MAXIMUS Reports Financial Results For Third Quarter Of Fiscal 2013

MAXIMUS (NYSE: MMS), a leading provider of government services worldwide, today reported financial results for its third quarter ended June 30, 2013.

Highlights for the quarter ended June 30, 2013 include:
  • Revenue grew 26% to $334.3 million for the third quarter of fiscal 2013 driven by organic growth.
  • GAAP diluted earnings per share from continuing operations increased 38% to $0.40 and adjusted diluted earnings per share from continuing operations increased 32% to $0.41.
  • Strong cash flows resulted in cash and cash equivalents that totaled $187.9 million at June 30, 2013.
  • Year-to-date signed contract awards totaled $1.3 billion at June 30, 2013 and the sales pipeline remained strong at $2.2 billion.
  • The Company completed a two-for-one stock split effective June 28, 2013. All common stock and per share amounts have been adjusted for the stock split.
  • Subsequent to quarter end, the Company announced the acquisition of Health Management Limited, establishing a UK foothold in the independent health assessment market.

Revenue for the fiscal 2013 third quarter increased 26% to $334.3 million, compared to revenue of $266.4 million reported for the same period last year, driven by new work and the expansion on existing contracts. Financial results in the quarter reflect solid organic growth across both segments. Revenue for the third quarter of 2013 grew 26% organically compared to the prior-year period.

Fiscal 2013 third quarter income from continuing operations, net of taxes, totaled $28.0 million, or $0.40 per diluted share, and included approximately $0.01 of net legal, settlement and acquisition-related expenses. Excluding these costs, third quarter adjusted diluted earnings per share from continuing operations increased 32% to $0.41 compared to $0.31 reported for the same period last year. The year-over-year increase to earnings is attributable to accretive revenue growth. A reconciliation to this non-GAAP measure is included in the accompanying financial schedules.

“This morning’s financial results are right in line with our growth trajectory for the remainder of fiscal 2013 and set a solid platform for continued top- and bottom-line growth next fiscal year,” commented Richard A. Montoni, Chief Executive Officer of MAXIMUS. “MAXIMUS continues to benefit from macro drivers and solid demand trends for our core health and human services. In the United States, we are pleased to have established a leading position in the first wave of health insurance exchange contracts, and remain optimistic about other long-term opportunities in other areas of health care reform. Internationally, the acquisition of Health Management has provided MAXIMUS with a strengthened position for future opportunities in the United Kingdom health market, supporting our international growth objectives as we expand our service offerings and our geographic footprint.”

Health Services Segment

Health Services Segment revenue for the third quarter of fiscal 2013 increased 28% to $217.9 million compared to the same period last year, driven by favorable volumes in our health appeals business, organic growth from new work and expansion on existing programs. Health Services Segment operating income for the third quarter of fiscal 2013 increased 34% to $34.4 million (15.8% operating margin) and benefitted from accretive revenue growth in our Federal appeals and transaction based-programs. This compares to $25.7 million (15.1% operating margin) for the same period last year, which included a $10.2 million change order that benefitted both revenue and profit.

Human Services Segment

Human Services Segment revenue for the third quarter of fiscal 2013 increased 21% to $116.4 million compared to the same period last year, driven principally by the ongoing ramp-up in the United Kingdom as well as growth in other international operations. Human Services Segment operating income for the third quarter of 2013 increased 20% to $11.0 million (9.5% operating margin) driven by accretive growth in operations outside the U.S. including the ongoing ramp-up in the UK, which offset lower margins in Australia. This compares to $9.2 million (9.6% operating margin) for the same period last year, which included a net benefit of $2.1 million on a fixed price contract.

Sales and Pipeline

Year-to-date signed contract awards at June 30, 2013 totaled $1.3 billion compared to $1.2 billion reported for the same period last year. New contracts pending (awarded but unsigned) totaled $413 million.

Sales pipeline for the quarter ended June 30, 2013 was $2.2 billion (consisting of $278 million in proposals pending, $158 million in proposals in preparation, and $1.8 billion in opportunities tracking) and includes opportunities across multiple geographies and both segments. This is lower compared to $3.4 billion in sales pipeline reported for the same period last year, due to opportunities converting into new sales. On a sequential basis, the pipeline is consistent with the second fiscal quarter of 2013.

Balance Sheet and Cash Flows

Cash and cash equivalents at June 30, 2013 totaled $187.9 million. Subsequent to quarter end, $71.4 million was used to acquire Health Management Limited. After this transaction, approximately 60% of the Company’s cash and cash equivalents were held overseas. For the third quarter of fiscal 2013, cash provided by operating activities from continuing operations totaled $49.7 million, with free cash flow of $32.7 million. Days Sales Outstanding (DSO) from continuing operations were 65 days and remain within the Company’s previously stated range of 65 to 80 days.

