Maximus Q2 2026 Earnings Report

Maximus EPS Results

• Actual EPS: $2.07
• Consensus EPS: $1.98
• Beat/Miss: Beat by +$0.09
• One Year Ago EPS: $2.01

Maximus Revenue Results

• Actual Revenue: $1.31 billion
• Expected Revenue: $1.32 billion
• Beat/Miss: Missed by -$11.93 million
• YoY Revenue Growth: -4.10%

Maximus Announcement Details

• Quarter: Q2 2026
• Date: 5/7/2026
• Time: Before Market Opens
• Conference Call Date: Thursday, May 7, 2026
• Conference Call Time: 9:00AM ET

Maximus (NYSE:MMS) (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. Maximus leverages its experience in contact center management, data analytics and digital engagement to help agencies improve access to benefits, streamline operations and enhance program outcomes.

In addition to core eligibility and enrollment services, Maximus offers a suite of technology and consulting solutions designed to modernize government systems. The company deploys proprietary platforms for automated case processing, workflow management and customer relationship management, enabling agencies to deliver more efficient, citizen-centric services. Maximus also provides health and human services consulting, program evaluation, and training services, helping public sector clients design, implement and optimize social assistance, workforce development and child support initiatives. Through these integrated offerings, the company addresses the full program lifecycle—from planning and implementation to performance measurement and continuous improvement.

Founded in 1975 and headquartered in Reston, Virginia, Maximus has grown its footprint to serve clients across the United States, Canada, the United Kingdom, Australia and New Zealand. Over its history, the company has expanded through organic growth and strategic acquisitions to enhance its service capabilities and geographic reach. Maximus employs a workforce of more than 35,000 professionals, including case managers, policy analysts, technology specialists and contact center agents, committed to supporting government missions and improving citizen access to public services. Leadership is led by President and Chief Executive Officer Bruce Caswell, under whose direction Maximus continues to pursue innovation in digital service delivery and strategic partnerships with public sector agencies.

Maximus Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Maximus raised its FY2026 outlook — adjusted EPS to $8.25–$8.55 (up $0.20) and adjusted EBITDA margin to ~14.2%, while reiterating revenue of $5.2–$5.35B and free cash flow of $450–$500M (midpoint implies ~14% YoY EPS growth).
• Positive Sentiment: Management attributes margin expansion to technology and AI-driven automation, raising its near-term adjusted EBITDA target range to 12%–15% and citing concrete efficiency wins (dispute resolution automation, TXM contact center, AI claim processing).
• Positive Sentiment: Board-authorized share repurchase resume — the company repurchased ~$151M of stock in Q2 and post-quarter, and refreshed its buyback program for up to $400M, signaling confidence in valuation and capital return priority.
• Negative Sentiment: Days sales outstanding increased to 78 days due to invoicing/administrative delays at a major federal customer, creating near-term cash-flow lumpiness despite management’s expectation DSO will fall below 70 days by year-end.
• Positive Sentiment: Strong pipeline and market opportunities — $56.8B total pipeline, $913M YTD signed awards, and a 75% QoQ increase in the H.R.1-related opportunity set that management expects to support U.S. Services returning to organic growth by Q4 and contribute to FY2027.

Presentation

[Operator]

Greetings, welcome to the Maximus Fiscal 2026 second quarter earnings conference call. At this time, all participants are in listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, James Francis, Vice President of Investor Relations. Thank you. You may begin.

[James Francis, VP of Investor Relations at Maximus]

Good morning, and thanks for joining us. With me today is Bruce Caswell, President and CEO, and David Mutryn, CFO. 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 Form 10-K.

[James Francis, VP of Investor Relations at Maximus]

We encourage you to review the information contained in our recent filings with the SEC and our earnings release. The company does not assume any obligation to revise or update these forward-looking statements to reflect subsequent events or circumstances except required by law. Today's presentation also contains non-GAAP financial information. For a reconciliation of the non-GAAP measures presented, please see the company's most recent Forms 10-Q and 10-K. With that, I'll hand the call over to David.

[David Mutryn, CFO at Maximus]

Thanks, James. Good morning. I would characterize our completed second quarter in three ways. First, strong execution with the sequential step-up to profitability we anticipated. Second, clear evidence that our technology investments are contributing to bottom-line returns, as reflected in our improved full year earnings outlook.

[David Mutryn, CFO at Maximus]

Third, increased capital deployment toward share repurchases, given our view that our shares have been trading at an attractive valuation. Turning to second quarter results, Maximus reported revenue of $1.31 billion, consistent with our expectations and on track with our full year guidance.

