MMS 10-Q

Maximus, Inc. (MMS)

10-Q 2025-02-06 For: 2024-12-31

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Added on April 10, 2026

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Maximus, Inc.
(Exact name of registrant as specified in its charter)

Virginia						54-1000588
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

1600 Tysons Boulevard, McLean, Virginia						22102
(Address of principal executive offices)						(Zip Code)

(703) 251-8500
(Registrant's telephone number, including the area code)


	SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS	3
Part I - Financial Information		4
Item 1.	Financial Statements	4
	Consolidated Statements of Operations	4
	Consolidated Statements of Comprehensive Income	5
	Consolidated Balance Sheets	6
	Consolidated Statements of Cash Flows	7
	Consolidated Statements of Changes in Shareholders’ Equity	8
	Notes to Consolidated Financial Statements	9
	1. Organization	9
	2. Significant Accounting Policies	9
	3. Business Segments	10
	4. Revenue Recognition	12
	5. Earnings Per Share	14
	6. Divestitures	14
	7. Debt and Derivatives	15
	8. Fair Value Measurements	16
	9. Equity	17
	10. Other Balance Sheet Items	18
	11. Commitments and Contingencies	19
	12. Subsequent Event	20
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	21
	Business Overview	21
	Financial Overview	22
	Results of Operations	22
	Liquidity and Capital Resources	26
	Critical Accounting Policies and Estimates	29
	Non-GAAP and Other Measures	30
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	32
Part II - Other Information		33
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 3.	Defaults Upon Senior Securities	33
Item 4.	Mine Safety Disclosures	33
Item 5.	Other Information	33
Item 6.	Exhibits	34
	Signatures	35


	For the Three Months Ended
	December 31, 2024		December 31, 2023
	(in thousands, except per share amounts)
Revenue	$	1,402,675	$	1,327,041
Cost of revenue	1,101,118		1,026,987
Gross profit	301,557		300,054
Selling, general, and administrative expenses	191,735		169,195
Amortization of intangible assets	23,035		23,349
Operating income	86,787		107,510
Interest expense	17,522		21,507
Other expense, net	312		488
Income before income taxes	68,953		85,515
Provision for income taxes	27,757		21,367
Net income	$	41,196	$	64,148

Earnings per share:
Basic	$	0.69	$	1.05
Diluted	$	0.69	$	1.04
Weighted average shares outstanding:
Basic	59,733		61,322
Diluted	60,002		61,535

Dividends declared per share	$	0.30	$	0.30


	For the Three Months Ended
	December 31, 2024		December 31, 2023
	(in thousands)
Net income	$	41,196	$	64,148
Other comprehensive income, net of tax:
Foreign currency translation adjustments	10,452		5,912
Net gains/(losses) on cash flow hedges, net of tax provision/(benefit) of $876 and $(3,169), respectively	2,454		(8,885)
Other comprehensive income/(loss)	12,906		(2,973)
Comprehensive income	$	54,102	$	61,175


