Exhibit 99.1
 
MAXIMUS REPORTS IMPROVED FISCAL 2007 SECOND QUARTER RESULTS
WITH REVENUE OF $179.1 MILLION AND DILUTED EPS of $0.11


(RESTON, Va. - May 9, 2007) - MAXIMUS (NYSE: MMS), a leading provider of government services, today reported results for its fiscal 2007 second quarter ended March 31, 2007. Highlights include:
 
Ø  
Second quarter revenue of $179.1 million and net income of $2.4 million,
Ø  
Diluted earnings per share of $0.45 from Base Operations (excludes Texas project operating loss and legal provision),
Ø  
Better-than-expected results from the Texas project, together with the execution of four new interim agreements with MAXIMUS as prime contractor,
Ø  
Cash, cash equivalents and marketable securities totaling $177.3 million,
Ø  
Days Sales Outstanding of 85 days, and
Ø  
New sales awards of $300 million and a total pipeline of $1.2 billion at May 1, 2007.

Revenue for the second quarter was $179.1 million compared to $179.8 million reported for the same period last year. The fiscal 2006 second quarter included approximately $6.9 million of revenue from voter hardware sales and the Corrections business, which has since been divested.

For the second quarter, net income was $2.4 million, or $0.11 per diluted share, compared to net income of $8.9 million, or $0.41 per diluted share, in last year’s second quarter. In the quarter, the Company recorded a $6.1 million provision which includes a settlement for a previously disclosed legal matter in Ontario, Canada and estimated future legal expenses for the ongoing arbitration with Accenture related to the Texas project. The Company also reports results from its Base Operations, which excludes the Texas project and legal expenses. Base Operations delivered $0.45 per diluted share in the second quarter.

The Texas Integrated Eligibility project contributed revenue of $11.2 million and a pre-tax loss of $6.5 million, or $0.18 per diluted share, to the Company’s second quarter results. Performance on the Texas project reflects better-than-expected results during the transition of the contract and the recognition of previously deferred revenue. The Company announced in March that it would provide services directly to the Texas Health and Human Services Commission (HHSC) as a prime contractor. MAXIMUS has since established four interim agreements with HHSC covering Enrollment Broker services, Children’s Health Insurance Program (CHIP) Operations, CHIP Systems, and Eligibility Support services, while the State completes the transition of these programs. The Company now expects that its operations in Texas will contribute to Company profitability beginning in the fiscal 2007 third quarter. Going forward, results from the Texas project will no longer be reported separately.

 
 
 
Richard Montoni, Chief Executive Officer of MAXIMUS, commented, “Overall, we are pleased with the results for the quarter and, we are enthusiastic about the prospects for the remainder of fiscal 2007 and the outlook for fiscal 2008. The Texas project, which was generating significant losses over the last three quarters, will begin contributing to profitability in the second half of our fiscal year. The turnaround on this project, as well as the settlement in Ontario, reflects our strategy of aggressively addressing legacy challenges and optimizing current operations. On the new business front, we are focusing on work that meets our more stringent criteria designed to improve profitability and increase levels of client satisfaction over the longer term. Our pipeline of new opportunities remains strong at over $1.2 billion."

Consulting Segment
Consulting Segment revenue, which represented 13% of total Company revenue for the second quarter, was $23.2 million compared to $26.4 million in the same period last year. Second quarter operating income for the Consulting Segment was $1.0 million compared to $3.0 million reported for the second quarter of last year. As expected, results for the segment were lower year-over-year, as well as sequentially, due primarily to the timing of revenue on contingency-based work and lower volume on a large school-based claiming project.

Systems Segment
Systems Segment revenue represented 20% of total Company revenue for the second quarter of fiscal 2007 and increased 10% to $35.4 million from the prior year period primarily resulting from new profitable contracts in the ERP Division. Anticipated losses in the Educational Systems Division lowered operating income for the period to $93,000 compared to operating income of $278,000 last year. However, on a sequential basis, operating income for the Segment improved significantly when compared to the fiscal 2007 first quarter operating loss of $1.6 million.

 
2
 
 
Operations Segment
Operations Segment revenue represented 67% of total Company revenue for the second quarter of fiscal 2007. Operations Segment revenue for the second quarter was $120.4 million compared to $121.2 million in last year’s second quarter which included revenue of approximately $6.9 million from voter hardware and the Corrections business, which the Company divested in the first quarter of fiscal 2007. Second quarter operating income for the Operations Segment was $7.1 million compared to income of $10.5 million reported for the same period last year. The reduction is due to the loss on the Texas project. On a sequential basis, both revenue and operating income increased substantially driven by the improved results from the Texas project, which is now expected to be a profitable contributor to the Operations Segment beginning in the third quarter.  