[David Mutryn, CFO at Maximus]

As I indicated on previous calls, as we progress across this fiscal year, we are facing tough comparative quarters to last year, which benefited from natural disaster work in the U.S. Federal Services segment and temporary clinical volume surges in both domestic segments.

[David Mutryn, CFO at Maximus]

On the bottom line, Adjusted EBITDA margin was 14.4% and Adjusted EPS was $2.07 for the quarter, which compares to 13.7% and $2.01, respectively, for the prior year period. The improvement highlights our ability to drive margin improvement through efficiencies enabled by automation, including AI tools.

[David Mutryn, CFO at Maximus]

One example is a dispute resolution program for a government customer where automation has helped create meaningful operating leverage. The second quarter results included two unusual items, with one reducing earnings and the other increasing earnings by approximately the same amount, meaning they effectively net out of Adjusted EPS. First, we recorded an asset impairment related to a subset of capitalized assets attributable to the U.S. Services segment.

[David Mutryn, CFO at Maximus]

This non-cash impairment was tied to an unusual circumstance dating back to fiscal 2024, where a software asset was built and capitalized under a prior contract for a specific customer. A recent decision by this customer led us to writing off the balance of the asset, which was $6.9 million or $0.09 per share impact to the U.S. Services segment operating income.

[David Mutryn, CFO at Maximus]

The second item is a discrete research and development tax benefit totaling $4.2 million or approximately $0.08 per share. As we have become a more tech-forward company with higher levels of R&D activity, we undertook an initiative to identify and document all eligible R&D tax credits. These credits became recognizable at the completion of the exercise during the second quarter.

[David Mutryn, CFO at Maximus]

As I mentioned, the impact of these roughly offset an Adjusted EPS, and both items have no impact on our Adjusted EBITDA. Let's go to the segment results. Second quarter revenue for the U.S. Federal Services segment was $753 million and in the range that we expected for this period.

[David Mutryn, CFO at Maximus]

The prior year period revenue was $778 million and benefited primarily from elevated natural disaster support that has not recurred at the same levels. I mentioned on the February call that this dynamic is expected to recur for this segment in FY 2026 when comparing to the prior year. Excluding the natural disaster work, U.S. Federal Services grew 1.5% organically year-over-year.

[David Mutryn, CFO at Maximus]

The operating income margin for this segment in the second quarter was 17.6% as compared to 15.3% in the prior year period. Another item I mentioned on the February call when we increased the full year segment margin guide is the anticipated durability of this segment's margins.

[David Mutryn, CFO at Maximus]

This quarter's segment margin is delivering on that commitment thanks to technology initiatives embedded in our programs that decouple labor costs from our ability to process more volumes. We are raising the margin guide for this segment again this quarter, which I'll touch on shortly. Moving to the U.S. Services segment, second quarter revenue was $416 million as compared to the prior year period revenue of $442 million.

[David Mutryn, CFO at Maximus]

I noted on the February call that our first quarter segment results had the greatest anticipated divergence, and that by the fourth quarter of fiscal year 2026, we anticipate positive organic growth, which we continue to forecast. These second quarter results are evidence of that progression.

[David Mutryn, CFO at Maximus]

Bruce will provide a positive update on current state customer priorities that are anticipated to make contributions in fiscal year 2027. The segment's operating income margin for the second quarter was 9.3% and was impacted by the $6.9 million non-cash item I mentioned earlier. Excluding the charge, the margin would have been 10.9% for this period and demonstrates substantial uplift from the lower segment margin in the first quarter that we anticipated.

[David Mutryn, CFO at Maximus]

Turning to the Outside the U.S. segment, second quarter revenue was $137 million, and the segment realized an operating loss of $3.1 million. As I mentioned on the February call, we are tracking a number of opportunities in the geographies that remain after our reshaping efforts. The majority of segment revenue stems from programs in the United Kingdom, with Canada and the Gulf region comprising the balance of the segment.

[David Mutryn, CFO at Maximus]

Our goal remains of driving growth and further margin improvement in the segment by building scale in those limited geographies, all of which have a corresponding set of pipeline opportunities. Moving to cash flow items, cash provided by operating activities was $190 million, and free cash flow was $179 million for the second quarter.

[David Mutryn, CFO at Maximus]

We continue to expect improving cash flow across the year and are reiterating our free cash flow guidance for the full year of between $450 million and $500 million. As we anticipated and communicated last quarter, DSO remained elevated at 78 days, driven by ongoing administrative delays at a major federal customer.

[David Mutryn, CFO at Maximus]

We are working diligently with this customer to process the outstanding invoices, and we expect collections to accelerate and thus DSO to trend downward and finish fiscal year 2026 below 70 days, driving strong second half free cash flow. We currently believe that DSO may remain elevated as of June 30th, then improving in our fourth fiscal quarter. Of note, we also expanded our receivables purchase agreement from a ceiling of $250 million to a ceiling of $350 million.

