Exhibit 99.1
MAXIMUS REPORTS RECORD THIRD QUARTER REVENUE
(RESTON, Va. – August 5, 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 third quarter ended June 30, 2004.
Key Financial Results
• On a year-over-year basis, revenue for the three months ended June 30, 2004, increased 13% to $160.2 million, and net income increased 11% to $9.9 million with diluted earnings per share of $0.45, including a non-recurring charge of $1.1 million pre-tax, or $0.03 per diluted share
• Health Services revenue for the quarter increased 45% over last year and 17% sequentially from the second quarter due primarily to the growth of the California Healthy Families Project
• Days sales outstanding were 95 days, including $4.4 million of certain receivables that have now been classified as long term other assets
• Year-to-date cash from operating activities totaled $26.2 million with cash and cash equivalents of $131.6 million at June 30, 2004
• Year-to-date contracts signed were $324 million and total pipeline was $1.3 billion, at July 29, 2004
• Factoring in non-recurring charges throughout the fiscal year, full-year diluted earnings per share are now expected to be at least $1.78 with a potential of $1.82
Revenue for the third quarter increased 13% to $160.2 million from $141.7 million in last year’s third quarter and grew 6% sequentially from $150.7 million reported in the second quarter of 2004. Year-over-year organic revenue growth for the third quarter was 12%. Net income for the period was $9.9 million, or $0.45 per diluted share, an 11% increase compared to net income of $9.0 million, or $0.43 per diluted share, for the same period last year. On a sequential basis, net income increased 4% compared to net income of $9.5 million, or $0.43 per diluted share, reported in the second quarter.
The fiscal 2004 third quarter reported results include the impact of a $1.1 million charge for certain accounts receivables that are at risk stemming from the previously disclosed
1
investigation of fraudulent activities by two terminated employees with whom the Company is now in litigation. The Company’s original assessment of the June charge was approximately $1.8 million pre-tax and included the expected legal costs. However, the Company will expense the legal costs as incurred. Therefore, the third quarter charge totals $1.1 million.
“With record revenue of $160.2 million, the Company delivered 13% year-over-year revenue growth primarily driven by the Health Services segment. Operationally, our businesses performed largely as expected, excluding the $1.1 million charge in the quarter,” commented Dr. David V. Mastran, Chief Executive Officer. “Overall results for the period benefited from an improved business climate, particularly at the state level. Demand continues to improve in several of our service areas including health, school-based claiming, and child welfare. Our financial services and systems businesses are also experiencing favorable demand trends.”
As a result of the Company’s recent realignment of its operating units, as disclosed in the Company’s Form 8-K filing in June 2004, MAXIMUS will now report its financial results under its three operating segments: Health Services, Human Services, and Technical Services.
Health Services Segment
Health Services revenue for the third quarter grew to $59.2 million, representing a 45% increase over the same period last year and 17% growth on a sequential basis from $50.7 million reported in the 2004 second quarter. Higher revenue from the California Healthy Families project drove the segment’s performance during the quarter. A number of recent successes in the health segment, including the landmark California Healthy Families contract, have positioned the Company to target larger health opportunities at the state and federal levels.
Human Services Segment
Human Services revenue for the third quarter was $60.0 million, level with last year as well as the fiscal 2004 second quarter. Third quarter earnings were impacted by the $1.1 million charge. Before the charge, the segment performed as expected for the period. Solid contributions from its domestic workforce services and school-based claiming businesses, in addition to a full quarter of profitability from its Australian operations, offset softer performance in some of the segment’s financial services divisions where certain projects are ramping up and are expected to deliver increased contributions in the fourth quarter.
2
Technical Services
Technical Services revenue increased slightly for the third quarter to $40.9 million compared to $40.5 million in last year’s third quarter and $39.8 million in the fiscal 2004 second quarter. Third quarter results for the Technical Services segment benefited from higher revenue and profit delivery on a variety of projects in ERP, Enterprise Solutions and Asset Solutions. Revenue and income in this segment are subject to periodic fluctuations resulting from software license fees and the timing of certain contracts.
