Greetings and welcome to the MAXIMUS Fiscal 2015 Fourth Quarter and Year End Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [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, you may begin.

Good morning. And thanks for joining us. With me today is Rich Montoni, CEO; Bruce Caswell, President; and Rick Nadeau, CFO. Beginning this quarter we are modifying the way we speak to our financial results. In the interest of brevity we will cover the financial trends and move away from repeating all the numbers on the income statement. All the pertinent information can be found in our press release and the detailed presentation that we provide on the Investor Relations homepage of the MAXIMUS website each quarter. Today's financial results are shown in three segments and today's press release also includes a supplemental table that details financial results for all four quarters of fiscal 2015 under the new segment structure. I would like to remind everyone that a number of statements being made today will be forward-looking in nature. Please remember that such statements are only predictions and actual events and results may differ materially as a result of risks we face including those discussed in Exhibit 99.1 of our SEC filings. We encourage you to review the summary of these risks in our most recent 10-K filed with the SEC. The company does not assume any obligation to revise or update these forward-looking statements to reflect subsequent events or circumstances. Today's presentation may contain non-GAAP financial information. Management uses this information in its internal analysis of results and believes that this information may be informative to investors in gauging the quality of our financial performance, identifying trends in our results and providing meaningful period to period comparisons. For reconciliation of the non-GAAP measures presented in this document, please view the company's most recent quarterly earnings press release. And with that, I'll turn the call over to Rick.

Thanks, Lisa. As we get started this morning, I wanted to first address the reason for our 2016 earnings guidance revision. The revision is a result of a single program, the U.K. Health Assessment Advisory Service, which is in start-up. While we've made substantial progress in effecting positive change for the program, the ramp-up to contract volume targets has been slower than originally planned. As a result we now expect that fiscal 2016 diluted earnings per share will range between $2.40 and $2.70. We have put forth fiscal 2016 earnings guidance that includes a wide range of possible outcomes under this program. The lower end of the range assumes that we continue to face challenges related to achieving our contract volume targets. The upper end of the range contemplates improved performance and increased volume output. The management team is certainly focused on delivering results that move us towards the upper end of this range. Both Rich and I, will go into greater detail on the U.K. assessment contract throughout the call. However, as it relates to our longer term three to five year outlook we firmly believe that the overall macro trends for our business remain intact. We continue to see opportunities for our core services across all of our segments and geographies. Governments around the world continue to seek ways to run more effectively and efficiently, while at the same time dealing with rising caseloads, changing demographics and unsustainable social programs spend. Through a combination of short-term and long-term opportunities we see continued growth for years to come. Let me start with results for the full year. We had another solid year with double-digit top and bottom line growth. Revenue for fiscal 2015 increased 23% over last year. Of this growth 19% was organic, primarily from the Health and…

Thank you, Rick and good morning, everyone. While the challenges we faced with the U.K. Assessment contract resulted in reduced earnings outlook for fiscal year 2016, it is important to remember that this is a single contract in our global portfolio. Over the past 12 months we've introduced several new growth platforms that strengthen our position for future opportunities in key markets. And the macro trends that drive demand for our services at the global level remain very favorable. In my comments this morning I will provide some additional insights on the U.K. Assessment contract. I will speak to the challenges we face today, what we're doing to address them and highlight some areas where we have already made solid improvements to the overall service. I will then give an update on the Acentia integration and our expectations for the third Affordable Care Act open enrollment period in the U.S. I will also update you on our sales awards and pipeline and I will close by sharing with you, my view on our commitment to deliver solid growth in fiscal 2016. Let me pick up where Rick left off and start with the U.K. Assessment contract. As a reminder, this is the contract where MAXIMUS is conducting assessments for individuals seeking certain disability benefits, according to the rules set down by the U.K. Parliament. The program faced significant criticism under the previous provider. When MAXIMUS took over the contract in March 2015, we acknowledged that it would take time to bring meaningful improvements to the program. You may recall that this is a hybrid contract that is predominantly cost reimbursable. However, it also has significant performance incentives with the largest being tied to volumes. While we have increased volumes during the start-up phase we are falling short at achieving the…

[Operator Instructions] Our first question comes from the line of Brian Kinstlinger from Maxim Group. Please go ahead with your question.

Good morning. The first question I had, as you know, guidance for the midpoint was reduced by $0.40. Can you quantify what you have expected for revenue and EPS contributions for the Assessments contract in your preliminary guidance versus what your expectations are to low and high end of today's revised guidance?

