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MAXIMUS Reports Fiscal 2011 Third Quarter Results

08/04/2011

- Company Delivers Record Revenue and Adjusted EPS, Raises Fiscal 2011 Outlook -

RESTON, Va.--(BUSINESS WIRE)--MAXIMUS (NYSE: MMS), a leading provider of government services worldwide, today reported financial results for its fiscal third quarter ended June 30, 2011.

Key highlights include:

  • Third quarter revenue grew 13% to a record $238.3 million compared to the same period last year.
  • Adjusted diluted earnings per share from continuing operations for the third quarter increased 22% to a record level of $0.56 compared to adjusted diluted EPS of $0.46 in the prior-year period.
  • Cash and cash equivalents totaled $204.0 million at June 30, 2011, while share repurchases totaled $9.4 million during the quarter.
  • Year-to-date signed awards were $1.4 billion at August 2, 2011.
  • The Company completed a two-for-one stock split effective June 30, 2011 and in May announced a 20% increase to its quarterly cash dividend payable on August 31, 2011.

Revenue for the fiscal 2011 third quarter increased 13% (8% on a constant currency basis) to $238.3 million compared to $211.5 million reported for the same period last year. Income from continuing operations, net of taxes, increased 24% to $20.0 million for the third quarter compared to $16.1 million last year. For the third quarter, adjusted diluted earnings per share from continuing operations increased 22% to $0.56 compared to $0.46 for the same period last year. All numbers reflect the recent two-for-one stock split.

Revenue and profit growth were driven principally by strong operational performance in both segments from new work and expansion of existing contracts, which resulted in an operating margin of 13.1%, excluding legal and settlement expense. Results in the quarter exceeded expectations and benefitted from strong performance in Australia, the acceleration of revenue and profit in the United Kingdom, and favorable currency rates in the quarter.

“Record results for the third quarter demonstrate our solid execution and continued strong performance, which positions us well for fiscal 2012,” commented Richard A. Montoni, Chief Executive Officer of MAXIMUS. “In June, we successfully launched operations in the United Kingdom for the new Work Programme and operations are trending as expected. We are also actively marketing and responding to the increase in activities under the Affordable Care Act, as states are working to solidify their plans for Medicaid expansion and health insurance exchanges.”

Health Services Segment

Health Services Segment revenue for the third quarter of fiscal 2011 increased 11% to $141.8 million compared to $127.3 million in the same period last year, driven by new work and expansion of existing contracts. Operating income for the third quarter increased 10% to $15.9 million compared to $14.5 million for the same period last year. Segment operating margin for the third quarter was 11.2%.

Human Services Segment

Human Services Segment revenue for the fiscal 2011 third quarter increased 15% (4% on a constant currency basis) to $96.5 million compared to $84.2 million in the prior-year period. Revenue growth was driven by the Company’s international welfare-to-work business in Australia and the United Kingdom. Operating income for the third quarter increased 40% to $14.9 million compared to $10.7 million for the same period last year. Segment operating margin for the third quarter was 15.4%.

New Sales and Pipeline

At August 2, 2011 fiscal year-to-date signed contract wins totaled $1.4 billion compared to $379 million reported last year. New contracts pending (awarded but unsigned) totaled $338 million compared to $916 million last year. Sales opportunities (pipeline) at August 2, 2011 totaled $1.8 billion (consisting of $378 million in proposals pending, $39 million in proposals in preparation and $1.4 billion in proposals tracking) compared to $1.8 billion the prior year.

Balance Sheet and Cash Flows

Cash and cash equivalents totaled $204.0 million at June 30, 2011. For the fiscal 2011 third quarter, cash provided by operating activities from continuing operations totaled $34.1 million with free cash flow of $27.8 million. The Company defines free cash flow as cash provided by operating activities from continuing operations less property, equipment and capitalized software.

Days Sales Outstanding (DSO) from continuing operations were favorable at 54 days and driven by the timing of collections.

On May 31, 2011, MAXIMUS paid a quarterly cash dividend of $2.6 million, which reflected the 25% dividend increase declared in January. During the third quarter, the Company completed a two-for-one stock split effective June 30, 2011 and announced another 20% increase to its quarterly cash dividend. The cash dividend of $0.09 is payable on August 31, 2011 to shareholders of record on August 15, 2011.

