MAXIMUS Reports Lower Earnings for Fiscal Q2

Maximus reported results for its fiscal 2007 second quarter ended March 31, 2007. Highlights include:

• Second quarter revenue of $179.1 million and net income of $2.4 million,
• Diluted earnings per share of $0.45 from Base Operations (excludes Texas project operating loss and legal provision),
• Better-than-expected results from the Texas project, together with the execution of four new interim agreements with MAXIMUS as prime contractor,
• Cash, cash equivalents and marketable securities totaling $177.3 million,
• Days Sales Outstanding of 85 days, and
• New sales awards of $300 million and a total pipeline of $1.2 billion at May 2, 2007.

Revenue for the second quarter was $179.1 million compared to $179.8 million reported for the same period last year. The fiscal 2006 second quarter included approximately $6.9 million of revenue from voter hardware sales and the Corrections business, which has since been divested.

For the second quarter, net income was $2.4 million, or $0.11 per diluted share, compared to net income of $8.9 million, or $0.41 per diluted share, in last year’s second quarter. In the quarter, the Company recorded a $6.1 million provision which includes a settlement for a previously disclosed legal matter in Ontario, Canada and estimated future legal expenses for the ongoing arbitration with Accenture related to the Texas project. The Company also reports results from its Base Operations, which excludes the Texas project and legal expenses. Base Operations delivered $0.45 per diluted share in the second quarter.

The Texas Integrated Eligibility project contributed revenue of $11.2 million and a pre-tax loss of $6.5 million, or $0.18 per diluted share, to the Company’s second quarter results. Performance on the Texas project reflects better-than-expected results during the transition of the contract and the recognition of previously deferred revenue. The Company announced in March that it would provide services directly to the Texas Health and Human Services Commission (HHSC) as a prime contractor. MAXIMUS has since established four interim agreements with HHSC covering Enrollment Broker services, Children’s Health Insurance Program (CHIP) Operations, CHIP Systems, and Eligibility Support services, while the State completes the transition of these programs. The Company now expects that its operations in Texas will contribute to Company profitability beginning in the fiscal 2007 third quarter. Going forward, results from the Texas project will no longer be reported separately.

Richard Montoni, Chief Executive Officer of MAXIMUS, commented, "Overall, we are pleased with the results for the quarter and, we are enthusiastic about the prospects for the remainder of fiscal 2007 and the outlook for fiscal 2008. The Texas project, which was generating significant losses over the last three quarters, will begin contributing to profitability in the second half of our fiscal year. The turnaround on this project, as well as the settlement in Ontario, reflects our strategy of aggressively addressing legacy challenges and optimizing current operations. On the new business front, we are focusing on work that meets our more stringent criteria designed to improve profitability and increase levels of client satisfaction over the longer term. Our pipeline of new opportunities remains strong at over $1.2 billion."

Full results here http://biz.yahoo.com/bw/070509/20070509005198.html?.v=2