Exhibit 99.1
MAXIMUS REPORTS SECOND QUARTER RESULTS
- Company Reiterates Fiscal 2004 Expectations -
(RESTON, Va. – May 6, 2004) – MAXIMUS (NYSE: MMS), a leading provider of consulting, health and human services program management, and information technology services to government, today reported results for its fiscal 2004 second quarter ended March 31, 2004.
Key Financial Results
• On a year-over-year basis, revenue for the three months ended March 31, 2004 increased 15% to $150.7 million, and diluted earnings per share (EPS) increased 34% to $0.43
• Solid performances by the Health Operations and Systems segments were offset by certain non-recurring charges from the Management Services segment, which impacted results by slightly more than two cents per diluted share
• Days sales outstanding were 88 days
• Year-to-date cash from operations of $21.6 million, with an ending balance of cash and cash equivalents of $138.4 million at March 31, 2004
• Year-to-date contracts signed of $219 million and total pipeline of $1.2 billion, at April 29, 2004
• On track to achieve earnings per diluted share of approximately $1.88 for fiscal 2004
Revenue for the second quarter grew to $150.7 million, a 15% increase from $130.7 million reported for the second quarter of 2003 and an 8.5% sequential increase from $138.9 million reported in the first quarter of 2004. Year-over-year organic revenue growth for the second quarter was 13%. The Company reported net income for the period of $9.5 million, or $0.43 per diluted share, a 38% increase compared to net income of $6.9 million, or $0.32 per diluted share, for the same period last year, and a 4% sequential increase over net income of $9.1 million, or $0.42 per diluted share reported in the first quarter.
Dr. David V. Mastran, Chief Executive Officer, commented, “Our quarterly results reflect sequential and year-over-year revenue and earnings gains as a result of growth in our Health Operations segment which is now benefiting from the California Healthy Families project, as well as an increased contribution from the Systems segment. While some of our businesses continue to experience quarterly fluctuations due primarily to the nature and timing of new work, the overall environment appears to be solidifying and our government customers remain receptive to the capabilities that MAXIMUS delivers.”
Health Operations Segment
Health Operations revenue for the second quarter increased 22% on a year-over-year basis to $50.2 million compared to $41.1 million reported last year, and revenue also increased 27% from first quarter revenue of $39.5 million. The revenue growth is primarily attributable to contributions from the California Healthy Families project, which launched on January 1, 2004 and is expected to generate approximately $40.0 million of revenue in fiscal 2004.
Human Services Operations Segment
Human Services revenue for the second quarter increased to $38.8 million, up 11% from $34.8 million reported in the second quarter of last year, and decreased slightly compared to revenue in the fiscal 2004 first quarter of $39.3 million. Once again, the Human Services segment posted steady gains in operating income with an operating margin of 5.5% driven primarily by continued improvement in areas such as workforce services which has experienced stronger demand.
Financial Services Consulting Segment
Financial Services revenue for the period was $17.6 million compared to $17.0 million for the same period last year and $19.3 million in the fiscal 2004 first quarter. This business relies heavily on contingency-based contracts and is impacted by front-end expenses from new work; therefore, quarter-to-quarter performance may vary. The Company anticipates continued strong performance from Financial Services throughout the year, with expected contributions related to new contracts, many of which are in the start-up phase. MAXIMUS continues to expect full-year operating margins for this segment in the mid-20% range.
Management Services Consulting Segment
Management Services revenue for the second quarter was $9.6 million compared to $13.4 million reported in the second quarter last year and $10.4 million recorded in the prior quarter. During the second quarter, the Management Services segment incurred non-recurring charges primarily related to a legal settlement and the downsizing of certain operations which adversely impacted the quarter. The total impact of these items in the March quarter was slightly more than two cents per diluted share. The Management Services segment has stabilized and is benefiting from measures taken over the last several months to improve performance. The Company expects future performance of these businesses to improve as a result of realigning the businesses within this segment with existing operations that will provide operating synergy, leadership and improved economies of scale.
Systems Segment
Systems revenue for the second quarter grew 41% to $34.5 million compared to $24.4 million recorded in the same period last year and increased 14% sequentially from $30.3 million reported in the fiscal 2004 first quarter, driven by certain projects that were significant contributors in the second quarter. The segment continues to be a solid contributor; however financial results can fluctuate as a result of project timing and license fee contributions.
Sales and Pipeline Activity
Year-to-date signed contract wins through April 29, 2004 totaled $219 million, compared to $238 million reported for the same period last year. New contracts pending (awarded but unsigned) totaled $242 million compared to $540 million, which included the $418 million California Healthy Families contract, last year.
