Maximus Lowers Annual Outlook Amid Federal Revenue Decline
The government services provider reduced its full-year adjusted diluted EPS guidance to a range of $7.90 - $8.20 a share.
Maximus (MMS), the government services provider, reported a decline in third-quarter revenue as the company faced a reduction in emergency-related federal demand.
While the company saw a lift in profitability metrics, the quarter was marked by a downward revision of full-year targets. Maximus lowered its full-year adjusted diluted EPS guidance to a range of $7.90 - $8.20 a share, down from the $8.25 - $8.55 range provided in May. This change was due to a temporary customer-directed contractual modification on a major federal program.
Revenue for the third quarter of fiscal 2026 was $1.28 billion, down from $1.35 billion in the prior year period. The decrease was primarily due to the absence of elevated natural disaster support and clinical volume surges in the U.S. Federal Services Segment. Despite the top-line dip, adjusted diluted EPS rose to $2.22 from $2.16, and diluted EPS increased to $1.95 from $1.86.
Margins expanded across the consolidated business. The consolidated adjusted EBITDA margin rose to 15.0% from 14.7% in the prior year, while the operating margin increased to 12.6% from 12.3%.
Performance varied by segment. Revenue in the U.S. Federal Services Segment declined to $721 million from $761 million, though its operating margin improved to 18.6% from 18.1%. The U.S. Services Segment saw revenue fall to $418 million from $440 million, while its operating margin expanded to 10.8% from 10.2%. Outside the U.S. Segment reported revenue of $140 million, down from $147 million, with the operating margin compressing to 0.9% from 4.0%.
Maximus also lowered its full-year adjusted EBITDA margin guidance to approximately 13.7%, down from the previous estimate of 14.2%. The company updated its full-year free cash flow guidance to a range of $425 million to $475 million.
Financial leverage and capital returns shifted during the period. The net leverage ratio increased to 2.0x at June 30, 2026, compared to 1.8x at March 31, 2026. The company repurchased 0.75 million shares for $50.4 million in the third quarter, a decrease from the 1.4 million shares repurchased for $111 million in the second quarter.