- Notified as Preferred Bidder for Five-Year, $200 Million Employment Services Contract in UK -

RESTON, Va.--(BUSINESS WIRE)--August 6, 2009--MAXIMUS (NYSE: MMS), a leading provider of government services, today reported results for its fiscal 2009 third quarter ended June 30, 2009.

Revenue for the third quarter was $185.2 million versus $189.4 million reported for the same period last year. On a constant currency basis, fiscal 2009 third quarter revenue increased 1% from the prior-year period. For the third quarter, net income from continuing operations was $15.0 million or $0.84 per diluted share compared to $17.3 million or $0.92 per diluted share reported for the third quarter last year. Fiscal 2009 third quarter earnings included $0.16 per diluted share of legal and settlement recovery from an insurance reimbursement. Earnings in the prior-year period included a one-time gain of $0.13 per diluted share from the sale of a property in McLean, Virginia.

The Company also announced that its United Kingdom subsidiary, MAXIMUS Employment & Training, has been selected as the preferred bidder by the United Kingdom Department of Work & Pensions for the delivery of employment services in southeast England. The five-year contract, valued at approximately $200 million (USD) is expected to be executed within a week and operations are expected to launch in October 2009.

Richard A. Montoni, Chief Executive Officer, commented, “Our solid results for the period reflect the integral role MAXIMUS plays in the administration of vital health and human services programs. Recent new wins, successful rebids and program expansions have offset some reductions in the domestic business resulting from the challenging state budgetary environment. We are actively working with our government partners to meet increased program demand with scalable solutions while best positioning the Company for emerging opportunities. With the recent doubling of our Australia operations and today’s announced win in the UK, we are excited to expand the reach of our thought leadership and program administration expertise in the global market.”

Operations Segment revenue increased 4.8% (8.3% on a constant currency basis) to $165.5 million in the fiscal 2009 third quarter compared to $157.9 million in the prior-year period, driven by the contribution of new and expanding contracts. Operating income was $20.0 million for the third quarter of fiscal 2009 with segment operating margin of 12.1%. Segment operating income compared to last year was lower due to less favorable currency rates, start up expenses on new work and the transition to a new contract that was rebid and launched in the second quarter of fiscal 2009.

For the fiscal 2009 third quarter, Consulting Segment revenue was $19.7 million, compared to $31.4 million last year. The year-over-year revenue decline was related to the ongoing planned transition of the Segment’s business, including the exit of the federal health care claiming (RevMax) business, and lower revenue from ERP projects that are winding down. As expected, the Segment lost $146,000 in the third quarter of fiscal 2009. On a sequential basis, losses were lower reflecting the Company’s efforts to improve the Segment’s overall performance.

Year-to-date signed contract wins at August 4, 2009, totaled $877 million, compared to the $684 million reported last year. New contracts pending at August 4, 2009, (awarded but unsigned) totaled $542 million compared to $265 million reported last year. Sales opportunities (pipeline) at August 4, 2009, totaled $1.2 billion (consisting of $228 million in proposals pending, $87 million in proposals in preparation and $910 million in proposals tracking) compared to $1.7 billion the prior year. The decrease in sales opportunities (pipeline) reflects the shift of contract dollars into new pending and signed awards. The Company believes that overall demand levels remain very strong.

Cash and cash equivalents totaled $91.7 million at June 30, 2009. In the fiscal 2009 third quarter, MAXIMUS generated cash from operating activities from continuing operations of $12.4 million and free cash flow of $6.3 million. Days Sales Outstanding (DSO) were 73 days with six days related to milestone-billing on programs where the Company is refreshing technology. MAXIMUS did not repurchase any shares during the quarter and at June 30, had approximately $54.1 million available under the Board-authorized share repurchase program. On May 29, 2009, MAXIMUS paid a quarterly cash dividend of $0.12 per share, and on July 10, 2009, the Company declared a quarterly cash dividend of $0.12 per share payable on August 31, 2009.

MAXIMUS reiterates expected fiscal 2009 revenue in the range of $745 million to $755 million and earnings in the range of $2.75 to $2.85 per diluted share, excluding the positive impact of the legal and settlement recovery of $0.16 per diluted share. The Company also reiterates its guidance for operating cash flow from continuing operations of $35 million to $45 million in fiscal 2009.

