MAXIMUS Reports FISCAL 2011 First Quarter Results
MAXIMUS Inc. today reported financial results for its fiscal first quarter ended December 31, 2010.
Key highlights include:
- Record revenue for the quarter was $214.1 million and grew 5.3% compared to the same period last year.
This was in-line with management expectations and consistent with seasonal revenue trends. - Diluted earnings per share from continuing operations increased 13.8% to $0.99 for the first quarter
compared to adjusted diluted EPS of $0.87 for the same period in the prior year. - The Company generated strong cash flows in the first quarter with cash provided by operating activities
from continuing operations of $30.4 million and free cash flow of $25.7 million. - Cash and cash equivalents totaled $177.0 million at December 31, 2010.
- Year-to-date signed awards were $753 million at January 28, 2011.
- In January, MAXIMUS increased its quarterly cash dividend by 25% to $0.15 per share.
Revenue for the fiscal 2011 first quarter increased 5.3% (3.6% on a constant currency basis) to $214.1 million versus $203.3 million reported for the same period last year. Revenue growth was driven by the international employment services businesses in Australia and the United Kingdom in the Human Services Segment. Income from continuing operations increased to $17.6 million for the first quarter, compared to $14.6 million last year, driven by growth, profit expansion and a lower tax rate in geographies outside the United States. For the first quarter, diluted earnings per share from continuing operations increased 13.8% to $0.99 compared to adjusted diluted EPS of $0.87 (normalized to exclude $0.02 of legal expense and $0.04 related to 2010 yearend tax adjustments) for the same period last year.
“Our first quarter results represent a strong start to the year, and we are on track to realize our growth objectives for fiscal 2011,” commented Richard A. Montoni, Chief Executive Officer of MAXIMUS. “During the first quarter, we renewed two large contracts in California and Texas and were named as a preferred supplier for the bidding framework on a promising employment services opportunity as the United Kingdom reforms its welfare system. Additionally, we successfully launched operations on a ground-breaking eligibility and enrollment modernization effort in Colorado, which is expected to serve as a model for health insurance exchanges. This is a growing area for the Company as more states proactively evaluate modernization initiatives to simplify and streamline the enrollment process for their public health insurance programs.”
Mr. Montoni continued, “We are also seeing increased activity in Requests for Information (RFIs) and Request for Proposals (RFPs) for other programs as states work to reduce costs, improve the quality of service delivery, and increase accountability. For example, many states are exploring the transition from traditional Medicaid fee-for-service to new Medicaid managed care models. In addition, other states, such as Texas, are actively moving certain Medicaid populations into mandatory managed care. Initiatives like these present us with new growth opportunities today.”
Health Services Segment
Health Services Segment revenue for the first quarter of fiscal 2011 remained relatively constant at $130.0 million compared to the same period last year. Operating income for the first quarter increased 7.5% to $18.8 million compared to $17.5 million last year. As a result, Health Segment operating margin expanded 110 basis points to 14.5% compared to the prior year. Income and margin expansion were driven by the timing of transaction-based revenue during the quarter. The Company expects quarterly fluctuations in the Segment’s operating margin as a result of volumes, open enrollments, contract start up and program timing.
Human Services Segment
Human Services Segment revenue for the fiscal 2011 first quarter increased 15.7% (11.5% on a constant currency basis) to $84.1 million compared to the prior-year period. Revenue growth was driven by the Company’s international employment services business in Australia and the United Kingdom. Operating income for the first quarter increased 15.2% to $8.5 million compared to $7.4 million in the same period last year. Segment operating margin was 10.1% and consistent with the prior year. The Segment’s operating margin is seasonally lower in the fiscal first quarter as a result of normal business trends in the Company’s tax credit business.
Sales and Pipeline
At January 28th, fiscal year-to-date signed contract wins totaled $753 million compared to $183 million reported last year, and new contracts pending (awarded but unsigned) totaled $177 million compared to $347 million last year. Sales opportunities (pipeline) at January 28, 2011 totaled $1.6 billion (consisting of $96 million in proposals pending, $460 million in proposals in preparation and $1.1 billion in proposals tracking) compared to $1.6 billion the prior year.
Balance Sheet and Cash Flows
Cash and cash equivalents totaled $177.0 million at December 31, 2010. For the fiscal 2011 first quarter, cash provided by operating activities from continuing operations totaled $30.4 million with free cash flow of $25.7 million. The Company defines free cash flow as cash provided by operating activities from continuing operations less property, equipment and capitalized software. Cash flows in the quarter were driven by solid net income and strong collections.
Days Sales Outstanding (DSO) from continuing operations were 57 days. On November 30, 2010, MAXIMUS paid a quarterly cash dividend of $0.12 per share and in January 2011, the Company announced a 25% increase for its next quarterly cash dividend to $0.15 per share, payable on February 28, 2011 to shareholders of record on February 15, 2011.
During the first quarter of fiscal 2011, MAXIMUS used $8.4 million to purchase 136,153 shares of common stock and at December 31, 2010, the Company had $118.6 million available for repurchases under the current program.
Outlook
The Company is reiterating its fiscal 2011 revenue and earnings guidance. MAXIMUS continues to expect revenue from continuing operations in the range of $890 million to $920 million and diluted earnings per share from continuing operations in the range of $3.95 to $4.15.
Mr. Montoni concluded, “With governments actively evaluating new models to transform their public health and human services programs, MAXIMUS is engaging with new and existing government partners to offer relevant and timely solutions. We expect our 2011 results to be driven by increased activity in our Health Services Segment with continued solid performance from our Human Services Segment. We see significant opportunity in the days ahead to build upon our brand and presence in our current markets, both domestically and internationally, while exploring entry into new markets where favorable dynamics exist.”
Website Presentation, Conference Call and Webcast Information
MAXIMUS will host a conference call this morning, February 3, 2011, 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 February 11, 2011.
Callers can access the replay by calling:
877.660.6853 (Domestic)/201.612.7415 (International)
Replay account number: 316
Replay conference ID number: 366059
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, and the United Kingdom. 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.
