Core Viewpoint - Maximus (MMS) has been upgraded to a Zacks Rank 1 (Strong Buy), indicating a positive outlook on its earnings estimates, which significantly influence stock prices [1][3]. Earnings Estimates and Stock Price Impact - The Zacks rating system emphasizes the correlation between changes in earnings estimates and stock price movements, driven by institutional investors adjusting their valuations based on these estimates [4][6]. - Rising earnings estimates for Maximus suggest an improvement in the company's underlying business, which could lead to higher stock prices as investors respond positively [5][10]. Zacks Rank System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with Zacks Rank 1 stocks historically generating an average annual return of +25% since 1988 [7]. - Only the top 5% of Zacks-covered stocks receive a "Strong Buy" rating, indicating superior earnings estimate revisions, positioning Maximus favorably for potential market-beating returns [9][10]. Recent Earnings Estimate Revisions - For the fiscal year ending September 2025, Maximus is expected to earn $6.49 per share, with a 6.7% increase in the Zacks Consensus Estimate over the past three months [8].

Group 1: Labor Market Overview - The U.S. job market exceeded expectations for the 11th consecutive month, with 147,000 jobs added in June compared to the forecast of 110,000 [1] - The unemployment rate decreased from 4.2% to 4.1%, better than the expected 4.3% [1] - Average hourly earnings increased by 0.2% month-over-month and 3.7% year-over-year [1] Group 2: Payroll Stocks Performance - Paylocity Holding Corporation (PCTY) and Dayforce (DAY) saw stock increases of over +2% and +1% respectively, both classified as Zacks Rank 3 (Hold) [2] - Paychex (PAYX) is noted for its integrated Human Capital Management (HCM) solutions and has a Zacks Rank 2 (Buy), with expectations for steady growth in top and bottom lines [3] - Maximus (MMS) is identified as a strong buy with a Zacks Rank 1 (Strong Buy), despite a 21% decline from its 52-week high, attributed to a spike in FY25 EPS estimates by 7% [5] Group 3: Market Reactions and Economic Implications - The dip in Maximus stock followed the announcement of 7,000 federal government job cuts, but this may be an overreaction given the addition of 47,000 state government jobs and 19,000 social assistance jobs [6] - The resilient labor market and better-than-expected jobs report contribute positively to the stock market's recovery, making payroll stocks particularly attractive [8]

Core Viewpoint - Maximus (MMS) is experiencing significant selling pressure, with a 6.1% decline over the past four weeks, but is now positioned for a potential trend reversal as it enters oversold territory, supported by analyst expectations of better-than-previously predicted earnings [1] Group 1: Technical Indicators - The Relative Strength Index (RSI) is a key technical indicator used to identify oversold conditions, with a reading below 30 typically indicating that a stock is oversold [2] - MMS has an RSI reading of 29.15, suggesting that the heavy selling may be exhausting itself, indicating a potential bounce back towards equilibrium in supply and demand [5] Group 2: Fundamental Indicators - There is a strong consensus among sell-side analysts that earnings estimates for MMS will improve, with a 0.5% increase in the consensus EPS estimate over the last 30 days, which often correlates with near-term price appreciation [7] - MMS holds a Zacks Rank 1 (Strong Buy), placing it in the top 5% of over 4,000 ranked stocks based on earnings estimate revisions and EPS surprises, further indicating a potential turnaround [8]