[David Mutryn, CFO at Maximus]

We view this as a helpful and low cost tool to help manage short-term liquidity needs. We ended the second quarter with total debt of $1.55 billion, representing a slight reduction from the first quarter balance. Our consolidated net total leverage ratio per our credit agreement was 1.8 times and unchanged from the ratio at December 31st.

[David Mutryn, CFO at Maximus]

We remain below our stated target leverage ratio range of 2-3 times. During the second quarter, we repurchased approximately 1.4 million shares totaling $111 million, and subsequent to quarter end through May 1st, we repurchased an additional 0.6 million shares totaling $40 million. We were pleased to announce this morning a board-authorized refresh of our share repurchase program for further share repurchases up to an aggregate of $400 million effective May 11th.

[David Mutryn, CFO at Maximus]

Let me expand on our thinking and provide some context for capital deployment in the near term. This fiscal year, we've been carefully managing our cash through the DSO dynamics I mentioned. In the second quarter, we deployed the majority of our free cash flow to share repurchases. We have long said that we are opportunistic in our share repurchasing.

[David Mutryn, CFO at Maximus]

To be more direct, we prioritize repurchasing when we believe our share price does not reflect the intrinsic value of the business based on a disciplined and conservative assessment.

[David Mutryn, CFO at Maximus]

Going forward, we will continue to execute on our capital deployment priorities while considering near-term liquidity, the potential M&A opportunity set, and all within the constraint of our stated target net debt ratio of two to three times. Even amidst market conditions that are favorable to share repurchases, we continue to seek acquisition targets to accelerate longer-term organic growth.

[David Mutryn, CFO at Maximus]

We remain focused on targets that add capabilities, add and expand customer relationships, and create revenue synergy opportunities. We also remain disciplined in our evaluation of targets and require that valuations must be reasonable in the context of current market conditions, and the expected return must exceed our cost of capital.

[David Mutryn, CFO at Maximus]

Moving to guidance, we're raising our fiscal year 2026 earnings outlook for the second consecutive quarter, and we're reiterating both revenue and free cash flow guidance. Starting from the top, we expect that fiscal year 2026 revenue will range between $5.2 billion and $5.35 billion. Our full year Adjusted EBITDA margin guidance for fiscal year 2026 is now approximately 14.2%, which is a 20 basis point improvement from prior guidance.

[David Mutryn, CFO at Maximus]

Our Adjusted EPS guidance increases by $0.20 and is now expected to range between $8.25 and $8.55 per share. It's notable that this represents 14% year-over-year growth at the midpoint of the new adjusted earnings guidance. Finally, free cash flow is expected to range between $450 million and $500 million.

[David Mutryn, CFO at Maximus]

While the timing of specific receivable collections always has the potential to cause significant cash flow variation at the end of a given period, the guidance reflects our expectation that DSO will finish the fiscal year below 70 days as we catch up on collections from the major federal customer. I'll provide some color on full year operating margin assumptions for the segments.

[David Mutryn, CFO at Maximus]

We expect the U.S. Federal Services full year segment operating margin to be approximately 17.5% and the U.S. Services segment full year operating margin to be approximately 10.0%, with the update reflecting the $6.9 million non-cash charge this quarter. For Outside the U.S., we are expecting the segment to be roughly break even on a full year basis.

[David Mutryn, CFO at Maximus]

Other updated assumptions include expected interest expense of roughly $84 million, we anticipate our full year tax rate to range between 24% and 25%. I'll conclude with updated thinking around our near-term margins. Approximately 18 months ago, we laid out a near-term Adjusted EBITDA margin target range of 10%-13%. At that time, our margin was around 11.6%, we are now guiding to approximately 14.2% for fiscal 2026.

[David Mutryn, CFO at Maximus]

Much of the improvement has come from technology enhancements and cost discipline that we believe have staying power. Given that progress, we are raising our near-term Adjusted EBITDA margin target range to 12%-15%. We expect to operate toward the upper end of that range in periods with stable volumes and continued technology leverage, while recognizing that new program ramps and mix can affect margins in any given year.

[David Mutryn, CFO at Maximus]

Revenue is holding within the range we set out for fiscal 2026, despite difficult comparable periods that we anticipated and communicated. Looking forward, we believe that our robust near-term pipeline is of high quality and capable of driving awards and revenue contribution in the coming quarters. With that, I'll turn the call over to Bruce.

