MAXIMUS Reports Record Results for Fiscal 2010 Fourth Quarter and Full Year
-Company Introduces Growth Outlook for Fiscal 2011-
RESTON, Va.--(BUSINESS WIRE)-- MAXIMUS (NYSE: MMS), a leading provider of government services worldwide, today reported record financial results for its fourth quarter and fiscal year ended September 30, 2010.
Key highlights include:
-- Revenue grew 9.1% to $212.5 million for the fourth quarter and 15.5% to
$831.7 million for the full fiscal year compared to the same periods
last year.
-- Adjusted diluted earnings per share from continuing operations increased
33.3% to $1.08 for the fourth quarter of fiscal 2010 and increased 26.1%
to $3.62 for the full fiscal year, compared to the same periods last
year.
-- The Company generated record cash in fiscal 2010 with cash provided by
operating activities from continuing operations of $141.0 million and
free cash flow from continuing operations of $118.4 million. The Company
had cash and cash equivalents of $155.3 million at September 30, 2010.
-- In September, MAXIMUS expanded its share repurchase program by $100
million.
-- During the fourth quarter, MAXIMUS signed its second eligibility and
enrollment modernization contract. Under a new five-year program with
the state of New York, the Company will establish and administer a
centralized enrollment center to serve all of New York's public health
insurance programs.
Revenue for the fiscal 2010 fourth quarter increased 9.1% (7.4% on a constant currency basis) to $212.5 million versus $194.8 million reported for the same period last year. Revenue for fiscal year 2010 increased 15.5% (11.2% on a constant currency basis) to $831.7 million compared to $720.1 million for fiscal year 2009. Revenue growth was driven principally by the international employment services businesses in Australia and the United Kingdom. Organic revenue grew 7.6% in the fourth quarter and 14.5% for the full fiscal year.
During the fourth quarter, the Company recorded a year-end tax adjustment which reduced the tax rate in the quarter to 31.9%. As a result, GAAP net income from continuing operations totaled $20.7 million for the fourth quarter, or $1.16 per diluted share, and includes approximately $0.08 of benefit related to adjustments of tax accounts. Normalized for these tax benefits, adjusted diluted earnings per share from continuing operations for the fourth quarter increased 33.3% to $1.08 compared to $0.81 reported for the same period last year.
For the full fiscal year, GAAP net income from continuing operations totaled $69.4 million, or $3.86 per diluted share, and includes $0.24 of infrequent benefits ($0.19 for legal and settlement recoveries and $0.05 for year-end tax adjustments). Normalized for these benefits, adjusted diluted earnings per share from continuing operations for fiscal 2010 grew 26.1% to $3.62, compared to $2.87 for fiscal 2009.
"We are very pleased with our results for the quarter and the full year. Fiscal 2010 was highlighted by extraordinary growth in our international welfare-to-work programs in Australia and the U.K.," commented Richard A. Montoni, Chief Executive Officer of MAXIMUS. "Domestically, we were awarded strategic new work as states take steps to prepare for health care reform. These wins include contracts for eligibility and enrollment modernization in Colorado and New York, as well as high risk pools in California and New York. This signifies increased traction with our government partners as they seek to build on existing program infrastructure and improve business processes in order to achieve the requirements under the Affordable Care Act."
Financial results by segment reflect the Company's new organization as filed on Form 8-K on October 29, 2010. The Company now reports under the Health Services and Human Services Segments.
Health Services Segment
Health Services Segment revenue for the fourth quarter of fiscal 2010 remained relatively constant at $129.0 million compared to $129.5 million for the same period last year. For fiscal 2010, revenue increased 3.9% to $514.3 million compared to $495.1 million last year, driven by new work and acquired revenue.
Health Services Segment operating income for the fourth quarter grew 5.1% to $20.0 million with an operating margin of 15.5% compared to $19.0 million in the fourth quarter of last year. For the full fiscal year, the segment generated operating income of $64.7 million with a 12.6% operating margin compared to $72.9 million in fiscal 2009. Fiscal 2010 operating income and margin were lower compared to the prior year principally due to the timing of rebids and expansion in cost-reimbursable programs.
