Exhibit 99.1
 
 
 
FOR IMMEDIATE RELEASE
CONTACT(S):
Lisa Miles (Investor)
   
800-MAXIMUS x 11637
     
DATE:  August 7, 2007
  
Rachael Rowland (Media)
   
800-MAXIMUS x 11688

MAXIMUS REPORTS RECORD REVENUE FOR FISCALTHIRD QUARTER
- Excluding Legal and Settlement Expense of $1.30, Pro Forma Earnings per Share of $0.65; GAAP Loss per Share of $0.65 -
 
(RESTON, Va.– August 7, 2007) – MAXIMUS (NYSE: MMS), a leading provider of government services, today reported results for its fiscal 2007 third quarter ended June 30, 2007.

Highlights include:
Ø  
Third quarter record revenue totaling $196.6 million,
Ø  
Excluding settlement and legal expense, pro forma earnings per share of $0.65; GAAP loss per share of $0.65 reflects a charge of $1.30 related to the previously announced settlement,
Ø  
Profitable results from the Texas project,
Ø  
Cash, cash equivalents and marketable securities at June 30, 2007 of $214.8 million (before the $30.5 million outlay of cash in July 2007 for the recently announced settlement),
Ø  
Record low Days Sales Outstanding of 75 days, and
Ø  
New sales awards of approximately $423 million and a total pipeline of $1.3 billion at August 1, 2007.

Revenue for the third quarter increased to $196.6 million compared to $186.6 million reported for the same period last year.  Last year’s third quarter included revenue of approximately $17.0 million which did not recur in the fiscal 2007 third quarter from voter hardware sales and the divested Corrections business.  Excluding these items, third quarter revenue increased approximately 15.9% over the same period last year.
 
1
 
For the third quarter, MAXIMUS recorded a net loss of $14.4 million, or $0.65 per share, which included $33.0 million in settlement and legal expenses primarily resulting from the previously disclosed settlement with the Department of Justice to resolve an investigation of the Company’s federal healthcare claiming work on behalf of the District of Columbia.  A portion of this settlement was not tax deductible, and the associated tax benefit related to the settlement was approximately $4.5 million. As a result, the after-tax charge for the Company’s third fiscal quarter was approximately $1.30 per share.  Excluding this charge, earnings per share would have been $0.65.  This compares to a net loss reported for the same period last year of $17.3 million, or $0.81 per share, which included a $34.3 million loss associated with the Texas subcontract which the Company terminated in February 2007.  The Company is now supporting the State of Texas directly through four interim agreements.

 “While results for the quarter were impacted by the recent settlement, we are pleased to resolve another legacy issue and focus on realizing the full value of our business portfolio," commented Richard Montoni, Chief Executive Officer of MAXIMUS.  “Excluding the settlement and related legal fees, our overall results for the quarter were solid. I’m pleased that we are growing organically in core health and human services markets and delivering financial results that reflect management actions to optimize the current business.   Notably, our Operations segment produced exceptional results driven primarily by organic growth and the turnaround of our Texas project.  While we still have improvements to make, particularly within our Enterprise Systems Segment, these results keep us on track to achieve our full year outlook.”

Consulting Segment
Consulting Segment revenue, which represented 12% of total Company revenue for the third quarter, was $23.3 million compared to $26.7 million in the same period last year.  Third quarter operating income for the Consulting Segment was $2.0 million compared to $3.8 million reported for same period last year primarily due to fluctuations related to the timing and billing of work.  As expected, operating income improved sequentially compared to $1.0 million reported for the second quarter of fiscal 2007.

Systems Segment
Systems Segment revenue represented 17% of total Company revenue for the third quarter of fiscal 2007 and increased 18.4% to $34.0 million from the prior-year period driven by the ERP division.  The Systems Segment lost $3.6 million in the third quarter as a result of approximately $3.2 million of charges from legacy contracts in the Justice Solutions division that adversely impacted the quarter, compared to a net loss of $3.0 million reported for the third quarter of 2006.  While the loss in the third quarter reflects legacy work, the Company has since implemented more stringent criteria for pursuing new business in an effort to reduce these types of quarterly project losses.
 
2
 
Operations Segment
Operations Segment revenue represented 71% of total Company revenue for the third quarter of fiscal 2007.  Operations Segment revenue for the third quarter was $139.3 million compared to $131.2 million in last year’s third quarter, which included revenue of $17.0 million which did not recur in fiscal 2007 from voter hardware sales and the divested Corrections business.  Third quarter operating income for the Operations Segment was $24.6 million compared to a loss of $23.1 million reported for the same period last year and operating income of $7.1 million reported for the second quarter of fiscal 2007.   The improved profitability compared to the prior year and last quarter was driven by strong organic growth and the turnaround in the Texas project.

