• Organic Revenue Growth: 9% for FY24.
• Adjusted Earnings Per Share (EPS): $6.11 for FY24.
• Free Cash Flow: Over $400 million for FY24.
• Net Leverage Ratio: 1.4 times at the end of FY24.
• US Federal Services Revenue Growth: 13.9% to $2.74 billion for FY24.
• US Federal Services Operating Income Margin: 12.2% for FY24.
• US Services Revenue Growth: 5.5% to $1.91 billion for FY24.
• US Services Operating Income Margin: 12.9% for FY24.
• Outside the US Revenue Decrease: 4.6% to $657 million for FY24.
• Outside the US Operating Income: $8 million for FY24.
• Book-to-Bill Ratio: Approximately 0.4 times for the trailing 12-month period.
• Pipeline: $54.3 billion as of September 30, 2024.
• Debt: $1.15 billion as of September 30, 2024.
• Cash and Cash Equivalents: $183 million as of September 30, 2024.
• Share Repurchase: Approximately 0.9 million shares for $73 million during FY24.
• FY25 Revenue Guidance: $5.275 billion to $5.425 billion.
• FY25 Adjusted EPS Guidance: $5.70 to $6 per share.
• FY25 Adjusted EBITDA Margin Guidance: Approximately 11%.
• FY25 Free Cash Flow Guidance: $345 million to $375 million.

• Warning! GuruFocus has detected 4 Warning Signs with MMS.

Release Date: November 21, 2024

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

Positive Points

• Maximus Inc (NYSE:MMS) reported organic revenue growth of 9% for FY24, with record adjusted earnings per share of $6.11.
• The company secured significant contract wins, including two task orders under the IRS Enterprise Development Operations Services, contributing a total contract value of $128 million.
• Maximus Inc (NYSE:MMS) successfully rebid its California Independent Medical Review project, valued at $120 million over a three-year period.
• The company launched its Global Capability Center, enhancing its ability to deliver and innovate solutions.
• Maximus Inc (NYSE:MMS) achieved a debt ratio reduction to 1.4 times, down from 2.2 times the previous year, demonstrating strong financial management.

Negative Points

• The book-to-bill ratio for the trailing 12-month period was approximately 0.4 times, reflecting a lower-than-normal period of rebid activity.
• Revenue guidance for FY25 is slightly lower than expected, with margins projected to be around 11%, indicating potential challenges in maintaining profitability.
• The company faces uncertainty due to the transition of the new administration, which may impact procurement processes and contract awards.
• Maximus Inc (NYSE:MMS) is involved in a legal dispute over the CMS Contact Center Operations contract, which could affect future revenue streams.
• The outside the US segment experienced a revenue decrease of 4.6%, highlighting challenges in international markets.

Q & A Highlights

Q: Can you provide an update on the CCO contract and any recent developments? A: Bruce Caswell, President and CEO, explained that the GAO upheld their protest on one component, requiring procurement clarification. The administration won't announce an award until March 2025. Maximus is operating under an option year, with six additional option years available. The company maintains its stance against the need for a labor harmony agreement and is pursuing a claim in the Court of Federal Claims.

Q: How did Maximus fare during the last Trump administration, and what are your expectations for Trump 2.0? A: Bruce Caswell noted that during Trump 1.0, there were delays in appointments, slowing procurement processes. However, this is less likely in Trump 2.0 due to more experience and planning. The company benefited from flexibility granted to states to use private contractors, which expanded opportunities. Maximus is now a different company with significant acquisitions, allowing it to engage with more agencies.

Q: Can you explain the revenue guidance and margin expectations for fiscal 2025? A: David Mutryn, CFO, highlighted that fiscal 2024 margins benefited from excess volumes in the US services segment, which won't recur in 2025. The guidance for 2025 reflects backfilling higher-margin revenue with work at normal profitability levels. The adjusted EBITDA margin is expected to be around 11%.

Q: What are the key factors affecting the backlog and book-to-bill ratio? A: David Mutryn explained that the backlog reduction was due to revenue burn and low rebid adjudication. The VA Medical Disability Examination contracts are in recompete, affecting backlog. Bruce Caswell added that the book-to-bill ratio is expected to trend toward 1.0 in FY25 with more normal rebid activity and a strong pipeline.

Q: What should we expect in terms of quarterly cadence for fiscal 2025? A: David Mutryn stated that revenue is expected to be fairly evenly distributed, with higher revenue in Q1 due to seasonality. The adjusted EBITDA margin is expected to be lower in the first half and higher in the second half, showing a trend of earnings growth throughout the year.

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