MAXIMUS Reports Fiscal 2009 Second Quarter Results
- Awarded $266 Million Rebid and Expansion in Australia -
- Updates Fiscal 2009 Outlook; Positioned for Accelerated Growth in Fiscal 2010 -
RESTON, Va.--(BUSINESS WIRE)-- MAXIMUS (NYSE:MMS), a leading provider of government services, today reported results for its fiscal 2009 second quarter ended March 31, 2009.
Key highlights for the second quarter of fiscal 2009 include:
-- Second quarter revenue of $184.2 million,
-- Net income from continuing operations of $11.4 million, or $0.64 per
diluted share, and on a pro forma basis $0.66 per diluted share
excluding legal and severance expenses,
-- Strong cash provided by operating activities - continuing operations of
$40.0 million in the quarter and cash at March 31, 2009 of $85.1
million,
-- Improved Days Sales Outstanding to 66 days at March 31, 2009,
-- New sales awards of $447 million and total pipeline of $1.4 billion at
May 4, and
-- Notification of award on a $266 million rebid and expansion in
Australia.
Revenue for the second quarter was $184.2 million versus $189.6 million reported for the same period last year. Results for the second quarter of fiscal 2009 reflect less favorable currency exchange rates. On a constant currency basis, revenue for the second quarter of fiscal 2009 increased approximately 1.0% over the comparable prior year quarter. For the second quarter, net income from continuing operations was $11.4 million or $0.64 per diluted share compared to $13.5 million or $0.72 per diluted share reported for the second quarter last year. Per share earnings in the second quarter of fiscal 2009 were lower principally due to less favorable currency exchange rates, as well as new contract transition and project timing in the Operations Segment, and lower contribution from the Consulting Segment, which was partially offset by share repurchase activities. For the second quarter of fiscal 2009, earnings per diluted share on a pro forma basis were $0.66 excluding legal and severance expenses.
In a separate release issued today, MAXIMUS announced that its MAXNetWork subsidiary has been awarded a rebid and expansion of its Job Services Australia contract by the Department of Education, Employment and Workplace Relations. The three-year base contract is valued at $266 million (USD) and launches July 1, 2009. The contract also allows for two three-year option periods, extending the contract to 2018 if all options are exercised. Under the new contract, MAXNetWork will provide employment services through 73 operational sites, a net increase of 36 new sites across Australia.
Richard A. Montoni, Chief Executive Officer commented, "We are pleased with the results for the quarter and what we see for the rest of fiscal 2009. Our year-to-date results demonstrate continued solid overall performance and stability of demand for our services, despite the challenging macro-economic environment. In addition, with today's announced win in Australia, along with other recent awards, we are excited about our prospects for growth in 2010 as these new contracts contribute to our stream of predictable, long-term revenue and profit. While the new wins will result in start-up expenses in the second half of the year, we expect that the new business awards year-to-date will increase revenue for fiscal 2010 by 7% over our current revenue forecast for fiscal 2009. Additionally, we remain optimistic on further growing the business in 2010 based on the high level of new work initiatives in process."
Operations Segment
Strong performance by the Operations Segment resulted in revenue of $155.6 million and operating income of $19.9 million for the second quarter of fiscal 2009. This compares to revenue of $161.0 million and operating income of $22.8 million for the same period last year. Segment results were lower in fiscal 2009 principally due to less favorable currency rates, the transition to a new contract that was successfully rebid last year, and project timing associated with the $6.9 million hardware and software contribution in the second quarter of last year which did not reoccur this year. Normalized for hardware and software revenue of $6.9 million and constant currency, Operations Segment revenue increased 5.6% compared to the same period last year. The Segment benefits from seasonal tax-credit work in the second half of the fiscal year, which will partially offset start-up expenses on new work and the deferral of outcomes-based revenue for the expanded Australian Job Services project.
Consulting Segment
For the fiscal 2009 second quarter, Consulting Segment revenue was $28.6 million, consistent with prior year revenue of $28.6 million. Revenue in the fiscal 2009 second quarter benefited from new work in the Educational Services division including $4.8 million of non-recurring pass through revenue. The Segment's operating loss for the fiscal 2009 second quarter was $475,000 compared to an operating profit of $496,000 in the prior-year period. Segment performance continues to be impacted by costs to exit business lines and project provisions; however the Company remains focused on executing its plan to improve Consulting Segment performance.
