Maximus sees stability in roller-coaster Census work
By
Ross Wilkers
Maximus knows the revenue infusion of working on the Census is short-lived. But they see the benefits in past performance, customer experience and cash as helping for the long-term.
Maximus is ramping up for the 2020 Census as the company holds a large contract for contact center support to help those looking for assistance on the questionnaire.
Just as quickly as that activity and revenue associated with it is accelerating, so too will the work come down and the sales associated with that will dry up almost overnight.
Reston, Virginia-based Maximus’ fourth quarter earnings presentation to investors given Nov. 19 lays out what the company expects. The company recorded $185 million in Census contract revenue in its 2019 fiscal year and expects to post $360 million in sales for the current 2020 period, but then that will shrink to $50 million in FY 2021.
So how is the company thinking through that dynamic and working to parlay the work it does for the Census into other opportunities?
Tom Romeo, president of Maximus’ federal services segment, said the company is including the employees in bids for similar contracts at other agencies and is also able to tout the work for the Census in those proposals.
The potential $430 million Census Questionnaire Assistance contract came to Maximus as part of its acquisition of the former General Dynamics IT contact center business that has nearly 10,000 employees.
In a briefing to WT and our sister publication FCW, Romeo cited the Federal Emergency Management Agency as one example of an agency Maximus does similar work to the Census and can also be leveraged for other bids.
Romeo said FEMA asks for companies “can give you scale and can you do it quickly, and can you do it securely.”“
The answer is ‘yeah,’ we do it all the time,” Romeo added. “It’s a core competency of ours and not that many companies can do it.”
That competency as Romeo described it is relatively straight-forward: the ability to quickly ramp up as the need increases, then draw down as that need starts to ease. GDIT brought to Maximus a call center contract with FEMA to stand up a call center in response to Hurricane Florence.
But even with the Census revenue spike, Romeo said Maximus would still see “organic growth at a pretty strong level in federal.”
Romeo has a point. Federal services revenue totaled $1.1 billion for Maximus' just-ended 2019 fiscal year, which is more than double that of fiscal 2018. But the company said in its earnings presentation that organic growth was 3.6 percent.
A “shooting star” project like the Census contract also helps Maximus’ financial profile in terms of the cash it brings in, CEO Bruce Caswell said in that same briefing alongside Romeo.
“Then it’s a question of ‘We’ve got capital, and now we can deploy it into these new growth platforms,’” Caswell said.
Acquisitions are certainly a part of that, although the company has noted to investors that elevated prices of businesses for sale continues to be a trend in the marketplace.
Caswell shared in the briefing a series of “Four C’s” principles regarding acquisitions that he has adopted from his predecessor Richard Montoni, former CEO and current chairman of the board of directors: Customer, Capabilities, Cost and Competition.
“If you’re moving into a market where the customer is different, the capabilities you need to deliver are different, the cost models are different and the competitive landscape is different: wow, be careful,” Caswell said. “That’s so many adjacencies away that you’ve got to be careful.”
Maximus’ acquisition strategy focuses on companies that are no more than two adjacencies away, and of course if the price is right.