Favorable tailwinds persist and drive third
consecutive raise to FY24 guidance
Maximus (NYSE: MMS), a leading provider of government services
worldwide, reported financial results for the three and nine months
ending June 30, 2024.
Highlights for the third quarter of fiscal year 2024
include:
- Revenue increased 10.6% to $1.31 billion, compared to $1.19
billion for the prior year period. All three segments contributed
to organic growth of 11.2%, with the U.S. Federal Services Segment
being the primary driver.
- Diluted earnings per share were $1.46 and adjusted diluted
earnings per share were $1.74, compared to $0.50 and $0.78,
respectively, for the prior year period.
- Guidance is increasing again for fiscal year 2024. At the
midpoints, revenue is increasing by $100 million, adjusted
operating income guidance is increasing by $30 million, adjusted
diluted earnings per share by $0.35, and free cash flow by $15
million.
- Net debt to EBITDA ratio improved to 1.5 times at June 30,
2024, compared to 1.7 times in the prior quarter.
- A quarterly cash dividend of $0.30 per share is payable on
August 31, 2024, to shareholders of record on August 15, 2024.
"Our third quarter demonstrates our ability to capitalize on
favorable tailwinds that have persisted across this year, where we
accomplished high quality and efficient delivery, at scale," said
Bruce Caswell, President and Chief Executive Officer. "I want to
acknowledge and thank all our teams for their respective roles in
delivering exceptional performance this quarter, enabling us to
solidly beat expectations and continue the momentum of the business
this year."
Third Quarter Results
Revenue for the third quarter of fiscal year 2024 increased
10.6% to $1.31 billion, compared to $1.19 billion for the prior
year period. All three segments contributed to consolidated organic
growth of 11.2%, with the primary driver being volume growth on
clinical programs in the U.S. Federal Services Segment.
For the third quarter of fiscal year 2024, operating margin was
10.8% and the adjusted operating margin was 12.6%. This compares to
margins of 4.9% and 6.9%, respectively, for the prior year period.
Diluted earnings per share were $1.46 and adjusted diluted earnings
per share were $1.74. This compares to $0.50 and $0.78,
respectively, for the prior year period which included a $0.26
impact from the previously disclosed cybersecurity incident.
Exceptional performance within environments of strong demand across
both domestic segments led to higher-than-anticipated earnings this
quarter.
U.S. Federal Services Segment
U.S. Federal Services Segment revenue for the third quarter of
fiscal year 2024 increased 17.0% to $683.3 million, compared to
$584.0 million reported for the prior year period. All growth was
organic and driven primarily by volume growth on clinical
programs.
The segment operating margin for the third quarter of fiscal
year 2024 was 15.5%, compared to 12.7% reported for the prior year
period. This quarter's margin reflects excellent operational
execution combined with high demand for services, particularly in
clinical services, and a temporarily favorable mix of lower
cost-plus revenue and higher performance-based revenue. The
full-year fiscal 2024 margin for the U.S. Federal Services Segment
is now expected to be approximately 12.5%.
U.S. Services Segment
U.S. Services Segment revenue for the third quarter of fiscal
year 2024 increased 5.2% to $472.3 million, compared to $449.1
million reported in the prior year period. All growth was organic
and enabled by strong performance across the Medicaid-related
portfolio, a portion of which were excess volumes from the
unwinding exercise which is now completed.
The segment operating margin for the third quarter of fiscal
year 2024 was 13.0%, compared to 10.5% reported for the prior year.
This quarter's margin benefited from the strong Medicaid-related
performance and the aforementioned excess volumes. The full-year
fiscal 2024 margin for the U.S. Services Segment is anticipated to
be approximately 13%.
Outside the U.S. Segment
Outside the U.S. Segment revenue for the third quarter of fiscal
year 2024 increased 2.3% to $159.3 million, compared to $155.7
million reported in the prior year period. Organic growth was 6.8%
and driven primarily by strong operations in the United Kingdom,
with the effect of divested businesses partially offsetting the
growth.
