As filed with the Securities and Exchange Commission on ~~May 5,~~August 4, 2022

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 31,~~June 30, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________to__________.

Commission file number: 1-12997


Maximus, Inc.
(Exact name of registrant as specified in its charter)

Virginia						54-1000588
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

1600 Tysons Boulevard, McLean, Virginia						22102
(Address of principal executive offices)						(Zip Code)

(703) 251-8500
(Registrant's telephone number, including the area code)
~~1891 Metro Center Drive, Reston, Virginia 20190~~
~~(Former address)~~

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, no par value

MMS

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒

Accelerated filer ☐

Non-accelerated filer ☐

Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

There were ~~61,412,807~~60,550,580 shares of the registrant's Common Stock outstanding as of ~~May 2,~~August 1, 2022.

Table of Contents

Table of Contents to ~~Second~~Third Quarter 2022 Form 10-Q


	SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS	3
Part I - Financial Information		4
Item 1.	Financial Statements	4
	Consolidated Statements of Operations	4
	Consolidated Statements of Comprehensive Income	5
	Consolidated Balance Sheets	6
	Consolidated Statements of Cash Flows	7
	Consolidated Statements of Changes in Shareholders' Equity	8
	Notes to the Consolidated Financial Statements	910
	1. Organization	910
	2. Significant Accounting Policies	910
	3. Business Segments	1011
	4. Revenue Recognition	1213
	5. Earnings Per Share	1415
	6. Business Combinations	1415
	7. Debt	1718
	8. ~~Derivatives~~	18
	9. Fair Value	19
	~~10. Stock Compensation~~	19
	~~11. Accumulated Other Comprehensive Income~~	19
	~~12. Stock Repurchases~~ Measurements	20
	19. 3 ~~. Cash and Cash Equivalents and Restricted Cash~~	20
	1 4 ~~. Accounts Receivable, Net~~	20
	1 5 ~~. Property and Equipment, Net~~Equity	21
	110. 6 .~~Commitments~~Cash and ~~Contingencies~~Cash Equivalents and Restricted Cash	2122
	1 71 . Accounts Receivable, Net	22
	1 2 . Property and Equipment, Net	22
	1 3 . Commitments and Contingencies	22
	1 4 . Subsequent Event	2123
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2224
	Business Overview	2224
	Financial Overview	2325
	Results of Operations	2325
	Liquidity and Capital Resources	2931
	Critical Accounting Policies and Estimates	3032
	Non-GAAP and Other Measures	3032
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3234
Item 4.	Controls and Procedures	3234
Part II - Other Information		3335
Item 1.	Legal Proceedings	3335
Item 1A.	Risk Factors	3335
Item 2.	Unregistered Sales of Equity Securities	3335
Item 3.	Defaults Upon Senior Securities	3335
Item 4.	Mine Safety Disclosures	3335
Item 5.	Other Information	3335
Item 6.	Exhibits	3436
	Signatures	3537

Table of Contents

Unless otherwise specified, references in this Quarterly Report on Form 10-Q to "our," "we," "us," "Maximus," the "Company," and "our business" refer to Maximus, Inc. and its subsidiaries.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Included in this Quarterly Report on Form 10-Q are forward-looking statements within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: "anticipate," "intend," "plan," "goal," "seek," "opportunity," "could," "potential," "believe," "project," "estimate," "expect," "forecast," "strategy," "future," "likely," "may," "should," "will," and similar references to future periods.

Forward-looking statements that are not historical facts, including statements about our confidence, strategies and initiatives, and our expectations about revenues, results of operations, profitability, liquidity, market demand, the impact of the coronavirus ("COVID-19") global pandemic and related policy implications, and our recent acquisitions are forward-looking statements that ~~involve~~are subject to risks and uncertainties. These risks could cause our actual results to differ materially from those indicated by such forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following:

•a failure to meet performance requirements in our contracts, which might lead to contract termination and actual or liquidated damages;

•our failure to successfully bid for and accurately price contracts to generate our desired profit;

•the effects of future legislative or government budgetary and spending changes;

•the impact of the Biden Administration on federal procurement, federal funding to states' safety-net programs, and the overall decision-making process related to our industry, including our business and customers;

•our ability to manage our growth, including acquired businesses;

•difficulties in integrating or achieving projected revenues, earnings, and other benefits associated with acquired businesses;

•the outcome of reviews or audits, which might result in financial penalties and impair our ability to respond to invitations for new work;

•our ability to manage capital investments and startup costs incurred before receiving related contract payments;

•our ability to manage our debt;

•the extent and impact of the continuation of the global pandemic and the actions taken or to be taken by us, our customers, and the governments or jurisdictions in which we operate in response to ~~COVID-19;~~COVID-19, including the U.S. federal government's ongoing Public Health Emergency declaration;

•our ability to maintain technology systems and otherwise protect confidential or protected information;

•our ability to attract and retain executive officers, senior managers, and other qualified personnel to execute our business;

•the ability of government customers to terminate contracts on short notice, with or without cause;

•our ability to maintain relationships with key government entities from whom a substantial portion of our revenue is derived;

•a failure to comply with laws governing our business, which might result in the Company being subject to fines, penalties, suspension, debarment, and other sanctions;

•the costs and outcome of litigation;

•the effects of changes in laws and regulations governing our business, including tax laws, and applicable interpretations and guidance thereunder, or changes in accounting policies, rules, methodologies, and practices, and our ability to estimate the impact of such changes;

•matters related to business we disposed of or divested; and

•other factors set forth in Item 1A, "Risk Factors" of our Annual Report on ~~From~~Form 10-K, filed with the Securities and Exchange Commission on November 18, 2021.

Any forward-looking statement made by us in this report is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments, or otherwise.

Table of Contents

PART I - Financial Information

Item 1. Financial Statements

Maximus, Inc.

