EX-99.1 2 mms-2022x12x31x8kxex991.htm EX-99.1

FOR IMMEDIATE RELEASE |  | CONTACT: | James Francis, VP - IR
|  |  | Jessica Batt, VP - IR & ESG
Date: February 8, 2023 |  |  | IR@maximus.com

Maximus Reports Fiscal Year 2023 First Quarter Results
Raises FY23 Revenue and Earnings Guidance Following Scheduled Restart of Medicaid Redeterminations
(Tysons, Va. - February 8, 2023) - Maximus (NYSE: MMS), a leading provider of government services worldwide, reported financial results for the three months ended December 31, 2022.
Highlights for the first quarter of fiscal year 2023 include:
•Revenue increased 8.5% to $1.25 billion, compared to $1.15 billion for the prior year period. Organic growth was 10.3% and driven by new or expanded programs in all three segments.
•Diluted earnings per share were $0.65, and adjusted diluted earnings per share were $0.94.
•The company is raising revenue and earnings guidance for fiscal year 2023 following the restart of Medicaid redeterminations scheduled to begin in the third quarter. Fiscal year 2023 revenue is now expected to range between $4.85 billion and $5.0 billion with adjusted diluted earnings per share between $4.00 and $4.30 per share.
•A quarterly cash dividend of $0.28 per share is payable on February 28, 2023, to shareholders of record on February 15, 2023.
"We are pleased with our solid first quarter results which reflect good execution, and we expect continued momentum in fiscal 2023," said Bruce Caswell, President and Chief Executive Officer. "Our increased guidance for fiscal 2023 is significant as it represents a clearing of the last remaining pandemic-related headwind in our U.S. Services business. Restarting Medicaid redeterminations is an unprecedented undertaking and as a long-term public partner to government, we are poised to support our current customers and see solid demand for our capabilities across the broader Medicaid market."
Caswell continued, "We are capitalizing on the organic growth potential of the core business and executing well on our recently refreshed strategy, including making definitive headway in the key areas of clinical services and technology modernization. The remainder of fiscal year 2023, underpinned by our stable business model, should see us continue to successfully capture the upside potential of in-demand government services."
First Quarter Results
Revenue for the first quarter of fiscal year 2023 increased 8.5% to $1.25 billion, compared to $1.15 billion for the prior year period, which was net of a 1.9% currency headwind. Organic growth was 10.3% from new or expanded programs in all three segments resulting from strong demand for the company's services.
For the first quarter of fiscal year 2023, operating margin was 6.0% and the adjusted operating margin was 7.9%. This compares to margins of 7.1% and 9.0%, respectively, for the prior year period. Diluted earnings per share were $0.65 and adjusted diluted earnings per share were $0.94. This compares to $0.85 and $1.12, respectively, for the prior-year period which contained profitable short-term COVID response work in the domestic segments and had less interest expense due to a more favorable rate environment.
U.S. Federal Services Segment
U.S. Federal Services Segment revenue for the first quarter of fiscal year 2023 increased 6.2% to $618.2 million, compared to $581.9 million reported for the prior year period. All growth was organic and driven primarily by volume growth in the segment's clinical services business and an anticipated higher run rate on a large cost-plus contract.
The segment operating margin for the first quarter of fiscal year 2023 was 8.3%, compared to 10.6% reported for the prior year, and in-line with company expectations. The full-year fiscal 2023 margin for the U.S. Federal Services Segment is still expected to range between 10% and 11%.
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U.S. Services Segment
U.S. Services Segment revenue for the first quarter of fiscal year 2023 increased 13.7% to $439.5 million, compared to $386.4 million reported in the prior year period. All growth was organic and driven by previously disclosed new work in the core business areas of eligibility support and clinical services.
The segment operating margin for the first quarter of fiscal year 2023 was 8.6%, compared to 14.1% reported for the prior year period, reflecting the headwind to the segment's profitability from the paused Medicaid redeterminations. The full-year fiscal 2023 margin for the U.S. Services Segment is expected to range between 9% and 11% with a lift to profitability expected later in the fiscal year due to the scheduled restart of redeterminations.
Outside the U.S. Segment
Outside the U.S. Segment revenue for the first quarter of fiscal year 2023 increased 4.9% to $191.6 million, compared to $182.6 million reported in the prior year period, which was net of a 12% currency headwind. Organic growth in the segment was approximately 16% driven primarily by the U.K. Restart Programme reaching full capacity.
The segment operating income for the first quarter of fiscal year 2023 was $10.1 million, or 5.3% on a margin basis. This compares to an operating loss of $9.5 million in the prior year period due primarily to contracts with planned start-up losses, such as the U.K. Restart Programme. The full-year fiscal 2023 margin for Outside the U.S. Segment is still expected near the lower end of a 3% to 7% range.
Sales and Pipeline
Year-to-date signed contract awards at December 31, 2022, totaled $481 million and contracts pending (awarded but unsigned) totaled $661 million. The book-to-bill ratio at December 31, 2022, was 2.2x calculated on trailing twelve month basis.
