MAXIMUS, INC. - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - August 9, 2012

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8-K - MAXIMUS, INC. 8-K - MAXIMUS, INC.a50372379.htm
Exhibit 99.1
 
 
MAXIMUS Reports Fiscal 2012 Third Quarter Results
 
- MAXIMUS Reiterates Full Year Revenue Guidance and Increases Earnings Estimates -
 
 
RESTON, Va.--(BUSINESS WIRE)--August 7, 2012--MAXIMUS (NYSE: MMS), a leading provider of government services worldwide, today reported financial results for its fiscal third quarter ended June 30, 2012.
 
Key highlights include:
 
 
●
Revenue for the third quarter grew 12% to $266.4 million compared to the same period last year.
 
●
Adjusted diluted earnings per share from continuing operations totaled $0.62 for the third quarter.
 
●
Cash and cash equivalents totaled $168.9 million at June 30, 2012.
 
●
Sales pipeline reached a record level of $3.4 billion at August 3, 2012.
 
●
The Company successfully completed a large change order that was previously expected to occur in the fourth quarter and contributed approximately $10.2 million in revenue in the third quarter.
 
Revenue for the fiscal 2012 third quarter increased 12% to $266.4 million compared to $238.3 million for the same period last year, driven by growth in the Health Services Segment and revenue from the PSI acquisition that closed on April 30, 2012. Compared to the same period last year, revenue increased 13% on a constant currency basis and organic revenue grew 2%.
 
Third quarter GAAP income from continuing operations, net of taxes, totaled $20.5 million, or $0.59 per diluted share. Adjusted diluted earnings per share from continuing operations totaled $0.62 and excluded net legal and acquisition related expenses. The tax rate in the quarter was higher than anticipated due to a larger mix of revenue from higher tax rate jurisdictions in the United States and tempered earnings by approximately $0.03 per diluted share.
 
During the quarter, MAXIMUS signed a change order to modify the scope of work on a large health program and reimburse the Company for work performed in prior periods. The change order was previously expected to occur in the fourth quarter and contributed approximately $10.2 million in revenue and $0.10 of diluted earnings per share in the third quarter.
 
“During the third quarter, MAXIMUS made steady progress towards several domestic and international initiatives. The integration of PSI into our U.S. operations is going smoothly, and we expanded our global workforce services footprint with new contracts in Saudi Arabia and Australia. At the same time, we are making good progress as we position our domestic health and federal services operations for new opportunities,” commented Richard A. Montoni, Chief Executive Officer of MAXIMUS. “Our sales pipeline of $3.4 billion is at record levels and we are awaiting decision on approximately $1.7 billion of proposals. The team delivered another great quarter, allowing us to increase our earnings outlook for the remainder of fiscal 2012 and setting a growth platform for fiscal 2013.”
 
 
 
 
 
Health Services Segment
 
Health Services Segment revenue for the third quarter of fiscal 2012 increased 20% to $170.4 million compared to $141.8 million for the same period last year, principally driven by the completion of a large change order that contributed $10.2 million of revenue in the third quarter, strong organic growth, and contributions from the PSI acquisition. Operating income for the third quarter totaled $25.7 million with an operating margin of 15.1%. Revenue and margin benefitted from the change order, which helped offset the ramp up of new contracts.
 
Human Services Segment
 
Human Services Segment revenue for the fiscal 2012 third quarter totaled $96.0 million, which was 1% lower compared to last year, but grew 2% on a constant currency basis. Operating income for the third quarter was $9.2 million and operating margins were 9.6%. As expected, results were affected by the ongoing ramp up of the UK Work Programme contract. Contributions from the PSI acquisition were tempered by operations in Australia where work on short term programs was completed, caseload volumes were lower, and foreign currency was unfavorable relative to the same period last year.
 
Sales and Pipeline
 
At August 3, 2012, fiscal year-to-date signed contract wins totaled $1.2 billion compared to $1.4 billion reported for the same period last year; the prior-year period included approximately $990 million related to four large contract renewals including the new Work Programme award in the United Kingdom. New contracts pending (awarded but unsigned) totaled $185.8 million compared to $338 million last year. Sales opportunities (pipeline) are at record levels and at August 3, 2012 totaled $3.4 billion (consisting of $1.7 billion in proposals pending, $118 million of proposals in preparation, and $1.5 billion in proposals tracking) compared to $1.8 billion the prior year.
 
