Recent Quotes View Full List My Watchlist Create Watchlist Indicators DJI Nasdaq Composite SPX Gold Crude Oil Hydroworld Market Index Markets Stocks ETFs Tools Overview News Currencies International Treasuries Maximus Reports Fiscal Year 2024 First Quarter Results By: Maximus via Business Wire February 07, 2024 at 16:05 PM EST Raises FY24 Earnings & Free Cash Flow Guidance Following Improved Margin Outlook Maximus (NYSE: MMS), a leading provider of government services worldwide, reported financial results for the three months ended December 31, 2023. Highlights for the first quarter of fiscal year 2024 include: Revenue increased 6.2% to $1.33 billion, compared to $1.25 billion for the prior year period. Organic growth was 6.9% and driven by expanded programs as well as resumed programs tied to Medicaid redeterminations. Diluted earnings per share were $1.04 and adjusted diluted earnings per share were $1.34, compared to $0.65 and $0.94, respectively, for the prior year period. The company is raising earnings and free cash flow guidance for fiscal year 2024. Adjusted operating income guidance is increasing by $15 million, adjusted diluted earnings per share by $0.15, and free cash flow by $10 million. A quarterly cash dividend of $0.30 per share is payable on February 29, 2024, to shareholders of record on February 15, 2024. "Our operational performance was excellent this quarter as we focused on delivery of programs critical to the wellbeing of individuals and families, including veteran exams, redeterminations for Medicaid, return to repayment for millions of borrowers, and recently-completed open enrollment," said Bruce Caswell, President and Chief Executive Officer. "The improved outlook for fiscal 2024 signifies the business is in great health and benefiting from scale. We continue to focus on creating growth opportunities for our employees while using technology to improve the citizen experience and deliver on our customers' missions." Caswell continued, "More broadly, we believe the current economic climate will continue to favor Maximus, given our current base underpinned by essential work and a strategy squarely aligned to prioritized areas of government spend." First Quarter Results Revenue for the first quarter of fiscal year 2024 increased 6.2% to $1.33 billion, compared to $1.25 billion for the prior year period. Organic growth was 6.9% from expanded programs in the domestic segments as well as resumed programs in the U.S. Services Segment tied to the restart of Medicaid redeterminations. For the first quarter of fiscal year 2024, operating margin was 8.1% and the adjusted operating margin was 9.9%. This compares to margins of 6.0% and 7.9%, respectively, for the prior year period. Diluted earnings per share were $1.04 and adjusted diluted earnings per share were $1.34. This compares to $0.65 and $0.94, respectively, for the prior-year period. The margin improvement is attributable to higher transactional volumes across both expanded and resumed programs. U.S. Federal Services Segment U.S. Federal Services Segment revenue for the first quarter of fiscal year 2024 increased 9.5% to $677.1 million, compared to $618.2 million reported for the prior year period. All growth was organic and driven primarily by volume growth on expanded programs, including the VA's Medical Disability Exam (MDE) contracts. The segment operating margin for the first quarter of fiscal year 2024 was 10.2%. This compares to 8.3% reported for the prior year, which reflected the hiring of resources in anticipation of the higher volumes. The anticipated profile for the U.S. Federal Services Segment is an increasing margin across the year with a full-year margin expected to range between 11% and 12%. U.S. Services Segment U.S. Services Segment revenue for the first quarter of fiscal year 2024 increased 11.5% to $489.8 million, compared to $439.5 million reported in the prior year period. All growth was organic and driven by the resumption of Medicaid redetermination activities and expanded programs in eligibility support and clinical services. The segment operating margin for the first quarter of fiscal year 2024 was 13.5%. This compares to 8.6% reported for the prior year period when redetermination activities were paused. Since resumed, beneficiary engagement drove the highest margin expected for the segment in fiscal year 2024, with slight moderation expected in subsequent quarters as engagement levels normalize. The full-year fiscal 2024 margin for the U.S. Services Segment is expected to range between 11% and 12%. Outside the U.S. Segment Outside the U.S. Segment revenue for the first quarter of fiscal year 2024 decreased 16.4% to $160.1 million, compared to $191.6 million reported in the prior year period. Approximately 7% of decline was attributable to disposal of businesses and the remaining decline was due to both lower employment services volumes and currency impacts. The segment broke even in the first quarter of fiscal year 2024. This compares to an operating margin of 5.3% in the prior year period which benefited from higher employment services volumes. The Outside the U.S. Segment is expected to be slightly above breakeven for the full-year fiscal 2024. Continued shaping of the segment to reduce volatility and deliver consistent profitability is a management priority this year. Sales and Pipeline Year-to-date signed contract awards at December 31, 2023, totaled $422 million, and contracts pending (awarded but unsigned) totaled $802 million. The book-to-bill ratio at December 31, 2023, was 1.2x calculated on a trailing twelve-month basis. The sales pipeline at December 31, 2023, totaled $37.7 billion, comprised of approximately $933 million in proposals pending, $1.01 billion in proposals in preparation, and $35.7 billion in opportunities tracking. New work opportunities represent approximately 77% of the total sales pipeline. Balance Sheet and Cash Flows At December 31, 2023, cash and cash equivalents totaled $104.2 million, and gross debt was $1.32 billion. The ratio of debt, net of allowed cash, to adjusted EBITDA for the quarter ended December 31, 2023, as calculated in accordance with our credit agreement, was 2.1x. This