Maximus (MMS) Q3 2024 earnings summary

Executive summary

• Q3 FY24 revenue grew 10.6% year-over-year to $1.31 billion, with all segments contributing to 11.2% organic growth, led by U.S. Federal Services.

• Net income surged 190.8% to $89.8 million, and adjusted EPS rose to $1.74, reflecting strong execution and recovery from the prior year's cybersecurity incident.

• Operating margin improved to 10.8% (adjusted 12.6%) from 4.9% (adjusted 6.9%) year-over-year.

• All business segments contributed to growth, with U.S. Federal Services and U.S. Services showing strong margin improvements and Outside the U.S. segment returning to near break-even.

• Free cash flow for Q3 was $165 million, and the company remains focused on organic growth, technology modernization, and operational efficiency.

Financial highlights

• Q3 revenue reached $1.31 billion, up 10.6% year-over-year (11.2% organic growth); net income was $89.8 million, and adjusted EPS was $1.74.

• Adjusted operating income margin was 12.6%, and operating margin was 10.8%, both up significantly year-over-year.

• Free cash flow for Q3 was $165 million; cash from operations was $199 million.

• Net debt to EBITDA ratio improved to 1.5x from 1.7x sequentially; total debt at quarter-end was $1.16 billion.

• Days sales outstanding (DSO) at June 30, 2024, was 59 days.

Outlook and guidance

• FY24 revenue guidance raised to $5.25–$5.35 billion, up $100 million at the midpoint from prior guidance.

• Adjusted operating income now expected at $570–$590 million; adjusted EPS at $6.00–$6.20.

• Free cash flow guidance increased to $350–$380 million.

• FY25 revenue expected to be roughly flat with FY24, reflecting normalization after non-recurring overperformance; long-term organic growth target remains mid-single digits.

• Full-year operating margin for U.S. Federal Services expected around 12.5%; U.S. Services at approximately 13%; Outside the U.S. segment to yield slightly above break-even.