MAXIMUS Reports Fiscal 2009 Third Quarter Results
- Notified as Preferred Bidder for Five-Year, $200 Million Employment Services Contract in UK -
- Reiterates Fiscal 2009 Guidance and Maintains 2010 Preliminary Outlook -
RESTON, Va.--(BUSINESS WIRE)-- MAXIMUS (NYSE: MMS), a leading provider of government services, today reported results for its fiscal 2009 third quarter ended June 30, 2009.
Key highlights include:
-- Third quarter revenue of $185.2 million,
-- Net income from continuing operations of $15.0 million, or $0.84 per
diluted share, which includes $0.16 per diluted share of legal and
settlement recovery. Excluding this recovery, earnings per diluted share
from continuing operations was $0.68, a penny ahead of consensus
estimates,
-- Third quarter cash provided by operating activities from continuing
operations of $12.4 million and free cash flow of $6.3 million; healthy
cash and cash equivalents at June 30, 2009 of $91.7 million,
-- Strong signed fiscal year-to-date awards of $877 million, which includes
wins related to the American Reinvestment and Recovery Act (ARRA), and a
robust pipeline of $1.2 billion at August 4, 2009, and,
-- Notification of award as the preferred bidder for a new five-year
contract, estimated to be valued at approximately $200 million (USD), to
provide employment services under the Flexible New Deal in the United
Kingdom.
Revenue for the third quarter was $185.2 million versus $189.4 million reported for the same period last year. On a constant currency basis, fiscal 2009 third quarter revenue increased 1% from the prior-year period. For the third quarter, net income from continuing operations was $15.0 million or $0.84 per diluted share compared to $17.3 million or $0.92 per diluted share reported for the third quarter last year. Fiscal 2009 third quarter earnings included $0.16 per diluted share of legal and settlement recovery from an insurance reimbursement. Earnings in the prior-year period included a one-time gain of $0.13 per diluted share from the sale of a property in McLean, Virginia.
The Company also announced that its United Kingdom subsidiary, MAXIMUS Employment & Training, has been selected as the preferred bidder by the United Kingdom Department of Work & Pensions for the delivery of employment services in southeast England. The five-year contract, valued at approximately $200 million (USD) is expected to be executed within a week and operations are expected to launch in October 2009.
Richard A. Montoni, Chief Executive Officer, commented, "Our solid results for the period reflect the integral role MAXIMUS plays in the administration of vital health and human services programs. Recent new wins, successful rebids and program expansions have offset some reductions in the domestic business resulting from the challenging state budgetary environment. We are actively working with our government partners to meet increased program demand with scalable solutions while best positioning the Company for emerging opportunities. With the recent doubling of our Australia operations and today's announced win in the UK, we are excited to expand the reach of our thought leadership and program administration expertise in the global market."
Operations Segment
Operations Segment revenue increased 4.8% (8.3% on a constant currency basis) to $165.5 million in the fiscal 2009 third quarter compared to $157.9 million in the prior-year period, driven by the contribution of new and expanding contracts. Operating income was $20.0 million for the third quarter of fiscal 2009 with segment operating margin of 12.1%. Segment operating income compared to last year was lower due to less favorable currency rates, start up expenses on new work and the transition to a new contract that was rebid and launched in the second quarter of fiscal 2009.
Consulting Segment
For the fiscal 2009 third quarter, Consulting Segment revenue was $19.7 million, compared to $31.4 million last year. The year-over-year revenue decline was related to the ongoing planned transition of the Segment's business, including the exit of the federal health care claiming (RevMax) business, and lower revenue from ERP projects that are winding down. As expected, the Segment lost $146,000 in the third quarter of fiscal 2009. On a sequential basis, losses were lower reflecting the Company's efforts to improve the Segment's overall performance.
Sales and Pipeline
Year-to-date signed contract wins at August 4, 2009, totaled $877 million, compared to the $684 million reported last year. New contracts pending at August 4, 2009, (awarded but unsigned) totaled $542 million compared to $265 million reported last year. Sales opportunities (pipeline) at August 4, 2009, totaled $1.2 billion (consisting of $228 million in proposals pending, $87 million in proposals in preparation and $910 million in proposals tracking) compared to $1.7 billion the prior year. The decrease in sales opportunities (pipeline) reflects the shift of contract dollars into new pending and signed awards. The Company believes that overall demand levels remain very strong.
