MAXIMUS Reports Fiscal 2011 Second Quarter Results
- Company Delivers Record Revenue and Increases Fiscal 2011 Guidance -
RESTON, Va.--(BUSINESS WIRE)-- MAXIMUS (NYSE: MMS), a leading provider of government services worldwide, today reported financial results for its fiscal second quarter ended March 31, 2011.
Key highlights include:
-- Second quarter revenue grew 11% to $227.1 million compared to the same
period last year.
-- Diluted earnings per share from continuing operations increased 39% to
$1.07 for the second quarter compared to adjusted diluted EPS of $0.77
in the prior-year period.
-- Cash and cash equivalents totaled $183.2 million at March 31, 2011.
-- Year-to-date signed awards were $904 million at May 2, 2011.
Revenue for the fiscal 2011 second quarter increased 11% (8% on a constant currency basis) to $227.1 million compared to $204.4 million reported for the same period last year. Income from continuing operations, net of taxes, increased to $19.0 million for the second quarter compared to $18.0 million last year (which included a pre-tax benefit of $6.0 million, or $0.21 per diluted share, related to a net legal recovery and is reflected in the supplemental pro forma table included on the last page of the financial tables). For the second quarter, diluted earnings per share from continuing operations increased 39% to $1.07 compared to adjusted diluted EPS of $0.77 for the same period last year.
Second quarter revenue and profit growth were driven by business expansion, as well as strong operational performance in both segments and across all geographies, which resulted in an operating margin of 13.0%.
"We generated very strong results for the period and made measurable progress on several key initiatives, including the expansion of our global operations and the growth of our domestic health care business," commented Richard A. Montoni, Chief Executive Officer of MAXIMUS. "In April, we were notified of award for three new welfare-to-work contracts in the United Kingdom. These awards offer attractive economics that we can build upon to grow our presence in the U.K. and, longer-term, into other geographies. On the domestic front, we are benefiting from increased demand as states transition Medicaid and CHIP program participants into more cost-effective managed care programs and seek to comply with regulations as part of federal health care reform."
Health Services Segment
Health Services Segment revenue for the second quarter of fiscal 2011 increased 8% to $137.8 million compared to $127.3 million in the same period last year. The year-over-year increase was driven primarily by organic growth and a spike in accretive transaction-based revenue, which resulted in an operating margin of 14%. Operating income for the second quarter increased 52% to $19.4 million compared to $12.7 million for the same period last year.
Human Services Segment
Human Services Segment revenue for the fiscal 2011 second quarter increased 16% (10% on a constant currency basis) to $89.3 million compared to $77.1 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 second quarter increased 12% to $10.1 million compared to $9.0 million in the same period last year. Segment operating margin was 11.3% and consistent with the same period last year.
Sales and Pipeline
At May 2, 2011 fiscal year-to-date signed contract wins totaled $904 million compared to $304 million reported last year, and new contracts pending (awarded but unsigned) totaled $526 million compared to $470 million last year. Sales opportunities (pipeline) at May 2, 2011 totaled $1.2 billion (consisting of $122 million in proposals pending, $203 million in proposals in preparation and $900 million in proposals tracking) compared to $1.8 billion the prior year.
Balance Sheet and Cash Flows
Cash and cash equivalents totaled $183.2 million at March 31, 2011. For the fiscal 2011 second quarter, cash provided by operating activities from continuing operations totaled $6.0 million with free cash flow of $0.4 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 61 days. On February 28, 2011, MAXIMUS paid a quarterly cash dividend of $0.15 per share. On April 12, 2011, the Company announced its next quarterly cash dividend of $0.15 per share, payable on May 31, 2011 to shareholders of record as of May 13, 2011.
Share repurchases were not material in the second quarter of fiscal 2011 and at March 31, 2011, the Company had $122.2 million available for repurchases under the current program.
Outlook
The Company is increasing its fiscal 2011 revenue and earnings guidance on the strength of its performance in the first half of fiscal 2011. MAXIMUS now expects revenue from continuing operations in the range of $910 million to $920 million and diluted earnings per share from continuing operations in the range of $4.10 to $4.25. The Company expects operating margin for the full year to range between 12.5% and 13.0%.
Mr. Montoni concluded, "Our recent wins in the U.K. meet our sound criteria for scope and profitability and are expected to yield an operating margin in excess of 15% over the life of the contracts. Revenue from these contracts is expected to ramp-up over a two-year period. As a result, the contracts are expected to generate significant start-up losses in the range of $9 million to $11 million, pre-tax, for fiscal 2012, but are expected to approach break-even profitability in the fourth quarter of fiscal 2012. Even considering the start up effects of the U.K. contracts in fiscal 2012, the overall dynamics in our portfolio today set the stage for continued top-line and bottom-line growth in fiscal 2012 and beyond."