compares to 2.2x at September 30, 2023. For the first quarter of fiscal year 2024, cash provided operating activities totaled $21.6 million and free cash flow was an outflow of approximately $1 million. Days sales outstanding (DSO) were 59 days as of December 31, 2023, reflecting good collections and offset by seasonality from the timing of payments that were expected this quarter. Free cash flow guidance is increasing for the full fiscal year 2024. On January 5, 2024, our Board of Directors declared a quarterly cash dividend of $0.30 for each share of our common stock outstanding. The dividend is payable on February 29, 2024, to shareholders of record on February 15, 2024. Raising FY24 Earnings and Free Cash Flow Guidance Maximus is raising fiscal year 2024 earnings and free cash flow guidance following first quarter results and improved margin outlook for the rest of the fiscal year. Revenue guidance is maintained between $5.05 billion and $5.20 billion. Adjusted operating income is now expected to range between $503 million and $528 million, representing an increase of $15 million from prior guidance. Adjusted operating income excludes an estimated $88 million of expense for amortization of intangible assets and $1 million of divestiture-related charges incurred this quarter. Adjusted diluted earnings per share is now expected to range between $5.20 and $5.50 per share, representing an increase of $0.15 per share from prior guidance. Free cash flow is now expected to range between $300 million and $350 million as a result of the increased earnings guidance. Other estimates include interest expense of approximately $73 million, an effective income tax rate between 24.5% and 25.5%, and weighted average shares outstanding between 62.0 million and 62.2 million shares for fiscal year 2024. Conference Call and Webcast Information Maximus will host a conference call tomorrow, February 8, 2024, 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 and divestiture-related charges, adjusted 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, 2023, which was filed with the Securities and Exchange Commission (SEC) on November 16, 2023. The Company's SEC reports are accessible on maximus.com. Maximus, Inc. Consolidated Statements of Operations (Unaudited) For the Three Months Ended December 31, 2023 December 31, 2022 (in thousands, except per share amounts) Revenue $ 1,327,041 $ 1,249,246 Cost of revenue 1,026,987 1,004,499 Gross profit 300,054 244,747 Selling, general, and administrative expenses 169,195 146,452 Amortization of intangible assets 23,349 23,518 Operating income 107,510 74,777 Interest expense 21,507 21,606 Other expense/(income), net 488 (266 ) Income before income taxes 85,515 53,437 Provision for income taxes 21,367 13,442 Net income $ 64,148 $ 39,995 Earnings per share: Basic $ 1.05 $ 0.65 Diluted $ 1.04 $ 0.65 Weighted average shares outstanding: Basic 61,322 61,117 Diluted 61,535 61,196 Dividends declared per share $ 0.30 $ 0.28 Maximus, Inc. Consolidated Balance Sheets December 31, 2023 September 30, 2023 (unaudited) (in thousands) Assets: Cash and cash equivalents $ 104,186 $ 65,405 Accounts receivable, net 860,409 826,873 Income taxes receivable 15,850 16,556 Prepaid expenses and other current assets 129,174 146,632 Total current assets 1,109,619 1,055,466 Property and equipment, net 34,976 38,831 Capitalized software, net 125,383 107,811 Operating lease right-of-use assets 154,929 163,929 Goodwill 1,781,092 1,779,215 Intangible assets, net 680,309 703,648 Deferred contract costs, net 46,439 45,372 Deferred compensation plan assets 47,273 42,919 Deferred income taxes 2,204 2,459 Other assets 34,637 46,147 Total assets $ 4,016,861 $ 3,985,797 Liabilities and Shareholders' Equity: Liabilities: Accounts payable and accrued liabilities $ 267,623 $ 282,081 Accrued compensation and benefits 115,864 194,251 Deferred revenue, current portion 63,032 60,477 Income taxes payable 23,717 451 Long-term debt, current portion 90,443 86,844 Operating lease liabilities, current portion 48,490 49,852 Other current liabilities 49,197 49,058 Total current liabilities 658,366 723,014 Deferred revenue, non-current portion 37,221 38,849 Deferred income taxes 198,317 203,898 Long-term debt, non-current portion 1,222,243 1,163,149 Deferred compensation plan liabilities, non-current portion 51,507 46,432 Operating lease liabilities, non-current portion 118,594 129,367 Other liabilities 12,807 13,253 Total liabilities 2,299,055 2,317,962 Shareholders' equity: Common stock, no par value; 100,000 shares authorized; 61,031 and 60,998 shares issued and outstanding as of December 31, 2023 and September 30 2023, respectively 585,278 577,898 Accumulated other comprehensive loss (30,588 ) (27,615 ) Retained earnings 1,163,116 1,117,552 Total shareholders' equity 1,717,806 1,667,835 Total liabilities and shareholders' equity $ 4,016,861 $ 3,985,797 Maximus, Inc. Consolidated Statements of Cash Flows (Unaudited) For the Three Months Ended December 31, 2023 December 31, 2022 (in thousands) Cash flows from operating activities: Net income $ 64,148 $ 39,995 Adjustments to reconcile net income to cash flows from operations: Depreciation and amortization of property, equipment, and capitalized software 8,411 12,280 Amortization of intangible assets 23,349 23,518 Amortization of debt issuance costs and debt discount 601 1,034 Deferred income taxes (2,165 ) (1,331 ) Stock compensation expense 9,427 4,403 Loss on sale of a businesses 1,018 — Change in assets and liabilities, net of effects of business combinations: Accounts receivable (35,379 ) (200,749 ) Prepaid expenses and other current assets 10,056 10,624 Deferred contract costs (888 ) (1,013 ) Accounts payable and accrued liabilities (15,543 ) 3,642 Accrued compensation and benefits (67,392 ) (53,271 ) Deferred revenue 877 14,764 Income taxes 22,250 9,465 Operating lease right-of-use assets and liabilities (1,088 ) (948 ) Other assets and liabilities 3,926 2,928 Net cash provided by/(used in) operating activities 21,608 (134,659 ) Cash flows from investing activities: Purchases of property and equipment and capitalized software (22,247 ) (15,697 ) Proceeds from divestitures 1,815 — Net cash used