The segment realized an operating loss of $1.4 million for the
third quarter of fiscal year 2024, compared to a loss of $15.2
million in the prior year period. This quarter's loss was
contemplated in the full-year outlook for the segment, which
remains slightly above breakeven. A smaller footprint and improved
profitability are expected once segment-shaping efforts are
complete, which remain a priority for this fiscal year.
Sales and Pipeline
Year-to-date signed contract awards at June 30, 2024, totaled
$1.25 billion, and contracts pending (awarded but unsigned) totaled
$398 million. The book-to-bill ratio at June 30, 2024, was 0.6x
calculated on a trailing twelve-month basis.
The sales pipeline at June 30, 2024, totaled $44.1 billion,
comprised of approximately $2.93 billion in proposals pending,
$7.33 billion in proposals in preparation, and $33.8 billion in
opportunities tracking. This quarter's large increase to the
pipeline is attributable to capturing the Contact Center Operations
(CCO) early recompete and the Veterans Affairs Medical Disability
Examination contracts recompete stemming from higher volumes on the
program. New work opportunities represent approximately 55% of the
total sales pipeline.
Balance Sheet and Cash Flows
At June 30, 2024, cash and cash equivalents totaled $103
million, and gross debt was $1.16 billion. The ratio of debt, net
of allowed cash, to EBITDA for the quarter ended June 30, 2024, as
calculated in accordance with our credit agreement, was 1.5x. This
compares to 1.7x at March 31, 2024.
For the third quarter of fiscal year 2024, cash provided by
operating activities totaled $199 million, and free cash flow was
$165 million. DSO at June 30, 2024, were 59 days, compared with 62
days at March 31, 2024.
During the third quarter of fiscal year 2024, we purchased
approximately 611,000 shares, totaling $50.6 million, which is an
average price of $82.79 per share. Subsequent to June 30, 2024, we
purchased an additional 250,000 shares, totaling $21.2 million, at
an average price of $84.78 per share. In June 2024, the Board of
Directors authorized an expansion to the purchase program for
Maximus common stock of up to an aggregate of $200 million.
On July 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 August 31, 2024, to
shareholders of record on August 15, 2024.
Further Raise to FY24 Guidance
Maximus is further raising fiscal year 2024 guidance following
its third quarter results. Revenue is now expected to range between
$5.25 billion and $5.35 billion, representing an increase of $100
million from the midpoint of prior guidance.
Adjusted operating income is now expected to range between $570
million and $590 million, representing an increase of $30 million
from the midpoint of prior guidance. Adjusted operating income
excludes an estimated $90 million of expense for amortization of
intangible assets and $1 million of divestiture-related
charges.
Adjusted diluted earnings per share is now expected to range
between $6.00 and $6.20 per share, representing an increase of
$0.35 per share from the midpoint of prior guidance.
Free cash flow is now expected to range between $350 million and
$380 million as a result of the increased earnings guidance and
partially offset by higher capital expenditures for the remainder
of the year. Interest expense is estimated to be $80 million for
fiscal year 2024.
Conference Call and Webcast Information
Maximus will host a conference call tomorrow, August 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 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, 2023, which was filed with the Securities
and Exchange Commission (SEC) on November 16, 2023. Our SEC reports
are accessible on maximus.com.
Maximus, Inc.
Consolidated Statements of
Operations
(Unaudited)
For the Three Months Ended
For the Nine Months Ended
June 30, 2024
June 30, 2023
June 30, 2024
June 30, 2023
(in thousands, except per share
amounts)
Revenue
$
1,314,929
$
1,188,677
$
3,990,327
$
3,644,775
Cost of revenue
982,615
924,313
3,040,370
2,907,061
Gross profit
332,314
264,364
949,957
737,714
Selling, general, and administrative
expenses
167,033
182,545
504,682
471,445
Amortization of intangible assets
23,542
23,431
68,532
70,599
Operating income
141,739
58,388
376,743
195,670
Interest expense
20,555
21,026
62,428
63,631
Other expense/(income), net
809
1,005
475
(79
)
Income before income taxes
120,375
36,357
313,840
132,118
Provision for income taxes
30,623
5,494
79,430
29,472
Net income
$
89,752
$
30,863
$
234,410
$
102,646
Earnings per share:
Basic
$
1.47
$
0.50
$
3.83
$
1.68
Diluted
$
1.46
$
0.50
$
3.81
$
1.67
Weighted average shares outstanding:
Basic
61,079
61,141
61,233
61,125
Diluted
61,381
61,544
61,495
61,368
Dividends declared per share
$
0.30
$
0.28
$
0.90
$
0.84
Maximus, Inc.