[Bruce Caswell, President and CEO at Maximus]

Thanks, David, and good morning. At roughly this point last year, I shared progress on our multi-year transformation initiative, where we streamlined certain areas of the business, driving cost out and funding investments in technology, primarily in the area of AI-enabled automation. Those investments are improving our operations and enabling us to scale a business that already supports roughly one in three Americans who rely on the programs we deliver for government.

[Bruce Caswell, President and CEO at Maximus]

At the halfway point of fiscal year 2026, our results provide further evidence that the investments we've made in technology, automation, and AI-enabled tools are improving execution across the business. Our second consecutive earnings guidance increase reflects that progress and suggests that we're slightly ahead of the technology leverage goals we set at the beginning of the year.

[Bruce Caswell, President and CEO at Maximus]

We also believe that we remain well-positioned to execute against our capital deployment priorities, including selective investments in capabilities that strengthen our differentiation, potential acquisition targets that could accelerate longer-term organic growth by augmenting capabilities and customer access, and share repurchases supported by the board-authorized $400 million program refresh.

[Bruce Caswell, President and CEO at Maximus]

As a reminder, we remain focused on the federal defense and national security domains for our inorganic priorities. I'll focus my remarks today on three areas. First, the growing emphasis across government on fraud. Second, how we're accelerating AI and automation in our solutions and across Maximus. Third, the progress we're seeing with state customers around Medicaid community engagement, also called work requirements, SNAP, and unemployment insurance administration.

[Bruce Caswell, President and CEO at Maximus]

Our government customers want programs that work, programs with integrity that are effective, efficient, and trusted, delivered by partners free from conflicts of interest, often under performance-based contracts structured to provide transparency and accountability to outcomes.

[Bruce Caswell, President and CEO at Maximus]

Increasingly, better technology and data quality is helping customers flip the model to combat fraud up front rather than relying solely on after-the-fact detection, often referred to as pay and chase. The technology-enabled services that Maximus provides to government are designed to embed integrity directly into program operations using analytics, automation, data matching, and increasingly AI-supported workflows to drive execution and support oversight without slowing service delivery.

[Bruce Caswell, President and CEO at Maximus]

It's important to emphasize our role in this ecosystem. As I've commented in the past, Maximus doesn't make policy, but we do help operationalize it. Our focus is on translating policy intent into practical technology-enabled solutions that strengthen program integrity and reinforce public trust.

[Bruce Caswell, President and CEO at Maximus]

We're seeing growing bipartisan alignment around this approach. A number of customers are using advanced data matching and analytics to address issues like concurrent enrollment, where Medicaid beneficiaries may be enrolled in multiple states concurrently, connecting data sets across programs to ensure enrollment integrity.

[Bruce Caswell, President and CEO at Maximus]

Technology allows these checks to happen faster, more accurately, and at scale, increasingly preventing enrollment errors before they occur. As a trusted partner to government, we develop data-driven insights through tens of millions of interactions with citizens each year.

[Bruce Caswell, President and CEO at Maximus]

That data matters, not just because it provides our teams and our customers real insight on the user experience, how people engage, where they struggle, and how they make choices. Moreover, this data is increasingly informing models that are designed to improve program delivery, eliminate friction, prevent fraud, and improve outcomes for our customers.

[Bruce Caswell, President and CEO at Maximus]

Fiscal 2026 has seen a planned acceleration of AI across Maximus through a company-wide initiative, and I'm pleased to provide an update on our enterprise activation. AI is already enabling Maximus to deliver even greater value for our customers. Our solutions are accelerating service delivery, providing deeper insights on program effectiveness, enabling rapid adaptation to changing policy and mission priorities, and increasing operating leverage and scale.

[Bruce Caswell, President and CEO at Maximus]

Let me begin with two customer-focused proof points. First, our Total Experience Management, or TXM solution, that I briefly mentioned on the last call, is capturing the attention of government customers and winning in the marketplace. In fact, one representative of a federal agency acknowledged TXM as the most sophisticated deployment of AI in a contact center environment that they had seen to date.

[Bruce Caswell, President and CEO at Maximus]

We continue to invest in TXM as we address this multi-billion-dollar government market. Second, our AI accelerator team rapidly implemented an innovative solution developed in-house using a combination of generative and probabilistic AI to streamline high-volume claim processing on a core program where we serve as an independent dispute resolution entity.

[Bruce Caswell, President and CEO at Maximus]

Nearly half of the effort required in processing claims is now handled through automation, enabling staff to focus on outcome accuracy and more complex cases. Our AI focus has been straightforward. We are deploying it where we believe it helps our customers run programs with greater integrity, speed, and consistency, and where it's designed to measurably reduce friction for the people those programs serve.

