Raises FY25 Earnings Guidance While Securing
Favorable Outcomes on Key Rebids
Maximus (NYSE: MMS), a leading provider of government services
worldwide, reported financial results for the three months ending
December 31, 2024.
Highlights for the first quarter of fiscal year 2025
include:
- Revenue increased 5.7% to $1.40 billion, compared to $1.33
billion for the prior year period. Organic growth of 6.3% was due
primarily to the U.S. Federal Services Segment with added
contributions from the Outside the U.S. Segment.
- Diluted earnings per share were $0.69 and adjusted diluted
earnings per share were $1.61, compared to $1.04 and $1.34,
respectively, for the prior year period. The three months ending
December 31, 2024, included divestiture-related charges resulting
from the completed sale of the employment services businesses in
Australia and South Korea in the Outside the U.S. Segment.
- Earnings guidance is increasing, with adjusted EBITDA margin
expected to be approximately 11.2% and adjusted diluted earnings
per share expected to range between $5.90 and $6.20 per share for
the full fiscal year 2025.
- Purchases of Maximus common stock totaled 3.1 million shares
for $237 million in the quarter, with additional purchases totaling
0.7 million shares for $52.9 million subsequent to December 31,
2024.
- A quarterly cash dividend of $0.30 per share is payable on
February 28, 2025, to shareholders of record on February 15,
2025.
"Along with strong financials in our first quarter and an
improvement to full-year earnings guidance, we have recently been
successful in removing multiple contractual and business
uncertainties that ultimately strengthen the durability of our
business," said Bruce Caswell, President and Chief Executive
Officer. "We had winning outcomes on the two large recompetes and
the recent divestiture improves the health and predictability of
our Outside the U.S. Segment."
Caswell added, "We believe that Maximus has a favorable and
unique position in government services, with a recognized and
proven track record administering critical government programs in
an efficient and accountable manner. As our government customers,
in both Federal agencies and state governments, face uncertainties
and potential challenges, we believe Maximus is in a superior
strategic position to provide value-added solutions and
assistance."
First Quarter Results
Revenue for the first quarter of fiscal year 2025 increased 5.7%
to $1.40 billion, compared to $1.33 billion for the prior year
period. Organic growth totaled 6.3%, primarily due to the U.S.
Federal Services Segment and, to a lesser degree, contributions
from the Outside the U.S. Segment.
For the first quarter of fiscal year 2025, operating margin was
6.2% and the adjusted EBITDA margin was 11.2%. This compares to
margins of 8.1% and 10.6%, respectively, for the prior year period.
Diluted earnings per share were $0.69 and adjusted diluted earnings
per share were $1.61. This compares to $1.04 and $1.34,
respectively, for the prior year period.
The first quarter of fiscal year 2025 included
divestiture-related charges from the completed sale of the
employment services businesses in Australia and South Korea as
announced in December 2024. The charges totaled approximately $38
million and mostly related to accumulated foreign exchange losses
since inception of operations in Australia. The divestiture-related
charges drove a higher tax rate for the first quarter of fiscal
year 2025.
U.S. Federal Services Segment
U.S. Federal Services Segment revenue for the first quarter of
fiscal year 2025 increased 15.3% to $780.7 million, compared to
$677.1 million reported for the prior year period. All growth was
organic and resulted from a combination of clinical assessment
volume, outsized volumes on other clinical programs, and customer
service-type programs.
The segment operating margin for the first quarter of fiscal
year 2025 was 12.7%, compared to 10.2% reported for the prior year
period. The outsized volumes on other clinical programs benefited
this quarter’s margin. The full-year fiscal 2025 margin for the
U.S. Federal Services Segment is now expected to be approximately
11.5%.
U.S. Services Segment
U.S. Services Segment revenue for the first quarter of fiscal
year 2025 decreased 7.7% to $452.3 million, compared to $489.8
million reported in the prior year period. The decrease resulted
from the prior year period containing excess volumes from
Medicaid-related activities, including the one-time unwinding
exercise that drove extra redeterminations.
The segment operating margin for the first quarter of fiscal
year 2025 was 9.0%, compared to 13.5% reported for the prior year.
