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TMCNet:  The Fedcap Group Reports First Half Fiscal Year 2020 Operating and Financial Results

[May 14, 2020]

The Fedcap Group Reports First Half Fiscal Year 2020 Operating and Financial Results

The Fedcap Group, the parent company for a growing network of top tier nonprofit agencies, today reported its operating and financial results for the first half of fiscal year 2020 ending March 31, 2020. Committed to providing services that positively impact the lives of people with barriers to social and economic well-being, The Fedcap Group operates in four main practice areas: Workforce Development, Education, Occupational Health and Economic Development.

Management Comment

"For the most part, The Fedcap Group's first half fiscal year 2020 results represented a continuation of the positive momentum we have experienced over the last several years," said Christine McMahon, President and Chief Executive Officer. "We were continuing our growth trajectory, achieving favorable outcomes for the populations we serve, expanding our work internationally with the launch of a new contract in Canada, and looking forward to the expansion of our Career Design School offerings. Throughout the period, we continued to refine our work in our five key areas of focus: Children ages 0-8, youth transitioning from foster care, individuals with intellectual/developmental disabilities, the previously incarcerated and those on public assistance. At the same time, we made investments to enhance our technology infrastructure through upgrades to our financial, HR, fundraising and business development platforms.

"With the onset of COVID-19, we turned our attention to rapidly and effectively responding to the crisis. We activated our Business Continuity Plan-focused on People, Workplace/Operations, Finances, Information Technology and Communications. We prioritized the health and safety of our employees, clients and communities by implementing new protocols, including strict sanitary and physical distancing procedures that adhered to or exceeded CDC guidelines. With respect to finance, we stress tested our liquidity against a wide range of likely scenarios, evaluated relevant Disaster Assistance and additional cash conversion opportunities, and succeeded in bringing in federal and philanthropic dollars to cover a portion of our increased operating costs. We ensured that our technology platform was capable of managing the shift to online learning and telehealth, and finally, provided frequent update to all of our stakeholders on the evolving situation," said Ms. McMahon.

2020 Financial and Operating Metrics

The first half of fiscal 2020 revenues were $129.4 million. Lower year-on-year comparisons primarily reflect the downsizing of our home health business, which contributed revenues of approximately $10 million in last year's first half, a COVID-19 revenue impact of approximately $3.5 million and the wind-down of a large project that was completed in 2019. In the first half of fiscal 2019, revenues were $145.3 million.

Over the last several years, The Fedcap Group has significantly diversified its revenue sources, bringing a broader array of services to at-risk populations.

  • Economic Development is comprised of business services operations that directly employ the populations we serve. In the first half of fiscal year 2020 we employed over 1,500 people in these businesses, the majority of whom have disabilities or other barriers. Within this activity, the largest unit is Total Facilities Management, which provides services at many iconic sites in the U.S. and at government and commercial office buildings. During this pandemic client demand for Total Facilities Management has increased significantly, and we have worked diligently to meet the need.
  • Workforce Development continues to represent the area in which The Fedcap Group serves the largest number of individuals through a broad range of services, including the Single Stop platform. In the first half of 2020 we provided functional capacity assessments, employment readiness training, vocational evaluations, and wellness services. We placed 5763 people in jobs and provided job retention services. We have continued to provide most of these services via video conferencing and technology platforms during the current healthcare crisis.
  • Education and Occupational Health represent growing bodies of work in the areas of early childhood services provided through Easterseals and assisting individuals with intellectual and developmental disabilities (I/DD) enter the workforce. We provided services to 4421 children ages 0-8, designing and delivering an array of evidence-based practices that promote long term economic and social well-being. The Fedcap Group is also at the forefront of helping individuals with I/DD learn new trades and enter the workforce at competitive wages-ending segregated employment in sheltered workshops. Transitioning this work to a telehealth model during COVID-19 has involved engagement of families and a learning curve for staff.

First half fiscal 2020 operating expenses were $130.8 million, 88% of which represented direct program expenses. The Fedcap Group reported an operating loss of $1.4 million for this year's first half, largely reflecting the impact of uncertainty about continued funding and allowable remote services at the start of the COVID crisis. We expect results in subsequent quarters of fiscal 2020 to stabilize and show some benefit from COVID-related opportunities and assistance.

During FY 2020 The Fedcap Group began the process of increasing its working capital line of credit to coincide with the many growth opportunities that exist.

At March 31, 2020 cash and marketable securities were $15.9 million compared to $22.2 million at the same time last year. Cash balance trends continue to reflect slow paying government funders, and The Fedcap Group is working diligently with these entities to ensure more timely payments for the services it provides.

Summary and Outlook

First half fiscal 2020 presented unprecedented operating conditions, and The Fedcap Group rose to meet these challenges.

Some of the organization's activities during this period include:

Front Line Work:

COVID-19 has exposed some of the most vulnerable in society. In response The Fedcap Group's front-line staff stepped up by:

  • Deep cleaning over 18,000 square feet of facilities.
  • Providing 27,214 pounds of food toiletries and other essentials 833 families through our child development centers and special education schools.
  • Partnering with organizations to cook 120,000 meals in our commercial kitchen and deliver to the homeless and individuals in shelters.
  • Provided childcare to health care providers and first responders.

Pivot Service Delivery Model as a Result of COVID-19:

As regulatory bodies and government guidelines reduced or, in most locations across our footprint eliminated our ability to provide in person services, we rapidly pivoted to the provision of online learning and telehealth services.

