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FOR IMMEDIATE RELEASECONTACT:James Francis, VP - IR
Jessica Batt, VP - IR & ESG
Date: May 3, 2023IR@maximus.com

Maximus Reports Fiscal Year 2023 Second Quarter Results
Company reaffirms guidance in strengthened financial position following significant debt reduction
(Tysons, Va. - May 3, 2023) - Maximus (NYSE: MMS), a leading provider of government services worldwide, reported financial results for the three and six months ended March 31, 2023.
Highlights for the second quarter of fiscal year 2023 include:
•Revenue increased 2.5% to $1.21 billion, compared to $1.18 billion for the prior year period. Organic growth was 3.9% and driven by new or expanded programs in the U.S. segments.
•Diluted earnings per share were $0.52, and adjusted diluted earnings per share were $0.80.
•Record cash flows with cash provided by operating activities totaling $309.7 million and free cash flow of $291.6 million, enabling $275 million of debt reduction.
•The company is maintaining revenue and earnings guidance for fiscal year 2023, with revenue expected to range between $4.85 billion and $5.0 billion and 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 May 31, 2023, to shareholders of record on May 15, 2023.
"Our second quarter results demonstrated solid execution, and we are entering the second half of fiscal year 2023 with excellent visibility into the key drivers to achieve our full-year financial targets," said Bruce Caswell, President and Chief Executive Officer. "In the quarter, we de-levered our debt position by a full half-turn which was driven by record cash flows. We continue to focus on optimizing our portfolio with the divestiture of two small businesses in the Outside the U.S. segment, which were not core to our strategy and did not meet our financial objectives."

Caswell continued, "Last quarter, we noted good line of sight to key operating assumptions, most notably around Medicaid redeterminations and volume growth in our Federal clinical services business driven by PACT Act legislation. I'm pleased that our outlook has proven durable as we are reaffirming fiscal year 2023 guidance and remain confident in our capability to execute in a superior manner in support of our customers’ essential programs."
Second Quarter Results
Revenue for the second quarter of fiscal year 2023 increased 2.5% to $1.21 billion, compared to $1.18 billion for the prior year period. Organic growth was 3.9% driven by new or expanded programs in the U.S. segments.
For the second quarter of fiscal year 2023, operating margin was 5.2% and the adjusted operating margin was 7.1%. This compares to margins of 6.4% and 8.3%, respectively, for the prior year period. Diluted earnings per share were $0.52 and adjusted diluted earnings per share were $0.80. This compares to $0.80 and $1.07, respectively, for the prior-year period.
An operating loss in the Outside the U.S. segment and lower-than-expected U.S. Federal Services segment profitability tempered second quarter fiscal year 2023 results. Two small businesses in the Outside the U.S. segment, which contributed to the operating loss, were divested in the quarter resulting in an approximately one-cent reduction to diluted earnings per share for the second quarter of fiscal year 2023.
Additionally, the prior year period contained profitable short-term COVID response work in the U.S. 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 second quarter of fiscal year 2023 increased 1.9% to $584.1 million, compared to $573.3 million reported for the prior year period. All growth was organic and driven primarily by volume
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growth on the Veterans Affairs Medical Disability Exams (MDE) contracts, which comprise the Veterans Evaluations Services (VES) business.
The segment operating margin for the second quarter of fiscal year 2023 was 8.2%, compared to 8.1% reported for the prior year, and slightly lower than company expectations. While MDE contract volumes increased across the quarter, total volumes were slightly lower than forecasted, and higher costs were incurred for training of VES staff to yield full productivity. Strong line of sight remains on the volume forecast, and the full-year fiscal 2023 margin for the U.S. Federal Services Segment is still expected to range between 10% and 11%.
U.S. Services Segment
U.S. Services Segment revenue for the second quarter of fiscal year 2023 increased 13.0% to $449.7 million, compared to $398.1 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 second quarter of fiscal year 2023 was 9.5%, compared to 11.7% reported for the prior year period that contained profitable, short-term work. The segment's profitability remained impacted by the paused Medicaid redeterminations, which are scheduled to restart in the third quarter. The full-year fiscal 2023 margin for the U.S. Services Segment is still expected to range between 9% and 11% with a lift to profitability expected in the fourth quarter reflecting an expected full-period contribution from redeterminations.
Outside the U.S. Segment
Outside the U.S. Segment revenue for the second quarter of fiscal year 2023 decreased 16.0% to $173.1 million, compared to $206.0 million reported in the prior year period. Organic revenue contracted 8% due primarily to lower revenue in Australia following last year's rebid outcome and currency was a 7% headwind.
