Maximus (MMS) 8 Aug 24 2024 Q3 Earnings call transcript

Maximus, a leading provider of government services, recently held its Fiscal 2024 Third Quarter Earnings Conference Call, revealing a solid financial performance and strategic wins that position the company for continued growth. The call, led by Bruce Caswell, President and CEO, David Mutryn, CFO, and Jessica Batt, Vice President of Investor Relations, provided insights into Maximus' operational and financial health, highlighting a strong focus on strategic initiatives and a positive outlook for the future.

Financial Highlights and Strategic Initiatives

Maximus reported a significant year-over-year growth of 10.6%, or 11.2% on an organic basis, with all three segments posting positive organic growth. The company's largest segment, U.S. Federal Services, drove the growth, with a 17.0% increase in revenue, largely attributed to volume growth in expanded clinical programs. This segment also showed a higher margin due to a favorable mix of lower cost plus revenue and higher performance-based revenue.

The U.S. Services segment, which includes Medicaid-related programs, also saw a 5.2% increase in revenue, largely driven by strong performance across the portfolio and excess volumes from the unwinding exercise. The Outside the U.S. segment, while facing challenges, is expected to return to breakeven by the end of fiscal year 2024.

Cash flow and balance sheet items showed strength, with $199 million in cash provided by operating activities and free cash flow of $165 million. The company also extended the maturity dates of its credit agreement, providing capacity and flexibility for future capital allocation.

Strategic Wins and Expansion

Maximus highlighted several strategic wins, including the award of the first task order under the IRS Enterprise Development Operations Services (EDOS) Blanket Purchase Agreement (BPA), valued at $87 million over a 5-year period. The company also won the rebid of its Independent Enrollment Broker contract in the Commonwealth of Pennsylvania, valued at $263 million over 5 years. These wins demonstrate Maximus' commitment to expanding its technology modernization services and digitally enabled customer services.

Outlook and Guidance

Looking ahead, Maximus raised its guidance for the third time this year, reflecting strong momentum and confidence in its financial health. Revenue is now projected to be between $5.25 billion and $5.35 billion for fiscal year 2024, an increase of $175 million from initial guidance in November 2023. The company also expects to achieve a net debt-to-EBITDA ratio of 1.5x by the end of fiscal year 2024, one quarter ahead of schedule.

Conclusion

Maximus' exceptional third quarter results, strategic wins, and positive outlook underscore its position as a leading provider of government services. With a focus on strategic initiatives, financial strength, and a solid pipeline of opportunities, Maximus is well-positioned for continued growth and success in the coming years.