Brian, good morning. This is Rich. And just to repeat the question so everybody understands it. And the connection is just fine Brian. Your question is what was assumed for revenue and earnings in our original preliminary guidance and the revised guidance which is at midpoint about $0.40 less what's behind that? Glad to respond to and I am going to ask Rick Nadeau to at least initially respond to that question, Brian.

Yes. Brian thank you. Our guidance is based on what we know today and reflects a wide range of probable outcomes. The lower end of the range assumes that we continue to face challenges on achieving our contract volume targets. In terms of revenue the lower end assumes approximately $230 million of revenue and a pretax operating loss of about $7 million. This is due to us not earning incentive fees as a result of us not hitting the volumes -- the volume targets. The middle of the range assumes breakeven operating income and then the upper end of the guidance range assumes higher levels of revenue and assumes that we're earning incentive fees tied to the performance targets, most notably the volume targets. The upper end contemplates $280 million of revenue approximately and an operating margin of approximately 7%. Brian, the management team is diligently focus to drive performance towards the upper end of the guidance range. You are correct. Our preliminary guidance did assume higher revenue and margins than is presently assumed in our formal guidance. The preliminary 2016 guidance assumed operating margin that was at the upper end of our targeted range of 10% to 15% of operating income that you talk about. Those estimates were based on early trends that we were experiencing in the first few months of the contract. Therefore assumed that we would be running at higher staffing levels and earning the incentive fees on the performance-based targets. Rich did you have anything to add to that.

Rick, I would add from a qualitative perspective and as you can imagine, Brian, the management team has spent a lot of time contemplating what the revised guidance should be and it does as you will note it reflects a range of probable outcomes. And our thinking when we set to this formal guidance was to provide a range. And the management team has a very high level of confidence in delivering within that range. I would also add that while not assured we believe that the upper end of the range is achievable and our goal clearly is to exceed the lower end of the range and the management team is determined to drive towards the upper end of that revised range. Next question please.

Our next question comes from the line of David Styblo from Jefferies. Please go ahead with your question.

Good morning. Thanks for the questions. I do want to [stand hot] for a second here. Just want to make sure I fully understand how to think about the move on the contracts here. Certainly as they push out to the right, Rich, I just want to make sure that I understand, after that, are we also talking about getting to the same full run rate earnings potential that you originally thought you could make on it or is there any touchdown on that over time?

Dave, that's a great question. So I think it's helpful for the listeners to envision a ramp curve. That's where we are with the start-up situation. Starting from basically a takeover of a prior operation from predecessor and ramping it up in terms of its authority to deliver monthly volumes and increased quality et cetera. And so I envision this ramp curve and it was a very aggressive ramp curve. We are climbing that ramp curve. We are making improvements. We are increasing but not at the same rate and really effectively the best vision is to envision that ramp curve pushing to the right. You hit upon a very meaningful aspect and that is at the end of the day will the mature level be at the same level originally anticipated and the answer is yes, definitely yes. We are not lowering the expected level of performance at the end of the day, or delivery or volume level or revenue level of this contract when it's mature.

So a follow-up to that. I think you said you had be, I think fully staffed in the summer of '16. I know obviously you don’t have '17 guidance out, but I if you had does that sort of insinuate that the '17 numbers wouldn't change, that you would be operating at that full run rate at that point or is there sort of the push-out to the right sort of impact fiscal year '17 as well?

Well I think what it means is that we expect that during our fiscal '16 we will reach full maturity level and that means for all of '17 that product would be operating at that level. And you touched upon a very important point in terms of, there will be a radical difference in '17's performance versus '16's performance for this set of contract.

Our next question comes from Stephen Lynch from Wells Fargo. Please go ahead with your question.

I was wondering if you could talk about the slower than expected ramp of staffing for the U.K. Assessment contract. Is that being driven by a shortage of qualified healthcare professionals in the market or if you could just talk about what factors causing the drag in recruiting that weak rate?

Stephen I think that's a great question. Bruce Caswell who is our President, by the way has spent as you would expect along with the rest of the executive team a lot of time on this project. He has been over to London several times and has some really great insight in terms of what's been done and what we will do to move this forward. So I am going to ask Bruce to comment upon and give you some insights as it relates to that topic.