	December 31, 2024		September 30, 2024
	(unaudited)
	(in thousands)
Assets:
Cash and cash equivalents	$	72,653	$	183,123
Accounts receivable, net	962,650		879,514
Income taxes receivable	1,384		5,282
Prepaid expenses and other current assets	128,691		132,625
Total current assets	1,165,378		1,200,544
Property and equipment, net	37,905		38,977
Capitalized software, net	200,070		187,677
Operating lease right-of-use assets	118,749		133,594
Goodwill	1,779,682		1,782,871
Intangible assets, net	607,033		630,569
Deferred contract costs, net	58,863		59,432
Deferred compensation plan assets	55,579		55,913
Deferred income taxes	12,259		14,801
Other assets	23,242		27,130
Total assets	$	4,058,760	$	4,131,508
Liabilities and Shareholders' Equity:
Liabilities:
Accounts payable and accrued liabilities	$	286,359	$	303,321
Accrued compensation and benefits	119,869		237,121
Deferred revenue, current portion	78,165		83,238
Income taxes payable	36,504		26,535
Long-term debt, current portion	34,945		40,139
Operating lease liabilities, current portion	38,013		47,656
Other current liabilities	85,070		69,519
Total current liabilities	678,925		807,529
Deferred revenue, non-current portion	40,366		45,077
Deferred income taxes	172,548		169,118
Long-term debt, non-current portion	1,353,217		1,091,954
Deferred compensation plan liabilities, non-current portion	58,781		57,599
Operating lease liabilities, non-current portion	89,743		97,221
Other liabilities	18,331		20,195
Total liabilities	2,411,911		2,288,693
Commitments and contingencies (Note 11)
Shareholders' equity:
Common stock, no par value; 100,000 shares authorized; 57,286 and 60,352 shares issued and outstanding as of December 31, 2024 and September 30, 2024, respectively	603,252		598,304
Accumulated other comprehensive loss	(19,554)		(32,460)
Retained earnings	1,063,151		1,276,971
Total shareholders' equity	1,646,849		1,842,815
Total liabilities and shareholders' equity	$	4,058,760	$	4,131,508


	Common Stock			Accumulated Other Comprehensive Loss		Retained Earnings		Total Equity
	Shares	Amount
	(in thousands)
Balance at September 30, 2024	60,352	$	598,304	$	(32,460)	$	1,276,971	$	1,842,815
Net income	—	—		—		41,196		41,196
Foreign currency translation	—	—		10,452		—		10,452
Cash flow hedge, net of tax	—	—		2,454		—		2,454
Cash dividends	—	—		—		(18,060)		(18,060)
Dividends on RSUs	—	301		—		(301)		—
Purchases of Maximus common stock	(3,113)	—		—		(236,655)		(236,655)
Stock compensation expense	—	6,952		—		—		6,952
Tax withholding adjustment related to RSU vesting	—	(2,305)		—		—		(2,305)
RSUs vested	47	—		—		—		—
Balance as of December 31, 2024	57,286	$	603,252	$	(19,554)	$	1,063,151	$	1,646,849

	Common Stock			Accumulated Other Comprehensive Loss		Retained Earnings		Total Equity
	Shares	Amount
	(in thousands)
Balance at September 30, 2023	60,998	$	577,898	$	(27,615)	$	1,117,552	$	1,667,835
Net income	—	—		—		64,148		64,148
Foreign currency translation	—	—		5,912		—		5,912
Cash flow hedge, net of tax	—	—		(8,885)		—		(8,885)
Cash dividends	—	—		—		(18,299)		(18,299)
Dividends on RSUs	—	285		—		(285)		—

Stock compensation expense	—	9,427		—		—		9,427
Tax withholding adjustment related to RSU vesting	—	(2,332)		—		—		(2,332)
RSUs vested	33	—		—		—		—
Balance as of December 31, 2023	61,031	$	585,278	$	(30,588)	$	1,163,116	$	1,717,806


Table 3.1: Results of Operations by Business Segment
	For the Three Months Ended
	December 31, 2024				December 31, 2023
	Amount		% (1)		Amount		% (1)
	(dollars in thousands)
Revenue:
U.S. Federal Services	$	780,655			$	677,078
U.S. Services	452,250				489,845
Outside the U.S.	169,770				160,118
Revenue	$	1,402,675			$	1,327,041
Gross profit:
U.S. Federal Services	$	173,315	22.2	%	$	156,662	23.1	%
U.S. Services	95,004		21.0	%	118,363		24.2	%
Outside the U.S.	33,238		19.6	%	25,029		15.6	%
Gross profit	$	301,557	21.5	%	$	300,054	22.6	%
Selling, general, and administrative expenses:
U.S. Federal Services	$	74,215	9.5	%	$	87,855	13.0	%
U.S. Services	54,158		12.0	%	52,300		10.7	%
Outside the U.S.	25,118		14.8	%	25,141		15.7	%
Divestiture-related charges (2)	38,341		NM		1,018		NM
Other (3)	(97)		NM		2,881		NM
Selling, general, and administrative expenses	$	191,735	13.7	%	$	169,195	12.7	%
Operating income/(loss):
U.S. Federal Services	$	99,100	12.7	%	$	68,807	10.2	%
U.S. Services	40,846		9.0	%	66,063		13.5	%
Outside the U.S.	8,120		4.8	%	(112)		(0.1)	%
Amortization of intangible assets	(23,035)		NM		(23,349)		NM
Divestiture-related charges (2)	(38,341)		NM		(1,018)		NM
Other (3)	97		NM		(2,881)		NM
Operating income	$	86,787	6.2	%	$	107,510	8.1	%


