Attached files
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| EX-99.2 - EXHIBIT 99.2 - MAXIMUS, INC. | a6297753ex99_2.htm |
| 8-K - MAXIMUS, INC. 8-K - MAXIMUS, INC. | a6297753.htm |
Exhibit 99.1
MAXIMUS Reports Strong Fiscal 2010 Second Quarter Results
-Adjusted EPS from Continuing Ops of $0.81; Company Raises Fiscal 2010 Guidance-
RESTON, Va.--(BUSINESS WIRE)--May 6, 2010--MAXIMUS (NYSE: MMS), a leading provider of government services worldwide, today reported results for the three and six months ended March 31, 2010.
Highlights for the second quarter include:
- Revenue growth of 15.1% to $203.8 million compared the second quarter of last year.
- Adjusted earnings per diluted share from continuing operations of $0.81 (non-GAAP) compared to $0.68 (non-GAAP) for the same period last year. These results reflect better-than-expected profitability from Australia and the United Kingdom as well as the benefit of a lower tax rate that resulted from an increasing mix of international business. GAAP earnings per diluted share from continuing operations were $1.02, which includes $0.21 per diluted share related to legal and settlement recovery.
- Cash provided by operating activities from continuing operations of $21.4 million, free cash flow of $17.6 million, resulting in cash and cash equivalents totaling $121.4 million at quarter end.
- Increased fiscal 2010 guidance to reflect strong results in the quarter, the acquisition of DeltaWare, and a lower tax rate for the remainder of the fiscal year. The Company now expects revenue in the range of $840 million to $860 million and adjusted earnings per diluted share in the range of $3.50 to $3.60.
Revenue for the second quarter increased 15.1% (or 8.5% on a constant currency basis) to $203.8 million driven by the Company’s expanding international employment services operations. For the second quarter, organic revenue grew 12.8% compared to the same period last year.
Net income from continuing operations for the second quarter increased to $18.3 million, or $1.02 per diluted share, which included a pre-tax benefit of $6.0 million, or $0.21 per diluted share, for net legal and settlement recovery. Excluding the $0.21 per diluted share recovery, adjusted earnings per diluted share from continuing operations grew 19.1% to $0.81, compared to $0.68 for the second quarter of last year. Adjusted earnings per diluted share in the quarter were $0.11 better than prior guidance, of which $0.06 is attributable to better-than-expected profitability from the Company’s international employment services operations and the remaining $0.05 resulting from a lower tax rate due to an increasing mix of international business.
“Our strong second quarter results benefited from the increasing contribution from our global operations, including our new and expanded programs in Australia and the U.K.,” commented Richard A. Montoni, President and Chief Executive Officer of MAXIMUS. “We are pursuing additional international opportunities in existing markets as part of our ‘land, execute and expand’ strategy. Domestically, our operations continue to perform well and as planned. In response to the recently enacted health care reform law, we are building on our leadership position in health and human services program administration as we work to help governments transition their programs to comply with the new requirements by 2014.”
Operations Segment
For the fiscal 2010 second quarter, Operations Segment revenue increased 23.0% (or 15.6% on a constant currency basis) to $191.4 million, compared to $155.6 million for the second quarter of fiscal 2009.
Operations Segment operating income for the second quarter grew 10.6% to $21.7 million compared to $19.7 million in the second quarter of last year. Operating margin for the quarter was 11.4%. Segment profitability in the second quarter was slightly better than expected and driven by cost management in the international employment services operations, where the Company tightly managed resources relative to caseload mix and volumes.
Also during the quarter, the Company completed the acquisition of Canada-based DeltaWare. The acquisition is part of the Company's long-term strategy to broaden its core health services offerings by expanding its Business Process Outsourcing capabilities in the emerging eHealth, Drug Information Systems and third party claims administration markets in North America and abroad. In fiscal 2010, the acquisition is expected to contribute approximately $7 million in revenue and to be neutral to earnings.
Consulting Segment
For the fiscal 2010 second quarter, Consulting Segment revenue was $12.5 million compared to $21.5 million for the same period last year. The fiscal 2009 second quarter included revenue from a business line the Company has since exited, as well as $4.8 million in non-recurring, pass-through revenue. Consulting Segment operating income for the fiscal 2010 second quarter was $460,000, with an operating margin of 3.7%, compared to $512,000 for the same period last year.