Sales and Pipeline
Year-to-date signed contract wins at May 4, 2009, totaled $447 million, compared to the $615 million reported last year which included two large program awards. New contracts pending at May 4, 2009, (awarded but unsigned) totaled $338 million compared to $149 million reported last year. Sales opportunities (pipeline) at May 4, 2009, totaled $1.4 billion (consisting of $651 million in proposals pending, $110 million in proposals in preparation and $646 million in proposals tracking) compared to $1.6 billion the prior year.
Balance Sheet and Cash Flows
MAXIMUS maintains a solid financial position with a robust cash balance totaling $85.1 million at March 31, 2009. In the second quarter, MAXIMUS generated cash from operating activities from continuing operations of $40.0 million and free cash flow of $34.5 million. This includes a $12.5 million insurance reimbursement that the Company received in connection with the previously announced arbitration settlement. Days Sales Outstanding (DSO) were 66 days for the Company's second quarter. During the second quarter, MAXIMUS purchased 187,200 shares of common stock for $6.8 million under its ongoing share repurchase program and at March 31, had approximately $53.4 million available under this program. On February 27, 2009, MAXIMUS paid a quarterly cash dividend of $0.12 per share, and on April 7, 2009, the Company declared a quarterly cash dividend of $0.12 per share payable on May 29, 2009.
Outlook
During the fiscal 2009 third and fourth quarters, MAXIMUS expects start-up expenses resulting from new wins and will defer revenue tied to outcome-based work on its expanded Australian employment services project, which, in total, is estimated to be approximately $0.20 per diluted share. In addition, MAXIMUS has slightly reduced its outlook for its Consulting Segment. As a result, MAXIMUS now expects fiscal 2009 revenue to be in the range of $745 million to $755 million and earnings per share in the range of $2.75 to $2.85. The Company is reiterating its guidance for cash flow from continuing operations of $35 million to $45 million in fiscal 2009, before any additional insurance reimbursements.
Conclusion
Mr. Montoni concluded, "We are fundamentally on track for fiscal 2009. Our 2009 guidance has been modified principally as a result of the impact of start-up investments on new work. The required investments are a net positive as we further strengthen the business base. We remain optimistic as we continue to see stable demand in both domestic and international health and human services managed services programs, as evidenced by our expansion in Australia, Pennsylvania and Shelby County, Tennessee. These recent awards are a testament to the Company's successful transition to focus our operations on less discretionary health and human services program administration."
Website Presentation, Conference Call and Webcast Information
MAXIMUS will host a conference call this morning, May 7, 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)
A replay will be available through May 15, 2009. Callers can access the replay by calling:
877.660.6853 (Domestic)/201.612.7415 (International)
Replay account
number: 316
Replay conference ID number: 321261
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, March 31,
2008 2009
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 119,605 $ 85,090
Restricted cash 2,736 2,449
Accounts receivable -- billed, net of reserves of 128,819 96,350
$5,512 and $4,232
Accounts receivable -- unbilled 30,695 35,388
Current portion of note receivable 746 786
Income taxes receivable -- 17,097
Deferred income taxes 21,901 8,735
Due from insurance carrier 12,500 --
Prepaid expenses and other current assets 7,892 17,655
Current assets of discontinued operations 193 192
Total current assets 325,087 263,742
Property and equipment, at cost 81,232 83,577
Less accumulated depreciation and amortization (47,238 ) (50,028 )
Property and equipment, net 33,994 33,549
Capitalized software 19,979 23,262
Less accumulated amortization (5,854 ) (6,581 )
Capitalized software, net 14,125 16,681
Deferred contract costs, net 5,324 7,604
Goodwill 60,659 58,763
Intangible assets, net 3,699 2,458
Note receivable, less current portion 1,337 721
Deferred income taxes 10,933 1,440
Other assets, net 3,788 3,065
Total assets $ 458,946 $ 388,023
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 48,950 $ 53,218
Accrued compensation and benefits 26,684 24,932
Current portion of deferred revenue 19,676 19,351
Current portion of income taxes payable 12,662 --
Current portion of capital lease obligations 417 --
Other accrued liabilities 53,891 15,029
Current liabilities of discontinued operations 11,028 4,406
