Maximus Reports Fiscal Year 2024 First Quarter Results
Maximus (MMS) reported a 6.2% increase in revenue to $1.33 billion for the first quarter of fiscal year 2024. Adjusted diluted earnings per share were $1.34, compared to $0.94 for the prior year period. The company raised earnings and free cash flow guidance for fiscal year 2024, with a quarterly cash dividend of $0.30 per share. U.S. Federal Services Segment revenue increased by 9.5% to $677.1 million, and U.S. Services Segment revenue increased by 11.5% to $489.8 million. Outside the U.S. Segment revenue decreased by 16.4% to $160.1 million. Maximus also provided balance sheet and cash flow data, including a net debt to adjusted EBITDA ratio of 2.1x. The company is raising FY24 earnings and free cash flow guidance, with revenue guidance maintained between $5.05 billion and $5.20 billion.
Positive
Revenue increased by 6.2% to $1.33 billion for the first quarter of fiscal year 2024.
Adjusted diluted earnings per share were $1.34, compared to $0.94 for the prior year period.
U.S. Federal Services Segment revenue increased by 9.5% to $677.1 million.
U.S. Services Segment revenue increased by 11.5% to $489.8 million.
The company is raising FY24 earnings and free cash flow guidance.
Negative
Outside the U.S. Segment revenue decreased by 16.4% to $160.1 million.
The announcement by Maximus indicates a robust financial performance, marked by a 6.2% year-over-year increase in revenue and significant growth in organic revenue. The raised guidance for fiscal year 2024, particularly the adjustments in earnings per share and free cash flow, suggests a positive outlook for the company's profitability and liquidity position. This could be indicative of efficient operational management and a favorable response to the company's services, potentially leading to investor confidence in the company's growth trajectory.
Moreover, the improvement in operating margins, especially in the U.S. Federal Services and U.S. Services Segments, reflects effective cost control measures and the ability to leverage higher transactional volumes. The book-to-bill ratio exceeding 1 is a bullish indicator of future revenue, as it implies that the company is booking more orders than it is billing, which could translate into sustained growth. Stakeholders should also consider the debt-to-EBITDA ratio, which has seen a slight decrease, indicating a stable leverage situation that could afford the company flexibility in future strategic initiatives.
The government services sector, in which Maximus operates, often benefits from long-term contracts and a stable flow of revenue due to the essential nature of the services provided. Maximus's positive results in the U.S. Federal Services Segment, driven by Medical Disability Exam contracts and the resumption of Medicaid redeterminations in the U.S. Services Segment, highlight the company's strong positioning within areas of prioritized government spending.
However, the decline in the Outside the U.S. Segment revenue calls for a strategic review to ensure consistent profitability and reduced volatility in international operations. The management's focus on this area could be critical in maintaining overall company health. Additionally, the sales pipeline's size and composition, with a significant portion representing new work opportunities, suggest potential for continued expansion and diversification of revenue streams.
Maximus's financial results and raised guidance must be contextualized within the broader economic environment. The company's optimism, particularly in light of the current economic climate, may be supported by its reliance on government contracts, which can be less cyclical and more resilient during economic downturns. Furthermore, the company's strategic alignment with areas of government spend could insulate it from adverse macroeconomic conditions.
It's also worth noting that the company's performance, including its effective tax rate and interest expense projections, should be evaluated against fiscal and monetary policies that could impact borrowing costs and disposable income. Such factors can influence both the demand for government services and the cost structure for service providers like Maximus.
02/07/2024 - 04:05 PM
Raises FY24 Earnings & Free Cash Flow Guidance Following Improved Margin Outlook
TYSONS, Va.--(BUSINESS WIRE)--
Maximus (NYSE: MMS), a leading provider of government services worldwide, reported financial results for the three months ended December 31, 2023.
Highlights for the first quarter of fiscal year 2024 include:
Revenue increased 6.2% to $1.33 billion , compared to $1.25 billion for the prior year period. Organic growth was 6.9% and driven by expanded programs as well as resumed programs tied to Medicaid redeterminations.
Diluted earnings per share were $1.04 and adjusted diluted earnings per share were $1.34 , compared to $0.65 and $0.94 , respectively, for the prior year period.