The segment realized an operating loss of $3.7 million for the second quarter of fiscal year 2023, compared to an operating profit of $4.3 million in the prior year period. The company is focused on portions of the segment that are underperforming. Two small businesses, a commercial division within the United Kingdom and the employment services business in Sweden, were divested, which had combined operating losses in the quarter of $1.5 million.
Sales and Pipeline
Year-to-date signed contract awards at March 31, 2023, totaled $1.22 billion and contracts pending (awarded but unsigned) totaled $1.27 billion. The book-to-bill ratio at March 31, 2023, was 2.1x calculated on a trailing twelve-month basis.
The sales pipeline at March 31, 2023, totaled $31.9 billion, comprised of approximately $5.6 billion in proposals pending, $0.94 billion in proposals in preparation, and $25.3 billion in opportunities tracking. New work opportunities represent approximately 78% of the total sales pipeline.
Balance Sheet and Cash Flows
At March 31, 2023, cash and cash equivalents totaled $56.3 million, and gross debt was $1.30 billion. The ratio of debt, net of allowed cash, to EBITDA for the quarter ended March 31, 2023, as calculated in accordance with the company's credit agreement, was 2.5x assisted by $275 million of debt reduction in the quarter. This compares to 3.0x at December 31, 2022.
For the second quarter of fiscal year 2023, cash provided by operating activities totaled $309.7 million and free cash flow was $291.6 million. The record quarterly cash flows made up for the temporarily low cash flows in the first quarter of fiscal year 2023. DSO was 56 days as of March 31, 2023. Going forward, the company expects to be in the target range of 60 to 70 days.
On April 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 May 31, 2023, to shareholders of record on May 15, 2023.
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Reaffirming FY23 Guidance
Maximus is reaffirming fiscal year 2023 guidance from the prior quarter. Revenue is expected to range between $4.85 billion and $5.0 billion, and adjusted operating income is expected to range between $415 million and $440 million, which excludes an estimated $94 million of expense for amortization of intangible assets. Adjusted diluted earnings per share is expected to range between $4.00 and $4.30 per share and free cash flow is expected to range between $225 million and $275 million.
The company's guidance still assumes that redetermination activities in the U.S. Services Segment phase in during the third quarter, making a full period contribution in the fourth quarter of fiscal year 2023, and volumes continue to ramp on the MDE contracts in the VES business related to the PACT Act in U.S. Federal Services.
The company forecasts a slight reduction to interest expense, now ranging between $82 million and $85 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, May 4, 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, 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 EndedFor the Six Months Ended
 March 31, 2023March 31, 2022March 31, 2023March 31, 2022
(in thousands, except per share amounts)
Revenue$1,206,852 $1,177,326 $2,456,098 $2,328,202 
Cost of revenue978,249 948,875 1,982,748 1,871,596 
Gross profit228,603 228,451 473,350 456,606 
Selling, general, and administrative expenses142,448 130,307 288,900 254,528 
Amortization of intangible assets23,650 22,856 47,168 45,261 
Operating income62,505 75,288 137,282 156,817 
Interest expense20,999 9,438 42,605 19,076 
Other income/(expense), net818 715 1,084 404 
Income before income taxes42,324 66,565 95,761 138,145 
Provision for income taxes10,536 16,469 23,978 34,719 
Net income$31,788 $50,096 $71,783 $103,426 
Earnings per share:
Basic$0.52 $0.81 $1.17 $1.66 
Diluted$0.52 $0.80 $1.17 $1.66 
Weighted average shares outstanding:
Basic61,120 62,227 61,119 62,256 
Diluted61,383 62,381 61,265 62,409 
Dividends declared per share$0.28 $0.28 $0.56 $0.56 










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Maximus, Inc.