Human Services Segment
Human Services Segment revenue for the fourth quarter increased 27.8% (23.7% on a constant currency basis) to $83.5 million compared to $65.3 million in the prior year period. For fiscal 2010, revenue increased 41.1% (or 29.4% on a constant currency basis) to $317.5 million compared to $225.0 million last year. Revenue growth was driven by the Company's international employment services business in Australia, where the Company more than doubled its book of business at the end of fiscal 2009, as well as new work in the United Kingdom.
Human Services Segment operating income for the fourth quarter totaled $12.4 million with operating margin of 14.8% compared to $5.2 million in the same period last year. Improved margin was driven both by economies of scale from expanded international business and seasonality in the tax credit business. As a result of the international expansion, operating income for the full fiscal year grew to $39.5 million with a 12.4% operating margin compared to $12.4 million in fiscal 2009.
Backlog, Sales and Pipeline
The Company reported record backlog totaling $2.1 billion at September 30, 2010, which is a 17% increase over backlog at September 30, 2009.
Year-to-date signed contract wins at September 30, 2010 totaled $685 million, compared to $1.1 billion for fiscal 2009. The lower contract signings for the year are offset by an increase in new contracts pending at September 30, 2010 (awarded but unsigned), which totaled $709 million compared to $254 million reported at September 30, 2009. Sales opportunities (pipeline) at November 5, 2010, totaled $1.8 billion (consisting of $238 million in proposals pending, $111 million in proposals in preparation and $1.5 billion in proposals tracking).
Balance Sheet and Cash Flows
Cash and cash equivalents totaled $155.3 million at September 30, 2010. For the full fiscal year, cash provided by operating activities from continuing operations totaled $141.0 million with free cash flow of $118.4 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 totaled 66 days, in line with the Company's stated range of 65 to 80 days. On August 31, 2010, MAXIMUS paid a quarterly cash dividend of $0.12 per share, and on October 8, 2010, the Company declared a $0.12 per share cash dividend, payable on November 30, 2010 to shareholders of record on November 15, 2010. During the fourth quarter, MAXIMUS used $17.7 million to purchase 307,987 shares of MAXIMUS common stock and also announced a $100 million expansion to its Board-authorized share repurchase program. At September 30, 2010, the Company had $122.8 million available for repurchases under the program.
Outlook
MAXIMUS is introducing fiscal 2011 revenue guidance in the range of $890 million to $920 million which represents a 7% to 11% increase compared to fiscal 2010 revenue of $831.7 million. At September 30, 2010, 97% of forecasted 2011 revenue was in the form of backlog or options periods. The Company expects fiscal 2011 adjusted diluted earnings from continuing operations in the range of $3.95 to $4.15, which represents 9% to 15% growth compared to adjusted diluted earnings per share from continuing operations of $3.62 for fiscal 2010.
Mr. Montoni concluded, "We enter fiscal 2011 with a leading market position, strong cash flows and a healthy balance sheet that will enable us to meet the growing demands of our government clients worldwide, as they contend with greater regulatory demands and increased program participation in a resource-constrained environment. We look forward to advancing our mission of 'Helping Government Serve the People' in the coming year."
Website Presentation, Conference Call and Webcast Information
MAXIMUS will host a conference call this morning, November 11, 2010, at 9:00 a.m. (EST). 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 November 19, 2010. Callers can access the replay by calling:
877.660.6853 (Domestic)/201.612.7415 (International)
Replay account
number: 316
Replay conference ID number: 359622
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, the United Kingdom, and Israel. 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.
Non-GAAP Financial Information
This press release includes certain non-GAAP financial information as defined by Securities and Exchange Commission Regulation G. Pursuant to the requirements of this regulation, reconciliations of this non-GAAP financial information to MAXIMUS financial statements as prepared under generally accepted accounting principles (GAAP) are included in this press release. MAXIMUS management believes providing investors with this information gives additional insights into MAXIMUS results of operations. While MAXIMUS management believes that these non-GAAP financial measures are useful in evaluating MAXIMUS operations, this information should be considered as supplemental in nature and not as a substitute for the related financial information prepared in accordance with GAAP.
