News Details

RESTON, Va.--(BUSINESS WIRE)--MAXIMUS (NYSE: MMS), a leading provider of government services worldwide, today reported financial results for its second quarter ended March 31, 2013.

Highlights for the quarter ended March 31, 2013 include:

• Revenue grew 34% to $326.4 million for the second quarter compared to $243.5 million reported for the same period last year, driven by the PSI acquisition, growth on existing contracts and new work. The second quarter of fiscal 2013 included $16.0 million of non-recurring revenue from a previously disclosed contract termination; excluding this, revenue grew 27%.
• Adjusted diluted earnings per share from continuing operations increased 47% to $0.72 for the second quarter of fiscal 2013 compared to $0.49 reported for the same period last year.
• Cash and cash equivalents totaled $187.3 million at March 31, 2013.
• Year-to-date signed contract awards totaled $886 million at March 31, 2013.

Revenue for the fiscal 2013 second quarter increased 34% to $326.4 million, which includes $16.0 million of non-recurring benefit related to a previously disclosed contract termination in the Human Services Segment. This compares to revenue of $243.5 million reported for the same period last year. Excluding the $16.0 million benefit, year-over-year second quarter revenue increased 27%, driven by the April 2012 acquisition of PSI, new work in both segments, and growth on existing contracts, which includes the ongoing revenue ramp up in the United Kingdom. Excluding PSI, revenue grew 15% organically compared to the prior-year period.

For the second quarter of fiscal 2013, income from continuing operations, net of taxes, totaled $31.7 million, or $0.91 per diluted share, and included pre-tax income of $10.9 million ($6.5 million, net of taxes), or $0.19 per diluted share, related to the previously disclosed contract termination. Excluding the benefit of $0.19 per diluted share, second quarter adjusted diluted earnings per share from continuing operations increased 47% to $0.72 compared to $0.49 reported for the same period last year. The year-over-year increase to earnings is attributable to accretive revenue growth in both segments. A reconciliation to non-GAAP measures is included in the accompanying financial schedules.

“Financial results in the quarter were solid and in-line with our expectations, supporting our growth trajectory for the remainder of fiscal 2013 and beyond. As expected, organic revenue growth accelerated in the second quarter, driven by strong performance from both segments. The long-term demand trends remain positive for MAXIMUS, with multi-year growth drivers in place as governments require a higher level of value-added services that deliver measurable and meaningful outcomes. These trends, coupled with our demonstrated experience and proven success, set the stage for our long-term success to grow the business and maximize shareholder value,” commented Richard A. Montoni, Chief Executive Officer of MAXIMUS.

Health Services Segment

Health Services Segment revenue for the second quarter of fiscal 2013 increased 23% to $197.9 million compared to $161.2 million for the same period last year, driven by the PSI acquisition, organic growth on existing contracts, and new work. Health Services Segment operating income for the second quarter of fiscal 2013 increased 59% to $28.9 million (14.6% operating margin) and benefitted from accretive revenue growth. This compares to $18.2 million (11.3% operating margin) for the same period last year.

Human Services Segment

Human Services Segment revenue for the second quarter of fiscal 2013 increased to $128.4 million compared to $82.3 million for the same period last year. Excluding the $16.0 million benefit from the aforementioned contract termination, revenue grew 37%, driven by the PSI acquisition, the ramp-up in the United Kingdom, as well as new work in Canada and Saudi Arabia. Human Services Segment operating income for the second quarter of 2013 totaled $21.5 million, which includes non-recurring pre-tax income of $10.9 million related to the contract termination. Excluding the $10.9 million benefit, operating income for the human services segment increased to $10.6 million (9.4% operating margin) compared to $8.6 million (10.5% operating margin) for the same period last year. The year-over-year operating income increase was driven by the expected improvement in the United Kingdom and growth in new programs, which offset the expected lower profit margin in Australia.

Sales and Pipeline

Year-to-date signed contract awards at March 31, 2013 totaled $886 million compared to $812 million reported for the same period last year. On a sequential basis, signed contract wins were strong with approximately $700 million of new signed awards during the fiscal second quarter of 2013. New contracts pending (awarded but unsigned) totaled $425 million compared to $284 million last year.