Consolidated Balance Sheets
March 31, 2023September 30, 2022
(unaudited)
(in thousands)
Assets:
Cash and cash equivalents$56,344 $40,658 
Accounts receivable, net742,387 807,110 
Income taxes receivable12,156 2,158 
Prepaid expenses and other current assets141,017 182,387 
Total current assets951,904 1,032,313 
Property and equipment, net46,915 52,258 
Capitalized software, net71,393 58,740 
Operating lease right-of-use assets162,633 132,885 
Goodwill1,780,200 1,779,415 
Intangible assets, net751,194 804,904 
Deferred contract costs, net47,498 47,732 
Deferred compensation plan assets42,049 37,050 
Deferred income taxes5,865 4,970 
Other assets39,205 42,447 
Total assets$3,898,856 $3,992,714 
Liabilities and Shareholders' Equity:
Liabilities:
Accounts payable and accrued liabilities$259,463 $264,553 
Accrued compensation and benefits156,990 178,199 
Deferred revenue, current portion66,796 87,146 
Income taxes payable4,482 718 
Long-term debt, current portion84,490 63,458 
Operating lease liabilities, current portion55,928 63,999 
Other current liabilities53,026 116,374 
Total current liabilities681,175 774,447 
Deferred revenue, non-current portion25,776 21,414 
Deferred income taxes201,079 206,099 
Long-term debt, non-current portion1,205,028 1,292,483 
Deferred compensation plan liabilities, non-current portion43,706 40,210 
Operating lease liabilities, non-current portion121,957 86,175 
Other liabilities18,413 22,515 
Total liabilities2,297,134 2,443,343 
Shareholders' equity:
Common stock, no par value; 100,000 shares authorized; 60,784 and 60,774 shares issued and outstanding as of March 31, 2023, and September 30, 2022, respectively (shares in thousands)572,632 557,978 
Accumulated other comprehensive loss(33,303)(33,961)
Retained earnings1,062,393 1,025,354 
Total shareholders' equity1,601,722 1,549,371 
Total liabilities and shareholders' equity$3,898,856 $3,992,714 
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Maximus, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
For the Three Months EndedFor the Six Months Ended
March 31, 2023March 31, 2022March 31, 2023March 31, 2022
(in thousands)
Cash flows from operating activities:
Net income$31,788 $50,096 $71,783 $103,426 
Adjustments to reconcile net income to cash flows from operations:
Depreciation and amortization of property, equipment, and capitalized software14,041 9,834 26,321 21,199 
Amortization of intangible assets23,650 22,856 47,168 45,261 
Amortization of debt issuance costs and debt discount601 648 1,635 1,297 
Deferred income taxes(37)(3,089)(1,368)(3,318)
Stock compensation expense9,540 6,804 13,943 15,052 
Loss on sale of businesses883 — 883 — 
Change in assets and liabilities, net of effects of business combinations and disposals:
Accounts receivable263,278 (34,950)62,529 (49,064)
Prepaid expenses and other current assets2,788 14,884 13,412 9,769 
Deferred contract costs1,596 380 583 (6,431)
Accounts payable and accrued liabilities(10,003)29,405 (6,361)(3,047)
Accrued compensation and benefits39,049 28,024 (14,222)(28,281)
Deferred revenue(33,111)12,544 (18,347)18,473 
Income taxes(16,043)(23,836)(6,578)(13,515)
Operating lease right-of-use assets and liabilities(1,124)5,077 (2,072)(1,293)
Other assets and liabilities(17,200)(3,899)(14,272)2,331 
Net cash provided by operating activities309,696 114,778 175,037 111,859 
Cash flows from investing activities:
Purchases of property and equipment and capitalized software(18,054)(16,571)(33,751)(22,898)
Acquisitions of businesses, net of cash acquired— (4)— (4)
Proceeds from sale of businesses9,124 — 9,124 — 
Net cash used in investing activities(8,930)(16,575)(24,627)(22,902)
Cash flows from financing activities:
Cash dividends paid to Maximus shareholders(17,016)(17,312)(34,033)(34,659)
Purchases of Maximus common stock— (24,464)— (25,843)
Tax withholding related to RSU vesting— — (8,475)(9,673)
Payments for contingent consideration(2,626)— (4,041)— 
Proceeds from borrowings193,696 140,000 462,398 240,000 
Principal payments for debt(469,105)(287,023)(530,460)(303,708)
Restricted cash movements(47,587)— (57,060)— 
Net cash used in financing activities(342,638)(188,799)(171,671)(133,883)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash765 (48)3,186 324 
Net change in cash, cash equivalents, and restricted cash(41,107)(90,644)(18,075)(44,602)
Cash, cash equivalents and restricted cash, beginning of period159,827 202,612 136,795 156,570 
Cash, cash equivalents and restricted cash, end of period$118,720 $111,968 $118,720 $111,968 
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Maximus, Inc.
