SEC Form 10-Q filed by Maximus Inc.

8/8/24 1:07:38 PM ET

Real Estate

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mms-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________to__________.

Commission file number: 1-12997


Maximus, Inc.
(Exact name of registrant as specified in its charter)

Virginia						54-1000588
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

1600 Tysons Boulevard, McLean, Virginia						22102
(Address of principal executive offices)						(Zip Code)

(703) 251-8500
(Registrant's telephone number, including the area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, no par value

MMS

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒

Accelerated filer ☐

Non-accelerated filer ☐

Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

There were 60,177,003 shares of the registrant's Common Stock outstanding as of August 5, 2024.


	SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS	3
Part I - Financial Information		4
Item 1.	Financial Statements	4
	Consolidated Statements of Operations	4
	Consolidated Statements of Comprehensive Income	5
	Consolidated Balance Sheets	6
	Consolidated Statements of Cash Flows	7
	Consolidated Statements of Changes in Shareholders’ Equity	8
	Notes to Consolidated Financial Statements	10
	1. Organization	10
	2. Significant Accounting Policies	10
	3. Business Segments	11
	4. Revenue Recognition	13
	5. Earnings Per Share	15
	6. Debt and Derivatives	15
	7. Acquisitions and Divestitures	16
	8. Fair Value Measurements	17
	9. Equity	18
	10. Other Balance Sheet Items	19
	11. Commitments and Contingencies	20
	12. Subsequent Even t	21
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	22
	Business Overview	22
	Financial Overview	23
	Results of Operations	23
	Liquidity and Capital Resources	27
	Critical Accounting Policies and Estimates	31
	Non-GAAP and Other Measures	31
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	33
Part II - Other Information		34
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3.	Defaults Upon Senior Securities	34
Item 4.	Mine Safety Disclosures	34
Item 5.	Other Information	34
Item 6.	Exhibits	35
	Signatures	36


	For the Three Months Ended				For the Nine Months Ended
	June 30, 2024		June 30, 2023		June 30, 2024		June 30, 2023
	(in thousands, except per share amounts)
Revenue	$	1,314,929	$	1,188,677	$	3,990,327	$	3,644,775
Cost of revenue	982,615		924,313		3,040,370		2,907,061
Gross profit	332,314		264,364		949,957		737,714
Selling, general, and administrative expenses	167,033		182,545		504,682		471,445
Amortization of intangible assets	23,542		23,431		68,532		70,599
Operating income	141,739		58,388		376,743		195,670
Interest expense	20,555		21,026		62,428		63,631
Other expense/(income), net	809		1,005		475		(79)
Income before income taxes	120,375		36,357		313,840		132,118
Provision for income taxes	30,623		5,494		79,430		29,472
Net income	$	89,752	$	30,863	$	234,410	$	102,646

Earnings per share:
Basic	$	1.47	$	0.50	$	3.83	$	1.68
Diluted	$	1.46	$	0.50	$	3.81	$	1.67
Weighted average shares outstanding:
Basic	61,079		61,141		61,233		61,125
Diluted	61,381		61,544		61,495		61,368

Dividends declared per share	$	0.30	$	0.28	$	0.90	$	0.84


	June 30, 2024		September 30, 2023
	(unaudited)
	(in thousands)
Assets:
Cash and cash equivalents	$	102,794	$	65,405
Accounts receivable, net	850,462		826,873
Income taxes receivable	9,464		16,556
Prepaid expenses and other current assets	115,571		146,632
Total current assets	1,078,291		1,055,466
Property and equipment, net	35,020		38,831
Capitalized software, net	169,449		107,811
Operating lease right-of-use assets	138,817		163,929
Goodwill	1,780,299		1,779,215
Intangible assets, net	653,386		703,648
Deferred contract costs, net	53,899		45,372
Deferred compensation plan assets	52,895		42,919
Deferred income taxes	5,911		2,459
Other assets	31,823		46,147
Total assets	$	3,999,790	$	3,985,797
Liabilities and Shareholders' Equity:
Liabilities:
Accounts payable and accrued liabilities	$	280,836	$	282,081
Accrued compensation and benefits	162,318		194,251
Deferred revenue, current portion	82,065		60,477
Income taxes payable	11,146		451
Long-term debt, current portion	39,952		86,844
Operating lease liabilities, current portion	47,992		49,852
Other current liabilities	55,734		49,058
Total current liabilities	680,043		723,014
Deferred revenue, non-current portion	35,269		38,849
Deferred income taxes	200,814		203,898
Long-term debt, non-current portion	1,100,701		1,163,149
Deferred compensation plan liabilities, non-current portion	55,870		46,432
Operating lease liabilities, non-current portion	101,911		129,367
Other liabilities	6,467		13,253
Total liabilities	2,181,075		2,317,962
Commitments and contingencies (Note 11)
Shareholders' equity:
Common stock, no par value; 100,000 shares authorized; 60,427 and 60,998 shares issued and outstanding as of June 30, 2024, and September 30, 2023, respectively	604,287		577,898
Accumulated other comprehensive loss	(30,934)		(27,615)
Retained earnings	1,245,362		1,117,552
Total shareholders' equity	1,818,715		1,667,835
Total liabilities and shareholders' equity	$	3,999,790	$	3,985,797