[Bruce Caswell, President and CEO at Maximus]

Doing that responsibly requires more than a model. It requires a methodology that leverages domain knowledge, brings the workforce along, embeds controls into workflows, and integrates securely into legacy environments.

[Bruce Caswell, President and CEO at Maximus]

We are intentionally acting as customer zero for many of these initiatives. In the government context, where trust and proven execution are critical, we believe that this matters. Through internal use, we gain first-hand insight into what drives adoption, the governance and controls required, how to integrate with real-world workflows, and what it takes to move from a successful pilot to scalable, sustainable operations.

[Bruce Caswell, President and CEO at Maximus]

We are already seeing the impact of our AI investments applied at scale on certain programs. I only expect this to grow as we move from pilots to scale with high-value contact center use cases. From call deflection to summarization, from training to quality assurance, from intelligent document processing to real-time fraud detection, our toolkit is broad and includes proprietary techniques developed through our R&D investments, venture investments and partnerships with early-stage companies, and preferred relationships with industry leaders.

[Bruce Caswell, President and CEO at Maximus]

That said, I'm optimistic about the ultimate potential for AI for our customers as we're in the early innings with regard to deploying some of our most sophisticated AI solutions. These solutions have the greatest potential to transform delivery models with speed and cost-effective delivery of high-quality complex services.

[Bruce Caswell, President and CEO at Maximus]

As an example, through our corporate venture capital, or CVC function, we invested in the health AI domain to create new intellectual property that we plan to deploy in the near term. This IP uses knowledge graphs and a complex clinical ontology to provide decision support traceability for clinical assessments that government programs require.

[Bruce Caswell, President and CEO at Maximus]

While we're advancing with the rapid pace of AI developments, we also acknowledge the still evolving federal and state government regulatory environment, as well as the limitations of legacy systems with which we often must integrate.

[Bruce Caswell, President and CEO at Maximus]

An equal, if not more important consideration, of course, is the environment of public trust that is foundational to the programs we administer on behalf of government. Finally, as you would expect, no area of the business has been exempted from our AI enablement. From back-office operations such as AP invoice processing to our business support functions like legal and human resources to enterprise technology development, we are examining every aspect of how we work and create value.

[Bruce Caswell, President and CEO at Maximus]

For employees, our generative AI tools delivered through familiar channels like Microsoft Teams are designed to streamline common tasks and are poised to evolve as agentic orchestration matures in the enterprise. To summarize, we're executing as planned, moving with speed and urgency, but also respecting the pace of our customers.

[Bruce Caswell, President and CEO at Maximus]

We're demonstrating the art of the possible, backing it up with proof points and differentiating Maximus in winning new work and our rebids. We view our combination of domain knowledge, ability to gain insights from large operational data sets, and our industry-leading tech talent as a powerful competitive differentiator. Next, I'll share how the procurement environment looks for us today.

[Bruce Caswell, President and CEO at Maximus]

On the federal side, particularly in civilian agencies, the shortage of acquisition professionals continues to make forecasting procurement timelines difficult. In an environment where awards have shifted right, protests have increased, further delaying outcomes.

[Bruce Caswell, President and CEO at Maximus]

Moreover, certain technology modernization initiatives, again, particularly in civilian agencies, have been slow to manifest in formal procurements, although the underlying demand signal is strong. That said, we believe momentum is starting to build, and we'll be in a good position heading into next year.

[Bruce Caswell, President and CEO at Maximus]

On the state side, we're seeing solid traction in a number of areas related to H.R. 1, or the Working Families Tax Cut Act. Presently, there are 2 states working with us toward arrangements that could utilize our existing contracts to support Medicaid Community Engagement, or MCE compliance. Depending on the contracting mechanism, these opportunities may either show up as higher volumes under existing contracts or be reported as new awards.

[Bruce Caswell, President and CEO at Maximus]

One of these examples we estimate could drive a more than 30% increase in current program revenue, subject to final scope and implementation timing. More broadly, states remain actively engaged in both planning and delivery to address Medicaid needs, and the momentum we're seeing is consistent. The timing of final MCE regulations has necessitated that states leave placeholders in their operating plans until regulations solidify, which is expected next quarter.

[Bruce Caswell, President and CEO at Maximus]

Following that, we believe action by customers to put in place solutions where we play a role could accelerate. We're also making good progress on positioning Maximus to assist states in lowering SNAP payment error rates through our Accuracy Assistant offering. After multiple rounds of demos being well-received with certain customers, our conversations are increasingly focused on integration, technical detail, and indicative pricing, which tells us that we've moved beyond concept and into serious implementation planning.

