilities & c
Slide 18: Recognition of HAAS Improvements
Recognition of HAAS Improvements Accomplishments Have Not Gone Unnoticed •During a public Work and Pensions Select Committee meeting, several government officials praised our recruiting plan & efforts to work through backlog •Confirmation of our effective working relationship with DWP & our belief t
Slide 19: Demonstrated Results With Start-Up Challenges
Demonstrated Results With Start-Up Challenges •Start-ups are the nature of our business •New programs are the best avenue to create substantial, long-term shareholder value •Growing pains are normal during the early days •Difficult to predict pace at which start-ups move to maturity •Past turn aroun
Slide 20: New Set of Opportunities Through Acentia Acquisition
New Set of Opportunities Through Acentia Acquisition •Integration nearly complete & seeing new prospects that combine BPO with technology solutions •Provides additional contract vehicles & access to new agencies •Opens up an entirely new set of opportunities Awarded a small, but strategic, task orde
Slide 21: Affordable Care Act (ACA) Update
Affordable Care Act (ACA) Update •Third Open Enrollment period (OE3) began last week & will run through January 31, 2016 •Believe that ACA-related revenue has largely stabilized into a relatively steady state •Even though the number of first-time enrollments are projected to be lower, continue to su
Slide 22: New Awards, Pipeline & Rebids
New Awards, Pipeline & Rebids Rebids •FY15: Texas ESS contract is still outstanding; remain cautiously optimistic on the outcome •FY16: Much lighter rebid year; 10 contracts with combined total contract value of approximately $170M New Awards September 30, 2015 YTD Signed Awards $3.4B New Contracts
Slide 23: Conclusion
Conclusion •Keenly focused on improving performance on U.K. assessment contract & delivering results toward upper end of guidance range •Have our arms around the issues & corrective action plans well underway •One contract in our global portfolio; fully expect it will provide solid returns to our sh