	Common Stock			Accumulated Other Comprehensive Loss		Retained Earnings		Total Equity
	Shares	Amount
	(in thousands)
Balance at September 30, 2023	60,998	$	577,898	$	(27,615)	$	1,117,552	$	1,667,835
Net income	—	—		—		64,148		64,148
Foreign currency translation	—	—		5,912		—		5,912
Cash flow hedge, net of tax	—	—		(8,885)		—		(8,885)
Cash dividends	—	—		—		(18,299)		(18,299)
Dividends on RSUs	—	285		—		(285)		—

Stock compensation expense	—	9,427		—		—		9,427
Tax withholding adjustment related to RSU vesting	—	(2,332)		—		—		(2,332)
RSUs vested	33	—		—		—		—
Balance as of December 31, 2023	61,031	$	585,278	$	(30,588)	$	1,163,116	$	1,717,806
Net income	—	—		—		80,510		80,510
Foreign currency translation	—	—		(2,245)		—		(2,245)
Cash flow hedge, net of tax	—	—		2,684		—		2,684
Cash dividends	—	—		—		(18,309)		(18,309)
Dividends on RSUs	—	412		—		(412)		—

Stock compensation expense	—	8,697		—		—		8,697

RSUs vested	6	—		—		—		—
Balance as of March 31, 2024	61,037	594,387		(30,149)		1,224,905		1,789,143
Net income	—	—		—		89,752		89,752
Foreign currency translation	—	—		412		—		412
Cash flow hedge, net of tax	—	—		(1,197)		—		(1,197)
Cash dividends	—	—		—		(18,239)		(18,239)
Dividends on RSUs	—	419		—		(419)		—
Purchases of Maximus common stock	(611)	—		—		(50,637)		(50,637)
Stock compensation expense	—	9,481		—		—		9,481

RSUs vested	1	—		—		—		—
Balance as of June 30, 2024	60,427	$	604,287	$	(30,934)	$	1,245,362	$	1,818,715


Table 3: Results of Operation by Business Segment
	For the Three Months Ended								For the Nine Months Ended
	June 30, 2024				June 30, 2023				June 30, 2024				June 30, 2023
	Amount		% (1)		Amount		% (1)		Amount		% (1)		Amount		% (1)
	(dollars in thousands)
Revenue:
U.S. Federal Services	$	683,347			$	583,960			$	2,062,127			$	1,786,202
U.S. Services	472,298				449,061				1,448,258				1,338,242
Outside the U.S.	159,284				155,656				479,942				520,331
Revenue	$	1,314,929			$	1,188,677			$	3,990,327			$	3,644,775
Gross profit:
U.S. Federal Services	$	186,075	27.2	%	$	156,945	26.9	%	$	506,074	24.5	%	$	402,513	22.5	%
U.S. Services	121,012		25.6	%	98,538		21.9	%	369,497		25.5	%	268,152		20.0	%
Outside the U.S.	25,227		15.8	%	8,881		5.7	%	74,386		15.5	%	67,049		12.9	%
Gross profit	$	332,314	25.3	%	$	264,364	22.2	%	$	949,957	23.8	%	$	737,714	20.2	%
Selling, general, and administrative expenses:
U.S. Federal Services	$	79,949	11.7	%	$	82,892	14.2	%	$	247,671	12.0	%	$	229,591	12.9	%
U.S. Services	59,531		12.6	%	51,536		11.5	%	174,032		12.0	%	140,793		10.5	%
Outside the U.S.	26,647		16.7	%	24,122		15.5	%	75,249		15.7	%	75,936		14.6	%
Divestiture-related charges (2)	—		NM		—		NM		1,018		NM		883		NM
Other (3)	906		NM		23,995		NM		6,712		NM		24,242		NM
Selling, general, and administrative expenses	$	167,033	12.7	%	$	182,545	15.4	%	$	504,682	12.6	%	$	471,445	12.9	%
Operating income/(loss):
U.S. Federal Services	$	106,126	15.5	%	$	74,053	12.7	%	$	258,403	12.5	%	$	172,922	9.7	%
U.S. Services	61,481		13.0	%	47,002		10.5	%	195,465		13.5	%	127,359		9.5	%
Outside the U.S.	(1,420)		(0.9)	%	(15,241)		(9.8)	%	(863)		(0.2)	%	(8,887)		(1.7)	%
Amortization of intangible assets	(23,542)		NM		(23,431)		NM		(68,532)		NM		(70,599)		NM
Divestiture-related charges (2)	—		NM		—		NM		(1,018)		NM		(883)		NM
Other (3)	(906)		NM		(23,995)		NM		(6,712)		NM		(24,242)		NM
Operating income	$	141,739	10.8	%	$	58,388	4.9	%	$	376,743	9.4	%	$	195,670	5.4	%