Sales and Pipeline Activity
Year-to-date signed contract wins through June 30, 2004, totaled $324 million, compared to $941 million, which included the $418 million California Healthy Families contract, reported for the same period last year. New contracts pending (awarded but unsigned) totaled $352 million compared to $59 million, reported for the third quarter last year. Excluding the $418 million California Healthy Families project, the Company's signed and contracts pending are tracking approximately $100 million better than last year.
Sales opportunities totaled approximately $1.3 billion (consisting of $300 million in proposals pending, $156 million in proposals in preparation, and $870 million of RFPs tracking) compared to $900 million for the same period a year ago.
Financial Position and Stock Repurchase
Days sales outstanding (DSO) at the end of the third quarter were 95 days, including certain receivables totaling $4.4 million now classified as long-term other assets. Cash and cash equivalents totaled $131.6 million. Year-to-date cash from operating activities totaled $26.2 million. The Company repurchased approximately 102,000 common shares during the third quarter under its ongoing share repurchase program. At the close of the third quarter, MAXIMUS had approximately $42.2 million available for future stock repurchases, which includes option proceeds that also fund this ongoing program.
Outlook and Conclusion
Dr. Mastran concluded, “We expect fourth quarter revenue and earnings to improve sequentially from our third quarter performance driven largely by anticipated gains from the Financial Services businesses within the Human Services segment.”
3
As a result of factoring in non-recurring charges throughout the fiscal year, full-year diluted earnings per share are now expected to be at least $1.78 with a potential of achieving $1.82. In addition, revenue for fiscal 2004 is now expected to be in the range of $605 million to $615 million.
The Company will host a conference call on Thursday, August 5, 2004, at 5:00 p.m. ET that is open to the public and can be accessed by calling: 800.819.9193 (domestic) or 913.981.4911 (international). For those unable to listen to the call, a replay will be available for one week following the call through Thursday, August 12, 2004, at 11:59 p.m. (ET). The replay will be available by calling: 888.203.1112, replay code 393129.
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 5,400 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
4
MAXIMUS, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
|
|
|
September 30, |
|
June 30, |
|
||
|
|
|
|
|
|
|
||
|
ASSETS |
|
|
|
|
|
||
|
Current assets: |
|
|
|
|
|
||
|
Cash and cash equivalents |
|
$ |
117,372 |
|
$ |
131,611 |
|
|
Restricted cash |
|
3,653 |
|
1,601 |
|
||
|
Marketable securities |
|
140 |
|
— |
|
||
|
Accounts receivable – billed, net |
|
114,992 |
|
122,659 |
|
||
|
Accounts receivable – unbilled |
|
29,142 |
|
40,522 |
|
||
|
Deferred income taxes |
|
3,410 |
|
413 |
|
||
|
Prepaid expenses and other current assets |
|
7,063 |
|
8,893 |
|
||
|
Total current assets |
|
275,772 |
|
305,699 |
|
||
|
|
|
|
|
|
|
||
|
Property and equipment, at cost |
|
46,412 |
|
51,446 |
|
||
|
Less accumulated depreciation and amortization |
|
(20,195 |
) |
(25,398 |
) |
||
|
Property and equipment, net |