On May 31, 2013, MAXIMUS paid a quarterly cash dividend of $0.045 per share. On July 10, 2013, the Company announced a $0.045 per share cash dividend, payable on August 30, 2013 to shareholders of record on August 15, 2013.

MAXIMUS repurchased 329,800 shares of the Company’s common stock for $12.4 million during the third quarter of fiscal 2013. At June 30, 2013, the Company had $102.2 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 $1.26 billion and $1.31 billion and diluted earnings per share from continuing operations to range between $1.50 and $1.58. The Company continues to expect cash provided by operating activities from continuing operations to range between $115 million and $135 million. The Company also continues to expect free cash flow from continuing operations to range between $70 million and $90 million, but more likely toward the lower end of the range.

MAXIMUS is also reiterating its preliminary fiscal year 2014 revenue and earnings guidance. The Company continues to expect fiscal year 2014 revenue will range between $1.555 billion and $1.650 billion and diluted earnings per share is expected to range between $1.75 and $1.85. This guidance does not contemplate any future mergers and acquisition activity or any significant legal expenses or recoveries.

Mr. Montoni concluded, “MAXIMUS continues to deliver on our long-term growth strategy and we see many new emerging opportunities for our core capabilities in all of our geographies. With our fiscal 2014 preliminary guidance in place, we remain committed to generating long-term shareholder value as we continue to grow the business.”

Website Presentation, Conference Call and Webcast Information

MAXIMUS will host a conference call this morning, August 8, 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 http://investor.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 23, 2013. Callers can access the replay by calling:

877.660.6853 (Domestic)/201.612.7415 (International)Replay conference ID number: 418441

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 9,750 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 and organic growth.

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. We believe that this measure is a useful basis for assessing the Company’s performance excluding the effect of the costs of acquiring PSI, as well as 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 or revenue growth 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
(Dollars in thousands, except per share data)
(Unaudited)
 
Three Months Nine Months
Ended June 30, Ended June 30,
2013   2012 2013   2012
Revenue $ 334,323 $ 266,353 $ 946,940 $ 749,408
Cost of revenue 239,763 187,652 678,406 546,094
Gross profit 94,560 78,701 268,534 203,314
Selling, general and administrative expenses 49,181 43,877 138,096 114,592
Acquisition-related expenses 1,174 1,877 1,500 2,110
Legal and settlement expenses/(recoveries), net (182 ) (352 ) (202 ) (990 )
Operating income from continuing operations 44,387 33,299 129,140 87,602
Interest and other income, net 701 1,164 2,444 3,092
Income from continuing operations before income taxes 45,088 34,463 131,584 90,694
Provision for income taxes 17,052 13,987 50,051 38,349
Income from continuing operations 28,036 20,476 81,533 52,345
 
Discontinued operations, net of income taxes:
Loss from discontinued operations (3 ) (597 )
Gain on disposal 67 9 169 117
Income (loss) from discontinued operations 64 9 (428 ) 117
 
Net income $ 28,100 $ 20,485 $ 81,105 $ 52,462
 
Basic earnings (loss) per share:
Income from continuing operations $ 0.41 $ 0.30 $ 1.20 $ 0.77
Income (loss) from discontinued operations (0.01 ) 0.01
Basic earnings per share $ 0.41 $ 0.30 $ 1.19 $ 0.78
 
Diluted earnings (loss) per share:
Income from continuing operations $ 0.40 $ 0.29 $ 1.17 $ 0.75
Income (loss) from discontinued operations (0.01 ) 0.01
Diluted earnings per share $ 0.40 $ 0.29 $ 1.16 $ 0.76
 
Dividends paid per share $ 0.045 $ 0.045 $ 0.135 $ 0.135
 
Weighted average shares outstanding:
Basic 68,162 67,946 68,168 67,615
Diluted 69,867 69,736 69,864 69,440
   
MAXIMUS, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
 
June 30, September 30,
2013 2012
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 187,911 $ 189,312
Restricted cash 12,313 11,593
Accounts receivable — billed, net of reserves of $3,293 and $3,975 221,319 172,705
Accounts receivable — unbilled 16,329 10,539
Prepaid income taxes 3,359 3,800
Deferred income taxes 25,183 22,207
Prepaid expenses and other current assets 36,466 38,528
Total current assets 502,880 448,684
 
