EX-99.1 2 a5605191ex991.htm EXHIBIT 99.1 a5605191ex991.htm
Exhibit 99.1
 
MAXIMUS Reports First Quarter Results
 
Revenue of $202.0 Million and Diluted EPS of $0.51
 
RESTON, Va.--(BUSINESS WIRE)--MAXIMUS (NYSE:MMS), a leading provider of government services, today reported results for its first quarter ended December 31, 2007.
 
First quarter highlights include:
 
  • Revenue increased 25% to $202.0 million compared to the same period last year,
  • Net income of $10.6 million and diluted earnings per share of $0.51,
  • Cash, cash equivalents and marketable securities at December 31, 2007 of $62.3 million, reflecting cash used during the quarter to fund the Company’s $150 million Accelerated Share Repurchase program,
  • Strong cash flow from operations totaling $20.8 million,
  • Improved Days Sales Outstanding to 77 days at December 31, 2007,
  • New sales awards of $324 million and total pipeline of $1.5 billion at January 29, 2008, and,
  • Completion of a $50 million credit facility with possible syndication up to $75 million.
Revenue for the first quarter increased 25% to $202.0 million compared to $161.1 million reported for the same period last year. All revenue growth in the quarter was organic. Net income increased to $10.6 million, or $0.51 per diluted share compared to a net loss of $10.4 million, or $0.48 per diluted share, for the same period last year. First quarter revenue growth and margin expansion, compared to the same period last year, was driven by the Operations Segment. This growth resulted from the optimization of the business portfolio, new work and the resolution of certain legacy contracts including the transformation of the Texas contract to a direct service agreement. As expected, first quarter operating margin was sequentially lower due to seasonality in the fourth quarter and planned investments on new projects.
 
Richard Montoni, Chief Executive Officer of MAXIMUS, commented, “The progress we made during the last year in resolving many legacy matters and more selectively pursuing new opportunities led to solid results from operations and healthy cash flows driven by continued strong performance by our Operations Segment. We continue to focus on underperforming areas within our Systems Segment and we are actively reviewing alternatives for certain business lines outside of our core service offerings. Despite a cautious economic environment, we had strong sales awards in the quarter and maintained a healthy pipeline of new opportunities totaling $1.5 billion.”
 
Consulting Segment
 
For the first quarter, Consulting Segment revenue was $22.2 million, or 11% of total Company revenue, compared to $24.7 million reported for the same period last year. First quarter operating income for the Consulting Segment was $1.2 million compared to $2.8 million reported for the same period last year. The reductions in revenue and operating income compared to last year are primarily attributable to investments in new markets and the transition away from contingent-based federal healthcare claiming projects.
 
Systems Segment
 
Systems Segment revenue, which represented 17% of total Company revenue, was $34.0 million in the first quarter versus $34.5 million in the prior-year period. The Systems Segment reported a first quarter operating loss of $3.1 million compared to a loss of $1.6 million for the first quarter of last year. The Segment’s financial results continue to be dampened by ongoing software development initiatives and legacy projects in the education and justice divisions.
 
Operations Segment
 
Operations Segment revenue accounted for 72% of total Company revenue in the first quarter and increased 43% to $145.8 million compared to $101.9 million for the first quarter of fiscal 2007, which was impacted by a $15.7 million revenue reduction related to past projects that have since been resolved. Operations Segment operating income for the first quarter was $18.7 million, compared to a loss of $16.0 million reported for the first quarter of last year. The improvements in revenue and profitability resulted from the optimization of the Company’s project portfolio, the transformation of the Texas contract to a direct service agreement and new organic growth in health and workforce services.
 
Sales and Pipeline
 
Year-to-date signed contract wins at January 29, 2008, totaled $324 million, compared to $80 million reported last year. New contracts pending at January 29, 2008, (awarded but unsigned) totaled $282 million compared to $142 million reported last year. Sales opportunities (pipeline) at January 29, 2008, totaled $1.5 billion (consisting of $362 million in proposals pending, $153 million in proposals in preparation, and $990 million in proposals tracking) compared to $1.3 billion the prior year.
 
