MAXIMUS Reports Fiscal 2011 First Quarter Results
- Company Delivers Record Revenue and Reiterates Fiscal 2011 Guidance -
RESTON, Va.--(BUSINESS WIRE)-- MAXIMUS (NYSE: MMS), a leading provider of government services worldwide, today reported financial results for its fiscal first quarter ended December 31, 2010.
Key highlights include:
-- Record revenue for the quarter was $214.1 million and grew 5.3% compared to the same period last year. This was in-line with management expectations and consistent with seasonal revenue trends. -- Diluted earnings per share from continuing operations increased 13.8% to $0.99 for the first quarter compared to adjusted diluted EPS of $0.87 for the same period in the prior year. -- The Company generated strong cash flows in the first quarter with cash provided by operating activities from continuing operations of $30.4 million and free cash flow of $25.7 million. -- Cash and cash equivalents totaled $177.0 million at December 31, 2010. -- Year-to-date signed awards were $753 million at January 28, 2011. -- In January, MAXIMUS increased its quarterly cash dividend by 25% to $0.15 per share.
Revenue for the fiscal 2011 first quarter increased 5.3% (3.6% on a constant currency basis) to $214.1 million versus $203.3 million reported for the same period last year. Revenue growth was driven by the international employment services businesses in Australia and the United Kingdom in the Human Services Segment.
Income from continuing operations increased to $17.6 million for the first quarter, compared to $14.6 million last year, driven by growth, profit expansion and a lower tax rate in geographies outside the United States. For the first quarter, diluted earnings per share from continuing operations increased 13.8% to $0.99 compared to adjusted diluted EPS of $0.87 (normalized to exclude $0.02 of legal expense and $0.04 related to 2010 year-end tax adjustments) for the same period last year.
"Our first quarter results represent a strong start to the year, and we are on track to realize our growth objectives for fiscal 2011," commented Richard A. Montoni, Chief Executive Officer of MAXIMUS. "During the first quarter, we renewed two large contracts in California and Texas and were named as a preferred supplier for the bidding framework on a promising employment services opportunity as the United Kingdom reforms its welfare system. Additionally, we successfully launched operations on a ground-breaking eligibility and enrollment modernization effort in Colorado, which is expected to serve as a model for health insurance exchanges. This is a growing area for the Company as more states proactively evaluate modernization initiatives to simplify and streamline the enrollment process for their public health insurance programs."
Mr. Montoni continued, "We are also seeing increased activity in Requests for Information (RFIs) and Request for Proposals (RFPs) for other programs as states work to reduce costs, improve the quality of service delivery, and increase accountability. For example, many states are exploring the transition from traditional Medicaid fee-for-service to new Medicaid managed care models. In addition, other states, such as Texas, are actively moving certain Medicaid populations into mandatory managed care. Initiatives like these present us with new growth opportunities today."
Health Services Segment
Health Services Segment revenue for the first quarter of fiscal 2011 remained relatively constant at $130.0 million compared to the same period last year. Operating income for the first quarter increased 7.5% to $18.8 million compared to $17.5 million last year. As a result, Health Segment operating margin expanded 110 basis points to 14.5% compared to the prior year. Income and margin expansion were driven by the timing of transaction-based revenue during the quarter. The Company expects quarterly fluctuations in the Segment's operating margin as a result of volumes, open enrollments, contract start up and program timing.
Human Services Segment
Human Services Segment revenue for the fiscal 2011 first quarter increased 15.7% (11.5% on a constant currency basis) to $84.1 million compared to the prior-year period. Revenue growth was driven by the Company's international employment services business in Australia and the United Kingdom. Operating income for the first quarter increased 15.2% to $8.5 million compared to $7.4 million in the same period last year. Segment operating margin was 10.1% and consistent with the prior year. The Segment's operating margin is seasonally lower in the fiscal first quarter as a result of normal business trends in the Company's tax credit business.
Sales and Pipeline
At January 28th, fiscal year-to-date signed contract wins totaled $753 million compared to $183 million reported last year, and new contracts pending (awarded but unsigned) totaled $177 million compared to $347 million last year. Sales opportunities (pipeline) at January 28, 2011 totaled $1.6 billion (consisting of $96 million in proposals pending, $460 million in proposals in preparation and $1.1 billion in proposals tracking) compared to $1.6 billion the prior year.
Balance Sheet and Cash Flows
Cash and cash equivalents totaled $177.0 million at December 31, 2010. For the fiscal 2011 first quarter, cash provided by operating activities from continuing operations totaled $30.4 million with free cash flow of $25.7 million. The Company defines free cash flow as cash provided by operating activities from continuing operations less property, equipment and capitalized software. Cash flows in the quarter were driven by solid net income and strong collections.