Thanks, Stephen and good morning. So fundamentally actually recruiting has improved quite a bit over the course of the last several months and actually is no longer kind of as significant a constraint as it was previously. So we feel like we've made very good progress in recruiting and we are now reaching a level of recruiting that from a rate perspective is an appropriate level. So the issue is really that we need to sustain that rate for the foreseeable future. We have done that through a number of methods by increasing our supply chain partners, focusing on the quality of the recruits that we are getting and so forth. So recruiting is less of constraint. The real issue that we've been facing is our ability to graduate those trainees that we bring into the system on a timely basis and ensure that we have a high level of graduation rate and obviously correspondingly low attrition. It might be helpful just to give you a sense of what the training program is like that folks have to go through. It is very extensive and rigorous, takes a long time about three months for them to complete. They have to go through multiple competency tests in that process. And these are healthcare professionals that for a good portion of their career, predating their joining us have been giving very direct care to folks in a clinical environment versus assessing very complex conditions many of which can fluctuate from day-to-day. So it's a very different type of work. It's a career shift for these folks, but they are by the most qualified people to serve as assessors. So while we can speak further about a number of the actions we have taken to address training and improve graduation rates, I did want to just clarify that recruitment we feel we made great progress on and it no longer represents the primary constraint to our success.

Thank you, Bruce.

Next question please.

Our next question comes from the line of Charlie Strauzer from CJS Securities. Please go ahead with your question.

If we can shift a little bit, if I can ask maybe Rick this question, the pro forma organic growth rates in both Federal and Human if you have those numbers, I'd appreciate those?

So Charlie you are asking for the pro forma organic growth rate for the Federal segment and the Human segment for the year ended September 30, 2015?

And the quarter please.

And the quarter as well as the fiscal year. Rick?

I am sorry which order did you want them in, Health first?

Human and Federal actually.

Human and Federal, okay. So Federal on the top line grew 70%. 56% was attributable to -- this is fourth quarter. 56% was attributable to Acentia and for fiscal 2015 revenue grew 47% and 30% was attributable to Acentia and 17% from organic growth that was Federal. And then Human was 12% in the fourth quarter and 8% for the fiscal year, with the top line being driven by the acquisition of Remploy.

That the 12% number is the organic number or was that revenue?

I am sorry total revenue, 12% and 8%.

That was altered then by the transaction of Remploy.

Yes. On a constant currency basis, revenue would have been 23% in the fourth quarter and 16% for the full fiscal year. That's what -- it's in the script.

Got it. Great. Okay thank you very much. It wasn't clear on that part. And then my second question is on Texas. I know you said bill pending, but is there any update on timing of that contract?

I think we expect to hear in this calendar year, probably December timeframe.

Great. Thank you very much.

Our next question comes from the line of Richard Close - Canaccord Genuity. Please go ahead with your question.

First I was wondering if you could comment, you mentioned first quarter will be sequentially down from the fourth quarter. How should we think about second quarter? Will that be flat year-over-year you thinking or just talk about maybe the quarterly progression?

Yes. This is Rick. We expect Q1 as we said will be lower compared to the fourth quarter. That is because we have many programs as you know in the start-up. Based on what we know today we would expect a steady level of earnings growth throughout the remainder of the year. We will grow throughout the year. However, I do want you to keep in mind that the timing of revenue and profit from things such as change orders and contract amendments can impact contract trends. So we can wind up doing work on a particular piece of work and having the charge go in one quarter and we cannot record the revenue because we have a change order that is pending and not signed, it would then wind up getting signed in the next quarter. So we can get some lumpiness that can result from that.

Richard that was your first question, do you have another one.

Yes. My follow-up would be on the Affordable Care Act. I think we were looking for about $300 million plus contribution from that in fiscal '15. Can you let us know where you stood for fiscal '15 on health reform and then how you are thinking about health reform contribution going forward? I think you said that you expect it to be stable, but just additional commentary in and around that please.

Be glad to do that, Rich. I will say that you are right, we did expect that we had have contribution in that vicinity actual in fiscal '15. I think fiscal '15 ended up being a very positive year from an Affordable Care Act perspective. There is just a lot of work that tends to come out of the woodworks. Bruce is going to comment in detail, but it feels like the table is set for -- again we think it's getting closer to steady-state. The nature of the work that we do seems to be changing. The issues seem to -- some issues, last year issues seem to be resolved, but new issues pop up. So Bruce please add to that.