Table 4.1: Revenue by Contract Type
	For the Three Months Ended								For the Nine Months Ended
	June 30, 2024				June 30, 2023				June 30, 2024				June 30, 2023
	(dollars in thousands)
Performance-based	$	758,942	57.7	%	$	617,800	52.0	%	$	2,202,541	55.2	%	$	1,761,764	48.3	%
Cost-plus	281,823		21.4	%	281,014		23.6	%	958,336		24.0	%	940,509		25.8	%
Fixed price	170,787		13.0	%	171,809		14.5	%	514,280		12.9	%	527,556		14.5	%
Time and materials	103,377		7.9	%	118,054		9.9	%	315,170		7.9	%	414,946		11.4	%
Total revenue	$	1,314,929			$	1,188,677			$	3,990,327			$	3,644,775


Table 4.2: Revenue by Customer Type
	For the Three Months Ended								For the Nine Months Ended
	June 30, 2024				June 30, 2023				June 30, 2024				June 30, 2023
	(dollars in thousands)
U.S. federal government agencies	$	666,895	50.7	%	$	568,924	47.9	%	$	2,015,780	50.5	%	$	1,742,739	47.8	%
U.S. state government agencies	470,301		35.8	%	445,855		37.5	%	1,440,391		36.1	%	1,329,766		36.5	%
International government agencies	156,587		11.9	%	148,742		12.5	%	468,995		11.8	%	491,861		13.5	%
Other, including local municipalities and commercial customers	21,146		1.6	%	25,156		2.1	%	65,161		1.6	%	80,409		2.2	%
Total revenue	$	1,314,929			$	1,188,677			$	3,990,327			$	3,644,775


Table 4.3: Effect of Changes in Contract Estimates
	For the Three Months Ended				For the Nine Months Ended
	June 30, 2024		June 30, 2023		June 30, 2024		June 30, 2023
	(in thousands, except per share data)
Benefit to/(reduction of) revenue recognized due to changes in contract estimates	$	(3,576)	$	(2,134)	$	(12,772)	$	(8,272)
Benefit to/(reduction of) diluted earnings per share recognized due to changes in contract estimates	$	(0.04)	$	(0.03)	$	(0.16)	$	(0.09)


Table 5: Weighted Average Number of Shares - Earnings Per Share
	For the Three Months Ended		For the Nine Months Ended
	June 30, 2024	June 30, 2023	June 30, 2024	June 30, 2023
	(in thousands)
Basic weighted average shares outstanding	61,079	61,141	61,233	61,125
Dilutive effect of unvested RSUs and PSUs	302	403	262	243
Denominator for diluted earnings per share	61,381	61,544	61,495	61,368


Table 6.1: Details of Debt
	June 30, 2024		September 30, 2023
	(in thousands)
Term Loan A	$	650,000	$	909,375
Term Loan B	500,000		344,934

Subsidiary loan agreements	5,003		3,220
Total debt principal	1,155,003		1,257,529
Less: Unamortized debt-issuance costs and discounts	(14,350)		(7,536)
Total debt	1,140,653		1,249,993
Less: Current portion of long-term debt	(39,952)		(86,844)
Long-term debt	$	1,100,701	$	1,163,149


Table 6.2: Details of Future Minimum Principal Payments Due
	Amount Due
	(in thousands)
July 1, 2024 through September 30, 2024	$	14,378
Year ended September 30, 2025	37,500
Year ended September 30, 2026	41,562
Year ended September 30, 2027	53,750
Year ended September 30, 2028	57,813
Years ended thereafter	950,000