Consolidated Statements of Operations

(Unaudited)


		For the Three Months Ended				For the Six Months Ended					For the Three Months Ended				For the Nine Months Ended
		March 31, 2022		March 31, 2021		March 31, 2022		March 31, 2021			June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
		(in thousands, except per share amounts)									(in thousands, except per share amounts)
Revenue	Revenue	$	1,177,326	$	959,280	$	2,328,202	$	1,904,834	Revenue	$	1,125,785	$	1,243,520	$	3,453,987	$	3,148,354
Cost of revenue	Cost of revenue	948,875		728,622		1,871,596		1,468,121		Cost of revenue	915,564		951,664		2,787,160		2,419,785
Gross profit	Gross profit	228,451		230,658		456,606		436,713		Gross profit	210,221		291,856		666,827		728,569
Selling, general, and administrative expenses	Selling, general, and administrative expenses	130,307		112,402		254,528		224,369		Selling, general, and administrative expenses	132,974		140,129		387,502		364,498
Amortization of intangible assets	Amortization of intangible assets	22,856		5,070		45,261		11,586		Amortization of intangible assets	22,690		12,132		67,951		23,718
Operating income	Operating income	75,288		113,186		156,817		200,758		Operating income	54,557		139,595		211,374		340,353
Interest expense	Interest expense	(9,438)		(756)		(19,076)		(962)		Interest expense	(10,791)		(3,087)		(29,867)		(4,049)
Other income/(expense), net		715		(520)		404		(1,295)
Other expense, net										Other expense, net	(2,497)		(8,289)		(2,093)		(9,584)
Income before income taxes	Income before income taxes	66,565		111,910		138,145		198,501		Income before income taxes	41,269		128,219		179,414		326,720
Provision for income taxes	Provision for income taxes	16,469		31,296		34,719		53,810		Provision for income taxes	9,934		33,724		44,653		87,534
Net income	Net income	$	50,096	$	80,614	$	103,426	$	144,691	Net income	$	31,335	$	94,495	$	134,761	$	239,186

Earnings per share:	Earnings per share:									Earnings per share:
Basic	Basic	$	0.81	$	1.30	$	1.66	$	2.33	Basic	$	0.51	$	1.52	$	2.17	$	3.86
Diluted	Diluted	$	0.80	$	1.29	$	1.66	$	2.33	Diluted	$	0.51	$	1.51	$	2.17	$	3.84
Weighted average shares outstanding:	Weighted average shares outstanding:									Weighted average shares outstanding:
Basic	Basic	62,227		62,026		62,256		62,022		Basic	61,607		62,064		62,038		62,028
Diluted	Diluted	62,381		62,294		62,409		62,212		Diluted	61,756		62,453		62,190		62,300

Dividends declared per share	Dividends declared per share	$	0.28	$	0.28	$	0.56	$	0.56	Dividends declared per share	$	0.28	$	0.28	$	0.84	$	0.84

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

Maximus, Inc.

Consolidated Statements of Comprehensive Income

(Unaudited)


		For the Three Months Ended				For the Six Months Ended					For the Three Months Ended				For the Nine Months Ended
		March 31, 2022		March 31, 2021		March 31, 2022		March 31, 2021			June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
		(in thousands)									(in thousands)
Net income	Net income	$	50,096	$	80,614	$	103,426	$	144,691	Net income	$	31,335	$	94,495	$	134,761	$	239,186
Other comprehensive income, net of tax:	Other comprehensive income, net of tax:									Other comprehensive income, net of tax:
Foreign currency translation adjustments	Foreign currency translation adjustments	(23)		770		436		7,693		Foreign currency translation adjustments	(8,935)		(24)		(8,499)		7,669
Net gains on cash flow hedge, net of tax		10,689		—		13,374		—
Net gains/(losses) on cash flow hedge, net of tax effect of $1,085, $(379), $5,857 and $(379), respectively										Net gains/(losses) on cash flow hedge, net of tax effect of $1,085, $(379), $5,857 and $(379), respectively	3,042		(1,062)		16,416		(1,062)
Other comprehensive income	Other comprehensive income	10,666		770		13,810		7,693		Other comprehensive income	(5,893)		(1,086)		7,917		6,607
Comprehensive income	Comprehensive income	$	60,762	$	81,384	$	117,236	$	152,384	Comprehensive income	$	25,442	$	93,409	$	142,678	$	245,793

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

Maximus, Inc.