For fiscal 2010, the Company is maintaining its preliminary fiscal 2010 revenue growth estimate of 7%, based on the midpoint of its fiscal 2009 revenue guidance, driven by its new business wins to date. This preliminary estimate includes both the benefit of today’s announced UK agreement as well as reduced contributions from a limited number of domestic projects due to recent program reductions, primarily in California.

“We remain encouraged by our revenue growth outlook for fiscal 2010,” Mr. Montoni concluded. “While we have yet to complete our budget planning process for the coming year, we believe that our preliminary outlook reflects our strong prospects and anticipated performance of our base business, which has experienced a limited impact from government spending reductions. Additional revenue upside to our outlook may be possible depending on the continued resilience of our base business and our ability to secure new work. Most importantly, we will continue our disciplined approach to execution and risk management to deliver profitable growth in our core health and human services markets.”

MAXIMUS will host a conference call this morning, August 6, 2009, 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 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:

For those unable to listen to the live call, a replay will be available through August 14, 2009. Callers can access the replay by calling:

877.660.6853 (Domestic)/201.612.7415 (International)
Replay account number: 316
Replay conference ID number: 328815

MAXIMUS is a leading provider of government services and is devoted to providing health and human services program management and consulting services to its clients. The Company has more than 6,000 employees located in more than 220 offices in the United States, Canada, Australia, Israel and the United Kingdom. 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 Quarterly Report filed with the Securities and Exchange Commission, found on www.maximus.com.

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 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.


MAXIMUS, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)


	September 30,			June 30,
	2008			2009
				(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	119,605		$	91,666
Restricted cash		2,736			3,702
Accounts receivable — billed, net of reserves of $5,512 and $4,473		128,819			116,884
Accounts receivable — unbilled		30,695			30,290
Current portion of note receivable		746			949
Income taxes receivable		—			7,823
Deferred income taxes		21,901			12,695
Due from insurance carrier		12,500			—
Prepaid expenses and other current assets		7,892			18,775
Current assets of discontinued operations		193			—
Total current assets		325,087			282,784

Property and equipment, at cost		81,232			91,156
Less accumulated depreciation and amortization		(47,238	)		(53,311	)
Property and equipment, net		33,994			37,845
Capitalized software		19,979			23,970
Less accumulated amortization		(5,854	)		(6,769	)
Capitalized software, net		14,125			17,201
Deferred contract costs, net		5,324			8,530
Goodwill		60,659			61,288
Intangible assets, net		3,699			2,419
Note receivable, less current portion		1,337			192
Deferred income taxes		10,933			—
Other assets, net		3,788			2,918
Total assets	$	458,946		$	413,177

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	48,950		$	49,971
Accrued compensation and benefits		26,684			26,830
Deferred revenue		19,676			21,824
Income taxes payable		12,662			—
Capital lease obligations		417			—
Other accrued liabilities		53,891			16,554
Liabilities of discontinued operations		11,028			3,708
Total current liabilities		173,308			118,887
Deferred revenue, less current portion		8,315			7,219
Income taxes payable, less current portion		1,617			1,753
Deferred income tax liability		—			2,212
Total liabilities		183,240			130,071

Shareholders’ equity:
Common stock, no par value; 60,000,000 shares authorized; 26,937,498 and 27,075,110 shares issued and 18,302,368 and 17,512,290 outstanding at September 30, 2008 and June 30, 2009, at stated amount, respectively		328,323			334,590
Treasury stock, at cost; 8,635,130 and 9,562,820 shares at September 30, 2008 and June 30, 2009, respectively		(289,103	)		(319,146	)
Accumulated other comprehensive income		5,536			4,694
Retained earnings		230,950			262,968
Total shareholders’ equity		275,706			283,106
Total liabilities and shareholders’ equity	$	458,946		$	413,177


MAXIMUS, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
(Unaudited)