Balance Sheet and Cash Flows
 
Cash and cash equivalents increased to $168.9 million at June 30, 2012. For the fiscal 2012 third quarter, cash provided by operating activities from continuing operations totaled $16.0 million with free cash flow of $9.7 million. The Days Sales Outstanding (DSO) for the third quarter were 58 days.
 
On May 31, 2012, MAXIMUS paid a quarterly cash dividend of $0.09 per share and in July 2012, the Company announced its next quarterly cash dividend of $0.09 per share, payable on August 31, 2012 to shareholders of record on August 15, 2012.
 
Outlook
 
The Company is reiterating its fiscal 2012 revenue guidance and increasing its earnings guidance. The Company still expects revenue to range between $1.030 billion and $1.060 billion, and now expects adjusted diluted earnings per share from continuing operations for fiscal 2012 in the range of $2.25 to $2.35 compared to its prior guidance of $2.20 to $2.30. The Company also reiterated its cash flow guidance with cash provided by operating activities derived from continuing operations to be in the range of $100 million to $120 million, and free cash flow from continuing operations to be in the range of $75 million to $95 million.
 
Website Presentation, Conference Call and Webcast Information
 
MAXIMUS will host a conference call this morning, August 7, 2012, 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 August 21, 2012. Callers can access the replay by calling:
 
877.660.6853 (Domestic)/201.612.7415 (International)
Replay account number: 316
Replay conference ID number: 397858
 
About MAXIMUS
 
MAXIMUS is a leading health and human services administrator for governments in the United States, United Kingdom, Canada, Australia and Saudi Arabia. The Company delivers administrative solutions 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 enforcement programs across 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 more than 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, constant currency revenue growth, organic growth, and operating income excluding legal, settlement and acquisition-related expenses.
 
To provide constant currency information, revenue from foreign operations is converted into United States dollars using average exchange rates from the previous fiscal year. We believe constant currency revenue growth provides a useful basis for assessing the performance of the Company excluding foreign exchange fluctuations. 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 flows to operating cash flows from continuing operations. We believe that free cash flows from operations is a useful basis for investors to compare our performance across periods or across our competitors. Free cash flows 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. We believe that these measures are a useful basis for assessing the Company’s performance excluding the effect of the costs of acquiring PSI and the recovery of insurance claims in the periods shown.
 
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 and operating income 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 on www.maximus.com.
 
 
 
 
 
MAXIMUS, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
         
   
Three Months
  
Nine Months
   
Ended June 30,
  
Ended June 30,
     
2012
      
2011
      
2012
      
2011
  
Revenue
  
$
266,353
    
$
238,296
    
$
749,408
    
$
679,526
  
Cost of revenue
    
187,652
      
171,897
      
546,094
      
494,102
  
Gross profit
    
78,701
      
66,399
      
203,314
      
185,424
  
Selling, general and administrative expenses
    
43,877
      
35,259
      
114,592
      
97,498
  
Acquisition-related expenses
    
1,877
      
—
      
2,110
      
—
  
Legal and settlement costs (recovery), net
    
(352
)
    
361
      
(990
)
    
361
  
Operating income from continuing operations
    
33,299
      
30,779
      
87,602
      
87,565
  
Interest and other income, net
    
1,164
      
961
      
3,092
      
2,371
  
Income from continuing operations before income taxes
    
34,463
      
31,740
      
90,694
      
89,936
  
Provision for income taxes
    
13,987
      
11,780
      
38,349
      
33,351
  
Income from continuing operations
    
20,476
      
19,960
      
52,345
      
56,585
  
                 
Discontinued operations, net of income taxes:
                
Income (loss) from discontinued operations
    
—
      
(65
)
    
—
      
(330
)
Gain (loss) on disposal
    
9
      
(3
)
    
117
      
(662
)
Income (loss) from discontinued operations
    
9
      
(68
)
    
117
      
(992
)
                 
Net income
  
$
20,485
    
$
19,892
    
$
52,462
    
$
55,593
  
                 
Basic earnings (loss) per share:
                
Income from continuing operations
  
$
0.60
    
$
0.58
    
$
1.55
    
$
1.64
  
Income (loss) from discontinued operations
    
—
      
(0.01
)
    
—
      
(0.03
)
Basic earnings per share
  
$
0.60
    
$
0.57
    
$
1.55
    
$
1.61
  
                 
Diluted earnings (loss) per share:
                