The company is raising earnings and free cash flow guidance for fiscal year 2024. Adjusted operating income guidance is increasing by $15 million , adjusted diluted earnings per share by $0.15 , and free cash flow by $10 million .
A quarterly cash dividend of $0.30 per share is payable on February 29, 2024, to shareholders of record on February 15, 2024.
"Our operational performance was excellent this quarter as we focused on delivery of programs critical to the wellbeing of individuals and families, including veteran exams, redeterminations for Medicaid, return to repayment for millions of borrowers, and recently-completed open enrollment," said Bruce Caswell, President and Chief Executive Officer. "The improved outlook for fiscal 2024 signifies the business is in great health and benefiting from scale. We continue to focus on creating growth opportunities for our employees while using technology to improve the citizen experience and deliver on our customers' missions."
Caswell continued, "More broadly, we believe the current economic climate will continue to favor Maximus, given our current base underpinned by essential work and a strategy squarely aligned to prioritized areas of government spend."
First Quarter Results
Revenue for the first quarter of fiscal year 2024 increased 6.2% to $1.33 billion , compared to $1.25 billion for the prior year period. Organic growth was 6.9% from expanded programs in the domestic segments as well as resumed programs in the U.S. Services Segment tied to the restart of Medicaid redeterminations.
For the first quarter of fiscal year 2024, operating margin was 8.1% and the adjusted operating margin was 9.9% . This compares to margins of 6.0% and 7.9% , respectively, for the prior year period. Diluted earnings per share were $1.04 and adjusted diluted earnings per share were $1.34 . This compares to $0.65 and $0.94 , respectively, for the prior-year period. The margin improvement is attributable to higher transactional volumes across both expanded and resumed programs.
U.S. Federal Services Segment
U.S. Federal Services Segment revenue for the first quarter of fiscal year 2024 increased 9.5% to $677.1 million , compared to $618.2 million reported for the prior year period. All growth was organic and driven primarily by volume growth on expanded programs, including the VA's Medical Disability Exam (MDE) contracts.
The segment operating margin for the first quarter of fiscal year 2024 was 10.2% . This compares to 8.3% reported for the prior year, which reflected the hiring of resources in anticipation of the higher volumes. The anticipated profile for the U.S. Federal Services Segment is an increasing margin across the year with a full-year margin expected to range between 11% and 12% .
U.S. Services Segment
U.S. Services Segment revenue for the first quarter of fiscal year 2024 increased 11.5% to $489.8 million , compared to $439.5 million reported in the prior year period. All growth was organic and driven by the resumption of Medicaid redetermination activities and expanded programs in eligibility support and clinical services.
The segment operating margin for the first quarter of fiscal year 2024 was 13.5% . This compares to 8.6% reported for the prior year period when redetermination activities were paused. Since resumed, beneficiary engagement drove the highest margin expected for the segment in fiscal year 2024, with slight moderation expected in subsequent quarters as engagement levels normalize. The full-year fiscal 2024 margin for the U.S. Services Segment is expected to range between 11% and 12% .
Outside the U.S. Segment
Outside the U.S. Segment revenue for the first quarter of fiscal year 2024 decreased 16.4% to $160.1 million , compared to $191.6 million reported in the prior year period. Approximately 7% of decline was attributable to disposal of businesses and the remaining decline was due to both lower employment services volumes and currency impacts.
The segment broke even in the first quarter of fiscal year 2024. This compares to an operating margin of 5.3% in the prior year period which benefited from higher employment services volumes. The Outside the U.S. Segment is expected to be slightly above breakeven for the full-year fiscal 2024. Continued shaping of the segment to reduce volatility and deliver consistent profitability is a management priority this year.
Sales and Pipeline
Year-to-date signed contract awards at December 31, 2023, totaled $422 million , and contracts pending (awarded but unsigned) totaled $802 million . The book-to-bill ratio at December 31, 2023, was 1.2x calculated on a trailing twelve-month basis.
The sales pipeline at December 31, 2023, totaled $37.7 billion , comprised of approximately $933 million in proposals pending, $1.01 billion in proposals in preparation, and $35.7 billion in opportunities tracking. New work opportunities represent approximately 77% of the total sales pipeline.
