Maximus, Inc. (NYSE:MMS) Q3 2023 Earnings Conference Call August 3, 2023 9:00 AM ET

Company Participants

Jessica Batt - Vice President, Investor Relations

Bruce Caswell - President and Chief Executive Officer

David Mutryn - Chief Financial Officer and Treasurer

James Francis - Vice President of Investor Relations

Conference Call Participants

Charlie Strauzer - CJS Securities

Operator

Greetings, and welcome to the Maximus Fiscal Year 2023 Third Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jessica Batt, Vice President of Investor Relations for Maximus. Please go ahead, Ms. Batt. You may begin.

Jessica Batt

Good morning, and thanks for joining us. With me today is Bruce Caswell, President and CEO; David Mutryn, CFO; and James Francis, Vice President of Investor Relations. I'd like to remind everyone that a number of statements being made today will be forward-looking in nature. Please remember that such statements are only predictions. Actual events and results may differ materially as a result of risks we face, including those discussed in Item 1A of our most recent Forms 10-Q and 10-K. We encourage you to review the information contained in our recent filings with the SEC and our earnings press release. The company does not assume any obligation to revise or update these forward-looking statements to reflect subsequent events or circumstances, except as required by law. Today's presentation also contains non-GAAP financial information. Management uses this information internally to analyze results and believe it may be informative to investors, engaging the quality of our financial performance, identifying trends and providing meaningful period-to-period comparisons. For a reconciliation of the non-GAAP measures presented, please see the company's most recent Forms 10-Q and 10-K. And with that, I'll hand the call over to David.

David Mutryn

Thanks, Jessica, and good morning. Our third quarter results reflect strong organic revenue growth and progress on our commitment to margin improvement, particularly in the U.S. Federal and U.S. Services segments. Our federal team is successfully ramping up to meet the unprecedented demand for clinical assessments for veterans. Our team supporting state customers have begun assisting beneficiaries in navigating the unwinding effort as redeterminations resume. Third quarter results include an expense of approximately $22 million for the cybersecurity incident that we disclosed last week. This charge represents our updated best estimate of costs to be incurred related to the incident for the total investigation, which is expected to be concluded this month, and remediation activities. The outside the U.S. segment realized a much greater than anticipated operating loss, driven in large part by macroeconomic factors that have caused our expectations to decline on our employment services contracts. Looking ahead, we feel confident in ongoing successful delivery to enable a step-up in earnings in the fourth quarter with our expectations for the quarter, largely intact from last quarter. Turning back to third-quarter results. Maximus reported revenue of $1.19 billion, which represents 5.6% year-over-year growth or 6.7% on an organic basis. This growth was driven by both the U.S. Federal and U.S. Services segments, which I'll cover shortly. Adjusted operating income margin, which excludes only intangibles amortization, was 6.9% and adjusted EPS was $0.78. This compares to 6.9% and $0.78, respectively, for the prior year period.