During the fiscal 2011 third quarter, the Company purchased 238,600 shares of MAXIMUS common stock for $9.4 million under the Board-authorized share repurchase program. At June 30, 2011, the Company had $115.4 million available under the program for future repurchases. MAXIMUS remains committed to this program and since 2008, has repurchased 12.4 million shares of common stock for $246.8 million through August 2, 2011.

Outlook

The Company is raising its fiscal 2011 revenue and earnings guidance as a result of strong performance in the third quarter. MAXIMUS now expects revenue from continuing operations in the range of $925 million to $935 million and adjusted diluted earnings per share from continuing operations in the range of $2.15 to $2.20.

Mr. Montoni concluded, “Our favorable performance in the quarter, in addition to our fourth quarter outlook, has led us to increase our full-year guidance and demonstrates our commitment to profitable growth and delivering long-term shareholder value. Additionally, we completed a two-for-one stock split and announced an additional 20% increase to our quarterly cash dividend, which underscores the confidence we have in our future. With a healthy balance sheet and strong cash flows, we are well positioned to fund our future growth while providing cash returns to shareholders."

Website Presentation, Conference Call and Webcast Information

MAXIMUS will host a conference call this morning, August 4, 2011, at 9:00 a.m. (ET). 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 11, 2011. Callers can access the replay by calling:

877.660.6853 (Domestic)/201.612.7415 (International)
Replay account number: 316
Replay conference ID number: 376023

About MAXIMUS

MAXIMUS is a leading provider of government services worldwide and is devoted to providing health and human services program management and consulting services to its clients. The Company has more than 6,500 employees located in more than 220 offices in the United States, Canada, Australia 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.

   
MAXIMUS, Inc.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
 
June 30, September 30,
2011 2010
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 204,016 $ 155,321
Restricted cash 5,097 4,182
Accounts receivable — billed, net of reserves of $3,792 and $1,845 125,747 136,260
Accounts receivable — unbilled 16,394 17,245
Income taxes receivable 19,127 4,149
Deferred income taxes 17,301 13,290
Prepaid expenses and other current assets 24,223 25,702
Total current assets 411,905 356,149
 
Property and equipment, net 50,426 48,873
Capitalized software, net 27,589 24,715
Goodwill 73,252 71,251
Intangible assets, net 6,409 7,778
Deferred contract costs, net 8,617 6,708
Deferred income taxes 676 1,844
Deferred compensation plan assets 9,171 8,317
Other assets, net 2,022 2,106
Total assets $ 590,067 $ 527,741
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 61,552 $ 49,200
Accrued compensation and benefits 41,134 40,807
Deferred revenue 45,109 58,070
Acquisition-related contingent consideration 2,969 923
Income taxes payable 9,420 7,120
Other accrued liabilities 6,100 7,934
Liabilities of discontinued operations 634
Total current liabilities 166,284 164,688
Deferred revenue, less current portion 4,494 4,083
Long-term debt 1,794 1,411
Acquisition-related contingent consideration, less current portion 406 2,138
Income taxes payable, less current portion 1,784 1,793
Deferred income tax liability 7,824 4,946
Deferred compensation plan liabilities 11,507 9,893
Total liabilities 194,093 188,952
 
Shareholders’ equity:
Common stock, no par value 374,267 352,696
Treasury stock, at cost; 21,140,926 and 20,627,168 shares at June 30, 2011 and September 30, 2010, respectively (377,247 ) (359,366 )
Accumulated other comprehensive income 23,154 14,530
Retained earnings 375,800 330,929
Total shareholders’ equity 395,974 338,789
Total liabilities and shareholders’ equity $ 590,067 $ 527,741
   