MAXIMUS, Inc.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
September 30,
2009 2010
ASSETS
Current assets:
Cash and cash equivalents $87,815 $155,321
Restricted cash 3,919 4,182
Accounts receivable--billed, net 133,485 136,260
Accounts receivable--unbilled 19,510 17,245
Current portion of note receivable 736 --
Prepaid income taxes 7,501 4,149
Deferred income taxes 5,389 13,290
Prepaid expenses and other current assets 19,749 25,702
Current assets of discontinued operations 14,007 --
Total current assets 292,111 356,149
Property and equipment, net 45,286 48,873
Capitalized software, net 18,969 24,715
Deferred contract costs, net 8,206 6,708
Goodwill 61,029 71,251
Intangible assets, net 2,455 7,778
Deferred income taxes 1,239 1,844
Deferred compensation plan assets -- 8,317
Other assets 3,939 2,106
Total assets $433,234 $527,741
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $44,644 $49,200
Accrued compensation and benefits 31,738 40,807
Deferred revenue 22,177 58,070
Acquisition-related contingent consideration -- 923
Income taxes payable -- 7,120
Accrued liabilities 15,083 7,934
Liabilities of discontinued operations 13,823 634
Total current liabilities 127,465 164,688
Deferred revenue, less current portion 6,527 4,083
Long-term debt -- 1,411
Acquisition-related contingent consideration, less -- 2,138
current portion
Income taxes payable, less current portion 1,871 1,793
Deferred income taxes 243 4,946
Deferred compensation plan liabilities -- 9,893
Total liabilities 136,106 188,952
Commitments and contingencies
Shareholders' equity:
Common stock, no par value 338,739 352,696
Treasury stock, at cost (319,149 ) (359,366 )
Accumulated other comprehensive income 8,268 14,530
Retained earnings 269,270 330,929
Total shareholders' equity 297,128 338,789
Total liabilities and shareholders' equity $433,234 $527,741
MAXIMUS, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Quarter Ended September 30, Year Ended September 30,
2009 2010 2009 2010
Revenue $ 194,806 $ 212,516 $ 720,108 $ 831,749
Cost of revenue 144,268 151,422 528,762 610,916
Gross profit 50,538 61,094 191,346 220,833
Selling, general and
administrative 26,645 30,904 107,028 118,778
expenses
Legal and settlement 190 -- (4,271 ) (5,351 )
expense (recovery)
Operating income from 23,703 30,190 88,589 107,406
continuing operations
Interest and other (113 ) 189 145 916
income, net
Income from continuing
operations before 23,590 30,379 88,734 108,322
income taxes
Provision for income 9,161 9,698 34,893 38,925
taxes
Income from continuing 14,429 20,681 53,841 69,397
operations
Discontinued
operations, net of
income taxes:
Income (loss) from
discontinued (4,300 ) 1,060 (5,734 ) 1,040
operations
Loss on disposal (1,562 ) (28 ) (1,567 ) (28 )
Income (loss) from
discontinued (5,862 ) 1,032 (7,301 ) 1,012
operations
Net income $ 8,567 $ 21,713 $ 46,540 $ 70,409
Basic earnings (loss)
per share:
Income from continuing $ 0.82 $ 1.20 $ 3.06 $ 3.99
operations
Income (loss) from
discontinued (0.33 ) 0.06 (0.41 ) 0.05
operations
Basic earnings per $ 0.49 $ 1.26 $ 2.65 $ 4.04
share
Diluted earnings
(loss) per share:
Income from continuing $ 0.80 $ 1.16 $ 3.01 $ 3.86
operations
Income (loss) from
discontinued (0.32 ) 0.06 $ (0.41 ) $ 0.06
operations
Diluted earnings per $ 0.48 $ 1.22 $ 2.60 $ 3.92
share
Dividends per share $ 0.12 $ 0.12 $ 0.46 $ 0.48
Weighted average
shares outstanding:
Basic 17,538 17,227 17,570 17,413
Diluted 17,945 17,807 17,886 17,965
MAXIMUS, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Quarter Ended September 30, Year Ended September 30,