Total current liabilities 173,308 116,936
Deferred revenue, less current portion 8,315 7,884
Income taxes payable, less current portion 1,617 1,573
Total liabilities 183,240 126,393
Shareholders' equity:
Common stock, no par value; 60,000,000 shares
authorized; 18,302,368 and 17,423,577 shares issued 328,323 332,462
and outstanding at September 30, 2008 and March 31,
2009, at stated amount, respectively
Treasury stock, at cost; 8,635,130 and 9,562,820
shares at September 30, 2008 and March 31, 2009, (289,103 ) (319,149 )
respectively
Accumulated other comprehensive income 5,536 (1,771 )
Retained earnings 230,950 250,088
Total shareholders' equity 275,706 261,630
Total liabilities and shareholders' equity $ 458,946 $ 388,023
MAXIMUS, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Six Months
Ended March 31, Ended March 31,
2008 2009 2008 2009
Revenue $ 189,611 $ 184,201 $ 366,700 $ 364,293
Cost of revenue 137,748 137,090 268,553 270,035
Gross profit 51,863 47,111 98,147 94,258
Selling, general and 28,762 27,996 55,800 55,334
administrative expenses
Legal and settlement expense 931 368 931 368
Operating income from 22,170 18,747 41,416 38,556
continuing operations
Interest and other income, 107 35 1,608 129
net
Income from continuing
operations before income 22,277 18,782 43,024 38,685
taxes
Provision for income taxes 8,788 7,419 17,267 15,281
Income from continuing 13,489 11,363 25,757 23,404
operations
Discontinued operations, net
of income taxes:
Loss from discontinued (3,862 ) (336 ) (5,525 ) (409 )
operations
Loss on disposal -- -- -- (5 )
Loss from discontinued (3,862 ) (336 ) (5,525 ) (414 )
operations
Net income $ 9,627 $ 11,027 $ 20,232 $ 22,990
Basic earnings (loss) per
share:
Income from continuing $ 0.73 $ 0.65 $ 1.32 $ 1.33
operations
Loss from discontinued (0.21 ) (0.02 ) (0.28 ) (0.03 )
operations
Basic earnings per share $ 0.52 $ 0.63 $ 1.04 $ 1.30
Diluted earnings (loss) per
share:
Income from continuing $ 0.72 $ 0.64 $ 1.30 $ 1.31
operations
Loss from discontinued (0.21 ) (0.02 ) (0.28 ) (0.02 )
operations
Diluted earnings per share $ 0.51 $ 0.62 $ 1.02 $ 1.29
Dividends paid per share $ 0.10 $ 0.12 $ 0.20 $ 0.22
Weighted average shares
outstanding:
Basic 18,537 17,435 19,527 17,621
Diluted 18,763 17,751 19,803 17,832
MAXIMUS, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Six Months
Ended March 31,
2008 2009
Cash flows from operating activities:
Net income $ 20,232 $ 22,990
Adjustments to reconcile net income to net cash
provided by operating activities:
Loss from discontinued operations 5,525 414
Depreciation 5,151 4,203
Amortization 1,410 1,525
Deferred income taxes 7,522 22,659
Gain on sale of fixed assets -- (51 )
Deferred interest income on note receivable -- 210
Non-cash equity based compensation 5,458 3,950
Change in assets and liabilities:
Accounts receivable - billed 7,079 31,321
Accounts receivable - unbilled (13,247 ) (5,464 )
Prepaid expenses and other current assets (462 ) (10,006 )
Deferred contract costs 1,843 (2,486 )
Due from insurance carrier -- 12,500
Other assets 282 (766 )
Accounts payable 686 5,320
Accrued compensation and benefits (479 ) (1,498 )
Deferred revenue (5,035 ) 965
Income taxes (11,107 ) (29,494 )
Other liabilities (32 ) (37,573 )
Cash provided by (used in) operating activities - 24,826 18,719
continuing operations
Cash provided by (used in) operating activities - 467 (7,035 )
discontinued operations
Cash provided by (used in) operating activities 25,293 11,684
Cash flows from investing activities:
Proceeds from sale of fixed assets -- 54
Decrease in note receivable -- 366
Purchases of property and equipment (3,534 ) (4,904 )
Capitalized software costs (2,038 ) (4,686 )
Decrease in marketable securities 126,210 --
Cash provided by (used in) investing activities - 120,638 (9,170 )
continuing operations
Cash provided by (used in) investing activities - (1,566 ) --
discontinued operations
Cash provided by (used in) investing activities 119,072 (9,170 )
Cash flows from financing activities:
Employee stock transactions 3,274 (97 )
Repurchases of common stock (150,388 ) (30,046 )
Payments on capital lease obligations (805 ) (417 )
Tax benefit due to option exercises and restricted 576 287
stock units vesting
Cash dividends paid (4,074 ) (3,854 )
Cash used in financing activities - continuing (151,417 ) (34,127 )
operations
Cash used in financing activities - discontinued -- --
operations
Cash used in financing activities (151,417 ) (34,127 )
Effect of exchange rate changes on cash and cash -- (2,902 )
equivalents
Net decrease in cash and cash equivalents (7,052 ) (34,515 )
Cash and cash equivalents, beginning of period 70,472 119,605
Cash and cash equivalents, end of period $ 63,420 $ 85,090
MAXIMUS, Inc.
