MAXIMUS Reports Fiscal 2011 Third Quarter Results
- Company Delivers Record Revenue and Adjusted EPS, Raises Fiscal 2011 Outlook -
RESTON, Va.--(BUSINESS WIRE)-- MAXIMUS (NYSE: MMS), a leading provider of government services worldwide, today reported financial results for its fiscal third quarter ended June 30, 2011.
Key highlights include:
- Third quarter revenue grew 13% to a record $238.3 million compared to the same period last year.
- Adjusted diluted earnings per share from continuing operations for the third quarter increased 22% to a record level of $0.56 compared to adjusted diluted EPS of $0.46 in the prior-year period.
- Cash and cash equivalents totaled $204.0 million at June 30, 2011, while share repurchases totaled $9.4 million during the quarter.
- Year-to-date signed awards were $1.4 billion at August 2, 2011.
- The Company completed a two-for-one stock split effective June 30, 2011 and in May announced a 20% increase to its quarterly cash dividend payable on August 31, 2011.
Revenue for the fiscal 2011 third quarter increased 13% (8% on a constant currency basis) to $238.3 million compared to $211.5 million reported for the same period last year. Income from continuing operations, net of taxes, increased 24% to $20.0 million for the third quarter compared to $16.1 million last year. For the third quarter, adjusted diluted earnings per share from continuing operations increased 22% to $0.56 compared to $0.46 for the same period last year. All numbers reflect the recent two-for-one stock split.
Revenue and profit growth were driven principally by strong operational performance in both segments from new work and expansion of existing contracts, which resulted in an operating margin of 13.1%, excluding legal and settlement expense. Results in the quarter exceeded expectations and benefitted from strong performance in Australia, the acceleration of revenue and profit in the United Kingdom, and favorable currency rates in the quarter.
“Record results for the third quarter demonstrate our solid execution and continued strong performance, which positions us well for fiscal 2012,” commented Richard A. Montoni, Chief Executive Officer of MAXIMUS. “In June, we successfully launched operations in the United Kingdom for the new Work Programme and operations are trending as expected. We are also actively marketing and responding to the increase in activities under the Affordable Care Act, as states are working to solidify their plans for Medicaid expansion and health insurance exchanges.”
Health Services Segment
Health Services Segment revenue for the third quarter of fiscal 2011 increased 11% to $141.8 million compared to $127.3 million in the same period last year, driven by new work and expansion of existing contracts. Operating income for the third quarter increased 10% to $15.9 million compared to $14.5 million for the same period last year. Segment operating margin for the third quarter was 11.2%.
Human Services Segment
Human Services Segment revenue for the fiscal 2011 third quarter increased 15% (4% on a constant currency basis) to $96.5 million compared to $84.2 million in the prior-year period. Revenue growth was driven by the Company’s international welfare-to-work business in Australia and the United Kingdom. Operating income for the third quarter increased 40% to $14.9 million compared to $10.7 million for the same period last year. Segment operating margin for the third quarter was 15.4%.
New Sales and Pipeline
At August 2, 2011 fiscal year-to-date signed contract wins totaled $1.4 billion compared to $379 million reported last year. New contracts pending (awarded but unsigned) totaled $338 million compared to $916 million last year. Sales opportunities (pipeline) at August 2, 2011 totaled $1.8 billion (consisting of $378 million in proposals pending, $39 million in proposals in preparation and $1.4 billion in proposals tracking) compared to $1.8 billion the prior year.
Balance Sheet and Cash Flows
Cash and cash equivalents totaled $204.0 million at June 30, 2011. For the fiscal 2011 third quarter, cash provided by operating activities from continuing operations totaled $34.1 million with free cash flow of $27.8 million. The Company defines free cash flow as cash provided by operating activities from continuing operations less property, equipment and capitalized software.
Days Sales Outstanding (DSO) from continuing operations were favorable at 54 days and driven by the timing of collections.
On May 31, 2011, MAXIMUS paid a quarterly cash dividend of $2.6 million, which reflected the 25% dividend increase declared in January. During the third quarter, the Company completed a two-for-one stock split effective June 30, 2011 and announced another 20% increase to its quarterly cash dividend. The cash dividend of $0.09 is payable on August 31, 2011 to shareholders of record on August 15, 2011.
During the fiscal 2011 third quarter, the Company purchased 238,600 shares of MAXIMUS common stock for $9.4 million under the Board-authorized share repurchase program. At June 30, 2011, the Company had $115.4 million available under the program for future repurchases. MAXIMUS remains committed to this program and since 2008, has repurchased 12.4 million shares of common stock for $246.8 million through August 2, 2011.
