MAXIMUS Reports Strong Fiscal 2010 First Quarter Results
-Solid Results from Continuing Operations and International Business Lines-
-Company Raises Guidance for FY 2010-
RESTON, Va.--(BUSINESS WIRE)-- MAXIMUS (NYSE: MMS), a leading provider of government services worldwide, today reported results for its first quarter ended December 31, 2009.
-- Better-than-expected revenue and earnings from continuing operations driven principally by the Company's international employment services operations in Australia and the United Kingdom, -- Revenue growth of 19.2% to $202.4 million for the fiscal 2010 first quarter compared to last year, -- Record adjusted earnings per diluted share from continuing operations of $0.83 compared to $0.69 for the same period last year, -- Healthy cash flow for the quarter with record cash provided by operating activities from continuing operations of $48.8 million and free cash flow of $42.2 million, -- A robust cash position with cash and cash equivalents totaling $126.9 million, or approximately $7.00 per share, at December 31, 2009, -- New sales awards totaling $183 million, new contracts pending of $347 million, and a solid sales pipeline totaling $1.6 billion at January 29, 2010, and -- An improved outlook for fiscal 2010, with revenue now expected to be in the range of $830 million to $850 million and diluted earnings per share of $3.35 to $3.45.
Revenue for the fiscal 2010 first quarter increased 19.2% to $202.4 million versus $169.7 million reported for the same period last year. On a constant currency basis, total Company revenue grew 13.3%. Revenue growth was driven by the Company's international employment services operations in Australia and the United Kingdom, both within the Operations Segment.
For the fiscal 2010 first quarter, net income from continuing operations grew 17.5% to $14.6 million, compared to $12.5 million reported for the same period last year. For the first quarter, adjusted diluted earnings per share from continuing operations were $0.83, which excludes legal expense of $.02 per share, compared to $0.69 per diluted share for the first quarter of last year.
The Company recorded a $2.0 million loss from discontinued operations, which includes a net after tax $2.2 million charge disclosed by the Company in a Form 8-K on January 29, 2010, to transfer an ERP project back to the client.
"Results for the fiscal 2010 first quarter reflect sound execution and an increased contribution from our international operations, which represented 25% of total revenue in the first quarter," commented Richard A. Montoni, President and Chief Executive Officer of MAXIMUS. "Our disciplined approach to new opportunities and favorable caseload volumes resulted in better-than-expected performance from our employment services programs in Australia and the United Kingdom. Our domestic business base remains stable and is meeting our expectations."
For the fiscal 2010 first quarter, Operations Segment revenue increased 20.7% to $188.7 million compared to $156.3 million for the first quarter of fiscal 2009. On a constant currency basis, revenue grew 14.2%.
Operations Segment operating income for the first quarter grew 14% to $24.0 million compared to $21.0 million in the first quarter of last year. Operating margin for the quarter was 12.7% and remains in-line with the Company's goal for the Segment of 12% to 15%.
Strong first quarter financial performance for the Segment was driven principally by the Company's international employment services operations, where the Company benefited from favorable caseload volumes and prudent resource management. The Company's domestic operations performed as expected with growth across certain business lines, including federal, health, and child support, compared to last year.
For the fiscal 2010 first quarter, Consulting Segment revenue was $13.6 million versus $13.4 million last year. Consulting Segment operating income for the first quarter was $970,000, with operating margin of 7.1%, compared to a loss of $302,000 for the same period last year. Improved performance for the Segment was a result of increased efficiencies and an improved mix of work.
New Sales and Sales Pipeline
At January 29, 2010, year-to-date signed contract wins totaled $183 million and new contracts pending (awarded, but unsigned) totaled $347 million.
Sales opportunities (pipeline) at January 29, 2010 totaled $1.6 billion (consisting of $299 million in proposals pending, $60 million in proposals in preparation, and $1,277 million in proposals tracking) compared to $1.2 billion the prior year.
Balance Sheet and Cash Flows
At December 31, 2009, cash and cash equivalents totaled $126.9 million. For the first quarter, the Company generated strong cash driven by favorable terms on new international work with advance cash payments and strong collections. Cash provided by operating activities from continuing operations totaled $48.8 million with free cash flow of $42.2 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 improved to 64 days. MAXIMUS repurchased 186,801 shares of common stock for $8.7 million during the quarter. The Company had approximately $49 million available under the Board-authorized share repurchase program at December 31, 2009. Subsequent to quarter end, the Company purchased 91,940 shares of common stock in January. On November 13, 2009, MAXIMUS paid a quarterly cash dividend of $0.12 per share, and on January 20, 2010, the Company announced a $0.12 per share cash dividend, payable on February 26, 2010 to shareholders of record on February 12, 2010.