Income from continuing operations
  
$
0.59
    
$
0.56
    
$
1.51
    
$
1.59
  
Income (loss) from discontinued operations
    
—
      
—
      
—
      
(0.03
)
Diluted earnings per share
  
$
0.59
    
$
0.56
    
$
1.51
    
$
1.56
  
                 
Dividends paid per share
  
$
0.09
    
$
0.075
    
$
0.27
    
$
0.21
  
Dividends declared per share
  
$
0.09
    
$
0.165
    
$
0.27
    
$
0.30
  
                 
Weighted average shares outstanding:
                
Basic
    
33,973
      
34,708
      
33,807
      
34,496
  
Diluted
    
34,868
      
35,803
      
34,720
      
35,612
  
 
 
 
 
 
MAXIMUS, Inc.
CONSOLIDATED BALANCE SHEETS
(In thousands)
         
   
June 30,
  
September 30,
    2012   2011
   
(unaudited)
    
ASSETS
        
Current assets:
        
Cash and cash equivalents
  
$
168,900
    
$
172,950
  
Restricted cash
    
11,930
      
4,839
  
Accounts receivable — billed, net of reserves of $4,580 and $3,265
    
157,795
      
146,900
  
Accounts receivable — unbilled
    
12,385
      
7,170
  
Prepaid income taxes
    
3,258
      
12,959
  
Deferred income taxes
    
23,916
      
19,256
  
Prepaid expenses and other current assets
    
39,266
      
27,202
  
Total current assets
    
417,450
      
391,276
  
         
Property and equipment, net
    
57,227
      
51,740
  
Capitalized software, net
    
26,140
      
26,616
  
Goodwill
    
104,697
      
71,323
  
Intangible assets, net
    
27,050
      
5,651
  
Deferred contract costs, net
    
6,717
      
8,020
  
Deferred income taxes
    
789
      
732
  
Deferred compensation plan assets
    
8,803
      
8,004
  
Other assets, net
    
2,713
      
1,917
  
Total assets
  
$
651,586
    
$
565,279
  
         
LIABILITIES AND SHAREHOLDERS’ EQUITY
        
Current liabilities:
        
Accounts payable
  
$
60,755
    
$
55,470
  
Accrued compensation and benefits
    
47,769
      
47,748
  
Deferred revenue
    
62,619
      
47,902
  
Current portion of long-term debt
    
171
      
42
  
Acquisition-related contingent consideration
    
1,951
      
1,840
  
Income taxes payable
    
5,418
      
5,104
  
Other accrued liabilities
    
6,942
      
5,787
  
Total current liabilities
    
185,625
      
163,893
  
Deferred revenue, less current portion
    
5,021
      
2,575
  
Long-term debt
    
1,538
      
1,654
  
Acquisition-related contingent consideration, less current portion
    
390
      
388
  
Income taxes payable, less current portion
    
1,387
      
1,484
  
Deferred income taxes
    
16,798
      
11,945
  
Deferred compensation plan liabilities, less current portion
    
11,128
      
8,883
  
Total liabilities
    
221,887
      
190,822
  
         
Shareholders’ equity:
        
Common stock, no par value; 60,000 shares authorized; 56,515 and 56,018 shares
    issued and 34,050 and 33,793 shares outstanding at June 30, 2012
    and September 30, 2011, at stated amount, respectively
    
395,441
      
377,579
  
Treasury stock, at cost; 22,465 and 22,225 shares at June 30, 2012 and
    September 30, 2011, respectively
    
(425,791
)
    
(416,850
)
Accumulated other comprehensive income
    
15,949
      
12,480
  
Retained earnings
    
444,100
      
401,248
  
Total shareholders’ equity
    
429,699
      
374,457
  
Total liabilities and shareholders’ equity
  
$
651,586
    
$
565,279
  
 
 
 
 
 
MAXIMUS, Inc,
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
         
   
Three Months
  
Nine Months
   
Ended June 30,
  
Ended June 30,
     
2012
      
2011
      
2012
      
2011
  
Cash flows from operating activities:
                
Net income
  
$
20,485
    
$
19,892
    
$
52,462
    
$
55,593
  
Adjustments to reconcile net income to net cash provided by operating activities:
                
Loss from discontinued operations
    
(9
)
    
68
      
(117
)
    
992
  
Depreciation and amortization
    
6,968
      
5,696
      
18,513
      
16,479
  
Deferred income taxes
    
687
      
(774
)
    
