Federal work drives Maximus to record revenue

Maximus is coming off a strong fiscal year and the company is reporting growing opportunities ahead, particularly for its federal business.

During Maximus’ fourth-quarter earnings call with investors Tuesday, CEO Bruce Caswell said the company has a total pipeline of sales opportunities of $30.7 billion that includes both proposals pending evaluation and those in preparation. The opportunities that Maximus is tracking are also part of that number.

The new work represents three quarters of that pipeline, while 57% of the total number is in the federal segment.

Caswell told analysts that the main drivers of those opportunities are clinical evaluations and technology solutions that support IT modernization initiatives at federal agencies.

Clinical evaluation work is growing beyond what Maximus provides for Veterans Affairs.

Reston, Virginia-based Maximus sees new opportunities to provide those services to other agencies that are responsible for fitness-for-work testing and other occupational health needs. At the state level, Maximus is interested in consolidated opportunities for evaluations of Medicaid recipients.

“These two types of work and opportunity are a good fit for Maximus through the previous acquisitions we made,” Caswell said, referring to the acquisitions of the federal practice of Attain and Veterans Assessment Services in 2021.

IT modernization efforts are growing rapidly and Caswell describes it as a crowded competitive landscape.

“We think we are very well positioned from a reputation and capabilities perspective,” he said.

The Attain Federal acquisition in particular gave Maximus greater scale in the capabilities needed for IT modernization.

In October 2021, the company won a $323 million contract to modernize the Securities and Exchange Commission’s document filing system. Maximus attributed that win directly to what the Attain Federal team contributed to the bid.

Attain Federal and VES represent the largest acquisitions ever made by Maximus, with respective prices of $430 million for Attain and $1.4 billion for VES.

“We’re seeing a lot of collaboration across the business, across sales functions and solution development teams to bring capabilities from one segment to another,” Caswell said.

One example is how the company is leveraging its service offerings around Medicaid eligibility and enrollment to take advantage of opportunities such as enrollment in federal employee health benefits.

“The net net of this is that 18 months ago, we really wouldn’t have been eligible to bid on the type of work that we’re looking at now,” Caswell said. “It gives me confidence that we will generate the revenue synergies that we anticipate through the acquisitions.”

For Maximus’ fiscal 2022 year ended September 30, revenue increased 8.9% to $4.63 billion compared to $4.25 billion in sales in fiscal 2021. Acquired and organic growth more than offset the $800 million year after years in work related to COVID-19.

Maximus had expected that decline and discussed it during his third-quarter earnings call in August. During that period, COVID work was cut by $413 million.

Federal service revenue for the fiscal year was $2.26 billion. That business stuck to its biggest program: a nine-year, $6.6 billion contract with the Centers for Medicare & Medicaid Services to continue operating contract centers for citizens.

The company’s order book stood at $10.5 billion at the end of the fiscal year and there is another group of contracts worth $800 million that have been awarded but not signed, Caswell said.

Maximus expects revenue in the range of $4.75 billion to $4.9 billion for its new fiscal year on operating income between $390 million and $415 million.

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