|
26,217 |
|
26,048 |
|
||
|
Capitalized software |
|
23,382 |
|
29,142 |
|
||
|
Less accumulated amortization |
|
(8,699 |
) |
(11,528 |
) |
||
|
Capitalized software, net |
|
14,683 |
|
17,614 |
|
||
|
Deferred contract costs, net |
|
7,283 |
|
16,367 |
|
||
|
Goodwill |
|
81,757 |
|
84,710 |
|
||
|
Intangible assets, net |
|
7,212 |
|
10,289 |
|
||
|
Other assets, net |
|
2,096 |
|
6,057 |
|
||
|
Total assets |
|
$ |
415,020 |
|
$ |
466,784 |
|
|
|
|
|
|
|
|
||
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
||
|
Current liabilities: |
|
|
|
|
|
||
|
Accounts payable |
|
$ |
21,578 |
|
$ |
25,778 |
|
|
Accrued compensation and benefits |
|
23,219 |
|
21,514 |
|
||
|
Deferred revenue |
|
22,356 |
|
25,341 |
|
||
|
Income taxes payable |
|
2,837 |
|
1,866 |
|
||
|
Current portion of capital lease obligations |
|
809 |
|
1,631 |
|
||
|
Other accrued liabilities |
|
3,653 |
|
1,663 |
|
||
|
Total current liabilities |
|
74,452 |
|
77,793 |
|
||
|
Capital lease obligations, less current portion |
|
3,821 |
|
5,527 |
|
||
|
Deferred income taxes |
|
2,745 |
|
10,899 |
|
||
|
Other liabilities |
|
725 |
|
137 |
|
||
|
Total liabilities |
|
81,743 |
|
94,356 |
|
||
|
|
|
|
|
|
|
||
|
Shareholders’ equity: |
|
|
|
|
|
||
|
Common stock, no par value; 60,000,000 shares authorized; 21,200,197 and 21,650,875 shares issued and outstanding at September 30, 2003 and June 30, 2004, at stated amount, respectively |
|
146,219 |
|
156,839 |
|
||
|
Accumulated other comprehensive loss |
|
(95 |
) |
(150 |
) |
||
|
Retained earnings |
|
187,153 |
|
215,739 |
|
||
|
Total shareholders’ equity |
|
333,277 |
|
372,428 |
|
||
|
Total liabilities and shareholders’ equity |
|
$ |
415,020 |
|
$ |
466,784 |
|
5
MAXIMUS, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
|
|
|
Three Months |
|
Nine Months |
|
||||||||
|
|
|
2003 |
|
2004 |
|
2003 |
|
2004 |
|
||||
|
Revenue |
|
$ |
141,741 |
|
$ |
160,158 |
|
$ |
405,095 |
|
$ |
449,759 |
|
|
Cost of revenue |
|
99,321 |
|
114,696 |
|
281,828 |
|
317,083 |
|
||||
|
Gross profit |
|
42,420 |
|
45,462 |
|
123,267 |
|
132,676 |
|
||||
|
Selling, general and administrative expenses |
|
27,933 |
|
29,340 |
|
81,674 |
|
86,245 |
|
||||
|
Income from operations |
|
14,487 |
|
16,122 |
|
41,593 |
|
46,431 |
|
||||
|
Interest and other income, net |
|
331 |
|
291 |
|
1,268 |
|
819 |
|
||||
|
Income before income taxes |
|
14,818 |
|
16,413 |
|
42,861 |
|
47,250 |
|
||||
|
Provision for income taxes |
|
5,853 |
|
6,483 |
|
16,930 |
|
18,664 |
|
||||
|
Net income |
|
$ |
8,965 |
|
$ |
9,930 |
|
$ |
25,931 |
|
$ |
28,586 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Earnings per share: |
|
|
|
|
|
|
|
|
|
||||
|
Basic |
|
$ |
0.43 |
|
$ |
0.46 |
|
$ |
1.23 |
|
$ |
1.32 |
|
|
Diluted |
|
$ |
0.43 |
|
$ |
0.45 |
|
$ |
1.22 |
|
$ |
1.29 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
||||
|
Basic |
|
20,731 |
|
21,664 |
|
21,016 |
|
21,612 |
|
||||
|
Diluted |
|
21,015 |
|
22,071 |
|
21,285 |
|
22,095 |
|
||||
6
MAXIMUS, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
|
|
|
Nine Months |
|
||||
|
|
|
2003 |
|
2004 |
|
||
|
|
|
|
|
|
|
||
|
Cash flows from operating activities: |
|
|
|
|
|
||
|
Net income |
|
$ |
25,931 |
|
$ |
28,586 |
|
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
||
|
Depreciation |
|
3,872 |
|
5,203 |
|
||
|
Amortization |