Rich you are absolutely right. I guess what I would add is we will see normal course fluctuations with our state clients as they prioritize a wide-ranging set of initiatives that are in front of them. And as we talked about a little bit this year's open enrollment period for example has a new series of tax forms that individuals will be receiving if they received qualified coverage through Medicaid, now got the 1095B forms. A number of our clients will turn to us to help them with either the production or fielding of phone calls around those types of forms. We also for example in one of our larger contracts are helping a client, I'm sure followed the status of the co-ops and there are certain co-ops that have shutdown just prior to the open enrollment period. In one instance there is up to 200,000 individuals that need to transition into new plans on a very expeditious basis. So we will turn and surge and help to support our clients in those activities. So I would call that part of kind of normal course on volume fluctuations that we would see. But overall as Rich has indicated we feel like we have reached pretty much a steady-state stabilized operation with the Affordable Care Act.

Richard I am going to add one other very important point as it's more of a horizon observation. But when we first got into the Affordable Care Act and parsing how MAXIMUS might play a meaningful role, the industry is pretty much focused on the universality of healthcare. Let's get a rewind. We positively came and signed up into a healthcare program. We knew that the second and third chapter would move away from the universality of healthcare and that's still a lot of work every year to re-annual folks, but also towards quality and cost of healthcare and in particular one of the big drivers there would be long-term care for elderly individuals. We are starting to see that solidify in our marketplace. so I won't go into in-depth detail here but as you follow MAXIMUS I think you should expect that that's going to further solidifying, we will see more opportunities in that direction. Next question please.

Our next question comes from the line of Allen Klee from Sidoti. Please go ahead with your question.

I had two questions. One, if you could talk a little about what you said on the student loan contract and how that's going to go to breakeven potentially next year, but what the opportunity you see there is? And then second, just going back to the U.K. contract one more time to understand, for the people you hire, what are the kind of the competitive choices that you think they have that can also be an issue?

Those are good questions. Bruce would you take the first one, give us a little bit of background on the student loan project, what we do and then the breakeven concept in opportunities moving forward. Clearly the one thing that crosses my mind Allen, is that this contract is important to MAXIMUS because it's with an agency that we really have not done any work with them in the past, the Department of Education and it's a sizable opportunity. And as folks probably know it was in start-up last year and is moving towards maturity. Bruce, you want to comment on how we are doing there?

I will begin and then actually turn it to Rick a little bit. But as a reminder the scope of the work that we do there is we help students who have reached their default status but for whom their cases have not been turned over to private collection agencies and that's a large volume of students. I think the estimates nationally are there is at least 5 million individuals and that will be growing toward nearly 10 million individuals by 2020, that will need that kind of assistance in that program. We have been working with the Department to implement upgrades to the technology platform that supports the program and moving through as Rich as noted the normal course start-up of the program to turn it to a point where we are expected to breakeven in fiscal '16. And Rick would like to add to that.

Just to remember, it's a 10 year contract and Rich is right, it started and we were in start-up last year. This year we have made the progress that we expected and it should be approaching breakeven soon, in fact fiscal '16 and that it will turn profitable. As I said it's a full 10 year contract. Now Bruce did you want to talk about the healthcare professionals and what other things that compete for their…

This is a harsh question.

Yes it is. Let me begin by just talking about a little bit about the types of healthcare professionals that we recruit, because we recruit to a large degree nurses, individuals with physical therapy or PT or occupational therapy, OT, capabilities. And coming up in the future we will also be adding mental health nurses to the [indiscernible] folks that we will be able to recruit. A large proportion of individuals that we serve as you could imagine have mental health conditions that become part of that assessment process. So having folks with that clinical capability is quite important. Doctors also comprise a significant component, but I would characterize it more in the 10% to 15% range of the folks that we are recruiting. It is a very tight labor market in the United Kingdom and individuals have a lot of options whether it's to go to work for the National Health Service, whether it's to practice in a general practice mode, a GP type environment or whether it's to do additional work on other assessment related contracts that are out there. So furthermore the types of characteristics that individuals need to have and the capabilities kind of really preclude you from hiring folks directly out of medical school for example. These are individuals that need to have a level of experience and capability and really emotional intelligence and the ability to navigate through a very complex assessment process in a manner where it's a very conversational and kind of low anxiety experience for the claimant, all the while manipulating and documenting the evidence of that assessment in a fairly sophisticated IT tool. So that does narrow the type of field of folks that can be successful in the role. We've been working very hard however now to profile and understand what are the characteristics of folks that can be successful and have been successful in this role and feed that back into the recruiting process. And then finally I might say of the work that we do there are certain elements of the work like scrutinizing complex cases that come in on paper, determining what additional further medical evidence is needed, that can only be done by individuals once they've been in the program for up to maybe a year. So it's really this time that we are seeing now as our new recruits that we have hired through the summer come in and get established and get more experienced that we will start to see increases in productivity but meaningfully an increase in their capability to handle a wider range of cases.