The margin disparity is due to a combination of the excess volumes
benefiting the margin of the prior year period as well as
seasonality factors that slightly reduced margin in the current
period and were anticipated in the full year outlook. The full-year
fiscal 2025 margin for the U.S. Services Segment is anticipated to
be approximately 11%.
Outside the U.S. Segment
Outside the U.S. Segment revenue for the first quarter of fiscal
year 2025 increased 6.0% to $169.8 million, compared to $160.1
million reported in the prior year period. Organic growth was 10.7%
and driven primarily by strong performance on flagship contracts in
the United Kingdom.
The segment operating margin for the first quarter of fiscal
year 2025 was 4.8%, or $8.1 million operating profit, compared to
an operating loss of $0.1 million in the prior year period. The
multiple divestitures of employment services businesses over the
last two years have reduced volatility and improved profitability
in the segment.
Sales and Pipeline
Year-to-date signed contract awards at December 31, 2024,
totaled $2.08 billion, and contracts pending (awarded but unsigned)
totaled $410 million. The book-to-bill ratio at December 31, 2024,
was 0.7x calculated on a trailing twelve-month basis, and 1.5x for
the three months ending December 31, 2024.
The sales pipeline at December 31, 2024, totaled $41.4 billion,
comprised of approximately $2.47 billion in proposals pending,
$1.50 billion in proposals in preparation, and $37.5 billion in
opportunities tracking. The reduction from the pipeline at
September 30, 2024 is primarily attributable to removal of the
Contact Center Operations (CCO) early recompete and successful win
of the Veterans Affairs Medical Disability Examination contracts
recompete. New work opportunities represent approximately 57% of
the total sales pipeline.
Balance Sheet and Cash Flows
At December 31, 2024, cash and cash equivalents totaled $73
million, and gross debt was $1.40 billion. The ratio of debt, net
of allowed cash, to EBITDA for the quarter ended December 31, 2024,
as calculated in accordance with our credit agreement, was 1.8x and
trended higher from increased purchases of Maximus common stock.
This compares to 1.4x at September 30, 2024 and remains below the
target net leverage range of 2x to 3x.
For the first quarter of fiscal year 2025, cash used in
operating activities totaled $80.0 million, and free cash flow was
an outflow of $103.0 million. Negative cash flow was anticipated
due to the timing of certain payments that often occur in the first
fiscal quarter, while free cash flow guidance for the full fiscal
year 2025 is increasing by $10 million. DSO at December 31, 2024,
were 62 days, compared with 61 days at September 30, 2024.
During the first quarter of fiscal year 2025, we purchased
approximately 3.1 million shares for $237 million. Subsequent to
December 31, 2024, and through January 31, 2025, we purchased an
additional 0.7 million shares for $52.9 million, leaving
approximately $85.0 million remaining under the current Board of
Directors authorization announced in December 2024.
On January 5, 2025, our Board of Directors declared a quarterly
cash dividend of $0.30 for each share of our common stock
outstanding. The dividend is payable on February 28, 2025, to
shareholders of record on February 15, 2025.
Raising Fiscal Year 2025 Earnings Guidance
Maximus is raising earnings guidance and adjusting revenue
guidance for fiscal year 2025. Revenue is now expected to range
between $5.2 billion and $5.35 billion adjusting for the recent
divestiture that removed approximately $100 million of revenue, and
partially offset by increased organic growth.
An adjusted EBITDA margin, which excludes divestiture-related
charges, of approximately 11.2% is anticipated for the full year.
Adjusted diluted earnings per share, which excludes expense for
amortization of intangible assets and divestiture-related charges,
is now expected to range between $5.90 and $6.20 per share for
fiscal year 2025.
Free cash flow is now expected to range between $355 million and
$385 million for fiscal year 2025. Interest expense is estimated to
be $75 million for fiscal year 2025 and increased from prior
guidance as a result of the higher purchase activity of Maximus
common stock. The full year tax rate is now expected to range
between 28% and 29% as a result of the higher tax rate for the
first quarter of fiscal year 2025. On a full-year basis, the
weighted average shares outstanding is forecasted to be
approximately 58 million shares for fiscal year 2025.
