Maximus Shines in FY 2025 Earnings Call

Maximus ((MMS)) has held its Q4 earnings call. Read on for the main highlights of the call.

Maximus’ latest earnings call revealed a generally positive sentiment, underscored by strong financial performance in FY 2025. The company showcased significant revenue and margin growth, particularly in the U.S. Federal Services segment. Strategic investments in AI and technology, along with expansion in defense and national security, were highlighted as key drivers for future growth. However, challenges persist in the U.S. Services and Outside The U.S. segments, with severance charges affecting margins and anticipated revenue headwinds for FY 2026.

Strong Financial Performance in FY 2025

Maximus reported impressive financial results for FY 2025, with revenue reaching $5.43 billion, reflecting an organic growth rate of 3.9%. The adjusted EBITDA margin improved to 12.9% from 11.6% the previous year, and adjusted EPS saw a 20% increase, rising to $7.36.

Growth in U.S. Federal Services

The U.S. Federal Services segment experienced a remarkable 12.1% revenue increase, totaling $3.07 billion. This growth was driven by high demand in clinical and natural disaster support programs, highlighting the segment’s strength and resilience.

Strong Cash Flow and Debt Reduction

Maximus achieved a free cash flow of $366 million for FY 2025, significantly reducing net leverage to 1.5 times. This financial discipline underscores the company’s commitment to maintaining a strong balance sheet.

Strategic Investments in AI and Technology

The company is heavily investing in AI and automation, with 30 AI-related deployments either planned or in progress. These initiatives are expected to enhance service delivery and operational efficiency, positioning Maximus for future growth.

Expansion in Defense and National Security

Maximus secured a new $86 million contract with the United States Air Force, marking a significant expansion of its technology services within the defense sector. This contract is a testament to the company’s growing influence in national security.

Revenue Decline in U.S. Services Segment

The U.S. Services segment faced a revenue decline, dropping to $1.76 billion from $1.91 billion. This decrease was primarily due to the completion of Medicaid unwinding engagements, presenting a challenge for the segment.

Outside The U.S. Segment Challenges

Revenue in the Outside The U.S. segment decreased, impacted by divestitures. However, this was partially offset by a 4.1% organic growth, although the operating income margin remained at a lower range of 3.7%.

Severance Charges Impacting Margins

The fourth quarter included $16 million in severance charges, which negatively affected operating margins in domestic segments, highlighting a challenge in cost management.

Potential Revenue Headwinds for FY 2026

Maximus anticipates a mild contraction in revenue for FY 2026, with expected headwinds of approximately 3% year-over-year. This is attributed to non-recurring high-volume work in FY 2025, posing a challenge for sustained growth.

Forward-Looking Guidance

Maximus provided robust guidance for FY 2026, projecting revenue between $5.225 billion and $5.425 billion, with an adjusted EBITDA margin expected to reach 13.7%. The company plans significant investments in AI and technology-enabled automation, particularly in the U.S. Federal and defense sectors. Additionally, Maximus aims for a free cash flow between $450 million and $500 million, capitalizing on opportunities from policy changes and expanding its defense and national security footprint.

In summary, Maximus’ earnings call reflected a positive outlook with strong financial performance and strategic initiatives poised to drive future growth. Despite some challenges in specific segments, the company’s focus on AI, technology, and defense expansion positions it well for the coming fiscal year.