Business Context and Reporting Period
Company: Maximus, Inc.
Filing Type: Form 10-K (Annual Report)
Reporting Period: Fiscal year ended September 30, 2025
Business Overview: Maximus is a leading provider of tech-enabled services to government agencies, primarily in the U.S. federal and state sectors, as well as internationally. The company operates through three segments: U.S. Federal Services (56% of revenue), U.S. Services (32% of revenue), and Outside the U.S. (11% of revenue). Services include program operations, clinical services, employment services, and technology solutions.
Key Financial Metrics
| Metric | Fiscal 2025 | Fiscal 2024 |
|---|---|---|
| Revenue | $5,431.3 million | $5,306.2 million |
| Net Income | $319.0 million | $306.9 million |
| Diluted EPS | $5.51 | $4.99 |
| Operating Income | $528.3 million | $488.5 million |
| Operating Margin | 9.7% | 9.2% |
| Free Cash Flow (Non-GAAP) | $366.2 million | $401.1 million |
| Total Debt (Principal) | $1,346.9 million | $1,145.8 million |
| Cash and Cash Equivalents | $222.4 million | $183.1 million |
| Backlog | $15.3 billion | $16.2 billion |
Material Changes vs. Prior Period
- Revenue Growth: Total revenue increased 2.4% year-over-year, driven by 3.9% organic growth. This was partially offset by a 1.8% decrease due to the disposal of businesses in Australia and Korea.
- Segment Performance:
- U.S. Federal Services: Revenue grew 12.1% and operating margin expanded to 15.3% (from 12.2%), driven by clinical programs and FEMA support.
- U.S. Services: Revenue declined 7.7% and operating margin contracted to 9.7% (from 12.9%) as Medicaid redetermination volumes returned to steady state.
- Outside the U.S.: Revenue decreased 8.7% due to divestitures, but operating margin improved significantly to 3.7% (from 1.2%) due to portfolio streamlining.
- Divestitures: The company recorded $39.5 million in divestiture-related charges in SG&A, including $21.3 million of previously unrealized foreign exchange losses and $11.3 million in indemnification liabilities related to the sale of Australian and Korean operations.
- Tax Rate: The effective tax rate increased to 28.3% from 24.5%, negatively impacted by the disposal of international businesses.
Guidance, Outlook, and Risks
- Fiscal 2026 Outlook:
- U.S. Federal Services Margin: Expected to range between 15.5% and 16%.
- U.S. Services Margin: Expected to range between 10% and 11%.
- Outside the U.S. Margin: Expected to range between 3% and 5%.
- Effective Tax Rate: Expected to be between 25.0% and 26.0%.
- Legislative Impact: The "One Big Beautiful Bill Act" (OBBBA), signed July 4, 2025, introduces changes to Medicaid (more frequent redeterminations, work requirements) and SNAP programs. While not anticipated to impact fiscal 2026 significantly, states may adjust programs in anticipation.
- Cybersecurity: The company experienced a material cybersecurity incident in Q3 2023 involving the MOVEit vulnerability. Litigation continues, with approximately half of the claims remaining after partial dismissals in July 2025. The company has accrued for expected resolution costs.
- Capital Allocation: The company utilized $447.5 million for share repurchases in fiscal 2025. In September 2025, the Board authorized an additional $400 million for stock repurchases.
Investor Verification Checklist
- Contract Concentration: Verify the status of the top 10 contracts, which comprised approximately 60% of revenue in fiscal 2025, and the impact of potential terminations or non-renewals.
- Cybersecurity Litigation: Monitor the progress of the MOVEit-related multidistrict litigation (MDL) and potential changes to the accrued liability range.
- Legislative Changes: Assess the specific operational and financial impact of the OBBBA on state Medicaid and SNAP programs as states implement new redetermination and work requirement rules.
- Debt Covenants: Confirm continued compliance with the Credit Agreement covenants, specifically the Consolidated Net Total Leverage Ratio (1.51:1.00 vs. 4.00:1.00 limit) and Interest Coverage Ratio (9.25:1.00 vs. 3.00:1.00 minimum).
- Backlog Realization: Evaluate the $15.3 billion backlog, noting that a significant portion is subject to option periods and government funding approvals.