Days Sales Outstanding (DSO) from continuing operations were 57 days. On November 30, 2010, MAXIMUS paid a quarterly cash dividend of $0.12 per share and in January 2011, the Company announced a 25% increase for its next quarterly cash dividend to $0.15 per share, payable on February 28, 2011 to shareholders of record on February 15, 2011.
During the first quarter of fiscal 2011, MAXIMUS used $8.4 million to purchase 136,153 shares of common stock and at December 31, 2010, the Company had $118.6 million available for repurchases under the current program.
The Company is reiterating its fiscal 2011 revenue and earnings guidance. MAXIMUS continues to expect revenue from continuing operations in the range of $890 million to $920 million and diluted earnings per share from continuing operations in the range of $3.95 to $4.15.
Mr. Montoni concluded, "With governments actively evaluating new models to transform their public health and human services programs, MAXIMUS is engaging with new and existing government partners to offer relevant and timely solutions. We expect our 2011 results to be driven by increased activity in our Health Services Segment with continued solid performance from our Human Services Segment. We see significant opportunity in the days ahead to build upon our brand and presence in our current markets, both domestically and internationally, while exploring entry into new markets where favorable dynamics exist."
Website Presentation, Conference Call and Webcast Information
MAXIMUS will host a conference call this morning, February 3, 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 February 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: 366059
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) December 31, September 30, 2010 2010 (unaudited) ASSETS Current assets: Cash and cash equivalents $ 177,004 $ 155,321 Restricted cash 4,966 4,182 Accounts receivable -- billed, net of reserves of 114,586 136,260 $2,088 and $1,845 Accounts receivable -- unbilled 18,797 17,245 Income taxes receivable 8,559 4,149 Deferred income taxes 14,848 13,290 Prepaid expenses and other current assets 24,682 25,702 Total current assets 363,442 356,149 Property and equipment, net 48,505 48,873 Capitalized software, net 26,346 24,715 Deferred contract costs, net 7,320 6,708 Goodwill 72,189 71,251 Intangible assets, net 7,389 7,778 Deferred income taxes 425 1,844 Deferred compensation plan assets 8,878 8,317 Other assets, net 2,250 2,106 Total assets $ 536,744 $ 527,741 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 53,638 $ 49,200 Accrued compensation and benefits 29,626 40,807 Deferred revenue 53,286 58,070 Acquisition-related contingent consideration 1,000 923 Income taxes payable 8,260 7,120 Other accrued liabilities 7,038 7,934 Liabilities of discontinued operations -- 634 Total current liabilities 152,848 164,688 Deferred revenue, less current portion 3,761 4,083 Long-term debt 1,452 1,411 Acquisition-related contingent consideration, less 2,300 2,138 current portion Income taxes payable, less current portion 1,823 1,793 Deferred income tax liability 5,924 4,946 Deferred compensation plan liabilities 11,459 9,893 Total liabilities 179,567 188,952 Shareholders' equity: Common stock, no par value; 60,000,000 shares authorized; 27,612,647 and 27,487,725 shares issued and 17,164,447 and 17,174,141 shares outstanding at 360,198 352,696 December 31, 2010 and September 30, 2010, at stated amount, respectively Treasury stock, at cost;10,448,200 and 10,313,584 shares at December 31, 2010 and September 30, 2010, (367,733 ) (359,366 ) respectively Accumulated other comprehensive income 18,459 14,530 Retained earnings 346,253 330,929 Total shareholders' equity 357,177 338,789 Total liabilities and shareholders' equity $ 536,744 $ 527,741
MAXIMUS, Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) Three Months Ended December 31, 2010 2009 Revenue $ 214,114 $ 203,320 Cost of revenue 158,155 151,145 Gross profit 55,959 52,175 Selling, general and administrative expenses 28,667 27,429 Legal and settlement expense -- 686 Operating income from continuing operations 27,292 24,060 Interest and other income, net 491 99 Income from continuing operations before income taxes 27,783 24,159 Provision for income taxes 10,196 9,559 Income from continuing operations 17,587 14,600 Discontinued operations, net of income taxes: Loss from discontinued operations -- (1,972 ) Loss on disposal (105 ) -- Loss from discontinued operations (105 ) (1,972 ) Net income $ 17,482 $ 12,628 Basic earnings (loss) per share: Income from continuing operations $ 1.02 $ 0.83 Loss from discontinued operations -- (0.11 ) Basic earnings per share $ 1.02 $ 0.72 Diluted earnings (loss) per share: Income from continuing operations $ 0.99 $ 0.81 Loss from discontinued operations -- (0.11 ) Diluted earnings per share $ 0.99 $ 0.70 Dividends paid per share $ 0.12 $ 0.12 Weighted average shares outstanding: Basic 17,180 17,595 Diluted 17,710 18,039
