Maximus (NYSE: MMS), a leading provider of government services worldwide, reported financial results for the three months and year ended September 30, 2024.

Highlights for the fourth quarter and full fiscal year 2024 include:

• Full year revenue increased 8.2% to $5.31 billion, compared to $4.90 billion for the prior year. Organic growth was 8.8% and driven by higher volumes on key programs in the U.S. segments. Fourth quarter revenue grew 4.4%, or 4.7% on an organic basis.
• Full year diluted earnings per share were $4.99, and adjusted diluted earnings per share were $6.11. Fourth quarter diluted earnings per share were $1.19, and adjusted diluted earnings per share were $1.46.
• Full year cash flows from operating activities totaled $515 million, and free cash flow was $401 million, enabling debt reduction across the year to yield a 1.4x leverage ratio at September 30, 2024, as calculated in accordance with our credit agreement.
• A quarterly cash dividend of $0.30 per share payable on November 30, 2024, to shareholders of record on November 15, 2024.

"We are proud of the team for an excellent finish to a strong year, and one that demonstrates a healthy core business operating within our margin expectations," said Bruce Caswell, President and Chief Executive Officer. "We kick off fiscal 2025 with guidance that blends the momentum of fiscal 2024 with thoughtfulness toward the upcoming U.S. Presidential transition."

Caswell continued, "Our earned position as an efficient and flexible partner to government in the administration of entitlement programs and essential government services perennially supported on a bipartisan basis positions us well to advise, adapt, and rapidly implement new priorities."

Consolidated Fiscal Year 2024 Fourth Quarter and Full Year Results

Revenue for the full fiscal year 2024 increased 8.2% to $5.31 billion, compared to $4.90 billion for the prior year. Organic growth was 8.8% over the prior year. Revenue for the fourth quarter of the fiscal year grew 4.4% to $1.32 billion, or 4.7% on an organic basis. Both periods benefited from volume growth on clinical programs in the U.S. Federal Services Segment. The U.S. Services Segment had a full fiscal year 2024 contribution of Medicaid redetermination activities that have returned to normal levels, plus excess volumes from Medicaid-related support activities that were concluded by the fourth quarter of fiscal year 2024.

For the full fiscal year 2024, the operating margin was 9.2% and the adjusted EBITDA margin was 11.6%. This compares to margins of 6.0% and 9.1%, respectively, for the prior year that reflected ramping volumes on core programs and a partial period contribution from resumed Medicaid-related activities. Adjusted EBITDA margin excludes divestiture-related charges which were not material in either fiscal year.

Earnings per share were $4.99 and adjusted diluted earnings per share were $6.11. This compares to $2.63 and $3.83, respectively, for the prior year. Fourth quarter diluted earnings per share were $1.19, and adjusted diluted earnings per share were $1.46. This compares to $0.96 and $1.29, respectively, for the prior-year period.

U.S. Federal Services Segment

U.S. Federal Services Segment revenue for fiscal year 2024 increased 13.9% to $2.74 billion, compared to $2.40 billion reported for the prior year. All growth was organic and driven primarily by volume growth on clinical programs.

The segment operating margin for the full fiscal year 2024 was 12.2%, as compared to 10.4% reported for the prior year. The segment delivered an 11.1% margin in fourth quarter of fiscal year 2024. Higher demand for services, particularly in clinical services, and a higher mix of performance-based work were drivers of margin enhancement in the segment this year.

U.S. Services Segment

U.S. Services Segment revenue for fiscal year 2024 increased by 5.5% to $1.91 billion, compared to $1.81 billion reported in the prior year. All growth was organic and driven by strong performance across the Medicaid-related portfolio. This included excess volumes from the unwinding exercise, which was concluded by the fourth quarter of this fiscal year.

The segment operating margin for fiscal year 2024 was 12.9%, compared to 10.1% reported in the prior year, and benefited from the strong Medicaid-related performance and the aforementioned excess volumes. The segment delivered an 11.1% margin in fourth quarter of fiscal year 2024 and did not benefit from excess volumes.