Sales and Pipeline
Year-to-date signed contract wins at May 2, 2007, totaled $302 million, compared to $292 million reported at May 2, 2006. New contracts pending at May 2, 2007, (awarded but unsigned) totaled $82 million compared to $135 million reported last year. Sales opportunities at May 2, 2007, totaled $1.2 billion (consisting of $519 million in proposals pending, $86 million in proposals in preparation, and $601 million in proposals tracking) compared to $1.3 billion the prior year.

Balance Sheet and Cash Flows
At March 31, 2007, cash, cash equivalents, and marketable securities totaled $177.3 million. Days Sales Outstanding (DSO) improved to 85 days at March 31, 2007, benefiting from strong collections, revenue recognition on collected receivables previously reserved, and deferred revenue. The Company’s DSO includes $2.1 million of net long-term accounts receivable included in other assets. For the second fiscal quarter, the Company generated net cash from operating activities of $17.5 million and paid a quarterly cash dividend of $0.10 per share on February 28, 2007. Free cash flow, which the Company defines as cash from operations less purchased property and equipment and capitalized software costs, totaled $14.0 million for the second quarter.

Outlook
Total Company revenue for fiscal 2007 is now estimated to be in the range of $740 million to $770 million. As a result, the Company expects that total fiscal year 2007 GAAP diluted earnings per share will be in the range of $0.85 to $0.95, inclusive of losses on the Texas project and legal expenses through March 31, 2007. The Company’s outlook does not include any costs associated with the settlement of outstanding legal matters that may occur in the second half of fiscal 2007.

3
 
 
The Company is also establishing preliminary fiscal 2008 guidance, with expected diluted earnings per share to be in the range of $2.30 to $2.60, and an expected revenue growth rate of approximately 10%. The basis for the outlook is driven by a strong state and local market environment coupled with the Company’s ongoing efforts to improve and optimize its current base operations.

Website Presentation, Conference Call and Webcast Information
 
MAXIMUS has posted a presentation on its website, under the Investor Relations page, for analysts to follow along with during the conference call.
 
The Company will host a conference call at 9:00 a.m. (EDT) this morning. 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:
 
800.552.8050 (Domestic)/206.902.3258  (International)
 
 
For those unable to listen to the live call, a replay will be available through Wednesday, May 16, 2007. Callers can access the replay by registering for the digital playback at the following website: http://reg.linkconferencecall.com/DigitalPlayback/DigitalPlaybackRegistration.aspx?recid=5406. Upon registration, participants will receive an email with the call back information.
 
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 5,200 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 net income and earnings per share excluding legal settlement expense and losses from the Texas project in the first half of fiscal 2007, and provides certain additional information, such as non-recurring reserves, regarding earnings per share for fiscal 2007. MAXIMUS 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.
 
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,
 
March 31,
 
 
 
2006
 
2007
 
 
 
 
 
(unaudited)
  
           
ASSETS
          
Current assets:
  
$
39,545
  
$
42,871
  
Cash and cash equivalents
    
117,315
    
134,409
  
Marketable securities
    
1,512
   
324
  
Restricted cash
    
153,399
   
126,673
  
Accounts receivable - billed, net of reserves of $5,830 and $24,468
    
47,728
    
39,077
  
Accounts receivable - unbilled
    
9,003
   
3,678
  
Income taxes receivable
    
6,844
   
13,704
  
Deferred income taxes
    
8,334
   
8,609
  
Prepaid expenses and other current assets.
              
Total current assets
   
383,680
    
369,345
  
Property and equipment, at cost .
    