Balance Sheet and Cash Flows
 
At December 31, 2007, cash, cash equivalents, and marketable securities totaled $62.3 million, which reflects strong cash flow from operations and a $150 million use of cash for the execution of the Company’s Accelerated Share Repurchase program. MAXIMUS generated net cash from operations of $20.8 million and free cash flow, which the Company defines as cash from operations less purchased property and equipment and capitalized software costs, totaling $16.7 million. Cash flow from operations benefited from solid receivables collections. As a result Days Sales Outstanding (DSO) improved to 77 days at December 31, 2007. MAXIMUS paid a quarterly cash dividend of $0.10 per share on November 30, 2007.
 
Outlook
 
The Company reiterates its fiscal 2008 revenue forecast in the range of approximately $850 million to $880 million. The Company is updating its earnings guidance to include the accretion for the Accelerated Share Repurchase program and now expects full year earnings in the range of $2.60 to $2.85 per diluted share.
 
Mr. Montoni concluded, “We expect 2008 to be a year of growth driven by the Operations Segment. With strong risk management controls in place, our approach to both new and existing business is working as demonstrated by the improvements in the Operations business over the last several quarters. We are determined to bring needed improvement to the Systems Segment and we are actively working to resolve the remaining legacy issues in underperforming areas of our business.”
 
Website Presentation, Conference Call and Webcast Information
 
MAXIMUS will host a conference call this morning, February 6, 2008, 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:
 
877.407.8289 (Domestic)/201.689.8341 (International)
 
A replay will be available through February 15, 2008. Callers can access the replay by calling: 877.660.6853 (Domestic)/201.612.7415 (International)
 
Replay account number: 316
Replay conference ID number: 271353
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 certain financial results excluding certain items related to legacy projects in the first half of fiscal 2007, and provides certain additional information, such as non-recurring reserves 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.
 
 
MAXIMUS, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
 
    September 30,
2007		   December 31,
2007
         
ASSETS        
Current assets:        
Cash and cash equivalents   $ 70,472     $ 62,279  
Marketable securities     126,210       50  
Restricted cash     325       325  
Accounts receivable — billed, net of reserves of $30,526 and $28,878     132,962       119,267  
Accounts receivable — unbilled     42,200       49,771  
Deferred income taxes     17,409       11,267  
Prepaid expenses and other current assets     9,159       7,688  
Total current assets     398,737       250,647  
         
Property and equipment, at cost     83,823       86,356  
Less accumulated depreciation and amortization     (47,922 )     (50,776
)
 
Property and equipment, net     35,901       35,580  
Capitalized software     61,459       63,009  
Less accumulated amortization     (31,919 )     (33,703
)
 
Capitalized software, net     29,540       29,306  
Deferred contract costs, net     8,116       7,712  
Goodwill     86,086       86,086  
Intangible assets, net     3,603       3,201  
Other assets, net     2,481       3,546  
Total assets   $ 564,464     $ 416,078  
         
LIABILITIES AND SHAREHOLDERS’ EQUITY        
Current liabilities:        
Accounts payable   $ 54,425     $ 52,441  
Accrued compensation and benefits     29,449       25,771  
Current portion of deferred revenue     38,545       37,461  
Current portion of income taxes payable     5,487       1,422  
Current portion of capital lease obligations     1,627       1,643  
Other accrued liabilities     2,059       1,253  
Total current liabilities     131,592       119,991  
Capital lease obligations, less current portion     417       —  
Deferred revenue, less current portion     10,143       10,213  
Income taxes payable, less current portion     —       2,106  
Deferred income taxes     12,912       11,202  
Total liabilities     155,064       143,512  
         
Shareholders’ equity:        
Common stock, no par value; 60,000,000 shares authorized; 22,194,489 and 18,497,241 shares issued and outstanding at September 30, 2007 and December 31, 2007, at stated amount, respectively     299,846       305,398  
Treasury stock, at cost; 4,490,073 and 8,248,530 shares at September 30, 2007 and December 31, 2007, respectively     (124,637 )     (275,025 )
Accumulated other comprehensive income     1,730       1,603  
Retained earnings     232,461       240,590  
Total shareholders’ equity     409,400       272,566  
Total liabilities and shareholders’ equity   $ 564,464     $ 416,078  
 
 
MAXIMUS, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
(Unaudited)
 