Balance Sheet and Cash Flows
At December 31, 2023, cash and cash equivalents totaled $104.2 million , and gross debt was $1.32 billion . The ratio of debt, net of allowed cash, to adjusted EBITDA for the quarter ended December 31, 2023, as calculated in accordance with our credit agreement, was 2.1x. This compares to 2.2x at September 30, 2023.
For the first quarter of fiscal year 2024, cash provided operating activities totaled $21.6 million and free cash flow was an outflow of approximately $1 million . Days sales outstanding (DSO) were 59 days as of December 31, 2023, reflecting good collections and offset by seasonality from the timing of payments that were expected this quarter. Free cash flow guidance is increasing for the full fiscal year 2024.
On January 5, 2024, 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 29, 2024, to shareholders of record on February 15, 2024.
Raising FY24 Earnings and Free Cash Flow Guidance
Maximus is raising fiscal year 2024 earnings and free cash flow guidance following first quarter results and improved margin outlook for the rest of the fiscal year. Revenue guidance is maintained between $5.05 billion and $5.20 billion .
Adjusted operating income is now expected to range between $503 million and $528 million , representing an increase of $15 million from prior guidance. Adjusted operating income excludes an estimated $88 million of expense for amortization of intangible assets and $1 million of divestiture-related charges incurred this quarter.
Adjusted diluted earnings per share is now expected to range between $5.20 and $5.50 per share, representing an increase of $0.15 per share from prior guidance.
Free cash flow is now expected to range between $300 million and $350 million as a result of the increased earnings guidance. Other estimates include interest expense of approximately $73 million , an effective income tax rate between 24.5% and 25.5% , and weighted average shares outstanding between 62.0 million and 62.2 million shares for fiscal year 2024.
Conference Call and Webcast Information
Maximus will host a conference call tomorrow, February 8, 2024, at 9:00 a.m. ET. Shareholders are invited to submit questions for management’s consideration by emailing IR@maximus.com up to one hour prior to the call.
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 governments across the globe, 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 Risk Factors
This release refers to 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, the reasons why we use and present them, and details as to how they are calculated are included in 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, 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 the company’s confidence and strategies, and the company’s expectations about revenues, results of operations, profitability, future contracts, market opportunities, market demand, or acceptance of the company’s products are forward-looking statements that involve risks and uncertainties.
These risks could cause the Company’s actual results to differ materially from those indicated by such forward-looking statements. 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, 2023, which was filed with the Securities and Exchange Commission (SEC) on November 16, 2023. The Company's SEC reports are accessible on maximus.com .
Maximus, Inc.
Consolidated Statements of Operations
(Unaudited)
For the Three Months Ended
December 31, 2023
December 31, 2022
(in thousands, except per share amounts)
Revenue
$
1,327,041
$
1,249,246
Cost of revenue
1,026,987
1,004,499
Gross profit
300,054
244,747
Selling, general, and administrative expenses
169,195
146,452
Amortization of intangible assets
23,349
23,518
Operating income
107,510
74,777
Interest expense
21,507
21,606
Other expense/(income), net
488
(266
)
Income before income taxes
85,515
53,437
Provision for income taxes
21,367
13,442
Net income
$
64,148
$
39,995
Earnings per share:
Basic
$
1.05
$
0.65
Diluted
$
1.04
$
0.65
Weighted average shares outstanding:
Basic
61,322
61,117
Diluted
61,535
61,196
Dividends declared per share
$
0.30
$
0.28
Maximus, Inc.
