-Record Revenue of $210.7 million and Record Diluted EPS of $0.91 from Continuing Operations-

RESTON, Va.--(BUSINESS WIRE)--August 5, 2010--MAXIMUS, Inc. (NYSE:MMS), a leading provider of government services worldwide, today reported results for the three months ended June 30, 2010.

Revenue for the third quarter increased 19.4% over the same period last year (or 15.9% on a constant currency basis) to $210.7 million, driven primarily by the Company’s international employment services operations in Australia and the United Kingdom. Revenue was slightly lower than expected as a result of lower volumes on certain performance-based projects where the Company effectively managed costs to achieve margin and earnings. For the fiscal 2010 third quarter, organic revenue grew 16.0% (or 12.5% on a constant currency basis) compared to the same period last year.

Net income from continuing operations for the third quarter increased to $16.4 million. Earnings from continuing operations in the fiscal 2010 third quarter increased 25% to $0.91 per diluted share compared to adjusted earnings from continuing operations of $0.73 per diluted share last year, which excluded $0.16 of legal and settlement recovery.

“Our record results for the third quarter reflect the increasing positive contribution from our international operations,” commented Richard A. Montoni, President and Chief Executive Officer of MAXIMUS. “Our emphasis on results-driven performance resonates with government clients around the world who seek to maximize results in a budget-constrained environment. As our bottom-line results indicate, we have maintained strong fiscal discipline by managing resources on volume-sensitive contracts and ramped new business effectively while strategically growing our base of operations.”

For the fiscal 2010 third quarter, Operations Segment revenue increased 18.7% (or 14.9% on a constant currency basis) to $196.5 million compared to $165.5 million for the third quarter of fiscal 2009. Operations Segment operating income for the third quarter grew 30.5% to $25.0 million compared to $19.1 million in the third quarter of last year. Operating margin for the quarter was 12.7%. Year-over-year revenue and profit expansion in the Segment were driven by strong growth in the Company’s international employment services operations in Australia and the United Kingdom.

For the fiscal 2010 third quarter, Consulting Segment revenue was $14.2 million compared to $10.9 million for the same period last year. Consulting Segment operating income for the fiscal 2010 third quarter was $604,000, with an operating margin of 4.3%.

At July 30, 2010, year-to-date signed contract awards totaled $379 million and new contracts pending (awarded, but unsigned) totaled $916 million, which includes approximately $750 million related to three large contracts where the Company has been notified of award and is in final contract negotiations.

Sales opportunities (pipeline) at July 30, 2010 totaled $1.8 billion (consisting of $241 million in proposals pending, $113 million in proposals in preparation, and $1,442 million in proposals tracking) compared to $928 million the prior year.

At June 30, 2010, the Company reported cash and cash equivalents of $153.1 million. Days Sales Outstanding (DSO) from continuing operations improved to 62 days, on a sequential basis, driven by increased collections in the third quarter.

The Company continues to generate strong cash flows driven by solid net income. As a result, cash provided by operating activities totaled $49.6 million with free cash flow of $43.2 million for the third quarter of 2010. The Company defines free cash flow as cash provided by operating activities from continuing operations less property, equipment, and capitalized software expenditures.

MAXIMUS remains committed to returning excess cash to shareholders. During the fiscal 2010 third quarter, the Company purchased 135,936 shares of MAXIMUS common stock for $8.0 million under the Board-authorized share repurchase program. At June 30, 2010, the Company had $38.1 million available under the program. MAXIMUS also paid a cash dividend of $0.12 per share on May 28, 2010 to shareholders of record as of May 14, 2010. Subsequent to quarter end, the Company declared a quarterly cash dividend of $0.12 per share payable on August 31, 2010 to shareholders of record as of August 16, 2010.

The Company is slightly revising its revenue guidance and now expects revenue from continuing operations in the range of $828 million to $838 million due to lower volumes on certain performance-based projects where the Company has continued to manage costs effectively and achieve its earnings objectives. In addition, MAXIMUS is narrowing the range on its previous earnings guidance. The Company now expects adjusted earnings per diluted share from continuing operations to be in the range of $3.55 to $3.60, which is at the top end of its prior guidance range of $3.50 to $3.60.