Outlook
The Company is raising its fiscal 2011 revenue and earnings guidance as a result of strong performance in the third quarter. MAXIMUS now expects revenue from continuing operations in the range of $925 million to $935 million and adjusted diluted earnings per share from continuing operations in the range of $2.15 to $2.20.
Mr. Montoni concluded, “Our favorable performance in the quarter, in addition to our fourth quarter outlook, has led us to increase our full-year guidance and demonstrates our commitment to profitable growth and delivering long-term shareholder value. Additionally, we completed a two-for-one stock split and announced an additional 20% increase to our quarterly cash dividend, which underscores the confidence we have in our future. With a healthy balance sheet and strong cash flows, we are well positioned to fund our future growth while providing cash returns to shareholders."
Website Presentation, Conference Call and Webcast Information
MAXIMUS will host a conference call this morning, August 4, 2011, at 9:00 a.m. (ET). The call is open to the public and can be accessed under the Investor Relations page of the Company’s website at www.maximus.com or by calling:
877.407.8289 (Domestic)/201.689.8341 (International)
For those unable to listen to the live call, a replay will be available through August 11, 2011. Callers can access the replay by calling:
877.660.6853 (Domestic)/201.612.7415 (International)
Replay account
number: 316
Replay conference ID number: 376023
About MAXIMUS
MAXIMUS is a leading provider of government services worldwide and is devoted to providing health and human services program management and consulting services to its clients. The Company has more than 6,500 employees located in more than 220 offices in the United States, Canada, Australia and the United Kingdom. Additionally, MAXIMUS is included in the Russell 2000 Index and the S&P SmallCap 600 Index.
Statements that are not historical facts, including statements about the Company's confidence and strategies and the Company's expectations about revenues, results of operations, profitability, future contracts, market opportunities, market demand or acceptance of the Company's products are forward-looking statements that involve risks and uncertainties. These uncertainties could cause the Company's actual results to differ materially from those indicated by such forward-looking statements and include reliance on government clients; risks associated with government contracting; risks involved in managing government projects; legislative changes and political developments; opposition from government unions; challenges resulting from growth; adverse publicity; and legal, economic, and other risks detailed in Exhibit 99.1 to the Company's most recent Quarterly Report filed with the Securities and Exchange Commission, found on www.maximus.com.
| MAXIMUS, Inc. | ||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||
| (In thousands, except share amounts) | ||||||||
| June 30, | September 30, | |||||||
| 2011 | 2010 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 204,016 | $ | 155,321 | ||||
| Restricted cash | 5,097 | 4,182 | ||||||
| Accounts receivable — billed, net of reserves of $3,792 and $1,845 | 125,747 | 136,260 | ||||||
| Accounts receivable — unbilled | 16,394 | 17,245 | ||||||
| Income taxes receivable | 19,127 | 4,149 | ||||||
| Deferred income taxes | 17,301 | 13,290 | ||||||
| Prepaid expenses and other current assets | 24,223 | 25,702 | ||||||
| Total current assets | 411,905 | 356,149 | ||||||
| Property and equipment, net | 50,426 | 48,873 | ||||||
| Capitalized software, net | 27,589 | 24,715 | ||||||
| Goodwill | 73,252 | 71,251 | ||||||
| Intangible assets, net | 6,409 | 7,778 | ||||||
| Deferred contract costs, net | 8,617 | 6,708 | ||||||
