MAXIMUS Reports Financial Results for Second Quarter of Fiscal 2013
- Company Reiterates Guidance -
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.
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
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.
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 on www.maximus.com .
|CONSOLIDATED STATEMENTS OF OPERATIONS|
|(Dollars in thousands, except per share data)|
|Three Months||Six Months|
|Ended March 31,||Ended March 31,|
|Cost of revenue||228,907||178,686||438,643||358,442|
|Selling, general and administrative expenses||46,693||37,959||88,915||70,715|
|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
|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||$||0.18|
|Weighted average shares outstanding:|
|CONSOLIDATED BALANCE SHEETS|
|(Dollars in thousands)|
|March 31,||September 30,|
|Cash and cash equivalents||$||187,343||$||189,312|
|Accounts receivable — billed, net of reserves of $3,769 and $3,265||205,397||172,705|
|Accounts receivable — unbilled||18,689||10,539|
|Prepaid income taxes||11,517||3,800|
|Deferred income taxes||20,992||22,207|
|Prepaid expenses and other current assets||36,690||38,528|
|Total current assets||493,562||448,684|
|Property and equipment, net||58,845||58,798|
|Capitalized software, net||32,374||27,390|
|Intangible assets, net||22,874||25,330|
|Deferred contract costs, net||10,675||9,284|
|Deferred income taxes||1,249||1,369|
|Deferred compensation plan assets||9,831||9,220|
|Other assets, net||3,280||3,186|
|LIABILITIES AND SHAREHOLDERS' EQUITY|
|Accounts payable and accrued liabilities||$||80,553||$||73,128|
|Accrued compensation and benefits||49,592||56,105|
|Current portion of long-term debt||172||178|
|Income taxes payable||4,434||3,100|
|Other accrued liabilities||9,018||6,599|
|Total current liabilities||209,841||199,136|
|Deferred revenue, less current portion||8,943||19,550|
|Acquisition-related contingent consideration, less current portion||393||406|
|Income taxes payable, less current portion||1,460||1,412|
|Deferred income taxes||15,539||10,384|
|Deferred compensation plan liabilities, less current portion||13,573||11,741|
|Common stock, no par value; 100,000 and 60,000 shares authorized; 56,883 and 56,516 shares issued and 34,103 and 33,985 shares outstanding at March 31, 2013 and September 30, 2012, at stated amount, respectively||407,685||395,967|
|Treasury stock, at cost; 22,780 and 22,531 shares at March 31, 2013 and September 30, 2012, respectively||(444,282||)||(429,646||)|
|Accumulated other comprehensive income||18,672||20,240|
|Total shareholders' equity||493,191||451,106|
|Total liabilities and shareholders' equity||$||744,360||$||695,293|