MAXIMUS Reports Financial Results for Second Quarter of Fiscal 2013

MAXIMUS Reports Financial Results for Second Quarter of Fiscal 2013

- Company Reiterates Guidance -

RESTON, Va.--(BUSINESS WIRE)-- MAXIMUS (NYS: MMS) , a leading provider of government services worldwide, today reported financial results for its second quarter ended March 31, 2013.


Highlights for the quarter ended March 31, 2013 include:

  • Revenue grew 34% to $326.4 million for the second quarter compared to $243.5 million reported for the same period last year, driven by the PSI acquisition, growth on existing contracts and new work. The second quarter of fiscal 2013 included $16.0 million of non-recurring revenue from a previously disclosed contract termination; excluding this, revenue grew 27%.

  • Adjusted diluted earnings per share from continuing operations increased 47% to $0.72 for the second quarter of fiscal 2013 compared to $0.49 reported for the same period last year.

  • Cash and cash equivalents totaled $187.3 million at March 31, 2013.

  • Year-to-date signed contract awards totaled $886 million at March 31, 2013.

Revenue for the fiscal 2013 second quarter increased 34% to $326.4 million, which includes $16.0 million of non-recurring benefit related to a previously disclosed contract termination in the Human Services Segment. This compares to revenue of $243.5 million reported for the same period last year. Excluding the $16.0 million benefit, year-over-year second quarter revenue increased 27%, driven by the April 2012 acquisition of PSI, new work in both segments, and growth on existing contracts, which includes the ongoing revenue ramp up in the United Kingdom. Excluding PSI, revenue grew 15% organically compared to the prior-year period.

For the second quarter of fiscal 2013, income from continuing operations, net of taxes, totaled $31.7 million, or $0.91 per diluted share, and included pre-tax income of $10.9 million ($6.5 million, net of taxes), or $0.19 per diluted share, related to the previously disclosed contract termination. Excluding the benefit of $0.19 per diluted share, second quarter adjusted diluted earnings per share from continuing operations increased 47% to $0.72 compared to $0.49 reported for the same period last year. The year-over-year increase to earnings is attributable to accretive revenue growth in both segments. A reconciliation to non-GAAP measures is included in the accompanying financial schedules.

"Financial results in the quarter were solid and in-line with our expectations, supporting our growth trajectory for the remainder of fiscal 2013 and beyond. As expected, organic revenue growth accelerated in the second quarter, driven by strong performance from both segments. The long-term demand trends remain positive for MAXIMUS, with multi-year growth drivers in place as governments require a higher level of value-added services that deliver measurable and meaningful outcomes. These trends, coupled with our demonstrated experience and proven success, set the stage for our long-term success to grow the business and maximize shareholder value," commented Richard A. Montoni, Chief Executive Officer of MAXIMUS.

Health Services Segment

Health Services Segment revenue for the second quarter of fiscal 2013 increased 23% to $197.9 million compared to $161.2 million for the same period last year, driven by the PSI acquisition, organic growth on existing contracts, and new work. Health Services Segment operating income for the second quarter of fiscal 2013 increased 59% to $28.9 million (14.6% operating margin) and benefitted from accretive revenue growth. This compares to $18.2 million (11.3% operating margin) for the same period last year.

Human Services Segment

Human Services Segment revenue for the second quarter of fiscal 2013 increased to $128.4 million compared to $82.3 million for the same period last year. Excluding the $16.0 million benefit from the aforementioned contract termination, revenue grew 37%, driven by the PSI acquisition, the ramp-up in the United Kingdom, as well as new work in Canada and Saudi Arabia. Human Services Segment operating income for the second quarter of 2013 totaled $21.5 million, which includes non-recurring pre-tax income of $10.9 million related to the contract termination. Excluding the $10.9 million benefit, operating income for the human services segment increased to $10.6 million (9.4% operating margin) compared to $8.6 million (10.5% operating margin) for the same period last year. The year-over-year operating income increase was driven by the expected improvement in the United Kingdom and growth in new programs, which offset the expected lower profit margin in Australia.

Sales and Pipeline

Year-to-date signed contract awards at March 31, 2013 totaled $886 million compared to $812 million reported for the same period last year. On a sequential basis, signed contract wins were strong with approximately $700 million of new signed awards during the fiscal second quarter of 2013. New contracts pending (awarded but unsigned) totaled $425 million compared to $284 million last year.

