MAXIMUS Reports Second Quarter Results

- Reports Record Revenue of $210.6 million, Diluted EPS of $0.51 and Sells Two Non-Core Businesses -

RESTON, Va.--(BUSINESS WIRE)--

MAXIMUS (NYSE:MMS), a leading provider of government services, today reported results for its second fiscal quarter ended March 31, 2008.

    Highlights include:

    --  Revenue of $210.6 million, an increase of 18%, compared to the
        same period last year,

    --  Net income of $9.6 million and diluted earnings per share of
        $0.51,

    --  Cash and cash equivalents at March 31, 2008, totaling $63.4
        million and cash flow from operations of $4.5 million,

    --  Days Sales Outstanding of 76 days at March 31, 2008,

    --  New sales awards of $615 million and total pipeline of $1.6
        billion at May 5, 2008, and,

    --  Subsequent to the March 31, 2008 quarter end, the Company
        closed the sale of two non-core businesses including the
        Security Solutions division and Unison-MAXIMUS subsidiary for
        after-tax gains totaling $2.2 million.

Revenue for the second quarter increased 18% to $210.6 million compared to $179.1 million reported for the same period last year. All revenue growth in the quarter was organic and driven by the Operations Segment. Net income increased to $9.6 million, or $0.51 per diluted share, compared to net income of $2.4 million, or $0.11 per diluted share, for the same period last year.

Second quarter net income was impacted by approximately $5.4 million, or $0.17 per diluted share in charges which include a $2.2 million charge related to the contract modification on a large Systems project, a $2.3 million charge related to a legacy claiming project which may be recovered pending the outcome of the client's recovery appeal, and approximately $0.9 million of legal expense principally related to ongoing arbitration. Year-over-year revenue and margin expansion was driven by the continuing strong performance of the Operations Segment. This Segment benefited from the Company's optimization efforts, new work with favorable margins, and the transformation of the Texas project to a direct service agreement.

Richard Montoni, Chief Executive Officer of MAXIMUS, commented, "The Operations Segment, which represented more than 75% of our revenue in the quarter, again delivered strong financial results on the success of our disciplined go-to-market approach and the optimization of our business portfolio. We are committed to replicating this progress in other areas of our business, including Systems, where we are focused on resolving remaining challenges and improving the Segment's overall performance. In addition, we are also pursuing a parallel path of continuing to divest certain non-core assets as we further solidify our position as the leading pure-play solution in our core government health and human services outsourcing."

Operations Segment

Operations Segment revenue accounted for 76% of total Company revenue in the second quarter and increased 33% to $159.8 million compared to $120.4 million for the second quarter of last year. Second quarter operating income for the Operations Segment totaled $23.6 million, compared to $7.1 million reported for the same period of last year. The year-over-year improvements in revenue and profitability continue to reflect the optimization of the Company's project portfolio, new organic growth, and the transformation of the Texas project. As a result, the Company now believes the Segment can deliver ongoing operating margins in the range of 10% to 15% on an annualized basis.

Consulting Segment

For the second quarter, Consulting Segment revenue was $20.2 million, or 10% of total Company revenue, compared to $23.2 million reported for the same period last year. Second quarter financial results were impacted by a $2.3 million charge related to a legacy claiming project which may be recovered pending the outcome of the client's recovery appeal. As a result, the Segment lost approximately $0.8 million in the quarter. The Segment continues to make investments and gain traction in new markets, such as Medicaid Fraud, Waste and Abuse, as it transitions away from contingent-based claiming work. In addition, the Company announced today the sale of Unison-MAXIMUS through a division management-led buyout. Unison-MAXIMUS is an airport, retail, and financial consulting business that, while a profitable contributor, was outside the Company's core health and human services focus.