Consolidated Balance
Sheets
June 30, 2024
September 30, 2023
(unaudited)
(in thousands)
Assets:
Cash and cash equivalents
$
102,794
$
65,405
Accounts receivable, net
850,462
826,873
Income taxes receivable
9,464
16,556
Prepaid expenses and other current
assets
115,571
146,632
Total current assets
1,078,291
1,055,466
Property and equipment, net
35,020
38,831
Capitalized software, net
169,449
107,811
Operating lease right-of-use assets
138,817
163,929
Goodwill
1,780,299
1,779,215
Intangible assets, net
653,386
703,648
Deferred contract costs, net
53,899
45,372
Deferred compensation plan assets
52,895
42,919
Deferred income taxes
5,911
2,459
Other assets
31,823
46,147
Total assets
$
3,999,790
$
3,985,797
Liabilities and Shareholders' Equity:
Liabilities:
Accounts payable and accrued
liabilities
$
280,836
$
282,081
Accrued compensation and benefits
162,318
194,251
Deferred revenue, current portion
82,065
60,477
Income taxes payable
11,146
451
Long-term debt, current portion
39,952
86,844
Operating lease liabilities, current
portion
47,992
49,852
Other current liabilities
55,734
49,058
Total current liabilities
680,043
723,014
Deferred revenue, non-current portion
35,269
38,849
Deferred income taxes
200,814
203,898
Long-term debt, non-current portion
1,100,701
1,163,149
Deferred compensation plan liabilities,
non-current portion
55,870
46,432
Operating lease liabilities, non-current
portion
101,911
129,367
Other liabilities
6,467
13,253
Total liabilities
2,181,075
2,317,962
Shareholders' equity:
Common stock, no par value; 100,000 shares
authorized; 60,427 and 60,998 shares issued and outstanding as of
June 30, 2024, and September 30, 2023, respectively
604,287
577,898
Accumulated other comprehensive loss
(30,934
)
(27,615
)
Retained earnings
1,245,362
1,117,552
Total shareholders' equity
1,818,715
1,667,835
Total liabilities and shareholders'
equity
$
3,999,790
$
3,985,797
Maximus, Inc.
Consolidated Statements of
Cash Flows
(Unaudited)
For the Three Months Ended
For the Nine Months Ended
June 30, 2024
June 30, 2023
June 30, 2024
June 30, 2023
(in thousands)
Cash flows from operating activities:
Net income
$
89,752
$
30,863
$
234,410
$
102,646
Adjustments to reconcile net income to
cash flows from operations:
Depreciation and amortization of property,
equipment, and capitalized software
7,530
10,771
24,146
37,092
Amortization of intangible assets
23,542
23,431
68,532
70,599
Amortization of debt issuance costs and
debt discount
1,697
601
2,899
2,236
Deferred income taxes
4,545
3,743
(3,770
)
2,375
Stock compensation expense
9,481
8,296
27,605
22,239
Loss on sale of businesses
—
—
1,018
883
Change in assets and liabilities, net of
effects of business combinations:
Accounts receivable
65,857
(54,854
)
(26,528
)
7,675
Prepaid expenses and other current
assets
(616
)
7,689
19,316
21,101
Deferred contract costs
(4,777
)
1,662
(8,377
)
2,245
Accounts payable and accrued
liabilities
4,642
23,276
(1,659
)
16,915
Accrued compensation and benefits
(10,487
)
(17,390
)
(21,043
)
(31,612
)
Deferred revenue
7,374
(13,400
)
18,079
(31,747
)
Income taxes
(2,734
)
(26,608