Consolidated Balance Sheets


		March 31, 2022		September 30, 2021			June 30, 2022		September 30, 2021
		(unaudited)					(unaudited)
		(in thousands)					(in thousands)
Assets:	Assets:					Assets:
Cash and cash equivalents	Cash and cash equivalents	$	92,638	$	135,061	Cash and cash equivalents	$	93,748	$	135,061
Accounts receivable, net	Accounts receivable, net	885,685		834,819		Accounts receivable, net	868,010		834,819
Income taxes receivable	Income taxes receivable	14,757		5,413		Income taxes receivable	15,608		5,413
Prepaid expenses and other current assets	Prepaid expenses and other current assets	97,420		104,201		Prepaid expenses and other current assets	94,218		104,201
Total current assets	Total current assets	1,090,500		1,079,494		Total current assets	1,071,584		1,079,494
Property and equipment, net	Property and equipment, net	57,945		62,627		Property and equipment, net	55,908		62,627
Capitalized software, net	Capitalized software, net	42,877		42,868		Capitalized software, net	48,478		42,868
Operating lease right-of-use assets	Operating lease right-of-use assets	160,183		179,349		Operating lease right-of-use assets	143,545		179,349
Goodwill	Goodwill	1,780,370		1,774,406		Goodwill	1,783,870		1,774,406
Intangible assets, net	Intangible assets, net	851,564		879,168		Intangible assets, net	829,179		879,168
Deferred contract costs, net	Deferred contract costs, net	42,813		36,486		Deferred contract costs, net	43,723		36,486
Deferred compensation plan assets	Deferred compensation plan assets	44,773		46,738		Deferred compensation plan assets	38,729		46,738
Deferred income taxes	Deferred income taxes	2,635		990		Deferred income taxes	4,776		990
Other assets	Other assets	34,036		16,839		Other assets	38,131		16,839
Total assets	Total assets	$	4,107,696	$	4,118,965	Total assets	$	4,057,923	$	4,118,965
Liabilities and Shareholders' Equity:	Liabilities and Shareholders' Equity:					Liabilities and Shareholders' Equity:
Liabilities:	Liabilities:					Liabilities:
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	$	302,912	$	305,565	Accounts payable and accrued liabilities	$	259,016	$	305,565
Accrued compensation and benefits	Accrued compensation and benefits	142,512		186,809		Accrued compensation and benefits	182,434		186,809
Deferred revenue, current portion	Deferred revenue, current portion	122,070		98,588		Deferred revenue, current portion	106,797		98,588
Income taxes payable	Income taxes payable	3,883		6,782		Income taxes payable	4,071		6,782
Long-term debt, current portion	Long-term debt, current portion	59,911		80,555		Long-term debt, current portion	59,698		80,555
Operating lease liabilities, current portion	Operating lease liabilities, current portion	70,731		76,077		Operating lease liabilities, current portion	67,680		76,077
Other current liabilities	Other current liabilities	51,247		35,057		Other current liabilities	50,510		35,057
Total current liabilities	Total current liabilities	753,266		789,433		Total current liabilities	730,206		789,433
Deferred revenue, non-current portion	Deferred revenue, non-current portion	30,429		35,932		Deferred revenue, non-current portion	23,518		35,932
Deferred income taxes	Deferred income taxes	198,848		194,638		Deferred income taxes	196,691		194,638
Long-term debt, non-current portion	Long-term debt, non-current portion	1,387,386		1,429,137		Long-term debt, non-current portion	1,423,276		1,429,137
Deferred compensation plan liabilities, non-current portion	Deferred compensation plan liabilities, non-current portion	44,923		47,405		Deferred compensation plan liabilities, non-current portion	39,006		47,405
Operating lease liabilities, non-current portion	Operating lease liabilities, non-current portion	106,670		121,771		Operating lease liabilities, non-current portion	93,035		121,771
Other liabilities	Other liabilities	31,958		20,320		Other liabilities	30,629		20,320
Total liabilities	Total liabilities	2,553,480		2,638,636		Total liabilities	2,536,361		2,638,636
Commitments and contingencies (Note 16)		0		0
Commitments and contingencies (Note 13)						Commitments and contingencies (Note 13)	0		0
Shareholders' equity:	Shareholders' equity:					Shareholders' equity:
Common stock, no par value; 100,000 shares authorized; 61,610 and 61,954 shares issued and outstanding as of March 31, 2022 and September 30, 2021, respectively (shares in thousands)		550,228		532,411
Common stock, no par value; 100,000 shares authorized; 60,904 and 61,954 shares issued and outstanding as of June 30, 2022 and September 30, 2021, respectively (shares in thousands)						Common stock, no par value; 100,000 shares authorized; 60,904 and 61,954 shares issued and outstanding as of June 30, 2022 and September 30, 2021, respectively (shares in thousands)	557,656		532,411
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(26,098)		(39,908)		Accumulated other comprehensive loss	(31,991)		(39,908)
Retained earnings	Retained earnings	1,030,086		987,826		Retained earnings	995,897		987,826
Total shareholders' equity	Total shareholders' equity	1,554,216		1,480,329		Total shareholders' equity	1,521,562		1,480,329
Total liabilities and shareholders' equity	Total liabilities and shareholders' equity	$	4,107,696	$	4,118,965	Total liabilities and shareholders' equity	$	4,057,923	$	4,118,965

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

Maximus, Inc.

Consolidated Statements of Cash Flows

(Unaudited)


		For the Six Months Ended					For the Nine Months Ended
		March 31, 2022		March 31, 2021			June 30, 2022		June 30, 2021
		(in thousands)					(in thousands)
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	103,426	$	144,691	Net income	$	134,761	$	239,186
Adjustments to reconcile net income to cash flows from operating activities:	Adjustments to reconcile net income to cash flows from operating activities:					Adjustments to reconcile net income to cash flows from operating activities:
Depreciation and amortization of property, equipment and capitalized software	Depreciation and amortization of property, equipment and capitalized software	21,199		22,835		Depreciation and amortization of property, equipment and capitalized software	29,875		33,664
Amortization of intangible assets	Amortization of intangible assets	45,261		11,586		Amortization of intangible assets	67,951		23,718
Amortization of debt issuance costs and debt discount	Amortization of debt issuance costs and debt discount	1,297		—		Amortization of debt issuance costs and debt discount	1,946		—
Costs related to debt financing						Costs related to debt financing	—		8,509
Deferred income taxes	Deferred income taxes	(3,318)		7,951		Deferred income taxes	(7,179)		3,632
Stock compensation expense	Stock compensation expense	15,052		13,479		Stock compensation expense	22,080		20,823
Change in assets and liabilities, net of effects of business combinations:	Change in assets and liabilities, net of effects of business combinations:					Change in assets and liabilities, net of effects of business combinations:
Accounts receivable	Accounts receivable	(49,064)		70,217		Accounts receivable	(39,997)		(254,304)
Prepaid expenses and other current assets	Prepaid expenses and other current assets	9,769		8,074		Prepaid expenses and other current assets	9,454		7,542
Deferred contract costs	Deferred contract costs	(6,431)		(9,184)		Deferred contract costs	(7,702)		(15,773)
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	(3,047)		12,395		Accounts payable and accrued liabilities	(42,577)		116,873
Accrued compensation and benefits	Accrued compensation and benefits	(28,281)		(16,761)		Accrued compensation and benefits	13,846		34,387
Deferred revenue	Deferred revenue	18,473		13,296		Deferred revenue	342		23,624
Income taxes	Income taxes	(13,515)		3,230		Income taxes	(12,822)		15,165
Operating lease right-of-use assets and liabilities	Operating lease right-of-use assets and liabilities	(1,293)		(414)		Operating lease right-of-use assets and liabilities	(1,330)		1,077
Other assets and liabilities	Other assets and liabilities	2,331		(1,697)		Other assets and liabilities	1,128		(11,464)
Net cash provided by operating activities	Net cash provided by operating activities	111,859		279,698		Net cash provided by operating activities	169,776		246,659
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Purchases of property and equipment and capitalized software	Purchases of property and equipment and capitalized software	(22,898)		(23,584)		Purchases of property and equipment and capitalized software	(35,936)		(32,133)
Acquisitions of businesses, net of cash acquired	Acquisitions of businesses, net of cash acquired	(4)		(413,940)		Acquisitions of businesses, net of cash acquired	(14,144)		(1,779,473)
Other						Other	2,000		—
Net cash used in investing activities	Net cash used in investing activities	(22,902)		(437,524)		Net cash used in investing activities	(48,080)		(1,811,606)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Cash dividends paid to Maximus shareholders	Cash dividends paid to Maximus shareholders	(34,659)		(34,414)		Cash dividends paid to Maximus shareholders	(51,762)		(51,625)
Purchases of Maximus common stock	Purchases of Maximus common stock	(25,843)		(3,363)		Purchases of Maximus common stock	(73,864)		(3,363)
Tax withholding related to RSU vesting	Tax withholding related to RSU vesting	(9,673)		(9,818)		Tax withholding related to RSU vesting	(9,673)		(9,818)
Payments for debt financing						Payments for debt financing	—		(22,759)
Proceeds from borrowings	Proceeds from borrowings	240,000		500,162		Proceeds from borrowings	415,000		2,285,000
Principal payments for debt	Principal payments for debt	(303,708)		(263,838)		Principal payments for debt	(442,973)		(607,880)
Other	Other	—		(2,762)		Other	—		(2,763)
Net cash (used in)/provided by financing activities	Net cash (used in)/provided by financing activities	(133,883)		185,967		Net cash (used in)/provided by financing activities	(163,272)		1,586,792
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	Effect of exchange rate changes on cash, cash equivalents, and restricted cash	324		3,263		Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(4,369)		2,830
Net change in cash, cash equivalents, and restricted cash	Net change in cash, cash equivalents, and restricted cash	(44,602)		31,404		Net change in cash, cash equivalents, and restricted cash	(45,945)		24,675
Cash, cash equivalents and restricted cash, beginning of period	Cash, cash equivalents and restricted cash, beginning of period	156,570		88,561		Cash, cash equivalents and restricted cash, beginning of period	156,570		88,561
Cash, cash equivalents and restricted cash, end of period	Cash, cash equivalents and restricted cash, end of period	$	111,968	$	119,965	Cash, cash equivalents and restricted cash, end of period	$	110,625	$	113,236