Sales pipeline for the quarter ended March 31, 2013 was $2.3 billion (consisting of $888 million in proposals pending, $85 million in proposals in preparation, and $1.3 billion in proposals tracking) and includes opportunities across multiple geographies and both segments. This compares to $1.7 billion in sales pipeline for the same period last year and $2.7 billion reported in the first fiscal quarter of 2013. Pipeline was lower on a sequential basis principally due to the large number of contracts shifting into the awarded categories.

Balance Sheet and Cash Flows

Cash and cash equivalents at March 31, 2013 totaled $187.3 million, of which approximately 70% is held overseas. For the second quarter of fiscal 2013, cash provided by operating activities from continuing operations totaled $29.4 million, with free cash flow of $18.3 million. Excluding the $16.0 million revenue benefit from the terminated contract, Days Sales Outstanding (DSO) from continuing operations were 66 days and remain within the Company’s previously stated range of 65 to 80 days.

On February 28, 2013, MAXIMUS paid a quarterly cash dividend of $0.09 per share. On April 18, 2013, the Company announced a $0.09 per share cash dividend, payable on May 31, 2013 to shareholders of record on May 15, 2013. In addition, on June 28, 2013 MAXIMUS will complete a two-for-one stock split where each shareholder of record on June 14, 2013 will receive an additional share of stock for each outstanding share.

MAXIMUS did not repurchase any shares of the Company’s common stock during the second quarter of fiscal 2013. At March 31, 2013, the Company had $114.6 million available for future repurchases under its Board-authorized share repurchase program.

Outlook

MAXIMUS is reiterating its fiscal 2013 revenue, earnings and cash flow guidance. The Company continues to expect fiscal 2013 revenue to range between $1.25 billion and $1.30 billion and adjusted diluted earnings per share from continuing operations to range between $3.00 and $3.15. The Company continues to expect cash provided by operating activities from continuing operations to range between $115 million and $135 million, and free cash flow from continuing operations to range between $70 million and $90 million.

Mr. Montoni concluded, “The recently announced two-for-one stock split underscores our confidence in the underlying, long-term fundamentals of MAXIMUS and our future outlook. The management team remains firmly committed to offering the highest quality of value-added services, enhancing our established brand recognition, and expanding our offerings to advance new opportunities.”

Website Presentation, Conference Call and Webcast Information

MAXIMUS will host a conference call this morning, May 9, 2013, 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 May 23, 2013. Callers can access the replay by calling:

877.660.6853 (Domestic)/201.612.7415 (International)
Replay conference ID number: 412909

About MAXIMUS

MAXIMUS is a leading operator of government health and human services programs in the United States, United Kingdom, Canada, Australia and Saudi Arabia. The Company delivers business process services to improve the cost effectiveness, efficiency and quality of government-sponsored benefit programs, such as Medicaid, Medicare, Children's Health Insurance Program (CHIP), Health Insurance BC (British Columbia), as well as welfare-to-work and child support programs around the globe. The Company's primary customer base includes federal, provincial, state, county and municipal governments. Operating under its founding mission of Helping Government Serve the People^®, MAXIMUS has approximately 8,800 employees worldwide. For more information, visit www.maximus.com.

Non-GAAP Measures

This release refers to non-GAAP financial measures, including free cash flows from operating activities, adjusted diluted earnings per share from continuing operations, organic growth, as well as revenues, operating income, net income and earnings per share excluding a terminated contract.

To provide organic growth information, revenue in the prior year is compared to the current year without PSI revenues. We believe organic growth provides a useful basis for assessing the performance of the business excluding PSI. We have provided a reconciliation of free cash flow to operating cash flow from continuing operations. We believe that free cash flow from operations is a useful basis for investors to compare our performance across periods or across our competitors. Free cash flow show the effects of the Company’s operations and routine capital expenditure and exclude the cash flow effects of acquisitions, share repurchases, dividend payments and other financing transactions. We have provided a reconciliation to adjusted diluted earnings per share and operating income excluding legal, settlement and acquisition-related expenses and the benefits of the terminated contract. We have also provided a reconciliation between revenue and revenue excluding the terminated contract. We believe that these measures are a useful basis for assessing the Company’s performance excluding the effect of the terminated contract, the costs of acquiring PSI, and net legal and settlement expenses.