Sales opportunities were approximately $1.2 billion (consisting of $419 million in proposals pending, $127 million in proposals in preparation, and $673 million of RFPs tracking) compared to $1.0 billion for the same period a year ago.
Financial Position and Stock Repurchase
The Company maintained a strong financial position at March 31, 2004 with $138.4 million in cash and cash equivalents, DSOs of 88 days, and no long-term debt with the exception of capital lease obligations. The Company repurchased 327,000 common shares during the
second fiscal quarter under its ongoing share repurchase program. At the close of the second quarter, MAXIMUS had approximately $43.5 million available for future stock repurchases, which includes option proceeds that also fund this ongoing program.
Conclusion
Dr. Mastran concluded, “As we move into the second half of fiscal 2004, we expect to continue to build upon the momentum we have established in recent quarters of delivering improving financial results over last year. As evidenced by an increasing pipeline, we are also benefiting from the proactive steps we initiated several quarters ago to increase our marketing efforts. Our dedicated sales and marketing teams are identifying and pursuing new business opportunities in our largest markets. Additionally, our financial position remains exceptionally strong and flexible, which enables future growth. Based upon recent new business wins becoming operational and continued improvement from existing businesses, we expect the remainder of fiscal 2004 to show additional growth and we remain confident in our ability to achieve our fiscal 2004 EPS target of approximately $1.88 per diluted share.”
The Company will host a conference call on Thursday, May 6, 2004 at 10:30a.m. ET that is open to the public and can be accessed by calling: 800.811.8830 (domestic) or 913.981.4904(international). For those unable to listen to the call, a replay will be available for one week following the call through Thursday, May 13, 2004 at 11:59 p.m. (ET). The replay will be available by calling: 888.203.1112, replay code 493248.
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 5,500 employees located in more than 280 offices in the United States, Canada and Australia. In 1999, 2001, 2002, and 2003 MAXIMUS was selected by Forbes Magazine as one of the Best 200 Small Companies in America for that year. MAXIMUS was selected by Business Week Magazine as one of the 100 Best Hot Growth Small Companies in 1999, 2000, 2001, and 2002. 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 revenue, 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).
CONTACTS:
Lisa Miles
Investor Relations
703.251.8637
Rachael Rowland
Public/Media Relations
703.251.8688
MAXIMUS, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
|
|
|
September 30, |
|
March 31, |
|
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|
|
|
(unaudited) |
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||
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||
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ASSETS |
|
|
|
|
|
||
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Current assets: |
|
|
|
|
|
||
|
Cash and cash equivalents |
|
$ |
117,372 |
|
$ |
138,414 |
|
|
Restricted cash |
|
3,653 |
|
3,394 |
|
||
|
Marketable securities |
|
140 |
|
— |
|
||
|
Accounts receivable – billed, net |
|
114,992 |
|
105,119 |
|
||
|
Accounts receivable - unbilled |
|
29,142 |
|
41,128 |
|
||
|
Deferred income taxes |
|
3,410 |
|
— |
|
||
|
Prepaid expenses and other current assets |
|
7,063 |
|
9,083 |
|
||
|
Total current assets |
|
275,772 |
|
297,138 |
|
||
|
Property and equipment, at cost |
|
46,412 |
|
50,327 |
|
||
|
Less accumulated depreciation and amortization |
|
(20,195 |
) |
(23,757 |
) |
||
|
Property and equipment, net |
|
26,217 |
|
26,570 |
|
||
|
Software development costs |
|
23,382 |
|
25,738 |
|
||
|
Less accumulated amortization |
|
(8,699 |
) |
(10,806 |
) |
||
|
Software development costs, net |
|
14,683 |
|
14,932 |
|
||
|
Deferred contract costs, net |
|
7,283 |
|
16,884 |
|
||
|
Goodwill |
|
81,757 |
|
82,742 |
|
||
|
Intangible assets, net |
|
7,212 |
|
6,564 |
|
||
|
Other assets |
|
2,096 |
|
1,631 |
|
||
|
Total assets |
|
$ |
415,020 |
|
$ |
446,461 |
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|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
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Current liabilities: |
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|
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|
|
||
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Accounts payable |
|
$ |
21,578 |
|
$ |
20,826 |
|
|
Accrued compensation and benefits |
|
23,219 |
|
21,162 |
|
||
|
Deferred revenue |
|
22,356 |
|
20,401 |
|
||
|
Income taxes payable |
|
2,837 |
|
— |
|
||
|
Deferred income taxes |
|
— |
|
1,497 |
|
||
|
Current portion of capital lease obligations |
|
809 |
|
2,119 |
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||
|
Other accrued liabilities |
|
3,653 |
|
3,957 |
|
||
|
Total current liabilities |
|
74,452 |
|
69,962 |
|
||
|
Capital lease obligations, less current portion |
|
3,821 |
|
5,436 |
|
||
|
Deferred income taxes |
|
2,745 |
|
7,763 |
|
||
|
Other liabilities |
|
725 |
|
432 |
|
||
|
Total liabilities |
|
81,743 |
|
83,593 |
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Shareholders’ equity: |
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|
|
|
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Common stock, no par value; 60,000,000 shares authorized; 21,200,197 and 21,628,665 shares issued and outstanding at September 30, 2003 and March 31, 2004, at stated amount, respectively |
|
146,219 |
|
156,982 |
|
||
|
Accumulated other comprehensive (loss) income |
|
(95 |
) |
77 |
|
||
|
Retained earnings |
|
187,153 |
|
205,809 |
|
||
|
Total shareholders’ equity |
|
333,277 |
|
362,868 |
|
||
|
Total liabilities and shareholders’ equity |
|
$ |
415,020 |
|
$ |
446,461 |
|
MAXIMUS, Inc.