MAXIMUS will host a conference call this morning, August 5, 2010, 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 can be accessed through 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 19, 2010. Callers can access the replay by calling:

877.660.6853 (Domestic)/201.612.7415 (International)
Replay account number: 316
Replay conference ID number: 354155

MAXIMUS is a leading provider of government services worldwide and is devoted to providing health and human services program management and consulting services to its clients. The Company has more than 6,500 employees located in more than 220 offices in the United States, Canada, Australia, the United Kingdom, and Israel. 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.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)

	September 30, 2009			June 30, 2010
				(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	87,815		$	153,059
Restricted cash		3,919			3,753
Accounts receivable — billed, net of reserves of $5,812 and $1,484		132,058			122,611
Accounts receivable — unbilled		16,706			19,598
Note receivable		736			—
Income taxes receivable		7,501			—
Deferred income taxes		5,389			8,017
Prepaid expenses and other current assets		19,749			21,757
Current assets of discontinued operations		18,238			9,368
Total current assets		292,111			338,163

Property and equipment, at cost		98,781			109,708
Less accumulated depreciation and amortization		(53,495	)		(62,887	)
Property and equipment, net		45,286			46,821
Capitalized software		26,475			32,830
Less accumulated amortization		(7,506	)		(10,049	)
Capitalized software, net		18,969			22,781
Deferred contract costs, net		8,206			6,863
Goodwill		61,029			67,806
Intangible assets, net		2,455			8,128
Deferred income taxes		1,239			—
Other assets, net		3,939			3,816
Total assets	$	433,234		$	494,378

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	44,368		$	55,834
Accrued compensation and benefits		31,713			37,941
Deferred revenue		22,177			35,385
Acquisition-related contingent consideration		—			906
Income taxes payable		—			823
Other accrued liabilities		15,083			9,577
Liabilities of discontinued operations		14,124			4,565
Total current liabilities		127,465			145,031
Deferred revenue, less current portion		6,527			16,081
Long-term debt		—			1,187
Acquisition-related contingent consideration		—			2,100
Income taxes payable, less current portion		1,871			1,755
Deferred income tax liability		243			2,724
Total liabilities		136,106			168,878

Shareholders’ equity:
Common stock, no par value; 60,000,000 shares authorized; 27,161,849 and 27,358,672 shares issued and 17,599,029 and 17,353,075 shares outstanding at September 30, 2009 and June 30, 2010, at stated amount, respectively		338,739			349,098
Treasury stock, at cost; 9,562,820 and 10,005,597 shares at September 30, 2009 and June 30, 2010, respectively		(319,149	)		(341,664	)
Accumulated other comprehensive income		8,268			6,673
Retained earnings		269,270			311,393
Total shareholders’ equity		297,128			325,500
Total liabilities and shareholders’ equity	$	433,234		$	494,378


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

	Three Months Ended June 30,					Nine Months Ended June 30,
	2009			2010		2009			2010
Revenue	$	176,393		$	210,659	$	523,261		$	616,859
Cost of revenue		128,041			153,359		381,471			456,612
Gross profit		48,352			57,300		141,790			160,247
Selling, general and administrative expenses		27,017			31,574		80,145			87,529
Legal and settlement expense (recovery), net		(4,829	)		—		(4,461	)		(5,351	)
Operating income from continuing operations		26,164			25,726		66,106			78,069
Interest and other income, net		129			442		258			729
Income from continuing operations before income taxes		26,293			26,168		66,364			78,798
Provision for income taxes		10,386			9,813		26,214			29,549
Income from continuing operations		15,907			16,355		40,150			49,249

Discontinued operations, net of income taxes:
Income (loss) from discontinued operations		(924	)		970		(2,172	)		(552	)
Loss on disposal		—			—		(5	)		—
Income (loss) from discontinued operations		(924	)		970		(2,177	)		(552	)

Net income	$	14,983		$	17,325	$	37,973		$	48,697

Basic earnings (loss) per share:
Income from continuing operations	$	0.91		$	0.94	$	2.28		$	2.82
Income (loss) from discontinued operations		(0.05	)		0.05		(0.12	)		(0.03	)
Basic earnings per share	$	0.86		$	0.99	$	2.16		$	2.79

Diluted earnings (loss) per share:
Income from continuing operations	$	0.89		$	0.91	$	2.25		$	2.73
Income (loss) from discontinued operations		(0.05	)		0.05		(0.12	)		(0.03	)
Diluted earnings per share	$	0.84		$	0.96	$	2.13		$	2.70

Dividends paid per share	$	0.12		$	0.12	$	0.34		$	0.36

Weighted average shares outstanding:
Basic		17,503			17,423		17,582			17,476
Diluted		17,839			18,004		17,855			18,015


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

	Nine Months Ended June 30,
	2009			2010
Cash flows from operating activities:
Net income	$	37,973		$	48,697
Adjustments to reconcile net income to net cash provided by operating activities:
Loss from discontinued operations		2,177			552
Depreciation		6,307			9,556
Amortization		2,080			4,093
Deferred income taxes		22,351			(1,281	)
Gain on sale of fixed assets		(51	)		—
Deferred interest income on note receivable		312			263
Non-cash equity based compensation		5,628			5,983

Change in assets and liabilities, net of effect of business combinations:
Accounts receivable — billed		7,493			11,065
Accounts receivable — unbilled		(8,111	)		(2,762	)
Prepaid expenses and other current assets		(10,949	)		(2,004	)
Deferred contract costs		(3,206	)		1,358
Due from insurance carrier		12,500			—
Other assets		308			(136	)
Accounts payable		3,418			7,543
Accrued compensation and benefits		(122	)		6,727
Deferred revenue		3,389			22,549
Income taxes		(20,042	)		9,519
Other liabilities		(35,664	)		(1,952	)
Cash provided by operating activities — continuing operations		25,791			119,770
Cash provided by (used in) operating activities — discontinued operations		(2,306	)		(1,573	)
Cash provided by operating activities		23,485			118,197

