MAXIMUS Reports Record Results For Fiscal 2010 Fourth Quarter And Full Year
MAXIMUS (NYSE: MMS), a leading provider of government services worldwide, today reported record financial results for its fourth quarter and fiscal year ended September 30, 2010.
Key highlights include:
- Revenue grew 9.1% to $212.5 million for the fourth quarter and 15.5% to $831.7 million for the full fiscal year compared to the same periods last year.
- Adjusted diluted earnings per share from continuing operations increased 33.3% to $1.08 for the fourth quarter of fiscal 2010 and increased 26.1% to $3.62 for the full fiscal year, compared to the same periods last year.
- The Company generated record cash in fiscal 2010 with cash provided by operating activities from continuing operations of $141.0 million and free cash flow from continuing operations of $118.4 million. The Company had cash and cash equivalents of $155.3 million at September 30, 2010.
- In September, MAXIMUS expanded its share repurchase program by $100 million.
- During the fourth quarter, MAXIMUS signed its second eligibility and enrollment modernization contract. Under a new five-year program with the state of New York, the Company will establish and administer a centralized enrollment center to serve all of New York’s public health insurance programs.
Revenue for the fiscal 2010 fourth quarter increased 9.1% (7.4% on a constant currency basis) to $212.5 million versus $194.8 million reported for the same period last year. Revenue for fiscal year 2010 increased 15.5% (11.2% on a constant currency basis) to $831.7 million compared to $720.1 million for fiscal year 2009. Revenue growth was driven principally by the international employment services businesses in Australia and the United Kingdom. Organic revenue grew 7.6% in the fourth quarter and 14.5% for the full fiscal year.
During the fourth quarter, the Company recorded a year-end tax adjustment which reduced the tax rate in the quarter to 31.9%. As a result, GAAP net income from continuing operations totaled $20.7 million for the fourth quarter, or $1.16 per diluted share, and includes approximately $0.08 of benefit related to adjustments of tax accounts. Normalized for these tax benefits, adjusted diluted earnings per share from continuing operations for the fourth quarter increased 33.3% to $1.08 compared to $0.81 reported for the same period last year.
For the full fiscal year, GAAP net income from continuing operations totaled $69.4 million, or $3.86 per diluted share, and includes $0.24 of infrequent benefits ($0.19 for legal and settlement recoveries and $0.05 for year-end tax adjustments). Normalized for these benefits, adjusted diluted earnings per share from continuing operations for fiscal 2010 grew 26.1% to $3.62, compared to $2.87 for fiscal 2009.
“We are very pleased with our results for the quarter and the full year. Fiscal 2010 was highlighted by extraordinary growth in our international welfare-to-work programs in Australia and the U.K.,” commented Richard A. Montoni, Chief Executive Officer of MAXIMUS. “Domestically, we were awarded strategic new work as states take steps to prepare for health care reform. These wins include contracts for eligibility and enrollment modernization in Colorado and New York, as well as high risk pools in California and New York. This signifies increased traction with our government partners as they seek to build on existing program infrastructure and improve business processes in order to achieve the requirements under the Affordable Care Act.”
Financial results by segment reflect the Company’s new organization as filed on Form 8-K on October 29, 2010. The Company now reports under the Health Services and Human Services Segments.
Health Services Segment
Health Services Segment revenue for the fourth quarter of fiscal 2010 remained relatively constant at $129.0 million compared to $129.5 million for the same period last year. For fiscal 2010, revenue increased 3.9% to $514.3 million compared to $495.1 million last year, driven by new work and acquired revenue.
Health Services Segment operating income for the fourth quarter grew 5.1% to $20.0 million with an operating margin of 15.5% compared to $19.0 million in the fourth quarter of last year. For the full fiscal year, the segment generated operating income of $64.7 million with a 12.6% operating margin compared to $72.9 million in fiscal 2009. Fiscal 2010 operating income and margin were lower compared to the prior year principally due to the timing of rebids and expansion in cost-reimbursable programs.
Human Services Segment
Human Services Segment revenue for the fourth quarter increased 27.8% (23.7% on a constant currency basis) to $83.5 million compared to $65.3 million in the prior year period. For fiscal 2010, revenue increased 41.1% (or 29.4% on a constant currency basis) to $317.5 million compared to $225.0 million last year. Revenue growth was driven by the Company’s international employment services business in Australia, where the Company more than doubled its book of business at the end of fiscal 2009, as well as new work in the United Kingdom.
Human Services Segment operating income for the fourth quarter totaled $12.4 million with operating margin of 14.8% compared to $5.2 million in the same period last year. Improved margin was driven both by economies of scale from expanded international business and seasonality in the tax credit business. As a result of the international expansion, operating income for the full fiscal year grew to $39.5 million with a 12.4% operating margin compared to $12.4 million in fiscal 2009.
Backlog, Sales and Pipeline
The Company reported record backlog totaling $2.1 billion at September 30, 2010, which is a 17% increase over backlog at September 30, 2009.
Year-to-date signed contract wins at September 30, 2010 totaled $685 million, compared to $1.1 billion for fiscal 2009. The lower contract signings for the year are offset by an increase in new contracts pending at September 30, 2010 (awarded but unsigned), which totaled $709 million compared to $254 million reported at September 30, 2009. Sales opportunities (pipeline) at November 5, 2010, totaled $1.8 billion (consisting of $238 million in proposals pending, $111 million in proposals in preparation and $1.5 billion in proposals tracking).
Balance Sheet and Cash Flows
Cash and cash equivalents totaled $155.3 million at September 30, 2010. For the full fiscal year, cash provided by operating activities from continuing operations totaled $141.0 million with free cash flow of $118.4 million. The Company defines free cash flow as cash provided by operating activities from continuing operations less property, equipment and capitalized software.
Days Sales Outstanding (DSO) from continuing operations totaled 66 days, in line with the Company’s stated range of 65 to 80 days. On August 31, 2010, MAXIMUS paid a quarterly cash dividend of $0.12 per share, and on October 8, 2010, the Company declared a $0.12 per share cash dividend, payable on November 30, 2010 to shareholders of record on November 15, 2010. During the fourth quarter, MAXIMUS used $17.7 million to purchase 307,987 shares of MAXIMUS common stock and also announced a $100 million expansion to its Board-authorized share repurchase program. At September 30, 2010, the Company had $122.8 million available for repurchases under the program.
Outlook
MAXIMUS is introducing fiscal 2011 revenue guidance in the range of $890 million to $920 million which represents a 7% to 11% increase compared to fiscal 2010 revenue of $831.7 million. At September 30, 2010, 97% of forecasted 2011 revenue was in the form of backlog or options periods. The Company expects fiscal 2011 adjusted diluted earnings from continuing operations in the range of $3.95 to $4.15, which represents 9% to 15% growth compared to adjusted diluted earnings per share from continuing operations of $3.62 for fiscal 2010.
Mr. Montoni concluded, “We enter fiscal 2011 with a leading market position, strong cash flows and a healthy balance sheet that will enable us to meet the growing demands of our government clients worldwide, as they contend with greater regulatory demands and increased program participation in a resource-constrained environment. We look forward to advancing our mission of ‘Helping Government Serve the People’ in the coming year.”
Website Presentation, Conference Call and Webcast Information
MAXIMUS will host a conference call this morning, November 11, 2010, at 9:00 a.m. (EST). 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 November 19, 2010. Callers can access the replay by calling:
877.660.6853 (Domestic)/201.612.7415 (International)
Replay account number: 316
Replay conference ID number: 359622
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.
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.