    Three Months
Ended December 31,
      2006       2007
Revenue   $ 161,138     $ 201,950
Cost of revenue     140,860       149,183
Gross profit     20,278       52,767
Selling, general and administrative expenses     34,653       36,253
Legal and settlement expense     3,000       —
Income (loss) from operations     (17,375 )     16,514
Interest and other income, net     477       1,501
Gain on sale of business     684       —
Income (loss) before income taxes     (16,214 )     18,015
Provision (benefit) for income taxes     (5,819 )     7,410
Net income (loss)   $ (10,395 )   $ 10,605
           
Earnings (loss) per share:          
Basic   $ (0.48 )   $ 0.52
Diluted   $ (0.48 )   $ 0.51
           
Dividends per share   $ 0.10     $ 0.10
           
Weighted average shares outstanding:          
Basic     21,590       20,506
Diluted     21,590       20,854
 
 
MAXIMUS, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
     
    Three Months
Ended December 31,
    2006   2007
Cash flows from operating activities:        
Net income (loss)   $ (10,395 )   $ 10,605  
         
Adjustments to reconcile net income (loss) to net cash provided by operating activities:        
Depreciation     2,284       2,854  
Amortization     2,769       2,185  
Deferred income taxes     (5,098 )     4,195  
Non-cash equity based compensation     1,020       3,600  
Gain on sale of business     (684 )     —  
         
Change in assets and liabilities, net of effects from sale of business:        
Accounts receivable - billed     26,486       13,695  
Accounts receivable - unbilled     6,734       (7,571 )
Prepaid expenses and other current assets     (151 )     1,470  
Deferred contract costs     1,407       404  
Other assets     2,065       101  
Accounts payable     (9,641 )     (1,983 )
Accrued compensation and benefits     (2,254 )     (3,679 )
Deferred revenue     (5,745 )     (1,013 )
Income taxes     (2,015 )     (3,141 )
Other liabilities     844       (933 )
Net cash provided by operating activities     7,626       20,789  
         
Cash flows from investing activities:        
Proceeds from sale of business, net of transaction costs     2,171       —  
Purchases of property and equipment     (1,918 )     (2,533 )
Capitalized software costs     (304 )     (1,550 )
(Increase) decrease in marketable securities     (24,496 )     126,160  
Net cash provided by (used in) investing activities     (24,547 )     122,077  
         
Cash flows from financing activities:        
Employee stock transactions     1,526       1,655  
Repurchases of common stock     —       (150,388 )
Payments on capital lease obligations     (384 )     (401 )
Tax benefit due to option exercises and restricted stock units vesting     357       297  
Cash dividends paid     (2,159 )     (2,222 )
Net cash used in financing activities     (660 )     (151,059 )
Net decrease in cash and cash equivalents     (17,581 )     (8,193 )
Cash and cash equivalents, beginning of period     39,545       70,472  
Cash and cash equivalents, end of period   $ 21,964     $ 62,279  
 
 
       
MAXIMUS, Inc.
Segment Information
(In thousands except per share data)
(Unaudited)
       
    Three Months  
    Ended Dec 31,  
    2006     2007  
Revenue:            
Consulting   $ 24,656     $ 22,156  
Systems   34,541     33,995  
Operations   101,941     145,799  
Total   $ 161,138     $ 201,950  
             
Gross Profit:            
Consulting   $ 10,907     $ 8,488  
Systems   8,551     8,937  
Operations   820     35,342  
Total   $ 20,278     $ 52,767  
             
Selling, General, and Administrative expense:            
Consulting   $ 8,092     $ 7,337  
Systems   10,148     12,078  
Operations   16,864     16,608  
Corporate/Other   (451 )   230  
Total   $ 34,653     $ 36,253  
             
Income (Loss) from Operations:            
Consulting   $ 2,815     $ 1,151  
Systems   (1,597 )   (3,141 )
Operations   (16,044 )   18,734  
Consolidating adjustments   451     (230 )
Legal expense   (3,000 )   -  
Total   $ (17,375 )   $ 16,514  
             
Net Income (Loss)   $ (10,395 )   $ 10,605  
             
Earnings (Loss) per share            
Basic   $ (0.48 )   $ 0.52  
Diluted   $ (0.48 )   $ 0.51  
 
CONTACT:
MAXIMUS
Investor Relations:
Lisa Miles, 703-251-8637
or
Public/Media Relations:
Rachael Rowland, 703-251-8688