Maximus (NYSE: MMS) reported fiscal Q3 2026 revenue of $1.28 billion, down about 5.2% from $1.35 billion a year earlier, while GAAP diluted EPS increased 4.8% to $1.95 from $1.86. Efficiency initiatives supported higher margins, but delayed customer collections contributed to negative quarterly free cash flow, and a temporary federal contract modification led Maximus to update its full-year earnings and cash flow outlook.

Core financial results

The revenue decline primarily reflected a difficult comparison in U.S. Federal Services, where the prior-year quarter benefited from elevated natural-disaster response activity and temporary clinical volume surges. Gross profit and operating income also declined, but by less than revenue, allowing both gross and operating margins to improve.

GAAP net income decreased 2.3%, while diluted EPS rose because the weighted-average diluted share count fell about 6.9%. Adjusted diluted EPS also increased, although adjusted EBITDA declined by approximately 3.0%.

Adjusted diluted EPS, adjusted EBITDA and free cash flow are non-GAAP measures. Other figures are GAAP unless otherwise indicated.

Business and segment performance

Revenue declined across all three segments, but profitability trends diverged. U.S. Federal Services and U.S. Services expanded their operating margins, while the Outside the U.S. segment experienced a material margin contraction.

Federal Services benefited from productivity improvements, technology-enabled efficiencies and stable core-program performance. Its revenue decline was largely attributable to the prior-year disaster response and clinical volumes that did not recur at the same level.

U.S. Services continued to improve sequentially during fiscal 2026, according to the company, although revenue remained below the prior-year quarter. Outside the U.S. was the main profitability weak point: changing volumes across clinical and employment-services contracts reduced revenue, while operating income fell to $1.2 million from $5.9 million.

At June 30, 2026, Maximus had $1.25 billion of year-to-date signed contract awards and $1.35 billion of awarded but unsigned contracts. Its sales pipeline totaled $50.4 billion, with new-work opportunities representing approximately 57% and Federal Services accounting for about 55%.

Efficiency protected earnings, but receivables weighed on cash flow

Maximus expanded margins despite lower revenue through efficiency initiatives that included broader use of automation and AI-enabled tools. Selling, general and administrative expenses decreased to $167.2 million from $170.8 million, and intangible-asset amortization declined to $20.2 million from $23.0 million. A lower diluted share count also allowed EPS to increase even though net income declined.

Cash conversion remained the main counterpoint. Operating activities used $125.0 million of cash, largely reflecting a $266.7 million quarterly increase in accounts receivable within the cash flow statement. Free cash outflow improved from the prior year but remained negative at $137.0 million.

Accounts receivable reached $1.38 billion at June 30, up from $898.1 million at the September 2025 fiscal year-end, while days sales outstanding reached 98 days. Maximus said collections from a major federal customer accelerated in July and continued to expect fiscal year-end DSO below 70 days.

Nine-month free cash flow was an outflow of $208.6 million. Based on the full-year guidance, Maximus would need to generate approximately $634 million to $684 million of free cash flow in the fourth quarter to reach its fiscal 2026 target, making customer collection timing particularly important.

Unrestricted cash totaled $57 million and gross debt was $1.65 billion. Net leverage was 2.0 times trailing consolidated EBITDA, up from 1.8 times at March 31 but still within the company’s target range of 2 to 3 times. Maximus also repurchased approximately 0.75 million shares for $50.4 million during the quarter.

Fiscal 2026 guidance

Maximus reiterated its fiscal 2026 revenue range but now expects results toward the lower end. Earnings and free cash flow guidance were updated to reflect a customer-directed contractual modification affecting a major federal program from July 1 through December 31, 2026.

The company also expects fiscal 2026 interest expense of $88 million and a tax rate of 24.0% to 24.5%.

Management perspective

President and CEO Bruce Caswell attributed the quarter’s earnings performance to disciplined execution and efficiency improvements. Management also reported encouraging demand signals, increased adoption of AI-enabled solutions, growing interest in SNAP-related offerings and opportunities in defense and national security markets.

The immediate operational focus is balancing those longer-term opportunities with the temporary federal contract change and converting the Outside the U.S. sales pipeline into revenue and improved profitability.

Recent insider transactions

The supplied six-month insider summary reports 97,481 shares purchased and 742 shares sold, resulting in net purchases of 96,739 shares. The latest individual records include one open-market sale, several grants and gifts, and a $249,081 purchase by CEO Bruce Caswell.

The $0 reported values relate to awards or gifts and should not be interpreted as open-market transaction prices. Individual transactions alone do not establish an insider’s view of the company’s prospects.

Risks investors should watch

• Federal contract profitability: The temporary modification to a major federal program has already affected fiscal 2026 earnings and margin guidance. Its financial impact is concentrated in Maximus’s largest segment.
• Cash collection timing: DSO of 98 days and negative nine-month free cash flow leave the full-year cash target dependent on substantial fourth-quarter collections.
• Outside the U.S. profitability: The segment’s operating margin fell to 0.9% from 4.0%. Achieving the company’s fiscal 2026 break-even objective depends partly on converting its sales pipeline and improving program performance.
• Continued revenue pressure: All three segments reported year-over-year revenue declines, and management expects full-year consolidated revenue toward the lower end of its unchanged range.

Summary

Maximus’s fiscal Q3 2026 results showed that efficiency measures and a lower share count could support margins and EPS even as revenue declined. The main near-term issues are the profitability impact of the federal contract modification and the conversion of elevated receivables into cash, while segment pipeline conversion and improvement outside the U.S. remain important operating priorities.

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