The sales pipeline at December 31, 2022, totaled $30.5 billion, comprised of approximately $6.0 billion in proposals pending, $1.71 billion in proposals in preparation, and $22.8 billion in opportunities tracking. New work opportunities represent 74.5% of the total sales pipeline.
Balance Sheet and Cash Flows
At December 31, 2022, cash and cash equivalents totaled $63.1 million, and gross debt was $1.57 billion. The ratio of debt, net of allowed cash, to adjusted EBITDA for the quarter ended December 31, 2022, as calculated in accordance with our credit agreement, was 3.0x. This compares to 2.6x at September 30, 2022.
For the first quarter of fiscal year 2023, cash used in operating activities totaled $134.7 million and free cash flow was an outflow of $150.4 million. Collections for the month of December were lower than expected, contributing to weaker cash flows and a high debt ratio at quarter end. DSO increased to 74 days as of December 31, 2022, reflecting what is expected to be a temporary increase to the target range of 60 to 70 days.
In the month of January, improved collections enabled the company to repay approximately $75 million of debt. T he company continues to prioritize debt reduction using its free cash flow.
On January 6, 2023, our Board of Directors declared a quarterly cash dividend of $0.28 for each share of our common stock outstanding. The dividend is payable on February 28, 2023, to shareholders of record on February 15, 2023.
Raising FY23 Guidance
Maximus is raising fiscal year 2023 revenue and earnings guidance following passage of the Consolidated Appropriations Act, 2023 (omnibus spending bill), which directs states to resume Medicaid redeterminations on a prescribed timeline. The company now expects revenue to range between $4.85 billion and $5.0 billion, compared to prior revenue guidance of between $4.75 billion and $4.90 billion.
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Adjusted operating income is expected to range between $415 million and $440 million, compared to a previous range between $390 million and $415 million. Adjusted operating income excludes an estimated $94 million of expense for amortization of intangible assets. Adjusted diluted earnings per share is now expected to range between $4.00 and $4.30 per share, compared to prior adjusted diluted earnings guidance of between $3.70 and $4.00 per share.
The company's guidance assumes that redetermination activities in the U.S. Services Segment phase in during the third quarter and make a full period contribution in the fourth quarter of fiscal year 2023.
Free cash flow is still expected to range between $225 million and $275 million for fiscal year 2023 and reflects expected working capital increases as a result of higher revenue later in the fiscal year. The company forecasts a slight reduction to interest expense, now ranging between $85 million and $90 million, an effective income tax rate between 24.5% and 25.5%, and weighted average shares outstanding between 61.2 million and 61.3 million shares for fiscal year 2023.
Conference Call and Webcast Information
Maximus will host a conference call tomorrow, February 9, 2023, at 9:00 a.m. ET. Shareholders are invited to submit questions for management’s consideration by emailing IR@maximus.com up to one hour prior to the call.
The call is open to the public and available by webcast or by phone at:
877.407.8289 (Domestic) / +1.201.689.8341 (International)
For those unable to listen to the live call, a recording of the webcast will be available on investor.maximus.com.
About Maximus
As a leading strategic partner to governments across the globe, Maximus helps improve the delivery of public services amid complex technology, health, economic, environmental, and social challenges. With a deep understanding of program service delivery, acute insights that achieve operational excellence, and an extensive awareness of the needs of the people being served, our employees advance the critical missions of our partners. Maximus delivers innovative business process management, impactful consulting services, and technology solutions that provide improved outcomes for the public and higher levels of productivity and efficiency of government-sponsored programs. For more information, visit maximus.com.
Non-GAAP Measures and Risk Factors
This release refers to non-GAAP measures and other indicators, including organic growth, free cash flow, operating income and EPS adjusted for amortization of intangible assets, adjusted EBITDA, and other non-GAAP measures.
A description of these non-GAAP measures, the reasons why we use and present them, and details as to how they are calculated are included in our earnings presentation and forthcoming Form 10-Q.
The presentation of these non-GAAP numbers is not meant to be considered in isolation, nor as alternatives to cash flows from operations, revenue growth, or net income as measures of performance. These non-GAAP financial measures, as determined and presented by us, may not be comparable to related or similarly titled measures presented by other companies.
Statements that are not historical facts, including statements about the company’s confidence and strategies, and the company’s expectations about revenues, results of operations, profitability, future contracts, market opportunities, market demand, or acceptance of the company’s products are forward-looking statements that involve risks and uncertainties.
These risks could cause the Company’s actual results to differ materially from those indicated by such forward-looking statements. A summary of risk factors can be found in Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the year ended September 30, 2022, which was filed with the Securities and Exchange Commission (SEC) on November 22, 2022. The Company's SEC reports are accessible on maximus.com.
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Maximus, Inc.
Consolidated Statements of Operations
(Unaudited)