Balance Sheet and Cash Flows
Cash and cash equivalents totaled $91.7 million at June 30, 2009. In the fiscal 2009 third quarter, MAXIMUS generated cash from operating activities from continuing operations of $12.4 million and free cash flow of $6.3 million. Days Sales Outstanding (DSO) were 73 days with six days related to milestone-billing on programs where the Company is refreshing technology. MAXIMUS did not repurchase any shares during the quarter and at June 30, had approximately $54.1 million available under the Board-authorized share repurchase program. On May 29, 2009, MAXIMUS paid a quarterly cash dividend of $0.12 per share, and on July 10, 2009, the Company declared a quarterly cash dividend of $0.12 per share payable on August 31, 2009.
Outlook
MAXIMUS reiterates expected fiscal 2009 revenue in the range of $745 million to $755 million and earnings in the range of $2.75 to $2.85 per diluted share, excluding the positive impact of the legal and settlement recovery of $0.16 per diluted share. The Company also reiterates its guidance for operating cash flow from continuing operations of $35 million to $45 million in fiscal 2009.
For fiscal 2010, the Company is maintaining its preliminary fiscal 2010 revenue growth estimate of 7%, based on the midpoint of its fiscal 2009 revenue guidance, driven by its new business wins to date. This preliminary estimate includes both the benefit of today's announced UK agreement as well as reduced contributions from a limited number of domestic projects due to recent program reductions, primarily in California.
"We remain encouraged by our revenue growth outlook for fiscal 2010," Mr. Montoni concluded. "While we have yet to complete our budget planning process for the coming year, we believe that our preliminary outlook reflects our strong prospects and anticipated performance of our base business, which has experienced a limited impact from government spending reductions. Additional revenue upside to our outlook may be possible depending on the continued resilience of our base business and our ability to secure new work. Most importantly, we will continue our disciplined approach to execution and risk management to deliver profitable growth in our core health and human services markets."
Website Presentation, Conference Call and Webcast Information
MAXIMUS will host a conference call this morning, August 6, 2009, 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 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 14, 2009. Callers can access the replay by calling:
877.660.6853 (Domestic)/201.612.7415 (International)
Replay account
number: 316
Replay conference ID number: 328815
MAXIMUS is a leading provider of government services and is devoted to providing health and human services program management and consulting services to its clients. The Company has more than 6,000 employees located in more than 220 offices in the United States, Canada, Australia, Israel 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.
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, June 30,
2008 2009
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 119,605 $ 91,666
Restricted cash 2,736 3,702
Accounts receivable -- billed, net of reserves of 128,819 116,884
$5,512 and $4,473
Accounts receivable -- unbilled 30,695 30,290
Current portion of note receivable 746 949
Income taxes receivable -- 7,823
Deferred income taxes 21,901 12,695
Due from insurance carrier 12,500 --
Prepaid expenses and other current assets 7,892 18,775
Current assets of discontinued operations 193 --
Total current assets 325,087 282,784
Property and equipment, at cost 81,232 91,156
Less accumulated depreciation and amortization (47,238 ) (53,311 )
Property and equipment, net 33,994 37,845
Capitalized software 19,979 23,970
Less accumulated amortization (5,854 ) (6,769 )
Capitalized software, net 14,125 17,201
Deferred contract costs, net 5,324 8,530
Goodwill 60,659 61,288
Intangible assets, net 3,699 2,419