Systems Segment

Systems Segment revenue, which represented 14% of total Company revenue, totaled $30.5 million in the second quarter versus $35.4 million in the prior-year period. The Systems Segment reported a second quarter operating loss of $5.9 million compared to a gain of $0.1 million for the same period last year. Included in Segment results was a $2.2 million charge necessary to modify a large Education Systems contract which now outlines terms and conditions needed to achieve project completion. Strong financial results from the Asset Solutions and ERP divisions were offset by weakness in the Justice and Education divisions. In a separate announcement, MAXIMUS announced the sale of its Security Solutions division to Cogent Systems as part of its efforts to divest non-core assets.

Sales and Pipeline

Year-to-date signed contract wins at May 5, 2008, totaled $615 million, compared to $302 million reported last year. New contracts pending at May 5, 2008, (awarded but unsigned) totaled $149 million compared to $82 million reported last year. Sales opportunities (pipeline) at May 5, 2008, totaled $1.6 billion (consisting of $581 million in proposals pending, $121 million in proposals in preparation, and $908 million in proposals tracking) compared to $1.2 billion the prior year.

Balance Sheet and Cash Flows

At March 31, 2008, cash and cash equivalents totaled $63.4 million. MAXIMUS generated net cash from operations of $4.5 million and free cash flow of $1.5 million (the Company defines free cash flow as cash from operations less purchased property and equipment and capitalized software costs). Days Sales Outstanding (DSOs) were 76 days at March 31, 2008. MAXIMUS paid a quarterly cash dividend of $0.10 per share on February 29, 2008.

Outlook

The sale of two businesses and ongoing softness in the Systems Segment has resulted in the revision of the Company's financial outlook for fiscal 2008. The Company now expects revenue in the range of $830 million to $850 million and GAAP basis diluted earnings per share in the range of $2.55 to $2.70. This GAAP basis guidance includes an expected gain of approximately $0.21 to $0.24 from the sale of the Security Solutions division and the Unison-MAXIMUS Subsidiary, as well as the pending sale of the Company's McLean, Virginia property. Additionally, GAAP basis guidance also includes $0.07 of anticipated future legal expenses. This guidance excludes any gains or losses from potential future divestiture or restructuring activities.

Mr. Montoni concluded, "Today's announced sale of our Security Solutions and Unison-MAXIMUS businesses underscores our commitment and progress towards sharpening our focus around our health and human services operations. Our core business operations are generating growth in revenue and income and have an improved sustainable margin outlook. We are keenly focused on improving or divesting underperforming areas of our business and we intend to drive sustainable improvement as expeditiously as possible. The prospects for outsourced government health and human services, both domestically and internationally, are encouraging. Through our highly regarded brand and renowned domain expertise, we have fortified our position as the leading government health and human services outsourcing provider."

    Website Presentation, Conference Call and Webcast Information

MAXIMUS will host a conference call this morning, May 8, 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)

For those unable to listen to the live call, a replay will be
 available through May 16, 2008. Callers can access the replay by
 dialing:

1-877-660-6853 (Domestic)/ 1-201-612-7415
Replay account number: 316
Replay conference ID number: 283775

MAXIMUS is one of America's leading government services companies devoted to providing program management, consulting and information technology services. The Company has more than 6,000 employees located in more than 220 offices in the United States, Canada and Australia. In 1999, 2001, 2002, 2003, and 2005 MAXIMUS was selected by Forbes Magazine as one of the Best 200 Small Companies in America for that year. 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 Annual Report on Form 10-K filed with the Securities and Exchange Commission (file number 001-12997).

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 discloses certain financial results excluding certain items and provides certain additional information because 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,
                                                 2007         2008
                                             ------------- -----------
                                                           (unaudited)
                                             ------------- -----------
                   ASSETS
Current assets:
  Cash and cash equivalents                  $     70,472  $   63,420
  Marketable securities                           126,210          --
  Restricted cash                                     325         327
  Accounts receivable -- billed, net of
   reserves of $29,939 and $31,721                132,962     122,692
  Accounts receivable -- unbilled                  42,200      52,314
  Income taxes receivable                              --       6,307
  Deferred income taxes                            17,409       9,490
  Prepaid expenses and other current assets         9,159       9,412
                                             ------------  ----------
    Total current assets                          398,737     263,962

