Maximus (MMS) Q1 2025 earnings summary

Executive summary

• Revenue grew 5.7% year-over-year to $1.40 billion in Q1, led by U.S. Federal Services and strong organic growth Outside the U.S., while U.S. Services declined due to prior year Medicaid volumes and divestitures.

• Adjusted diluted EPS rose to $1.61 from $1.34, while reported EPS was $0.69, impacted by $38 million in divestiture-related charges; net income declined to $41.2 million.

• Completed divestitures in Australia and South Korea, reducing volatility and improving profitability in the Outside the U.S. segment.

• Repurchased 3.1 million shares for $237 million in Q1, with $290 million deployed since October 2024 and $85 million remaining under current authorization.

• Secured major contract wins, including a $76 million Federal Reserve contact center award and a $123 million Department of Energy IT services contract, and reawarded VA Medical Disability Examination contracts.

Financial highlights

• Adjusted EBITDA margin improved to 11.2% from 10.6%; adjusted EBITDA rose to $156.6 million, while operating margin fell to 6.2% due to divestiture charges.

• Free cash flow was negative $103 million, reflecting seasonal payment timing; cash and cash equivalents at quarter-end were $73 million.

• Net debt-to-EBITDA ratio increased to 1.8x due to share repurchases, with total debt at $1.40 billion.

• Book-to-bill ratio was 1.5x for the quarter, 0.7x trailing twelve months; pipeline at $41.4 billion, with 57% new work and 63% attributed to U.S. Federal Services.

• Gross profit was $301.6 million (21.5% margin), nearly flat year-over-year.

Outlook and guidance

• FY25 revenue guidance raised to $5.2–$5.35 billion, with organic growth rate up 50 basis points.

• Adjusted EBITDA margin guidance increased to ~11.2%; adjusted EPS guidance raised to $5.90–$6.20.

• Free cash flow guidance increased to $355–$385 million.

• Segment margin outlook: U.S. Federal ~11.5%, U.S. Services ~11%, Outside the U.S. 3–5%.

• Full-year tax rate expected at 28–29%, with Q2–Q4 rates normalizing to 25.5–26%.