MAXIMUS Reports First Quarter Results
Revenue of $180.1 million and Diluted EPS of $0.67; Company Reiterates Fiscal 2009 Earnings Outlook
RESTON, Va.--(BUSINESS WIRE)-- MAXIMUS (NYSE:MMS), a leading provider of government services, today reported results for its fiscal 2009 first quarter ended December 31, 2008.
Recent highlights include:
-- First quarter revenue increase of 5% on a constant currency basis to $180.1 million, compared to the same period last year, -- Increase in net income of 13% to $12.0 million, or $0.67 per diluted share, -- Cash at December 31, 2008 of $61.5 million, -- Declared increase in the Company's quarterly cash dividend to $0.12 per share, -- Improved Days Sales Outstanding to 67 days at December 31, 2008, -- New sales awards of $208 million and total pipeline of $1.7 billion at February 3, and -- Notification of a new award for the administration of Medicaid enrollment for Pennsylvania valued at $37.5 million over 60 months, and the recent signing of a five-year, $54.9 million contract with the New York City Department of Education for special education case management services.
Revenue for the first quarter increased to $180.1 million compared to $177.1 million reported for the same period last year. On a constant currency basis, total revenue increased 5%, and Operations Segment revenue increased 11% compared to last year. Nearly all revenue growth in the quarter was organic. Net income increased 13% to $12.0 million compared to $10.6 million reported for the first quarter of fiscal 2008. Diluted earnings per share increased to $0.67 compared to $0.51 reported for the same period last year and reflect the Company's ongoing share repurchase program.
"We are pleased with the results this quarter and excited about our future opportunities. Our narrowed focus on our core health and human services offerings has positioned MAXIMUS well to grow and provide new and expanding work, including today's announced award for the administration of Medicaid enrollment services for Pennsylvania," commented Richard Montoni, Chief Executive Officer of MAXIMUS. "While MAXIMUS is not completely immune to the current economic climate, we believe we are presented with a unique set of opportunities to partner with government clients as they face increasing demand for their vital safety-net programs such as Medicaid and SCHIP. Enrollments in key support areas that we administer continue to rise, and we are closely tracking emerging opportunities anticipated through the reauthorization and expansion of SCHIP and the anticipated passage of the American Recovery and Reinvestment Act. The signing of the SCHIP bill by President Obama last evening represents a significant milestone that confirms the substance of this opportunity. We expect that this new legislation will provide underfunded states with significant program support. We anticipate any material contribution from the potential increase in program funding to occur in fiscal 2010. Therefore, we are reiterating our previous earnings outlook for fiscal 2009 which includes only a modest benefit in the latter part of the year from these initiatives."
Operations Segment revenue accounted for 87% of total Company revenue in the first quarter and increased 6% to $156.3 million compared to $146.8 million reported for the first quarter of fiscal 2008. On a constant currency basis, Operations Segment revenue increased 11% compared to the same period last year. Top-line growth in the Segment's domestic business offset currency impact from international operations. Operations Segment operating income for the first quarter grew 20% to $21.3 million, compared to $17.8 million reported for the first quarter of last year. The Segment's growth in revenue and operating income was driven by the solid performance of the Company's health and federal operations.
For the first quarter, Consulting Segment revenue was $23.8 million, or 13% of total Company revenue. The Segment posted a quarterly operating loss of $1.5 million resulting from a $2.5 million charge due to cost increases on a legacy fixed-price ERP contract. The Company expects improvement in Segment performance beginning in its fiscal second quarter, fueled by revenue and profit associated with new work. This includes the New York City Department of Education contract, which will contain approximately $5 million in non-recurring pass-through revenue in the second quarter.
Sales and Pipeline
Year-to-date signed contract wins at January 30, 2009, totaled $208 million, compared to $311 million reported last year. New contracts pending at February 3, 2009, (awarded but unsigned) totaled $135 million compared to $264 million reported last year. In the first quarter of fiscal 2008, new sales and new contracts pending benefited from two large contracts. Sales opportunities (pipeline) at February 3, 2009, totaled $1.7 billion (consisting of $582 million in proposals pending, $327 million in proposals in preparation, and $761 million in proposals tracking) compared to $1.0 billion the prior year.
Balance Sheet and Cash Flows
At December 31, 2008, cash totaled $61.5 million. This does not include a $13.0 million insurance reimbursement that the Company expects to receive in its second quarter related to the previously announced arbitration settlement. As part of the settlement, MAXIMUS paid $40 million in cash in its fiscal first quarter. As a result, MAXIMUS used cash from continuing operations of $21.2 million and recorded negative free cash flow of $25.3 million in the first quarter. Normalizing continuing operations cash flow to exclude the $40 million cash settlement paid in the first quarter results in pro forma cash flow from operations of $18.8 million and pro forma free cash flow from continuing operations of $14.7 million. In the first quarter, Days Sales Outstanding (DSO) improved to 67 days at December 31, 2008. During the quarter, MAXIMUS purchased 740,490 shares of MAXIMUS common stock for $23.2 million under its ongoing share repurchase program and at December 31, MAXIMUS had approximately $59.5 million available under this program. On November 30, 2008, MAXIMUS paid a quarterly cash dividend of $0.10 per share, and on December 17, 2008, the Company declared an increase in its quarterly cash dividend to $0.12 per share which is payable on February 27, 2009.