Core Insights - Maximus, Inc. (MMS) reported better-than-expected second-quarter fiscal 2025 results with adjusted earnings of $2.01 per share, exceeding the Zacks Consensus Estimate by 46.7% and increasing 28% year over year. Revenues reached $1.36 billion, surpassing the consensus mark by 5.8% and rising 1% from the previous year [1] Segmental Revenues - The U.S. Federal Services segment generated revenues of $777.9 million, an 11% increase from the prior year, beating the estimate of $687.2 million [2] - The Outside the U.S. segment reported revenues of $141.5 million, a 12% decrease year over year, but exceeded the anticipated $123.1 million [2] - The U.S. Services segment's revenues were $442.4 million, down 9% year over year, falling short of the estimate of $497.2 million [2] Sales and Pipeline - Year-to-date signed contract awards totaled $2.92 billion as of March 31, 2025, with contracts pending amounting to $451 million. The sales pipeline stood at $41.2 billion, including $1.97 billion in pending proposals, $3 billion in proposals in preparation, and $36.3 billion in tracking opportunities. The book-to-bill ratio was 0.8X on a trailing 12-month basis [3] Operating Performance - Operating income was $153 million, reflecting a 20% year-over-year increase, compared to the expected adjusted operating income of $138.6 million, which was down 16.2% year over year. The adjusted operating income margin improved to 11.2%, up 170 basis points year over year [4] Balance Sheet and Cash Flow - Maximus ended the quarter with cash and cash equivalents of $108 million, up from $73 million in the previous quarter. The company generated $42.7 million in cash from operations, with capital expenditures of $17.2 million, resulting in free cash flow of $25.5 million [5] Updated Fiscal 2025 Guidance - Maximus raised its earnings and revenue guidance for fiscal year 2025, now expecting total revenues between $5.25 billion and $5.4 billion, compared to the previous range of $5.2 billion to $5.35 billion. The midpoint of the new range ($5.325 billion) is above the Zacks Consensus Estimate of $5.31 billion [6] - Adjusted earnings are now anticipated in the range of $6.30 to $6.60 per share, up from the previous expectations of $5.90 to $6.20 per share, and higher than the current Zacks Consensus Estimate of $6.08. The adjusted EBITDA margin is expected to be approximately 11.7%, compared to the earlier expectation of 11.2% [7] - Free cash flow expectations remain unchanged between $355 million and $385 million, with forecasted interest expenses of approximately $78 million, up from the prior estimate of $75 million. The effective income tax rate is anticipated to be within 28-29%, with approximately 58 million shares expected to be outstanding on a full-year basis [8]

Revenue and Profitability - Revenue for the three months ended March 31, 2025, was $1,361,786 thousand, a 1.0% increase from $1,348,357 thousand in the same period of 2024[104] - Gross profit for the six months ended March 31, 2025, was $640,378 thousand, reflecting a 3.7% increase compared to $617,643 thousand for the same period in 2024[106] - Operating income for the three months ended March 31, 2025, was $152,968 thousand, up 19.9% from $127,494 thousand in the prior year[104] - The gross profit percentage for the three months ended March 31, 2025, improved to 24.9% from 23.6% in the same period of 2024[104] - Organic growth contributed $39,802 thousand (3.0%) to revenue for the three months ended March 31, 2025[105] - Adjusted EBITDA margin (Non-GAAP) improved to 13.7% for the three months ended March 31, 2025, compared to 11.7% in the previous year[154] Segment Performance - The U.S. Federal Services Segment reported revenue of $777,927 thousand for the three months ended March 31, 2025, a 10.9% increase from $701,702 thousand in the prior year[115] - U.S. Services Segment revenue for the three months ended March 31, 2025, was $442.35 million, a decrease of 9.0% compared to $486.12 million for the same period in 2024[120] - Gross profit margin for the U.S. Services Segment decreased to 25.3% in Q1 2025 from 26.8% in Q1 2024[120] - Outside the U.S. Segment revenue for the three months ended March 31, 2025, was $141.51 million, down 11.9% from $160.54 million in Q1 2024[124] - The full-year operating margin for the U.S. Services Segment is anticipated to be approximately 11% for fiscal year 2025[121] - The Outside the U.S. Segment is expected to achieve a full-year operating margin between 3% and 5% for fiscal year 2025[128] Tax and Financial Position - The effective tax rate for the six months ended March 31, 2025, was 31.6%, an increase from 25.2% in the same period of 2024, due to the divestiture of businesses[113] - The company expects an overall effective tax rate between 28.0% and 29.0% for fiscal year 2025, influenced by divestitures and non-recurring items[113] Cash Flow and Debt - As of March 31, 2025, the company had $108.1 million in cash and cash equivalents, indicating a strong liquidity position[129] - The company reported net cash used in operating activities of $37.3 million for the first six months of fiscal year 2025, compared to net cash provided of $152.1 million for the same period in 2024[134] - The company increased its term loan debt facility by $250 million in fiscal year 2025 to reduce revolving debt and meet working capital needs[137] - The effective interest rate on the company's debt as of March 31, 2025, was 5.4%[132] - Free cash flow for the six months ended March 31, 2025, is $(77,480,000), compared to $104,549,000 for the same period in 2024[146] Operational Metrics - Days Sales Outstanding (DSO) increased to 73 days as of March 31, 2025, compared to 61 days at September 30, 2024, indicating delays in payments[135] - Consolidated Net Total Leverage Ratio is 1.85, well below the maximum limit of 4.00:1.00 as per the Credit Agreement[144] - Consolidated EBITDA for the trailing twelve months ended March 31, 2025, is $754,403,000, with a net income of $300,021,000[143] - Consolidated Net Interest Coverage Ratio stands at 9.21, significantly above the minimum requirement of 3.00:1.00[144] Strategic Initiatives - The launch of Maximus Total Experience Management (TXM) aims to enhance customer experience through intelligent automation and cognitive computing[101] - The company has not recorded U.S. deferred income taxes on funds held in foreign jurisdictions, which may impact future cash flows[145] - The company continues to explore opportunities for remitting additional funds from foreign locations, considering working capital requirements and tax rules[145]