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

Maximus, Inc.

Consolidated Statements of Changes in Shareholders' Equity

(Unaudited)


		Common Stock			Accumulated Other Comprehensive Loss			Retained Earnings				Total Equity		Common Stock							Accumulated Other Comprehensive Loss		Retained Earnings		Total Equity
		Shares	Amount								Shares				Amount
		(in thousands)												(in thousands)
Balance at September 30, 2021	Balance at September 30, 2021	61,954	$	532,411		$	(39,908)		$	987,826				$	1,480,329	Balance at September 30, 2021	61,954			$		532,411	$	(39,908)	$	987,826	$	1,480,329
Net income	Net income	—	—		—			53,330				53,330	Net income	—				—			—		53,330		53,330
Foreign currency translation	Foreign currency translation	—	—		459			—				459	Foreign currency translation	—				—			459		—		459
Cash flow hedge, net of tax	Cash flow hedge, net of tax	—	—		2,685			—				2,685	Cash flow hedge, net of tax	—				—			2,685		—		2,685
Cash dividends	Cash dividends	—	—		—			(17,347)				(17,347)	Cash dividends	—				—			—		(17,347)		(17,347)
Dividends on RSUs	Dividends on RSUs	—	272		—			(272)				—	Dividends on RSUs	—				272			—		(272)		—
Purchases of Maximus common stock	Purchases of Maximus common stock	(18)	—		—			(1,379)				(1,379)	Purchases of Maximus common stock	(18)				—			—		(1,379)		(1,379)
Stock compensation expense	Stock compensation expense	—	8,248		—			—				8,248	Stock compensation expense	—				8,248			—		—		8,248
Tax withholding adjustment related to RSU vesting	Tax withholding adjustment related to RSU vesting	—	2,101		—			—				2,101	Tax withholding adjustment related to RSU vesting	—				2,101			—		—		2,101
Balance as of December 31, 2021	Balance as of December 31, 2021	61,936	543,032		(36,764)			1,022,158				1,528,426	Balance as of December 31, 2021	61,936				$	543,032		$	(36,764)	$	1,022,158	$	1,528,426
Net income	Net income	—	—		—			50,096				50,096	Net income	—				—			—		50,096		50,096
Foreign currency translation	Foreign currency translation	—	—		(23)			—				(23)	Foreign currency translation	—				—			(23)		—		(23)
Cash flow hedge, net of tax	Cash flow hedge, net of tax	—	—		10,689			—				10,689	Cash flow hedge, net of tax	—				—			10,689		—		10,689
Cash dividends	Cash dividends	—	—		—			(17,312)				(17,312)	Cash dividends	—				—			—		(17,312)		(17,312)
Dividends on RSUs	Dividends on RSUs	—	392		—			(392)				—	Dividends on RSUs	—				392			—		(392)		—
Purchases of Maximus common stock	Purchases of Maximus common stock	(330)	—		—			(24,464)				(24,464)	Purchases of Maximus common stock	(330)				—			—		(24,464)		(24,464)
Stock compensation expense	Stock compensation expense	—	6,804		—			—				6,804	Stock compensation expense	—				6,804			—		—		6,804

RSUs vested	RSUs vested	4	—		—			—				—	RSUs vested	4				—			—		—		—
Balance as of March 31, 2022	Balance as of March 31, 2022	61,610	550,228		(26,098)			1,030,086				1,554,216	Balance as of March 31, 2022	61,610				$	550,228		$	(26,098)	$	1,030,086	$	1,554,216
Net income													Net income	—				—			—		31,335		31,335
Foreign currency translation													Foreign currency translation	—				—			(8,935)		—		(8,935)
Cash flow hedge, net of tax													Cash flow hedge, net of tax	—				—			3,042		—		3,042
Cash dividends													Cash dividends	—				—			—		(17,103)		(17,103)
Dividends on RSUs													Dividends on RSUs	—				400			—		(400)		—
Purchases of Maximus common stock													Purchases of Maximus common stock	(706)				—			—		(48,021)		(48,021)
Stock compensation expense													Stock compensation expense	—				7,028			—		—		7,028

Balance as of June 30, 2022													Balance as of June 30, 2022	60,904				$	557,656		$	(31,991)	$	995,897	$	1,521,562

Common Stock Accumulated
Other
Comprehensive
Loss Retained
Earnings Total
Equity
Shares Amount
(in thousands)
Balance at September 30, 2020 61,504 $ 513,959 $ (42,638) $ 770,498 $ 1,241,819
Net income — — — 64,077 64,077
Foreign currency translation — — 6,923 — 6,923
Cash dividends — — — (17,207) (17,207)
Dividends on RSUs — 336 — (336) —
Purchases of Maximus common stock (52) — — (3,363) (3,363)
Stock compensation expense — 6,062 — — 6,062
Balance as of December 31, 2020 61,452 $ 520,357 $ (35,715) $ 813,669 $ 1,298,311
Net income — — — 80,614 80,614
Foreign currency translation — — 770 — 770
Cash dividends — — — (17,207) (17,207)
Dividends on RSUs — 431 — (431) —
Stock compensation expense — 7,417 — — 7,417
RSUs vested 20 — — — —
Balance as of March 31, 2021 61,472 $ 528,205 $ (34,945) $ 876,645 $ 1,369,905

Table of Contents

Maximus, Inc.