Property and equipment, net 63,371 58,798
Capitalized software, net 36,106 27,390
Goodwill 109,295 112,032
Intangible assets, net 21,596 25,330
Deferred contract costs, net 11,695 9,284
Deferred income taxes 1,167 1,369
Deferred compensation plan assets 9,768 9,220
Other assets, net 3,180 3,186
Total assets $ 759,058 $ 695,293
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 87,689 $ 73,128
Accrued compensation and benefits 55,052 56,105
Deferred revenue 66,009 60,026
Current portion of long-term debt 167 178
Income taxes payable 8,537 3,100
Other accrued liabilities 8,715 6,599
Total current liabilities 226,169 199,136
Deferred revenue, less current portion 7,939 19,550
Long-term debt 1,333 1,558
Acquisition-related contingent consideration, less current portion 380 406
Income taxes payable, less current portion 1,460 1,412
Deferred income taxes 16,711 10,384
Deferred compensation plan liabilities, less current portion 14,093 11,741
Total liabilities 268,085 244,187
 
Total shareholders’ equity 490,973 451,106
Total liabilities and shareholders’ equity $ 759,058 $ 695,293
   
MAXIMUS, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
 
Three Months Nine Months
Ended June 30, Ended June 30,
2013   2012 2013   2012
Cash flows from operating activities:
Net income $ 28,100 $ 20,485 $ 81,105 $ 52,462
Adjustments to reconcile net income to net cash provided by operating activities:
(Income) loss from discontinued operations (64 ) (9 ) 428 (117 )
Depreciation and amortization 7,829 6,968 25,763 18,513
Deferred income taxes (3,727 ) 687 3,030 (4,628 )
Non-cash equity based compensation 3,646 3,208 10,708 8,841
 
Change in assets and liabilities:
Accounts receivable — billed (16,761 ) (184 ) (50,072 ) 7,084
Accounts receivable — unbilled 2,231 281 (5,921 ) 218
Prepaid expenses and other current assets (1 ) (4,153 ) (2,522 ) (8,245 )
Deferred contract costs (1,038 ) 210 (2,451 ) 1,319
Accounts payable and accrued liabilities 7,752 (15,572 ) 16,480 (3,274 )
Accrued compensation and benefits 8,818 2,267 6,941 (4,020 )
Deferred revenue (6 ) (130 ) (2,940 ) 11,161
Income taxes 12,550 631 5,989 9,541
Other assets and liabilities 339 1,334 2,624 (3,794 )
Cash provided by operating activities – continuing ops 49,668 16,023 89,162 85,061
Cash used in operating activities – discontinued ops (33 ) - (587 ) -  
Cash provided by operating activities 49,635 16,023 88,575 85,061
 
Cash flows from investing activities:
Purchases of property and equipment (11,518 ) (5,308 ) (24,869 ) (11,884 )
Capitalized software costs (5,412 ) (1,018 ) (13,652 ) (2,850 )
Acquisition of PSI, net of cash acquired and final settlement - (66,000 ) 3,380 (66,000 )
Proceeds from note receivable 113 27 285 299
Proceeds from sale of discontinued operations - - - 2,240  
Cash used in investing activities (16,817 ) (72,299 ) (34,856 ) (78,195 )
 
Cash flows from financing activities:
Repurchases of common stock (12,411 ) (140 ) (27,814 ) (9,889 )
Employee tax withholding on restricted stock units vesting (2,191 ) (1,357 ) (8,868 ) (4,445 )
Tax benefit due to option exercises and RSU vesting - 965 4,680 3,475
Cash dividends paid (3,071 ) (3,056 ) (9,202 ) (9,117 )
Stock option exercises 88 1,636 1,840 6,411
Repayment of long-term debt (43 ) - (130 ) -  
Cash used in financing activities (17,628 ) (1,952 ) (39,494 ) (13,565 )
 
Effect of exchange rate changes on cash and cash equivalents (14,622 ) (2,409 ) (15,626 ) 2,649
 
Net increase/(decrease) in cash and cash equivalents 568 (60,637 ) (1,401 ) (4,050 )
 
Cash and cash equivalents, beginning of period 187,343 229,537 189,312 172,950  
 
Cash and cash equivalents, end of period $ 187,911 $ 168,900 $ 187,911 $ 168,900  
   
MAXIMUS, Inc.
SEGMENT INFORMATION
(Dollars in thousands)
(Unaudited)
 
Three Months Ended June 30, Nine Months Ended June 30,
2013   % (1)   2012   % (1) 2013   % (1)   2012   % (1)
 