in investing activities (20,432 ) (15,697 ) Cash flows from financing activities: Cash dividends paid to Maximus shareholders (18,299 ) (17,017 ) Tax withholding related to RSU vesting (13,455 ) (8,475 ) Payments for contingent consideration (2,819 ) (1,415 ) Proceeds from borrowings 228,409 268,702 Principal payments for debt (166,658 ) (61,355 ) Cash-collateralized escrow liabilities 1,204 (9,473 ) Net cash provided by financing activities 28,382 170,967 Effect of exchange rate changes on cash, cash equivalents, and restricted cash 1,846 2,421 Net change in cash, cash equivalents, and restricted cash 31,404 23,032 Cash, cash equivalents, and restricted cash, beginning of period 122,091 136,795 Cash, cash equivalents, and restricted cash, end of period $ 153,495 $ 159,827 Maximus, Inc. Consolidated Results of Operations by Segment (Unaudited) For the Three Months Ended December 31, 2023 December 31, 2022 Amount % (1) Amount % (1) (dollars in thousands) Revenue: U.S. Federal Services $ 677,078 $ 618,167 U.S. Services 489,845 439,478 Outside the U.S. 160,118 191,601 Revenue $ 1,327,041 $ 1,249,246 Gross profit: U.S. Federal Services $ 156,662 23.1 % $ 122,694 19.8 % U.S. Services 118,363 24.2 % 83,598 19.0 % Outside the U.S. 25,029 15.6 % 38,455 20.1 % Gross profit $ 300,054 22.6 % $ 244,747 19.6 % Selling, general, and administrative expenses: U.S. Federal Services $ 87,855 13.0 % $ 71,649 11.6 % U.S. Services 52,300 10.7 % 45,842 10.4 % Outside the U.S. 25,141 15.7 % 28,389 14.8 % Divestiture-related charges (2) 1,018 NM — NM Other (3) 2,881 NM 572 NM Selling, general, and administrative expenses $ 169,195 12.7 % $ 146,452 11.7 % Operating income: U.S. Federal Services $ 68,807 10.2 % $ 51,045 8.3 % U.S. Services 66,063 13.5 % 37,756 8.6 % Outside the U.S. (112 ) (0.1 )% 10,066 5.3 % Amortization of intangible assets (23,349 ) NM (23,518 ) NM Divestiture-related charges (2) (1,018 ) NM — NM Other (3) (2,881 ) NM (572 ) NM Operating income $ 107,510 8.1 % $ 74,777 6.0 % (1) Percentage of respective segment revenue. Percentages not considered meaningful are marked "NM." (2) In November 2023, we sold our businesses in Italy and Singapore, as well as our employment services business in Canada, recording a loss of $1.0 million. We previously recorded an impairment charge of $2.9 million related to these assets. (3) Other expenses includes credits and costs that are not allocated to a particular segment. This includes expenses incurred as part of our acquisitions, as well as potential acquisitions which have not been or may not be completed. Maximus, Inc. Consolidated Free Cash Flows - Non-GAAP (Unaudited) For the Three Months Ended December 31, 2023 December 31, 2022 (in thousands) Net cash provided by/(used in) operating activities 21,608 (134,659 ) Purchases of property and equipment and capitalized software (22,247 ) (15,697 ) Free cash flow (Non-GAAP) $ (639 ) $ (150,356 ) Maximus, Inc. Non-GAAP Adjusted Results Excluding Amortization of Intangible Assets (Unaudited) For the Three Months Ended December 31, 2023 December 31, 2022 (dollars in thousands, except per share data) Operating income $ 107,510 $ 74,777 Add back: Amortization of intangible assets 23,349 23,518 Add back: Divestiture-related charges 1,018 — Adjusted operating income excluding amortization of intangible assets and divestiture-related charges (Non-GAAP) $ 131,877 $ 98,295 Adjusted operating income margin excluding amortization of intangible assets and divestiture-related charges (Non-GAAP) 9.9 % 7.9 % Net income $ 64,148 $ 39,995 Add back: Amortization of intangible assets, net of tax 17,208 17,360 Add back: Divestiture-related charges 1,018 — Adjusted net income excluding amortization of intangible assets and divestiture-related charges (Non-GAAP) $ 82,374 $ 57,355 Diluted earnings per share $ 1.04 $ 0.65 Add back: Effect of amortization of intangible assets on diluted earnings per share 0.28 0.29 Add back: Effect of divestiture-related charges on diluted earnings per share 0.02 — Adjusted diluted earnings per share excluding amortization of intangible assets and divestiture-related charges (Non-GAAP) $ 1.34 $ 0.94 View source version on businesswire.com: https://www.businesswire.com/news/home/20240207818524/en/Contacts James Francis, VP - IR Jessica Batt, VP - IR & ESG IR@maximus.com Data & News supplied by www.cloudquote.io Stock quotes supplied by Barchart Quotes delayed at least 20 minutes. 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Maximus Reports Fiscal Year 2024 First Quarter Results By: Maximus via Business Wire February 07, 2024 at 16:05 PM EST Raises FY24 Earnings & Free Cash Flow Guidance Following Improved Margin Outlook Maximus (NYSE: MMS), a leading provider of government services worldwide, reported financial results for the three months ended December 31, 2023. Highlights for the first quarter of fiscal year 2024 include: Revenue increased 6.2% to $1.33 billion, compared to $1.25 billion for the prior year period. Organic growth was 6.9% and driven by expanded programs as well as resumed programs tied to Medicaid redeterminations. Diluted earnings per share were $1.04 and adjusted diluted earnings per share were $1.34, compared to $0.65 and $0.94, respectively, for the prior year period. The company is raising earnings and free cash flow guidance for fiscal year 2024. Adjusted operating income guidance is increasing by $15 million, adjusted diluted earnings per share by $0.15, and free cash flow by $10 million. A quarterly cash dividend of $0.30 per share is payable on February 29, 2024, to shareholders of record on February 15, 2024. "Our operational performance was excellent this quarter as we focused on delivery of programs critical to the wellbeing of individuals and families, including veteran exams, redeterminations for Medicaid, return to repayment for millions of borrowers, and recently-completed open enrollment," said Bruce Caswell, President and Chief Executive Officer. "The improved outlook for fiscal 2024 signifies the business is in great health and benefiting from scale. We continue to focus on creating growth opportunities for our employees while using technology to improve the citizen experience and deliver on