Note receivable, less current portion 1,337 192
Deferred income taxes 10,933 --
Other assets, net 3,788 2,918
Total assets $ 458,946 $ 413,177
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 48,950 $ 49,971
Accrued compensation and benefits 26,684 26,830
Deferred revenue 19,676 21,824
Income taxes payable 12,662 --
Capital lease obligations 417 --
Other accrued liabilities 53,891 16,554
Liabilities of discontinued operations 11,028 3,708
Total current liabilities 173,308 118,887
Deferred revenue, less current portion 8,315 7,219
Income taxes payable, less current portion 1,617 1,753
Deferred income tax liability -- 2,212
Total liabilities 183,240 130,071
Shareholders' equity:
Common stock, no par value; 60,000,000 shares
authorized; 26,937,498 and 27,075,110 shares issued
and 18,302,368 and 17,512,290 outstanding at 328,323 334,590
September 30, 2008 and June 30, 2009, at stated
amount, respectively
Treasury stock, at cost; 8,635,130 and 9,562,820
shares at September 30, 2008 and June 30, 2009, (289,103 ) (319,146 )
respectively
Accumulated other comprehensive income 5,536 4,694
Retained earnings 230,950 262,968
Total shareholders' equity 275,706 283,106
Total liabilities and shareholders' equity $ 458,946 $ 413,177
MAXIMUS, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Nine Months
Ended June 30, Ended June 30,
2008 2009 2008 2009
Revenue $ 189,364 $ 185,240 $ 556,064 $ 549,533
Cost of revenue 136,576 137,187 405,129 407,222
Gross profit 52,788 48,053 150,935 142,311
Selling, general and 28,949 28,155 84,749 83,489
administrative expenses
Gain on sale of building 3,938 -- 3,938 --
Legal and settlement expense 700 (4,829 ) 1,631 (4,461 )
(recovery), net
Operating income from 27,077 24,727 68,493 63,283
continuing operations
Interest and other income, 490 129 2,098 258
net
Income from continuing
operations before income 27,567 24,856 70,591 63,541
taxes
Provision for income taxes 10,271 9,818 27,538 25,099
Income from continuing 17,296 15,038 43,053 38,442
operations
Discontinued operations, net
of income taxes:
Loss from discontinued (7,617 ) (55 ) (13,142 ) (464 )
operations
Gain (Loss) on disposal 1,726 -- 1,726 (5 )
Loss from discontinued (5,891 ) (55 ) (11,416 ) (469 )
operations
Net income $ 11,405 $ 14,983 $ 31,637 $ 37,973
Basic earnings per share:
Income from continuing $ 0.93 $ 0.86 $ 2.24 $ 2.19
operations
Loss from discontinued (0.32 ) -- (0.60 ) (0.03 )
operations
Basic earnings per share $ 0.61 $ 0.86 $ 1.64 $ 2.16
Diluted earnings (loss) per
share:
Income from continuing $ 0.92 $ 0.84 $ 2.21 $ 2.15
operations
Loss from discontinued (0.31 ) -- (0.59 ) (0.02 )
operations
Diluted earnings per share $ 0.61 $ 0.84 $ 1.62 $ 2.13
Dividends paid per share $ 0.10 $ 0.12 $ 0.30 $ 0.34
Weighted average shares
outstanding:
Basic 18,648 17,503 19,235 17,582
Diluted 18,819 17,839 19,471 17,855
MAXIMUS, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Nine Months
Ended June 30,
2008 2009
Cash flows from operating activities:
Net income $ 31,637 $ 37,973
Adjustments to reconcile net income to net cash
provided by operating activities:
Loss from discontinued operations 11,416 469
Depreciation 7,755 6,468
Amortization of intangible assets and capitalized 2,149 2,080
software
Deferred income taxes 5,815 22,350
Gain on sale of building (3,938 ) --
Gain on sale of fixed assets -- (51 )
Deferred interest income on note receivable 37 311
Non-cash equity based compensation 7,028 5,628
Change in assets and liabilities:
Accounts receivable -- billed (1,950 ) 11,596
Accounts receivable -- unbilled (13,296 ) (36 )
Prepaid expenses and other current assets (65 ) (10,980 )
Deferred contract costs 2,681 (3,206 )
Due from insurance carrier -- 12,500
Other assets 275 308
Accounts payable 3,141 1,577
Accrued compensation and benefits 867 (141 )
Deferred revenue (3,859 ) 1,935
Income taxes (7,902 ) (20,042 )
Other liabilities 933 (37,658 )
Cash provided by operating activities -- continuing 42,724 31,081