Sales and Pipeline
Year-to-date signed contract wins at August 1, 2007, totaled $423 million, compared to $569 million reported last year.  New contracts pending at August 1, 2007, (awarded but unsigned) totaled $339 million compared to $145 million reported last year.  While new signed awards are down compared to last year, contracts that have been awarded but remain unsigned increased nearly $200 million compared to last year, the majority of which are expected to be signed by fiscal year end. Sales opportunities at August 1, 2007, totaled $1.3 billion (consisting of $414 million in proposals pending, $61 million in proposals in preparation, and $851 million in proposals tracking) compared to $1.1 billion the prior year.

Balance Sheet and Cash Flows
At June 30, 2007, cash, cash equivalents, and marketable securities totaled $214.8 million.  Days Sales Outstanding (DSO) improved to a record low of 75 days at June 30, 2007, benefiting from an improving revenue mix with new contracts and an increased focus on the fundamentals of cash flow management.  The Company’s DSO includes $1.9 million of net long-term accounts receivable included in other assets.  For the third fiscal quarter, the Company generated net cash from operating activities of $34.3 million and paid a quarterly cash dividend of $0.10 per share on May 31, 2007.  Free cash flow, which the Company defines as cash from operations less purchased property and equipment and capitalized software costs, totaled $29.7 million for the third quarter.

3

Outlook
Total Company revenue for fiscal 2007 is estimated to be in the range of $740 million to $750 million.  As a result, the Company expects that total fiscal year 2007 GAAP diluted loss per share will be in the range of $0.35 to $0.45, inclusive of losses on the Texas project and legal and settlement expenses through June 30, 2007.

The Company has also adjusted its preliminary fiscal 2008 guidance, with expected diluted earnings per share to be in the range of $2.35 to $2.65, and an expected revenue growth rate greater than 10%.

Mr. Montoni concluded, “We recently announced that our Board of Directors is exploring strategic alternatives to enhance shareholder value, including a possible sale of the Company.  As we pursue these opportunities, our day-to-day focus will remain on serving our clients and the continued improvement in the performance of our operations with an emphasis on generating profitable, sustainable growth.”

Website Presentation, Conference Call and Webcast Information
MAXIMUS will host a conference call this morning at 9:00 a.m. (ET).  The Company has also posted a presentation on its website, under the Investor Relations page, for analysts to follow along with during the conference call.
 
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:
 
888.881.3328 (Domestic)/206.902.3258 (International)
 
For those unable to listen to the live call, a replay will be available through Tuesday, August 14, 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 approximately 6,000 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).
 
4
 
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
 
5
 
MAXIMUS, Inc.
 
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
 
   
September 30
2006
    
June 30,
2007
  
         
(unaudited)
  
ASSETS
            
Current assets:
  
 
        
Cash and cash equivalents
   $
39,545
     $
91,105
  
Marketable securities
    
117,315
      
123,737
  
Restricted cash
    
1,512
      
323
  
Accounts receivable – billed, net of reserves of $5,830 and $27,876
    
153,399
      
120,287
  
Accounts receivable – unbilled
    
47,728
      
40,451
  
Income taxes receivable
    
9,003
      
3,598
  
Deferred income taxes
    
6,844
      
13,932
  
Prepaid expenses and other current assets
    
8,334
      
6,918
  
Total current assets
    
383,680
      
400,351
  
Property and equipment, at cost    
71,078
      
78,030
  
Less accumulated depreciation and amortization
     (37,64 )     (44,889 )
Property and equipment, net
    
33,429
      
33,141
  
Capitalized software
    
57,260
      
59,996
  
Less accumulated amortization
     (23,335 )     (29,901 )
Capitalized software, net
    
33,925
      
30,095
  
Deferred contract costs, net
    
11,165
      
8,368
  
Goodwill
    
86,688
      
86,086
  
Intangible assets, net
    
5,720
      
3,994
  
Other assets, net
    
3,894
      
2,611
  
Total assets
   $
558,501
     $
564,646
  
LIABILITIES AND SHAREHOLDERS’ EQUITY
                
Current liabilities:
                
