MAXIMUS Reports Second Quarter Results

Business Wire,  May 8, 2008  

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- Reports Record Revenue of $210.6 million, Diluted EPS of $0.51 and Sells Two Non-Core Businesses -

RESTON, Va. -- MAXIMUS (NYSE:MMS), a leading provider of government services, today reported results for its second fiscal quarter ended March 31, 2008.

Highlights include:

* Revenue of $210.6 million, an increase of 18%, compared to the same period last year,

* Net income of $9.6 million and diluted earnings per share of $0.51,

* Cash and cash equivalents at March 31, 2008, totaling $63.4 million and cash flow from operations of $4.5 million,

* Days Sales Outstanding of 76 days at March 31, 2008,

* New sales awards of $615 million and total pipeline of $1.6 billion at May 5, 2008, and,

* Subsequent to the March 31, 2008 quarter end, the Company closed the sale of two non-core businesses including the Security Solutions division and Unison-MAXIMUS subsidiary for after-tax gains totaling $2.2 million.

Revenue for the second quarter increased 18% to $210.6 million compared to $179.1 million reported for the same period last year. All revenue growth in the quarter was organic and driven by the Operations Segment. Net income increased to $9.6 million, or $0.51 per diluted share, compared to net income of $2.4 million, or $0.11 per diluted share, for the same period last year.

Second quarter net income was impacted by approximately $5.4 million, or $0.17 per diluted share in charges which include a $2.2 million charge related to the contract modification on a large Systems project, a $2.3 million charge related to a legacy claiming project which may be recovered pending the outcome of the client's recovery appeal, and approximately $0.9 million of legal expense principally related to ongoing arbitration. Year-over-year revenue and margin expansion was driven by the continuing strong performance of the Operations Segment. This Segment benefited from the Company's optimization efforts, new work with favorable margins, and the transformation of the Texas project to a direct service agreement.

Richard Montoni, Chief Executive Officer of MAXIMUS, commented, "The Operations Segment, which represented more than 75% of our revenue in the quarter, again delivered strong financial results on the success of our disciplined go-to-market approach and the optimization of our business portfolio. We are committed to replicating this progress in other areas of our business, including Systems, where we are focused on resolving remaining challenges and improving the Segment's overall performance. In addition, we are also pursuing a parallel path of continuing to divest certain non-core assets as we further solidify our position as the leading pure-play solution in our core government health and human services outsourcing."

Operations Segment

Operations Segment revenue accounted for 76% of total Company revenue in the second quarter and increased 33% to $159.8 million compared to $120.4 million for the second quarter of last year. Second quarter operating income for the Operations Segment totaled $23.6 million, compared to $7.1 million reported for the same period of last year. The year-over-year improvements in revenue and profitability continue to reflect the optimization of the Company's project portfolio, new organic growth, and the transformation of the Texas project. As a result, the Company now believes the Segment can deliver ongoing operating margins in the range of 10% to 15% on an annualized basis.

Consulting Segment

For the second quarter, Consulting Segment revenue was $20.2 million, or 10% of total Company revenue, compared to $23.2 million reported for the same period last year. Second quarter financial results were impacted by a $2.3 million charge related to a legacy claiming project which may be recovered pending the outcome of the client's recovery appeal. As a result, the Segment lost approximately $0.8 million in the quarter. The Segment continues to make investments and gain traction in new markets, such as Medicaid Fraud, Waste and Abuse, as it transitions away from contingent-based claiming work. In addition, the Company announced today the sale of Unison-MAXIMUS through a division management-led buyout. Unison-MAXIMUS is an airport, retail, and financial consulting business that, while a profitable contributor, was outside the Company's core health and human services focus.

Systems Segment

Systems Segment revenue, which represented 14% of total Company revenue, totaled $30.5 million in the second quarter versus $35.4 million in the prior-year period. The Systems Segment reported a second quarter operating loss of $5.9 million compared to a gain of $0.1 million for the same period last year. Included in Segment results was a $2.2 million charge necessary to modify a large Education Systems contract which now outlines terms and conditions needed to achieve project completion. Strong financial results from the Asset Solutions and ERP divisions were offset by weakness in the Justice and Education divisions. In a separate announcement, MAXIMUS announced the sale of its Security Solutions division to Cogent Systems as part of its efforts to divest non-core assets.