Cash flows from investing activities:
Proceeds from sale of fixed assets		54			—
Decrease in note receivable		631			473
Purchases of property and equipment		(10,604	)		(10,383	)
Capitalized software costs		(5,037	)		(6,307	)
Acquisition of businesses, net of cash acquired		—			(10,673	)
Cash used in investing activities — continuing operations		(14,956	)		(26,890	)
Cash used in investing activities — discontinued operations		(36	)		—
Cash used in investing activities		(14,992	)		(26,890	)

Cash flows from financing activities:
Employee stock transactions		636			2,679
Repurchases of common stock		(30,046	)		(22,518	)
Payments on capital lease obligations		(417	)		—
Tax benefit due to option exercises and restricted stock units vesting		6			1,424
Issuance of long-term debt		—			326
Cash dividends paid		(5,955	)		(6,295	)
Cash used in financing activities — continuing operations		(35,776	)		(24,384	)
Cash used in financing activities — discontinued operations		—			—
Cash used in financing activities		(35,776	)		(24,384	)

Effect of exchange rate changes on cash and cash equivalents		(656	)		(1,679	)

Net increase (decrease) in cash and cash equivalents		(27,939	)		65,244

Cash and cash equivalents, beginning of period		119,605			87,815

Cash and cash equivalents, end of period	$	91,666		$	153,059


MAXIMUS, Inc.
SEGMENT INFORMATION
(Dollars in thousands)
(Unaudited)

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

	Three Months Ended June 30,										Nine Months Ended June 30,
	2009			% (1)		2010			% (1)		2009			% (1)		2010			% (1)

Revenue:
Operations	$	165,522		100	%	$	196,458		100	%	$	477,486		100	%	$	576,580		100	%
Consulting		10,871		100	%		14,201		100	%		45,775		100	%		40,279		100	%
Total		176,393		100	%		210,659		100	%		523,261		100	%		616,859		100	%

Gross profit:
Operations		41,981		25.4	%		52,271		26.6	%		123,683		25.9	%		145,773		25.3	%
Consulting		6,371		58.6	%		5,029		35.4	%		18,107		39.6	%		14,474		35.9	%
Total		48,352		27.4	%		57,300		27.2	%		141,790		27.1	%		160,247		26.0	%

Selling, general, and administrative expense:
Operations		22,854		13.8	%		27,311		13.9	%		63,866		13.4	%		75,114		13.0	%
Consulting		4,119		37.9	%		4,425		31.2	%		15,645		34.2	%		12,440		30.9	%
Corporate/other		44		NM			(162	)	NM			634		NM			(25	)	NM
Total		27,017		15.3	%		31,574		15.0	%		80,145		15.3	%		87,529		14.2	%

Operating income from continuing operations:
Operations		19,127		11.6	%		24,960		12.7	%		59,817		12.5	%		70,659		12.3	%
Consulting		2,252		20.7	%		604		4.3	%		2,462		5.4	%		2,034		5.0	%
Consolidating adjustments		(44	)	NM			162		NM			(634	)	NM			25		NM
Subtotal: Segment operating income		21,335		12.1	%		25,726		12.2	%		61,645		11.8	%		72,718		11.8	%
Legal and settlement recovery (expense), net		4,829		NM			—		NM			4,461		NM			5,351		NM
Total	$	26,164		14.8	%	$	25,726		12.2	%	$	66,106		12.6	%	$	78,069		12.7	%


MAXIMUS, Inc.
Supplemental Pro Forma Diluted EPS from Continuing Operations ("Adjusted EPS")
FY 2009 and Q1, Q2, and Q3 FY 2010
(Unaudited)

	Q1 09		Q2 09		Q3 09			Q4 09		Total FY 09			Q1 10		Q2 10			Q3 10
Diluted EPS from continuing operations-
GAAP basis	$	0.69	$	0.66	$	0.89		$	0.80	$	3.05		$	0.81	$	1.02		$	0.91

Pro forma adjustments:
Legal and settlement expense (recovery), net		-		0.01		(0.16	)		0.01		(0.14	)		0.02		(0.21	)		-
Severance		-		0.01		-			-		-			-		-			-
Subtotal pro forma adjustments	$	0.00	$	0.02		($0.16	)	$	0.01		($0.14	)	$	0.02		($0.21	)		-

Adjusted EPS from continuing operations	$	0.69	$	0.68	$	0.73		$	0.81	$	2.91		$	0.83	$	0.81		$	0.91

(1)		Percentage of respective segment revenue. Changes considered not meaningful are marked “NM.”