Table 4.1: Revenue by Service Type
	For the Three Months Ended
	December 31, 2024				December 31, 2023
	(dollars in thousands)
Program Operations	$	727,967	51.9	%	$	687,370	51.8	%
Clinical Services	471,526		33.6	%	428,369		32.3	%
Employment & Other	113,618		8.1	%	118,288		8.9	%
Technology Solutions	89,564		6.4	%	93,014		7.0	%
Total revenue	$	1,402,675			$	1,327,041


Table 4.2: Revenue by Contract Type
	For the Three Months Ended
	December 31, 2024				December 31, 2023
	(dollars in thousands)
Performance-based	$	717,771	51.2	%	$	704,711	53.1	%
Cost-plus	384,427		27.4	%	342,015		25.8	%
Fixed price	174,679		12.5	%	176,677		13.3	%
Time and materials	125,798		9.0	%	103,638		7.8	%
Total revenue	$	1,402,675			$	1,327,041


Table 4.3: Revenue by Customer Type
	For the Three Months Ended
	December 31, 2024				December 31, 2023
	(dollars in thousands)
New York state government agencies	$	161,695	11.5	%	$	160,534	12.1	%
Other U.S. state government agencies	291,067		20.8	%	326,409		24.6	%
Total U.S. state government agencies	452,762				486,943
U.S. federal government agencies	764,437		54.5	%	662,946		50.0	%
International government agencies	166,866		11.9	%	155,612		11.7	%
Other, including local municipalities and commercial customers	18,610		1.3	%	21,540		1.6	%
Total revenue	$	1,402,675			$	1,327,041


Table 5: Weighted Average Number of Shares - Earnings Per Share
	For the Three Months Ended
	December 31, 2024	December 31, 2023
	(in thousands)
Basic weighted average shares outstanding	59,733	61,322
Dilutive effect of unvested RSUs and PSUs	269	213
Denominator for diluted earnings per share	60,002	61,535


Table 7.1: Details of Debt
	December 31, 2024		September 30, 2024
	(in thousands)
Term Loan A (TLA)	$	633,750	$	641,875
Term Loan B (TLB)	497,500		498,750
Revolver	270,000		—
Subsidiary loan agreements	—		5,194
Total debt principal	1,401,250		1,145,819
Less: Unamortized debt-issuance costs and discounts	(13,088)		(13,726)
Total debt	1,388,162		1,132,093
Less: Current portion of long-term debt	(34,945)		(40,139)
Long-term debt	$	1,353,217	$	1,091,954


Table 7.2: Details of Future Minimum Principal Payments Due
	Amount Due
	(in thousands)
January 1, 2025 through September 30, 2025	$	28,125
Year ended September 30, 2026	41,563
Year ended September 30, 2027	53,750
Year ended September 30, 2028	57,812
Year ended September 30, 2029	746,250
Years ended thereafter	473,750
Total payments	$	1,401,250


Table 8.1: Fair Value Measurements
	As of December 31, 2024
	Level 1		Level 2		Level 3		Balance
	(in thousands)
Assets:
Deferred compensation assets - Rabbi Trust	$	34,832	$	—	$	—	$	34,832
Interest rate swaps - $450 million notional value	—		13,388		—		13,388