Table 8.3: Fair Value Measurement Using Significant Unobservable Inputs (Level 3)
	Contingent Consideration
	(in thousands)
Opening contingent consideration as of September 30, 2023	$	9,903
Adjustments to fair value recorded in the period	985
Cash payments	(10,977)
Foreign currency translations	89
Closing contingent consideration as of June 30, 2024	$	—


Table MD&A 9: Balances and interest rates as of June 30, 2024

	Carrying value		Effective cash interest rate	Interest rate basis
	(dollars in thousands)
Term Loan A - Hedged though May 2026	$	500,000	3.91%	Fixed rate of 2.31% plus margin. (1)
Term Loan A - Hedged through September 2024	150,000		5.98%	Fixed rate of 4.38% plus margin. (1)
Term Loan B	500,000		7.44%	Term SOFR (variable reset) plus 2% margin.

Debt held by international subsidiaries	5,003		6.21%	Floating rate, reset quarterly.
Debt Principal	$	1,155,003


Table MD&A 13: Consolidated Net Interest Coverage Ratio
	For the Trailing Twelve Months Ended
	June 30, 2024
	(in thousands, except ratio data)
Consolidated EBITDA (as defined by our Amended Credit Agreement)	$	716,771

Interest expense	82,935
Components of other income/expense, net allowed in ratio calculation	2,454

Consolidated Net Interest Expense (as defined by our Amended Credit Agreement)	$	85,389

Consolidated Net Interest Coverage Ratio (as defined by our Amended Credit Agreement)	8.39


Table 8.1: Fair Value Measurements
	As of June 30, 2024
	Level 1		Level 2		Level 3		Balance
	(in thousands)
Assets:
Deferred compensation assets - Rabbi Trust	$	32,642	$	—	$	—	$	32,642
Interest rate swaps - $650 million notional value	—		20,991		—		20,991

Total assets	$	32,642	$	20,991	$	—	$	53,633


Table 8.2: Details of Changes in Accumulated Other Comprehensive Loss by Category
	Foreign currency translation adjustment		Net unrealized gain on derivatives, net of tax		Total
	(in thousands)
Balance as of September 30, 2023	$	(50,484)	$	22,869	$	(27,615)
Other comprehensive income before reclassifications	3,946		1,860		5,806
Amounts reclassified from accumulated other comprehensive loss	133		(9,258)		(9,125)
Net current period other comprehensive losses	4,079		(7,398)		(3,319)
Balance as of June 30, 2024	$	(46,405)	$	15,471	$	(30,934)


Table 10.1: Details of Cash and Cash Equivalents and Restricted Cash
	June 30, 2024		September 30, 2023
	(in thousands)
Cash and cash equivalents	$	102,794	$	65,405
Restricted cash	45,007		56,686
Cash, cash equivalents, and restricted cash	$	147,801	$	122,091


Table 10.2: Supplemental Disclosures of Cash Flow Information
	For the Nine Months Ended
	June 30, 2024		June 30, 2023
	(in thousands)
Interest payments	$	59,367	$	59,580
Income tax payments	$	67,822	$	60,460


Table 10.3: Details of Accounts Receivable, Net
	June 30, 2024		September 30, 2023
	(in thousands)
Billed and billable receivables	$	613,429	$	692,707
Unbilled receivables	249,813		137,885
Allowance for credit losses	(12,780)		(3,719)
Accounts receivable, net	$	850,462	$	826,873


Table MD&A 1: Consolidated Results of Operations
	For the Three Months Ended						For the Nine Months Ended
	June 30, 2024			June 30, 2023			June 30, 2024			June 30, 2023
	(dollars in thousands, except per share data)
Revenue	$	1,314,929		$	1,188,677		$	3,990,327		$	3,644,775
Cost of revenue	982,615			924,313			3,040,370			2,907,061
Gross profit	332,314			264,364			949,957			737,714
Gross profit percentage	25.3		%	22.2		%	23.8		%	20.2		%
Selling, general, and administrative expenses	167,033			182,545			504,682			471,445
Selling, general, and administrative expenses as a percentage of revenue	12.7		%	15.4		%	12.6		%	12.9		%
Amortization of intangible assets	23,542			23,431			68,532			70,599
Operating income	141,739			58,388			376,743			195,670
Operating margin	10.8		%	4.9		%	9.4		%	5.4		%
Interest expense	20,555			21,026			62,428			63,631
Other expense/(income), net	809			1,005			475			(79)
Income before income taxes	120,375			36,357			313,840			132,118
Provision for income taxes	30,623			5,494			79,430			29,472
Effective tax rate	25.4		%	15.1		%	25.3		%	22.3		%
Net income	$	89,752		$	30,863		$	234,410		$	102,646
Earnings per share:
Basic	$	1.47		$	0.50		$	3.83		$	1.68
Diluted	$	1.46		$	0.50		$	3.81		$	1.67