Consolidated Statements of Changes in Shareholders' Equity

(Unaudited)


	Common Stock			Accumulated Other Comprehensive Loss		Retained Earnings		Total Equity
	Shares	Amount
	(in thousands)
Balance at September 30, 2020	61,504	$	513,959	$	(42,638)	$	770,498	$	1,241,819
Net income	—	—		—		64,077		64,077
Foreign currency translation	—	—		6,923		—		6,923
Cash dividends	—	—		—		(17,207)		(17,207)
Dividends on RSUs	—	336		—		(336)		—
Purchases of Maximus common stock	(52)	—		—		(3,363)		(3,363)
Stock compensation expense	—	6,062		—		—		6,062
Balance as of December 31, 2020	61,452	$	520,357	$	(35,715)	$	813,669	$	1,298,311
Net income	—	—		—		80,614		80,614
Foreign currency translation	—	—		770		—		770
Cash dividends	—	—		—		(17,207)		(17,207)
Dividends on RSUs	—	431		—		(431)		—
Stock compensation expense	—	7,417		—		—		7,417
RSUs vested	20	—		—		—		—
Balance as of March 31, 2021	61,472	$	528,205	$	(34,945)	$	876,645	$	1,369,905
Net income	—	—		—		94,495		94,495
Foreign currency translation	—	—		(24)		—		(24)
Cash flow hedge, net of income tax	—	—		(1,062)		—		(1,062)
Cash dividends	—	—		—		(17,211)		(17,211)
Dividends on RSUs	—	441		—		(441)		—
Stock compensation expense	—	7,344		—		—		7,344

Balance as of June 30, 2021	61,472	$	535,990	$	(36,031)	$	953,488	$	1,453,447

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

Maximus, Inc.

Notes to the Unaudited Consolidated Financial Statements

1. ORGANIZATION

Maximus, a Virginia corporation established in 1975, is a leading provider of government services worldwide. ~~Maximus operates under its founding~~Under our mission of ~~Helping Government Serve the People~~®~~, enabling~~moving people forward, we offer industry-leading expertise, including citizen engagement, eligibility and program integrity and case management to enable citizens around the globe to successfully engage with their governments at all ~~levels~~levels. We assist governments to support families, strengthen workforces and across a variety of health and human services programs. Maximus delivers innovative business process management and technology solutions that contribute to improved outcomes for citizens and higher levels of productivity, accuracy, accountability, and efficiency of government-sponsored programs. Maximus isstreamline their services. We are a proud partner to government agencies in the United States, Australia, Canada, Italy, Saudi Arabia, Singapore, South Korea, Sweden, and the United Kingdom.

2. SIGNIFICANT ACCOUNTING POLICIES

(a)Basis of Presentation

The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries over which the Company has a controlling financial interest, and have been prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP, and the rules and regulations of the U.S. Securities and Exchange Commission, or SEC. All intercompany balances and transactions have been eliminated in consolidation.

(b)Basis of Presentation for Interim Periods

Certain information and footnote disclosures normally included for the annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted for the interim periods presented. We believe that the unaudited interim financial statements include all adjustments (which are normal and recurring in nature) necessary to present fairly our financial position and the results of operations and cash flows for the periods presented.

The results of operations for the interim periods presented are not necessarily indicative of results that may be expected for the year or future periods. The financial statements should be read in conjunction with our audited consolidated financial statements and the notes thereto for the year ended September 30, 2021 included in our Annual Report on Form 10-K for the fiscal year then ended (the "2021 10-K"). We have continued to follow the accounting policies set forth in those financial statements.

(c)Estimates

The preparation of these financial statements, in conformity with U.S. GAAP, requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities, and the reported amounts of revenue and expenses. At each reporting period end, we make estimates, including those related to revenue recognition and cost estimation on certain contracts, the realizability of goodwill, and amounts related to income taxes, certain accrued liabilities, and contingencies and litigation.

We base our estimates on historical experience and expectations of the future that we believe to be reasonable. The continued uncertainty related to the economic and political effects of the COVID-19 global pandemic ~~increase uncertainty, which has reduced~~reduce our ability to use past results to estimate future performance. Accordingly, our estimates may be subject to greater volatility than has been the case in the past.

910

Table of Contents

3. BUSINESS SEGMENTS

We conduct our operations through 3 business segments: U.S. Services, U.S. Federal Services, and Outside the U.S.

U.S. Services

Our U.S. Services Segment provides a variety of business process services ("BPS") such as program administration, appeals and assessments, and related consulting work for U.S. state and local government programs. These services support a variety of programs, including the Affordable Care Act ("ACA"), Medicaid, the Children's Health Insurance Program ("CHIP"), Temporary Assistance to Needy Families ("TANF"), and child support programs. Addressing societal macro trends such as aging populations and rising costs, the segment continues to execute on its clinical evolution strategy by expanding its clinical offerings. This includes assessments to determine whether personal care services are medically necessary and public health offerings such as contact tracing, disease investigation, and vaccine distribution support services as part of the governments' COVID-19 response efforts.

U.S. Federal Services

From technology solutions to program administration and operations, our U.S. Federal Services Segment delivers end-to-end solutions that help various U.S. federal government agencies better deliver on their mission. This also includes appeals and assessments services, system and application development, IT modernization, and maintenance services. The segment also contains certain state-based assessments and appeals work that is part of the segment's heritage within the Medicare Appeals portfolio which continues to be managed within this segment. Benefiting from the Maximus Federal Consulting (formerly Attain Federal) platform, the segment executes on its digital strategy to deliver technology solutions that advance agency missions, including the challenge to modernize, provide better customer experience, and drive process efficiencies. The segment continues to expand its clinical solutions with the acquisition of VES Group, Inc., which manages the clinical evaluation process for U.S. veterans and service members on behalf of the U.S. Department of Veterans Affairs. The segment further supports clinical offerings in public health with new work supporting the U.S. ~~Federal Government's~~federal government's COVID-19 response efforts. This included expanded work with the Centers for Disease Control and Prevention ("CDC") for their helpline and increased support for the IRS Wage and Investment Division's response efforts to general inquiries regarding the Coronavirus Aid Relief & Economic Security ("CARES") Act and Economic Impact Payment Service Plan.