[Bruce Caswell, President and CEO at Maximus]

Senior state officials have commented on the comprehensiveness of our SNAP solution, noting that Accuracy Assistant is the only truly end-to-end complete vendor solution they have seen. Finally, we're seeing renewed traction in unemployment insurance administration, representing a small but important pipeline.

[Bruce Caswell, President and CEO at Maximus]

We view this as both reflecting current economic conditions and also the greater flexibility granted to states to use private partners for this work, a development championed by Maximus, and of which I've spoken previously. Moving now to our award metrics and pipeline.

[Bruce Caswell, President and CEO at Maximus]

Our year-to-date signed contract awards as of the end of the second quarter were $913 million of total contract value. In addition, at March 31st, we had a balance of $322 million worth of contracts that had been awarded but not yet signed.

[Bruce Caswell, President and CEO at Maximus]

These awards translate into a book-to-bill ratio of approximately 0.5 times using our standard reporting for the trailing twelve-month period. The second quarter had a quarterly book-to-bill ratio of 0.5 times, reflecting sequential improvement from the prior quarter's figure of 0.2 times.

[Bruce Caswell, President and CEO at Maximus]

Turning to our total pipeline of sales opportunities, we had $56.8 billion at March 31st, comprised of approximately $4.6 billion in proposals pending, $1.5 billion in proposals in preparation, and $50.7 million in opportunities we are tracking. The share of new work in the total pipeline is 59%, and the U.S. Federal Services segment's share of the total pipeline is 58%.

[Bruce Caswell, President and CEO at Maximus]

Finally, even as states await final work requirement regulations expected this summer, I'm pleased that the second quarter pipeline includes an H.R. 1-related opportunity set that increased 75% compared to our tracking of this set last quarter. The other positive sign of H.R. 1 progression is that our forecast for U.S. Services includes mid-single-digit organic growth in Q4, providing early momentum as we enter FY 2027, with improvement possible as the H.R. 1 pipeline matures and converts.

[Bruce Caswell, President and CEO at Maximus]

In all, I'm proud of the team for their continued focused execution this quarter, for the momentum we are building to capitalize on market opportunities, and for the enterprise-wide focus on our continued evolution as a leading provider of technology-enabled solutions to government. With that, we'll open the line for Q&A. Operator?

[Operator]

Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from William Gildea with CJS Securities.

[William Gildea, Analyst at CJS Securities]

Hey, good morning. Thanks for taking our questions today.

[Bruce Caswell, President and CEO at Maximus]

Good morning, Will. It's Bruce. Hope you're well.

[William Gildea, Analyst at CJS Securities]

I guess for David, you know, any more color on the higher DSOs in the quarter, and you refreshed the buyback authorization, but how are you thinking about capacity for share buybacks considering the cash flow lumpiness?

[David Mutryn, CFO at Maximus]

Yeah. Thanks. A little more color on the higher DSO. It stems from a major federal customer, as I said, and it's the same customer that contributed to the temporarily higher DSO in our fiscal year 2025. We did anticipate a buildup of accounts receivable in our November guidance and then again in February when we said we expected DSO to remain elevated in Q2.

[David Mutryn, CFO at Maximus]

A little more detail. This is a large program with extremely complex and data-intensive invoicing requirements. The slowdown in collections has occurred since November as we've worked with our customer on incorporating new and evolving requirements, many of which are retroactive, may require rework of prior period invoices. This is a federal agency.

[David Mutryn, CFO at Maximus]

We're operating under a funded contract, we do have full confidence that the outstanding invoices will be collected, and we continue to regularly collect, this customer's AR increased in Q2. Our current view is that it may remain flat in Q3 before declining in Q4, as we expect to catch up and collect more than our revenue.

[David Mutryn, CFO at Maximus]

That matches with my prepared remarks that we believe DSO may remain elevated as of June thirtieth, improve in Q4. You know, near-term cash flow plays into our thinking, as I said, among other factors with the share repurchase, including the valuation, as well as any kind of near-term M&A opportunities. We factor all that thinking into our repurchase calculation.

[William Gildea, Analyst at CJS Securities]

That is super helpful. Thank you. Then, thinking about H.R. 1 opportunities in SNAP, you talked about the error prevention solution and the good response from potential customers. Are you currently planning or marketing or planning to bring to market other solutions for SNAP?

[Bruce Caswell, President and CEO at Maximus]

Well, Will, it's Bruce. The heart of the solution is the Accuracy Assistant tool, which has been very well received in the marketplace. In fact, as I mentioned in my prepared remarks, we've had customers say that it's the most comprehensive end-to-end tool out there, and those very same customers have now come to us and said, "Okay, how would we get something like this implemented? What would the indicative pricing be?"