  • 1400 staff were trained on remote work and the provision of telehealth services.
  • Provided 6556 telehealth meetings over a 6-week period.
  • Expanded online educational platforms allowed us to continue to provide work readiness training and courses resulting in certification in high growth sectors.

"I could not be prouder of The Fedcap Group leadership and staff who have worked tirelessly to continue to bring our essential services to the at-risk populations we serve within a very difficult operating environment. This demonstrates the strong culture that unites us and supports our confidence in The Fedcap Group's ability to continue to effectively navigate the COVID-19 health crisis and to emerge from it as an even stronger organization.

"We are optimistic as we prepare for the 'new normal' and are planning our approach to the path forward. While we continue to expect challenges ahead, we are operating with rigorous financial and risk management controls and procedures to manage our cost structure and conserve cash.

"We believe that the post-COVID-19 environment will provide opportunities for The Fedcap Group and similar service providers, who are well-capitalized and have the scale and IT infrastructure to offer robust solutions to funders. Specifically, we believe that demand for our on-premises Facilities Management Services will increase as will the need for our workforce training and development work to help get individuals back to work. Additionally, we see further opportunities for The Fedcap Group's services and expertise in the education and public health arenas to address the increased needs of the populations we serve.

"The Fedcap Group has the unique ability to leverage complementary capabilities and qualifications across our organization to achieve positive outcomes for clients. Spanning 22 states and three countries, we are approaching our funders with innovative ideas about how to optimize service delivery within the ever-changing environment. Our leadership in providing relevant services, our strong financial position and the dedication of our staff give us confidence in The Fedcap Group's ability to remain a sustainable organization with sufficient infrastructure and resources to effectively serve clients," said Ms. McMahon.

About The Fedcap Group

For 85 years, The Fedcap Group has developed scalable, innovative and potentially disruptive solutions to some of society's most pressing needs. Serving over 265,000 people each year, The Fedcap Group provides educational services to every age group, vocational training in high-growth industries, behavioral health services, work readiness skill building and jobs-all targeted to helping people achieve long-term self-sufficiency.

The Fedcap Group also invests its time and resources in broader system change-working in partnership with federal, state and local government to improve the way services are designed, funded and delivered.

Conference Call Details:
Date:
05/14/20 at 11:00am EDT

Webcast:
www.fedcapgroup.org/results
US:
1-844-792-3735
UK: 08002799489
Canada: 1-855-669-9657

Financials:



 

Fedcap Rehabilitation Services, Inc. and Subsidiaries

Statement of Financial Position

 

 

 

As of March 31

 

2020

 

2019

 

Unaudited

 

Unaudited

ASSETS
Cash and short term investments

$ 15,943,559

$ 23,281,947

Accounts Receivable (net)

59,912,790

53,565,820

Inventories (net)

284,685

35,951

Prepaid Expenses and Other Assets

9,406,488

7,419,833

Total Current Assets

$ 85,547,522

$ 84,303,551

 
Fixed Assets (net)

85,697,535

80,647,332

Beneficial Remander Trust

4,504,385

5,088,627

Other Assets

5,633,166

3,696,191

Total Assets

$ 181,382,608

$ 173,735,701

 
Liabilities
Accounts Payable and Accrued Liabilities

$ 42,111,350

$ 31,508,362

Notes Payable

743,749

244,484

Current Portion of Line of Credit

26,653,273

-

Advance from government agency

3,696,001

-

Other Current Liabilities

1,468,087

7,113,411

Total Current Liabilities

$ 74,672,460

$ 38,866,257

 
 
Long Term Debt

$ 67,088,733

$ 67,652,849

Line of Credit

-

26,653,273

Other Liabilities

3,384,564

3,330,860

Total Liabilities

$ 145,145,757

$ 136,503,240

 
Net Assets
Unrestricted

$ 27,602,420

$ 28,978,708

Temporarily Restricted

6,678,579

6,297,900

Permanently Restricted

1,955,852

1,955,853

Total Net Assets

$ 36,236,851

$ 37,232,461

 
Total Liabilities & Net Assets

$ 181,382,608

$ 173,735,701

 
 
 
Current Ratio

1.15

 

2.17

A/R Turnover Ratio

2.16

 

2.71

A/R Average Days Outstanding

83

 

66

Debt Coverage Ratio

1.32

 

2.1

 

Consolidated Statement of Activities and Changes in Net Assets

 

 

 

 

 

Six Months Ended

 

 

March 31

 

 

2020

 

2019

UNAUDITED UNAUDITED
 
REVENUE

$ 129,434,047

$ 145,310,032

 
EXPENSES
Salaries and benefits

$ 87,538,898

$ 90,177,871

Occupancy

8,795,537

9,000,174

Subcontractors

11,825,223

17,022,559

Depreciation and amortization

2,444,686

2,417,862

Interest expense

2,785,371

2,573,376

Other expense

17,452,386

23,927,850

TOTAL EXPENSES

$ 130,842,101

$ 145,119,692

 
OPER PROFIT/(LOSS)

$ (1,408,054)

$ 190,340

 
 
Operating Ratios
Net operating ratio

-1.09%

 

0.13%

Program Expense Ratio

88%

 

88%

Personnel cost ratio

67%

 

62%

 

 


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