Maximus Q3 FY25 slides: Record EPS drives third consecutive guidance raise

Introduction & Market Context

Maximus Inc (NYSE:MMS) reported its fiscal third quarter 2025 results on August 7, 2025, showcasing record-breaking adjusted earnings per share and raising its full-year guidance for the third consecutive quarter. The government services provider’s stock jumped 3.51% in premarket trading to $77.50, reflecting positive investor sentiment following the strong results.

The company continues to benefit from its strategic positioning as a "conflict-free partner" for government agencies, particularly in the U.S. Federal Services segment, which has offset challenges in other business areas. Maximus has successfully leveraged its expertise in translating policy changes into operational models while expanding its technological capabilities.

Quarterly Performance Highlights

Maximus reported Q3 FY25 revenue of $1.35 billion, representing a modest 2.5% increase from the prior year but a more robust 4.3% organic growth rate. The company achieved record-breaking adjusted diluted earnings per share of $2.16, a 24.1% increase compared to Q3 FY24.

Total (EPA:TTEF) operating income reached $165.7 million, up 16.9% year-over-year, while adjusted EBITDA grew by 14.7% to $198.3 million. The adjusted EBITDA margin expanded to 14.7%, demonstrating the company’s improved operational efficiency and cost management.

Detailed Financial Analysis

Segment performance showed significant variation across the company’s three business units. The U.S. Federal Services segment was the standout performer, with revenue increasing by 11.4% and an impressive operating margin of 18.1%. This growth helped offset weakness in other segments.

The U.S. Services segment experienced a 6.9% revenue decline with a 10.2% operating margin. Meanwhile, the Outside the U.S. segment saw an anticipated revenue decrease due to strategic divestitures, though organic revenue growth was positive at 7.3% with a 4.0% operating margin.

Cash flow presented challenges during the quarter, with free cash flow at negative $198.2 million, primarily due to payment delays. However, the company reported positive developments post-quarter, including the collection of more than $300 million related to a U.S. Federal Services program, which is expected to significantly improve Q4 FY25 cash flows.

Strategic Initiatives

Maximus continues to strengthen its market position through strategic initiatives focused on leadership development and business expansion. The company highlighted several achievements, including winning a $77 million contract with the U.S. Air Force Life Cycle Management Center and achieving Cybersecurity Maturity Model Certification (CMMC) Level 2, which enhances its ability to compete for federal contracts.

The company’s pipeline remains robust with $44.7 billion in sales opportunities, of which 63% represents new work and 67% is in the U.S. Federal Services segment. This strong pipeline provides visibility into potential future growth, despite a trailing twelve-month book-to-bill ratio of 0.8x.

Forward-Looking Statements

In a significant vote of confidence, Maximus raised its full-year fiscal 2025 guidance across all key metrics. Revenue guidance was increased to $5.375-$5.475 billion from the previous $5.25-$5.4 billion. Adjusted EBITDA margin guidance was raised to approximately 13% from 11.7%, while adjusted diluted EPS guidance was substantially increased to $7.35-$7.55 from $6.30-$6.60.

Looking ahead to fiscal 2026, Maximus provided early thoughts on potential scenarios. The company noted it is well-positioned to scale but acknowledged that volume-sensitive programs can be difficult to predict. FY26 revenue possibilities could range from roughly in line with the latest FY25 guidance to modest growth, depending on volume moderation. The company is targeting adjusted EBITDA at the high end of the 10-13% range.

Competitive Industry Position

Maximus emphasized its competitive advantages in the government services sector, highlighting its ability to translate policy changes into operational models. The company noted several legislative changes creating opportunities, including Medicaid redeterminations required twice annually, work requirements mandates for expansion populations, and states bearing more program costs for SNAP error rates.

The company also referenced earlier Office of Personnel Management (OPM) guidance that increases states’ flexibility to engage contractors, potentially expanding Maximus’s addressable market. As government agencies increasingly focus on efficiency and technology adoption, Maximus is positioning itself as a proven partner with deep experience in leveraging contact centers and digital tools.

This strong quarterly performance builds on Maximus’s momentum from Q2 2025, when the company reported EPS of $2.01, exceeding forecasts by 37.67%. The continued growth in adjusted EPS to $2.16 in Q3 FY25 and the acceleration in organic growth from approximately 2% in Q2 to 4.3% in Q3 demonstrate the company’s ability to consistently outperform expectations, justifying the third consecutive guidance raise.

Full presentation:

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