TYSONS, Va. - Maximus (NYSE: NYSE:MMS), a prominent provider of government services globally, announced an impressive second quarter for fiscal year 2024, with a significant increase in earnings and revenue.
The company reported Q2 adjusted earnings per share (EPS) of $1.57, which surpassed the analyst estimate of $1.30. Revenue also exceeded expectations, coming in at $1.35 billion against a consensus estimate of $1.28 billion, marking an 11.7% increase from the $1.21 billion reported in the same quarter last year.
Organic growth contributed 12.6% to the revenue increase, attributed to expanded programs in the U.S. Federal Services Segment, including the Veterans Affairs (VA) Medical Disability Exams (MDE) contracts, and resumed Medicaid-related activities in the U.S. Services Segment.
The adjusted operating margin for Q2 was reported at 11.1%, a significant improvement from the 7.2% in the prior year period.
Maximus also announced an upward revision of its fiscal year 2024 guidance.
The company now expects adjusted diluted EPS to be between $5.65 and $5.85, which is $0.40 higher than previous guidance and exceeds the analyst consensus of $5.41. Revenue projections for FY24 have been raised to a range of $5.15 billion to $5.25 billion, with the midpoint slightly below the consensus of $5.172 billion.
Bruce Caswell, President and CEO of Maximus, expressed confidence in the company's earnings potential, stating, "For the second consecutive quarter, we are able to raise guidance that reflects our confidence in the earnings power of the business."
He attributed the strong performance to operational excellence and innovative technology solutions aimed at driving long-term shareholder value.
The company's balance sheet showed an improved net debt to EBITDA ratio of 1.7 times as of March 31, 2024, down from 2.1 times in the prior quarter. Additionally, Maximus declared a quarterly cash dividend of $0.30 per share, payable on May 31, 2024, to shareholders of record on May 15, 2024.
The U.S. Federal Services Segment experienced a revenue increase of 20.1% to $701.7 million, with all growth being organic and primarily driven by the VA MDE contracts.
The segment's operating margin for Q2 was 11.9%, slightly above expectations due to the contracts exceeding production goals. The full-year fiscal 2024 margin for this segment is now expected to be approximately 12%.
In the U.S. Services Segment, revenue increased by 8.1% to $486.1 million, with organic growth driven by expanded programs and resumed Medicaid-related programs. The operating margin for Q2 was 14.0%, which is anticipated to represent a peak for segment profitability.
Despite these positive results, revenue in the Outside the U.S. Segment decreased by 7.2% to $160.5 million, with the divestiture of businesses in the prior fiscal year reducing revenue by 8.2%. However, the segment experienced an operating profit of $0.7 million for Q2, compared to an operating loss in the prior year period.
Maximus remains focused on aligning its Outside the U.S. Segment strategically with the rest of the business and delivering consistent profitability. The company's sales pipeline as of March 31, 2024, totaled $37.8 billion, with new work opportunities representing approximately 75% of the total sales pipeline.
The company's financial results and optimistic outlook for FY24 reflect its resilience and strategic positioning to capitalize on growth opportunities, despite the challenges faced in markets outside the U.S.
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