The presentation of these non-GAAP numbers is not meant to be considered in isolation, nor as alternatives to net income, cash flows from operating activities, diluted earnings per share, revenue growth, operating income and operating margin as measures of performance.

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 filed with the Securities and Exchange Commission, found on www.maximus.com.

MAXIMUS, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
(Unaudited)
		Three Months								Six Months
		Ended March 31,								Ended March 31,
		2013				2012				2013				2012
Revenue		$	326,351			$	243,452			$	612,617			$	483,055
Cost of revenue		228,907				178,686				438,643				358,442
Gross profit		97,444				64,766				173,974				124,613
Selling, general and administrative expenses		46,693				37,959				88,915				70,715
Acquisition-related expenses		16				233				164				233
Legal and settlement expenses/(recoveries), net		—				(824		)		142				(638		)
Operating income from continuing operations		50,735				27,398				84,753				54,303
Interest and other income, net		637				824				1,743				1,928
Income from continuing operations before income taxes		51,372				28,222				86,496				56,231
Provision for income taxes		19,658				14,011				32,999				24,362
Income from continuing operations		31,714				14,211				53,497				31,869
Discontinued operations, net of income taxes:
Loss from discontinued operations		(91		)		—				(594		)		—
Gain on disposal		66				62				102				108
Income (loss) from discontinued operations		(25		)		62				(492		)		108
Net income		$	31,689			$	14,273			$	53,005			$	31,977
Basic earnings (loss) per share:
Income from continuing operations		$	0.93			$	0.42			$	1.57			$	0.95
Loss from discontinued operations		—				—				(0.01		)		—
Basic earnings per share		$	0.93			$	0.42			$	1.56			$	0.95
Diluted earnings (loss) per share:
Income from continuing operations		$	0.91			$	0.41			$	1.53			$	0.92
Loss from discontinued operations		—				—				(0.01		)		—
Diluted earnings per share		$	0.91			$	0.41			$	1.52			$	0.92
Dividends paid per share		$	0.09			$	0.09			$	0.18			$	0.18
Weighted average shares outstanding:
Basic		34,089				33,788				34,085				33,725
Diluted		34,954				34,728				34,917				34,638

MAXIMUS, Inc.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
		March 31,				September 30,
		2013				2012
		(unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	187,343			$	189,312
Restricted cash		12,934				11,593
Accounts receivable — billed, net of reserves of $3,769 and $3,265		205,397				172,705
Accounts receivable — unbilled		18,689				10,539
Prepaid income taxes		11,517				3,800
Deferred income taxes		20,992				22,207
Prepaid expenses and other current assets		36,690				38,528
Total current assets		493,562				448,684
Property and equipment, net		58,845				58,798
Capitalized software, net		32,374				27,390
Goodwill		111,670				112,032
Intangible assets, net		22,874				25,330
Deferred contract costs, net		10,675				9,284
Deferred income taxes		1,249				1,369
Deferred compensation plan assets		9,831				9,220
Other assets, net		3,280				3,186
Total assets		$	744,360			$	695,293
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities		$	80,553			$	73,128
Accrued compensation and benefits		49,592				56,105
Deferred revenue		66,072				60,026
Current portion of long-term debt		172				178
Income taxes payable		4,434				3,100
Other accrued liabilities		9,018				6,599
Total current liabilities		209,841				199,136
Deferred revenue, less current portion		8,943				19,550
Long-term debt		1,420				1,558
Acquisition-related contingent consideration, less current portion		393				406
Income taxes payable, less current portion		1,460				1,412
Deferred income taxes		15,539				10,384
Deferred compensation plan liabilities, less current portion		13,573				11,741
Total liabilities		251,169				244,187
Shareholders’ equity:
Common stock, no par value; 100,000 and 60,000 shares authorized; 56,883 and 56,516 shares issued and 34,103 and 33,985 shares outstanding at March 31, 2013 and September 30, 2012, at stated amount, respectively		407,685				395,967
Treasury stock, at cost; 22,780 and 22,531 shares at March 31, 2013 and September 30, 2012, respectively		(444,282		)		(429,646		)
Accumulated other comprehensive income		18,672				20,240
Retained earnings		511,116				464,545
Total shareholders’ equity		493,191				451,106
Total liabilities and shareholders’ equity		$	744,360			$	695,293