Conference Call and Webcast Information
Maximus will host a conference call this morning, February 6,
2025, at 9:00 a.m. ET.
The call is open to the public and available by webcast or by
phone at:
877.407.8289 (Domestic) / +1.201.689.8341 (International)
For those unable to listen to the live call, a recording of the
webcast will be available on investor.maximus.com.
About Maximus
As a leading strategic partner to government, Maximus helps
improve the delivery of public services amid complex technology,
health, economic, environmental, and social challenges. With a deep
understanding of program service delivery, acute insights that
achieve operational excellence, and an extensive awareness of the
needs of the people being served, our employees advance the
critical missions of our partners. Maximus delivers innovative
business process management, impactful consulting services, and
technology solutions that provide improved outcomes for the public
and higher levels of productivity and efficiency of
government-sponsored programs. For more information, visit
maximus.com.
Non-GAAP Measures and Forward-Looking Statements
This release contains non-GAAP measures and other indicators,
including organic growth, free cash flow, operating income and EPS
adjusted for amortization of intangible assets and
divestiture-related charges, adjusted EBITDA, and other non-GAAP
measures.
A description of these non-GAAP measures and details as to how
they are calculated are included with our earnings presentation and
forthcoming Form 10-Q.
The presentation of these non-GAAP numbers is not meant to be
considered in isolation, nor as alternatives to cash flows from
operations, revenue growth, operating income, or net income as
measures of performance. These non-GAAP financial measures, as
determined and presented by us, may not be comparable to related or
similarly titled measures presented by other companies.
Statements that are not historical facts, including statements
about our confidence and strategies, and our expectations about
revenues, results of operations, profitability, future contracts,
market opportunities, market demand, or acceptance of our products
are forward-looking statements that involve risks and
uncertainties.
These risks could cause our actual results to differ materially
from those indicated by such forward-looking statements. A Special
Note Regarding Forward-Looking Statements is included within our
forthcoming Form 10-Q and a summary of risk factors can be found in
Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the
year ended September 30, 2024, which was filed with the Securities
and Exchange Commission (SEC) on November 21, 2024. Our SEC reports
are accessible on maximus.com.
FY25 Guidance Reconciliation -
Non-GAAP
($ in millions except per share items)
Low End
High End
Operating income
$
405
$
429
Add: amortization of intangible assets
92
92
Add: depreciation & amortization of
property, equipment and capitalized software
43
43
Add: divestiture-related charges
38
38
Adjusted EBITDA
$
578
$
602
Revenue
$
5,200
$
5,350
Adjusted EBITDA Margin
11.1
%
11.3
%
Diluted EPS
$
4.09
$
4.39
Add: effect of amortization of intangible
assets on diluted EPS
1.17
1.17
Add: divestiture-related charges
0.64
0.64
Adjusted diluted EPS
$
5.90
$
6.20
Cash flows from operating activities
$
435
$
465
Remove: purchases of property and
equipment and capitalized software costs
(80
)
(80
)
Free cash flow
$
355
$
385
Maximus, Inc.
Consolidated Statements of
Operations
(Unaudited)
For the Three Months Ended
December 31, 2024
December 31, 2023
(in thousands, except per share
amounts)
Revenue
$
1,402,675
$
1,327,041
Cost of revenue
1,101,118
1,026,987
Gross profit
301,557
300,054
Selling, general, and administrative
expenses
191,735
169,195
Amortization of intangible assets
23,035
23,349
Operating income
86,787
107,510
Interest expense
17,522
21,507
Other expense, net
312
488
Income before income taxes
68,953
85,515
Provision for income taxes
27,757
21,367
Net income
$
41,196
$
64,148
Earnings per share:
Basic
$
0.69
$
1.05
Diluted
$
0.69
$
1.04
Weighted average shares outstanding:
Basic
59,733
61,322
Diluted
60,002
61,535
Dividends declared per share
$
0.30
$
0.30
Maximus, Inc.
