• Revenue: $1.40 billion for Q1 FY2025, representing 5.7% year-over-year growth.
• Adjusted EBITDA Margin: 11.2% for the quarter.
• Adjusted EPS: $1.61 for the quarter.
• US Federal Services Revenue: $781 million, a 15.3% increase, all organic.
• US Federal Services Operating Margin: 12.7% for the quarter.
• US Services Revenue: $452 million, a 7.7% decrease.
• US Services Operating Margin: 9.0% for the quarter.
• Outside the US Revenue: $170 million, a 6.0% increase.
• Outside the US Operating Margin: 4.8% for the quarter.
• Free Cash Flow: Outflow of $103 million for the quarter.
• Share Repurchases: Approximately 3.1 million shares for $237 million during the quarter.
• Total Debt: $1.40 billion with a net debt to EBITDA ratio of 1.8 times.
• Updated Revenue Guidance for FY2025: $5.2 billion to $5.35 billion.
• Updated Adjusted EPS Guidance for FY2025: $5.90 to $6.20 per share.
• Updated Free Cash Flow Guidance for FY2025: $355 to $385 million.

• Warning! GuruFocus has detected 2 Warning Signs with MMS.

Release Date: February 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Maximus Inc (NYSE:MMS) reported strong first quarter results with a 5.7% year-over-year revenue growth, primarily driven by the US federal services segment.
• The company successfully secured favorable outcomes on two key rebids, including the CMS contact center operations and VA medical disability examination contracts.
• Maximus Inc (NYSE:MMS) completed the divestiture of its employment services businesses in Australia and South Korea, reducing volatility and improving profitability in the outside the US segment.
• The board of directors authorized an increase of $200 million to the share repurchase program, with $290 million deployed in share repurchases during the quarter.
• The company has a healthy pipeline of sales opportunities, with a total value of $41.4 billion, and is focusing on technology modernization and cost-effective program administration.

Negative Points

• The US services segment experienced a 7.7% revenue decrease, attributed to tough year-over-year comparisons and seasonality impacts.
• The outside the US segment incurred divestiture charges of about $38 million, primarily due to foreign exchange losses related to Australia.
• The company's net debt to EBITDA ratio increased from 1.4 to 1.8 times, primarily due to increased share repurchase activity.
• Maximus Inc (NYSE:MMS) faces potential risks from policy changes and procurement timing, with less than 2% of FY25 revenue coming from new work.
• The company's tax rate guidance increased slightly, with the first quarter rate impacted by non-tax deductible divestiture-related charges.

Q & A Highlights

Q: Bruce Caswell, can you discuss the strength in Q1 and whether there was any pull forward in performance? A: David Mutryn explained that the Q1 overperformance was not a pull forward but rather a result of strong execution. The full-year guidance has been adjusted to reflect this, with a $0.20 increase in earnings guidance. The company maintains a cautious approach, with less than 2% of revenue coming from new work.

Q: Can you talk about your confidence in the guidance and any potential risks? A: David Mutryn stated that confidence remains high, and the company is careful not to lean forward too much in its guidance. The new business assumption is conservative, with less than 2% of revenue from anticipated pipeline conversions, ensuring good visibility.

Q: How is the new administration affecting your portfolio, particularly in areas not tied to durable programs? A: Bruce Caswell noted that any potential impacts would be in small pockets. The company has reviewed its portfolio and believes that core functions will continue even if there are structural changes at the department level. The deal flow remains normal, similar to previous presidential transitions.

Q: Can you elaborate on the Medicaid and state-based exchanges relationship and what you've observed over the last 12 months? A: Bruce Caswell highlighted that there has been a significant increase in health plan selections during open enrollment, indicating a transition from Medicaid to exchanges. Maximus operates state-based exchanges, allowing them to capture this transition. The policy environment remains fluid, with potential changes affecting enrollments.

Q: What is the outlook for the veteran assessment business, and how does the new contract renewal impact it? A: Bruce Caswell and David Mutryn explained that the claims inventory has stabilized, and the company expects steady to modest growth in volumes. The focus remains on improving the veteran experience and handling volumes efficiently, with significant technology investments planned.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.