MAXIMUS Reports Fiscal 2008 Results
Pro Forma Results from Continuing Operations In Line with Prior Guidance Company Reiterates Fiscal 2009 Earnings Outlook
RESTON, Va.--(BUSINESS WIRE)--
MAXIMUS (NYSE:MMS), a leading provider of government services, today reported results for its fourth quarter and fiscal year ended September 30, 2008, which reflects divestitures in fiscal 2008.
Highlights include:
-- Revenue for the fourth quarter increased 9% to $189.1 million
and for the full fiscal year grew 19% to $745.1 million
compared to the same periods last year,
-- The successful divestiture of three Systems businesses in the
fourth quarter which have been accounted for as discontinued
operations,
-- Pro forma earnings per diluted share from continuing
operations of $0.71 for the fourth quarter and $2.83 for the
full fiscal year, as presented in the supplemental pro forma
information provided on the last page of the financial tables,
-- Fourth quarter GAAP loss per diluted share of $0.09 and
diluted earnings per share of $1.55 for the full fiscal year,
-- New sales awards totaling $913 million at September 30, 2008
and a total pipeline of $1.8 billion at November 7, 2008,
-- Cash at September 30, 2008 of $120.6 million and no debt
outstanding.
Revenue for the fourth quarter increased 9% to $189.1 million compared to $173.7 million reported for the same period last year. For the full year, fiscal 2008 revenue increased 19% to $745.1 million compared to $626.2 million last year. This growth was driven by new and expanded work in the Operations Segment.
In fiscal 2008, MAXIMUS divested five divisions, three of which were completed in the fourth quarter. As a result, those operations are accounted for as discontinued operations. The Company's remaining core Operations and Consulting Segments are accounted for as continuing operations.
In the fourth quarter, pro forma diluted earnings per share from continuing operations totaled $0.71 and $2.83 for the full fiscal year, which is in line with the Company's prior guidance. This has been adjusted to reflect a benefit of $0.02 per diluted share from an insurance reimbursement, severance costs of $0.03 per diluted share, and a $7.6 million, or $0.25 per diluted share, non-cash goodwill impairment charge related to the Company's ERP division, which is now part of continuing operations.
On a GAAP basis, MAXIMUS reported a total fourth quarter net loss of $1.8 million, or $0.09 per share which includes (1) net income from continuing operations of $8.4 million, or $0.45 per diluted share and (2) a net loss of $10.2 million from discontinued operations. For the full year, net income totaled $29.9 million or $1.55 per diluted share for fiscal 2008 which includes (1) net income from continuing operations of $51.5 million and (2) a net loss of $21.6 million from discontinued operations.
"With a narrowed business focus on our core operations, MAXIMUS is now positioned as the leading pure play provider in the administration of government health and human services programs. This transformation creates a solid foundation for future growth during these uncertain economic times. We believe our core services are increasingly important under the new political landscape where the emphasis is expected to be on domestic health and human services programs," commented Richard Montoni, Chief Executive Officer of MAXIMUS.
Montoni continued, "We enter the new year with a strong backlog and record pipeline of new business. Our base of recurring revenue affords us a high level of visibility with approximately 87% of projected revenue in the form of backlog. While we are not immune to broader market conditions, the sale of our Systems businesses reduces our exposure to discretionary services that are more susceptible to budget cutbacks. Longer term, we are anticipating an increase in caseloads in health and human services programs, as well as opportunities to meet the increasing demand for eligibility and enrollment support services as states look for efficiencies through centralization of functions."
Operations Segment
The Operations Segment accounted for 84% of total Company revenue. Operations Segment revenue for the fourth quarter increased 14% to $163.5 million compared to $143.0 million in the prior-year period and for the full fiscal year increased 24% to $629.2 million compared to $507.5 million last year.
Operations Segment operating income for the fourth quarter was $22.2 million, which included approximately $1.0 million in non-reimbursable proposal expense, compared to $22.8 million in the fourth quarter of last year. For the full fiscal year, operating income for the Operations Segment totaled $85.7 million compared to $35.6 million in fiscal 2007. For the full fiscal year, improved profitability was driven primarily by the Company's health and workforce services projects, both domestic and abroad, and the transformation of the Texas contract under the direct services agreement.
Consulting Segment
Consulting Segment revenue was $25.5 million in the fiscal 2008 fourth quarter, compared to $30.7 million in the same period last year. For the full fiscal year, Consulting Segment revenue was $115.9 million, or 16% of total revenue, versus $118.7 million last year.