(4,628
)
    
372
  
Non-cash equity based compensation
    
3,208
      
2,441
      
8,841
      
6,936
  
Change in assets and liabilities:
                
Accounts receivable — billed
    
(184
)
    
12,483
      
7,084
      
10,887
  
Accounts receivable — unbilled
    
281
      
(1,162
)
    
218
      
859
  
Prepaid expenses and other current assets
    
(4,153
)
    
220
      
(8,245
)
    
1,889
  
Deferred contract costs
    
210
      
(620
)
    
1,319
      
(1,849
)
Accounts payable
    
(15,572
)
    
(4,827
)
    
(3,274
)
    
7,460
  
Accrued compensation and benefits
    
2,267
      
6,061
      
(4,020
)
    
(506
)
Deferred revenue
    
(130
)
    
(2,679
)
    
11,161
      
(13,975
)
Income taxes
    
631
      
(2,883
)
    
9,541
      
(13,217
)
Other assets and liabilities
    
1,334
      
183
      
(3,794
)
    
(1,435
)
Cash provided by continuing operations
    
16,023
      
34,099
      
85,061
      
70,485
  
Cash used in discontinued operations
    
—
      
(135
)
    
—
      
(1,086
)
Cash provided by operating activities
    
16,023
      
33,964
      
85,061
      
69,399
  
                 
Cash flows from investing activities:
                
Acquisition of business, net of cash acquired
    
(66,000
)
    
—
      
(66,000
)
    
—
  
Proceeds from sale of discontinued operations
    
—
      
—
      
2,240
      
—
  
Purchases of property and equipment
    
(5,308
)
    
(4,499
)
    
(11,884
)
    
(10,963
)
Capitalized software costs
    
(1,018
)
    
(1,821
)
    
(2,850
)
    
(5,693
)
Proceeds from note receivable
    
27
      
65
      
299
      
65
  
Cash used in investing activities — continuing ops
    
(72,299
)
    
(6,255
)
    
(78,195
)
    
(16,591
)
                 
Cash flows from financing activities:
                
Employee stock transactions
    
279
      
1,037
      
1,966
      
9,050
  
Repurchases of common stock
    
(140
)
    
(8,515
)
    
(9,889
)
    
(16,974
)
Tax benefit due to option exercises and restricted stock units vesting
    
965
      
1,409
      
3,475
      
5,227
  
Issuance (repayment) of long-term debt
    
—
      
4
      
—
      
304
  
Cash dividends paid
    
(3,056
)
    
(2,598
)
    
(9,117
)
    
(7,241
)
Cash used in financing activities — continuing ops
    
(1,952
)
    
(8,663
)
    
(13,565
)
    
(9,634
)
                 
Effect of exchange rate changes on cash and cash equivalents
    
(2,409
)
    
1,815
      
2,649
      
5,521
  
                 
Net increase in cash and cash equivalents
    
(60,637
)
    
20,861
      
(4,050
)
    
48,695
  
                 
Cash and cash equivalents, beginning of period
    
229,537
      
183,155
      
172,950
      
155,321
  
                 
Cash and cash equivalents, end of period
  
$
168,900
    
$
204,016
    
$
168,900
    
$
204,016
  
 
 
 
 
 
MAXIMUS, Inc.
SEGMENT INFORMATION
(In thousands)
(Unaudited)
         
   
Three Months Ended June 30,
  
Nine Months Ended June 30,
   
2012
  
% (1)
  
2011
  
% (1)
  
2012
  
% (1)
  
2011
  
% (1)
                                 
Revenue:
                                        
Health Services
  
$
170,403
  
100
%
  
$
141,788
  
100
%
  
$
489,616
  
100
%
  
$
409,578
  
100
%
Human Services
  
95,950
  
100
%
  
96,508
  
100
%
  
259,792
  
100
%
  
269,948
  
100
%
Total
  
266,353
  
100
%
  
238,296
  
100
%
  
749,408
  
100
%
  
679,526
  
100
%
                                         
Gross Profit:
                                        
Health Services
  
50,787
  
29.8
%
  
35,459
  
25.0
%
  
127,923
  
26.1
%
  
108,056
  
26.4
%
Human Services
  
27,914
  
29.1
%
  
30,940
  
32.1
%
  
75,391
  
29.0
%
  
77,368
  
28.7
%
Total
  
78,701
  
29.5
%
  
66,399
  
27.9
%
  
203,314
  
27.1
%
  
185,424
  
27.3
%
                                         
Selling, general, and administrative expense:
                          