Total assets	$	34,832	$	13,388	$	—	$	48,220
Liabilities:
Interest rate swaps - $200 million notional value	$	—	$	880	$	—	$	880
Indemnification liability	—		—		9,710		9,710
Total liabilities	$	—	$	880	$	9,710	$	10,590


Table 8.2: Details of Changes in Accumulated Other Comprehensive Loss by Category
	Foreign currency translation adjustment		Net unrealized gain on derivatives, net of tax		Total
	(in thousands)
Balance as of September 30, 2024	$	(39,225)	$	6,765	$	(32,460)
Other comprehensive income before reclassifications	(10,820)		4,912		(5,908)
Amounts reclassified from accumulated other comprehensive loss	21,272		(2,458)		18,814
Net current period other comprehensive losses	10,452		2,454		12,906
Balance as of December 31, 2024	$	(28,773)	$	9,219	$	(19,554)


Table MD&A 10: Consolidated Net Total Leverage Ratio
	For the Trailing Twelve Months Ended
	December 31, 2024
	(in thousands, except ratio data)
Funded Debt (as defined by our Credit Agreement)	$	1,401,250
Cash and cash equivalents up to $150 million	72,653
Consolidated Net Total Leverage (as defined by our Credit Agreement)	$	1,328,597

Consolidated Net Total Leverage Ratio (as defined by our Credit Agreement)	1.81


Table MD&A 11: Consolidated Net Interest Coverage Ratio
	For the Trailing Twelve Months Ended
	December 31, 2024
	(in thousands, except ratio data)
Consolidated EBITDA (as defined by our Credit Agreement)	$	732,431

Interest expense	78,455
Components of other income/expense, net allowed in ratio calculation	2,843

Consolidated Net Interest Expense (as defined by our Credit Agreement)	$	81,298

Consolidated Net Interest Coverage Ratio (as defined by our Credit Agreement)	9.01


Common Stock Repurchase Activity During the Three Months Ended December 31, 2024
Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of the Publicly Announced Plans or Programs (1)	Maximum Dollar Value that May Yet Be Purchased Under the Plans or Programs (in thousands)

October 1, 2024 - October 31, 2024	55,688	$	86.87	55,688	$	166,592
November 1, 2024 - November 30, 2024	1,020,625	$	77.44	1,020,625	$	87,560
December 1, 2024 - December 31, 2024	2,036,826	$	73.46	2,036,826	$	137,934
Total	3,113,139	$	75.00	3,113,139



v			Filed herewith.
Φ			Furnished herewith.


Table 10.1: Details of Cash and Cash Equivalents and Restricted Cash
	December 31, 2024		September 30, 2024
	(in thousands)
Cash and cash equivalents	$	72,653	$	183,123
Restricted cash	50,217		52,640
Cash, cash equivalents, and restricted cash	$	122,870	$	235,763


Table 10.2: Supplemental Disclosures of Cash Flow Information
	For the Three Months Ended
	December 31, 2024		December 31, 2023
	(in thousands)
Interest payments	$	17,559	$	20,522
Income tax payments/(refunds), net	$	12,418	$	(588)


Table 10.3: Details of Accounts Receivable, Net
	December 31, 2024		September 30, 2024
	(in thousands)
Billed and billable receivables	$	672,288	$	734,817
Unbilled receivables	295,025		149,488
Allowance for credit losses	(4,663)		(4,791)
Accounts receivable, net	$	962,650	$	879,514


Table MD&A 1: Consolidated Results of Operations
	For the Three Months Ended
	December 31, 2024			December 31, 2023
	(dollars in thousands, except per share data)
Revenue	$	1,402,675		$	1,327,041
Cost of revenue	1,101,118			1,026,987
Gross profit	301,557			300,054
Gross profit percentage	21.5		%	22.6		%
Selling, general, and administrative expenses	191,735			169,195
Selling, general, and administrative expenses as a percentage of revenue	13.7		%	12.7		%
Amortization of intangible assets	23,035			23,349
Operating income	86,787			107,510
Operating margin	6.2		%	8.1		%
Interest expense	17,522			21,507
Other expense, net	312			488
Income before income taxes	68,953			85,515
Provision for income taxes	27,757			21,367
Effective tax rate	40.3		%	25.0		%
Net income	$	41,196		$	64,148
Earnings per share:
Basic	$	0.69		$	1.05
Diluted	$	0.69		$	1.04