New Sales and Sales Pipeline
At May 4, 2010, year-to-date signed contract wins totaled $304 million and new contracts pending (awarded, but unsigned) totaled $470 million.
Sales opportunities (pipeline) at May 4, 2010 totaled $1.8 billion (consisting of $290 million in proposals pending, $97 million in proposals in preparation, and $1,453 million in proposals tracking) compared to $1.4 billion the prior year.
Balance Sheet and Cash Flows
At March 31, 2010, the Company had a healthy cash balance with cash and cash equivalents of $121.4 million. Days Sales Outstanding (DSO) from continuing operations were 68 days and were well within the Company’s expected range of 65 to 80 days.
Cash provided by operating activities totaled $21.4 million with free cash flow of $17.6 million. The Company defines free cash flow as cash provided by operating activities from continuing operations less property, equipment and capitalized software expenditures. During the quarter, the Company used cash of $10.7 million related to acquisitions. The Company purchased 120,040 of MAXIMUS common stock for $5.9 million under the Board-authorized share repurchase program and at March 31, 2010, the Company had approximately $45 million available under the program. In addition, the Company recorded a net legal recovery of $6.0 million principally related to an insurance reimbursement in the period.
MAXIMUS also paid a cash dividend of $0.12 per share on February 26, 2010 to shareholders of record as of February 12, 2010. Subsequent to quarter end, the Company declared a quarterly cash dividend of $0.12 per share payable on May 28, 2010 to shareholders of record as of May 14, 2010.
Outlook
MAXIMUS is increasing its fiscal 2010 full year revenue guidance by $10 million principally to reflect the acquisition of DeltaWare. As a result, the Company now expects revenue from continuing operations in the range of $840 million to $860 million. The Company is also updating its guidance for adjusted earnings per diluted share from continuing operations to reflect strong results and the lower tax rate as a result of an increasing mix of international business. The Company now expects 2010 non-GAAP adjusted earnings per diluted share from continuing operations of $3.50 to $3.60, a $0.15 increase compared to its previously forecasted range. Adjusted earnings per diluted share exclude the net legal and settlement recovery as reflected in the supplemental table in the financial statements.
Web Site Presentation, Conference Call and Web Cast Information
MAXIMUS will host a conference call this morning, May 6, 2010, at 9:00 a.m. (ET). The Company has also posted a presentation on its Web site, 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 Web site at www.maximus.com or by calling:
877.407.8289 (Domestic)/201.689.8341 (International)
For those unable to listen to the live call, a replay will be available through May 14, 2010. Callers can access the replay by calling:
877.660.6853 (Domestic)/201.612.7415 (International)
Replay account
number: 316
Replay conference ID number: 349764
About MAXIMUS
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.
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 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.
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MAXIMUS, Inc. |
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CONSOLIDATED BALANCE SHEETS |
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(Dollars in thousands) |
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September 30, |
March 31, |
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| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 87,815 | $ | 121,362 | ||||
| Restricted cash | 3,919 | 3,971 | ||||||
| Accounts receivable — billed, net of reserves of $5,812 and $5,521 | 132,058 | 129,715 | ||||||