Consolidated Balance
Sheets
December 31, 2024
September 30, 2024
(unaudited)
(in thousands)
Assets:
Cash and cash equivalents
$
72,653
$
183,123
Accounts receivable, net
962,650
879,514
Income taxes receivable
1,384
5,282
Prepaid expenses and other current
assets
128,691
132,625
Total current assets
1,165,378
1,200,544
Property and equipment, net
37,905
38,977
Capitalized software, net
200,070
187,677
Operating lease right-of-use assets
118,749
133,594
Goodwill
1,779,682
1,782,871
Intangible assets, net
607,033
630,569
Deferred contract costs, net
58,863
59,432
Deferred compensation plan assets
55,579
55,913
Deferred income taxes
12,259
14,801
Other assets
23,242
27,130
Total assets
$
4,058,760
$
4,131,508
Liabilities and Shareholders' Equity:
Liabilities:
Accounts payable and accrued
liabilities
$
286,359
$
303,321
Accrued compensation and benefits
119,869
237,121
Deferred revenue, current portion
78,165
83,238
Income taxes payable
36,504
26,535
Long-term debt, current portion
34,945
40,139
Operating lease liabilities, current
portion
38,013
47,656
Other current liabilities
85,070
69,519
Total current liabilities
678,925
807,529
Deferred revenue, non-current portion
40,366
45,077
Deferred income taxes
172,548
169,118
Long-term debt, non-current portion
1,353,217
1,091,954
Deferred compensation plan liabilities,
non-current portion
58,781
57,599
Operating lease liabilities, non-current
portion
89,743
97,221
Other liabilities
18,331
20,195
Total liabilities
2,411,911
2,288,693
Shareholders' equity:
Common stock, no par value; 100,000 shares
authorized; 57,286 and 60,352 shares issued and outstanding as of
December 31, 2024, and September 30, 2024, respectively
603,252
598,304
Accumulated other comprehensive loss
(19,554
)
(32,460
)
Retained earnings
1,063,151
1,276,971
Total shareholders' equity
1,646,849
1,842,815
Total liabilities and shareholders'
equity
$
4,058,760
$
4,131,508
Maximus, Inc.
Consolidated Statements of
Cash Flows
(Unaudited)
For the Three Months Ended
December 31, 2024
December 31, 2023
(in thousands)
Cash flows from operating activities:
Net income
$
41,196
$
64,148
Adjustments to reconcile net income to
cash flows from operations:
Depreciation and amortization of property,
equipment, and capitalized software
8,455
8,411
Amortization of intangible assets
23,035
23,349
Amortization of debt issuance costs and
debt discount
638
601
Deferred income taxes
2,157
(2,165
)
Stock compensation expense
6,952
9,427
Divestiture-related charges
38,341
1,018
Change in assets and liabilities, net of
effects of business combinations and divestitures:
Accounts receivable
(103,454
)
(35,379
)
Prepaid expenses and other current
assets
(2,500
)
10,056
Deferred contract costs
(366
)
(888
)
Accounts payable and accrued
liabilities
(8,150
)
(15,543
)
Accrued compensation and benefits
(93,036
)
(67,392
)
Deferred revenue
(8,232
)
877
Income taxes
12,076
22,250
Operating lease right-of-use assets and
liabilities
(2,349
)
(1,088
)
Other assets and liabilities
5,241
3,926
Net cash (used in)/provided by operating
activities
(79,996
)
21,608
Cash flows from investing activities:
Purchases of property and equipment and
capitalized software
(22,992
)
(22,247
)
Proceeds from divestitures
736
1,815
Net cash used in investing activities
(22,256
)
(20,432
)
Cash flows from financing activities:
Cash dividends paid to Maximus
shareholders
(18,060
)
(18,299
)
Purchases of Maximus common stock
(228,593
)
—
Tax withholding related to RSU vesting
(16,441
)
(13,455
)
Payments for contingent consideration
—
(2,819
)
Proceeds from borrowings
435,000
228,409
Principal payments for debt
(179,264
)
(166,658
)
Cash-collateralized escrow liabilities
(899
)
1,204
Net cash (used in)/provided by financing
activities
(8,257
)
28,382
Effect of exchange rate changes on cash,
cash equivalents, and restricted cash
(2,384
)
1,846
Net change in cash, cash equivalents, and
restricted cash
(112,893
)
31,404
Cash, cash equivalents, and restricted
cash, beginning of period
235,763
122,091
Cash, cash equivalents, and restricted
cash, end of period
$
122,870
$
153,495
Maximus, Inc.