Sales pipeline for the quarter ended March 31, 2013 was $2.3 billion (consisting of $888 million in proposals pending, $85 million in proposals in preparation, and $1.3 billion in proposals tracking) and includes opportunities across multiple geographies and both segments. This compares to $1.7 billion in sales pipeline for the same period last year and $2.7 billion reported in the first fiscal quarter of 2013. Pipeline was lower on a sequential basis principally due to the large number of contracts shifting into the awarded categories.

Balance Sheet and Cash Flows

Cash and cash equivalents at March 31, 2013 totaled $187.3 million, of which approximately 70% is held overseas. For the second quarter of fiscal 2013, cash provided by operating activities from continuing operations totaled $29.4 million, with free cash flow of $18.3 million. Excluding the $16.0 million revenue benefit from the terminated contract, Days Sales Outstanding (DSO) from continuing operations were 66 days and remain within the Company's previously stated range of 65 to 80 days.

On February 28, 2013, MAXIMUS paid a quarterly cash dividend of $0.09 per share. On April 18, 2013, the Company announced a $0.09 per share cash dividend, payable on May 31, 2013 to shareholders of record on May 15, 2013. In addition, on June 28, 2013 MAXIMUS will complete a two-for-one stock split where each shareholder of record on June 14, 2013 will receive an additional share of stock for each outstanding share.

MAXIMUS did not repurchase any shares of the Company's common stock during the second quarter of fiscal 2013. At March 31, 2013, the Company had $114.6 million available for future repurchases under its Board-authorized share repurchase program.

Outlook

MAXIMUS is reiterating its fiscal 2013 revenue, earnings and cash flow guidance. The Company continues to expect fiscal 2013 revenue to range between $1.25 billion and $1.30 billion and adjusted diluted earnings per share from continuing operations to range between $3.00 and $3.15. The Company continues to expect cash provided by operating activities from continuing operations to range between $115 million and $135 million, and free cash flow from continuing operations to range between $70 million and $90 million.

Mr. Montoni concluded, "The recently announced two-for-one stock split underscores our confidence in the underlying, long-term fundamentals of MAXIMUS and our future outlook. The management team remains firmly committed to offering the highest quality of value-added services, enhancing our established brand recognition, and expanding our offerings to advance new opportunities."

Website Presentation, Conference Call and Webcast Information

MAXIMUS will host a conference call this morning, May 9, 2013, at 9:00 a.m. (ET). 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)

For those unable to listen to the live call, a replay will be available through May 23, 2013. Callers can access the replay by calling:

877.660.6853 (Domestic)/201.612.7415 (International)
Replay conference ID number: 412909

About MAXIMUS

MAXIMUS is a leading operator of government health and human services programs in the United States, United Kingdom, Canada, Australia and Saudi Arabia. The Company delivers business process services to improve the cost effectiveness, efficiency and quality of government-sponsored benefit programs, such as Medicaid, Medicare, Children's Health Insurance Program (CHIP), Health Insurance BC (British Columbia), as well as welfare-to-work and child support programs around the globe. The Company's primary customer base includes federal, provincial, state, county and municipal governments. Operating under its founding mission of Helping Government Serve the People®, MAXIMUS has approximately 8,800 employees worldwide. For more information, visit www.maximus.com.

Non-GAAP Measures

This release refers to non-GAAP financial measures, including free cash flows from operating activities, adjusted diluted earnings per share from continuing operations, organic growth, as well as revenues, operating income, net income and earnings per share excluding a terminated contract.

To provide organic growth information, revenue in the prior year is compared to the current year without PSI revenues. We believe organic growth provides a useful basis for assessing the performance of the business excluding PSI. We have provided a reconciliation of free cash flow to operating cash flow from continuing operations. We believe that free cash flow from operations is a useful basis for investors to compare our performance across periods or across our competitors. Free cash flow show the effects of the Company's operations and routine capital expenditure and exclude the cash flow effects of acquisitions, share repurchases, dividend payments and other financing transactions. We have provided a reconciliation to adjusted diluted earnings per share and operating income excluding legal, settlement and acquisition-related expenses and the benefits of the terminated contract. We have also provided a reconciliation between revenue and revenue excluding the terminated contract. We believe that these measures are a useful basis for assessing the Company's performance excluding the effect of the terminated contract, the costs of acquiring PSI, and net legal and settlement expenses.

The presentation of these non-GAAP numbers is not meant to be considered in isolation, nor as alternatives to net income, cash flows from operating activities, diluted earnings per share, revenue growth, operating income and operating margin as measures of performance.