| Deferred income taxes | 676 | 1,844 | ||||||
| Deferred compensation plan assets | 9,171 | 8,317 | ||||||
| Other assets, net | 2,022 | 2,106 | ||||||
| Total assets | $ | 590,067 | $ | 527,741 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 61,552 | $ | 49,200 | ||||
| Accrued compensation and benefits | 41,134 | 40,807 | ||||||
| Deferred revenue | 45,109 | 58,070 | ||||||
| Acquisition-related contingent consideration | 2,969 | 923 | ||||||
| Income taxes payable | 9,420 | 7,120 | ||||||
| Other accrued liabilities | 6,100 | 7,934 | ||||||
| Liabilities of discontinued operations | — | 634 | ||||||
| Total current liabilities | 166,284 | 164,688 | ||||||
| Deferred revenue, less current portion | 4,494 | 4,083 | ||||||
| Long-term debt | 1,794 | 1,411 | ||||||
| Acquisition-related contingent consideration, less current portion | 406 | 2,138 | ||||||
| Income taxes payable, less current portion | 1,784 | 1,793 | ||||||
| Deferred income tax liability | 7,824 | 4,946 | ||||||
| Deferred compensation plan liabilities | 11,507 | 9,893 | ||||||
| Total liabilities | 194,093 | 188,952 | ||||||
| Shareholders’ equity: | ||||||||
| Common stock, no par value | 374,267 | 352,696 | ||||||
| Treasury stock, at cost; 21,140,926 and 20,627,168 shares at June 30, 2011 and September 30, 2010, respectively | (377,247 | ) | (359,366 | ) | ||||
| Accumulated other comprehensive income | 23,154 | 14,530 | ||||||
| Retained earnings | 375,800 | 330,929 | ||||||
| Total shareholders’ equity | 395,974 | 338,789 | ||||||
| Total liabilities and shareholders’ equity | $ | 590,067 | $ | 527,741 | ||||
| MAXIMUS, Inc. | |||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||
| (In thousands, except per share data) | |||||||||||||||
| (Unaudited) | |||||||||||||||
| Three Months | Nine Months | ||||||||||||||
| Ended June 30, | Ended June 30, | ||||||||||||||
| 2011 | 2010 | 2011 | 2010 | ||||||||||||
| Revenue | $ | 238,296 | $ | 211,527 | $ | 679,526 | $ | 619,233 | |||||||
| Cost of revenue | 171,897 | 154,514 | 494,102 | 459,494 | |||||||||||
| Gross profit | 66,399 | 57,013 | 185,424 | 159,739 | |||||||||||
| Selling, general and administrative expenses | 35,259 | 31,658 | 97,498 | 87,874 | |||||||||||
| Legal and settlement expense (recovery), net | 361 | — | 361 | (5,351 | ) | ||||||||||
| Operating income from continuing operations | 30,779 | 25,355 | 87,565 | 77,216 | |||||||||||
| Interest and other income, net | 961 | 442 | 2,371 | 727 | |||||||||||
| Income from continuing operations before income taxes | 31,740 | 25,797 | 89,936 | 77,943 | |||||||||||
| Provision for income taxes | 11,780 | 9,672 | 33,351 | 29,227 | |||||||||||
| Income from continuing operations | 19,960 | 16,125 | 56,585 | 48,716 | |||||||||||
| Discontinued operations, net of income taxes: | |||||||||||||||
| Income (loss) from discontinued operations | (65 | ) | 1,200 | (330 | ) | (20 | ) | ||||||||
| Loss on disposal | (3 | ) | — | (662 | ) | — | |||||||||
| Income (loss) from discontinued operations | (68 | ) | 1,200 | (992 | ) | (20 | ) | ||||||||
| Net income | $ | 19,892 | $ | 17,325 | $ | 55,593 | $ | 48,696 | |||||||
| Basic earnings (loss) per share: | |||||||||||||||
| Income from continuing operations | $ | 0.58 | $ | 0.46 | $ | 1.64 | $ | 1.39 | |||||||
| Income (loss) from discontinued operations | (0.01 | ) | 0.04 | (0.03 | ) | — | |||||||||
| Basic earnings per share | $ | 0.57 | $ | 0.50 | $ | 1.61 | $ | 1.39 | |||||||
| Diluted earnings (loss) per share: | |||||||||||||||
| Income from continuing operations | $ | 0.56 | $ | 0.45 | $ | 1.59 | $ | 1.35 | |||||||
| Income (loss) from discontinued operations | — | 0.03 | (0.03 | ) | — | ||||||||||
| Diluted earnings per share | $ | 0.56 | $ | 0.48 | $ | 1.56 | $ | 1.35 | |||||||
| Dividends paid per share | $ | 0.075 | $ | 0.06 | $ | 0.21 | $ | 0.18 | |||||||