(In thousands, except per share data)
(Unaudited)
|
|
|
Three
Months |
|
Six Months |
|
||||||||
|
|
|
2003 |
|
2004 |
|
2003 |
|
2004 |
|
||||
|
Revenue |
|
$ |
130,663 |
|
$ |
150,707 |
|
$ |
263,354 |
|
$ |
289,601 |
|
|
Cost of revenue |
|
92,077 |
|
106,076 |
|
182,507 |
|
202,387 |
|
||||
|
Gross profit |
|
38,586 |
|
44,631 |
|
80,847 |
|
87,214 |
|
||||
|
Selling, general and administrative expenses |
|
27,588 |
|
29,253 |
|
53,741 |
|
56,905 |
|
||||
|
Income from operations |
|
10,998 |
|
15,378 |
|
27,106 |
|
30,309 |
|
||||
|
Interest and other income |
|
390 |
|
336 |
|
937 |
|
528 |
|
||||
|
Income before income taxes |
|
11,388 |
|
15,714 |
|
28,043 |
|
30,837 |
|
||||
|
Provision for income taxes |
|
4,498 |
|
6,207 |
|
11,077 |
|
12,181 |
|
||||
|
Net income |
|
$ |
6,890 |
|
$ |
9,507 |
|
$ |
16,966 |
|
$ |
18,656 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
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Earnings per share: |
|
|
|
|
|
|
|
|
|
||||
|
Basic |
|
$ |
0.33 |
|
$ |
0.44 |
|
$ |
0.80 |
|
$ |
0.86 |
|
|
Diluted |
|
$ |
0.32 |
|
$ |
0.43 |
|
$ |
0.79 |
|
$ |
0.84 |
|
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
||||
|
Basic |
|
21,092 |
|
21,796 |
|
21,159 |
|
21,586 |
|
||||
|
Diluted |
|
21,329 |
|
22,262 |
|
21,419 |
|
22,098 |
|
||||
MAXIMUS, Inc.
(Dollars in thousands)
(Unaudited)
|
|
|
Six Months |
|
||||
|
|
|
2003 |
|
2004 |
|
||
|
|
|
|
|
|
|
||
|
Cash flows from operating activities: |
|
|
|
|
|
||
|
Net income |
|
$ |
16,966 |
|
$ |
18,656 |
|
|
|
|
|
|
|
|
||
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
||
|
Depreciation |
|
2,608 |
|
3,561 |
|
||
|
Amortization |
|
2,474 |
|
2,755 |
|
||
|
Deferred income taxes |
|
294 |
|
9,925 |
|
||
|
Tax benefit due to option exercises |
|
333 |
|
3,352 |
|
||
|
Non-cash equity based compensation |
|
512 |
|
457 |
|
||
|
|
|
|
|
|
|
||
|
Change in assets and liabilities, net of effects from acquisitions: |
|
|
|
|
|
||
|
Accounts receivable - billed |
|
(3,201 |
) |
9,872 |
|
||
|
Accounts receivable - unbilled |
|
(4,738 |
) |
(11,986 |
) |
||
|
Prepaid expenses and other current assets |
|
(1,253 |
) |
(1,584 |
) |
||
|
Deferred contract costs |
|
— |
|
(6,275 |
) |
||
|
Other assets |
|
259 |
|
179 |
|
||
|
Accounts payable |
|
2,316 |
|
(751 |
) |
||
|
Accrued compensation and benefits |
|
(1,365 |
) |
(2,057 |
) |
||
|
Deferred revenue |
|
3,132 |
|
(1,955 |
) |
||
|
Income taxes payable |
|
838 |
|
(2,837 |
) |
||
|
Other liabilities |
|
(187 |
) |
270 |
|
||
|
|
|
|
|
|
|
||
|
Net cash provided by operating activities |
|
18,988 |
|
21,582 |
|
||
|
|
|
|
|
|
|
||
|
Cash flows from investing activities: |
|
|
|
|
|
||
|
Acquisition of businesses, net of cash acquired |
|
(2,801 |
) |
(985 |
) |
||
|
Purchases of property and equipment |
|
(3,382 |
) |
(3,914 |
) |