Health Services
  
25,135
  
14.8
%
  
19,536
  
13.8
%
  
67,286
  
13.7
%
  
53,958
  
13.2
%
Human Services
  
18,727
  
19.5
%
  
16,032
  
16.6
%
  
47,291
  
18.2
%
  
43,834
  
16.2
%
Corporate/Other
  
15
  
NM
    
(309
)
NM
    
15
  
NM
    
(294
)
NM
  
Total
  
43,877
  
16.5
%
  
35,259
  
14.8
%
  
114,592
  
15.3
%
  
97,498
  
14.3
%
                                         
Operating income from continuing operations:
                      
Health Services
  
25,652
  
15.1
%
  
15,923
  
11.2
%
  
60,637
  
12.4
%
  
54,098
  
13.2
%
Human Services
  
9,187
  
9.6
%
  
14,908
  
15.4
%
  
28,100
  
10.8
%
  
33,534
  
12.4
%
Corporate/Other
  
(15
)
NM
    
309
  
NM
    
(15
)
NM
    
294
  
NM
  
Subtotal: Segment Operating Income
  
34,824
  
13.1
%
  
31,140
  
13.1
%
  
88,722
  
11.8
%
  
87,926
  
12.9
%
Legal, settlement and acquisition-related expenses, net
  
(1,525
 )
NM
    
(361
)
NM
    
(1,120
 ) 
NM
    
(361
)
NM
  
Total
  
$
33,299
  
12.5
%
  
$
30,779
  
12.9
%
  
$
87,602
  
11.7
%
  
$
87,565
  
12.9
%
 
(1) % of respective segment revenue. Changes not considered meaningful are marked “NM.”
 
 
 
 
 
MAXIMUS, Inc.
Non-GAAP Measures
 
PRO FORMA DILUTED EPS FROM CONTINUING OPERATIONS
("Adjusted Diluted EPS")
FY 2011 and FY 2012
(Unaudited)
     
 
Quarter Ended
  
 
Dec. 31,
    
Mar. 31,
  
Jun. 30,
  
 
2011
    
2012
  
2012
  
Diluted EPS from continuing operations-GAAP basis
 $ 0.51     $ 0.41     $ 0.59  
                   
Pro forma adjustments:
                  
Legal, settlement and acquisition-related expenses, net
   –       (0.01 )     0.03  
Adjustment for tax accounts
   –       0.09       –  
Subtotal pro forma adjustments
   –       0.08       0.03  
                   
Adjusted Diluted EPS from continuing operations
 $ 0.51     $ 0.49     $ 0.62  
 
     
Year
 
Quarter Ended
  
Ended
 
Dec. 31,
    
Mar. 31,
  
Jun. 30,
    
Sept. 30,
  
Sept. 30,
 
2010
    
2011
  
2011
    
2011
  
2011
Diluted EPS from continuing operations-GAAP basis
 $ 0.50     $ 0.54     $ 0.56     $ 0.73     $ 2.31  
                               
Pro forma adjustments:
                              
Legal and settlement expense, net
   –       –       –       (0.02 )     (0.02 )
Adjustment for tax accounts
   0.01       0.01       0.01       (0.07 )     (0.04 )
Subtotal pro forma adjustments
   0.01       0.01       0.01       (0.09 )     (0.06 )
                               
Adjusted Diluted EPS from continuing operations
 $ 0.51     $ 0.55     $ 0.57     $ 0.64     $ 2.25  
 
FREE CASH FLOW
(In thousands)
(Unaudited)
         
   
Three Months
  
Nine Months
   
Ended June 30,
  
Ended June 30,
     
2012
      
2011
      
2012
      
2011
  
                 
Cash provided by operating activities – continuing ops
  
$
16,023
    
$
34,099
    
$
85,061
    
$
70,485
  
Purchases of property and equipment
    
(5,308
)
    
(4,499
)
    
(11,884
)
    
(10,963
)
Capitalized software costs
    
(1,018
)
    
(1,821
)
    
(2,850
)
    
(5,693
)
Free cash flow
  
$
9,697
    
$
27,779
    
$
70,327
    
$
53,829
  
                 
 
CONTACT:
MAXIMUS, Inc.
Lisa Miles, 703-251-8637
 

MAXIMUS, INC. Reports