71,078
   
74,882
  
Less accumulated depreciation and amortization
    
(37,649
)
  
(42,100
)
Property and equipment, net
    
33,429
    
32,782
  
Capitalized software
    
57,260
   
58,533
  
Less accumulated amortization
    
(23,335
)
  
(27,709
)
Capitalized software, net
    
33,925
   
30,824
  
Deferred contract costs, net
    
11,165
    
8,482
  
Goodwill
    
86,688
    
86,019
  
Intangible assets, net
    
5,720
   
4,444
  
Other assets, net
    
3,894
    
2,903
  
Total assets
  
$
558,501
  
$
534,799
  
               
LIABILITIES AND SHAREHOLDERS’ EQUITY
             
Current liabilities:
              
Accounts payable
  
$
54,484
  
$
51,456
  
Accrued compensation and benefits
    
24,426
   
24,136
  
Deferred revenue
    
54,414
   
41,432
  
Current portion of capital lease obligations
    
1,690
    
1,594
  
Other accrued liabilities
    
1,600
    
1,509
  
Total current liabilities
    
136,614
   
120,127
  
Capital lease obligations, less current portion
   
2,044
    
1,239
  
Deferred income taxes
    
14,944
    
13,874
  
     
153,602
    
135,240
  
Total liabilities
              
               
Shareholders' equity:
              
Common stock, no par value; 60,000,000 shares authorized; 21,544,964
              
and 21,868,583 shares issued and outstanding at September 30, 2006 and March 31, 2007, at
              
stated amount, respectively
    
156,349
    
161,929
  
Accumulated other comprehensive income (loss)
    
(916
)
  
528
  
Retained earnings
    
249,466
    
237,102
  
Total shareholders' equity
   
404,899
   
399,559
  
Total liabilities and shareholders' equity
  
$
558,501
  
$
534,799
  
 
5
 
 
 
MAXIMUS, Inc.
 
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(Unaudited)

   
Three Months
Ended March 31,
 
Six Months
Ended March 31,
 
 
 
2006
 
2007
 
2006
 
2007
  
Revenue 
  
$
179,773
  
$
179,077
  
$
342,499
  
$
340,215
  
Cost of revenue
    
134,441
    
136,202
    
252,421
    
277,062
  
Gross profit
    
45,332
    
42,875
    
90,078
    
63,153
  
Selling, general and administrative expenses 
    
30,886
    
34,451
    
62,450
    
69,104
  
Legal expense
    
725
    
6,104
    
1,225
    
9,104
  
Income (loss) from operations
    
13,721
    
2,320
    
26,403
    
(15,055
)
Interest and other income, net
    
940
    
1,615
    
2,978
    
2,092
  
Gain on sale of business
    
-
    
-
    
-
    
684
  
Income (loss) before income taxes=
    
14,661
    
3,935
    
29,381
    
(12,279
)
Provision (benefit) for income taxes
    
5,791
    
1,573
    
11,605
    
(4,246
)
Net income (loss)
  
$
8,870
  
$
2,362
  
$
17,776
  
$
(8,033
)
                           
Earnings (loss) per share:
                          
Basic
  
$
0.41
  
$
0.11
  
$
0.83
  
$
(0.37
)
Diluted
  
$
0.41
  
$
0.11
  
$
0.81
  
$
(0.37
)
                           
Dividends per share 
  
$
0.10
  
$
0.10
  
$
0.20
  
$
0.20
  
                           
Weighted average shares outstanding:
                          
Basic
    
21,421
    
21,714
   
21,427
    
21,651
  
Diluted
    
21,888
    
21,972
    
21,892
    
21,651
  
 
6
 
 
 MAXIMUS, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
 
 
Six Months
 
 
 
Ended March 31,
 
 
 
2006
 
2007
  
Cash flows from operating activities:
          
Net income (loss)
  
$
17,776
  
$
(8,033
)
               
Adjustments to reconcile net income to net cash provided by operating activities:
             
Depreciation
   
4,475
    
4,754
  
Amortization
   
3,839
    
5,271
  
Deferred income taxes
    
(2,774
)
  
(7,930
)
Gain on sale of business
    
-
    
(684
)
Non-cash equity based compensation
   
2,687
    
1,401
  
               
Change in assets and liabilities, net of effects from divestiture:
              
Accounts receivable - billed
    
(15,156
)
  
26,726
  
Accounts receivable - unbilled
    
(2,449
)
  
7,606
  
Prepaid expenses and other current assets
    
427
    
(264
)
Deferred contract costs
    
(11,513
)
  
2,683
  
Other assets
    
(459
)
  
2,357
  
Accounts payable
   
8,674
    
(2,534
)
Accrued compensation and benefits
    
(3,002
)
  
(291
)
Deferred revenue
   
14,537
    
(12,577
)
Income taxes
    
432
    
5,325
  
Other liabilities
    
(999
)
  
1,218
  
               
Net cash provided by operating activities1
    
6,495
   
25,028
  
               
Cash flows from investing activities:
              