As a result of the Company's strong performance in its international employment services operations, MAXIMUS is raising its fiscal 2010 full year estimates from continuing operations. The Company now expects revenue in the range of $830 million to $850 million and adjusted diluted earnings per share from continuing operations (which excludes certain legal expenses and recoveries) in the range of $3.35 to $3.45. For the second quarter, the Company expects adjust diluted EPS to be in-line with consensus of approximately $0.70 due to timing of start-ups and volume fluctuations.
"With solid trends in our international operations, we now expect revenue and adjusted earnings growth from continuing operations to range between 15% and 19% compared to fiscal 2009. We also enter the second quarter with a healthy sales pipeline highlighted by several international opportunities within established markets," concluded Mr. Montoni. "While the final legislative outcome surrounding domestic health care reform has yet to be determined, market trends remain favorable as states seek to adopt new delivery models to meet demands and achieve goals."
Website Presentation, Conference Call and Webcast Information
MAXIMUS will host a conference call this morning, February 4, 2010, at 9:00 a.m. (ET). The Company has also posted a presentation on its website, under the Investor Relations page, for analysts to follow during the conference call.
The call 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 12, 2010. Callers can access the replay by calling:
877.660.6853 (Domestic)/201.612.7415 (International)
Replay account number: 316
Replay conference ID number: 343097
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. CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands) September 30, December 31, 2009 2009 (unaudited) ASSETS Current assets: Cash and cash equivalents $ 87,815 $ 126,940 Restricted cash 3,919 4,590 Accounts receivable -- billed, net of reserves 132,058 122,574 of $5,812 and $5,628 Accounts receivable -- unbilled 16,706 19,153 Current portion of note receivable 736 458 Income taxes receivable 7,501 -- Deferred income taxes 5,389 11,609 Prepaid expenses and other current assets 19,749 18,750 Current assets of discontinued operations 18,238 8,916 Total current assets 292,111 312,990 Property and equipment, at cost 98,781 103,300 Less accumulated depreciation and amortization (53,495 ) (56,857 ) Property and equipment, net 45,286 46,443 Capitalized software 26,475 29,402 Less accumulated amortization (7,506 ) (8,504 ) Capitalized software, net 18,969 20,898 Deferred contract costs, net 8,206 7,753 Goodwill 61,029 61,364 Intangible assets, net 2,455 3,218 Deferred income taxes 1,239 3,434 Other assets, net 3,939 3,975 Total assets $ 433,234 $ 460,075 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 44,368 $ 47,550 Accrued compensation and benefits 31,713 29,361 Deferred revenue 22,177 32,278 Income taxes payable -- 4,982 Other accrued liabilities 15,083 16,396 Liabilities of discontinued operations 14,124 14,543 Total current liabilities 127,465 145,110 Deferred revenue, less current portion 6,527 9,572 Income taxes payable, less current portion 1,871 2,086 Deferred income tax liability 243 243 Total liabilities 136,106 157,011 Shareholders' equity: Common stock, no par value; 60,000,000 shares authorized; 27,161,849 and 27,223,890 shares issued and 17,599,029 and 17,474,269 shares 338,739 341,819 outstanding at September 30, 2009 and December 31, 2009, at stated amount, respectively Treasury stock, at cost; 9,562,820 and 9,749,621 shares at September 30, 2009 and (319,149 ) (327,810 ) December 31, 2009, respectively Accumulated other comprehensive income 8,268 9,351 Retained earnings 269,270 279,704 Total shareholders' equity 297,128 303,064 Total liabilities and shareholders' equity $ 433,234 $ 460,075
MAXIMUS, Inc. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) Three Months Ended December 31, 2008 2009 Revenue $ 169,710 $ 202,355 Cost of revenue 122,806 150,240 Gross profit 46,904 52,115 Selling, general and administrative expenses 26,414 27,324 Legal and settlement expense -- 686 Operating income from continuing operations 20,490 24,105 Interest and other income, net 94 99 Income from continuing operations before income taxes 20,584 24,204 Provision for income taxes 8,131 9,576 Income from continuing operations 12,453 14,628 Discontinued operations, net of income taxes: Loss from discontinued operations (485 ) (2,000 ) Loss on disposal (5 ) -- Loss from discontinued operations (490 ) (2,000 ) Net income $ 11,963 $ 12,628 Basic earnings (loss) per share Income from continuing operations $ 0.70 $ 0.83 Loss from discontinued operations (0.03 ) (0.11 ) Basic earnings per share attributable $ 0.67 $ 0.72 Diluted earnings (loss) per share Income from continuing operations $ 0.69 $ 0.81 Loss from discontinued operations (0.02 ) (0.11 ) Diluted earnings per share $ 0.67 $ 0.70 Dividends paid per share $ 0.10 $ 0.12 Weighted average shares outstanding: Basic 17,802 17,595 Diluted 17,956 18,039