Website Presentation, Conference Call and Webcast Information
MAXIMUS will host a conference call this morning, May 5, 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 May 12, 2011. Callers can access the replay by calling:
877.660.6853 (Domestic)/201.612.7415 (International)
Replay account
number: 316
Replay conference ID number: 371369
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)
March 31, September 30,
2011 2010
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 183,155 $ 155,321
Restricted cash 4,930 4,182
Accounts receivable -- billed, net of reserves 138,153 136,260
of $2,961 and $1,845
Accounts receivable -- unbilled 15,228 17,245
Income taxes receivable 14,919 4,149
Deferred income taxes 16,074 13,290
Prepaid expenses and other current assets 24,386 25,702
Total current assets 396,845 356,149
Property and equipment, at cost 120,694 115,740
Less accumulated depreciation and amortization (71,335 ) (66,867 )
Property and equipment, net 49,359 48,873
Capitalized software 38,418 35,648
Less accumulated amortization (11,438 ) (10,933 )
Capitalized software, net 26,980 24,715
Deferred contract costs, net 7,991 6,708
Goodwill 72,832 71,251
Intangible assets, net 6,963 7,778
Deferred income taxes 453 1,844
Deferred compensation plan assets 9,176 8,317
Other assets, net 2,019 2,106
Total assets $ 572,618 $ 527,741
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 62,206 $ 49,200
Accrued compensation and benefits 36,288 40,807
Deferred revenue 47,112 58,070
Acquisition-related contingent consideration 1,028 923
Income taxes payable 7,835 7,120
Other accrued liabilities 6,817 7,934
Liabilities of discontinued operations -- 634
Total current liabilities 161,286 164,688
Deferred revenue, less current portion 4,854 4,083
Long-term debt 1,802 1,411
Acquisition-related contingent consideration, 2,360 2,138
less current portion
Income taxes payable, less current portion 1,851 1,793
Deferred income tax liability 7,332 4,946
Deferred compensation plan liabilities 10,543 9,893
Total liabilities 190,028 188,952
Shareholders' equity:
Common stock, no par value; 60,000,000 shares
authorized; 27,776,260 and 27,487,725 shares
issued and 17,325,097 and 17,174,141 shares 367,739 352,696
outstanding at March 31, 2011 and September 30,
2010, at stated amount, respectively
Treasury stock, at cost; 10,451,163 and
10,313,584 shares at March 31, 2011 and (367,822 ) (359,366 )
September 30, 2010, respectively
Accumulated other comprehensive income 20,918 14,530
Retained earnings 361,755 330,929
Total shareholders' equity 382,590 338,789
Total liabilities and shareholders' equity $ 572,618 $ 527,741
MAXIMUS, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Six Months
Ended March 31, Ended March 31,
2011 2010 2011 2010
Revenue $ 227,116 $ 204,386 $ 441,230 $ 407,706
Cost of revenue 164,050 153,835 322,205 304,980
Gross profit 63,066 50,551 119,025 102,726
Selling, general and 33,572 28,787 62,239 56,216
administrative expenses
Legal and settlement expense -- (6,037 ) -- (5,351 )
(recovery), net
Operating income from 29,494 27,801 56,786 51,861
continuing operations
Interest and other income, 919 186 1,410 285
net
Income from continuing
operations before income 30,413 27,987 58,196 52,146
taxes
Provision for income taxes 11,375 9,996 21,571 19,555
Income from continuing 19,038 17,991 36,625 32,591
operations
Discontinued operations, net
of income taxes:
Income (loss) from (265 ) 752 (265 ) (1,220 )
discontinued operations
Loss on disposal (554 ) -- (659 ) --
Income (loss) from (819 ) 752 (924 ) (1,220 )
discontinued operations
Net income $ 18,219 $ 18,743 $ 35,701 $ 31,371
Basic earnings (loss) per
share:
Income from continuing $ 1.11 $ 1.03 $ 2.13 $ 1.86
operations
Income (loss) from (0.05 ) 0.05 (0.05 ) (0.07 )
discontinued operations
Basic earnings per share $ 1.06 $ 1.08 $ 2.08 $ 1.79
Diluted earnings (loss) per
share:
Income from continuing $ 1.07 $ 1.00 $ 2.06 $ 1.81
operations
Income (loss) from (0.05 ) 0.04 (0.05 ) (0.07 )
discontinued operations
Diluted earnings per share $ 1.02 $ 1.04 $ 2.01 $ 1.74
Dividends paid per share $ 0.15 $ 0.12 $ 0.27 $ 0.24
Weighted average shares
outstanding:
Basic 17,211 17,408 17,196 17,503
Diluted 17,787 17,980 17,750 18,012
MAXIMUS, Inc,
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands, except per share data)