Outside the U.S.

Our Outside the U.S. Segment provides BPS for international governments and commercial clients, transforming the lives of people around the world. Helping people find employment, access vital support, and remain healthy, these services include health and disability assessments, program administration for employment services, wellbeing solutions, and other job seeker related services. We support programs and deliver services in the U.K., including the Health Assessment Advisory Service ("HAAS")~~, the Work & Health Programme, Fair Start,~~ and Restart; Australia, including ~~jobactive~~Workforce Australia and the Disability Employment Service; Canada, including Health Insurance British Columbia and the Employment Program of British Columbia; in addition to Italy, Saudi Arabia, Singapore, South Korea, and Sweden, where we predominantly provide employment support and job seeker services.

1011

Table of Contents


Table 3: Results of Operation by Business Segment	Table 3: Results of Operation by Business Segment													Table 3: Results of Operation by Business Segment
		For the Three Months Ended						For the Six Months Ended							For the Three Months Ended						For the Nine Months Ended
		March 31, 2022			March 31, 2021			March 31, 2022			March 31, 2021				June 30, 2022			June 30, 2021			June 30, 2022			June 30, 2021
		Amount		% (1)	Amount		% (1)	Amount		% (1)	Amount		% (1)		Amount		% (1)	Amount		% (1)	Amount		% (1)	Amount		% (1)
		(dollars in thousands)													(dollars in thousands)
Revenue:	Revenue:													Revenue:
U.S. Services	U.S. Services	$	398,077		$	448,215		$	784,494		$	833,149		U.S. Services	$	399,320		$	436,338		$	1,183,814		$	1,269,487
U.S. Federal Services	U.S. Federal Services	573,288			330,136			1,155,159			735,381			U.S. Federal Services	525,519			617,601			1,680,678			1,352,982
Outside the U.S.	Outside the U.S.	205,961			180,929			388,549			336,304			Outside the U.S.	200,946			189,581			589,495			525,885
Revenue	Revenue	$	1,177,326		$	959,280		$	2,328,202		$	1,904,834		Revenue	$	1,125,785		$	1,243,520		$	3,453,987		$	3,148,354
Gross profit:	Gross profit:													Gross profit:
U.S. Services	U.S. Services	$	84,971	21.3 %	$	119,440	26.6 %	$	174,670	22.3 %	$	218,442	26.2 %	U.S. Services	$	74,135	18.6 %	$	104,814	24.0 %	$	248,805	21.0 %	$	323,256	25.5 %
U.S. Federal Services	U.S. Federal Services	115,153		20.1 %	74,133		22.5 %	241,729		20.9 %	156,629		21.3 %	U.S. Federal Services	124,203		23.6 %	155,776		25.2 %	365,932		21.8 %	312,405		23.1 %
Outside the U.S.	Outside the U.S.	28,327		13.8 %	37,085		20.5 %	40,207		10.3 %	61,642		18.3 %	Outside the U.S.	11,883		5.9 %	31,266		16.5 %	52,090		8.8 %	92,908		17.7 %
Gross profit	Gross profit	$	228,451	19.4 %	$	230,658	24.0 %	$	456,606	19.6 %	$	436,713	22.9 %	Gross profit	$	210,221	18.7 %	$	291,856	23.5 %	$	666,827	19.3 %	$	728,569	23.1 %
Selling, general, and administrative expenses:	Selling, general, and administrative expenses:													Selling, general, and administrative expenses:
U.S. Services	U.S. Services	$	38,273	9.6 %	$	36,593	8.2 %	$	73,375	9.4 %	$	74,049	8.9 %	U.S. Services	$	42,351	10.6 %	$	42,606	9.8 %	$	115,726	9.8 %	$	116,655	9.2 %
U.S. Federal Services	U.S. Federal Services	68,949		12.0 %	50,978		15.4 %	133,874		11.6 %	103,230		14.0 %	U.S. Federal Services	69,466		13.2 %	69,647		11.3 %	203,340		12.1 %	172,877		12.8 %
Outside the U.S.	Outside the U.S.	24,011		11.7 %	22,013		12.2 %	45,351		11.7 %	42,045		12.5 %	Outside the U.S.	23,101		11.5 %	22,973		12.1 %	68,452		11.6 %	65,018		12.4 %
Other (2)	Other (2)	(926)		NM	2,818		NM	1,928		NM	5,045		NM	Other (2)	(1,944)		NM	4,903		NM	(16)		NM	9,948		NM
Selling, general, and administrative expenses	Selling, general, and administrative expenses	$	130,307	11.1 %	$	112,402	11.7 %	$	254,528	10.9 %	$	224,369	11.8 %	Selling, general, and administrative expenses	$	132,974	11.8 %	$	140,129	11.3 %	$	387,502	11.2 %	$	364,498	11.6 %
Operating income/(loss):	Operating income/(loss):													Operating income/(loss):
U.S. Services	U.S. Services	$	46,698	11.7 %	$	82,847	18.5 %	$	101,295	12.9 %	$	144,393	17.3 %	U.S. Services	$	31,784	8.0 %	$	62,208	14.3 %	$	133,079	11.2 %	$	206,601	16.3 %
U.S. Federal Services	U.S. Federal Services	46,204		8.1 %	23,155		7.0 %	107,855		9.3 %	53,399		7.3 %	U.S. Federal Services	54,737		10.4 %	86,129		13.9 %	162,592		9.7 %	139,528		10.3 %
Outside the U.S.	Outside the U.S.	4,316		2.1 %	15,072		8.3 %	(5,144)		(1.3) %	19,597		5.8 %	Outside the U.S.	(11,218)		(5.6) %	8,293		4.4 %	(16,362)		(2.8) %	27,890		5.3 %
Amortization of intangible assets	Amortization of intangible assets	(22,856)		NM	(5,070)		NM	(45,261)		NM	(11,586)		NM	Amortization of intangible assets	(22,690)		NM	(12,132)		NM	(67,951)		NM	(23,718)		NM
Other (2)	Other (2)	926		NM	(2,818)		NM	(1,928)		NM	(5,045)		NM	Other (2)	1,944		NM	(4,903)		NM	16		NM	(9,948)		NM
Operating income/(loss)		$	75,288	6.4 %	$	113,186	11.8 %	$	156,817	6.7 %	$	200,758	10.5 %
Operating income														Operating income	$	54,557	4.8 %	$	139,595	11.2 %	$	211,374	6.1 %	$	340,353	10.8 %

(1)Percentage of respective segment revenue. Percentages not considered meaningful are marked "NM."