Consolidated Results of Operations by Segment
(Unaudited)
 For the Three Months EndedFor the Six Months Ended
March 31, 2023March 31, 2022March 31, 2023March 31, 2022
Amount% (1)Amount% (1)Amount% (1)Amount% (1)
(dollars in thousands)
Revenue:
U.S. Federal Services$584,075 $573,288 $1,202,242 $1,155,159 
U.S. Services449,703 398,077 889,181 784,494 
Outside the U.S.173,074 205,961 364,675 388,549 
Revenue$1,206,852 $1,177,326 $2,456,098 $2,328,202 
Gross profit:
U.S. Federal Services$122,874 21.0 %$115,153 20.1 %$245,568 20.4 %$241,729 20.9 %
U.S. Services86,016 19.1 %84,971 21.3 %169,614 19.1 %174,670 22.3 %
Outside the U.S.19,713 11.4 %28,327 13.8 %58,168 16.0 %40,207 10.3 %
Gross profit$228,603 18.9 %$228,451 19.4 %$473,350 19.3 %$456,606 19.6 %
Selling, general, and administrative expenses:
U.S. Federal Services$75,050 12.8 %$68,949 12.0 %$146,699 12.2 %$133,874 11.6 %
U.S. Services43,415 9.7 %38,273 9.6 %89,257 10.0 %73,375 9.4 %
Outside the U.S.23,425 13.5 %24,011 11.7 %51,814 14.2 %45,351 11.7 %
Loss on sale of businesses (2)883 NM— NM883 NM— NM
Other (3)(325)NM(926)NM247 NM1,928 NM
Selling, general, and administrative expenses$142,448 11.8 %$130,307 11.1 %$288,900 11.8 %$254,528 10.9 %
Operating income/(loss):
U.S. Federal Services$47,824 8.2 %$46,204 8.1 %$98,869 8.2 %$107,855 9.3 %
U.S. Services42,601 9.5 %46,698 11.7 %80,357 9.0 %101,295 12.9 %
Outside the U.S.(3,712)(2.1)%4,316 2.1 %6,354 1.7 %(5,144)(1.3)%
Amortization of intangible assets(23,650)NM(22,856)NM(47,168)NM(45,261)NM
Loss on sale of businesses (2)(883)NM— NM(883)NM— NM
Other (3)325 NM926 NM(247)NM(1,928)NM
Operating income$62,505 5.2 %$75,288 6.4 %$137,282 5.6 %$156,817 6.7 %
        
(1)Percentage of respective segment revenue. Percentages not considered meaningful are marked "NM."
(2)During the second quarter of fiscal year 2023, we sold a small commercial practice in the United Kingdom and our employment operations business in Sweden, both subsidiaries within our Outside the U.S. Segment, resulting in a loss.
(3)Other includes credits and costs that are not allocated to a particular segment.
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Maximus, Inc.
Consolidated Free Cash Flows - Non-GAAP
(Unaudited)
For the Three Months EndedFor the Six Months Ended
March 31, 2023March 31, 2022March 31, 2023March 31, 2022
(in thousands)
Net cash provided by operating activities$309,696 $114,778 $175,037 $111,859 
Purchases of property and equipment and capitalized software(18,054)(16,571)(33,751)(22,898)
Free cash flow$291,642 $98,207 $141,286 $88,961 


Maximus, Inc.
Non-GAAP Adjusted Results Excluding Amortization of Intangible Assets
(Unaudited)
For the Three Months EndedFor the Six Months Ended
March 31, 2023March 31, 2022March 31, 2023March 31, 2022
(dollars in thousands, except per share data)
Operating income$62,505 $75,288 $137,282 $156,817 
Add back: Amortization of intangible assets23,650 22,856 47,168 45,261 
Adjusted operating income excluding amortization of intangible assets (Non-GAAP)$86,155 $98,144 $184,450 $202,078 
Adjusted operating income margin excluding amortization of intangible assets (Non-GAAP)7.1 %8.3 %7.5 %8.7 %
Net income$31,788 $50,096 $71,783 $103,426 
Add back: Amortization of intangible assets, net of tax17,446 16,884 34,806 33,414 
Adjusted net income excluding amortization of intangible assets (Non-GAAP)$49,234 $66,980 $106,589 $136,840 
Diluted earnings per share$0.52 $0.80 $1.17 $1.66 
Add back: Effect of amortization of intangible assets on diluted earnings per share0.28 0.27 0.57 0.53 
Adjusted diluted earnings per share excluding amortization of intangible assets (Non-GAAP)$0.80 $1.07 $1.74 $2.19 
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