MAXIMUS, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
		Three Months								Six Months
		Ended March 31,								Ended March 31,
		2013				2012				2013				2012
Cash flows from operating activities:
Net income		$	31,689			$	14,273			$	53,005			$	31,977
Adjustments to reconcile net income to net cash provided by operating activities:
(Income) loss from discontinued operations		25				(62		)		492				(108		)
Depreciation and amortization		7,959				5,434				17,934				11,545
Deferred income taxes		7,368				(2,891		)		6,757				(5,315		)
Non-cash equity based compensation		3,587				2,836				7,062				5,633
Change in assets and liabilities:
Accounts receivable — billed		(6,931		)		9,741				(33,311		)		7,268
Accounts receivable — unbilled		(7,307		)		355				(8,152		)		(63		)
Prepaid expenses and other current assets		(2,593		)		(2,471		)		(2,521		)		(4,092		)
Deferred contract costs		3,932				319				(1,413		)		1,109
Accounts payable and accrued liabilities		(1,798		)		4,528				8,728				12,298
Accrued compensation and benefits		5,817				4,266				(1,877		)		(6,287		)
Deferred revenue		(9,397		)		3,662				(2,934		)		11,291
Income taxes		(4,328		)		3,932				(6,561		)		8,910
Other assets and liabilities		1,352				(2,440		)		2,285				(5,128		)
Cash provided by operating activities – continuing ops		29,375				41,482				39,494				69,038
Cash used in operating activities – discontinued ops		(61		)		-				(554		)		-
Cash provided by operating activities		29,314				41,482				38,940				69,038
Cash flows from investing activities:
Purchases of property and equipment		(6,264		)		(4,022		)		(13,351		)		(6,576		)
Capitalized software costs		(4,776		)		(1,112		)		(8,240		)		(1,832		)
Proceeds from settlement of final PSI price		3,380				-				3,380				-
Proceeds from note receivable		112				124				172				272
Proceeds from sale of discontinued operations		-				-				-				2,240
Cash used in investing activities		(7,548		)		(5,010		)		(18,039		)		(5,896		)
Cash flows from financing activities:
Repurchases of common stock				-		-				(15,403		)		(9,749		)
Employee tax withholding on restricted stock units vesting				-		-				(6,677		)		(3,088		)
Tax benefit due to option exercises and RSU vesting		2,315				770				4,680				2,510
Cash dividends paid		(3,067		)		(3,038		)		(6,131		)		(6,061		)
Stock option exercises				-		1,959				1,752				4,775
Repayment of long-term debt		(43		)		-				(87		)		-
Cash used in financing activities		(795		)		(309		)		(21,866		)		(11,613		)
Effect of exchange rate changes on cash and cash equivalents		(766		)		2,326				(1,004		)		5,058
Net increase/(decrease) in cash and cash equivalents		20,205				38,489				(1,969		)		56,587
Cash and cash equivalents, beginning of period		167,138				191,048				189,312				172,950
Cash and cash equivalents, end of period		$	187,343			$	229,537			$	187,343			$	229,537