[Bruce Caswell, President and CEO at Maximus]

At the heart of it is really that tool and then the services that we can wrap around that tool to help states identify instances where there could be inconsistencies. The tool surfaces inconsistencies in the data, then the BPO services you use to go out and contact the beneficiaries and get corrections to that made and ensure that you're making an accurate eligibility determination.

[Bruce Caswell, President and CEO at Maximus]

That's the core tool there. I'll also say on the Medicaid side, we have a community engagement tool that's been designed and structured to allow beneficiaries, first of all, to navigate the process of determining whether they actually need to comply with the work requirements, because they may have conditions that meet the qualifications for exemption.

[Bruce Caswell, President and CEO at Maximus]

There's an entire upfront process where folks need to be given the ability to apply for an exemption that has to be determined, and they do have appeal rights. If they don't agree with the outcome of that determination, they can appeal that.

[Bruce Caswell, President and CEO at Maximus]

When once they've gotten through that process and they actually then need to be demonstrating compliance with the 80 hours a month work requirement, the tool, very simply, you know, mobile app style allows them to do things like image a time sheet or any kind of evidence that they may have volunteered.

[Bruce Caswell, President and CEO at Maximus]

They're working in the community, they're at a job, what have you. We use our intelligent document processing solution, which is AI-enabled as well, to ensure that those documents appropriately reflect the hours worked from a federal compliance standpoint in the core legacy system. There is a lot of tech that we're building as part of this.

[Bruce Caswell, President and CEO at Maximus]

As I mentioned in my remarks, our view about implementing AI for our customers is that it's not about having a shiny tool, it's about understanding workflows. It's understanding the governance and the guardrails. It's about bringing the staff along that are gonna be using these tools 'cause it requires retraining and so forth.

[Bruce Caswell, President and CEO at Maximus]

Most importantly, it's working with the customers to ensure that the public trust that they've created with these programs is maintained and if anything, enhanced, if possible, through the use. We feel like we're in a great position to obviously help our customers navigate H.R. 1.

[William Gildea, Analyst at CJS Securities]

That's great color. Thank you. You know, just asking for some more color on the state side, what are the dynamics that have driven revenue declines in, you know, the first 2 quarters of the year, and why are you confident in a return to growth, you know, by Q4?

[David Mutryn, CFO at Maximus]

Yeah, sure. I'll take it. Thanks. We expected the year-over-year comparisons to improve over the remaining quarters. We said that last quarter. Q2 is sequentially up from Q1. We are seeing that play out. I mentioned in the prepared remarks that there was an element of higher clinical work in the prior year period in U.S. Services, as well as U.S. Federal.

[David Mutryn, CFO at Maximus]

On the U.S. Services side, one of our larger clinical contracts in the segment had some state-specific dynamics that drove a reduction in volume year-versus-year. They're not really indicative of any broader trend. I think what our confidence in Q4 really is driven by the H.R. 1 related activities, which we expect to see coming in in Q4. That sequential growth in U.S.

[David Mutryn, CFO at Maximus]

services actually drives our expectation that for the whole company, revenue and earnings, we believe, should be a little higher sequentially in Q4 versus Q3. There's a little quarterly color while I'm at it.

[William Gildea, Analyst at CJS Securities]

Thank you. You keep raising the margin outlook on U.S. Federal based on tech initiatives and efficiency gains. Maybe add some more color on exactly what those efficiency gains are and why have we yet to see a similar dynamic in the Services segment?

[Bruce Caswell, President and CEO at Maximus]

Sure. Well, I'll take that one. First to note, our federal contracts are generally larger, meaning that when you implement technology initiatives, they get applied in that segment to programs that are larger from a scale and volume standpoint. They just, by definition, are gonna be more impactful on the margins of the business.

[Bruce Caswell, President and CEO at Maximus]

Secondly, all of our U.S. Services contracts, it's important to remember, particularly in Medicaid and the health benefit exchange area, they see us delivering services directly to consumers. That, again, that issue of public trust that I mentioned is super important for our customers.

[Bruce Caswell, President and CEO at Maximus]

It's front and center for our state customers, and as a consequence, they've expressed, I will say, decidedly more caution in the adoption of AI and other automation tools without first really understanding deeply how guardrails can be put in place to ensure that they maintain compliance with program regulations, 'cause compliance is super important to them.

[Bruce Caswell, President and CEO at Maximus]

It's also worth noting that there's a patchwork quilt of regulations out there at the state level that our clients have to individually navigate, whereas that's less the case at the federal level presently.