Outside the U.S. Segment

Outside the U.S. Segment revenue for fiscal year 2024 decreased 4.6% to $657.1 million as compared to $689.1 million reported for the prior year. Prior-year divestitures reduced revenue by 6.1%, while currency effects provided a 1.7% benefit to revenue growth.

The segment realized an operating profit of $7.7 million for fiscal year 2024, compared to an operating loss of $9.1 million in the prior year. Profitability for the segment this year, including the 4.8% margin in fourth quarter, reflects progress in containing volatile programs that have acted as greater headwinds in prior periods.

Sales, Pipeline, and Backlog

Year-to-date signed contract awards at September 30, 2024, totaled $2.2 billion, and contracts pending (awarded but unsigned) totaled $312 million. The book-to-bill ratio at September 30, 2024, was 0.4x on a trailing twelve-month basis. The lower book-to-bill reflects an anticipated lower-than-normal period of rebid activity. Given circumstances as best known today, the volume of adjudications for both rebids and new work are expected to increase over the next 12 months and result in an improved book-to-bill.

The sales pipeline at September 30, 2024, was $54.3 billion (comprised of approximately $4.22 billion in proposals pending, $7.12 billion in proposals in preparation, and $42.9 billion in opportunities tracking). New work opportunities represent approximately 48% of the total sales pipeline.

Backlog at September 30, 2024, which represents estimated future revenue from existing signed contracts, contracts that have been awarded but not yet signed, and unexercised priced contract options, was estimated to be $16.2 billion. This compares to $20.7 billion at the same point in the prior year. Remaining option periods for the Contact Center Operations (CCO) contract are included in the year-end balance, while the backlog associated with the Veterans Affairs Medical Disability Examination contracts has been reduced to account for the two-year recompete currently in the procurement stage.

Balance Sheet and Cash Flows

At September 30, 2024, cash and cash equivalents totaled $183 million, and gross debt was $1.15 billion. The ratio of debt, net of allowed cash, to consolidated EBITDA for the full year ended September 30, 2024, as calculated in accordance with our credit agreement, was 1.4x. At the same point in the prior year, the ratio was 2.2x, and we remain below our target leverage range of 2x to 3x.

For fiscal year 2024, cash flows from operating activities totaled $515 million, and free cash flow was $401 million. This compares to $314 million and $224 million, respectively, in the prior year. DSO at September 30, 2024, were 61 days, compared with 60 days at the same point in the prior year.

During fiscal year 2024, we purchased approximately 0.9 million shares totaling $73.1 million. Subsequent to September 30, 2024, and through November 19, 2024, we purchased approximately 0.5 million shares totaling $43.2 million. Including the subsequent activity, approximately $128 million remains on the current $200 million Board of Directors authorization granted in June 2024.

On October 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 November 30, 2024, to shareholders of record on November 15, 2024.

Fiscal Year 2025 Outlook

Maximus is establishing fiscal year 2025 guidance. Revenue is expected to range between $5.275 billion and $5.425 billion. An adjusted EBITDA margin, which excludes divestiture-related charges, of approximately 11.0% is anticipated for the full year. Adjusted diluted earnings per share, which excludes expense for amortization of intangible assets and divestiture-related charges, is expected to range between $5.70 and $6.00 per share.

Free cash flow is expected to range between $345 million and $375 million for fiscal year 2025. Forecasted expense of $92 million for amortization of intangible assets, $45 million for depreciation and amortization, and $65 million for interest is anticipated for the full year. An effective income tax rate of approximately 25% and weighted average shares outstanding of about 61 million is expected for fiscal year 2025.

Conference Call and Webcast Information

Maximus will host a conference call tomorrow, November 21, 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-K.

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, 2024, expected to be filed shortly with the Securities and Exchange Commission (SEC). The Company's SEC reports are accessible on maximus.com.

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