Accounts payable
   $ 
54,484
     $ 
50,032
  
Accrued compensation and benefits
    
24,426
      
27,900
  
Deferred revenue
    
54,414
      
44,918
  
Current portion of capital lease obligations
    
1,690
      
1,742
  
Other accrued liabilities
     1,600       32,468  
Total current liabilities
    
136,614
      
157,060
  
Capital lease obligations, less current portion
    
2,044
      
698
  
Deferred income taxes
    
14,944
      
11,754
  
Total liabilities
    
153,602
      
169,512
  
 
                
                 
Shareholders' equity:
                
Common stock, no par value; 60,000,000 shares authorized; 21,544,964 and 22,151,770 shares issued and outstanding at September 30, 2006 and
June 30, 2007, at stated amount, respectively 
    
156,349
      
173,485
  
Accumulated other comprehensive income (loss)
     (916 )    
1,138
  
Retained earnings
    
249,466
      
220,511
  
Total shareholders' equity 
    
404,899
      
395,134
  
Total liabilities and shareholders' equity
   $
558,501
     $
564,646
  
 
6
 
MAXIMUS, Inc.
 
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(Unaudited)

   
Three Months
Ended June 30,
    
 Nine Months
 Ended June 30,
   
2006
    
2007
    
2006
    
2007
    
Revenue
   $
186,596
     $
196,557
     $
529,095
     $
536,772
  
Cost of revenue
    
158,945
      
138,126
      
411,366
      
415,188
  
Write-off of deferred contract costs
    
17,109
      
-
      
17,109
      
-
  
     Gross profit
    
10,542
      
58,431
      
100,620
      
121,584
  
Selling, general and administrative expenses
    
32,275
      
35,350
      
94,725
      
104,454
  
Legal and settlement expense
    
9,078
      
33,010
      
10,303
      
42,114
  
     Loss from operations
     (30,811 )     (9,929 )     (4,408 )     (24,984 )
Interest and other income, net
    
2,196
      
1,131
      
5,174
      
3,223
  
Gain (gain adjustment) on sale of business
    
-
       (233 )    
-
      
451
  
     Income (loss) before income taxes
     (28,615 )     (9,031 )    
766
       (21,310 )
Provision (benefit) for income taxes
     (11,306 )    
5,360
      
299
      
1,114
  
     Net income (loss)
   $ (17,309 )   $ (14,391 )   $
467
     $ (22,424 )
                             
Earnings (loss) per share:
                            
Basic
   $ (0.81 )   $ (0.65 )   $
0.02
     $ (1.03 )
Diluted
   $ (0.81 )   $ (0.65 )   $
0.02
     $ (1.03 )
                             
Dividends per share
   $
0.10
     $
0.10
     $
0.30
     $
0.30
  
                             
Weighted average shares outstanding:
                            
Basic
    
21,472
      
21,998
      
21,442
      
21,767
  
Diluted
    
21,472
      
21,998
      
21,851
      
21,767
  
 
7

MAXIMUS, Inc.
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
 
   
Nine Months Ended June 30,    
  
   
 2006
    
2007
  
Cash flows from operating activities: 
                
Net income (loss)
   $
467
     $
(22,424
 )
                 
Adjustments to reconcile net income to net cash provided by operating activities: 
                
Depreciation
    
6,786
      
7,542
  
Amortization
    
5,839
      
7,912
  
Write-off of deferred contract costs
    
17,109
      
-
  
Deferred income taxes
    
(9,547
 )     
(10,277
 )
Gain on sale of business
    
-
      
(451
 ) 
Non-cash equity-based compensation
    
4,570
      
2,208
  
                 
Change in assets and liabilities, net of effects from divestiture:
                
Accounts receivable - billed
    
(14,721
 )    
33,111
  
Accounts receivable - unbilled
    
(1,569
 )    
6,232
  
Prepaid expenses and other current assets
    
(1,312
 )    
1,428
  
Deferred contract costs
    
(13,411
 )    
2,797
  
Other assets
    
(961
 )     
3,261
  
Accounts payable
    
27,281
      
(3,959
 )
Accrued compensation and benefits
    
(1,782
 )    
3,474
  
Deferred revenue
    
12,455
      
(9,091
 )
Income taxes
    
(13,816
 )    
5,405
  
Other liabilities
    
(1,114
 )     
32,179
  
                 
Net cash provided by operating activities
    
16,274
      
59,347
  
                 
Cash flows from investing activities:
                