our customers' missions." Caswell continued, "More broadly, we believe the current economic climate will continue to favor Maximus, given our current base underpinned by essential work and a strategy squarely aligned to prioritized areas of government spend." First Quarter Results Revenue for the first quarter of fiscal year 2024 increased 6.2% to $1.33 billion, compared to $1.25 billion for the prior year period. Organic growth was 6.9% from expanded programs in the domestic segments as well as resumed programs in the U.S. Services Segment tied to the restart of Medicaid redeterminations. For the first quarter of fiscal year 2024, operating margin was 8.1% and the adjusted operating margin was 9.9%. This compares to margins of 6.0% and 7.9%, respectively, for the prior year period. Diluted earnings per share were $1.04 and adjusted diluted earnings per share were $1.34. This compares to $0.65 and $0.94, respectively, for the prior-year period. The margin improvement is attributable to higher transactional volumes across both expanded and resumed programs. U.S. Federal Services Segment U.S. Federal Services Segment revenue for the first quarter of fiscal year 2024 increased 9.5% to $677.1 million, compared to $618.2 million reported for the prior year period. All growth was organic and driven primarily by volume growth on expanded programs, including the VA's Medical Disability Exam (MDE) contracts. The segment operating margin for the first quarter of fiscal year 2024 was 10.2%. This compares to 8.3% reported for the prior year, which reflected the hiring of resources in anticipation of the higher volumes. The anticipated profile for the U.S. Federal Services Segment is an increasing margin across the year with a full-year margin expected to range between 11% and 12%. U.S. Services Segment U.S. Services Segment revenue for the first quarter of fiscal year 2024 increased 11.5% to $489.8 million, compared to $439.5 million reported in the prior year period. All growth was organic and driven by the resumption of Medicaid redetermination activities and expanded programs in eligibility support and clinical services. The segment operating margin for the first quarter of fiscal year 2024 was 13.5%. This compares to 8.6% reported for the prior year period when redetermination activities were paused. Since resumed, beneficiary engagement drove the highest margin expected for the segment in fiscal year 2024, with slight moderation expected in subsequent quarters as engagement levels normalize. The full-year fiscal 2024 margin for the U.S. Services Segment is expected to range between 11% and 12%. Outside the U.S. Segment Outside the U.S. Segment revenue for the first quarter of fiscal year 2024 decreased 16.4% to $160.1 million, compared to $191.6 million reported in the prior year period. Approximately 7% of decline was attributable to disposal of businesses and the remaining decline was due to both lower employment services volumes and currency impacts. The segment broke even in the first quarter of fiscal year 2024. This compares to an operating margin of 5.3% in the prior year period which benefited from higher employment services volumes. The Outside the U.S. Segment is expected to be slightly above breakeven for the full-year fiscal 2024. Continued shaping of the segment to reduce volatility and deliver consistent profitability is a management priority this year. Sales and Pipeline Year-to-date signed contract awards at December 31, 2023, totaled $422 million, and contracts pending (awarded but unsigned) totaled $802 million. The book-to-bill ratio at December 31, 2023, was 1.2x calculated on a trailing twelve-month basis. The sales pipeline at December 31, 2023, totaled $37.7 billion, comprised of approximately $933 million in proposals pending, $1.01 billion in proposals in preparation, and $35.7 billion in opportunities tracking. New work opportunities represent approximately 77% of the total sales pipeline. Balance Sheet and Cash Flows At December 31, 2023, cash and cash equivalents totaled $104.2 million, and gross debt was $1.32 billion. The ratio of debt, net of allowed cash, to adjusted EBITDA for the quarter ended December 31, 2023, as calculated in accordance with our credit agreement, was 2.1x. This compares to 2.2x at September 30, 2023. For the first quarter of fiscal year 2024, cash provided operating activities totaled $21.6 million and free cash flow was an outflow of approximately $1 million. Days sales outstanding (DSO) were 59 days as of December 31, 2023, reflecting good collections and offset by seasonality from the timing of payments that were expected this quarter. Free cash flow guidance is increasing for the full fiscal year 2024. On January 5, 2024, our Board of Directors declared a quarterly cash dividend of $0.30 for each share of our common stock outstanding. The dividend is payable on February 29, 2024, to shareholders of record on February 15, 2024. Raising FY24 Earnings and Free Cash Flow Guidance Maximus is raising fiscal year 2024 earnings and free cash flow guidance following first quarter results and improved margin outlook for the rest of the fiscal year. Revenue guidance is maintained between $5.05 billion and $5.20 billion. Adjusted operating income is now expected to range between $503 million and $528 million, representing an increase of $15 million from prior guidance. Adjusted operating income excludes an estimated $88 million of expense for amortization of intangible assets and $1 million of divestiture-related charges incurred this quarter. Adjusted diluted earnings per share is now expected to range between $5.20 and $5.50 per share, representing an increase of $0.15 per share from prior guidance. Free cash flow is now expected to range between $300 million and $350 million as a result of the increased earnings guidance. Other estimates include interest expense of approximately $73 million, an effective income tax rate between 24.5% and 25.5%, and weighted average shares outstanding between 62.0 million and 62.2 million shares for fiscal year 2024. Conference Call and Webcast Information Maximus will host a conference call tomorrow, February 8, 2024, 