| For the Three Months Ended
| December 31, 2022 |  | December 31, 2021
| (in thousands, except per share amounts)
Revenue | $ | 1,249,246 |  |  | $ | 1,150,876 |
Cost of revenue | 1,004,499 |  |  | 922,721 |
Gross profit | 244,747 |  |  | 228,155 |
Selling, general, and administrative expenses | 146,452 |  |  | 124,221 |
Amortization of intangible assets | 23,518 |  |  | 22,405 |
Operating income | 74,777 |  |  | 81,529 |
Interest expense | 21,606 |  |  | 9,638 |
Other income/(expense), net | 266 |  |  | (311) |
Income before income taxes | 53,437 |  |  | 71,580 |
Provision for income taxes | 13,442 |  |  | 18,250 |
Net income | $ | 39,995 |  |  | $ | 53,330 |
Earnings per share: |  |  |
Basic | $ | 0.65 |  |  | $ | 0.86 |
Diluted | $ | 0.65 |  |  | $ | 0.85 |
Weighted average shares outstanding: |  |  |
Basic | 61,117 |  |  | 62,262 |
Diluted | 61,196 |  |  | 62,445 |
Dividends declared per share | $ | 0.28 |  |  | $ | 0.28 |

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Maximus, Inc.
Consolidated Balance Sheets

| December 31, 2022 |  | September 30, 2022
| (unaudited) |  |
| (in thousands)
Assets: |  |  |
Cash and cash equivalents | $ | 63,050 |  |  | $ | 40,658 |
Accounts receivable, net | 1,014,046 |  |  | 807,110 |
Income taxes receivable | 4,486 |  |  | 2,158 |
Prepaid expenses and other current assets | 174,505 |  |  | 182,387 |
Total current assets | 1,256,087 |  |  | 1,032,313 |
Property and equipment, net | 50,181 |  |  | 52,258 |
Capitalized software, net | 64,963 |  |  | 58,740 |
Operating lease right-of-use assets | 162,289 |  |  | 132,885 |
Goodwill | 1,783,239 |  |  | 1,779,415 |
Intangible assets, net | 782,821 |  |  | 804,904 |
Deferred contract costs, net | 49,030 |  |  | 47,732 |
Deferred compensation plan assets | 39,606 |  |  | 37,050 |
Deferred income taxes | 5,038 |  |  | 4,970 |
Other assets | 41,661 |  |  | 42,447 |
Total assets | $ | 4,234,915 |  |  | $ | 3,992,714 |
Liabilities and Shareholders' Equity: |  |  |
Liabilities: |  |  |
Accounts payable and accrued liabilities | $ | 272,196 |  |  | $ | 264,553 |
Accrued compensation and benefits | 118,505 |  |  | 178,199 |
Deferred revenue, current portion | 96,201 |  |  | 87,146 |
Income taxes payable | 12,422 |  |  | 718 |
Long-term debt, current portion | 77,479 |  |  | 63,458 |
Operating lease liabilities, current portion | 59,553 |  |  | 63,999 |
Other current liabilities | 109,866 |  |  | 116,374 |
Total current liabilities | 746,222 |  |  | 774,447 |
Deferred revenue, non-current portion | 29,624 |  |  | 21,414 |
Deferred income taxes | 203,545 |  |  | 206,099 |
Long-term debt, non-current portion | 1,486,975 |  |  | 1,292,483 |
Deferred compensation plan liabilities, non-current portion | 44,688 |  |  | 40,210 |
Operating lease liabilities, non-current portion | 119,081 |  |  | 86,175 |
Other liabilities | 23,773 |  |  | 22,515 |
Total liabilities | 2,653,908 |  |  | 2,443,343 |
Shareholders' equity: |  |  |
Common stock, no par value; 100,000 shares authorized; 60,774 issued and outstanding as of December 31, 2022 and September 30 2022, respectively (shares in thousands) | 562,679 |  |  | 557,978 |
Accumulated other comprehensive loss | (29,706) |  |  | (33,961) |
Retained earnings | 1,048,034 |  |  | 1,025,354 |
Total shareholders' equity | 1,581,007 |  |  | 1,549,371 |
Total liabilities and shareholders' equity | $ | 4,234,915 |  |  | $ | 3,992,714 |