The Consulting Segment had a fourth quarter operating loss of $2.1 million compared to operating income of $1.9 million in the same period last year. For the full year, operating income totaled $1.4 million versus $7.7 million last year. The reduction in revenue and operating income for the fourth quarter and full year relates primarily to a fourth quarter project provision of approximately $2.7 million.
Backlog, Sales and Pipeline
All current and historical backlog and pipeline numbers have been reclassified to reflect the divestitures. Backlog at September 30, 2008 totaled $1.4 billion compared to $1.2 billion reported for the prior-year period. On an annualized basis, the Company estimates that approximately 87% of forecasted fiscal 2009 revenue is in the form of backlog.
Year-to-date signed contract wins at September 30, 2008 totaled $913 million, compared to $519 million reported last year. New contracts pending at September 30, 2008, (awarded but unsigned) totaled $107 million compared to $291 million reported last year. Sales opportunities (pipeline) at November 7, 2008, totaled $1.8 billion (consisting of $421 million in proposals pending, $341 million in proposals in preparation, and $1.0 billion in proposals tracking) compared to $1.3 billion the prior year.
Cash and Cash Flow Items
At September 30, 2008, cash and cash equivalents totaled $120.6 million. The Company generated net cash from operating activities from continuing operations of $9.0 million for the fourth quarter and $51.7 million for the full year. The Company generated free cash flow from continuing operations, defined as cash from operations less purchased property and equipment and capitalized software costs, of $5.2 million for the fourth quarter and $36.3 million for the full fiscal year.
The Company resumed share repurchases under its Board-authorized program in August and has since repurchased $34.1 million of its common stock. This includes $20 million repurchased after the close of the fourth quarter. As of November 4, 2008, the Company had $62.1 million available for the future repurchase of shares under its current program.
For the fourth fiscal quarter, Days Sales Outstanding (DSOs) from continuing operations totaled 78 days. The Company also paid a quarterly cash dividend of $0.10 per share on August 29, 2008.
Outlook
The Company is updating its fiscal 2009 revenue guidance to reflect the strengthening of the U.S. dollar against foreign currencies. The Company now expects revenue for the full fiscal year from continuing operations in the range of approximately $750 million to $775 million. The Company is reiterating its bottom-line guidance of diluted earnings per share for fiscal 2009 of $3.00 to $3.15. This reflects the favorable impact of completed share repurchase activities to date, offset by the impact of foreign currency rates.
Website Presentation, Conference Call and Webcast Information
MAXIMUS will host a conference call on November 13, 2008, at 8:30 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 November 21, 2008. Callers can access the replay by dialing: 877.660.6853 (Domestic)/201.612.7415 (International) Replay account number: 316 Replay conference ID number: 302929
MAXIMUS, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
September 30,
---------------------
2007 2008
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 70,472 $ 120,628
Marketable securities 126,210 --
Restricted cash 325 329
Accounts receivable -- billed, net 111,210 128,819
Accounts receivable -- unbilled 19,782 30,695
Current portion of note receivable -- 746
Deferred income taxes 17,409 10,812
Prepaid expenses and other current assets 8,087 9,276
Current assets of discontinued operations 45,242 193
--------- ---------
Total current assets 398,737 301,498
Property and equipment, net 34,329 33,994
Capitalized software, net 10,830 14,125
Deferred contract costs, net 8,116 5,324
Goodwill 62,376 60,659
Intangible assets, net 2,476 3,699
Note receivable -- 1,337
Deferred income taxes -- 7,722
Other assets 2,366 3,788
Noncurrent assets of discontinued operations 45,234 --
--------- ---------
Total assets $ 564,464 $ 432,146
====================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 45,711 $ 48,950
Accrued compensation and benefits 24,569 26,684
Current portion of deferred revenue 16,845 19,676
Current portion of income taxes payable 5,487 12,662
Current portion of capital lease obligations 1,627 417
Other accrued liabilities 1,387 3,891
Current liabilities of discontinued operations 35,966 11,028
--------- ---------
Total current liabilities 131,592 123,308
Capital lease obligations, less current portion 417 --
Deferred revenue, less current portion 10,143 8,315
Income taxes payable, less current portion -- 1,617
Deferred income taxes 12,912 --
--------- ---------
Total liabilities 155,064 133,240
Commitments and contingencies
Shareholders' equity:
Common stock, no par value; 60,000,000 shares
authorized; 22,194,489 and 18,302,368 shares
issued and outstanding at September 30, 2007
and 2008, at stated amount, respectively 299,846 314,420
Treasury stock, at cost; 4,490,073 and
8,635,130 shares at September 30, 2007 and
2008, respectively (124,637) (275,200)
Accumulated other comprehensive income 1,730 5,536
Retained earnings 232,461 254,150
--------- ---------
Total shareholders' equity 409,400 298,906
--------- ---------