2009 2010 2009 2010
Net income $ 8,567 $ 21,713 $ 46,540 $ 70,409
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
(Income) loss from
discontinued 5,862 (1,032 ) 7,301 (1,012 )
operations
Depreciation 2,575 3,302 8,882 12,857
Amortization 1,270 1,390 3,350 5,483
Deferred income taxes 4,368 (5,814 ) 26,719 (7,095 )
Gain on sale of fixed -- -- (51 ) --
assets
Deferred interest
income on note 64 -- 376 263
receivable
Non-cash equity based 1,679 1,935 7,307 7,918
compensation
Change in assets and
liabilities, net of
effect from
divestitures:
Accounts receivable -- (19,579 ) (10,857 ) (13,052 ) 38
billed
Accounts receivable -- 602 4,954 (6,677 ) 2,415
unbilled
Due from insurance -- -- 12,500 --
carrier
Prepaid expenses and (852 ) 264 (11,801 ) (1,740 )
other current assets
Deferred contract 324 183 (2,882 ) 1,541
costs
Other assets (1,130 ) (6,637 ) (822 ) (6,773 )
Accounts payable (1,689 ) (8,975 ) 993 (407 )
Accrued compensation 5,619 1,122 5,497 7,883
and benefits
Deferred revenue 2,431 8,745 5,820 31,294
Income taxes (709 ) 778 (20,751 ) 10,297
Other liabilities (1,051 ) 9,551 (36,715 ) 7,600
Cash provided by
operating activities $ 8,351 $ 20,622 $ 32,534 $ 140,971
-- continuing
operations
Cash used in operating
activities -- (1,203 ) (378 ) (1,901 ) (2,530 )
discontinued
operations
Cash provided by $ 7,148 $ 20,244 $ 30,633 $ 138,441
operating activities
Cash flows from
investing activities:
Proceeds (payments)
from sale of
discontinued $ (1,626 ) $ 1,700 $ (1,626 ) $ 1,700
operations, net of
transaction costs
Acquisition of
businesses, net of (406 ) (1,287 ) (406 ) (11,960 )
cash acquired
Proceeds from sale of 642 -- 696 --
equipment
Decrease in note 341 -- 972 473
receivable
Purchases of property (9,090 ) (3,553 ) (19,694 ) (13,936 )
and equipment
Capitalized software (1,851 ) (2,365 ) (6,888 ) (8,672 )
costs
Cash used in investing
activities -- (11,990 ) (5,505 ) (26,946 ) (32,395 )
continuing operations
Cash used in investing
activities -- (54 ) -- (90 ) --
discontinued
operations
Cash used in investing (12,044 ) (5,505 ) (27,036 ) (32,395 )
activities
Cash flows from
financing activities:
Employee stock $ 1,656 $ 84 $ 2,292 $ 2,763
transactions
Repurchases of common -- (17,699 ) (30,046 ) (40,217 )
stock
Payments on capital -- -- (417 ) --
lease obligations
Tax benefit due to
option exercises and 645 1,477 651 2,901
restricted stock units
vesting
Repayment of long-term -- -- -- (7 )
debt
Issuance of long-term -- 199 -- 533
debt
Cash dividends paid (2,099 ) (2,079 ) (8,054 ) (8,375 )
Cash used in financing
activities -- 202 (18,018 ) (35,574 ) (42,402 )
continuing operations
Cash used in financing
activities -- -- -- -- --
discontinued
operations
Cash used in financing 202 (18,018 ) (35,574 ) (42,402 )
activities
Effect of exchange
rate changes on cash 843 5,541 187 3,862
and cash equivalents
Net increase
(decrease) in cash and (3,851 ) 2,262 (31,790 ) 67,506
cash equivalents
Cash and cash
equivalents, beginning 91,666 153,059 119,605 87,815
of period
Cash and cash
equivalents, end of $ 87,815 $ 155,321 $ 87,815 $ 155,321
period
MAXIMUS, Inc. BUSINESS SEGMENTS (Dollars in thousands) (Unaudited) During the fourth quarter, the Company aligned its organization of the business to reflect its focus on the administration of government health and human services programs. As a result of this organizational realignment, the Company has reclassified its segment financial information to reflect the two new operating segments of Health Services and Human services.