Property and equipment, at cost                    83,823      87,752
  Less accumulated depreciation and
   amortization                                   (47,922)    (53,419)
                                             ------------  ----------
    Property and equipment, net                    35,901      34,333
Capitalized software                               61,459      64,668
  Less accumulated amortization                   (31,919)    (35,485)
                                             ------------  ----------
    Capitalized software, net                      29,540      29,183
Deferred contract costs, net                        8,116       6,273
Goodwill                                           86,086      86,086
Intangible assets, net                              3,603       2,827
Other assets, net                                   2,481       3,605
                                             ------------  ----------
    Total assets                             $    564,464  $  426,269
                                             ============  ==========

    LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Accounts payable                           $     54,425  $   53,391
  Accrued compensation and benefits                29,449      28,390
  Current portion of deferred revenue              38,545      33,151
  Current portion of income taxes payable           5,487          --
  Current portion of capital lease
   obligations                                      1,627       1,238
  Other accrued liabilities                         2,059         998
                                             ------------  ----------
    Total current liabilities                     131,592     117,168
Capital lease obligations, less current
 portion                                              417          --
Deferred revenue, less current portion             10,143       9,361
Income taxes payable, less current portion             --       2,109
Deferred income taxes                              12,912      12,752
                                             ------------  ----------
    Total liabilities                             155,064     141,390

Shareholders' equity:
  Common stock, no par value; 60,000,000
   shares authorized; 22,194,489 and
   18,646,607 shares issued and outstanding
   at September 30, 2007 and March 31, 2008,
   at stated amount, respectively                 299,846     309,450
  Treasury stock, at cost; 4,490,073 and
   8,248,530 shares at September 30, 2007
   and March 31, 2008, respectively              (124,637)   (275,025)
Accumulated other comprehensive income              1,730       2,089
Retained earnings                                 232,461     248,365
                                             ------------  ----------
    Total shareholders' equity                    409,400     284,879
                                             ------------  ----------
    Total liabilities and shareholders'
     equity                                  $    564,464  $  426,269
                                             ============  ==========


                            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,
                                  ----------------- ------------------
                                    2007     2008     2007      2008
                                  -------- -------- --------- --------
Revenue                           $179,077 $210,584 $340,215  $412,534
Cost of revenue                    136,202  156,694  277,062   305,877
                                  -------- -------- --------  --------
  Gross profit                      42,875   53,890   63,153   106,657
Selling, general and
 administrative expenses            34,451   37,173   69,104    73,426
Legal and settlement expense         6,104      931    9,104       931
                                  -------- -------- --------  --------
  Income (loss) from operations      2,320   15,786  (15,055)   32,300
Interest and other income, net       1,615      107    2,092     1,608
Gain on sale of business                --       --      684        --
                                  -------- -------- --------  --------
  Income (loss) before income
   taxes                             3,935   15,893  (12,279)   33,908
Provision (benefit) for income
 taxes                               1,573    6,266   (4,246)   13,676
                                  -------- -------- --------  --------
  Net income (loss)               $  2,362 $  9,627 $ (8,033) $ 20,232
                                  ======== ======== ========  ========

Earnings (loss) per share :
  Basic                           $   0.11 $   0.52 $  (0.37) $   1.04
                                  ======== ======== ========  ========
  Diluted                         $   0.11 $   0.51 $  (0.37) $   1.02
                                  ======== ======== ========  ========

Dividends per share               $   0.10 $   0.10 $   0.20  $   0.20
                                  ======== ======== ========  ========

Weighted average shares
 outstanding:
  Basic                             21,714   18,537   21,651    19,527
                                  ======== ======== ========  ========
  Diluted                           21,972   18,763   21,651    19,803
                                  ======== ======== ========  ========


                            MAXIMUS, Inc.
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                        (Dollars in thousands)
                             (Unaudited)