| Dividends declared per share | $ | 0.165 | $ | 0.06 | $ | 0.30 | $ | 0.18 | |||||||
| Weighted average shares outstanding: | |||||||||||||||
| Basic | 34,708 |
34,847 |
|
34,496 | 34,952 | ||||||||||
| Diluted | 35,803 | 36,008 | 35,612 | 36,030 | |||||||||||
| MAXIMUS, Inc. | ||||||||||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||||||
| (In thousands) | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| Three Months | Nine Months | |||||||||||||||
| Ended June 30, | Ended June 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| Cash flows from operating activities: | ||||||||||||||||
| Net income | $ | 19,892 | $ | 17,325 | $ | 55,593 | $ | 48,696 | ||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||
| Loss from discontinued operations | 68 | (1,200 | ) | 992 | 20 | |||||||||||
| Depreciation and amortization | 5,696 | 4,630 | 16,479 | 13,648 | ||||||||||||
| Deferred income taxes | (774 | ) | (1,126 | ) | 372 | (1,281 | ) | |||||||||
| Deferred interest income on note receivable | — | 84 | — | 263 | ||||||||||||
| Non-cash equity based compensation | 2,441 | 2,030 | 6,936 | 5,983 | ||||||||||||
| Change in assets and liabilities: | ||||||||||||||||
| Accounts receivable — billed | 12,483 | 6,118 | 10,887 | 10,895 | ||||||||||||
| Accounts receivable — unbilled | (1,162 | ) | 1,891 | 859 | (2,539 | ) | ||||||||||
| Prepaid expenses and other current assets | 220 | (1,590 | ) | 1,889 | (2,004 | ) | ||||||||||
| Deferred contract costs | (620 | ) | 392 | (1,849 | ) | 1,358 | ||||||||||
| Accounts payable | (4,827 | ) | 6,762 | 7,460 | 8,568 | |||||||||||
| Accrued compensation and benefits | 6,061 | 3,844 | (506 | ) | 6,761 | |||||||||||
| Deferred revenue | (2,679 | ) | 8,423 | (13,975 | ) | 22,549 | ||||||||||
| Income taxes | (2,883 | ) | 5,751 | (13,217 | ) | 9,519 | ||||||||||
| Other assets and liabilities | 183 | (3,745 | ) | (1,435 | ) | (2,087 | ) | |||||||||
| Cash provided by continuing operations | 34,099 | 49,589 | 70,485 | 120,349 | ||||||||||||
| Cash used in discontinued operations | (135 | ) | (1,147 | ) | (1,086 | ) | (2,152 | ) | ||||||||
| Cash provided by operating activities | 33,964 | 48,442 | 69,399 | 118,197 | ||||||||||||
| Cash flows from investing activities: | ||||||||||||||||
| Acquisition of businesses, net of cash acquired | — | — | — | (10,673 | ) | |||||||||||
| Purchases of property and equipment | (4,499 | ) | (4,352 | ) | (10,963 | ) | (10,383 | ) | ||||||||
| Capitalized software costs | (1,821 | ) | (1,982 | ) | (5,693 | ) | (6,307 | ) | ||||||||
| Proceeds from note receivable | 65 | 83 | 65 | 473 | ||||||||||||
| Cash used in investing activities — continuing ops | (6,255 | ) | (6,251 | ) | (16,591 | ) | (26,890 | ) | ||||||||
| Cash flows from financing activities: | ||||||||||||||||
| Employee stock transactions | 1,037 | 1,064 | 9,050 | 2,679 | ||||||||||||
| Repurchases of common stock | (8,515 | ) | (8,007 | ) | (16,974 | ) | (22,518 | ) | ||||||||
| Tax benefit due to option exercises and restricted stock units vesting | 1,409 | 314 | 5,227 | 1,424 | ||||||||||||
| Issuance of long-term debt | 4 | 333 | 304 | 326 | ||||||||||||
| Cash dividends paid | (2,598 | ) | (2,094 | ) | (7,241 | ) | (6,295 | ) | ||||||||
| Cash used in financing activities — continuing ops | (8,663 | ) | (8,390 | ) | (9,634 | ) | (24,384 | ) | ||||||||
| Effect of exchange rate changes on cash and cash equivalents | 1,815 | (2,104 | ) | 5,521 | (1,679 | ) | ||||||||||
| Net increase in cash and cash equivalents | 20,861 | 31,697 | 48,695 | 65,244 | ||||||||||||
| Cash and cash equivalents, beginning of period | 183,155 | 121,362 | 155,321 | 87,815 | ||||||||||||
| Cash and cash equivalents, end of period | $ | 204,016 | $ | 153,059 | $ | 204,016 | $ | 153,059 | ||||||||
| MAXIMUS, Inc. | ||||||||||||||||||||||||||||