The Company is reiterating its fiscal 2009 earnings forecast of $3.00 to $3.15 per diluted share. As a result of timing on contracts, including the start of a large rebid contract which began January 1, the Company expects its fiscal 2009 second quarter earnings to decline slightly from its first fiscal quarter, with a return to earnings growth in both operating segments in the second half of the year driven by new work and seasonality. For the full fiscal year, MAXIMUS now expects to be at the lower end of its revenue range of $750 million to $775 million as a result of project delays which may be offset by a modest contribution in the latter half of fiscal 2009 from new federal legislation.
Website Presentation, Conference Call and Webcast Information
MAXIMUS will host a conference call this morning, February 5, 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 along with 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 February 13, 2009. Callers can access the replay by calling: 877.660.6853 (Domestic)/201.612.7415 (International)
Replay account number: 316
Replay conference ID number: 311570
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 and Australia. 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, 2008 2008 (unaudited) ASSETS Current assets: Cash and cash equivalents $ 119,605 $ 61,461 Restricted cash 2,736 2,543 Accounts receivable -- billed, net of reserves 128,819 101,876 of $5,512 and $4,828 Accounts receivable -- unbilled 30,695 28,180 Current portion of note receivable 746 759 Income taxes receivable -- 9,469 Deferred income taxes 21,901 17,574 Due from insurance carrier 12,500 12,986 Prepaid expenses and other current assets 7,892 11,370 Current assets of discontinued operations 193 192 Total current assets 325,087 246,410 Property and equipment, at cost 81,232 81,498 Less accumulated depreciation and amortization (47,238 ) (48,106 ) Property and equipment, net 33,994 33,392 Capitalized software 19,979 20,521 Less accumulated amortization (5,854 ) (6,159 ) Capitalized software, net 14,125 14,362 Deferred contract costs, net 5,324 6,384 Goodwill 60,659 58,976 Intangible assets, net 3,699 2,832 Note receivable, less current portion 1,337 1,036 Deferred income taxes 10,933 3,217 Other assets, net 3,788 3,459 Total assets $ 458,946 $ 370,068 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 48,950 $ 36,799 Accrued compensation and benefits 26,684 22,681 Current portion of deferred revenue 19,676 21,441 Current portion of income taxes payable 12,662 -- Current portion of capital lease obligations 417 -- Other accrued liabilities 53,891 19,068 Current liabilities of discontinued operations 11,028 5,134 Total current liabilities 173,308 105,123 Deferred revenue, less current portion 8,315 6,861 Income taxes payable, less current portion 1,617 1,668 Total liabilities 183,240 113,652 Shareholders' equity: Common stock, no par value; 60,000,000 shares authorized; 18,302,368 and 17,586,834 shares issued and outstanding at September 30, 2008 and 328,323 330,834 December 31, 2008, at stated amount, respectively Treasury stock, at cost; 8,635,130 and 9,375,620 shares at September 30, 2008 and December 31, (289,103 ) (312,338 ) 2008, respectively Accumulated other comprehensive income 5,536 (1,139 ) Retained earnings 230,950 239,059 Total shareholders' equity 275,706 256,416 Total liabilities and shareholders' equity $ 458,946 $ 370,068
MAXIMUS, Inc. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share data) (Unaudited) Three Months Ended December 31, 2007 2008 Revenue $ 177,089 $ 180,092 Cost of revenue 130,805 132,945 Gross profit 46,284 47,147 Selling, general and administrative expenses 27,038 27,338 Operating income from continuing operations 19,246 19,809 Interest and other income, net 1,501 94 Income from continuing operations before income taxes 20,747 19,903 Provision for income taxes 8,479 7,862 Income from continuing operations 12,268 12,041 Discontinued operations, net of income taxes: Loss from discontinued operations (1,663 ) (73 ) Loss on disposal -- (5 ) Loss from discontinued operations (1,663 ) (78 ) Net income $ 10,605 $ 11,963 Basic earnings (loss) per share (Note 6): Income from continuing operations $ 0.60 $ 0.68 Loss from discontinued operations (0.08 ) (0.01 ) Basic earnings per share $ 0.52 $ 0.67 Diluted earnings (loss) per share (Note 6): Income from continuing operations $ 0.59 $ 0.67 Loss from discontinued operations (0.08 ) -- Diluted earnings per share $ 0.51 $ 0.67 Dividends paid per share $ 0.10 $ 0.10 Weighted average shares outstanding: Basic 20,506 17,802 Diluted 20,854 17,956
