Highlights for first quarter of fiscal 2014 from MAXIMUS

MAXIMUS (NYSE: MMS), a leading provider of government services worldwide, today reported financial results for its first quarter ended December 31, 2013.

Highlights for the first quarter of fiscal 2014 include:

• Revenue grew 42% to $406.6 million, driven principally by organic growth in the Health Services Segment.
• Diluted earnings per share from continuing operations increased 55% to $0.48.
• Cash and cash equivalents totaled $120.6 million at December 31, 2013 and DSOs improved to 67 days.
• Signed contract awards totaled $347 million and the sales pipeline remained strong at $2.4 billion at December 31, 2013.

For the first quarter of fiscal 2014, revenue increased 42% (44% on a constant currency basis) to $406.6 million, compared to revenue of $286.3 million reported for the same period last year. The increase in revenue was driven by organic growth in the Health Services Segment from new work and expansion on existing contracts, much of which was tied to work under the Affordable Care Act (ACA). Organic revenue growth was 37% in the first quarter.

Fiscal 2014 first quarter income from continuing operations, net of taxes, totaled $33.8 million, or $0.48 per diluted share. This represents a 55% increase compared to $0.31 reported for the same period last year. The year-over-year increase to earnings was primarily attributed to growth in the Health Services Segment.

"Financial results in the quarter were better-than-expected, principally driven by increased activities in our health insurance exchange customer contact centers and higher-than-forecasted caseloads in our health appeals business. Our financial results are confirmation of the value we bring to our clients. We provide governments with meaningful solutions, including business process diagnostics and re-engineering, to specific program challenges. In this case, we helped clients manage the significant change associated with the ACA rollout and deal with technological challenges in order to facilitate consumer enrollment into health plans," commented Richard A. Montoni, Chief Executive Officer of MAXIMUS.

Health Services Segment

Health Services Segment revenue for the first quarter of fiscal 2014 increased 70% to $299.2 million, driven by new work and the expansion of existing contracts, including work supporting the ACA in the United States and revenue from the July 2013 acquisition of Health Management in the United Kingdom. This compares to $176.0 million for the same period last year. Health Services Segment operating income for the first quarter increased 101% to $41.6 million (13.9% operating margin) and benefitted from higher caseloads in the Company's health appeals business and new work associated primarily with the ACA. This compares to $20.6 million (11.7% operating margin) for the same period last year.

Human Services Segment

Human Services Segment revenue for the first quarter of fiscal 2014 decreased 3% to $107.4 million compared to $110.3 million for the same period last year. On a constant currency basis, first quarter revenue increased 2% compared to last year. Human Services Segment operating income for the first quarter decreased to $11.8 million (10.9% operating margin) compared to $13.7 million (12.4% operating margin) last year. Both revenue and profit in the prior-year period were bolstered by highly accretive performance-based payments in a domestic welfare-to-work program. For the first quarter of fiscal 2014, ongoing margin improvement in the United Kingdom offset the expected lowered margins in the Segment's U.S. operations.

Sales and Pipeline

Year-to-date signed contract awards at December 31, 2013 totaled $347 million. This compares to $178 million reported for the same period last year. In addition, new contracts pending (awarded but unsigned) totaled $50 million at December 31, 2013.

Sales pipeline at December 31, 2013 was $2.4 billion (consisting of $224 million in proposals pending, $259 million in proposals in preparation, and $1.9 billion in opportunities tracking) and includes opportunities across multiple geographies and both segments. This compares to a pipeline of $2.7 billion for the same period in fiscal 2013. The Company posted a record year of contract awards in fiscal 2013, so the year-over-year decrease is a result of contracts that have moved out of the pipeline and converted into sales. On a sequential basis, the pipeline is comparable to the fourth quarter of fiscal 2013.

Balance Sheet and Cash Flows

Cash and cash equivalents at December 31, 2013 totaled $120.6 million, of which approximately 65% were held overseas. For the first quarter of fiscal 2014, cash provided by operating activities from continuing operations totaled $42.0 million, with free cash flow of $34.0 million. Days Sales Outstanding (DSO) from continuing operations improved to 67 days and remain within the Company's previously stated range of 65 to 80 days.

On November 29, 2013, MAXIMUS paid a quarterly cash dividend of $0.045 per share. On January 14, 2014, the Company announced a $0.045 per share cash dividend, payable on February 28, 2014 to shareholders of record on February 14, 2014.

During the first quarter of fiscal 2014, MAXIMUS repurchased 505,738 shares of the Company's common stock for approximately $22.5 million. At December 31, 2013, the Company had approximately $74.9 million available for future repurchases under its Board-authorized share repurchase program.

Outlook

MAXIMUS is raising its fiscal year 2014 revenue and earnings guidance. The Company now expects fiscal year 2014 revenue to range between $1.60 billion and $1.68 billion, compared to its prior range of $1.55 billion to $1.65 billion. MAXIMUS now expects diluted earnings per share from continuing operations to range between $1.95 and $2.05, compared to its prior range of $1.75 to $1.85.

Mr. Montoni concluded, "With our excellent first quarter financial performance, we are pleased to be increasing our fiscal 2014 expectations. Our new full-year guidance assumes continued high federal appeals volumes and includes contributions from several of our health insurance exchange contracts where the increased scope is expected to provide an ongoing benefit in the second quarter."