(Unaudited)
Three Months Six Months
Ended March 31, Ended March 31,
2011 2010 2011 2010
Cash flows from operating
activities:
Net income $ 18,219 $ 18,743 $ 35,701 $ 31,371
Adjustments to reconcile net
income to net cash provided
by operating activities:
Loss from discontinued 819 (752 ) 924 1,220
operations
Depreciation and 5,551 4,478 10,783 9,018
amortization
Deferred income taxes 156 8,337 1,146 (155 )
Deferred interest income on -- 118 -- 179
note receivable
Non-cash equity based 2,438 2,088 4,495 3,953
compensation
Change in assets and
liabilities:
Accounts receivable -- (23,741 ) (4,572 ) (1,596 ) 4,777
billed
Accounts receivable -- 3,575 (2,103 ) 2,021 (4,430 )
unbilled
Prepaid expenses and other 628 (1,456 ) 1,669 (414 )
current assets
Deferred contract costs (649 ) 487 (1,229 ) 966
Other assets 38 (253 ) (1,246 ) (287 )
Accounts payable 8,339 1,219 12,287 1,806
Accrued compensation and 4,986 4,952 (6,567 ) 2,917
benefits
Deferred revenue (6,026 ) 992 (11,296 ) 14,126
Income taxes (6,864 ) (11,099 ) (10,334 ) 3,768
Other liabilities (1,464 ) 694 (372 ) 1,945
Cash provided by continuing 6,005 21,873 36,386 70,760
operations
Cash used in discontinued (212 ) (7,139 ) (951 ) (1,005 )
operations
Cash provided by operating 5,793 14,734 35,435 69,755
activities
Cash flows from investing
activities:
Acquisition of businesses, -- (10,673 ) -- (10,673 )
net of cash acquired
Purchases of property and (4,057 ) (2,093 ) (6,464 ) (6,031 )
equipment
Capitalized software costs (1,574 ) (1,684 ) (3,872 ) (4,325 )
Proceeds from note -- 173 -- 390
receivable
Cash used in investing (5,631 ) (14,277 ) (10,336 ) (20,639 )
activities -- continuing ops
Cash flows from financing
activities:
Employee stock transactions 3,684 611 8,013 1,615
Repurchases of common stock (89 ) (5,850 ) (8,459 ) (14,511 )
Tax benefit due to option
exercises and restricted 2,787 975 3,818 1,110
stock units vesting
Issuance (repayment) of 300 (7 ) 300 (7 )
long-term debt
Cash dividends paid (2,576 ) (2,083 ) (4,643 ) (4,201 )
Cash used in financing 4,106 (6,354 ) (971 ) (15,994 )
activities -- continuing ops
Effect of exchange rate
changes on cash and cash 1,883 319 3,706 425
equivalents
Net increase in cash and 6,151 (5,578 ) 27,834 33,547
cash equivalents
Cash and cash equivalents, 177,004 126,940 155,321 87,815
beginning of period
Cash and cash equivalents, $ 183,155 $ 121,362 $ 183,155 $ 121,362
end of period
MAXIMUS, Inc.
SEGMENT INFORMATION
(Dollars in thousands)
(Unaudited)
Three Months Ended March 31, Six Months Ended March 31,
2011 % 2010 % 2011 % 2010 %
(1) (1) (1) (1)
Revenue:
Health Services $ 137,779 100 % $ 127,279 100 % $ 267,790 100 % $ 257,919 100 %
Human Services 89,337 100 % 77,107 100 % 173,440 100 % 149,787 100 %
Total 227,116 100 % 204,386 100 % 441,230 100 % 407,706 100 %
Gross Profit:
Health services 38,320 28 % 28,932 23 % 72,597 27 % 61,842 24 %
Human Services 24,746 28 % 21,619 28 % 46,428 27 % 40,884 27 %
Total 63,066 28 % 50,551 25 % 119,025 27 % 102,726 25 %
Selling,
general, and
administrative
expense:
Health Services 18,968 14 % 16,209 13 % 34,422 13 % 31,611 12 %
Human Services 14,623 16 % 12,582 16 % 27,802 16 % 24,468 16 %
Corporate/Other (19 ) NM (4 ) NM 15 NM 137 NM
Total 33,572 15 % 28,787 14 % 62,239 14 % 56,216 14 %
Operating
income from
continuing
operations:
Health services 19,352 14 % 12,723 10 % 38,175 14 % 30,231 12 %
Human Services 10,123 11 % 9,037 12 % 18,626 11 % 16,416 11 %
Corporate/Other 19 NM 4 NM (15 ) NM (137 ) NM
Subtotal:
Segment 29,494 13 % 21,764 11 % 56,786 13 % 46,510 11 %
Operating
Income
Legal and
settlement -- NM 6,037 NM -- NM 5,351 NM
recovery
(expense), net
Total $ 29,494 13 % $ 27,801 14 % $ 56,786 13 % $ 51,861 13 %
(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 Q1/Q2 of 2011
Total
Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11
FY 10
Diluted EPS from
continuing operations-
GAAP basis $0.81 $1.00 $0.90 $1.16 $3.86 $0.99 $1.07
Pro forma adjustments:
Legal and settlement
expense (recovery), 0.02 (0.21 ) - - (0.19 ) - -
net
Adjustment for 0.04 (0.02 ) 0.01 (0.08 ) (0.05 ) - -
taxation rate
Subtotal pro forma $0.06 ($0.23 ) $0.01 ($0.08 ) ($0.24 ) $0.00 $0.00
adjustments
Adjusted EPS from $0.87 $0.77 $0.91 $1.08 $3.62 $0.99 $1.07
continuing operations
Source: MAXIMUS
Released May 5, 2011