Table MD&A 2: Changes in Revenue, Cost of Revenue, and Gross Profit for the Three Months Ended December 31, 2024
	Revenue				Cost of Revenue				Gross Profit
	Dollars		% Change		Dollars		% Change		Dollars		% Change
	(dollars in thousands)
Three months ended December 31, 2023	$	1,327,041			$	1,026,987			$	300,054
Organic effect	83,088		6.3	%	82,156		8.0	%	932		0.3	%
Disposal of businesses	(10,896)		(0.8)	%	(10,866)		(1.1)	%	(30)		—	%

Currency effect compared to the prior period	3,442		0.3	%	2,841		0.3	%	601		0.2	%
Three months ended December 31, 2024	$	1,402,675	5.7	%	$	1,101,118	7.2	%	$	301,557	0.5	%


Table MD&A 3: U.S. Federal Services Segment - Financial Results
	For the Three Months Ended
	December 31, 2024		December 31, 2023
	(dollars in thousands)
Revenue	$	780,655	$	677,078
Cost of revenue	607,340		520,416
Gross profit	173,315		156,662
Selling, general, and administrative expenses	74,215		87,855
Operating income	99,100		68,807
Gross profit percentage	22.2 %		23.1 %
Operating margin percentage	12.7 %		10.2 %


Table MD&A 4: U.S. Services Segment - Financial Results
	For the Three Months Ended
	December 31, 2024		December 31, 2023
	(dollars in thousands)
Revenue	$	452,250	$	489,845
Cost of revenue	357,246		371,482
Gross profit	95,004		118,363
Selling, general, and administrative expenses	54,158		52,300
Operating income	40,846		66,063
Gross profit percentage	21.0 %		24.2 %
Operating margin percentage	9.0 %		13.5 %


Table MD&A 5: Outside the U.S. Segment - Financial Results
	For the Three Months Ended
	December 31, 2024		December 31, 2023
	(dollars in thousands)
Revenue	$	169,770	$	160,118
Cost of revenue	136,532		135,089
Gross profit	33,238		25,029
Selling, general, and administrative expenses	25,118		25,141
Operating income/(loss)	8,120		(112)
Gross profit percentage	19.6 %		15.6 %
Operating margin percentage	4.8 %		(0.1) %


Table MD&A 6: Outside the U.S. Segment - Changes in Revenue, Cost of Revenue, and Gross Profit
	Revenue				Cost of Revenue				Gross Profit
	Amount		% Change		Amount		% Change		Amount		% Change
	(dollars in thousands)
Three months Ended December 31, 2023	$	160,118			$	135,089			$	25,029
Organic effect	17,106		10.7	%	9,468		7.0	%	7,638		30.5	%
Disposal of businesses	(10,896)		(6.8)	%	(10,866)		(8.0)	%	(30)		(0.1)	%

Currency effect compared to the prior period	3,442		2.1	%	2,841		2.1	%	601		2.4	%
Three months ended December 31, 2024	$	169,770	6.0	%	$	136,532	1.1	%	$	33,238	32.8	%


Table MD&A 7: Debt Balances and Interest Rates as of December 31, 2024
	December 31, 2024
	Carrying value		Effective cash interest rate		Interest rate basis
	(dollars in thousands)
Term Loan A - Hedged through May 2026	$	500,000	3.81	%	Fixed rate of 2.31% plus margin. (1)
Term Loan A - Unhedged	133,750		5.86	%	Term SOFR reset monthly plus margin. (1)
Term Loan B - Hedged through September 2026	75,000		5.72	%	Fixed Rate of 3.72% plus margin. (1)
Term Loan B - Hedged through September 2025	75,000		6.09	%	Fixed Rate of 4.09% plus margin. (1)
Term Loan B - Unhedged	347,500		6.36	%	Term SOFR reset monthly plus margin. (1)
Revolver	270,000		5.82	%	Term SOFR reset monthly plus margin. (1)