MAXIMUS, Inc.
SEGMENT INFORMATION
(Dollars in thousands)
(Unaudited)
		Three Months Ended March 31,														Six Months Ended March 31,
		2013				% (1)			2012				% (1)			2013				% (1)			2012				% (1)
Revenue:
Health Services		$	197,948			100	%		$	161,170			100	%		$	373,946			100	%		$	319,213			100	%
Human Services		128,403				100	%		82,282				100	%		238,671				100	%		163,842				100	%
Total		326,351				100	%		243,452				100	%		612,617				100	%		483,055				100	%
Gross Profit:
Health Services		54,651				28	%		41,137				26	%		99,910				27	%		77,136				24	%
Human Services		42,793				33	%		23,629				29	%		74,064				31	%		47,477				29	%
Total		97,444				30	%		64,766				27	%		173,974				28	%		124,613				26	%
Selling, general, and administrative expense:
Health Services		25,742				13	%		22,935				14	%		50,375				13	%		42,151				13	%
Human Services		21,334				17	%		15,024				18	%		38,923				16	%		28,564				17	%
Corporate/Other		(383		)		NM			—				NM			(383		)		NM			—				NM
Total		46,693				14	%		37,959				16	%		88,915				15	%		70,715				15	%
Operating income from continuing operations:
Health Services		28,909				15	%		18,202				11	%		49,535				13	%		34,985				11	%
Human Services		21,459				17	%		8,605				10	%		35,141				15	%		18,913				12	%
Corporate/Other		383				NM			—				NM			383				NM			—				NM
Subtotal: Segment Operating Income		50,751				16	%		26,807				11	%		85,059				14	%		53,898				11	%
Acquisition-related expenses		16				NM			233				NM			164				NM			233				NM
Legal and settlement expenses/(recoveries), net		—				NM			(824		)		NM			142				NM			(638		)		NM
Total		$	50,735			16	%		$	27,398			11	%		$	84,753			14	%		$	54,303			11	%

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

MAXIMUS, Inc.
Non-GAAP Measures
ADJUSTED REVENUE AND OPERATING INCOME
(Dollars in thousands)
(Unaudited)
		Three Months				Six Months
		Ended March 31,				Ended March 31,
		2013				2013
Total company revenue		$	326,351			$	612,617
Revenue from terminated contract		16,035				16,035
Total company revenue excluding terminated contract		$	310,316			$	596,582
Total company operating income		$	50,735			$	84,753
Operating income from terminated contract			10,900				10,900
Total company operating income, excluding terminated contract		$	39,835			$	73,853
Total company operating margin, excluding terminated contract			12.8	%			12.4	%
		Three Months				Six Months
		Ended March 31,				Ended March 31,
		2013				2013
Human Services revenue		$	128,403			$	238,671
Revenue from terminated contract		16,035				16,035
Human Services revenue, excluding terminated contract		$	112,368			$	222,636
Human Services operating income		$	21,459			$	35,141
Operating income from terminated contract			10,900				10,900
Human Services operating income, excluding terminated contract		$	10,559			$	24,241
Human Services operating margin, excluding terminated contract			9.4	%			10.9	%

MAXIMUS, Inc.
ADJUSTED DILUTED EPS FROM CONTINUING OPERATIONS
FY 2013 and FY 2012
(Unaudited)
	Quarter Ended
	Dec. 31,		Mar. 31,
	2012		2013
Diluted EPS from continuing operations-GAAP basis	$0.62		$0.91
Adjustments:
Legal, settlement and acquisition-related expenses	0.01		–
Adjustment for terminated contract	–		(0.19)
Subtotal pro forma adjustments	0.01		(0.19)
Adjusted diluted EPS from continuing operations	$0.63		$0.72
	Quarter Ended								Year Ended
	Dec. 31,		Mar. 31,		Jun. 30,		Sept. 30,		Sept. 30,
	2011		2012		2012		2012		2012
Diluted EPS from continuing operations-GAAP basis	$0.51		$0.41		$0.59		$0.68		$2.19
Adjustments:
Legal, settlement and acquisition-related expenses (recovery), net	–		(0.01)		0.03		0.03		0.05
Adjustment for tax accounts	–		0.09		–		0.03		0.12
Subtotal pro forma adjustments	–		0.08		0.03		0.06		0.17
Adjusted Diluted EPS from continuing operations	$0.51		$0.49		$0.62		$0.74		$2.36

MAXIMUS, Inc.
FREE CASH FLOW
(Dollars in thousands)
(Unaudited)
		Three Months								Six Months
		Ended March 31,								Ended March 31,
		2013				2012				2013				2012
Cash provided by operating activities – continuing operations		$	29,375			$	41,482			$	39,494			$	69,038
Purchases of property and equipment			(6,264	)			(4,022	)			(13,351	)			(6,576	)
Capitalized software costs		(4,776		)		(1,112		)		(8,240		)		(1,832		)
Free cash flow from continuing operations		$	18,335			$	36,348			$	17,903			$	60,630