| Accounts receivable — unbilled | 16,706 | 21,688 | ||||||
| Note receivable | 736 | 167 | ||||||
| Income taxes receivable | 7,501 | 5,478 | ||||||
| Deferred income taxes | 5,389 | 6,846 | ||||||
| Prepaid expenses and other current assets | 19,749 | 20,341 | ||||||
| Current assets of discontinued operations | 18,238 | 6,560 | ||||||
| Total current assets | 292,111 | 316,128 | ||||||
| Property and equipment, at cost | 98,781 | 107,189 | ||||||
| Less accumulated depreciation and amortization | (53,495 | ) | (60,380 | ) | ||||
| Property and equipment, net | 45,286 | 46,809 | ||||||
| Capitalized software | 26,475 | 31,496 | ||||||
| Less accumulated amortization | (7,506 | ) | (9,379 | ) | ||||
| Capitalized software, net | 18,969 | 22,117 | ||||||
| Deferred contract costs, net | 8,206 | 7,298 | ||||||
| Goodwill | 61,029 | 69,067 | ||||||
| Intangible assets, net | 2,455 | 8,826 | ||||||
| Deferred income taxes | 1,239 | — | ||||||
| Other assets, net | 3,939 | 3,999 | ||||||
| Total assets | $ | 433,234 | $ | 474,244 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 44,368 | $ | 53,151 | ||||
| Accrued compensation and benefits | 31,713 | 34,799 | ||||||
| Deferred revenue | 22,177 | 30,319 | ||||||
| Other accrued liabilities | 15,083 | 10,554 | ||||||
| Liabilities of discontinued operations | 14,124 | 4,448 | ||||||
| Total current liabilities | 127,465 | 133,271 | ||||||
| Deferred revenue, less current portion | 6,527 | 13,039 | ||||||
| Long-term debt | — | 885 | ||||||
| Acquisition-related contingent consideration | — | 3,092 | ||||||
| Income taxes payable, less current portion | 1,871 | 2,041 | ||||||
| Deferred income tax liability | 243 | 2,714 | ||||||
| Total liabilities | 136,106 | 155,042 | ||||||
| Shareholders’ equity: | ||||||||
| Common stock, no par value; 60,000,000 shares authorized; 27,161,849 and 27,326,677 shares issued and 17,599,029 and 17,457,016 shares outstanding at September 30, 2009 and March 31, 2010, at stated amount, respectively | 338,739 | 345,591 | ||||||
| Treasury stock, at cost; 9,562,820 and 9,869,661 shares at September 30, 2009 and March 31, 2010, respectively | (319,149 | ) | (333,657 | ) | ||||
| Accumulated other comprehensive income | 8,268 | 11,007 | ||||||
| Retained earnings | 269,270 | 296,261 | ||||||
| Total shareholders’ equity | 297,128 | 319,202 | ||||||
| Total liabilities and shareholders’ equity | $ | 433,234 | $ | 474,244 | ||||
| MAXIMUS, Inc. | ||||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||
| (Dollars in thousands, except per share data) | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
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Three Months |
Six Months Ended March 31, |
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| 2009 | 2010 | 2009 | 2010 | |||||||||||||
| Revenue | $ | 177,158 | $ | 203,844 | $ | 346,868 | $ | 406,199 | ||||||||
| Cost of revenue | 130,624 | 153,013 | 253,430 | 303,253 | ||||||||||||
| Gross profit | 46,534 | 50,831 | 93,438 | 102,946 | ||||||||||||
| Selling, general and administrative expenses | 26,714 | 28,629 | 53,128 | 55,953 | ||||||||||||
| Legal and settlement expense (recovery), net | 368 | (6,037 | ) | 368 | (5,351 | ) | ||||||||||
| Operating income from continuing operations | 19,452 | 28,239 | 39,942 | 52,344 | ||||||||||||
| Interest and other income, net | 35 | 186 | 129 | 285 | ||||||||||||
| Income from continuing operations before income taxes | 19,487 | 28,425 | 40,071 | 52,629 | ||||||||||||
| Provision for income taxes | 7,697 | 10,160 | 15,828 | 19,736 | ||||||||||||
| Income from continuing operations | 11,790 | 18,265 | 24,243 | 32,893 | ||||||||||||
| Discontinued operations, net of income taxes: | ||||||||||||||||
| Income (loss) from discontinued operations | (763 | ) | 478 | (1,248 | ) | (1,522 | ) | |||||||||