(2)Other selling, general, and administrative expenses includes costs that are not allocated to a particular segment. This includes legal expenses and settlements and expenses incurred as part of our acquisitions, as well as potential acquisitions which have not been or may not be completed. Our results for the three and nine months ended June 30, 2022 included a $2.3 million credit related to changes in acquisition related contingent consideration. See "Note 6. Business Combinations" for more information.

1112

Table of Contents

4. REVENUE RECOGNITION

The Company recognizes revenue as, or when, we satisfy performance obligations under a contract. The majority of our contracts have performance obligations which are satisfied over time. In most cases, we view our performance obligations as promises to transfer a series of distinct services to our customers that are substantially the same and which have the same pattern of service.

Disaggregation of Revenue

In addition to our segment reporting, we disaggregate our revenues by contract type, customer type, and geography. Our operating segments represent the manner in which our Chief Executive Officer reviews our financial results, which is further discussed in "Note 3. Business Segments."


Table 4.1: Revenue by Contract Type	Table 4.1: Revenue by Contract Type													Table 4.1: Revenue by Contract Type
		For the Three Months Ended						For the Six Months Ended							For the Three Months Ended						For the Nine Months Ended
		March 31, 2022			March 31, 2021			March 31, 2022			March 31, 2021				June 30, 2022			June 30, 2021			June 30, 2022			June 30, 2021
		Amount		%	Amount		%	Amount		%	Amount		%		Amount		%	Amount		%	Amount		%	Amount		%
		(dollars in thousands)													(dollars in thousands)
Performance-based	Performance-based	$	516,210	43.9 %	$	349,749	36.4 %	$	1,007,166	43.3 %	$	643,709	33.8 %	Performance-based	$	520,202	46.2 %	$	389,800	31.3 %	$	1,527,368	44.2 %	$	1,033,509	32.8 %
Cost-plus	Cost-plus	322,823		27.4 %	286,082		29.8 %	662,904		28.5 %	670,565		35.2 %	Cost-plus	282,578		25.1 %	282,808		22.7 %	945,482		27.4 %	953,373		30.3 %
Fixed price	Fixed price	158,867		13.5 %	146,344		15.3 %	310,372		13.3 %	267,121		14.0 %	Fixed price	160,219		14.2 %	146,175		11.8 %	470,591		13.6 %	413,296		13.1 %
Time and materials	Time and materials	179,426		15.2 %	177,105		18.5 %	347,760		14.9 %	323,439		17.0 %	Time and materials	162,786		14.5 %	424,737		34.2 %	510,546		14.8 %	748,176		23.8 %
Total revenue	Total revenue	$	1,177,326		$	959,280		$	2,328,202		$	1,904,834		Total revenue	$	1,125,785		$	1,243,520		$	3,453,987		$	3,148,354


Table 4.2: Revenue by Customer Type	Table 4.2: Revenue by Customer Type													Table 4.2: Revenue by Customer Type
		For the Three Months Ended						For the Six Months Ended							For the Three Months Ended						For the Nine Months Ended
		March 31, 2022			March 31, 2021			March 31, 2022			March 31, 2021				June 30, 2022			June 30, 2021			June 30, 2022			June 30, 2021
		Amount		%	Amount		%	Amount		%	Amount		%		Amount		%	Amount		%	Amount		%	Amount		%
		(dollars in thousands)													(dollars in thousands)
U.S. state government agencies	U.S. state government agencies	$	411,287	35.0 %	$	445,697	46.5 %	$	782,834	33.7 %	$	833,811	43.8 %	U.S. state government agencies	$	401,042	35.7 %	$	431,987	34.7 %	$	1,183,876	34.3 %	$	1,265,798	40.2 %
U.S. federal government agencies	U.S. federal government agencies	553,707		47.0 %	307,870		32.1 %	1,117,801		48.0 %	693,442		36.4 %	U.S. federal government agencies	507,047		45.0 %	594,771		47.8 %	1,624,848		47.0 %	1,288,213		40.9 %
International government agencies	International government agencies	194,800		16.5 %	171,700		17.9 %	366,175		15.7 %	319,042		16.7 %	International government agencies	191,753		17.0 %	180,049		14.5 %	557,928		16.2 %	499,091		15.9 %
Other, including local municipalities and commercial customers	Other, including local municipalities and commercial customers	17,532		1.5 %	34,013		3.5 %	61,392		2.6 %	58,539		3.1 %	Other, including local municipalities and commercial customers	25,943		2.3 %	36,713		3.0 %	87,335		2.5 %	95,252		3.0 %
Total revenue	Total revenue	$	1,177,326		$	959,280		$	2,328,202		$	1,904,834		Total revenue	$	1,125,785		$	1,243,520		$	3,453,987		$	3,148,354


Table 4.3: Revenue by Geography	Table 4.3: Revenue by Geography													Table 4.3: Revenue by Geography
		For the Three Months Ended						For the Six Months Ended							For the Three Months Ended						For the Nine Months Ended
		March 31, 2022			March 31, 2021			March 31, 2022			March 31, 2021				June 30, 2022			June 30, 2021			June 30, 2022			June 30, 2021
		Amount		%	Amount		%	Amount		%	Amount		%		Amount		%	Amount		%	Amount		%	Amount		%
		(dollars in thousands)													(dollars in thousands)
United States	United States	$	971,365	82.5 %	$	778,350	81.1 %	$	1,939,653	83.3 %	$	1,568,529	82.3 %	United States	$	924,839	82.2 %	$	1,053,940	84.8 %	$	2,864,492	83.0 %	$	2,622,469	83.3 %
United Kingdom	United Kingdom	107,898		9.1 %	72,882		7.6 %	193,705		8.3 %	137,668		7.2 %	United Kingdom	109,776		9.7 %	74,109		6.0 %	303,481		8.8 %	211,777		6.7 %
Australia	Australia	46,670		4.0 %	70,947		7.4 %	99,484		4.3 %	126,878		6.7 %	Australia	43,594		3.9 %	65,283		5.2 %	143,078		4.1 %	192,161		6.1 %
Rest of world	Rest of world	51,393		4.4 %	37,101		3.9 %	95,360		4.1 %	71,759		3.8 %	Rest of world	47,576		4.2 %	50,188		4.0 %	142,936		4.1 %	121,947		3.9 %
Total revenue	Total revenue	$	1,177,326		$	959,280		$	2,328,202		$	1,904,834		Total revenue	$	1,125,785		$	1,243,520		$	3,453,987		$	3,148,354

1213

Table of Contents

Contract balances

Differences in timing between revenue recognition and cash collection result in contract assets and contract liabilities. We classify these assets as accounts receivable — billed and billable and unbilled receivables; the liabilities are classified as deferred revenue.