)
10,576
(33,186
)
Operating lease right-of-use assets and
liabilities
(1,746
)
(1,670
)
(2,131
)
(3,742
)
Other assets and liabilities
5,268
(1,696
)
8,351
(15,968
)
Net cash provided by/(used in) operating
activities
199,328
(5,286
)
351,424
169,751
Cash flows from investing activities:
Purchases of property and equipment and
capitalized software
(34,690
)
(25,112
)
(82,237
)
(58,863
)
Asset acquisition
—
—
(18,006
)
—
Proceeds from divestitures
—
—
3,078
9,124
Net cash used in investing activities
(34,690
)
(25,112
)
(97,165
)
(49,739
)
Cash flows from financing activities:
Cash dividends paid to Maximus
shareholders
(18,239
)
(17,020
)
(54,847
)
(51,053
)
Purchases of Maximus common stock
(47,275
)
—
(47,275
)
—
Tax withholding related to RSU vesting
—
—
(13,455
)
(8,475
)
Payments for contingent consideration
(2,809
)
(2,621
)
(10,977
)
(6,662
)
Payments for debt financing costs
(9,724
)
—
(9,724
)
—
Proceeds from borrowings
426,757
220,000
850,166
682,398
Principal payments for debt
(488,038
)
(200,054
)
(952,825
)
(730,514
)
Cash-collateralized escrow liabilities
3,996
2,517
9,118
(54,543
)
Net cash provided by/(used in) financing
activities
(135,332
)
2,822
(229,819
)
(168,849
)
Effect of exchange rate changes on cash,
cash equivalents, and restricted cash
155
549
1,270
3,735
Net change in cash, cash equivalents, and
restricted cash
29,461
(27,027
)
25,710
(45,102
)
Cash, cash equivalents, and restricted
cash, beginning of period
118,340
118,720
122,091
136,795
Cash, cash equivalents, and restricted
cash, end of period
$
147,801
$
91,693
$
147,801
$
91,693
Maximus, Inc.
Consolidated Results of
Operations by Segment
(Unaudited)
For the Three Months Ended
For the Nine Months Ended
June 30, 2024
June 30, 2023
June 30, 2024
June 30, 2023
Amount
% (1)
Amount
% (1)
Amount
% (1)
Amount
% (1)
(dollars in thousands)
Revenue:
U.S. Federal Services
$
683,347
$
583,960
$
2,062,127
$
1,786,202
U.S. Services
472,298
449,061
1,448,258
1,338,242
Outside the U.S.
159,284
155,656
479,942
520,331
Revenue
$
1,314,929
$
1,188,677
$
3,990,327
$
3,644,775
Gross
profit:
U.S. Federal Services
$
186,075
27.2
%
$
156,945
26.9
%
$
506,074
24.5
%
$
402,513
22.5
%
U.S. Services
121,012
25.6
%
98,538
21.9
%
369,497
25.5
%
268,152
20.0
%
Outside the U.S.
25,227
15.8
%
8,881
5.7
%
74,386
15.5
%
67,049
12.9
%
Gross profit
$
332,314
25.3
%
$
264,364
22.2
%
$
949,957
23.8
%
$
737,714
20.2
%
Selling, general,
and administrative expenses:
U.S. Federal Services
$
79,949
11.7
%
$
82,892
14.2
%
$
247,671
12.0
%
$
229,591
12.9
%
U.S. Services
59,531
12.6
%
51,536
11.5
%
174,032
12.0
%
140,793
10.5
%
Outside the U.S.
26,647
16.7
%
24,122
15.5
%
75,249
15.7
%
75,936
14.6
%
Divestiture-related charges (2)
—
NM
—
NM
1,018
NM
883
NM
Other (3)
906
NM
23,995
NM
6,712
NM
24,242
NM
Selling, general, and administrative
expenses
$
167,033
12.7
%
$
182,545
15.4
%
$
504,682
12.6
%
$
471,445
12.9
%
Operating
income/(loss):
U.S. Federal Services
$
106,126
15.5
%
$
74,053
12.7
%
$
258,403
12.5
%
$
172,922
9.7
%
U.S. Services
61,481
13.0
%
47,002
10.5
%
195,465
13.5
%
127,359
9.5
%
Outside the U.S.