Proceeds from sale of business, net of transaction costs
    
-
      
1,871
  
Purchases of property and equipment
    
(8,200
 )     
(7,390
 ) 
Capitalized software costs
    
(6,472
 )     
(2,949
 ) 
Increase in marketable securities
    
(18,575
 )     
(6,422
 ) 
                 
Net cash used in investing activities
    
(33,247
 )     
(14,890
 ) 
                 
Cash flows from financing activities:
                
Employee stock transactions
    
7,268
      
11,807
  
Repurchases of common stock
    
(10,139
 )     
-
  
Payments on capital lease obligations
    
(1,121
 )     
(1,294
 ) 
Tax benefit due to option exercises and restricted stock units vesting
    
1,058
      
3,121
  
Cash dividends paid
    
(6,434
 )     
(6,531
 ) 
                 
Net cash (used in) provided by financing activities
    
(9,368
 )     
7,103
  
 
                
Net increase (decrease) in cash and cash equivalents
    
(26,341
 )     
51,560
  
                 
Cash and cash equivalents, beginning of period
    
59,073
      
39,545
  
                 
Cash and cash equivalents, end of period
   $
32,732
     $
91,105
  
 
8

MAXIMUS, Inc.
Segment Information
(In thousands)
(Unaudited)

   
Three Months
Ended June 30,
    
Nine Months
Ended June 30,
  
   
2006
    
2007
    
2006
    
2007
  
Revenue:
                        
Consulting
   $
26,714
     $
23,285
     $
76,717
     $
71,165
  
Systems
    
28,686
      
33,957
      
97,205
      
103,910
  
Operations
    
131,196
      
139,315
      
355,173
      
361,697
  
Total
   $
186,596
     $
196,557
     $
529,095
     $
536,772
  
                                 
Gross Profit (Loss):
                                
Consulting
   $
11,148
     $
9,937
     $
31,512
     $
30,097
  
Systems
    
6,644
      
8,293
      
30,511
      
26,758
  
Operations
     (7,250 )    
40,201
      
38,597
      
64,729
  
Total
   $
10,542
     $
58,431
     $
100,620
     $
121,584
  
                                 
Selling, General, and Administrative expense:
                                
Consulting
   $
7,330
     $
7,917
     $
22,182
     $
24,230
  
Systems
    
9,654
      
11,910
      
29,356
      
31,879
  
Operations
    
15,871
      
15,631
      
45,106
      
49,145
  
Corporate/Other
     (580 )     (108 )     (1,919 )     (800 )
Total
   $
32,275
     $
35,350
     $
94,725
     $
104,454
  
                                 
Income (Loss) from Operations:
                                
Consulting
   $
3,818
     $
2,020
     $
9,330
     $
5,867
  
Systems
     (3,010 )     (3,617 )    
1,155
       (5,121 )
Operations
     (23,121 )    
24,570
       (6,509 )    
15,584
  
Consolidating adjustments
    
580
      
108
      
1,919
      
800
  
Legal expense
     (9,078 )     (33,010 )     (10,303 )     (42,114 )
Total
   $ (30,811 )   $ (9,929 )   $ (4,408 )   $ (24,984 )
 
9
 
MAXIMUS, Inc.
Supplemental Pro Forma Information
(Dollars in millions, except per share data)
(unaudited)
 
   
Three Months Ended
        
   
Dec 31
2006
    
Mar 31
2007
    
Jun 30
2007
    
Total
  
                                 
Income before taxes, as reported (GAAP)
   $ (16.2 )   $
3.9
     $ (9.0 )   $ (21.3 )
Add back Texas project loss (1)
    
24.0
      
6.5
      
-
      
30.5
  
Add back legal and settlement expense
    
3.0
      
6.1
      
33.0
      
42.1
  
                                 
Pro forma income before taxes (non-GAAP)
   $
10.8
     $
16.5
     $
24.0
     $
51.3
  
                                 
Diluted earnings per share, as reported (GAAP)
   $ (0.48 )   $
0.11
     $ (0.65 )   $ (1.02 )
Add back Texas project loss (1)
    
0.71
      
0.18
      
-
      
0.89
  
Add back legal and settlement expense
    
0.09
      
0.16
      
1.30
      
1.55
  
                                 
Pro forma diluted earnings per share (non-GAAP)
   $
0.32
     $
0.45
     $
0.65
     $
1.42
  
 
 
(1)  Pro forma adjustments for the Texas project loss are for periods presented through March 31, 2007.  No pro forma adjustment is presented for the three months ended June 30, 2007 on the basis that the Texas project was profitable.
 
- XXX -
 
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