MAXIMUS(US:MMS)2023-08-03 19:37Financial Performance - Revenue for Q3 FY2023 was $1,188.7 million, a 5.6% increase from $1,125.8 million in Q3 FY2022[92] - Gross profit for Q3 FY2023 was $264.4 million, representing a gross profit margin of 22.2%, up from 18.7% in Q3 FY2022[92] - Operating income for Q3 FY2023 was $58.4 million, with an operating margin of 4.9%, slightly up from 4.8% in Q3 FY2022[92] - Net income for Q3 FY2023 was $30.9 million, down from $31.3 million in Q3 FY2022, resulting in earnings per share of $0.50[92] - Revenue for the nine months ended June 30, 2023, was $3,644.8 million, a 5.5% increase from $3,454.0 million in the same period of FY2022[95] - Net income for the nine months ended June 30, 2023, was $102,646,000, down 24% from $134,761,000 for the same period in 2022[146] Expenses and Costs - Selling, general, and administrative (SG&A) expenses increased to $182.5 million in Q3 FY2023, accounting for 15.4% of revenue, compared to 11.8% in Q3 FY2022[92] - Interest expense increased significantly to $21.0 million in Q3 FY2023 from $10.8 million in Q3 FY2022, primarily due to rising market rates[100] - The company incurred $22.1 million in expenses related to a cybersecurity incident, affecting approximately 14.5 to 17.5 million individuals[92] - U.S. Services revenue for the three months ended June 30, 2023, rose by 12.5% to $449,061,000, while costs increased by 7.8% to $350,523,000[108] Margins and Ratios - The effective tax rate for Q3 FY2023 was 15.1%, down from 24.1% in Q3 FY2022, with expectations for FY2023 to be between 23.0% and 23.5%[102] - The operating margin for U.S. Services for the three months ended June 30, 2023, was 10.5%, compared to 8.0% in the same period of 2022[108] - The company anticipates full-year operating margins for U.S. Federal Services to range between 10% and 11%[106] - The Consolidated Net Total Leverage Ratio was 2.45 as of June 30, 2023, which is below the maximum allowable ratio of 4.00:1.00[137] - The Consolidated Net Interest Coverage Ratio was 6.39 for the trailing twelve months ended June 30, 2023, exceeding the minimum requirement of 3.00:1.00[138] Cash Flow and Liquidity - As of June 30, 2023, the company had $35.0 million in cash and cash equivalents, sufficient for operating requirements and long-term debt repayments[119] - For the nine months ended June 30, 2023, net cash provided by operating activities was $169.8 million, consistent with the prior year despite a decline in net income[128] - The company reported a net cash outflow of $45.1 million in cash and cash equivalents and restricted cash for the nine months ended June 30, 2023, compared to a net outflow of $45.9 million in the prior year[127] - Free cash flow for the nine months ended June 30, 2023, was $110.9 million, down from $133.8 million in the prior year[140] Strategic Focus - The company is focusing on three strategic pillars: customer services, future of health, and advanced technologies for modernization to drive growth over the next three to five years[89] Segment Performance - U.S. Federal Services revenue for the three months ended June 30, 2023, increased by 11.1% to $583,960,000 compared to $525,519,000 in the same period of 2022[104] - Gross profit for U.S. Federal Services for the three months ended June 30, 2023, was $156,945,000, with a gross profit margin of 26.9%, up from 23.6% in the prior year[104] - Outside the U.S. Segment revenue for the three months ended June 30, 2023, decreased by 22.5% to $155,656,000, with a gross profit margin of 5.7%[112] - The Outside the U.S. Segment is expected to finish the year in a loss position, impacted by macroeconomic challenges and contract scope reductions[118] Financial Management - The effective cash interest rate as of June 30, 2023, is 5.9%, reflecting the drivers of cash interest payments[123] - The company entered into additional interest rate swaps, bringing the total balance of its credit facility subject to fixed rates to $650 million, enhancing predictability in interest payments[124] - The company amended its debt and interest rate swaps to use interest rates based on the Secured Overnight Financing Rate (SOFR), replacing the previous LIBOR basis[124] - Derivative instruments are utilized to manage selected interest rate exposures, indicating a proactive approach to financial risk management[147] Operational Efficiency - The company experienced a decline in Days Sales Outstanding (DSO) from 62 days to 61 days between September 30, 2022, and June 30, 2023, indicating improved collections[132] - Days Sales Outstanding (DSO) is calculated by dividing billed and unbilled receivable balances at the end of each quarter by revenue per day, indicating efficiency in converting revenue into cash receipts[146] Acquisitions and Intangible Assets - The company has made several acquisitions in recent years, impacting its financial performance and resulting in significant intangible assets[145] - For the three months ended June 30, 2023, adjusted operating income excluding amortization of intangible assets was $81,819,000, a 6.6% increase from $77,247,000 in the same period of 2022[146] - The adjusted operating income margin excluding amortization of intangible assets remained stable at 6.9% for both June 30, 2023, and June 30, 2022[146] - Amortization of intangible assets for the three months ended June 30, 2023, was $23,431,000, compared to $22,690,000 for the same period in 2022[146] Cash Flow Management - The company’s principal source of financing comes from customer payments, emphasizing the importance of cash flow management[146] - The company has not experienced material changes in market rate risk disclosures related to interest rates and foreign currency exchange rates during the nine months ended June 30, 2023[147]