| SEGMENT INFORMATION | ||||||||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||||||
| Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||||||||||||||
| 2011 | % (1) | 2010 | % (1) | 2011 | % (1) | 2010 | % (1) | |||||||||||||||||||||
| Revenue: | ||||||||||||||||||||||||||||
| Health Services | $ | 141,788 | 100 | % | $ | 127,307 | 100 | % | $ | 409,578 | 100 | % | $ | 385,226 | 100 | % | ||||||||||||
| Human Services | 96,508 | 100 | % | 84,220 | 100 | % | 269,948 | 100 | % | 234,007 | 100 | % | ||||||||||||||||
| Total | 238,296 | 100 | % | 211,527 | 100 | % | 679,526 | 100 | % | 619,233 | 100 | % | ||||||||||||||||
| Gross Profit: | ||||||||||||||||||||||||||||
| Health Services | 35,459 | 25.0 | % | 32,425 | 25.5 | % | 108,056 | 26.4 | % | 94,267 | 24.5 | % | ||||||||||||||||
| Human Services | 30,940 | 32.1 | % | 24,588 | 29.2 | % | 77,368 | 28.7 | % | 65,472 | 28.0 | % | ||||||||||||||||
| Total | 66,399 | 27.9 | % | 57,013 | 27.0 | % | 185,424 | 27.3 | % | 159,739 | 25.8 | % | ||||||||||||||||
| Selling, general, and administrative expense: | ||||||||||||||||||||||||||||
| Health Services | 19,536 | 13.8 | % | 17,916 | 14.1 | % | 53,958 | 13.2 | % | 49,527 | 12.9 | % | ||||||||||||||||
| Human Services | 16,032 | 16.6 | % | 13,904 | 16.5 | % | 43,834 | 16.2 | % | 38,372 | 16.4 | % | ||||||||||||||||
| Corporate/Other | (309 | ) | NM | (162 | ) | NM | (294 | ) | NM | (25 | ) | NM | ||||||||||||||||
| Total | 35,259 | 14.8 | % | 31,658 | 15.0 | % | 97,498 | 14.3 | % | 87,874 | 14.2 | % | ||||||||||||||||
| Operating income from continuing operations: | ||||||||||||||||||||||||||||
| Health Services | 15,923 | 11.2 | % | 14,509 | 11.4 | % | 54,098 | 13.2 | % | 44,740 | 11.6 | % | ||||||||||||||||
| Human Services | 14,908 | 15.4 | % | 10,684 | 12.7 | % | 33,534 | 12.4 | % | 27,100 | 11.6 | % | ||||||||||||||||
| Consolidating adjustments | 309 | NM | 162 | NM | 294 | NM | 25 | NM | ||||||||||||||||||||
| Subtotal: Segment Operating Income | 31,140 | 13.1 | % | 25,355 | 12.0 | % | 87,926 | 12.9 | % | 71,865 | 11.6 | % | ||||||||||||||||
| Legal and settlement recovery (expense), net | (361 | ) | NM | — | NM | (361 | ) | NM | 5,351 | NM | ||||||||||||||||||
| Total | $ | 30,779 | 12.9 | % | $ | 25,355 | 12.0 | % | $ | 87,565 | 12.9 | % | $ | 77,216 | 12.5 | % | ||||||||||||
|
(1) |
Percentage of respective segment revenue. Changes not considered meaningful are marked “NM.” |
| MAXIMUS, Inc. | ||||||||||||||||||
| Supplemental Pro Forma Diluted EPS from Continuing Operations | ||||||||||||||||||
| ("Adjusted EPS") | ||||||||||||||||||
| FY 2010 and YTD FY 2011 | ||||||||||||||||||
| (Unaudited) | ||||||||||||||||||
| Total | ||||||||||||||||||
|
Q1 10 |
Q2 10 |
Q3 10 | Q4 10 | FY 10 | ||||||||||||||
| Diluted EPS from continuing operations - GAAP basis | $ | 0.40 | $ | 0.50 | $ | 0.45 | $ | 0.58 | $ | 1.93 | ||||||||
| Pro forma Adjustments: | ||||||||||||||||||
| Legal and settlement expense (recovery), net | 0.01 | (0.11 | ) | - | - | (0.10 | ) | |||||||||||
| Adjustment for taxation rate | 0.02 | (0.01 | ) | 0.01 | (0.04 | ) | (0.02 | ) | ||||||||||
|
Subtotal pro forma adjustments |
0.03 | (0.12 | ) | 0.01 | (0.04 | ) | (0.12 | ) | ||||||||||
| Adjusted EPS from continuing operations | $ | 0.43 | $ | 0.38 | $ | 0.46 | $ | 0.54 | $ | 1.81 | ||||||||
|
Q1 11 |
Q2 11 | Q3 11 | ||||||||||||||||
| Diluted EPS from continuing operations | $ | 0.50 | $ | 0.54 | $ | 0.56 | ||||||||||||
| Pro forma Adjustments: | ||||||||||||||||||
| Legal and settlement expense (recovery), net | - | - | - | |||||||||||||||
| Adjustment for taxation rate | - | - | - | |||||||||||||||
| Subtotal pro forma adjustments | - | - | - | |||||||||||||||
| Adjusted EPS from continuing operations | $ | 0.50 | $ | 0.54 | $ | 0.56 | ||||||||||||
MAXIMUS
Lisa Miles, 800-MAXIMUS x11637
Source: MAXIMUS
Released August 4, 2011