Proceeds from sale of business, net of transactions costs
    
-
    
2,171
  
Purchases of property and equipment
    
(6,204
)
  
(4,242
)
Capitalized software costs
    
(4,223
)
  
(1,485
)
Increase in marketable securities
    
(17,525
)
  
(17,094
)
               
Net cash used in investing activities
    
(27,952
)
  
(20,650
)
               
Cash flows from financing activities:
              
Employee stock transactions
    
4,217
    
3,418
  
Repurchases of common stock
    
(9,266
)
  
-
  
Payments on capital lease obligations
    
(743
)
  
(901
)
Tax benefit due to option exercises and restricted stock units vesting
   
904
    
762
  
Cash dividends paid
    
(4,292
)
  
(4,331
)
               
Net cash used in financing activities
    
(9,180
)
  
(1,052
)
 
              
Net increase (decrease) in cash and cash equivalents
    
(20,637
)
  
3,326
  
               
Cash and cash equivalents, beginning of period
    
59,073
    
39,545
  
Cash and cash equivalents, beginning of period
    
59,073
    
39,545
  
Cash and cash equivalents, end of period
  
$
38,436
  
$
42,871
  

7
 
 
 
MAXIMUS, Inc.
Segment Information
(In thousands)
(Unaudited)
 
 
Three Months
 
Six Months
 
 
 
Ended March 31,
 
Ended March 31,
 
 
 
2006
 
2007
 
2006
 
2007
  
Revenue:
                  
Consulting
 
$
26,368
    
23,224
 
$
50,003
    
47,880
 
Systems
   
32,229
   
35,412
   
68,519
   
69,953
 
Operations
   
121,176
   
120,441
   
223,977
   
222,382
 
Total
 
$
179,773
  
$
179,077
  
$
342,499
  
$
340,215
  
                           
Gross Profit:
                          
Consulting
 
$
10,168
    
9,253
 
$
20,364
    
20,160
 
Systems
   
9,997
   
9,914
   
23,867
   
18,465
 
Operations
   
25,167
   
23,708
   
45,847
   
24,528
 
Total
 
$
45,332
  
$
42,875
  
$
90,078
  
$
63,153
  
                           
Selling, General, and Administrative expense:
                          
 
                          
Consulting
 
$
7,192
    
8,221
 
$
14,852
    
16,313
 
Systems
   
9,719
   
9,821
   
19,702
   
19,969
 
Operations
   
14,623
   
16,650
   
29,235
   
33,514
 
Corporate/Other
   
(648
)
  
(241
)
  
(1,339
)
  
(692
)
Total
 
$
30,886
  
$
34,451
  
$
62,450
  
$
69,104
  
                           
Income (Loss) from Operations:
                          
 
                          
Consulting
 
$
2,976
  
$
1,032
  
$
5,512
  
$
3,847
  
Systems
   
278
   
93
   
4,165
   
(1,504
)
Operations
   
10,544
   
7,058
   
16,612
   
(8,986
)
Consolidating adjustments
   
648
   
241
   
1,339
   
692
 
Legal expense
   
(725
)
  
(6,104
)
  
(1,225
)
  
(9,104
)
Total
 
$
13,721
  
$
2,320
  
$
26,403
  
$
(15,055
)

8
 
 
 
MAXIMUS, Inc.
Supplemental Pro Forma Information
(Dollar in millions, except per share data) 
(unaudited)
 
               
 
  
Three Months Ended
      
 
  
Dec. 31, 2006
 
Mar. 31, 2007
 
Total
  
 
              
Income before taxes, as reported (GAAP)
  
$
(16.2
)
$
3.9
  
$
(12.3
)
Add back Texas project operating loss
   
24.0
   
6.5
   
30.5
  
Add back provision for legal expense
   
3.0
   
6.1
   
9.1
  
                     
Pro Forma income before income taxes, base operations (Non-GAAP)
 
$
10.8
  
$
16.5
  
$
27.3
  
                     
Diluted earnings per share, as reported (GAAP)
 
$
(0.48
)
$
0.11 $(0.37
)
      
Add back Texas project operating loss
   
0.71
   
0.18
   
0.89
  
Add back provision for legal expense
   
0.09
   
0.16
   
0.25
  
                     
Pro Forma diluted earnings per share, base operations (Non-GAAP)
 
$
0.32
  
$
0.45
  
$
0.77
  

9