Financial Data and Key Metrics Changes - The company reported revenue of $1,360,000,000 for the quarter, reflecting a 3% organic growth year over year [6][30] - Adjusted EBITDA margin was 13.7%, in the upper end of the near-term guidance range [6][30] - Adjusted EPS was $2.01, compared to $1.57 for the prior year period [30][42] Business Line Data and Key Metrics Changes - U.S. Federal Services segment revenue increased by 10.9% to $778,000,000, driven by strong clinical assessments [33] - U.S. Services segment revenue decreased to $442,000,000, reflecting normalization after last year's Medicaid unwinding [35] - Outside the U.S. segment revenue decreased to $142,000,000, but organic growth was 4.6% [36] Market Data and Key Metrics Changes - The total pipeline of sales opportunities was $41,200,000,000, with approximately 55% representing new work [26] - Signed awards totaled $2,900,000,000 of total contract value through the second quarter [25] - The book to bill ratio was approximately 0.8 times, showing improvement from previous periods [26] Company Strategy and Development Direction - The company is focused on leveraging technology and innovation to drive efficient operations and enhance customer satisfaction [8][12] - MAXIMUS FORWARD initiatives aim to modernize programs through technology and performance-based contracting [7][8] - The company is exploring opportunities for efficiencies and innovation in response to government inquiries [13][14] Management's Comments on Operating Environment and Future Outlook - Management maintains a cautious view for the second half of the fiscal year due to evolving operating conditions [14][42] - The company anticipates a normalization in cash flow and collections in the fourth quarter [38][43] - There is optimism regarding the pipeline of opportunities, with an uptick in business proposals volume [29][30] Other Important Information - The company has been recognized by Fortune as one of America's most innovative companies, highlighting its commitment to operational innovation [27] - Cash provided by operating activities was $43,000,000, with free cash flow of $26,000,000 for the quarter [37] - The company ended the quarter with total debt of $1,510,000,000, yielding a net leverage ratio of 1.9 times [41] Q&A Session Summary Question: How should the market think about the guidance and weightings between Q3 and Q4? - Management indicated that the guidance reflects Q2 overperformance while maintaining a cautious approach for Q3 and Q4 due to visibility into potential moderation in clinical volumes [51][52] Question: Can you provide more color on the margin performance in the quarter? - The strong margin performance was attributed to increased volumes and investments in technology that improved operational efficiencies [55][56] Question: Are there potential delays in new work coming into the pipeline? - There has been some slowdown in the civilian agency space, but the company is still seeing opportunities and contract extensions that benefit incumbents [60][62] Question: What are the drivers behind the organic growth in the Outside the U.S. segment? - The organic growth was primarily driven by the functional assessment services contract in the UK, which provides a modest revenue increase compared to the predecessor contract [67]