MAXIMUS, Inc. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited) Three Months Ended December 31, 2008 2009 Cash flows from operating activities: Net income $ 11,963 $ 12,628 Adjustments to reconcile net income to net cash provided by operating activities: Loss from discontinued operations 490 2,000 Depreciation 1,961 3,104 Amortization of intangible assets and capitalized 737 1,436 software Deferred income taxes 12,043 (8,492 ) Deferred interest income on note receivable 107 61 Non-cash equity based compensation 1,866 1,865 Change in assets and liabilities: Accounts receivable -- billed 23,143 9,596 Accounts receivable -- unbilled (5,775 ) (2,448 ) Prepaid expenses and other current assets (3,844 ) 1,042 Deferred contract costs (1,236 ) 479 Other assets (899 ) (34 ) Accounts payable (10,716 ) 342 Accrued compensation and benefits (3,746 ) (2,045 ) Deferred revenue 2,492 13,134 Income taxes (21,959 ) 14,867 Other liabilities (34,755 ) 1,251 Cash provided by (used in) operating activities -- (28,128 ) 48,786 continuing operations Cash provided by operating activities -- discontinued 951 6,235 operations Cash provided by (used in) operating activities (27,177 ) 55,021 Cash flows from investing activities: Proceeds from note receivable 182 217 Purchases of property and equipment (2,414 ) (3,938 ) Capitalized software costs (1,717 ) (2,641 ) Cash used in investing activities -- continuing (3,949 ) (6,362 ) operations Cash used in investing activities -- discontinued (11 ) -- operations Cash used in investing activities (3,960 ) (6,362 ) Cash flows from financing activities: Employee stock transactions 593 1,004 Repurchases of common stock (22,431 ) (8,661 ) Payments on capital lease obligations (417 ) -- Tax benefit due to option exercises and restricted 53 135 stock units vesting Cash dividends paid (1,765 ) (2,118 ) Cash used in financing activities -- continuing (23,967 ) (9,640 ) operations Cash used in financing activities -- discontinued -- -- operations Cash used in financing activities (23,967 ) (9,640 ) Effect of exchange rate changes on cash and cash (3,040 ) 106 equivalents Net increase/(decrease) in cash and cash equivalents (58,144 ) 39,125 Cash and cash equivalents, beginning of period 119,605 87,815 Cash and cash equivalents, end of period $ 61,461 $ 126,940
The following table provides certain financial information for each of the Company's business segments (in thousands):
Three Months Ended December 31, 2008 % (1) 2009 % (1) Revenue: Operations $ 156,338 100 % $ 188,731 100 % Consulting 13,372 100 % 13,624 100 % Total 169,710 100 % 202,355 100 % Gross Profit: Operations 41,469 26.5 % 47,089 25.0 % Consulting 5,435 40.6 % 5,026 36.9 % Total 46,904 27.6 % 52,115 25.8 % Selling, general, and administrative expense: Operations 20,442 13.1 % 23,127 12.3 % Consulting 5,737 42.9 % 4,056 29.8 % Corporate/Other 235 NM (2) 141 NM (2) Total 26,414 15.6 % 27,324 13.5 % Operating income (loss) from continuing operations: Operations 21,027 13.4 % 23,962 12.7 % Consulting (302 ) (2.3 )% 970 7.1 % Consolidating adjustments (235 ) NM (2) (141 ) NM (2) Operating income from continuing operations before Legal and 20,490 12.1 % 24,791 12.3 % Settlement Expense Legal and Settlement Expense -- NM (2) (686 ) NM (2) Total $ 20,490 12.1 % $ 24,105 11.9 %
(1) % of respective segment revenue (2) Not meaningful
MAXIMUS, Inc. Supplemental Pro Forma Diluted EPS from Continuing Operations ("Adjusted EPS") FY 2009 and First Quarter FY 2010 Total Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 FY 09 Diluted EPS from continuing operations- GAAP basis $0.69 $0.66 $0.89 $0.80 $3.05 $0.81 Pro forma adjustments: Legal and settlement expense - 0.01 (0.16) 0.01 (0.14) 0.02 (recovery), net Severance - 0.01 - - - - Subtotal pro forma adjustments $0.00 $0.02 ($0.16) $0.01 ($0.14) $0.02 Adjusted EPS from continuing $0.69 $0.68 $0.73 $0.81 $2.91 $0.83 operations
Released February 4, 2010