Revenue:
Health Services $ 217,901 100 % $ 170,403 100 % $ 591,847 100 % $ 489,616 100 %
Human Services 116,422 100 % 95,950 100 % 355,093 100 % 259,792 100 %
Total 334,323 100 % 266,353 100 % 946,940 100 % 749,408 100 %
 
Gross Profit:
Health Services 62,868 28.9 % 50,787 29.8 % 162,778 27.5 % 127,923 26.1 %
Human Services 31,692 27.2 % 27,914 29.1 % 105,756 29.8 % 75,391 29.0 %
Total 94,560 28.3 % 78,701 29.5 % 268,534 28.4 % 203,314 27.1 %
 
Selling, general, and administrative expense:
Health Services 28,507 13.1 % 25,135 14.8 % 78,882 13.3 % 67,286 13.7 %
Human Services 20,674 17.8 % 18,727 19.5 % 59,597 16.8 % 47,291 18.2 %
Corporate/Other NM 15 NM (383 ) NM 15 NM
Total 49,181 14.7 % 43,877 16.5 % 138,096 14.6 % 114,592 15.3 %
 
Operating income from continuing operations:
Health Services 34,361 15.8 % 25,652 15.1 % 83,896 14.2 % 60,637 12.4 %
Human Services 11,018 9.5 % 9,187 9.6 % 46,159 13.0 % 28,100 10.8 %
Corporate/Other NM (15 ) NM 383 NM (15 ) NM
 
Segment Operating Income 45,379 13.6 % 34,824 13.1 % 130,438 13.8 % 88,722 11.8 %
Acquisition-related expenses 1,174 NM 1,877 NM 1,500 NM 2,110 NM
Legal and settlement expenses/(recoveries), net (182 ) NM (352 ) NM (202 ) NM (990 ) NM
Total $ 44,387 13.3 % $ 33,299 12.5 % $ 129,140 13.6 % $ 87,602 11.7 %
 

(1) Percentage of respective segment revenue. Changes not considered meaningful are marked “NM.”
       
MAXIMUS, Inc.
NON-GAAP MEASURES
 
MAXIMUS, Inc.
ADJUSTED DILUTED EPS FROM CONTINUING OPERATIONS
FY 2013 and FY 2012
(Unaudited)
 
 
Quarter Ended FY 2013
Dec. 31, Mar. 31, Jun. 30, Year to
2012 2013 2013 Date
Diluted EPS from continuing operations-GAAP basis $0.31 $0.45 $0.40 $1.17
 
Adjustments:
Legal, settlement and acquisition-related expenses, net 0.01 0.01
Adjustment for terminated contract (0.09) (0.09)
Subtotal pro forma adjustments (0.09) 0.01 (0.08)
 
Adjusted diluted EPS from continuing operations $0.31 $0.36 $0.41 $1.09
   
Quarter Ended Year Ended
Dec. 31,   Mar. 31,   Jun. 30,   Sept. 30, Sept. 30,
2011 2012 2012 2012 2012
Diluted EPS from continuing operations-GAAP basis $0.26 $0.21 $0.29 $0.34 $1.09
 
Adjustments:

Legal, settlement and acquisition-related expenses, net
0.02 0.01 0.03
Adjustment for tax accounts 0.03 0.02 0.06
Subtotal pro forma adjustments 0.03 0.02 0.03 0.09
 
Adjusted Diluted EPS from continuing operations $0.26 $0.24 $0.31 $0.37 $1.18
   
MAXIMUS, Inc.
FREE CASH FLOW
(Dollars in thousands)
(Unaudited)
 
Three Months Nine Months
Ended June 30, Ended June 30,
2013   2012 2013   2012
Cash provided by operating activities – continuing operations $ 49,668 $ 16,023 $ 89,162 $ 85,061
Purchases of property and equipment (11,518 ) (5,308 ) (24,869 ) (11,884 )
Capitalized software costs (5,412 ) (1,018 ) (13,652 ) (2,850 )
Free cash flow from continuing operations $ 32,738 $ 9,697 $ 50,641 $ 70,327  

Copyright Business Wire 2010

More from Press Releases

NFL Pushes for Regulation Following Supreme Court's Sports Gambling Ruling

NFL Pushes for Regulation Following Supreme Court's Sports Gambling Ruling

21st Century Fox Scoops Up Local News Stations

21st Century Fox Scoops Up Local News Stations

Walmart CEO: 'We Are Transforming Globally' With Flipkart

Walmart CEO: 'We Are Transforming Globally' With Flipkart

Three-Part FREE Webinar Series

Three-Part FREE Webinar Series

March 24 Full-Day Course Offering: Professional Approach to Trading SPX

March 24 Full-Day Course Offering: Professional Approach to Trading SPX