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Maximus, Inc.
Consolidated Statements of Cash Flows
(Unaudited)

| For the Three Months Ended
| December 31, 2022 |  | December 31, 2021
| (in thousands)
Cash flows from operating activities: |  |  |
Net income | $ | 39,995 |  |  | $ | 53,330 |
Adjustments to reconcile net income to cash flows from operations: |  |  |
Depreciation and amortization of property, equipment and capitalized software | 12,280 |  |  | 11,365 |
Amortization of intangible assets | 23,518 |  |  | 22,405 |
Amortization of debt issuance costs and debt discount | 1,034 |  |  | 649 |
Deferred income taxes | (1,331) |  |  | (229) |
Stock compensation expense | 4,403 |  |  | 8,248 |
Change in assets and liabilities, net of effects of business combinations: |  |  |
Accounts receivable | (200,749) |  |  | (14,114) |
Prepaid expenses and other current assets | 10,624 |  |  | (5,115) |
Deferred contract costs | (1,013) |  |  | (6,811) |
Accounts payable and accrued liabilities | 3,642 |  |  | (32,452) |
Accrued compensation and benefits | (53,271) |  |  | (56,305) |
Deferred revenue | 14,764 |  |  | 5,929 |
Income taxes | 9,465 |  |  | 10,321 |
Operating lease right-of-use assets and liabilities | (948) |  |  | (6,370) |
Other assets and liabilities | 2,928 |  |  | 6,230 |
Net cash used in operating activities | (134,659) |  |  | (2,919) |
Cash flows from investing activities: |  |  |
Purchases of property and equipment and capitalized software | (15,697) |  |  | (6,327) |
Net cash used in investing activities | (15,697) |  |  | (6,327) |
Cash flows from financing activities: |  |  |
Cash dividends paid to Maximus shareholders | (17,017) |  |  | (17,347) |
Purchases of Maximus common stock | — |  |  | (1,379) |
Tax withholding related to RSU vesting | (8,475) |  |  | (9,673) |
Payments for contingent consideration | (1,415) |  |  | — |
Proceeds from borrowings | 268,702 |  |  | 100,000 |
Principal payments for debt | (61,355) |  |  | (16,685) |
Restricted cash movements | (9,473) |  |  | — |
Net cash provided by financing activities | 170,967 |  |  | 54,916 |
Effect of exchange rate changes on cash, cash equivalents, and restricted cash | 2,421 |  |  | 372 |
Net change in cash, cash equivalents, and restricted cash | 23,032 |  |  | 46,042 |
Cash, cash equivalents and restricted cash, beginning of period | 136,795 |  |  | 156,570 |
Cash, cash equivalents and restricted cash, end of period | $ | 159,827 |  |  | $ | 202,612 |