Three Months Ended Sept. 30, Twelve Months Ended Sept. 30,
2009 % (1) 2010 % (1) 2009 % (1) 2010 % (1)
Revenue:
Health Services $ 129,503 100 % $ 129,032 100 % $ 495,141 100 % $ 514,258 100 %
Human Services 65,303 100 % 83,484 100 % 224,967 100 % 317,491 100 %
Total 194,806 100 % 212,516 100 % 720,108 100 % 831,749 100 %
Gross profit:
Health Services 33,283 25.7 % 36,009 27.9 % 131,547 26.6 % 130,276 25.3 %
Human Services 17,255 26.4 % 25,085 30.0 % 59,799 26.6 % 90,557 28.5 %
Total 50,538 25.9 % 61,094 28.7 % 191,346 26.6 % 220,833 26.6 %
Selling,
general, and
administrative
expense:
Health Services 14,267 11.0 % 16,024 12.4 % 58,673 11.8 % 65,551 12.7 %
Human Services 12,099 18.5 % 12,695 15.2 % 47,442 21.1 % 51,067 16.1 %
Corporate/other 279 NM 2,185 NM 913 NM 2,160 NM
Total 26,645 13.7 % 30,904 14.5 % 107,028 14.9 % 118,778 14.3 %
Operating
income from
continuing
operations:
Health Services 19,016 14.7 % 19,985 15.5 % 72,874 14.7 % 64,725 12.6 %
Human Services 5,156 7.9 % 12,390 14.8 % 12,357 5.5 % 39,490 12.4 %
Consolidating (279 ) NM (2,185 ) NM (913 ) NM (2,160 ) NM
adjustments
Subtotal:
Segment 23,893 12.3 % 30,190 14.2 % 84,318 11.7 % 102,055 12.3 %
operating
income
Legal and
settlement (190 ) NM -- NM 4,271 NM 5,351 NM
recovery
(expense), net
Total $ 23,703 12.2 % $ 30,190 14.2 % $ 88,589 12.3 % $ 107,406 12.9 %
(1) Percentage of respective segment revenue. Changes considered not meaningful are marked "NM."
MAXIMUS, Inc.
Supplemental Pro Forma Diluted EPS from Continuing Operations ("Adjusted EPS")
FY 2010 and FY 2009
(Unaudited)
In fiscal 2010, the full-year tax rate was 35.9%, which includes a benefit of
0.8% from certain non-recurring credits. Without these credits, the effective
full-year tax rate would have been 36.7%. This adjustment normalizes the tax
rates for each individual quarter to reflect the final full-year tax rate.
FY 2010 Quarter Ended
Year Ended
Dec. 31, Mar. 31, June 30, Sept. 30, Sept. 30,
2009 2010 2010 2010 2010
Diluted EPS from
continuing $ 0.81 $ 1.00 $ 0.90 $ 1.16 $ 3.86
operations - GAAP
basis
Pro forma
adjustments:
Legal and settlement
expense (recovery), 0.02 (0.21 ) -- -- (0.19 )
net
Adjustment for tax 0.04 (0.02 ) 0.01 (0.08 ) (0.05 )
accounts
Subtotal pro forma $ 0.06 $ (0.23 ) $ 0.01 $ (0.08 ) (0.24 )
adjustments
Adjusted EPS from
continuing $ 0.87 $ 0.77 $ 0.91 $ 1.08 $ 3.62
operations
FY 2009 Quarter Ended
Year Ended
Dec. 31, Mar. 31, June 30, Sept. 30, Sept. 30,
2008 2009 2009 2009 2009
Diluted EPS from
continuing $ 0.69 $ 0.66 $ 0.85 $ 0.80 $ 3.01
operations - GAAP
basis
Pro forma
adjustments:
Legal and settlement
expense (recovery), -- 0.01 (0.16 ) 0.01 (0.14 )
net
Severance -- 0.01 -- -- --
Subtotal pro forma -- $ 0.02 $ (0.16 ) $ 0.01 $ (0.14 )
adjustments
Adjusted EPS from
continuing $ 0.69 $ 0.68 $ 0.69 $ 0.81 $ 2.87
operations
Source: MAXIMUS
Released November 11, 2010