|
3,725 |
|
4,366 |
|
||
|
Deferred income taxes |
|
(435 |
) |
11,151 |
|
||
|
Tax benefit due to option exercises |
|
523 |
|
3,604 |
|
||
|
Non-cash equity based compensation |
|
726 |
|
809 |
|
||
|
Change in assets and liabilities, net of effects from acquisitions: |
|
|
|
|
|
||
|
Accounts receivable - billed |
|
(11,323 |
) |
(7,667 |
) |
||
|
Accounts receivable - unbilled |
|
(3,702 |
) |
(11,380 |
) |
||
|
Prepaid expenses and other current assets |
|
(707 |
) |
(1,511 |
) |
||
|
Deferred contract costs |
|
(1,148 |
) |
(5,758 |
) |
||
|
Other assets |
|
262 |
|
(4,360 |
) |
||
|
Accounts payable |
|
8,785 |
|
4,168 |
|
||
|
Accrued compensation and benefits |
|
100 |
|
(1,705 |
) |
||
|
Deferred revenue |
|
8,795 |
|
2,195 |
|
||
|
Income taxes payable |
|
169 |
|
(971 |
) |
||
|
Other liabilities |
|
(1,545 |
) |
(526 |
) |
||
|
Net cash provided by operating activities |
|
34,028 |
|
26,204 |
|
||
|
|
|
|
|
|
|
||
|
Cash flows from investing activities: |
|
|
|
|
|
||
|
Acquisition of businesses, net of cash acquired |
|
(13,532 |
) |
(6,429 |
) |
||
|
Purchases of property and equipment |
|
(4,574 |
) |
(4,961 |
) |
||
|
Capitalized software costs |
|
(2,954 |
) |
(6,212 |
) |
||
|
Other |
|
(1,611 |
) |
227 |
|
||
|
Net cash used in investing activities |
|
(22,671 |
) |
(17,375 |
) |
||
|
|
|
|
|
|
|
||
|
Cash flows from financing activities: |
|
|
|
|
|
||
|
Employee stock transactions |
|
3,682 |
|
21,340 |
|
||
|
Repurchases of common stock |
|
(20,394 |
) |
(15,133 |
) |
||
|
Payments on capital lease obligations |
|
(109 |
) |
(797 |
) |
||
|
Net cash (used in) provided by financing activities |
|
(16,821 |
) |
5,410 |
|
||
|
Net (decrease) increase in cash and cash equivalents |
|
(5,464 |
) |
14,239 |
|
||
|
Cash and cash equivalents, beginning of period |
|
94,965 |
|
117,372 |
|
||
|
Cash and cash equivalents, end of period |
|
$ |
89,501 |
|
$ |
131,611 |
|
7
Segment Information
The following table provides certain financial information for each of the Company’s business segments (in thousands):
|
|
|
Three Months |
|
Nine Months |
|
||||||||
|
|
|
2003 |
|
2004 |
|
2003 |
|
2004 |
|
||||
|
Revenue: |
|
|
|
|
|
|
|
|
|
||||
|
Health Services |
|
$ |
40,923 |
|
$ |
59,193 |
|
$ |
123,032 |
|
$ |
149,505 |
|
|
Human Services |
|
60,363 |
|
60,043 |
|
172,543 |
|
182,829 |
|
||||
|
Technical Services |
|
40,455 |
|
40,922 |
|
109,520 |
|
117,425 |
|
||||
|
Total |
|
$ |
141,741 |
|
$ |
160,158 |
|
$ |
405,095 |
|
$ |
449,759 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Gross Profit: |
|
|
|
|
|
|
|
|
|
||||
|
Health Services |
|
$ |
8,532 |
|
$ |
12,628 |
|
$ |
28,474 |
|
$ |
33,908 |
|
|
Human Services |
|
17,851 |
|
17,346 |
|
47,027 |
|
53,727 |
|
||||
|
Technical Services |
|
16,037 |
|
15,488 |
|
47,766 |
|
45,041 |
|
||||
|
Total |
|
$ |
42,420 |
|
$ |
45,462 |
|
$ |
123,267 |
|
$ |
132,676 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Income from Operations: |
|
|
|
|
|
|
|
|
|
||||
|
Health Services |
|
$ |
4,034 |
|
$ |
7,612 |
|
$ |
15,326 |
|
$ |
19,822 |
|
|
Human Services |
|
6,925 |
|
4,266 |
|
15,641 |
|
15,953 |
|
||||
|
Technical Services |
|
3,218 |
|
3,707 |
|
9,602 |
|
9,526 |
|
||||
|
Consolidating adjustments |
|
310 |
|
537 |
|
1,024 |
|
1,130 |
|
||||
|
Total |
|
$ |
14,487 |
|
$ |
16,122 |
|
$ |
41,593 |
|
$ |
46,431 |
|
8