||
|
Decrease in notes receivable |
|
136 |
|
90 |
|
||
|
Capitalization of software development costs |
|
(1,695 |
) |
(2,356 |
) |
||
|
Decrease in marketable securities, net |
|
30 |
|
174 |
|
||
|
|
|
|
|
|
|
||
|
Net cash used in investing activities |
|
(7,712 |
) |
(6,991 |
) |
||
|
|
|
|
|
|
|
||
|
Cash flows from financing activities: |
|
|
|
|
|
||
|
Employee stock transactions |
|
1,906 |
|
18,955 |
|
||
|
Repurchases of common stock |
|
(15,465 |
) |
(12,001 |
) |
||
|
Payments on capital lease obligations |
|
(59 |
) |
(503 |
) |
||
|
|
|
|
|
|
|
||
|
Net cash (used in) provided by financing activities |
|
(13,618 |
) |
6,451 |
|
||
|
|
|
|
|
|
|
||
|
Net (decrease) increase in cash and cash equivalents |
|
(2,342 |
) |
21,042 |
|
||
|
|
|
|
|
|
|
||
|
Cash and cash equivalents, beginning of period |
|
94,965 |
|
117,372 |
|
||
|
|
|
|
|
|
|
||
|
Cash and cash equivalents, end of period |
|
$ |
92,623 |
|
$ |
138,414 |
|
MAXIMUS, Inc.
Segment Information
The following table provides certain financial information for each of the Company’s business segments (in thousands):
|
|
|
Three
Months |
|
Six Months |
|
||||||||
|
|
|
2003 |
|
2004 |
|
2003 |
|
2004 |
|
||||
|
Revenue: |
|
|
|
|
|
|
|
|
|
||||
|
Health Operations |
|
$ |
41,118 |
|
$ |
50,245 |
|
$ |
82,109 |
|
$ |
89,792 |
|
|
Human Services Operations |
|
34,788 |
|
38,750 |
|
71,526 |
|
78,085 |
|
||||
|
Financial Services |
|
17,029 |
|
17,554 |
|
33,480 |
|
36,828 |
|
||||
|
Management Services |
|
13,372 |
|
9,614 |
|
27,592 |
|
20,024 |
|
||||
|
Systems Group |
|
24,356 |
|
34,544 |
|
48,647 |
|
64,872 |
|
||||
|
Total |
|
$ |
130,663 |
|
$ |
150,707 |
|
$ |
263,354 |
|
$ |
289,601 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Gross Profit: |
|
|
|
|
|
|
|
|
|
||||
|
Health Operations |
|
$ |
9,591 |
|
$ |
11,107 |
|
$ |
19,942 |
|
$ |
21,046 |
|
|
Human Services Operations |
|
6,036 |
|
8,420 |
|
13,112 |
|
15,703 |
|
||||
|
Financial Services |
|
9,152 |
|
8,300 |
|
17,504 |
|
17,640 |
|
||||
|
Management Services |
|
3,971 |
|
3,796 |
|
8,580 |
|
7,995 |
|
||||
|
Systems Group |
|
9,836 |
|
13,008 |
|
21,709 |
|
24,830 |
|
||||
|
Total |
|
$ |
38,586 |
|
$ |
44,631 |
|
$ |
80,847 |
|
$ |
87,214 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Income (loss) from Operations: |
|
|
|
|
|
|
|
|
|
||||
|
Health Operations |
|
$ |
5,039 |
|
$ |
6,251 |
|
$ |
11,292 |
|
$ |
12,215 |
|
|
Human Services Operations |
|
663 |
|
2,124 |
|
2,445 |
|
3,989 |
|
||||
|
Financial Services |
|
4,488 |
|
3,649 |
|
8,325 |
|
8,214 |
|
||||
|
Management Services |
|
769 |
|
(491 |
) |
2,364 |
|
(636 |
) |
||||
|
Systems Group |
|
(477 |
) |
3,414 |
|
1,966 |
|
5,934 |
|
||||
|
Consolidating adjustments |
|
516 |
|
431 |
|
714 |
|
593 |
|
||||
|
Total |
|
$ |
10,998 |
|
$ |
15,378 |
|
$ |
27,106 |
|
$ |
30,309 |
|