MAXIMUS, INC. Q4 FY2024 earnings call

• MAXIMUS is well-positioned during government transitions, having served governments through numerous political changes for nearly half a century. - Focused on bipartisan priorities such as digitalizing citizen services, supporting veterans, and technology modernization. - Recent wins include task orders under IRS Enterprise Development Operations Services, the rebate of the California independent medical review project, and an AI collaboration with the Department of Defense. - The Maximus Forward program: The CDIO team mapped over 90% of near-term requirements, contributed significant annual recurring savings, and launched the Global Capability Center. - Fiscal year 2024 signed awards totaled $2.2 billion, and the pipeline at September 30th was $54.3 billion, including a $6.6 billion CMS contact center operations contract and VA medical disability exams contracts.

For the full fiscal year 2024, consolidated revenue increased 8.2% to $5.31 billion. Organic revenue growth was 8.8%. The US Federal Services segment saw revenue increase 13.9% to $2.74 billion, with an operating income margin of 12.2% in 2024. The US services segment had revenue rise 5.5% to $1.91 billion, and its operating income margin was 12.9% in 2024. The outside the US segment experienced a 4.6% decrease in revenue to $657 million, with an operating income of $8 million in 2024 compared to an operating loss of $9 million in the prior year.

For fiscal 2025, revenue is projected to be between $5.275 billion and $5.425 billion. The adjusted EBITDA margin is estimated to be approximately 11%, and adjusted EPS is projected between $5.70 and $6.00 per share. The US Federal Services margin is expected to be near the 12% range, the US services segment margin is in the 11% range, and the outside the US margin is between 1% and 3%. Free cash flow for fiscal 2025 is expected to be between $345 million and $375 million.

• Uncertainty arising from government transitions, including potential procurement delays and changes in administration priorities. - Concerns regarding the need for a labor harmony agreement in the CMS CCO solicitation. - Potential impact of a reduction in government civil servants on contracting and procurement functions.

Q: Talk about the CCO contract.

A: The CMS CCO contract is under an option year. We are focused on our GAO claim, operating under an existing contract option period with six additional option years left. New administration leadership changes are being monitored, and we remain steadfast in our view that a labor harmony agreement is unnecessary.

Q: Compare Trump 1.0 and Trump 2.0.

A: Trump 2.0 is likely to have less delay in procurement. We are a different company now with a broader portfolio, well-positioned at both state and federal levels, and have new capabilities such as the AI work with the Department of Defense.

Q: Clarity on backlog and book to bill.

A: Backlog reduction is due to revenue burn, rebid adjudication, and the VA MDE contract recompete. Book to bill is expected to trend toward 1.0 as rebid volume normalizes and our pipeline is robust.

Q: Quarterly cadence and segment basis.

A: Revenue is fairly evenly distributed with seasonality. The US services segment is expected to be down year over year due to excess volume, while the other two segments are growing year over year.

Q: Cash flow dip in 2025.

A: A lower earnings, reversal of working capital benefits, and lower CapEx contribute to the slight dip in free cash flow. The free cash flow to net income ratio is expected to be between 1.2 and 1.3 times.