Maximus Reports Record Earnings Amid Growth Challenges

Maximus ((MMS)) has held its Q3 earnings call. Read on for the main highlights of the call.

The recent earnings call for Maximus showcased a positive sentiment, driven by record earnings and robust revenue growth, particularly in the U.S. Federal Services segment. Despite facing challenges such as cash flow issues due to payment delays and a decrease in U.S. Services segment revenue, the overall tone remained optimistic, buoyed by strong financial performance and upward guidance revisions.

Record-Breaking Earnings

Maximus reported adjusted diluted earnings per share of $2.16, marking a 24% increase year-over-year. The company also saw a 15% growth in adjusted EBITDA, underscoring its strong financial performance this quarter.

Strong Revenue Growth

The company achieved a Q3 revenue of $1.35 billion, reflecting a 4.3% organic growth compared to the previous year. This growth highlights Maximus’ ability to expand its business despite challenging market conditions.

U.S. Federal Services Segment Performance

Revenue in the U.S. Federal Services segment increased by 11.4% to $761 million, with an operating income margin reaching a new high of 18.1%. This segment’s performance was a significant contributor to the company’s overall success.

Significant Contract Wins

Maximus secured a $77 million contract with the U.S. Air Force Life Cycle Management Center to provide cybersecurity and cloud-based services, demonstrating its competitive edge and ability to win substantial contracts.

Guidance Raise

The company raised its revenue guidance by $100 million, now ranging from $5.375 billion to $5.475 billion. Additionally, the adjusted EPS guidance was increased by $1, now expected to be between $7.35 and $7.55 per share, reflecting confidence in future performance.

Debt Collection Progress

Maximus collected over $300 million related to a major U.S. federal program in July, which improved cash flow expectations and demonstrated effective debt management.

Decrease in U.S. Services Segment Revenue

Revenue in the U.S. Services segment decreased to $440 million from $472 million in the prior year period, primarily due to the completion of Medicaid unwinding volumes, indicating a challenge in maintaining segment growth.

Cash Flow Challenges

The company faced a net outflow of $183 million in cash provided by operating activities due to payment delays, resulting in a days sales outstanding (DSO) of 96 days, highlighting a significant cash flow challenge.

Outside U.S. Segment Performance

The outside U.S. segment reported an operating income margin of 4.0%, reflecting ongoing challenges in achieving higher profitability in international markets.

Potential Budget Constraints

Maximus noted that federal and state budget constraints could pose headwinds for fiscal year 2026, potentially affecting revenue growth and necessitating strategic adjustments.

Forward-Looking Guidance

Maximus provided an optimistic outlook for the future, emphasizing its strategic positioning to capitalize on new legislative changes, such as the “One Big Beautiful Bill Act,” which could enhance opportunities in Medicaid and SNAP programs. The company’s strategy focuses on adaptability to policy changes and leveraging existing infrastructure to deliver efficient outcomes.

In conclusion, Maximus’ earnings call reflected a positive sentiment, driven by record earnings and strong revenue growth. While challenges such as cash flow issues and potential budget constraints were acknowledged, the company’s strategic initiatives and upward guidance revisions suggest a promising outlook for the future.