Maximus (MMS) Q1 2023 earnings summary

Executive summary

• Q1 FY23 revenue rose 8.5% to $1.249B; organic growth was 10.3%, driven by new or expanded programs across all three segments.

• FY23 revenue and adjusted EPS guidance increased following the scheduled Q3 restart of Medicaid redeterminations.

Financial highlights

• Net income was $40.0M vs. $53.3M YoY; diluted EPS was $0.65 vs. $0.85 and adjusted diluted EPS was $0.94 vs. $1.12.

• Operating income was $74.8M vs. $81.5M; operating margin was 6.0% vs. 7.1%, while adjusted operating margin was 7.9% vs. 9.0%.

• Prior-year results included profitable short-term COVID response work in domestic segments and lower interest expense from a more favorable rate environment.

Outlook and guidance

• FY23 revenue guidance rose to $4.85B–$5.0B from $4.75B–$4.90B; adjusted operating income guidance increased to $415M–$440M from $390M–$415M.

• FY23 adjusted diluted EPS guidance rose to $4.00–$4.30 from $3.70–$4.00; adjusted operating income excludes an estimated $94M of intangible-asset amortization expense.

• Guidance assumes Medicaid redeterminations phase in during Q3 and contribute for a full period in Q4; FY23 free cash flow is expected at $225M–$275M.

• FY23 interest expense is forecast at $85M–$90M, effective tax rate at 24.5%–25.5%, and weighted average shares at 61.2M–61.3M.