Maximus, Inc. · NYSE:MMS
Maximus — Q1 2007 Earnings Presentation
21 slides from Maximus's earnings presentation, Feb 12, 2007
Slide 1: Maximus Quarterly Earnings Call, 1st Quarter Fiscal 2007
MAXIMUS QUARTERLY EARNINGS CALL David N. Walker Chief Financial Officer and Treasurer 1st Quarter Fiscal 2007 February 8, 2007
Slide 2: Q1 FY07 Financial Results
Confidential 2 Q1 FY07 Financial Results ($ in millions except EPS) Income (Loss) Revenue Before Taxes EPS Base without Ontario Contract 165.2 $ 14.8 $ 0.44 $ Ontario Contract (3.6) (4.0) (0.12) Subtotal Base Operations 161.6 10.80 0.32 Texas Projects TX Operations 11.6 (11.9) (0.35) AR Provisions (
Slide 3: Consulting Segment
Confidential 3 Consulting Segment • Revenue was $24.7 million for the quarter; up 4.3% • Operating income totaled $2.8 million for the quarter; an operating income margin of 11.4% • Continues to meet expectations; can fluctuate as a result of timing associated with completion of work and customer re
Slide 4: Systems Segment
Confidential 4 Systems Segment • Revenue in Q1 totaled $34.5 million; lower compared to Q1 FY06 • Operating loss in Q1 of $1.6 million; related to weakness in the Educational Systems division • Large software licensing contracts take longer to negotiate and implement and generally require license re
Slide 5: Operations Segment
Confidential 5 Operations Segment • Revenue totaled $101.9 million for Q1 and was reduced by $16.0 million as a result of the Texas and Ontario provisions • Lost $16.0 million in Q1 - $11.9 million pre-tax operating loss in Texas - $12.1 million provision in Texas for outstanding receivables - $ 4.0
Slide 6: Other P&L Items
Confidential 6 Other P&L Items • Expect total Company margins may return to more normalized levels later FY07; depending on Texas outcome • SG&A as a percentage of revenue was adversely impacted by the revenue reductions in Q1 of approx. $16.0 million - SG&A expense remained relatively flat sequenti
Slide 7: Balance Sheet and Cash Flow
Confidential 7 Balance Sheet and Cash Flow $166.9 $201.1 $184.5 $185.8 $170.8 Total AR $39.9 $47.7 $45.3 $46.2 $47.2 Unbilled AR $126.9 $153.4 $139.2 $139.6 $123.6 Billed AR Q1 07 Q4 06 & FY 06 Q3 06 Q2 06 Q1 06 • Cash, cash equivalents, and marketable securities of $163.8 million • Accounts receiva
Slide 8: Maximus Quarterly Earnings Call, Richard A. Montoni
MAXIMUS QUARTERLY EARNINGS CALL Richard A. Montoni President and Chief Executive Officer 1st Quarter Fiscal 2007 February 8, 2007
Slide 9: Operational Items on Texas
Confidential 9 Operational Items on Texas Three Main Components to the Project: • Children’s Health Insurance Program (CHIP) - Transitioned the majority of operations to Accenture - Remaining ramp down in the next few weeks • Medicaid Enrollment - Assessing our role on this program on a go-forward b
Slide 10: Operational Items on Texas
Confidential 10 Operational Items on Texas • Texas losses of $27.0 million pre-tax ($24 million related to operating loss and AR provision, $3 million for legal provision) • Expect Texas operating losses to trend down - Expect between $13 - $18 million of pre-tax losses in 2Q - Full year pre-tax los
Slide 11: Arbitration Process
Confidential 11 Arbitration Process • Timeline of Arbitration Process with Accenture - Arbitration panel is not finalized - Following finalization of the panel - expect a discovery phase which may take several months - Hearing would probably occur sometime in 2008 • We remain confident in the merits
Slide 12: Ontario, Canada Project
Confidential 12 • Provision for receivables for systems implementation project in Ontario - Beyond our core Child Support operations; traditionally focus on the front end case management and call center operations - Client came by referral from peer customer - No longer performing work on the projec
Slide 13: Addressing Legacy Challenges
Confidential 13 • Contracts were written years ago under different protocols, policies, and procedures - Identify issues in existing projects as we finish work on them - Mitigate future risk in new projects • Issues typically arise in the project life cycle in three main areas - Contract terms, proj
Slide 14: New Contract Approach Example
Confidential 14 Old Approach • Not subject to a formal internal contract review • Emphasis on driving sales • Contract was signed with unclear back ended milestones • Not enough clarity on what constituted completion • Resulted in cost overruns New Approach • Formal internal review conducted • Eleva
Slide 15: Quality & Risk Management
Confidential 15 QA organization conducts a number of key reviews for existing projects • Reviews include: - Independent Verification and Validation - IV&V reviews - Full detailed field reviews - Self assessment reviews Quality & Risk Management
Slide 16: Mitigate Levels of Future Risks
Confidential 16 • Not a one quarter fix - Aggressive implementation oversight - Moving from an entrepreneurial approach to one that is more disciplined and driven by the bottom line - Represents a cultural shift within our organization • Elements in fixed priced contracts have been a recurring sourc
Slide 17: New Sales and Pipeline
Confidential 17 • Earnings in the short term will come from optimizing the existing base business - Long-term growth is contingent upon bringing in new, profitable business - New sales awards and current pipeline reflect emphasis on “singles and doubles” rather than home runs • Awarded a new Health
Slide 18: New Sales and Pipeline
Confidential 18 • Year-to-date signed contract wins - $80 million • New contracts pending - $142 million • Overall pipeline - $1.3 billion - Sales opportunities across all segments of the business • Pipeline is healthy with many opportunities; jobs up to $50 million New Sales and Pipeline
Slide 19: Dispositions
Confidential 19 • Booked a gain on the sale of our corrections business • Exited the student loan business • Possible there may be additional dispositions in 2007 • Continue to review the business portfolio; no plans finalized Dispositions
Slide 20: FY07 Guidance
Confidential 20 • Estimate revenue for fiscal 2007 to be in the range of $710 - $730 million; reflects the impact from the Texas project • Incur pre-tax losses on the Texas project for fiscal 2007 of $45 - $55 million - Q2 Texas loss to range between $13 - $18 million; abate substantially in 2nd hal
Slide 21: Conclusion
Confidential 21 • Took necessary steps in the quarter to clean up legacy issues and position MAXIMUS for long-term profitable growth • Failing a cure, transition IE component of the Texas project starting as early as this month. The transition of the CHIP program has largely been completed • More ac