	Three Months						Nine Months
	Ended June 30,						Ended June 30,
	2008			2009			2008			2009
Revenue	$	189,364		$	185,240		$	556,064		$	549,533
Cost of revenue		136,576			137,187			405,129			407,222
Gross profit		52,788			48,053			150,935			142,311
Selling, general and administrative expenses		28,949			28,155			84,749			83,489
Gain on sale of building		3,938			—			3,938			—
Legal and settlement expense (recovery), net		700			(4,829	)		1,631			(4,461	)
Operating income from continuing operations		27,077			24,727			68,493			63,283
Interest and other income, net		490			129			2,098			258
Income from continuing operations before income taxes		27,567			24,856			70,591			63,541
Provision for income taxes		10,271			9,818			27,538			25,099
Income from continuing operations		17,296			15,038			43,053			38,442

Discontinued operations, net of income taxes:
Loss from discontinued operations		(7,617	)		(55	)		(13,142	)		(464	)
Gain (Loss) on disposal		1,726			—			1,726			(5	)
Loss from discontinued operations		(5,891	)		(55	)		(11,416	)		(469	)

Net income	$	11,405		$	14,983		$	31,637		$	37,973

Basic earnings per share:
Income from continuing operations	$	0.93		$	0.86		$	2.24		$	2.19
Loss from discontinued operations		(0.32	)		—			(0.60	)		(0.03	)
Basic earnings per share	$	0.61		$	0.86		$	1.64		$	2.16

Diluted earnings (loss) per share:
Income from continuing operations	$	0.92		$	0.84		$	2.21		$	2.15
Loss from discontinued operations		(0.31	)		—			(0.59	)		(0.02	)
Diluted earnings per share	$	0.61		$	0.84		$	1.62		$	2.13

Dividends paid per share	$	0.10		$	0.12		$	0.30		$	0.34

Weighted average shares outstanding:
Basic		18,648			17,503			19,235			17,582
Diluted		18,819			17,839			19,471			17,855


MAXIMUS, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)


	Nine Months
	Ended June 30,
	2008			2009
Cash flows from operating activities:
Net income	$	31,637		$	37,973
Adjustments to reconcile net income to net cash provided by operating activities:
Loss from discontinued operations		11,416			469
Depreciation		7,755			6,468
Amortization of intangible assets and capitalized software		2,149			2,080
Deferred income taxes		5,815			22,350
Gain on sale of building		(3,938	)		—
Gain on sale of fixed assets		—			(51	)
Deferred interest income on note receivable		37			311
Non-cash equity based compensation		7,028			5,628

Change in assets and liabilities:
Accounts receivable — billed		(1,950	)		11,596
Accounts receivable — unbilled		(13,296	)		(36	)
Prepaid expenses and other current assets		(65	)		(10,980	)
Deferred contract costs		2,681			(3,206	)
Due from insurance carrier		—			12,500
Other assets		275			308
Accounts payable		3,141			1,577
Accrued compensation and benefits		867			(141	)
Deferred revenue		(3,859	)		1,935
Income taxes		(7,902	)		(20,042	)
Other liabilities		933			(37,658	)
Cash provided by operating activities — continuing operations		42,724			31,081
Cash used in operating activities — discontinued operations		(4,632	)		(7,596	)
Cash provided by operating activities		38,092			23,485

Cash flows from investing activities:
Proceeds from sales of discontinued operations, net of transaction costs		4,643			—
Proceeds from sale of building, net of transaction costs		5,929			—
Proceeds from sale of fixed assets		—			54
Proceeds from note receivable		59			631
Purchases of property and equipment		(7,890	)		(10,640	)
Capitalized software costs		(3,719	)		(5,037	)
Decrease in marketable securities		126,210			—
Cash provided by (used in) investing activities — continuing operations		125,232			(14,992	)
Cash used in investing activities — discontinued operations		(2,259	)		—
Cash provided by (used in) investing activities		122,973			(14,992	)

Cash flows from financing activities:
Employee stock transactions		3,364			636
Repurchases of common stock		(150,388	)		(30,046	)
Payments on capital lease obligations		(1,213	)		(417	)
Tax benefit due to option exercises and restricted stock units vesting		583			6
Cash dividends paid		(5,939	)		(5,955	)
Cash used in financing activities — continuing operations		(153,593	)		(35,776	)
Cash used in financing activities — discontinued operations		—			—
Cash used in financing activities		(153,593	)		(35,776	)