Consolidated Results of
Operations by Segment
(Unaudited)
For the Three Months Ended
December 31, 2024
December 31, 2023
Amount
% (1)
Amount
% (1)
(dollars in thousands)
Revenue:
U.S. Federal Services
$
780,655
$
677,078
U.S. Services
452,250
489,845
Outside the U.S.
169,770
160,118
Revenue
$
1,402,675
$
1,327,041
Gross
profit:
U.S. Federal Services
$
173,315
22.2
%
$
156,662
23.1
%
U.S. Services
95,004
21.0
%
118,363
24.2
%
Outside the U.S.
33,238
19.6
%
25,029
15.6
%
Gross profit
$
301,557
21.5
%
$
300,054
22.6
%
Selling, general,
and administrative expenses:
U.S. Federal Services
$
74,215
9.5
%
$
87,855
13.0
%
U.S. Services
54,158
12.0
%
52,300
10.7
%
Outside the U.S.
25,118
14.8
%
25,141
15.7
%
Divestiture-related charges (2)
38,341
NM
1,018
NM
Other (3)
(97
)
NM
2,881
NM
Selling, general, and administrative
expenses
$
191,735
13.7
%
$
169,195
12.7
%
Operating
income/(loss):
U.S. Federal Services
$
99,100
12.7
%
$
68,807
10.2
%
U.S. Services
40,846
9.0
%
66,063
13.5
%
Outside the U.S.
8,120
4.8
%
(112
)
(0.1
)%
Amortization of intangible assets
(23,035
)
NM
(23,349
)
NM
Divestiture-related charges (2)
(38,341
)
NM
(1,018
)
NM
Other (3)
97
NM
(2,881
)
NM
Operating income
$
86,787
6.2
%
$
107,510
8.1
%
(1)
Percentage of respective segment revenue.
Percentages not considered meaningful are marked "NM."
(2)
During fiscal years 2025 and 2024, we have
divested businesses from our Outside the U.S. Segment.
(3)
Other expenses includes credits and costs
that are not allocated to a particular segment.
Maximus, Inc.
Consolidated Free Cash Flows -
Non-GAAP
(Unaudited)
For the Three Months Ended
December 31, 2024
December 31, 2023
(in thousands)
Net cash (used in)/provided by in
operating activities
$
(79,996
)
$
21,608
Purchases of property and equipment and
capitalized software
(22,992
)
(22,247
)
Free cash flow (Non-GAAP)
$
(102,988
)
$
(639
)
Maximus, Inc.
Non-GAAP Adjusted Results -
Operating Income, Adjusted EBITDA, Net Income, and Diluted Earnings
per Share
(Unaudited)
For the Three Months Ended
December 31, 2024
December 31, 2023
(dollars in thousands, except per
share data)
Operating income
$
86,787
$
107,510
Add back: Amortization of intangible
assets
23,035
23,349
Add back: Divestiture-related charges
38,341
1,018
Add back: Depreciation and amortization of
property, equipment, and capitalized software
8,455
8,411
Adjusted EBITDA (Non-GAAP)
$
156,618
$
140,288
Adjusted EBITDA margin (Non-GAAP)
11.2
%
10.6
%
Net income
$
41,196
$
64,148
Add back: Amortization of intangible
assets, net of tax
16,977
17,208
Add back: Divestiture-related charges
38,341
1,018
Adjusted net income excluding amortization
of intangible assets and divestiture-related charges (Non-GAAP)
$
96,514
$
82,374
Diluted earnings per share
$
0.69
$
1.04
Add back: Effect of amortization of
intangible assets on diluted earnings per share
0.28
0.28
Add back: Effect of divestiture-related
charges on diluted earnings per share
0.64
0.02
Adjusted diluted earnings per
share excluding amortization of intangible assets and
divestiture-related charges (Non-GAAP)
$
1.61
$
1.34
View source
version on businesswire.com: https://www.businesswire.com/news/home/20250206450370/en/
James Francis, VP - IR Jessica Batt, VP - IR & ESG
IR@maximus.com
MAXIMUS (NYSE:MMS)
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