Next question please.

Our next question comes from the line of Frank Sparacino - First Analysis. Please go ahead with your question.

On the U.K. contract, Rick, I am just trying to figure out from a worst case scenario perspective, you talked about stop-loss provision at 5% of the allowable cost that, can you help us think about that in terms of actual dollars relative to your low end of the range that you talked about earlier of $7 million?

Sure. Stop-loss provision in the contract restricts our loss to 5% of allowable costs on the contract plus any costs that we incurred that are not billable under the contract, in any contract here. Meaning it's a contract by contract to your calculation. This contract has been disclosed at being approximately £595 million, which translates to a little bit more than $900 million, which puts the stop-loss under the contract at something like $15 million per contractual year. When you factor in on billables, we ran $5.5 million of unbillables on this contract during fiscal year '15, so that we give you a stop-loss that's around $20 million per contract year. Now our analysis indicates that we believe it is remote that we will trigger that stop-loss in either contract year one which ends February 29, 2016 or contract year two.

Frank you have a follow-up?

No. Thank you.

Thanks, Frank.

You are welcome. Then next question please.

Our next question comes from the line of Brian Kinstlinger from Maxim Group. Please go ahead.

The first, is how many healthcare professionals do you have on that contract, the Assessments contract right now and what is the current -- what you will require in the follow-up. So undoubtedly my question is what will be the impacts to actually earnings and revenue you said in currency in the fourth quarter and how did it impact fiscal 2016 guidance and earnings? Please.

Brian, I think there are three questions there. Your first one [indiscernible] or that we need and then what's the current number of FTEs that we have and then I think your third question is really the impact of currency and the consolidated results. Rick will quickly the third answer one first and then we will come back to Bruce on question one and two.

Yes. The currency impact on the full year was approximately $44 million of revenue and about $0.02 of earnings per share is what we calculated.

As a matter of client confidentiality we can't actually speak to the detailed metrics in terms of the number of our healthcare professionals that we have on board. But I would remind you that we feel like we've made very significant progress in expanding our supply chain of qualified healthcare professionals. I spoke a moment ago about the breadth of that supply chain. We've added recruiting partners and others and we really feel like we put a very solid number of new hires into the pipeline and they are now coming through graduating and becoming productive. It's worth noting like we said, that it takes individuals up to six to eight months to reach full productivity after they graduate, that's why we are seeing that lag in the uptick of production. But we feel that we are at the right rate for recruiting and we feel that we just need to keep it going for the foreseeable future.

Thanks. Brian any follow-ups.

No. That's it. Thank you.

Next question please.

Our final question for today comes from the line of Stephen Lynch from Wells Fargo. Please go ahead.

I just wanted to ask about backlog coverage of guidance, it sounds like you have about 93% of fiscal '16 revenue guidance in the form of backlog or option periods. It looks like that's up from 90% coverage at this time last year going into fiscal '15. Can you maybe talk a little bit about what's driving the difference there or are there any difference in the underlying assumptions maybe a bigger cushion for FX impact or is this just normal course timing of contracts? That would be great. Thanks.

I'd say I am please that it's 93%. I have always felt that 90% seems to be -- given our business model Stephen, 90% seems to be a very comfortable number and frankly I think it's a great business model when you got 90% of next year's midpoint in the form of backlog. Glad to see it's 93%, but we didn't change the way we measure it. It's measured in the same fashion and I might even put the additional 3% which is nice in a category of statistically within the same range. So I think it's very comparable and very solid as we enter next year.

Stephen, do you have a follow-up to that?

No. That's it from me. Thank you.

Well that's the final question.

Thank you very much for joining us on today's conference call. Management will be available following this. Thank you.

Thank you ladies and gentlemen. This does conclude our teleconference for today. You may now disconnect your lines at this time. Thank you for your participation and have a wonderful day.