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 and divestiture-related charges, adjusted 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, 2023, which was filed with the Securities and Exchange Commission (SEC) on November 16, 2023. The Company's SEC reports are accessible on maximus.com. Maximus, Inc. Consolidated Statements of Operations (Unaudited) For the Three Months Ended December 31, 2023 December 31, 2022 (in thousands, except per share amounts) Revenue $ 1,327,041 $ 1,249,246 Cost of revenue 1,026,987 1,004,499 Gross profit 300,054 244,747 Selling, general, and administrative expenses 169,195 146,452 Amortization of intangible assets 23,349 23,518 Operating income 107,510 74,777 Interest expense 21,507 21,606 Other expense/(income), net 488 (266 ) Income before income taxes 85,515 53,437 Provision for income taxes 21,367 13,442 Net income $ 64,148 $ 39,995 Earnings per share: Basic $ 1.05 $ 0.65 Diluted $ 1.04 $ 0.65 Weighted average shares outstanding: Basic 61,322 61,117 Diluted 61,535 61,196 Dividends declared per share $ 0.30 $ 0.28 Maximus, Inc. Consolidated Balance Sheets December 31, 2023 September 30, 2023 (unaudited) (in thousands) Assets: Cash and cash equivalents $ 104,186 $ 65,405 Accounts receivable, net 860,409 826,873 Income taxes receivable 15,850 16,556 Prepaid expenses and other current assets 129,174 146,632 Total current assets 1,109,619 1,055,466 Property and equipment, net 34,976 38,831 Capitalized software, net 125,383 107,811 Operating lease right-of-use assets 154,929 163,929 Goodwill 1,781,092 1,779,215 Intangible assets, net 680,309 703,648 Deferred contract costs, net 46,439 45,372 Deferred compensation plan assets 47,273 42,919 Deferred income taxes 2,204 2,459 Other assets 34,637 46,147 Total assets $ 4,016,861 $ 3,985,797 Liabilities and Shareholders' Equity: Liabilities: Accounts payable and accrued liabilities $ 267,623 $ 282,081 Accrued compensation and benefits 115,864 194,251 Deferred revenue, current portion 63,032 60,477 Income taxes payable 23,717 451 Long-term debt, current portion 90,443 86,844 Operating lease liabilities, current portion 48,490 49,852 Other current liabilities 49,197 49,058 Total current liabilities 658,366 723,014 Deferred revenue, non-current portion 37,221 38,849 Deferred income taxes 198,317 203,898 Long-term debt, non-current portion 1,222,243 1,163,149 Deferred compensation plan liabilities, non-current portion 51,507 46,432 Operating lease liabilities, non-current portion 118,594 129,367 Other liabilities 12,807 13,253 Total liabilities 2,299,055 2,317,962 Shareholders' equity: Common stock, no par value; 100,000 shares authorized; 61,031 and 60,998 shares issued and outstanding as of December 31, 2023 and September 30 2023, respectively 585,278 577,898 Accumulated other comprehensive loss (30,588 ) (27,615 ) Retained earnings 1,163,116 1,117,552 Total shareholders' equity 1,717,806 1,667,835 Total liabilities and shareholders' equity $ 4,016,861 $ 3,985,797 Maximus, Inc. Consolidated Statements of Cash Flows (Unaudited) For the Three Months Ended December 31, 2023 December 31, 2022 (in thousands) Cash flows from operating activities: Net income $ 64,148 $ 39,995 Adjustments to reconcile net income to cash flows from operations: Depreciation and amortization of property, equipment, and capitalized software 8,411 12,280 Amortization of intangible assets 23,349 23,518 Amortization of debt issuance costs and debt discount 601 1,034 Deferred income taxes (2,165 ) (1,331 ) Stock compensation expense 9,427 4,403 Loss on sale of a businesses 1,018 — Change in assets and liabilities, net of effects of business combinations: Accounts receivable (35,379 ) (200,749 ) Prepaid expenses and other current assets 10,056 10,624 Deferred contract costs (888 ) (1,013 ) Accounts payable and accrued liabilities (15,543 ) 3,642 Accrued compensation and benefits (67,392 ) (53,271 ) Deferred revenue 877 14,764 Income taxes 22,250 9,465 Operating lease right-of-use assets and liabilities (1,088 ) (948 ) Other assets and liabilities 3,926 2,928 Net cash provided by/(used in) operating activities 21,608 (134,659 ) Cash flows from investing activities: Purchases of property and equipment and capitalized software (22,247 ) (15,697 ) Proceeds from divestitures 1,815 — Net cash used in investing activities (20,432 ) (15,697 ) Cash flows from financing activities: Cash dividends paid to Maximus shareholders (18,299 ) (17,017 ) Tax withholding related to RSU vesting (13,455 ) (8,475 ) Payments for contingent consideration (2,819 ) (1,415 ) Proceeds from borrowings 228,409 268,702 Principal payments for debt (166,658 ) (61,355 ) Cash-collateralized escrow liabilities 1,204 (9,473 ) Net cash provided by financing activities 28,382 170,967 Effect of exchange rate changes on cash, cash equivalents, and restricted cash 1,846 2,421 Net change in cash, cash equivalents, and restricted cash 31,404 23,032 Cash, cash equivalents, and restricted cash, beginning of period 122,091 136,795 Cash, cash equivalents, and restricted cash, end of period $ 153,495 $ 159,827 Maximus, Inc. Consolidated Results of Operations by Segment (Unaudited) For the Three Months Ended December 31, 2023 December 31, 2022 Amount % (1) Amount % (1) (dollars in thousands) Revenue: U.S. Federal Services $ 677,078 $ 618,167 U.S. Services 489,845 439,478 Outside the U.S. 160,118 191,601 Revenue $ 1,327,041 $ 1,249,246 Gross profit: U.S. Federal Services $ 156,662 23.1 % $ 122,694 19.8 % U.S. Services 118,363 24.2 % 83,598 19.0 % Outside the U.S. 25,029 15.6 % 38,455 20.1 % Gross profit $ 300,054 22.6 % $ 244,747 19.6 % Selling, general, and administrative expenses: U.S. Federal Services $ 87,855 13.0 % $ 71,649 11.6 % U.S. Services 52,300 10.7 % 45,842 10.4 % Outside the U.S. 25,141 15.7 % 28,389 14.8 % Divestiture-related charges (2) 1,018 NM — NM Other (3) 2,881 NM 572 NM Selling, general, and administrative expenses $ 169,195 12.7 % $ 146,452 11.7 % Operating income: U.S. Federal Services $ 68,807 10.2 % $ 51,045 8.3 % U.S. Services 66,063 13.5 % 37,756 8.6 % Outside the U.S. (112 ) (0.1 )% 10,066 5.3 % Amortization of intangible assets (23,349 ) NM (23,518 ) NM Divestiture-related charges (2) (1,018 ) NM — NM Other (3) (2,881 ) NM (572 ) NM Operating income $ 107,510 8.1 % $ 74,777 6.0 % (1) Percentage of respective segment revenue. Percentages not considered meaningful are marked "NM." (2) In November 2023, we sold our businesses in Italy and Singapore, as well as our employment services business in Canada, recording a loss of $1.0 million. We previously recorded an impairment charge of $2.9 million related to these assets. (3) Other expenses includes credits and costs that are not allocated to a particular segment. This includes expenses incurred as part of our acquisitions, as well as potential acquisitions which have not been or may not be completed. Maximus, Inc. Consolidated Free Cash Flows - Non-GAAP (Unaudited) For the Three Months Ended December 31, 2023 December 31, 2022 (in thousands) Net cash provided by/(used in) operating activities 21,608 (134,659 ) Purchases of property and equipment and capitalized software (22,247 ) (15,697 ) Free cash flow (Non-GAAP) $ (639 ) $ (150,356 ) Maximus, Inc. Non-GAAP Adjusted Results Excluding Amortization of Intangible Assets (Unaudited) For the Three Months Ended December 31, 2023 December 31, 2022 (dollars in thousands, except per share data) Operating income $ 107,510 $ 74,777 Add back: Amortization of intangible assets 23,349 23,518 Add back: Divestiture-related charges 1,018 — Adjusted operating income excluding amortization of intangible assets and divestiture-related charges (Non-GAAP) $ 131,877 $ 98,295 Adjusted operating income margin excluding amortization of intangible assets and divestiture-related charges (Non-GAAP) 9.9 % 7.9 % Net income $ 64,148 $ 39,995 Add back: Amortization of intangible assets, net of tax 17,208 17,360 Add back: Divestiture-related charges 1,018 — Adjusted net income excluding amortization of intangible assets and divestiture-related charges (Non-GAAP) $ 82,374 $ 57,355 Diluted earnings per share $ 1.04 $ 0.65 Add back: Effect of amortization of intangible assets on diluted earnings per share 0.28 0.29 Add back: Effect of divestiture-related charges on diluted earnings per share 0.02 — Adjusted diluted earnings per share excluding amortization of intangible assets and divestiture-related charges (Non-GAAP) $ 1.34 $ 0.94 View source version on businesswire.com: https://www.businesswire.com/news/home/20240207818524/en/Contacts James Francis, VP - IR Jessica Batt, VP - IR & ESG IR@maximus.com
Maximus (NYSE: MMS), a leading provider of government services worldwide, reported financial results for the three months ended December 31, 2023. Highlights for the first quarter of fiscal year 2024 include: Revenue increased 6.2% to $1.33 billion, compared to $1.25 billion for the prior year period. Organic growth was 6.9% and driven by expanded programs as well as resumed programs tied to Medicaid redeterminations. Diluted earnings per share were $1.04 and adjusted diluted earnings per share were $1.34, compared to $0.65 and $0.94, respectively, for the prior year period. The company is raising earnings and free cash flow guidance for fiscal year 2024. Adjusted operating income guidance is increasing by $15 million, adjusted diluted earnings per share by $0.15, and free cash flow by $10 million. A quarterly cash dividend of $0.30 per share is payable on February 29, 2024, to shareholders of record on February 15, 2024. "Our operational performance was excellent this quarter as we focused on delivery of programs critical to the wellbeing of individuals and families, including veteran exams, redeterminations for Medicaid, return to repayment for millions of borrowers, and recently-completed open enrollment," said Bruce Caswell, President and Chief Executive Officer. "The improved outlook for fiscal 2024 signifies the business is in great health and benefiting from scale. We continue to focus on creating growth opportunities for our employees while using technology to improve the citizen experience and deliver on our customers' missions." Caswell continued, "More broadly, we believe the current economic climate will continue to favor Maximus, given our current base underpinned by essential work and a strategy squarely aligned to prioritized areas of government spend." First Quarter Results Revenue for the first quarter of fiscal year 2024 increased 6.2% to $1.33 billion, compared to $1.25 billion for the prior year period. Organic growth was 6.9% from expanded programs in the domestic segments as well as resumed programs in the U.S. Services Segment tied to the restart of Medicaid redeterminations. For the first quarter of fiscal year 2024, operating margin was 8.1% and the adjusted operating margin was 9.9%. This compares to margins of 6.0% and 7.9%, respectively, for the prior year period. Diluted earnings per share were $1.04 and adjusted diluted earnings per share were $1.34. This compares to $0.65 and $0.94, respectively, for the prior-year period. The margin improvement is attributable to higher transactional volumes across both expanded and resumed programs. U.S. Federal Services Segment U.S. Federal Services Segment revenue for the first quarter of fiscal year 2024 increased 9.5% to $677.1 million, compared to $618.2 million reported for the prior year period. All growth was organic and driven primarily by volume growth on expanded programs, including the VA's Medical Disability Exam (MDE) contracts. The segment operating margin for the first quarter of fiscal year 2024 was 10.2%. This compares to 8.3% reported for the prior year, which reflected the hiring of resources in anticipation of the higher volumes. The anticipated profile for the U.S. Federal Services Segment is an increasing margin across the year with a full-year margin expected to range between 11% and 12%. U.S. Services Segment U.S. Services Segment revenue for the first quarter of fiscal year 2024 increased 11.5% to $489.8 million, compared to $439.5 million reported in the prior year period. All growth was organic and driven by the resumption of Medicaid redetermination activities and expanded programs in eligibility support and clinical services. The segment operating margin for the first quarter of fiscal year 2024 was 13.5%. This compares to 8.6% reported for the prior year period when redetermination