MAXIMUS, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 
Three Months Nine Months
Ended June 30, Ended June 30,
2011   2010 2011   2010
Revenue $ 238,296 $ 211,527 $ 679,526 $ 619,233
Cost of revenue 171,897 154,514 494,102 459,494
Gross profit 66,399 57,013 185,424 159,739
Selling, general and administrative expenses 35,259 31,658 97,498 87,874
Legal and settlement expense (recovery), net 361 361 (5,351 )
Operating income from continuing operations 30,779 25,355 87,565 77,216
Interest and other income, net 961 442 2,371 727
Income from continuing operations before income taxes 31,740 25,797 89,936 77,943
Provision for income taxes 11,780 9,672 33,351 29,227
Income from continuing operations 19,960 16,125 56,585 48,716
 
Discontinued operations, net of income taxes:
Income (loss) from discontinued operations (65 ) 1,200 (330 ) (20 )
Loss on disposal (3 ) (662 )
Income (loss) from discontinued operations (68 ) 1,200 (992 ) (20 )
 
Net income $ 19,892 $ 17,325 $ 55,593 $ 48,696
 
Basic earnings (loss) per share:
Income from continuing operations $ 0.58 $ 0.46 $ 1.64 $ 1.39
Income (loss) from discontinued operations (0.01 ) 0.04 (0.03 )
Basic earnings per share $ 0.57 $ 0.50 $ 1.61 $ 1.39
 
Diluted earnings (loss) per share:
Income from continuing operations $ 0.56 $ 0.45 $ 1.59 $ 1.35
Income (loss) from discontinued operations 0.03 (0.03 )
Diluted earnings per share $ 0.56 $ 0.48 $ 1.56 $ 1.35
 
Dividends paid per share $ 0.075 $ 0.06 $ 0.21 $ 0.18
Dividends declared per share $ 0.165 $ 0.06 $ 0.30 $ 0.18
 
Weighted average shares outstanding:
Basic 34,708

34,847

 

34,496 34,952
Diluted 35,803 36,008 35,612 36,030
   
MAXIMUS, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
Three Months Nine Months
Ended June 30, Ended June 30,
2011   2010 2011   2010
Cash flows from operating activities:
Net income $ 19,892 $ 17,325 $ 55,593 $ 48,696
Adjustments to reconcile net income to net cash provided by operating activities:
Loss from discontinued operations 68 (1,200 ) 992 20
Depreciation and amortization 5,696 4,630 16,479 13,648
Deferred income taxes (774 ) (1,126 ) 372 (1,281 )
Deferred interest income on note receivable 84 263
Non-cash equity based compensation 2,441 2,030 6,936 5,983
Change in assets and liabilities:
Accounts receivable — billed 12,483 6,118 10,887 10,895
Accounts receivable — unbilled (1,162 ) 1,891 859 (2,539 )
Prepaid expenses and other current assets 220 (1,590 ) 1,889 (2,004 )
Deferred contract costs (620 ) 392 (1,849 ) 1,358
Accounts payable (4,827 ) 6,762 7,460 8,568
Accrued compensation and benefits 6,061 3,844 (506 ) 6,761
Deferred revenue (2,679 ) 8,423 (13,975 ) 22,549
Income taxes (2,883 ) 5,751 (13,217 ) 9,519
Other assets and liabilities 183 (3,745 ) (1,435 ) (2,087 )
Cash provided by continuing operations 34,099 49,589 70,485 120,349
Cash used in discontinued operations (135 ) (1,147 ) (1,086 ) (2,152 )
Cash provided by operating activities 33,964 48,442 69,399 118,197
 
Cash flows from investing activities:
Acquisition of businesses, net of cash acquired (10,673 )
Purchases of property and equipment (4,499 ) (4,352 ) (10,963 ) (10,383 )
Capitalized software costs (1,821 ) (1,982 ) (5,693 ) (6,307 )
Proceeds from note receivable 65 83 65 473
Cash used in investing activities — continuing ops (6,255 ) (6,251 ) (16,591 ) (26,890 )
 
Cash flows from financing activities:
Employee stock transactions 1,037 1,064 9,050 2,679
Repurchases of common stock (8,515 ) (8,007 ) (16,974 ) (22,518 )
Tax benefit due to option exercises and restricted stock units vesting 1,409 314 5,227 1,424
Issuance of long-term debt 4 333 304 326
Cash dividends paid (2,598 ) (2,094 ) (7,241 ) (6,295 )
Cash used in financing activities — continuing ops (8,663 ) (8,390 ) (9,634 ) (24,384 )
 