[Bruce Caswell, President and CEO at Maximus]

Third, U.S. Services contracts certainly have great incremental technology opportunities in them, there's no question. They also operate in a fairly sophisticated environment that incorporates a lot of legacy systems. Therefore, there are multiple points of integration with state legacy systems that are required in just executing our program delivery model.

[Bruce Caswell, President and CEO at Maximus]

I wanna give you an example to kind of bring this home. In 1 state in particular, our employees are trained across 5 different state systems in order to do their work. Environments like this are much more challenging to apply automation to, and particularly when this has to be done across multiple vendor contracts that have to be coordinated.

[Bruce Caswell, President and CEO at Maximus]

Finally, to kind of overlay all of this, our state customers already have a lot on their plates, particularly with the requirements for implementing H.R. 1. In many cases, they have limited bandwidth.

[Bruce Caswell, President and CEO at Maximus]

They don't have the budget resources necessarily to do a lot more than that, and they're performing, you know, the system surgery, if you will, that's needed to really drive significant automation and changing an already very stable, in most cases, and positive end user experience. It has just become less of an immediate priority for them. David, would you add anything more to that?

[David Mutryn, CFO at Maximus]

No, that's great. Thanks.

[William Gildea, Analyst at CJS Securities]

Thank you. Yeah, switching back to federal, do you have any updates on the VBA contract? Is a recompete still expected in the summer, or do you think there will most likely be an extension? You have an industry day later this month. What are you looking to accomplish or learn there?

[Bruce Caswell, President and CEO at Maximus]

Yeah, I'll take that. To start, the current contract, as a reminder, goes through December 31st for all vendors, December 31st, 2026. The VA has not yet released a formal timeline for the rebid. What we expect to learn at the upcoming industry day is maybe what that timeline is intended to be.

[Bruce Caswell, President and CEO at Maximus]

What we do know is that generally speaking, agencies across government have the ability, if needed, to extend existing contracts as they complete their recompete process. Again, we don't know yet if the VA will need to do that or intend to do that. We may learn that at the industry day as well. We'll see. We'd expect to be able to share more information on subsequent calls as it becomes available from the customer.

[Bruce Caswell, President and CEO at Maximus]

In the meantime, we're remaining just completely focused on providing first-class service to veterans and to the VBA. We think we've earned the reputation for delivering a high-quality veteran experience. I'll note that this is very much made possible by the many employees in our Veterans Evaluation Services subsidiary themselves, that have served and are veterans.

[Bruce Caswell, President and CEO at Maximus]

They understand that experience and how to navigate these programs, they do so with a great deal of empathy and compassion, I'll note. We feel like we're delivering great value to the VBA under the current contract. Therefore, we are optimistic about the future outcome of the rebid. We've got a strong track record with the VBA. We've got demonstrated delivery capabilities at scale and capacity.

[Bruce Caswell, President and CEO at Maximus]

We've made significant technology investments and continue to make significant investments in further improving the veteran experience. By that, I mean focusing specifically on reducing the time that veterans spend in our portion of the MDE claims process. That's the update that I'm able to provide at this time.

[William Gildea, Analyst at CJS Securities]

Thank you. Outside of the VBA, are there any notable recompetes over the next 12 to 24 months?

[Bruce Caswell, President and CEO at Maximus]

Nothing that I'd call out in particular. You know, as you've noted, the veterans exam recompete's the largest. Everything else is kind of normal recompete cadence within our contract portfolio. As I noted in my prepared remarks, we are seeing bid determinations or including rebid determinations moving to the right, both on the federal and the state side.

[Bruce Caswell, President and CEO at Maximus]

That's, you know, not necessarily a bad thing, because often our work can be extended while we're awaiting the outcome of rebid, and our rebid win rate remains very high. Not a bad environment necessarily.

[William Gildea, Analyst at CJS Securities]

That sounds great. Just one more of a guidance question for David. On the Federal side, are there any other tough comps to lap in these last two quarters? I know, yeah, the emergency stuff was a tough comp for this quarter.

[David Mutryn, CFO at Maximus]

Yeah. The, if you look back at fiscal year 25 Q3, the June quarter, was also very strong on the surge in clinical volume. That, that, will remain a tough comp, as will Q4 to a lesser extent.

[William Gildea, Analyst at CJS Securities]

Thank you. That's all for me.

[Bruce Caswell, President and CEO at Maximus]

Thanks, Will. Operator, back to you.

[Operator]

Thank you. This concludes our Q&A session and our call. Thank you for your participation. You may disconnect your lines at this time, and have a great day.

Participants

Executives

• Bruce Caswell, President and CEO
• David Mutryn, CFO
• James Francis, VP of Investor Relations

Analysts

• William Gildea, Analyst at CJS Securities