activities were paused. Since resumed, beneficiary engagement drove the highest margin expected for the segment in fiscal year 2024, with slight moderation expected in subsequent quarters as engagement levels normalize. The full-year fiscal 2024 margin for the U.S. Services Segment is expected to range between 11% and 12%. Outside the U.S. Segment Outside the U.S. Segment revenue for the first quarter of fiscal year 2024 decreased 16.4% to $160.1 million, compared to $191.6 million reported in the prior year period. Approximately 7% of decline was attributable to disposal of businesses and the remaining decline was due to both lower employment services volumes and currency impacts. The segment broke even in the first quarter of fiscal year 2024. This compares to an operating margin of 5.3% in the prior year period which benefited from higher employment services volumes. The Outside the U.S. Segment is expected to be slightly above breakeven for the full-year fiscal 2024. Continued shaping of the segment to reduce volatility and deliver consistent profitability is a management priority this year. Sales and Pipeline Year-to-date signed contract awards at December 31, 2023, totaled $422 million, and contracts pending (awarded but unsigned) totaled $802 million. The book-to-bill ratio at December 31, 2023, was 1.2x calculated on a trailing twelve-month basis. The sales pipeline at December 31, 2023, totaled $37.7 billion, comprised of approximately $933 million in proposals pending, $1.01 billion in proposals in preparation, and $35.7 billion in opportunities tracking. New work opportunities represent approximately 77% of the total sales pipeline. Balance Sheet and Cash Flows At December 31, 2023, cash and cash equivalents totaled $104.2 million, and gross debt was $1.32 billion. The ratio of debt, net of allowed cash, to adjusted EBITDA for the quarter ended December 31, 2023, as calculated in accordance with our credit agreement, was 2.1x. This compares to 2.2x at September 30, 2023. For the first quarter of fiscal year 2024, cash provided operating activities totaled $21.6 million and free cash flow was an outflow of approximately $1 million. Days sales outstanding (DSO) were 59 days as of December 31, 2023, reflecting good collections and offset by seasonality from the timing of payments that were expected this quarter. Free cash flow guidance is increasing for the full fiscal year 2024. On January 5, 2024, our Board of Directors declared a quarterly cash dividend of $0.30 for each share of our common stock outstanding. The dividend is payable on February 29, 2024, to shareholders of record on February 15, 2024. Raising FY24 Earnings and Free Cash Flow Guidance Maximus is raising fiscal year 2024 earnings and free cash flow guidance following first quarter results and improved margin outlook for the rest of the fiscal year. Revenue guidance is maintained between $5.05 billion and $5.20 billion. Adjusted operating income is now expected to range between $503 million and $528 million, representing an increase of $15 million from prior guidance. Adjusted operating income excludes an estimated $88 million of expense for amortization of intangible assets and $1 million of divestiture-related charges incurred this quarter. Adjusted diluted earnings per share is now expected to range between $5.20 and $5.50 per share, representing an increase of $0.15 per share from prior guidance. Free cash flow is now expected to range between $300 million and $350 million as a result of the increased earnings guidance. Other estimates include interest expense of approximately $73 million, an effective income tax rate between 24.5% and 25.5%, and weighted average shares outstanding between 62.0 million and 62.2 million shares for fiscal year 2024. Conference Call and Webcast Information Maximus will host a conference call tomorrow, February 8, 2024, 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 and divestiture-related charges, adjusted 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, 2023, which was filed with the Securities and Exchange Commission (SEC) on November 16, 2023. The Company's SEC reports are accessible on maximus.com. Maximus, Inc. Consolidated Statements of Operations (Unaudited) For the Three Months Ended December 31, 2023 December 31, 2022 (in thousands, except per share amounts) Revenue $ 1,327,041 $ 1,249,246 Cost of revenue 1,026,987 1,004,499 Gross profit 300,054 244,747 Selling, general, and administrative expenses 169,195 146,452 Amortization of intangible assets 23,349 23,518 Operating income 107,510 74,777 Interest expense 21,507 21,606 Other expense/(income), net 488 (266 ) Income before income taxes 85,515 53,437 Provision for income taxes 21,367 13,442 Net income $ 64,148 $ 39,995 Earnings per share: Basic $ 1.05 $ 0.65 Diluted $ 1.04 $ 0.65 Weighted average shares outstanding: Basic 61,322 61,117 Diluted 61,535 61,196 Dividends declared per share $ 0.30 $ 0.28 Maximus, Inc. Consolidated Balance Sheets December 31, 2023 September 30, 2023 (unaudited) (in thousands) Assets: Cash and cash equivalents $ 104,186 $ 65,405 Accounts receivable, net 860,409 826,873 Income taxes receivable 15,850 16,556 Prepaid expenses and other current assets 129,174 146,632 Total current assets 1,109,619 1,055,466 Property and equipment, net 34,976 38,831 Capitalized software, net 125,383 107,811 Operating lease right-of-use assets 154,929 163,929 Goodwill 1,781,092 1,779,215 Intangible assets, net 680,309 703,648 Deferred contract costs, net 46,439 45,372 Deferred compensation plan assets 47,273 42,919 Deferred income taxes 2,204 2,459 Other assets 34,637 46,147 Total assets $ 4,016,861 $ 3,985,797 Liabilities and Shareholders' Equity: Liabilities: Accounts payable and accrued liabilities $ 267,623 $ 282,081 Accrued compensation and benefits 115,864 194,251 Deferred revenue, current portion 63,032 60,477 Income taxes payable 23,717 451 Long-term debt, current portion 90,443 86,844 Operating lease liabilities, current portion 48,490 49,852 Other current liabilities 49,197 49,058 Total current liabilities 658,366 723,014 Deferred revenue, non-current portion 37,221 38,849 Deferred income taxes 198,317 203,898 Long-term