Maximus (NYSE:MMS) executives said fiscal 2026 opened with “solid” first-quarter results that prompted the company to raise its full-year earnings outlook and narrow its revenue range, citing durable demand for government-funded essential services and productivity gains from technology initiatives.
First-quarter results and guidance updates
For the fiscal 2026 first quarter, Maximus reported revenue of $1.35 billion, a 4.1% decline from the prior-year period. CFO David Mutryn said about 1.5% of the decline was tied to the divestiture of an outside-the-U.S. business near the end of the prior year’s first quarter, with most of the remaining change reflecting organic movements across segments.
Management updated full-year fiscal 2026 guidance as follows:
- Revenue: $5.2 billion to $5.35 billion. Mutryn said both ends were reduced by $25 million to remove the impact of the divested U.S. Services business, and the top end was reduced by an additional $50 million due to delays in “already modest” in-year new work assumptions.
- Adjusted EBITDA margin: approximately 14%, up 30 basis points from prior guidance.
- Adjusted EPS: $8.05 to $8.35, up $0.10 from prior guidance. At the $8.20 midpoint, Mutryn said this implies more than 11% year-over-year earnings growth.
- Free cash flow: unchanged at $450 million to $500 million.
Government shutdown impacts and contract activity
CEO Bruce Caswell said the company saw “virtually no direct impact” from the prior fall’s government shutdown on its contract portfolio, adding that Maximus programs are typically deemed essential during shutdowns. He cited two secondary effects the company tends to see: slower customer payments and temporary delays in award decisions.
Contract award activity was light in the quarter. Maximus reported signed awards of $246 million of total contract value for the first quarter. Caswell also noted $699 million of contracts awarded but not yet signed as of December 31. The company’s trailing 12-month book-to-bill was approximately 0.5x, which management attributed to the quarter’s low award volume (a quarterly book-to-bill of 0.2x). Caswell said the shutdown affected U.S. Federal award activity, but management views it as a timing issue rather than a structural change and expects award activity to pick up across the remaining three quarters of the fiscal year.
On the sales pipeline, Maximus reported $59.1 billion of opportunities at December 31, up from $51.3 billion at September 30, including $3.8 billion of proposals pending, $2.4 billion in preparation, and $52.9 billion of tracked opportunities. Caswell said 59% of the pipeline is new work and 61% is tied to the U.S. Federal Services segment. He highlighted that proposals pending/submitted plus proposals in preparation totaled $6.2 billion, a 55% increase from $4.0 billion a year earlier.
Mutryn also emphasized on the call that updated revenue guidance contains “virtually no new work remaining in the forecast,” adding that even the initial guidance assumed only a modest contribution.
Segment performance and drivers
U.S. Federal Services revenue increased 0.8% year over year to $787 million, entirely organic. Mutryn said the prior-year quarter benefited from unexpected volume growth and natural disaster support that was not expected to recur at the same level. Segment operating income margin rose to 16.5% from 12.7%, which Mutryn attributed to wider adoption of technology initiatives that improve staff productivity across multiple program areas. The company raised its full-year margin outlook for this segment to 16.5% to 17%.
U.S. Services revenue declined to $415 million from $452 million a year earlier. Mutryn said the contraction was anticipated and reflected several programs experiencing lower volumes or demand for engagement compared with prior years. Segment operating income margin fell to 7.1% from 9.0%, which Mutryn attributed in part to seasonality and contract pricing dynamics that depress first-quarter profitability due to open enrollment resource needs. Maximus updated its full-year U.S. Services margin outlook to 10.5% to 11%, raising the bottom end of the prior range. Mutryn said the company expects year-over-year comparisons to improve over the remaining quarters and that U.S. Services should return to positive organic growth by the fourth quarter.
Outside the U.S. revenue declined to $143 million from $170 million. Mutryn said about $19 million of the decrease was attributable to prior divestitures of the Australian and South Korean businesses, while the rest was driven by lower volumes on several programs, partially offset by a small currency benefit. The segment posted an operating loss of $1.4 million versus operating profit of $8.1 million in the prior-year quarter. Mutryn said the leaner segment has prioritized business development investments while revenue contributions tied to new work have shifted out. Maximus guided to a profitable full year for the segment with a 1% to 3% margin.