Total liabilities and shareholders' equity $ 564,464 $ 432,146
========= =========
MAXIMUS, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended Year Ended
September 30, September 30,
------------------ ------------------
2007 2008 2007 2008
-------- -------- -------- --------
Revenue $173,712 $189,069 $626,231 $745,133
Cost of revenue 126,204 138,260 478,507 543,389
-------- -------- -------- --------
Gross profit 47,508 50,809 147,724 201,744
Selling, general and
administrative expenses 23,233 30,900 104,632 115,649
Gain on sale of building -- -- -- 3,938
Gain on sale of Corrections
Services business -- -- 451 --
Legal and settlement expense,
net of reimbursed insurance
claims 2,324 (773) 44,438 858
Goodwill impairment -- 7,600 -- 7,600
-------- -------- -------- --------
Income (loss) from operations 21,951 13,082 (895) 81,575
Interest and other income, net 2,581 325 5,804 2,423
-------- -------- -------- --------
Income before income taxes 24,532 13,407 4,909 83,998
Provision for income taxes 10,301 4,979 12,081 32,517
-------- -------- -------- --------
Income (loss) from
continuing operations 14,231 8,428 (7,172) 51,481
Discontinued operations, net
of income taxes:
Loss from discontinued
operations (62) (2,827) (1,083) (15,969)
Loss on disposal -- (7,361) -- (5,635)
-------- -------- -------- --------
Loss from discontinued
operations (62) (10,188) (1,083) (21,604)
-------- -------- -------- --------
Net income (loss) $ 14,169 $ (1,760) $ (8,255) $ 29,877
======== ======== ======== ========
Basic earnings (loss) per
share:
Income (loss) from
continuing operations $ 0.64 $ 0.45 $ (0.33) $ 2.70
Loss from discontinued
operations -- (0.54) (0.05) (1.13)
-------- -------- -------- --------
Basic earnings (loss) per
share $ 0.64 $ (0.09) $ (0.38) $ 1.57
======== ======== ======== ========
Diluted earnings (loss) per
share:
Income (loss) from
continuing operations $ 0.63 $ 0.45 $ (0.33) $ 2.67
Loss from discontinued
operations -- (0.54) (0.05) (1.12)
-------- -------- -------- --------
Diluted earnings (loss) per
share $ 0.63 $ (0.09) $ (0.38) $ 1.55
======== ======== ======== ========
Dividends per share $ 0.10 $ 0.10 $ 0.40 $ 0.40
======== ======== ======== ========
Weighted average shares
outstanding:
Basic 22,177 18,540 21,870 19,060
======== ======== ======== ========
Diluted 22,554 18,742 21,870 19,305
======== ======== ======== ========
MAXIMUS, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
--------------------
Year Ended
September 30,
--------------------
2007 2008
--------- ----------
Cash flows from operating activities:
Net income (loss) $ (8,255) $ 29,877
Adjustments to reconcile net income to net cash
provided by operating activities:
Loss from discontinued operations 1,083 21,604
Depreciation 9,889 9,132
Amortization 2,450 3,396
Impairment of goodwill -- 7,600
Deferred income taxes (12,598) (14,274)
Gain on sale of Corrections Services business (451) --
Gain on sale of building -- (3,938)
Deferred interest income on note receivable -- 147
Non-cash equity based compensation 3,962 9,123
Changes in assets and liabilities, net of
effects from divestitures:
Accounts receivable - billed (2,039) (16,000)
Accounts receivable - unbilled 1,750 (10,913)
Prepaid expenses and other current assets (216) (1,173)
Deferred contract costs 3,049 2,792
Other assets 4,375 (227)
Accounts payable 1,694 3,014
Accrued compensation and benefits 4,085 2,115
Deferred revenue 2,254 1,003
Income taxes 14,490 11,223
Other liabilities 1,167 (2,778)
-------- ---------
Cash provided by operating activities -
continuing operations 26,689 51,723
Cash provided by operating activities -
discontinued operations 24,501 4,850
-------- ---------
Cash provided by operating activities 51,190 56,573
Cash flows from investing activities:
Proceeds from sales of discontinued operations,
net of transaction costs -- 37,678
Proceeds from sale of Corrections Services
business, net of transaction costs 1,871 --
Proceeds from sale of building, net of
transaction costs -- 5,929
Acquisition of business, net of cash acquired -- (3,150)
Decrease in note receivable -- 237
Purchases of property and equipment (12,390) (10,318)
Capitalized software costs (2,350) (5,131)
(Increase) decrease in marketable securities (8,895) 126,210
-------- ---------
Cash provided by (used in) investing activities
- continuing operations (21,764) 151,455
Cash used in investing activities -
discontinued operations (3,090) (2,995)
-------- ---------
Cash provided by (used in) investing activities (24,854) 148,460
Cash flows from financing activities:
Employee stock transactions 12,953 4,423
Repurchases of common stock -- (164,466)
Price adjustment under Accelerated Share
Repurchase agreement -- 13,903
Payments on capital lease obligations (1,690) (1,627)
Tax benefit due to option exercises and
restricted stock units vesting 2,078 689
Cash dividends paid (8,750) (7,799)
-------- ---------
Cash provided by (used in) financing
activities - continuing operations 4,591 (154,877)
Cash provided by financing activities -
discontinued operations -- --
-------- ---------
Cash provided by (used in) financing
activities 4,591 (154,877)
-------- ---------
Net increase in cash and cash equivalents 30,927 50,156
Cash and cash equivalents, beginning of period 39,545 70,472
-------- ---------
Cash and cash equivalents, end of period $ 70,472 $ 120,628
======== =========
MAXIMUS, Inc.