Table MD&A 2: Changes in Revenue, Cost of Revenue, and Gross Profit for the Three Months Ended June 30, 2024
	Revenue				Cost of Revenue				Gross Profit
	Dollars		% Change		Dollars		% Change		Dollars		% Change
	(dollars in thousands)
Three months ended June 30, 2023	$	1,188,677			$	924,313			$	264,364
Organic effect	133,211		11.2	%	66,178		7.2	%	67,033		25.4	%
Disposal of businesses	(7,123)		(0.6)	%	(7,905)		(0.9)	%	782		0.3	%

Currency effect compared to the prior period	164		—	%	29		—	%	135		0.1	%
Three months ended June 30, 2024	$	1,314,929	10.6	%	$	982,615	6.3	%	$	332,314	25.7	%


Table MD&A 3: Changes in Revenue, Cost of Revenue, and Gross Profit for the Nine Months Ended June 30, 2024
	Revenue				Cost of Revenue				Gross Profit
	Dollars		% Change		Dollars		% Change		Dollars		% Change
	(dollars in thousands)
Nine months ended June 30, 2023	$	3,644,775			$	2,907,061			$	737,714
Organic effect	372,624		10.2	%	164,374		5.7	%	208,250		28.2	%
Disposal of businesses	(35,126)		(1.0)	%	(37,955)		(1.3)	%	2,829		0.4	%

Currency effect compared to the prior period	8,054		0.2	%	6,890		0.2	%	1,164		0.2	%
Nine months ended June 30, 2024	$	3,990,327	9.5	%	$	3,040,370	4.6	%	$	949,957	28.8	%


Table MD&A 4: U.S. Federal Services Segment - Financial Results
	For the Three Months Ended						For the Nine Months Ended
	June 30, 2024			June 30, 2023			June 30, 2024			June 30, 2023
	(dollars in thousands)
Revenue	$	683,347		$	583,960		$	2,062,127		$	1,786,202
Cost of revenue	497,272			427,015			1,556,053			1,383,689
Gross profit	186,075			156,945			506,074			402,513
Selling, general, and administrative expenses	79,949			82,892			247,671			229,591
Operating income	106,126			74,053			258,403			172,922
Gross profit percentage	27.2		%	26.9		%	24.5		%	22.5		%
Operating margin percentage	15.5		%	12.7		%	12.5		%	9.7		%


Table MD&A 5: U.S. Services Segment - Financial Results
	For the Three Months Ended						For the Nine Months Ended
	June 30, 2024			June 30, 2023			June 30, 2024			June 30, 2023
	(dollars in thousands)
Revenue	$	472,298		$	449,061		$	1,448,258		$	1,338,242
Cost of revenue	351,286			350,523			1,078,761			1,070,090
Gross profit	121,012			98,538			369,497			268,152
Selling, general, and administrative expenses	59,531			51,536			174,032			140,793
Operating income	61,481			47,002			195,465			127,359
Gross profit percentage	25.6		%	21.9		%	25.5		%	20.0		%
Operating margin percentage	13.0		%	10.5		%	13.5		%	9.5		%

SEC Form 10-Q filed by Maximus Inc.

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$MMS Insider Purchases

Chief Financial Officer Mutryn David bought $75,625 worth of shares (1,000 units at $75.62), increasing direct ownership by 3% to 40,037 units (SEC Form 4)

Director Rajan Gayathri was granted 8 shares and bought $3,643 worth of shares (42 units at $86.11), increasing direct ownership by 0.35% to 14,396 units (SEC Form 4)

Director Rajan Gayathri bought $3,630 worth of shares (41 units at $87.58) and was granted 7 shares, increasing direct ownership by 0.34% to 14,346 units (SEC Form 4)

$MMS Insider Trading

Chief Financial Officer Mutryn David bought $75,625 worth of shares (1,000 units at $75.62), increasing direct ownership by 3% to 40,037 units (SEC Form 4)

Amendment: CEO & President Caswell Bruce was granted 96,187 shares and covered exercise/tax liability with 47,276 shares, increasing direct ownership by 18% to 324,838 units (SEC Form 4)

Chief Financial Officer Mutryn David was granted 13,391 shares and covered exercise/tax liability with 6,040 shares, increasing direct ownership by 23% to 39,037 units (SEC Form 4)

$MMS SEC Filings