Debt Principal	$	1,401,250


Table MD&A 8: Net Change in Cash and Cash Equivalents and Restricted Cash
	For the Three Months Ended
	December 31, 2024		December 31, 2023
	(in thousands)
Operating activities:
Net cash (used in)/provided by operating activities	$	(79,996)	$	21,608
Net cash used in investing activities	(22,256)		(20,432)
Net cash (used in)/provided by financing activities	(8,257)		28,382
Effect of foreign exchange rates on cash and cash equivalents and restricted cash	(2,384)		1,846
Net change in cash and cash equivalents and restricted cash	$	(112,893)	$	31,404


Table MD&A 9: Reconciliation of Net Income to Consolidated EBITDA as defined by our Credit Agreement
	For the Three Months Ended		For the Trailing Twelve Months Ended
	December 31, 2024		December 31, 2024
	(in thousands)
Net income	$	41,196	$	283,962
Adjustments:
Interest expense	17,522		78,455
Other expense/(income), net	312		(625)
Provision for income taxes	27,757		105,985
Amortization of intangibles	23,035		91,256
Stock compensation expense	6,952		32,874
Acquisition-related expenses	121		1,615

Loss on sale of businesses	38,341		38,341

Depreciation and amortization of property, equipment, and capitalized software	8,455		34,001
Pro forma and other adjustments permitted by our Credit Agreement	4,059		66,567
Consolidated EBITDA (as defined by our Credit Agreement)	$	167,750	$	732,431


Table MD&A 12: Free Cash Flow (Non-GAAP)
	For the Three Months Ended
	December 31, 2024		December 31, 2023
	(in thousands)
Net cash (used in)/provided by in operating activities	$	(79,996)	$	21,608
Purchases of property and equipment and capitalized software	(22,992)		(22,247)
Free cash flow (Non-GAAP)	$	(102,988)	$	(639)


Table MD&A 13: Non-GAAP Adjusted Results - Operating Income, Adjusted EBITDA, Net Income, and Diluted Earnings per Share
	For the Three Months Ended
	December 31, 2024			December 31, 2023
	(dollars in thousands, except per share data)
Operating income	$	86,787		$	107,510
Add back: Amortization of intangible assets	23,035			23,349
Add back: Divestiture-related charges	38,341			1,018



Add back: Depreciation and amortization of property, equipment, and capitalized software	8,455			8,411
Adjusted EBITDA (Non-GAAP)	$	156,618		$	140,288
Adjusted EBITDA margin (Non-GAAP)	11.2		%	10.6		%

Net income	$	41,196		$	64,148
Add back: Amortization of intangible assets, net of tax	16,977			17,208
Add back: Divestiture-related charges	38,341			1,018
Adjusted net income excluding amortization of intangible assets and divestiture-related charges (Non-GAAP)	$	96,514		$	82,374

Diluted earnings per share	$	0.69		$	1.04
Add back: Effect of amortization of intangible assets on diluted earnings per share	0.28			0.28
Add back: Effect of divestiture-related charges on diluted earnings per share	0.64			0.02
Adjusted diluted earnings per share excluding amortization of intangible assets and divestiture-related charges (Non-GAAP)	$	1.61		$	1.34


Maximus, Inc.

	/s/ Bruce L. Caswell	February 6, 2025
By:	Bruce L. Caswell
	President and Chief Executive Officer
	(Principal Executive Officer)

	/s/ David W. Mutryn	February 6, 2025
By:	David W. Mutryn
	Chief Financial Officer
	(Principal Financial Officer)