Financial Data and Key Metrics Changes - The company reported revenue of $1,360,000,000 for the quarter, representing a solid 3% organic growth year over year [5][25] - Adjusted EBITDA margin was 13.7% in Q2, in the upper end of the near-term guidance range [5][25] - Adjusted EPS was $2.01 for the quarter, compared to $1.57 for the prior year period [25][28] Business Line Data and Key Metrics Changes - U.S. Federal Services segment revenue increased 10.9% to $778,000,000, all organic growth, driven by strong performance in clinical assessments [28] - U.S. Services segment revenue decreased to $442,000,000, reflecting the prior year's outsized growth from Medicaid unwinding [29] - Outside the U.S. segment revenue decreased to $142,000,000, but organic growth was 4.6% due to healthier components remaining [30] Market Data and Key Metrics Changes - The total pipeline of sales opportunities was $41,200,000,000, with approximately 55% representing new work [22][23] - Signed awards totaled $2,900,000,000 of total contract value through the second quarter [21] - The book to bill ratio was approximately 0.8 times, showing improvement from previous periods [22] Company Strategy and Development Direction - The company is focused on modernization through technology and performance-based contracting, aligning with government efficiency initiatives [6][10] - MAXIMUS FORWARD transformation emphasizes technology and innovation to drive efficient operations and customer satisfaction [7][10] - The company is exploring opportunities for efficiencies, consolidation, and innovation in response to government inquiries [11][12] Management's Comments on Operating Environment and Future Outlook - Management maintains a cautious view for the second half of the fiscal year, reflecting ongoing uncertainties in the operating environment [12][36] - The company anticipates a normalization in cash flow and collections in the fourth quarter, following delays in administrative processes [32][36] - There is optimism regarding the pipeline of opportunities, with an uptick in business proposals volume [25][56] Other Important Information - The company has been recognized by Fortune as one of America's most innovative companies, highlighting its commitment to operational innovation and technology [23] - Cash provided by operating activities was $43,000,000, with free cash flow of $26,000,000 for the quarter [31] - Total debt at the end of the quarter was $1,510,000,000, yielding a net total leverage ratio of 1.9 times [35] Q&A Session Summary Question: How should the market think about the guidance and weightings between Q3 and Q4? - Management indicated that the guidance reflects Q2 overperformance while maintaining a cautious approach for Q3 and Q4 due to visibility into potential moderation in clinical volumes [44][46] Question: Can you provide more color on the margin performance drivers? - The strong margin performance was attributed to increased volumes and investments in technology that improved operational efficiency [49][50] Question: Are there potential delays in new work coming into the pipeline? - There has been some slowdown in the civilian agency space, but the overall pipeline volume remains healthy, with a 25% increase in proposals in preparation [53][54]

Core Viewpoint - Maximus reported quarterly earnings of $2.01 per share, significantly exceeding the Zacks Consensus Estimate of $1.37 per share, marking a 46.72% earnings surprise [1]. Financial Performance - The company achieved revenues of $1.36 billion for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 5.83% and showing a slight increase from $1.35 billion year-over-year [2]. - Over the last four quarters, Maximus has exceeded consensus EPS estimates three times and topped revenue estimates four times [2]. Stock Performance and Outlook - Maximus shares have declined approximately 10% since the beginning of the year, compared to a 4.3% decline in the S&P 500 [3]. - The current consensus EPS estimate for the upcoming quarter is $1.52 on revenues of $1.3 billion, and for the current fiscal year, it is $6.08 on revenues of $5.31 billion [7]. Industry Context - The Government Services industry, to which Maximus belongs, is currently ranked in the bottom 8% of over 250 Zacks industries, indicating potential challenges ahead [8].