Effect of exchange rate changes on cash and cash equivalents 1,815 (2,104 ) 5,521 (1,679 )
 
Net increase in cash and cash equivalents 20,861 31,697 48,695 65,244
 
Cash and cash equivalents, beginning of period 183,155 121,362 155,321 87,815
 
Cash and cash equivalents, end of period $ 204,016 $ 153,059 $ 204,016 $ 153,059
   
MAXIMUS, Inc.
SEGMENT INFORMATION
(In thousands)
(Unaudited)
 
Three Months Ended June 30, Nine Months Ended June 30,
2011   % (1)   2010   % (1) 2011   % (1)   2010   % (1)
 
Revenue:
Health Services $ 141,788 100 % $ 127,307 100 % $ 409,578 100 % $ 385,226 100 %
Human Services 96,508 100 % 84,220 100 % 269,948 100 % 234,007 100 %
Total 238,296 100 % 211,527 100 % 679,526 100 % 619,233 100 %
 
Gross Profit:
Health Services 35,459 25.0 % 32,425 25.5 % 108,056 26.4 % 94,267 24.5 %
Human Services 30,940 32.1 % 24,588 29.2 % 77,368 28.7 % 65,472 28.0 %
Total 66,399 27.9 % 57,013 27.0 % 185,424 27.3 % 159,739 25.8 %
 
Selling, general, and administrative expense:
Health Services 19,536 13.8 % 17,916 14.1 % 53,958 13.2 % 49,527 12.9 %
Human Services 16,032 16.6 % 13,904 16.5 % 43,834 16.2 % 38,372 16.4 %
Corporate/Other (309 ) NM (162 ) NM (294 ) NM (25 ) NM
Total 35,259 14.8 % 31,658 15.0 % 97,498 14.3 % 87,874 14.2 %
 
Operating income from continuing operations:
Health Services 15,923 11.2 % 14,509 11.4 % 54,098 13.2 % 44,740 11.6 %
Human Services 14,908 15.4 % 10,684 12.7 % 33,534 12.4 % 27,100 11.6 %
Consolidating adjustments 309 NM 162 NM 294 NM 25 NM
Subtotal: Segment Operating Income 31,140 13.1 % 25,355 12.0 % 87,926 12.9 % 71,865 11.6 %
Legal and settlement recovery (expense), net (361 ) NM NM (361 ) NM 5,351 NM
Total $ 30,779 12.9 % $ 25,355 12.0 % $ 87,565 12.9 % $ 77,216 12.5 %
   

(1)

 

Percentage of respective segment revenue. Changes not considered meaningful are marked “NM.”

         
MAXIMUS, Inc.
Supplemental Pro Forma Diluted EPS from Continuing Operations
("Adjusted EPS")
FY 2010 and YTD FY 2011
(Unaudited)
 
 
Total

Q1 10

 

Q2 10

  Q3 10   Q4 10   FY 10
Diluted EPS from continuing operations - GAAP basis $ 0.40   $ 0.50     $ 0.45   $ 0.58     $ 1.93  
 
Pro forma Adjustments:
Legal and settlement expense (recovery), net 0.01 (0.11 ) - - (0.10 )
Adjustment for taxation rate   0.02     (0.01 )     0.01     (0.04 )     (0.02 )

Subtotal pro forma adjustments

  0.03     (0.12 )     0.01     (0.04 )     (0.12 )
 
Adjusted EPS from continuing operations $ 0.43   $ 0.38     $ 0.46   $ 0.54     $ 1.81  
 
 

Q1 11

  Q2 11   Q3 11
Diluted EPS from continuing operations $ 0.50   $ 0.54     $ 0.56
 
Pro forma Adjustments:
Legal and settlement expense (recovery), net - - -
Adjustment for taxation rate   -     -       -
Subtotal pro forma adjustments - - -
 
Adjusted EPS from continuing operations $ 0.50   $ 0.54     $ 0.56

MAXIMUS
Lisa Miles, 800-MAXIMUS x11637

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