MAXIMUS(MMS) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For fiscal year 2024, consolidated revenue increased by 8.2% to $5.31 billion, with organic revenue growth of 8.8$6.11, a significant increase from $3.83 in the prior year [30][29] - Free cash flow exceeded$400 million, representing nearly 80% growth over the prior year [29][36] - Adjusted EBITDA margin for fiscal year 2024 was 11.6%, compared to 9.1% in the prior year [31][30] Business Line Data and Key Metrics Changes - US Federal Services segment revenue increased by 13.9% to $2.74 billion, driven by volume growth on expanded clinical programs [33] - US Services segment revenue grew by 5.5$1.91 billion, supported by strong performance in core Medicaid-related activities [34] - Outside the US segment revenue decreased by 4.6% to $657 million, impacted by prior year divestitures [35] Market Data and Key Metrics Changes - The total pipeline as of September 30 was$54.3 billion, up from $44.1 billion in the previous quarter [23] - Approximately 68$128 million task order with the IRS [16] - The company aims for a compound annual growth rate of 5% over the next three years, consistent with mid-single-digit organic growth targets [15] - The company is committed to maintaining a disciplined approach to capital allocation, prioritizing organic investments and strategic acquisitions [38][39] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate the transition to a new administration, emphasizing its established role as a trusted partner to governments [12][26] - The company anticipates a return to a more normal volume of rebids and procurement activity in fiscal year 2025 [22][62] - Management highlighted the importance of continuing to deliver high-quality services to over 100 million Americans, particularly in entitlement programs [55] Other Important Information - The company repurchased approximately 0.9 million shares for about $73 million during fiscal year 2024, with an additional 0.5 million shares repurchased post-year-end [37] - The company is currently involved in legal proceedings regarding the CMS CCO contract, with a stay of award until March 15, 2025 [22] Q&A Session Summary Question: Update on the CCO contract - Management confirmed that the GAO upheld a protest regarding the procurement, and the administration has indicated that award announcements will not occur until March 2025 [53] Question: Comparison of Trump 1.0 and Trump 2.0 administrations - Management noted that the current administration has more experience, which may reduce delays in procurement processes compared to the previous administration [54] Question: Clarification on revenue guidance and margins - Management explained that fiscal year 2024 margins benefited from excess volumes that are not expected to recur in fiscal year 2025, leading to a more normalized margin outlook [58] Question: Backlog and book-to-bill dynamics - Management indicated that the book-to-bill ratio is expected to trend towards 1.0 as rebid activity normalizes in fiscal year 2025 [62]