Consolidated Balance Sheets
December 31, 2023
September 30, 2023
(unaudited)
(in thousands)
Assets:
Cash and cash equivalents
$
104,186
$
65,405
Accounts receivable, net
860,409
826,873
Income taxes receivable
15,850
16,556
Prepaid expenses and other current assets
129,174
146,632
Total current assets
1,109,619
1,055,466
Property and equipment, net
34,976
38,831
Capitalized software, net
125,383
107,811
Operating lease right-of-use assets
154,929
163,929
Goodwill
1,781,092
1,779,215
Intangible assets, net
680,309
703,648
Deferred contract costs, net
46,439
45,372
Deferred compensation plan assets
47,273
42,919
Deferred income taxes
2,204
2,459
Other assets
34,637
46,147
Total assets
$
4,016,861
$
3,985,797
Liabilities and Shareholders' Equity:
Liabilities:
Accounts payable and accrued liabilities
$
267,623
$
282,081
Accrued compensation and benefits
115,864
194,251
Deferred revenue, current portion
63,032
60,477
Income taxes payable
23,717
451
Long-term debt, current portion
90,443
86,844
Operating lease liabilities, current portion
48,490
49,852
Other current liabilities
49,197
49,058
Total current liabilities
658,366
723,014
Deferred revenue, non-current portion
37,221
38,849
Deferred income taxes
198,317
203,898
Long-term debt, non-current portion
1,222,243
1,163,149
Deferred compensation plan liabilities, non-current portion
51,507
46,432
Operating lease liabilities, non-current portion
118,594
129,367
Other liabilities
12,807
13,253
Total liabilities
2,299,055
2,317,962
Shareholders' equity:
Common stock, no par value; 100,000 shares authorized; 61,031 and 60,998 shares issued and outstanding as of December 31, 2023 and September 30 2023, respectively
585,278
577,898
Accumulated other comprehensive loss
(30,588
)
(27,615
)
Retained earnings
1,163,116
1,117,552
Total shareholders' equity
1,717,806
1,667,835
Total liabilities and shareholders' equity
$
4,016,861
$
3,985,797
Maximus, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
For the Three Months Ended
December 31, 2023
December 31, 2022
(in thousands)
Cash flows from operating activities:
Net income
$
64,148
$
39,995
Adjustments to reconcile net income to cash flows from operations:
Depreciation and amortization of property, equipment, and capitalized software
8,411
12,280
Amortization of intangible assets
23,349
23,518
Amortization of debt issuance costs and debt discount
601
1,034
Deferred income taxes
(2,165
)
(1,331
)
Stock compensation expense
9,427
4,403
Loss on sale of a businesses
1,018
—
Change in assets and liabilities, net of effects of business combinations:
Accounts receivable
(35,379
)
(200,749
)
Prepaid expenses and other current assets
10,056
10,624
Deferred contract costs
(888
)
(1,013
)
Accounts payable and accrued liabilities
(15,543
)
3,642
Accrued compensation and benefits
(67,392
)
(53,271
)
Deferred revenue
877
14,764
Income taxes
22,250
9,465
Operating lease right-of-use assets and liabilities
(1,088
)
(948
)
Other assets and liabilities
3,926
2,928
Net cash provided by/(used in) operating activities
21,608
(134,659
)
Cash flows from investing activities:
Purchases of property and equipment and capitalized software
(22,247
)
(15,697
)
Proceeds from divestitures
1,815
—
Net cash used in investing activities
(20,432
)
(15,697
)
Cash flows from financing activities:
Cash dividends paid to Maximus shareholders
(18,299
)
(17,017
)
Tax withholding related to RSU vesting
(13,455
)
(8,475
)
Payments for contingent consideration
(2,819
)
(1,415
)
Proceeds from borrowings
228,409
268,702
Principal payments for debt
(166,658
)
(61,355
)
Cash-collateralized escrow liabilities
1,204
(9,473
)
Net cash provided by financing activities
28,382
170,967
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
1,846
2,421
Net change in cash, cash equivalents, and restricted cash
31,404
23,032
Cash, cash equivalents, and restricted cash, beginning of period
122,091
136,795
Cash, cash equivalents, and restricted cash, end of period
$
153,495
$
159,827
Maximus, Inc.
Consolidated Results of Operations by Segment
(Unaudited)
For the Three Months Ended
December 31, 2023
December 31, 2022
Amount
% (1)
Amount
% (1)
(dollars in thousands)
Revenue:
U.S. Federal Services
$
677,078
$
618,167
U.S. Services
489,845
439,478
Outside the U.S.
160,118
191,601
Revenue
$
1,327,041
$
1,249,246
Gross profit:
U.S. Federal Services
$
156,662
23.1
%
$
122,694
19.8
%
U.S. Services
118,363
24.2
%
83,598
19.0
%
Outside the U.S.
25,029
15.6
%
38,455
20.1
%
Gross profit
$
300,054
22.6
%
$
244,747
19.6
%
Selling, general, and administrative expenses:
U.S. Federal Services
$
87,855
13.0
%
$
71,649
11.6
%
U.S. Services
52,300
10.7
%
45,842
10.4
%
Outside the U.S.