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Maximus, Inc.
Consolidated Results of Operations by Segment
(Unaudited)

| For the Three Months Ended
| December 31, 2022 |  | December 31, 2021
| Amount |  | % (1) |  | Amount |  | % (1)
| (dollars in thousands)
Revenue: |  |  |  |  |  |  |
U.S. Federal Services | $ | 618,167 |  |  |  |  | $ | 581,871 |  |  |
U.S. Services | 439,478 |  |  |  |  | 386,417 |  |  |
Outside the U.S. | 191,601 |  |  |  |  | 182,588 |  |  |
Revenue | $ | 1,249,246 |  |  |  |  | $ | 1,150,876 |  |  |
Gross profit: |  |  |  |  |  |  |
U.S. Federal Services | $ | 122,694 |  |  | 19.8 | % |  | $ | 126,576 |  |  | 21.8 | %
U.S. Services | 83,598 |  |  | 19.0 | % |  | 89,699 |  |  | 23.2 | %
Outside the U.S. | 38,455 |  |  | 20.1 | % |  | 11,880 |  |  | 6.5 | %
Gross profit | $ | 244,747 |  |  | 19.6 | % |  | $ | 228,155 |  |  | 19.8 | %
Selling, general, and administrative expenses: |  |  |  |  |  |  |
U.S. Federal Services | $ | 71,649 |  |  | 11.6 | % |  | $ | 64,925 |  |  | 11.2 | %
U.S. Services | 45,842 |  |  | 10.4 | % |  | 35,102 |  |  | 9.1 | %
Outside the U.S. | 28,389 |  |  | 14.8 | % |  | 21,340 |  |  | 11.7 | %
Other (2) | 572 |  |  | NM |  | 2,854 |  |  | NM
Selling, general, and administrative expenses | $ | 146,452 |  |  | 11.7 | % |  | $ | 124,221 |  |  | 10.8 | %
Operating income: |  |  |  |  |  |  |
U.S. Federal Services | $ | 51,045 |  |  | 8.3 | % |  | $ | 61,651 |  |  | 10.6 | %
U.S. Services | 37,756 |  |  | 8.6 | % |  | 54,597 |  |  | 14.1 | %
Outside the U.S. | 10,066 |  |  | 5.3 | % |  | (9,460) |  |  | (5.2) | %
Amortization of intangible assets | (23,518) |  |  | NM |  | (22,405) |  |  | NM
Other (2) | (572) |  |  | NM |  | (2,854) |  |  | NM
Operating income | $ | 74,777 |  |  | 6.0 | % |  | $ | 81,529 |  |  | 7.1 | %

(1)Percentage of respective segment revenue. Percentages not considered meaningful are marked "NM."
(2)Other expenses includes credits and costs that are not allocated to a particular segment. This includes expenses incurred as part of our acquisitions, as well as potential acquisitions which have not been or may not be completed.
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Maximus, Inc.
Consolidated Free Cash Flows - Non-GAAP
(Unaudited)

| For the Three Months Ended
| December 31, 2022 |  | December 31, 2021
| (in thousands)
Net cash used in operating activities | (134,659) |  |  | (2,919) |
Purchases of property and equipment and capitalized software | (15,697) |  |  | (6,327) |
Free cash flow | $ | (150,356) |  |  | $ | (9,246) |

Maximus, Inc.
Non-GAAP Adjusted Results Excluding Amortization of Intangible Assets
(Unaudited)

| For the Three Months Ended
| December 31, 2022 |  | December 31, 2021
| (dollars in thousands, except per share data)
Operating income | $ | 74,777 |  |  | $ | 81,529 |
Add back: Amortization of intangible assets | 23,518 |  |  | 22,405 |
Adjusted operating income excluding amortization of intangible assets (Non-GAAP) | $ | 98,295 |  |  | $ | 103,934 |
Adjusted operating income margin excluding amortization of intangible assets (Non-GAAP) | 7.9 | % |  | 9.0 | %
Net income | $ | 39,995 |  |  | $ | 53,330 |
Add back: Amortization of intangible assets, net of tax | 17,360 |  |  | 16,530 |
Adjusted net income excluding amortization of intangible assets (Non-GAAP) | $ | 57,355 |  |  | $ | 69,860 |
Diluted earnings per share | $ | 0.65 |  |  | $ | 0.85 |
Add back: Effect of amortization of intangible assets on diluted earnings per share | 0.29 |  |  | 0.27 |
Adjusted diluted earnings per share excluding amortization of intangible assets (Non-GAAP) | $ | 0.94 |  |  | $ | 1.12 |

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