Medicaid and SNAP opportunities, plus AI-driven initiatives
Caswell highlighted pending state-driven needs tied to Medicaid and the Supplemental Nutrition Assistance Program (SNAP), including potential opportunities connected to Working Families Tax Cut (WFTC) legislation.
On Medicaid, Caswell said states that expanded Medicaid will be required to conduct semi-annual eligibility determinations for the expansion population beginning January 1, and he characterized engagement frequency—rather than absolute enrollment—as a key volume driver for many state contracts. He also discussed community engagement (work requirements) for the Medicaid expansion population, effective January 1, 2027, which would require new compliance processes and expanded program administration. Caswell said Maximus expects to work with states on modifying operations and leveraging technology investments to deliver a high-quality customer experience. He noted that CMS announced Maximus as one of 10 companies with existing Medicaid eligibility and enrollment contracts that pledged to support states preparing for and implementing the requirements, including offering digital tools such as a community engagement tracking tool and job boards at reduced costs through the investment.
On SNAP, Caswell described incentives for states to reduce payment error rates, including that beginning in federal fiscal 2028, states with payment error rates above 6% must begin contributing to benefit costs. He also noted that the WFTC Act would shift states to being responsible for 75% of SNAP administrative funding beginning in federal fiscal 2027. Maximus recently launched its Accuracy Assistant tool, which Caswell said uses predictive analytics and intelligent automation to detect inconsistencies and flag potential errors before they occur, and is designed to integrate into existing state data environments. In the Q&A, Caswell said state receptivity to the tool has been “really positive,” and described its use in identifying root causes of errors and supporting real-time intervention during case processing. Mutryn added that the company has previously estimated that the combined emerging Medicaid and SNAP needs could create a high single- to low double-digit organic growth opportunity for U.S. Services once fully ramped, with new work layering into fiscal 2027 and fiscal 2028.
Caswell also discussed broader automation and AI investments. He cited examples including a win in the outside-the-U.S. segment that incorporated an evolution of the company’s AI-powered intelligent document processing tool, as well as an AI-based solution for payment-related disputes that automated data extraction and validation and applied an empirical evaluation against state laws. Caswell said the approach resulted in 45% of disputes being resolved autonomously and increased throughput for the customer, while also improving the program’s financial performance year over year.
Cash flow, leverage, and select program commentary
Maximus reported first-quarter cash used in operating activities of $244 million and free cash flow outflow of $251 million, which Mutryn said reflected expected seasonality as well as temporary collection delays in U.S. Federal Services tied to administrative delays on one program and, to a lesser extent, lingering shutdown-related delays. Days sales outstanding rose to 78 days; management expects DSO to remain elevated at March 31 and then normalize in the latter half of the fiscal year.
Total debt ended the quarter at $1.58 billion, with a consolidated net total leverage ratio of 1.8x, up from 1.5x at September 30 due to near-term borrowing needs. Mutryn said the ratio remains below the company’s stated 2x to 3x target range and that, absent M&A or share repurchases, Maximus would still expect to finish fiscal 2026 at or below 1.0x.
During the quarter, Maximus divested its child support business within U.S. Services, which Mutryn said represented about $25 million of annual revenue; the company recognized a gain of about $9 million. Mutryn said the business was not meeting growth and profitability expectations and was not considered a core offering as Maximus shifts toward higher-value state services.
In Q&A, management discussed volumes related to the PACT Act work and said it did not see meaningful shutdown-related disruption. Mutryn said guidance assumes PACT volumes remain “pretty steady” from the first-quarter run rate through the rest of fiscal 2026. On federal natural disaster support, Mutryn said last year’s context was “in the $100 million range,” typically concentrated in the first two quarters around hurricane season and its aftermath.
Maximus also addressed the timing of its Veterans Affairs work, noting current contracts have a period of performance through December 31, 2026, and management said it continues to invest in technology to improve the veteran experience ahead of a future rebid.
About Maximus (NYSE:MMS)
Maximus, Inc (NYSE: MMS) is a global provider of government services focused on delivering health and human services programs. The company partners with federal, state, and local agencies to administer and manage programs that support individuals and families across various stages of life. Key service areas include eligibility determination and enrollment services for Medicaid, Medicare, Children’s Health Insurance Program (CHIP) and other public assistance programs, as well as call center operations, case management and program integrity solutions.