| Loss on disposal | — | — | (5 | ) | — | |||||||||||
| Income (loss) from discontinued operations | (763 | ) | 478 | (1,253 | ) | (1,522 | ) | |||||||||
| Net income | $ | 11,027 | $ | 18,743 | $ | 22,990 | $ | 31,371 | ||||||||
| Basic earnings (loss) per share: | ||||||||||||||||
| Income from continuing operations | $ | 0.68 | $ | 1.05 | $ | 1.38 | $ | 1.88 | ||||||||
| Income (loss) from discontinued operations | (0.05 | ) | 0.03 | (0.08 | ) | (0.09 | ) | |||||||||
| Basic earnings per share | $ | 0.63 | $ | 1.08 | $ | 1.30 | $ | 1.79 | ||||||||
| Diluted earnings (loss) per share: | ||||||||||||||||
| Income from continuing operations | $ | 0.66 | $ | 1.02 | $ | 1.36 | $ | 1.83 | ||||||||
| Income (loss) from discontinued operations | (0.04 | ) | 0.02 | (0.07 | ) | (0.09 | ) | |||||||||
| Diluted earnings per share | $ | 0.62 | $ | 1.04 | $ | 1.29 | $ | 1.74 | ||||||||
| Dividends paid per share | $ | 0.12 | $ | 0.12 | $ | 0.22 | $ | 0.24 | ||||||||
| Weighted average shares outstanding: | ||||||||||||||||
| Basic | 17,435 | 17,408 | 17,621 | 17,503 | ||||||||||||
| Diluted | 17,751 | 17,980 | 17,832 | 18,012 | ||||||||||||
| MAXIMUS, Inc. | ||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
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| (Unaudited) | ||||||||
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Six Months Ended March 31, |
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| 2009 | 2010 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 22,990 | $ | 31,371 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Loss from discontinued operations | 1,253 | 1,522 | ||||||
| Depreciation | 4,090 | 6,236 | ||||||
| Amortization | 1,525 | 2,782 | ||||||
| Deferred income taxes | 22,660 | (155 | ) | |||||
| Gain on sale of fixed assets | (51 | ) | — | |||||
| Deferred interest income on note receivable | 211 | 179 | ||||||
| Non-cash equity based compensation | 3,950 | 3,953 | ||||||
| Change in assets and liabilities, net of effect of business combinations: | ||||||||
| Accounts receivable — billed | 25,079 | 4,661 | ||||||
| Accounts receivable — unbilled | (13,597 | ) | (4,644 | ) | ||||
| Prepaid expenses and other current assets | (9,925 | ) | (414) | |||||
| Deferred contract costs | (2,486 | ) | 966 | |||||
| Due from insurance carrier | 12,500 | — | ||||||
| Other assets | (766 | ) | (287) | |||||
| Accounts payable | 6,878 | 1,292 | ||||||
| Accrued compensation and benefits | (1,646 | ) | 2,888 | |||||
| Deferred revenue | 2,549 | 14,126 | ||||||
| Income taxes | (29,494 | ) | 3,768 | |||||
| Other liabilities | (35,478 | ) | 1,945 | |||||
| Cash provided by operating activities — continuing operations | 10,242 | 70,189 | ||||||
| Cash provided by (used in) operating activities — discontinued operations | 1,442 | (434 | ) | |||||
| Cash provided by operating activities | 11,684 | 69,755 | ||||||
| Cash flows from investing activities: | ||||||||
| Proceeds from sale of fixed assets | 54 | — | ||||||
| Decrease in note receivable | 366 | 390 | ||||||
| Purchases of property and equipment | (4,890 | ) | (6,031 | ) | ||||
| Capitalized software costs | (4,686 | ) | (4,325 | ) | ||||
| Acquisition of business, net of cash acquired | — | (10,673 | ) | |||||
| Cash used in investing activities — continuing operations | (9,156 | ) | (20,639 | ) | ||||
| Cash used in investing activities — discontinued operations | (14 | ) | — | |||||
| Cash used in investing activities | (9,170 | ) | (20,639 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Employee stock transactions | (97 | ) | 1,615 | |||||
| Repurchases of common stock | (30,046 | ) | (14,511 | ) | ||||
| Payments on capital lease obligations | (417 | ) | — | |||||
| Tax benefit due to option exercises and restricted stock units vesting | 287 | 1,103 | ||||||