(1,420
)
(0.9
)%
(15,241
)
(9.8
)%
(863
)
(0.2
)%
(8,887
)
(1.7
)%
Amortization of intangible assets
(23,542
)
NM
(23,431
)
NM
(68,532
)
NM
(70,599
)
NM
Divestiture-related charges (2)
—
NM
—
NM
(1,018
)
NM
(883
)
NM
Other (3)
(906
)
NM
(23,995
)
NM
(6,712
)
NM
(24,242
)
NM
Operating income
$
141,739
10.8
%
$
58,388
4.9
%
$
376,743
9.4
%
$
195,670
5.4
%
(1)
Percentage of respective segment revenue.
Percentages not considered meaningful are marked "NM."
(2)
We have sold businesses in both fiscal
years 2023 and 2024.
(3)
Other expenses includes credits and costs
that are not allocated to a particular segment. In the three and
nine months ended June 30, 2024, these charges include $0.3 million
and $3.3 million related to the costs of a previously disclosed
cybersecurity incident, respectively, compared to $22.1 million for
the three and nine months ended June 30, 2023. Other charges
include expenses incurred as part of our acquisitions, as well as
potential acquisitions that have not been or may not be
completed.
Maximus, Inc.
Consolidated Free Cash Flows -
Non-GAAP
(Unaudited)
For the Three Months Ended
For the Nine Months Ended
June 30, 2024
June 30, 2023
June 30, 2024
June 30, 2023
(in thousands)
Net cash provided by/(used in) operating
activities
$
199,328
$
(5,286
)
$
351,424
$
169,751
Purchases of property and equipment and
capitalized software
(34,690
)
(25,112
)
(82,237
)
(58,863
)
Free cash flow (Non-GAAP)
$
164,638
$
(30,398
)
$
269,187
$
110,888
Maximus, Inc.
Non-GAAP Adjusted Results
Excluding Amortization of Intangible Assets and Divestiture-Related
Charges
(Unaudited)
For the Three Months Ended
For the Nine Months Ended
June 30, 2024
June 30, 2023
June 30, 2024
June 30, 2023
(dollars in thousands, except per
share data)
Operating income
$
141,739
$
58,388
$
376,743
$
195,670
Add back: Amortization of intangible
assets
23,542
23,431
68,532
70,599
Add back: Divestiture-related charges
—
—
1,018
883
Adjusted operating income excluding
amortization of intangible assets and divestiture-related charges
(Non-GAAP)
$
165,281
$
81,819
$
446,293
$
267,152
Adjusted operating income margin excluding
amortization of intangible assets and divestiture-related charges
(Non-GAAP)
12.6
%
6.9
%
11.2
%
7.3
%
Net income
$
89,752
$
30,863
$
234,410
$
102,646
Add back: Amortization of intangible
assets, net of tax
17,350
17,276
50,508
52,082
Add back: Divestiture-related charges
—
—
1,018
883
Adjusted net income excluding amortization
of intangible assets and divestiture-related charges (Non-GAAP)
$
107,102
$
48,139
$
285,936
$
155,611
Diluted earnings per share
$
1.46
$
0.50
$
3.81
$
1.67
Add back: Effect of amortization of
intangible assets on diluted earnings per share
0.28
0.28
0.82
0.86
Add back: Effect of divestiture-related
charges on diluted earnings per share
—
—
0.02
0.01
Adjusted diluted earnings per share
excluding amortization of intangible assets and divestiture-related
charges (Non-GAAP)
$
1.74
$
0.78
$
4.65
$
2.54
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240807786571/en/
James Francis, VP - IR Jessica Batt, VP - IR & ESG
IR@maximus.com
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