Maximus, PAE share integration updates

Two publicly-traded government contractors are either digesting or getting ready to digest the second in pair of acquisitions they made to expand into new markets or grow footprints among current customers.

Here is how Maximus and PAE updated the investment community on their integrations, and some other important items, in quarterly earnings calls Thursday morning.

Maximus

One deal is done with the former Attain federal practice now in the fold of Maximus, which paid $430 million for that business. In its second deal, it is paying a company-record $1.4 billion for a Veterans Evaluation Services.

The acquisition of VES should close by the end of June, which coincides with the completion of Maximus’ third fiscal quarter. But the VES business has more than plenty on its to-do list after that happens and work to identify revenue synergy opportunities will be a longer process.

“Likely, those pipeline opportunities will be more like two-to-four years out and not immediate, because we are absolutely 100-percent focused as we come together with VES in working with the (Veterans Affairs Department) on the inventory that’s built up during the COVID pandemic period,” Maximus CEO Bruce Caswell said in the company’s second quarter call with analysts.

VES reported $535 million in revenue during its most recent fiscal year. Maximus sees that business contributing $160 million-to-$175 million in sales for its current fiscal year that ends Sept. 30.

Attain Federal being absorbed into Maximus is a slightly different matter and did create a “meaningful uptick” in the acquirer’s overall pipeline as Caswell characterized it, though that is just the beginning.

“We’re still only getting started with Attain and really understanding what the combined capabilities now mean in terms of larger deals we can bid and competitors we can go against,” Caswell said.

But overlaps are now out of the combined pipeline and which of the two teams they feel is the best-positioned with a certain agency to bid for an opportunity will do so, Caswell added.

Reston, Virginia-headquartered Maximus sees Attain Federal adding $120 million-to-$140 million in revenue for the current fiscal year.

Second quarter revenue for Maximus’ federal segment fell 16.1 percent year-over-year to $330.1 million, a decline mostly attributed to the end of the company’s 2020 Census work. The company said organic growth in the quarter was 13 percent when excluding the Census contract.

Maximus raised its full fiscal year revenue outlook to $4 billion-to-$4.2 billion from the prior range of $3.4 billion-to-$3.525 billion on the acquired sales and increase in COVID-19 response efforts the company is supporting.

PAE

PAE closed a pair of acquisitions in quick succession during the late fall of last year and those transactions came nine months after the government services company’s public listing.

One win is already on the board that PAE is directly crediting to its additions of Metis Solutions and Centra Technology, albeit one that is cryptic.

During PAE’s first quarter call, Chief Financial Officer and interim CEO Charlie Peiffer said the company secured a new $65 million task order at the end of the quarter for counterintelligence and human intelligence support services to a “national security customer.”

That award represents new business for PAE, which sought a greater intelligence community presence through its nearly $300 million combined purchases of Metis and Centra. New contract vehicles also came to PAE so they could pursue task orders such as the one Peiffer vaguely described.

Falls Church-headquartered PAE does believe most of the sizeable award decisions under that category will be more of a second half activity this year versus in the first given ongoing procurement delays because of the pandemic. But the company also sees early traction as evidenced by the award.

“Where the value creation is going to be coming from is what we’re calling phase one, which is the utilization and capitalizing of the (multiple-award contract) vehicles that really were of interest to us,” Peiffer said.

“We will also be pursuing some of the single-award opportunities, not just the IDIQs, those are back-end loaded, but we see excellent opportunities we can pursue together.”

Centra and Metis contributed $89 million in revenue for the first quarter, which saw revenue climb 21.3-percent year-over-year to $748.6 million overall and grow organically by around 7 percent.

Opportunity would also be an apt description of how PAE sees the landscape for its pursuit of more work with civilian agencies, which the Biden administration sought significant increases for in its April budget blueprint.

Peiffer highlighted the Justice, State and Health and Human Services departments as customers through which PAE could seek additional business surrounding its work in global health, logistics, international development and other areas.

Regarding the process to find a new CEO, Peiffer said PAE’s board of directors is working with an executive search firm. Then-CEO John Heller departed the company in March after seven years.

PAE’s financial outlook for this year remains the same: $3.05 billion-to-$3.15 billion in revenue and $205 million-to-$215 million in adjusted EBITDA (earnings before interest, taxes, depreciation and amortization).