operations
Cash used in operating activities -- discontinued (4,632 ) (7,596 )
operations
Cash provided by operating activities 38,092 23,485
Cash flows from investing activities:
Proceeds from sales of discontinued operations, net 4,643 --
of transaction costs
Proceeds from sale of building, net of transaction 5,929 --
costs
Proceeds from sale of fixed assets -- 54
Proceeds from note receivable 59 631
Purchases of property and equipment (7,890 ) (10,640 )
Capitalized software costs (3,719 ) (5,037 )
Decrease in marketable securities 126,210 --
Cash provided by (used in) investing activities -- 125,232 (14,992 )
continuing operations
Cash used in investing activities -- discontinued (2,259 ) --
operations
Cash provided by (used in) investing activities 122,973 (14,992 )
Cash flows from financing activities:
Employee stock transactions 3,364 636
Repurchases of common stock (150,388 ) (30,046 )
Payments on capital lease obligations (1,213 ) (417 )
Tax benefit due to option exercises and restricted 583 6
stock units vesting
Cash dividends paid (5,939 ) (5,955 )
Cash used in financing activities -- continuing (153,593 ) (35,776 )
operations
Cash used in financing activities -- discontinued -- --
operations
Cash used in financing activities (153,593 ) (35,776 )
Effect of exchange rate changes on cash and cash -- (656 )
equivalents
Net increase/(decrease) in cash and cash equivalents 7,472 (27,939 )
Cash and cash equivalents, beginning of period 70,472 119,605
Cash and cash equivalents, end of period $ 77,944 $ 91,666
Segment Information
The following table provides certain financial information for each of the Company's business segments
(in thousands):
Three Months Ended June 30, Nine Months Ended June 30,
2008 % (1) 2009 % (1) 2008 % (1) 2009 % (1)
Revenue:
Operations $ 157,917 100 % $ 165,522 100 % $ 465,706 100 % $ 477,486 100 %
Consulting 31,447 100 % 19,718 100 % 90,358 100 % 72,047 100 %
Total 189,364 100 % 185,240 100 % 556,064 100 % 549,533 100 %
Gross Profit:
Operations 41,870 26.5 % 41,981 25.4 % 119,593 25.7 % 123,683 25.9 %
Consulting 10,918 34.7 % 6,072 30.8 % 31,342 34.7 % 18,628 25.9 %
Total 52,788 27.9 % 48,053 25.9 % 150,935 27.1 % 142,311 25.9 %
Selling,
general, and
administrative
expense:
Operations 19,025 12.0 % 21,942 13.3 % 56,074 12.0 % 62,388 13.1 %
Consulting 9,656 30.7 % 6,218 31.5 % 27,805 30.8 % 20,711 28.7 %
Corporate/Other 268 NM(2) (5 ) NM(2) 870 NM(2) 390 NM(2)
Total 28,949 15.3 % 28,155 15.2 % 84,749 15.2 % 83,489 15.2 %
Operating
income (loss)
from continuing
operations:
Operations 22,845 14.5 % 20,039 12.1 % 63,519 13.6 % 61,295 12.8 %
Consulting 1,262 4.0 % (146 ) (0.7 )% 3,537 3.9 % (2,083 ) (2.9 )%
Consolidating (268 ) NM(2) 5 NM(2) (870 ) NM(2) (390 ) NM(2)
adjustments
Subtotal:
Segment 23,839 12.6 % 19,898 10.7 % 66,186 11.9 % 58,822 10.7 %
operating
income
Gain on sale of 3,938 2.1 % -- -- % 3,938 0.7 % -- -- %
building
Legal and
settlement (700 ) (0.4 ) 4,829 2.6 % (1,631 ) (0.3 )% 4,461 0.8 %
(expense)
recovery, net
Total $ 27,077 14.3 % $ 24,727 13.3 % $ 68,493 12.3 % $ 63,283 11.5 %
(1) % of respective segment revenue
(2) Not meaningful
MAXIMUS, Inc.
Supplemental Pro Forma Diluted EPS from Continuing Operations
Fiscal Year 2008 and Year To Date Fiscal 2009
Total
Q1 08 Q2 08 Q3 08 Q4 08 FY 08 Q1 09 Q2 09 Q3 09 YTD 09
Diluted EPS
from
continuing
operations-
GAAP basis $0.59 $0.72 $0.92 ($0.80 ) $1.43 $0.67 $0.64 $0.84 $2.15
Pro forma
adjustments:
Legal and
settlement
expense - 0.03 0.02 1.23 1.28 - 0.01 (0.16 ) (0.15 )
(recovery),
net
Gain on sale - - (0.13 ) - (0.13 ) - - - -
of building
Pre-ASR
interest (0.03 ) - - - (0.03 ) - - - -
income
Non-cash
goodwill - - - 0.25 0.25 - - - -
impairment
charge
Severance - - - 0.03 0.03 - 0.01 - 0.01
Subtotal pro
forma ($0.03 ) $0.03 ($0.11 ) $1.51 $1.40 $0.00 $0.02 ($0.16 ) ($0.14 )
adjustments
Pro forma
diluted EPS
from $0.56 $0.75 $0.81 $0.71 $2.83 $0.67 $0.66 $0.68 $2.01
continuing
operations
Source: MAXIMUS
Released August 6, 2009