MAXIMUS, Inc. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited) Three Months Ended December 31, 2007 2008 Cash flows from operating activities: Net income $ 10,605 $ 11,963 Adjustments to reconcile net income to net cash provided by operating activities: Loss from discontinued operations 1,663 78 Depreciation 2,681 2,009 Amortization 719 737 Deferred income taxes 4,195 12,043 Deferred interest income on note receivable -- 107 Non-cash equity based compensation 3,386 1,866 Change in assets and liabilities: Accounts receivable - billed 10,822 25,930 Accounts receivable - unbilled (8,078 ) 1,901 Prepaid expenses and other current assets 1,362 (3,819 ) Deferred contract costs 404 (1,236 ) Other assets 104 (899 ) Accounts payable (1,608 ) (11,071 ) Accrued compensation and benefits (2,879 ) (3,701 ) Deferred revenue (1,628 ) 1,698 Income taxes (3,141 ) (21,959 ) Other liabilities (530 ) (36,852 ) Cash provided by (used in) operating activities - 18,077 (21,205 ) continuing operations Cash provided by (used in) operating activities - 2,712 (5,972 ) discontinued operations Cash provided by (used in) operating activities 20,789 (27,177 ) Cash flows from investing activities: Decrease in note receivable -- 182 Purchases of property and equipment (2,381 ) (2,425 ) Capitalized software costs (920 ) (1,717 ) (Increase) decrease in marketable securities 126,160 -- Cash provided by (used in) investing activities - 122,859 (3,960 ) continuing operations Cash provided by (used in) investing activities - (782 ) -- discontinued operations Cash provided by (used in) investing activities 122,077 (3,960 ) Cash flows from financing activities: Employee stock transactions 1,655 593 Repurchases of common stock (150,388 ) (22,431 ) Payments on capital lease obligations (401 ) (417 ) Tax benefit due to option exercises and restricted stock 297 53 units vesting Cash dividends paid (2,222 ) (1,765 ) Cash used in financing activities - continuing operations (151,059 ) (23,967 ) Cash used in financing activities - discontinued -- -- operations Cash used in financing activities (151,059 ) (23,967 ) Effect of exchange rate changes on cash and cash -- (3,040 ) equivalents Net decrease in cash and cash equivalents (8,193 ) (58,144 ) Cash and cash equivalents, beginning of period 70,472 119,605 Cash and cash equivalents, end of period $ 62,279 $ 61,461
MAXIMUS, Inc. Segment Information (Dollars in thousands) (Unaudited) The following table provides certain financial information for each of the Company's business segments: Three Months Ended December 31, 2008 %(1) 2009 %(1) Revenue: Operations $ 146,807 100 % $ 156,338 100 % Consulting 30,282 100 % 23,754 100 % Total 177,089 100 % 180,092 100 % Gross Profit: Operations 35,557 24.2 % 41,469 26.5 % Consulting 10,727 35.4 % 5,678 23.9 % Total 46,284 26.1 % 47,147 26.2 % Selling, general, and administrative expense: Operations 17,731 12.1 % 20,123 12.9 % Consulting 8,948 29.5 % 7,140 30.1 % Corporate/Other 359 NM (2) 75 NM (2) Total 27,038 15.3 % 27,338 15.2 % Operating income (loss) from continuing operations: Operations 17,826 12.1 % 21,346 13.7 % Consulting 1,779 5.9 % (1,462 ) (6.2 ) % Consolidating adjustments (359 ) NM (2) (75 ) NM (2) Total $ 19,246 10.9 % $ 19,809 11.0 %
(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 Quarter Fiscal Year 2009 Q1 08 Q2 08 Q3 08 Q4 08 Total FY 08 Q1 09 Diluted earnings per share from continuing operations- GAAP basis $ 0.59 $ 0.72 $ 0.92 ($0.80 ) $ 1.43 $ 0.67 Pro forma adjustments: Legal and settlement - 0.03 0.02 1.23 1.28 - charges Gain on sale of - - (0.13 ) - (0.13 ) - building Pre-ASR (0.03 ) - - - (0.03 ) - interest income Non-cash goodwill - - - 0.25 0.25 - impairment charge Severance - - - 0.03 0.03 - Subtotal pro forma ($0.03 ) $ 0.03 ($0.11 ) $ 1.51 $ 1.40 - adjustments Pro forma diluted earnings per $ 0.56 $ 0.75 $ 0.81 $ 0.71 $ 2.83 $ 0.67 share from continuing operations
Released February 5, 2009