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 filed with the Securities and Exchange Commission, found onwww.maximus.com.

MAXIMUS, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share data)

(Unaudited)

Three Months

Six Months

Ended March 31,

Ended March 31,

2013

2012

2013

2012

Revenue

$

326,351

$

243,452

$

612,617

$

483,055

Cost of revenue

228,907

178,686

438,643

358,442

Gross profit

97,444

64,766

173,974

124,613

Selling, general and administrative expenses

46,693

37,959

88,915

70,715

Acquisition-related expenses

16

233

164

233

Legal and settlement expenses/(recoveries), net

(824

)

142

(638

)

Operating income from continuing operations

50,735

27,398

84,753

54,303

Interest and other income, net

637

824

1,743

1,928

Income from continuing operations before income taxes

51,372

28,222

86,496

56,231

Provision for income taxes

19,658

14,011

32,999

24,362

Income from continuing operations

31,714

14,211

53,497

31,869

Discontinued operations, net of income taxes:

Loss from discontinued operations

(91

)

(594

)

Gain on disposal

66

62

102

108

Income (loss) from discontinued operations

(25

)

62

(492

)

108

Net income

$

31,689

$

14,273

$

53,005

$

31,977

Basic earnings (loss) per share:

Income from continuing operations

$

0.93

$

0.42

$

1.57

$

0.95

Loss from discontinued operations

(0.01

)

Basic earnings per share

$

0.93

$

0.42

$

1.56

$

0.95

Diluted earnings (loss) per share:

Income from continuing operations

$

0.91

$

0.41

$

1.53

$

0.92

Loss from discontinued operations

(0.01

)

Diluted earnings per share

$

0.91

$

0.41

$

1.52

$

0.92

Dividends paid per share

$

0.09

$

0.09

$

0.18

$

0.18

Weighted average shares outstanding:

Basic

34,089

33,788

34,085

33,725

Diluted

34,954

34,728

34,917

34,638

MAXIMUS, Inc.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

March 31,

September 30,

2013

2012

(unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

187,343

$

189,312

Restricted cash

12,934

11,593

Accounts receivable — billed, net of reserves of $3,769 and $3,265

205,397

172,705

Accounts receivable — unbilled

18,689

10,539

Prepaid income taxes

11,517

3,800

Deferred income taxes

20,992

22,207

Prepaid expenses and other current assets

36,690

38,528

Total current assets

493,562

448,684

Property and equipment, net

58,845

58,798

Capitalized software, net

32,374

27,390

Goodwill

111,670

112,032

Intangible assets, net

22,874

25,330

Deferred contract costs, net

10,675

9,284

Deferred income taxes

1,249

1,369

Deferred compensation plan assets

9,831

9,220

Other assets, net

3,280

3,186

Total assets

$

744,360

$

695,293

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable and accrued liabilities

$

80,553

$

73,128

Accrued compensation and benefits

49,592

56,105

Deferred revenue

66,072

60,026

Current portion of long-term debt

172

178

Income taxes payable

4,434

3,100

Other accrued liabilities

9,018

6,599

Total current liabilities

209,841

199,136

Deferred revenue, less current portion

8,943

19,550

Long-term debt

1,420

1,558

Acquisition-related contingent consideration, less current portion

393

406

Income taxes payable, less current portion

1,460

1,412

Deferred income taxes

15,539

10,384

Deferred compensation plan liabilities, less current portion

13,573

11,741

Total liabilities

251,169

244,187

Shareholders' equity:

Common stock, no par value; 100,000 and 60,000 shares authorized; 56,883 and 56,516 shares issued and 34,103 and 33,985 shares outstanding at March 31, 2013 and September 30, 2012, at stated amount, respectively

407,685

395,967

Treasury stock, at cost; 22,780 and 22,531 shares at March 31, 2013 and September 30, 2012, respectively

(444,282

)

(429,646

)

Accumulated other comprehensive income

18,672

20,240

Retained earnings

511,116

464,545

Total shareholders' equity

493,191

451,106

Total liabilities and shareholders' equity

$

744,360

$

695,293

MAXIMUS, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

Three Months

Six Months

Ended March 31,

Ended March 31,

2013

2012

2013

2012

Cash flows from operating activities:

Net income

$

31,689

$

14,273

$

53,005

$

31,977

Adjustments to reconcile net income to net cash provided by operating activities:

(Income) loss from discontinued operations

25

(62

)

492