debt, non-current portion 1,222,243 1,163,149 Deferred compensation plan liabilities, non-current portion 51,507 46,432 Operating lease liabilities, non-current portion 118,594 129,367 Other liabilities 12,807 13,253 Total liabilities 2,299,055 2,317,962 Shareholders' equity: Common stock, no par value; 100,000 shares authorized; 61,031 and 60,998 shares issued and outstanding as of December 31, 2023 and September 30 2023, respectively 585,278 577,898 Accumulated other comprehensive loss (30,588 ) (27,615 ) Retained earnings 1,163,116 1,117,552 Total shareholders' equity 1,717,806 1,667,835 Total liabilities and shareholders' equity $ 4,016,861 $ 3,985,797 Maximus, Inc. Consolidated Statements of Cash Flows (Unaudited) For the Three Months Ended December 31, 2023 December 31, 2022 (in thousands) Cash flows from operating activities: Net income $ 64,148 $ 39,995 Adjustments to reconcile net income to cash flows from operations: Depreciation and amortization of property, equipment, and capitalized software 8,411 12,280 Amortization of intangible assets 23,349 23,518 Amortization of debt issuance costs and debt discount 601 1,034 Deferred income taxes (2,165 ) (1,331 ) Stock compensation expense 9,427 4,403 Loss on sale of a businesses 1,018 — Change in assets and liabilities, net of effects of business combinations: Accounts receivable (35,379 ) (200,749 ) Prepaid expenses and other current assets 10,056 10,624 Deferred contract costs (888 ) (1,013 ) Accounts payable and accrued liabilities (15,543 ) 3,642 Accrued compensation and benefits (67,392 ) (53,271 ) Deferred revenue 877 14,764 Income taxes 22,250 9,465 Operating lease right-of-use assets and liabilities (1,088 ) (948 ) Other assets and liabilities 3,926 2,928 Net cash provided by/(used in) operating activities 21,608 (134,659 ) Cash flows from investing activities: Purchases of property and equipment and capitalized software (22,247 ) (15,697 ) Proceeds from divestitures 1,815 — Net cash used in investing activities (20,432 ) (15,697 ) Cash flows from financing activities: Cash dividends paid to Maximus shareholders (18,299 ) (17,017 ) Tax withholding related to RSU vesting (13,455 ) (8,475 ) Payments for contingent consideration (2,819 ) (1,415 ) Proceeds from borrowings 228,409 268,702 Principal payments for debt (166,658 ) (61,355 ) Cash-collateralized escrow liabilities 1,204 (9,473 ) Net cash provided by financing activities 28,382 170,967 Effect of exchange rate changes on cash, cash equivalents, and restricted cash 1,846 2,421 Net change in cash, cash equivalents, and restricted cash 31,404 23,032 Cash, cash equivalents, and restricted cash, beginning of period 122,091 136,795 Cash, cash equivalents, and restricted cash, end of period $ 153,495 $ 159,827 Maximus, Inc. Consolidated Results of Operations by Segment (Unaudited) For the Three Months Ended December 31, 2023 December 31, 2022 Amount % (1) Amount % (1) (dollars in thousands) Revenue: U.S. Federal Services $ 677,078 $ 618,167 U.S. Services 489,845 439,478 Outside the U.S. 160,118 191,601 Revenue $ 1,327,041 $ 1,249,246 Gross profit: U.S. Federal Services $ 156,662 23.1 % $ 122,694 19.8 % U.S. Services 118,363 24.2 % 83,598 19.0 % Outside the U.S. 25,029 15.6 % 38,455 20.1 % Gross profit $ 300,054 22.6 % $ 244,747 19.6 % Selling, general, and administrative expenses: U.S. Federal Services $ 87,855 13.0 % $ 71,649 11.6 % U.S. Services 52,300 10.7 % 45,842 10.4 % Outside the U.S. 25,141 15.7 % 28,389 14.8 % Divestiture-related charges (2) 1,018 NM — NM Other (3) 2,881 NM 572 NM Selling, general, and administrative expenses $ 169,195 12.7 % $ 146,452 11.7 % Operating income: U.S. Federal Services $ 68,807 10.2 % $ 51,045 8.3 % U.S. Services 66,063 13.5 % 37,756 8.6 % Outside the U.S. (112 ) (0.1 )% 10,066 5.3 % Amortization of intangible assets (23,349 ) NM (23,518 ) NM Divestiture-related charges (2) (1,018 ) NM — NM Other (3) (2,881 ) NM (572 ) NM Operating income $ 107,510 8.1 % $ 74,777 6.0 % (1) Percentage of respective segment revenue. Percentages not considered meaningful are marked "NM." (2) In November 2023, we sold our businesses in Italy and Singapore, as well as our employment services business in Canada, recording a loss of $1.0 million. We previously recorded an impairment charge of $2.9 million related to these assets. (3) Other expenses includes credits and costs that are not allocated to a particular segment. This includes expenses incurred as part of our acquisitions, as well as potential acquisitions which have not been or may not be completed. Maximus, Inc. Consolidated Free Cash Flows - Non-GAAP (Unaudited) For the Three Months Ended December 31, 2023 December 31, 2022 (in thousands) Net cash provided by/(used in) operating activities 21,608 (134,659 ) Purchases of property and equipment and capitalized software (22,247 ) (15,697 ) Free cash flow (Non-GAAP) $ (639 ) $ (150,356 ) Maximus, Inc. Non-GAAP Adjusted Results Excluding Amortization of Intangible Assets (Unaudited) For the Three Months Ended December 31, 2023 December 31, 2022 (dollars in thousands, except per share data) Operating income $ 107,510 $ 74,777 Add back: Amortization of intangible assets 23,349 23,518 Add back: Divestiture-related charges 1,018 — Adjusted operating income excluding amortization of intangible assets and divestiture-related charges (Non-GAAP) $ 131,877 $ 98,295 Adjusted operating income margin excluding amortization of intangible assets and divestiture-related charges (Non-GAAP) 9.9 % 7.9 % Net income $ 64,148 $ 39,995 Add back: Amortization of intangible assets, net of tax 17,208 17,360 Add back: Divestiture-related charges 1,018 — Adjusted net income excluding amortization of intangible assets and divestiture-related charges (Non-GAAP) $ 82,374 $ 57,355 Diluted earnings per share $ 1.04 $ 0.65 Add back: Effect of amortization of intangible assets on diluted earnings per share 0.28 0.29 Add back: Effect of divestiture-related charges on diluted earnings per share 0.02 — Adjusted diluted earnings per share excluding amortization of intangible assets and divestiture-related charges (Non-GAAP) $ 1.34 $ 0.94 View source version on businesswire.com: https://www.businesswire.com/news/home/20240207818524/en/