Revenue Performance - Revenue for Q2 FY2025 increased 1.0% to $1.36 billion, with organic growth of 3.0% driven primarily by strong performance in the U.S. Federal Services Segment[3]. - U.S. Federal Services Segment revenue increased 10.9% to $777.9 million, all organic growth from multiple sources[5]. - U.S. Services Segment revenue decreased 9.0% to $442.4 million, attributed to prior year excess volumes from Medicaid-related activities[8]. - Outside the U.S. Segment revenue decreased to $141.5 million, with positive organic growth of 4.6% partially offsetting the decline[10]. - Revenue for the three months ended March 31, 2025, was $1,361,786 thousand, a slight increase from $1,348,357 thousand for the same period in 2024, representing a growth of 1.73%[38]. Earnings and Profitability - Diluted earnings per share were $1.69, and adjusted diluted earnings per share were $2.01, compared to $1.31 and $1.57 for the prior year period[4]. - Net income for the three months ended March 31, 2025, was $96,569 thousand, up from $80,510 thousand in the prior year, indicating a year-over-year increase of 19.93%[37]. - Gross profit margin improved to 24.9% for the three months ended March 31, 2025, compared to 23.6% for the same period in 2024[38]. - Operating income for the three months ended March 31, 2025, was $152,968 thousand, up from $127,494 thousand in the same period last year, reflecting a growth of 19.98%[38]. - Adjusted EBITDA for the three months ended March 31, 2025, was $186,406,000, compared to $157,340,000 in the prior year, reflecting a year-over-year increase of 18.5%[44]. - The adjusted EBITDA margin improved to 13.7% for the three months ended March 31, 2025, up from 11.7% in the same quarter of 2024[44]. Guidance and Forecast - Full year revenue guidance for FY2025 is raised to a range of $5.25 billion to $5.4 billion, an increase of $50 million[17]. - Adjusted diluted earnings per share guidance for FY2025 is now expected to range between $6.30 and $6.60, an increase of $0.40[19]. - Free cash flow guidance remains unchanged at between $355 million and $385 million for FY2025[20]. Cash Flow and Assets - Cash, cash equivalents, and restricted cash at the end of the period increased to $155,938 thousand from $118,340 thousand year-over-year, marking a growth of 31.7%[37]. - Cash flows from operating activities for the three months ended March 31, 2025, were $42,714 thousand, down from $130,488 thousand in the prior year, a decline of 67.24%[37]. - Free cash flow for the three months ended March 31, 2025, was $25,508,000, a significant decline from $105,188,000 in the same quarter of 2024, representing a decrease of 75.7%[43]. - The company reported net cash used in operating activities of $(37,282,000) for the six months ended March 31, 2025, compared to $152,096,000 in the same period of 2024[43]. Balance Sheet - Total assets increased to $4,199,772 thousand as of March 31, 2025, compared to $4,131,508 thousand on September 30, 2024, reflecting a growth of 1.65%[35]. - Total liabilities rose to $2,532,298 thousand as of March 31, 2025, compared to $2,288,693 thousand on September 30, 2024, an increase of 10.66%[35]. - The company reported a decrease in accounts receivable, net, to $1,097,404 thousand as of March 31, 2025, from $879,514 thousand on September 30, 2024, indicating a significant increase of 24.83%[35]. Dividends and Amortization - The company paid cash dividends of $16,901 thousand during the three months ended March 31, 2025, compared to $18,309 thousand in the same period last year, a decrease of 7.66%[37]. - Amortization of intangible assets for the three months ended March 31, 2025, was $22,996,000, slightly higher than $21,641,000 in the same period of 2024, indicating a year-over-year increase of 6.3%[44]. Segment Performance - Maximus has divested businesses from its Outside the U.S. Segment during fiscal years 2025 and 2024, impacting overall segment performance[40]. - Net income for the six months ended March 31, 2025, was $137,765,000, slightly down from $144,658,000 in the same period of 2024, indicating a decrease of 4.8%[44].

Financial Performance - Revenue for Q2 FY25 was $136 billion, representing a 30% organic growth year-over-year[12] - Adjusted EBITDA margin for Q2 FY25 was 137%[12] - U S Federal Services revenue increased by 109% to $7779 million in Q2 FY25[39][42] - U S Services revenue decreased by 90% to $4424 million in Q2 FY25[39][45] - Outside the U S revenue decreased by 119% to $1415 million in Q2 FY25, but organic revenue growth was 46%[39][48][49] Guidance and Outlook - Fiscal Year 2025 revenue guidance is updated to $525 billion - $54 billion, implying approximately 2% organic growth[54][56] - Adjusted diluted EPS guidance for FY25 increases by $040 to $630 - $660[56] - Free cash flow guidance for FY25 remains unchanged at $355 million - $385 million[54] Strategic Initiatives and New Business - New awards signed contracts year-to-date reached $29 billion, with unsigned contracts at $451 million[33] - The total pipeline of sales opportunities is $412 billion, with 55% representing new work and 60% in the U S Federal Services Segment[33] - Proposals in preparation and submitted are 25% higher than last quarter, indicating increased government procurement activity[28]