Maximus, Inc. Q1 FY2026 earnings call

Management Statement and Operational Highlights

• First Quarter Results: Virtually no direct impact from the government shutdown on the contract portfolio. Signed awards totaled $246 million, with $699 million of awarded but unsigned contracts. Book-to-bill ratio for trailing twelve-month period was ~0.5 times, with a quarterly ratio of 0.2 times.
• Pipeline: Pipeline of sales opportunities was $59.1 billion at December 31, with $3.8 billion in pending proposals, $2.4 billion in proposals in preparation, and $52.9 billion in tracked opportunities. 59% of the pipeline is new work.
• State Customers: Medicaid expansion populations require twice-yearly eligibility determinations starting January 2027, and community engagement (work requirements) effective January 2027. SNAP program has emerging opportunities, including the Accuracy Assistant tool to reduce payment error rates.
• Strategic Evolution: Expansion of automation and AI, including wins in AI-powered contract bids and GSA blanket purchase agreement for government experience contact center services. Recognized as one of America's best employers for 2026.

Segment Performance

• US Federal Services: Revenue increased 0.8% to $787 million compared to the prior year period, with all growth organic. Operating income margin was 16.5% in the first quarter, up from 12.7% in the prior year period.
• US Services: Revenue decreased to $415 million from $452 million in the prior year period. Operating income margin was 7.1% in the first quarter, down from 9% in the prior year period.
• Outside the US: Revenue decreased to $143 million from $170 million in the prior year period. The segment realized an operating loss of $1.4 million compared to an operating profit of $8.1 million in the prior period.

Guidance

• Raised earnings guidance, narrowed revenue guidance for fiscal 2026. Revenue guidance revised to $5.2 billion to $5.35 billion. Adjusted EPS guidance ranges from $8.05 to $8.35 per share. Adjusted EBITDA margin expected to be ~14%. US Federal Services margin expected to range 16.5%-17%, US Services margin 10.5%-11%, and Outside the US segment expected to be profitable with ~13% margin.
• Free cash flow guidance unchanged at $450 million to $500 million.

Risks

• Potential delays in award decisions and slower payments from customers due to the government shutdown.
• Uncertainties in state program implementations, such as the timing and impact of Medicaid community engagement requirements and SNAP error rate reduction timelines.

Q: How much of revenue guidance is in hand versus new work?

A: David Mutryn stated virtually no new work remaining in the forecast, with initial guidance having very small new work component.

Q: Color on segment revenue guidance and drivers/impediments?

A: David Mutryn mentioned US Services revenue down in first quarter but expected improvement in remaining quarters; US Federal Services had tough comps due to natural disaster support; Outside the US segment had divestitures and lower volumes.

Q: Examples of AI-related awards?

A: Bruce Caswell discussed GSA blanket purchase agreement for government experience contact center services, leveraging TXM platform with AI for multichannel contact centers.

Q: Receptivity to SNAP Accuracy Assistant?

A: Bruce Caswell said receptivity is positive, helps identify error root causes and assist workers in collecting info.

Q: VA contract timing?

A: Current contracts period ends 12/31/2026; investments in technology ongoing for veteran experience improvement.