Effect of exchange rate changes on cash and cash equivalents		—			(656	)

Net increase/(decrease) in cash and cash equivalents		7,472			(27,939	)

Cash and cash equivalents, beginning of period		70,472			119,605

Cash and cash equivalents, end of period	$	77,944		$	91,666


Segment Information

The following table provides certain financial information for each of the Company’s business segments (in thousands):


	Three Months Ended June 30,										Nine Months Ended June 30,
	2008			% (1)		2009			% (1)		2008			% (1)		2009			% (1)

Revenue:
Operations	$	157,917		100	%	$	165,522		100	%	$	465,706		100	%	$	477,486		100	%
Consulting		31,447		100	%		19,718		100	%		90,358		100	%		72,047		100	%
Total		189,364		100	%		185,240		100	%		556,064		100	%		549,533		100	%

Gross Profit:
Operations		41,870		26.5	%		41,981		25.4	%		119,593		25.7	%		123,683		25.9	%
Consulting		10,918		34.7	%		6,072		30.8	%		31,342		34.7	%		18,628		25.9	%
Total		52,788		27.9	%		48,053		25.9	%		150,935		27.1	%		142,311		25.9	%

Selling, general, and administrative expense:
Operations		19,025		12.0	%		21,942		13.3	%		56,074		12.0	%		62,388		13.1	%
Consulting		9,656		30.7	%		6,218		31.5	%		27,805		30.8	%		20,711		28.7	%
Corporate/Other		268		NM(2)			(5	)	NM(2)			870		NM(2)			390		NM(2)
Total		28,949		15.3	%		28,155		15.2	%		84,749		15.2	%		83,489		15.2	%

Operating income (loss) from continuing operations:
Operations		22,845		14.5	%		20,039		12.1	%		63,519		13.6	%		61,295		12.8	%
Consulting		1,262		4.0	%		(146	)	(0.7	)%		3,537		3.9	%		(2,083	)	(2.9	)%
Consolidating adjustments		(268	)	NM(2)			5		NM(2)			(870	)	NM(2)			(390	)	NM(2)
Subtotal: Segment operating income		23,839		12.6	%		19,898		10.7	%		66,186		11.9	%		58,822		10.7	%
Gain on sale of building		3,938		2.1	%		—		—	%		3,938		0.7	%		—		—	%
Legal and settlement (expense) recovery, net		(700	)	(0.4	)		4,829		2.6	%		(1,631	)	(0.3	)%		4,461		0.8	%
Total	$	27,077		14.3	%	$	24,727		13.3	%	$	68,493		12.3	%	$	63,283		11.5	%


MAXIMUS, Inc.
Supplemental Pro Forma Diluted EPS from Continuing Operations
Fiscal Year 2008 and Year To Date Fiscal 2009


								Total
	Q1 08		Q2 08	Q3 08		Q4 08		FY 08		Q1 09	Q2 09	Q3 09		YTD 09
Diluted EPS from continuing operations-
GAAP basis	$0.59		$0.72	$0.92		($0.80	)	$1.43		$0.67	$0.64	$0.84		$2.15

Pro forma adjustments:
Legal and settlement expense (recovery), net	-		0.03	0.02		1.23		1.28		-	0.01	(0.16	)	(0.15	)
Gain on sale of building	-		-	(0.13	)	-		(0.13	)	-	-	-		-
Pre-ASR interest income	(0.03	)	-	-		-		(0.03	)	-	-	-		-
Non-cash goodwill impairment charge	-		-	-		0.25		0.25		-	-	-		-
Severance	-		-	-		0.03		0.03		-	0.01	-		0.01
Subtotal pro forma adjustments	($0.03	)	$0.03	($0.11	)	$1.51		$1.40		$0.00	$0.02	($0.16	)	($0.14	)

Pro forma diluted EPS from continuing operations	$0.56		$0.75	$0.81		$0.71		$2.83		$0.67	$0.66	$0.68		$2.01

										(1)						% of respective segment revenue

										(2)						Not meaningful