MAXIMUS, Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited) Three Months Ended December 31, 2010 2009 Cash flows from operating activities: Net income $ 17,482 $ 12,628 Adjustments to reconcile net income to net cash provided by operating activities: Loss from discontinued operations 105 1,972 Depreciation and amortization 5,232 4,540 Deferred income taxes 990 (8,492 ) Deferred interest income on note receivable -- 61 Non-cash equity based compensation 2,057 1,865 Change in assets and liabilities: Accounts receivable -- billed 22,145 9,349 Accounts receivable -- unbilled (1,554 ) (2,327 ) Prepaid expenses and other current assets 1,041 1,042 Deferred contract costs (580 ) 479 Other assets (1,284 ) (34 ) Accounts payable 3,948 587 Accrued compensation and benefits (11,553 ) (2,035 ) Deferred revenue (5,270 ) 13,134 Income taxes (3,470 ) 14,867 Other liabilities 1,092 1,251 Cash provided by operating activities -- continuing 30,381 48,887 operations Cash provided by (used in) operating activities -- (739 ) 6,134 discontinued operations Cash provided by operating activities 29,642 55,021 Cash flows from investing activities: Proceeds from note receivable -- 217 Purchases of property and equipment (2,407 ) (3,938 ) Capitalized software costs (2,298 ) (2,641 ) Cash used in investing activities -- continuing (4,705 ) (6,362 ) operations Cash used in investing activities -- discontinued -- -- operations Cash used in investing activities (4,705 ) (6,362 ) Cash flows from financing activities: Employee stock transactions 4,329 1,004 Repurchases of common stock (8,370 ) (8,661 ) Tax benefit due to option exercises and restricted 1,031 135 stock units vesting Cash dividends paid (2,067 ) (2,118 ) Cash used in financing activities -- continuing (5,077 ) (9,640 ) operations Cash used in financing activities -- discontinued -- -- operations Cash used in financing activities (5,077 ) (9,640 ) Effect of exchange rate changes on cash and cash 1,823 106 equivalents Net increase/(decrease) in cash and cash equivalents 21,683 39,125 Cash and cash equivalents, beginning of period 155,321 87,815 Cash and cash equivalents, end of period $ 177,004 $ 126,940
MAXIMUS, Inc. BUSINESS SEGMENTS (Dollars in thousands) (Unaudited) The following table provides certain financial information for each of the Company's business segments (in thousands): Three Months Ended December 31, 2010 % (1) 2009 % (1) Revenue: Health Services $ 130,011 100 % $ 130,640 100 % Human Services 84,103 100 % 72,680 100 % Total 214,114 100 % 203,320 100 % Gross profit: Health Services 34,277 26.4 % 32,910 25.2 % Human Services 21,682 25.8 % 19,265 26.5 % Total 55,959 26.1 % 52,175 25.7 % Selling, general, and administrative expense: Health Services 15,454 11.9 % 15,402 11.8 % Human Services 13,179 15.7 % 11,886 16.4 % Corporate/other 34 NM 141 NM Total 28,667 13.4 % 27,429 13.5 % Operating income from continuing operations: Health Services 18,823 14.5 % 17,508 13.4 % Human Services 8,503 10.1 % 7,379 10.2 % Consolidating adjustments (34 ) NM (141 ) NM Subtotal: Segment operating income 27,292 12.7 % 24,746 12.2 % Legal and settlement expense -- NM (686 ) NM Total $ 27,292 12.7 % $ 24,060 11.8 %
(1) % of respective segment revenue. Changes not considered meaningful are marked NM.
MAXIMUS, Inc. Supplemental Pro Forma Diluted EPS from Continuing Operations ("Adjusted Diluted EPS") FY 2010 and FY 2011 (Unaudited) Year Quarter Quarter Ended Ended Ended Dec. Mar. 31, Jun. 30, Sept. 30, Sept. 30, Dec. 31, 31, 2010 2010 2010 2010 2010 2009 Diluted EPS from continuing $ 0.81 $ 1.00 $ 0.90 $ 1.16 $ 3.86 $ 0.99 operations-GAAP basis Pro forma adjustments: Legal and settlement 0.02 (0.21 ) - - (0.19 ) - expense (recovery), net Severance - - - - - - Adjustment for 0.04 (0.02 ) 0.01 (0.08 ) (0.05 ) - tax accounts Subtotal pro forma $ 0.06 ($0.23 ) 0.01 ($0.08 ) ($0.24 ) - adjustments Adjusted Diluted EPS $ 0.87 $ 0.77 $ 0.91 $ 1.08 $ 3.62 $ 0.99 from continuing operations
Released February 3, 2011