Segment Information - Income (loss) from Continuing Operations (1)
(Dollars in thousands)
(Unaudited)
Three Months Ended Year Ended
September 30, September 30,
------------------- -------------------
2007 2008 2007 2008
--------- --------- --------- ---------
Revenue:
Operations $142,988 $163,520 $507,486 $629,226
Consulting 30,724 25,549 118,745 115,907
-------- -------- -------- --------
Total 173,712 189,069 626,231 745,133
-------- -------- -------- --------
Gross Profit:
Operations 37,580 43,715 102,886 163,308
Consulting 9,928 7,094 44,838 38,436
-------- -------- -------- --------
Total 47,508 50,809 147,724 201,744
-------- -------- -------- --------
Selling, General, and
Administrative expense:
Operations 14,814 21,541 67,271 77,615
Consulting 8,015 9,206 37,090 37,011
Corporate/Other 404 153 271 1,023
-------- -------- -------- --------
Total 23,233 30,900 104,632 115,649
-------- -------- -------- --------
Income (loss) from Operations:
(1)
Operations 22,766 22,174 35,615 85,693
Consulting 1,913 (2,112) 7,748 1,425
Consolidating adjustments (404) (153) (271) (1,023)
-------- -------- -------- --------
Subtotal: Segment Operating
Income 24,275 19,909 43,092 86,095
-------- -------- -------- --------
Gain on sale of Corrections
Services business -- -- 451 --
Gain on sale of building -- -- -- 3,938
Legal and settlement
expense, net of reimbursed
insurance claims (2,324) 773 (44,438) (858)
Goodwill impairment -- (7,600) -- (7,600)
-------- -------- -------- --------
Consolidated total $ 21,951 $ 13,082 $ (895) $ 81,575
======== ======== ======== ========
Operating margin (loss)
percentage:
Operations 15.9% 13.6% 7.0% 13.6%
======== ======== ======== ========
Consulting 6.2% -8.3% 6.5% 1.2%
======== ======== ======== ========
Subtotal: Segment Operating
Income 14.0% 10.5% 6.9% 11.6%
======== ======== ======== ========
Consolidated total 12.6% 6.9% -0.1% 10.9%
======== ======== ======== ========
(1) Before income taxes.
MAXIMUS, Inc.
Supplemental Pro Forma Earnings per Diluted Share from Continuing
Operations
Fiscal Year 2008
Q1 08 Q2 08 Q3 08 Q4 08 Total
------- ----- ------- ------- -------
Diluted earnings per share from
continuing operations-
GAAP basis $ 0.59 $0.72 $ 0.92 $ 0.45 $ 2.68
-------------------------------------
Pro forma adjustments:
Legal and settlement charges
(credit) - 0.03 0.02 (0.02) 0.03
Gains on sale of building - - (0.13) - (0.13)
Pre-ASR interest income (0.03) - - - (0.03)
Non-cash goodwill impairment
charge - - - $ 0.25 $ 0.25
Severance - - - $ 0.03 $ 0.03
-------------------------------------
Subtotal pro forma
adjustments $(0.03) $0.03 $(0.11) $ 0.26 $ 0.15
-------------------------------------
-------------------------------------
Pro forma diluted earnings per
share from continuing
operations $ 0.56 $0.75 $ 0.81 $ 0.71 $ 2.83
-------------------------------------
Source: MAXIMUS
Released November 13, 2008