| Cash dividends paid | (3,854 | ) | (4,201 | ) | ||||
| Cash used in financing activities — continuing operations | (34,127 | ) | (15,994 | ) | ||||
| Cash used in financing activities — discontinued operations | — | — | ||||||
| Cash used in financing activities | (34,127 | ) | (15,994 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents | (2,902 | ) | 425 | |||||
| Net increase (decrease) in cash and cash equivalents | (34,515 | ) | 33,547 | |||||
| Cash and cash equivalents, beginning of period | 119,605 | 87,815 | ||||||
| Cash and cash equivalents, end of period | $ | 85,090 | $ | 121,362 | ||||
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Segment Information |
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The following table provides certain financial information for each of the Company’s business segments (in thousands): |
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| Three Months Ended March 31, | Six Months Ended March 31, | |||||||||||||||||||||||||||
| 2009 | % (1) | 2010 | % (1) | 2009 | % (1) | 2010 | % (1) | |||||||||||||||||||||
| Revenue: | ||||||||||||||||||||||||||||
| Operations | $ | 155,626 | 100 | % | $ | 191,390 | 100 | % | $ | 311,964 | 100 | % | $ | 380,121 | 100 | % | ||||||||||||
| Consulting | 21,532 | 100 | % | 12,454 | 100 | % | 34,904 | 100 | % | 26,078 | 100 | % | ||||||||||||||||
| Total | 177,158 | 100 | % | 203,844 | 100 | % | 346,868 | 100 | % | 406,199 | 100 | % | ||||||||||||||||
| Gross Profit: | ||||||||||||||||||||||||||||
| Operations | 40,233 | 25.9 | % | 46,412 | 24.2 | % | 81,702 | 26.2 | % | 93,501 | 24.6 | % | ||||||||||||||||
| Consulting | 6,301 | 29.3 | % | 4,419 | 35.5 | % | 11,736 | 33.6 | % | 9,445 | 36.2 | % | ||||||||||||||||
| Total | 46,534 | 26.3 | % | 50,831 | 24.9 | % | 93,438 | 26.9 | % | 102,946 | 25.3 | % | ||||||||||||||||
| Selling, general, and administrative expense: | ||||||||||||||||||||||||||||
| Operations | 20,570 | 13.2 | % | 24,674 | 12.9 | % | 41,012 | 13.1 | % | 47,801 | 12.6 | % | ||||||||||||||||
| Consulting | 5,789 | 26.9 | % | 3,959 | 31.8 | % | 11,526 | 33.0 | % | 8,015 | 30.7 | % | ||||||||||||||||
| Corporate/Other | 355 | NM(2) | (4 | ) | NM(2) | 590 | NM(2) | 137 | NM(2) | |||||||||||||||||||
| Total | 26,714 | 15.1 | % | 28,629 | 14.0 | % | 53,128 | 15.3 | % | 55,953 | 13.8 | % | ||||||||||||||||
| Operating income (loss) from continuing operations: | ||||||||||||||||||||||||||||
| Operations | 19,663 | 12.6 | % | 21,738 | 11.4 | % | 40,690 | 13.0 | % | 45,700 | 12.0 | % | ||||||||||||||||
| Consulting | 512 | 2.4 | % | 460 | 3.7 | % | 210 | 0.6 | % | 1,430 | 5.5 | % | ||||||||||||||||
| Consolidating adjustments | (355 | ) | NM(2) | 4 | NM(2) | (590 | ) | NM(2) | (137 | ) | NM(2) | |||||||||||||||||
| Subtotal: Segment Operating Income | 19,820 | 11.2 | % | 22,202 | 10.9 | % | 40,310 | 11.6 | % | 46,993 | 11.6 | % | ||||||||||||||||
| Legal recovery (expense) | (368 | ) | NM(2) | 6,037 | NM(2) | (368 | ) | NM(2) | 5,351 | NM(2) | ||||||||||||||||||
| Operating income from continuing operations | $ | 19,452 | 11.0 | % | $ | 28,239 | 13.9 | % | $ | 39,942 | 11.5 | % | $ | 52,344 | 12.9 | % | ||||||||||||
| (1) % of respective segment revenue | ||||||||||||||||||||||||||||
| (2) Not meaningful | ||||||||||||||||||||||||||||
| MAXIMUS, Inc. | |||||||||||||||||
| Supplemental Pro Forma Diluted EPS from Continuing Operations ("Adjusted EPS") | |||||||||||||||||
| FY 2009 and First Half FY 2010 | |||||||||||||||||
| Q1 09 | Q2 09 | Q3 09 | Q4 09 |
Total |
Q1 10 | Q2 10 | |||||||||||
| Diluted EPS from continuing operations- | |||||||||||||||||
| GAAP basis | $0.69 | $0.66 | $0.89 | $0.80 | $3.05 | $0.81 | $1.02 | ||||||||||
| 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 | ||||||||||
CONTACT:
MAXIMUS
Lisa Miles
800-MAXIMUS x11637