                                                       Six Months
                                                    Ended March 31,
                                                  --------------------
                                                    2007       2008
                                                  --------- ----------
Cash flows from operating activities:
  Net income (loss)                               $ (8,033) $  20,232
  Adjustments to reconcile net income to net cash
   provided by operating activities:
    Depreciation                                     4,754      5,497
    Amortization                                     5,271      4,341
    Deferred income taxes                           (7,930)     7,522
    Gain on sale of business                          (684)        --
    Non-cash equity based compensation               1,401      5,754

  Change in assets and liabilities, net of
   effects from sale of business:
    Accounts receivable - billed                    26,726     10,270
    Accounts receivable - unbilled                   7,606    (10,114)
    Prepaid expenses and other current assets         (264)      (253)
    Deferred contract costs                          2,683      1,843
    Other assets                                     2,357        279
    Accounts payable                                (2,534)    (1,034)
    Accrued compensation and benefits                 (291)    (1,059)
    Deferred revenue                               (12,577)    (6,176)
    Income taxes                                     5,325    (11,107)
    Other liabilities                                1,218       (702)
                                                  --------  ---------

  Net cash provided by operating activities         25,028     25,293

Cash flows from investing activities:
    Proceeds from sale of business, net of
     transactions costs                              2,171         --
    Purchases of property and equipment             (4,242)    (3,929)
    Capitalized software costs                      (1,485)    (3,209)
    (Increase) decrease in marketable securities   (17,094)   126,210
                                                  --------  ---------

  Net cash provided by (used in) investing
   activities                                      (20,650)   119,072

Cash flows from financing activities:
    Employee stock transactions                      3,418      3,274
    Repurchases of common stock                         --   (150,388)
    Payments on capital lease obligations             (901)      (805)
    Tax benefit due to option exercises and
     restricted stock units vesting                    762        576
    Cash dividends paid                             (4,331)    (4,074)
                                                  --------  ---------

  Net cash used in financing activities             (1,052)  (151,417)
                                                  --------  ---------

  Net increase (decrease) in cash and cash
   equivalents                                       3,326     (7,052)

Cash and cash equivalents, beginning of period      39,545     70,472
                                                  --------  ---------

Cash and cash equivalents, end of period          $ 42,871  $  63,420
                                                  ========  =========

                            MAXIMUS, Inc.
                         Segment Information
                            (In thousands)
                             (Unaudited)

                                  Three Months         Six Months
                                 Ended March 31,     Ended March 31,
                               ------------------- -------------------
                                 2007      2008      2007      2008
                               --------- --------- --------- ---------
Revenue:
  Consulting                   $ 23,224    20,216  $ 47,880    42,372
  Systems                        35,412    30,523    69,953    64,518
  Operations                    120,441   159,845   222,382   305,644
                               --------- --------- --------- ---------
    Total                      $179,077  $210,584  $340,215  $412,534
                               ========= ========= ========= =========

Gross Profit:
  Consulting                   $  9,253     6,808  $ 20,160    15,296
  Systems                         9,914     5,150    18,465    14,087
  Operations                     23,708    41,932    24,528    77,274
                               --------- --------- --------- ---------
    Total                      $ 42,875  $ 53,890  $ 63,153  $106,657
                               ========= ========= ========= =========

Selling, General, and
 Administrative expense:
  Consulting                   $  8,221     7,621  $ 16,313    14,958
  Systems                         9,821    11,077    19,969    23,155
  Operations                     16,650    18,382    33,514    34,990
  Corporate/Other                  (241)       93      (692)      323
                               --------- --------- --------- ---------
    Total                      $ 34,451  $ 37,173  $ 69,104  $ 73,426
                               ========= ========= ========= =========

Income (loss) from Operations:
  Consulting                   $  1,032  $   (813) $  3,847  $    338
  Systems                            93    (5,927)   (1,504)   (9,068)
  Operations                      7,058    23,550    (8,986)   42,284
  Consolidating adjustments         241       (93)      692      (323)
  Legal and settlement expense   (6,104)     (931)   (9,104)     (931)
                               --------- --------- --------- ---------
    Total                      $  2,320  $ 15,786  $(15,055) $ 32,300
                               ========= ========= ========= =========

Source: MAXIMUS