25,141
15.7
%
28,389
14.8
%
Divestiture-related charges (2)
1,018
NM
—
NM
Other (3)
2,881
NM
572
NM
Selling, general, and administrative expenses
$
169,195
12.7
%
$
146,452
11.7
%
Operating income:
U.S. Federal Services
$
68,807
10.2
%
$
51,045
8.3
%
U.S. Services
66,063
13.5
%
37,756
8.6
%
Outside the U.S.
(112
)
(0.1
)%
10,066
5.3
%
Amortization of intangible assets
(23,349
)
NM
(23,518
)
NM
Divestiture-related charges (2)
(1,018
)
NM
—
NM
Other (3)
(2,881
)
NM
(572
)
NM
Operating income
$
107,510
8.1
%
$
74,777
6.0
%
(1)
Percentage of respective segment revenue. Percentages not considered meaningful are marked "NM."
(2)
In November 2023, we sold our businesses in Italy and Singapore , as well as our employment services business in Canada , recording a loss of $1.0 million . We previously recorded an impairment charge of $2.9 million related to these assets.
(3)
Other expenses includes credits and costs that are not allocated to a particular segment. This includes expenses incurred as part of our acquisitions, as well as potential acquisitions which have not been or may not be completed.
Maximus, Inc.
Consolidated Free Cash Flows - Non-GAAP
(Unaudited)
For the Three Months Ended
December 31, 2023
December 31, 2022
(in thousands)
Net cash provided by/(used in) operating activities
21,608
(134,659
)
Purchases of property and equipment and capitalized software
(22,247
)
(15,697
)
Free cash flow (Non-GAAP)
$
(639
)
$
(150,356
)
Maximus, Inc.
Non-GAAP Adjusted Results Excluding Amortization of Intangible Assets
(Unaudited)
For the Three Months Ended
December 31, 2023
December 31, 2022
(dollars in thousands, except per share data)
Operating income
$
107,510
$
74,777
Add back: Amortization of intangible assets
23,349
23,518
Add back: Divestiture-related charges
1,018
—
Adjusted operating income excluding amortization of intangible assets and divestiture-related charges (Non-GAAP)
$
131,877
$
98,295
Adjusted operating income margin excluding amortization of intangible assets and divestiture-related charges (Non-GAAP)
9.9
%
7.9
%
Net income
$
64,148
$
39,995
Add back: Amortization of intangible assets, net of tax
17,208
17,360
Add back: Divestiture-related charges
1,018
—
Adjusted net income excluding amortization of intangible assets and divestiture-related charges (Non-GAAP)
$
82,374
$
57,355
Diluted earnings per share
$
1.04
$
0.65
Add back: Effect of amortization of intangible assets on diluted earnings per share
0.28
0.29
Add back: Effect of divestiture-related charges on diluted earnings per share
0.02
—
Adjusted diluted earnings per share excluding amortization of intangible assets and divestiture-related charges (Non-GAAP)
$
1.34
$
0.94
View source version on businesswire.com: https://www.businesswire.com/news/home/20240207818524/en/
James Francis, VP - IR
Jessica Batt, VP - IR & ESG
IR@maximus.com
Source: Maximus
What is the ticker symbol for Maximus?
The ticker symbol for Maximus is MMS.
What was the revenue increase for the first quarter of fiscal year 2024?
The revenue increased by 6.2% to $1.33 billion.
What were the adjusted diluted earnings per share for the first quarter of fiscal year 2024?
The adjusted diluted earnings per share were $1.34.
What was the percentage increase in U.S. Federal Services Segment revenue?
U.S. Federal Services Segment revenue increased by 9.5% to $677.1 million.
What was the percentage increase in U.S. Services Segment revenue?
U.S. Services Segment revenue increased by 11.5% to $489.8 million.
What was the percentage decrease in Outside the U.S. Segment revenue?
Outside the U.S. Segment revenue decreased by 16.4% to $160.1 million.
What is the net debt to adjusted EBITDA ratio?
The net debt to adjusted EBITDA ratio was 2.1x for the quarter ended December 31, 2023.