SEGMENT INFORMATION
(Dollars in thousands)
(Unaudited)
Three Months Ended March 31, Six Months Ended March 31,
2008 % (1) 2009 % (1) 2008 % (1) 2009 % (1)
Revenue:
Operations $ 160,982 100 % $ 155,626 100 % $ 307,789 100 % $ 311,964 100 %
Consulting 28,629 100 % 28,575 100 % 58,911 100 % 52,329 100 %
Total 189,611 100 % 184,201 100 % 366,700 100 % 364,293 100 %
Gross Profit:
Operations 42,166 26.2 % 40,233 25.9 % 77,723 25.3 % 81,702 26.2 %
Consulting 9,697 33.9 % 6,878 24.1 % 20,424 34.7 % 12,556 24.0 %
Total 51,863 27.4 % 47,111 25.6 % 98,147 26.8 % 94,258 25.9 %
Selling,
general, and
administrative
expense:
Operations 19,318 12.0 % 20,323 13.1 % 37,049 12.0 % 40,446 13.0 %
Consulting 9,201 32.1 % 7,353 25.7 % 18,149 30.8 % 14,493 27.7 %
Corporate/Other 243 NM (2) 320 NM (2) 602 NM (2) 395 NM (2)
Total 28,762 15.2 % 27,996 15.2 % 55,800 15.2 % 55,334 15.2 %
Operating
income (loss)
from continuing
operations:
Operations 22,848 14.2 % 19,910 12.8 % 40,674 13.2 % 41,256 13.2 %
Consulting 496 1.7 % (475 ) (1.7 )% 2,275 3.9 % (1,937 ) (3.7 )%
Consolidating (243 ) NM (2) (320 ) NM (2) (602 ) NM (2) (395 ) NM (2)
adjustments
Legal and
settlement (931 ) NM (2) (368 ) NM (2) (931 ) NM (2) (368 ) NM (2)
expense
Total $ 22,170 11.7 % $ 18,747 10.2 % $ 41,416 11.3 % $ 38,556 10.6 %
(1) % of respective segment revenue
(2) Not meaningful
MAXIMUS, Inc.
Supplemental Pro Forma Earnings per Diluted share from Continuing Operations
Fiscal Year 2008 and First Half Fiscal Year 2009
Q1 08 Q2 08 Q3 08 Q4 08 Total Q1 09 Q2 09 Total FY
FY 08 09
Diluted
earnings per
share from
continuing
operations-
GAAP basis $0.59 $0.72 $0.92 ($0.80) $1.43 $0.67 $0.64 $1.31
Pro forma
adjustments:
Legal and
settlement - 0.03 0.02 1.23 1.28 - 0.01 0.01
charges
Gains on
sale of - - (0.13) - (0.13) - - -
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 - $0.02 $0.02
adjustments
Pro forma
diluted
earnings per $0.56 $0.75 $0.81 $0.71 $2.83 $0.67 $0.66 $1.33
share from
continuing
operations
Source: MAXIMUS, Inc.
Released May 7, 2009