In many contracts, we bill our customers on a monthly basis shortly after the month end for work performed in that month. These balances are considered collectible and are included within accounts receivable — billed and billable.

Exceptions to this pattern will arise for various reasons, including those listed below.

•Under cost-plus contracts, we are typically required to estimate a contract's share of our general and administrative expenses. This share is based upon estimates of total costs which may vary over time. We typically invoice our customers at an agreed provisional billing rate which may differ from actual rates incurred. If our actual rates are higher than the provisional billing rates, an asset is recorded for this variance; if the provisional billing rates are higher than our actual rates, we record a liability.

•Certain contracts include retainage balances, whereby revenue is earned but some portion of cash payments are held back by the customer for a period of time, typically to allow the customer to confirm the objective criteria laid out by the contract have been met. This balance is classified as accounts receivable — unbilled until restrictions on billing are lifted. As of ~~March 31,~~June 30, 2022, and September 30, 2021, ~~$12.6~~$12.2 million and $10.4 million, respectively, of our unbilled receivables related to amounts pursuant to contractual retainage provisions.

•In certain contracts, we may receive funds from our customers prior to performing operations. These funds are typically referred to as "set-up costs" and reflect the need for us to make investments in infrastructure prior to providing a service. This investment in infrastructure is not a performance obligation which is distinct from the service that is subsequently provided and, as a result, revenue is not recognized based upon the establishment of this infrastructure, but rather over the course of the contractual relationship. The funds are initially recorded as deferred revenue and recognized over the term of the contract. Other contracts may not include set-up fees but will provide higher fees in earlier periods of the contract. The premium on these fees is deferred.

•Some of our contracts, notably our employment services contracts in the Outside the U.S. Segment, include payments for desired outcomes, such as job placement and job retention, and these outcome payments occur over several months. We are required to estimate these outcome fees ahead of their realization and recognize this estimated fee over the period of delivery.

During the three and ~~six~~nine months ended ~~March 31,~~June 30, 2022, we recognized revenue of ~~$20.6~~$23.7 million and ~~$61.8~~$85.5 million, respectively, that was included in our deferred revenue balances as of September 30, 2021. During the three and ~~six~~nine months ended ~~March 31,~~June 30, 2021, we recognized revenue of ~~$15.2~~$7.5 million and ~~$29.1~~$36.7 million, respectively, that was included in our deferred revenue balances at September 30, 2020.

Contract estimates

We are required to use estimates in recognizing revenue from some of our contracts. As discussed in "Note 2. Significant Accounting Policies," the calculation of these estimates has been complicated by the COVID-19 pandemic, which has reduced our ability to use past results to estimate future performance.

Some of our performance-based contract revenue is recognized based upon future outcomes defined in each contract. This is the case in many of our employment services contracts in the Outside the U.S. Segment, where we are paid as individuals attain employment goals, which may take many months to achieve. We recognize revenue on these contracts over the period of performance. Our estimates vary from contract to contract but may include estimates of the number of participants, the length of the contract, and the participants reaching employment milestones. We are required to estimate these outcome fees ahead of their collection and recognize this estimated fee over the period of delivery. Changes to our estimates are recognized on a cumulative catch-up basis.

1314

Table of Contents


Table 4.4: Effect of Changes in Contract Estimates	Table 4.4: Effect of Changes in Contract Estimates									Table 4.4: Effect of Changes in Contract Estimates
		For the Three Months Ended				For the Six Months Ended					For the Three Months Ended				For the Nine Months Ended
		March 31, 2022		March 31, 2021		March 31, 2022		March 31, 2021			June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
		(in thousands, except per share data)									(in thousands, except per share data)
Benefit to/(reduction of) revenue recognized due to changes in contract estimates	Benefit to/(reduction of) revenue recognized due to changes in contract estimates	$	(1,369)	$	7,603	$	(4,215)	$	15,986	Benefit to/(reduction of) revenue recognized due to changes in contract estimates	$	(959)	$	1,800	$	(5,174)	$	17,800
Benefit to/(reduction of) diluted earnings per share recognized due to changes in contract estimates	Benefit to/(reduction of) diluted earnings per share recognized due to changes in contract estimates	$	(0.02)	$	0.09	$	(0.05)	$	0.19	Benefit to/(reduction of) diluted earnings per share recognized due to changes in contract estimates	$	(0.01)	$	0.03	$	(0.06)	$	0.20

Remaining performance obligations

As of ~~March 31,~~June 30, 2022, we had approximately $550 million of remaining performance obligations. We anticipate that we will recognize revenue on approximately ~~50%~~45% of this balance within the next 12 months. This balance excludes contracts with an original duration of ~~twelve~~12 months or less, including contracts with a penalty-free termination for convenience clause, and any variable consideration which is allocated entirely to future performance obligations, including variable transaction fees or fees tied directly to costs incurred.

5. EARNINGS PER SHARE


Table 5: Weighted Average Number of Shares - Earnings Per Share	Table 5: Weighted Average Number of Shares - Earnings Per Share					Table 5: Weighted Average Number of Shares - Earnings Per Share
		For the Three Months Ended		For the Six Months Ended			For the Three Months Ended		For the Nine Months Ended
		March 31, 2022	March 31, 2021	March 31, 2022	March 31, 2021		June 30, 2022	June 30, 2021	June 30, 2022	June 30, 2021
		(in thousands)					(in thousands)
Basic weighted average shares outstanding	Basic weighted average shares outstanding	62,227	62,026	62,256	62,022	Basic weighted average shares outstanding	61,607	62,064	62,038	62,028
Dilutive effect of unvested RSUs and PSUs	Dilutive effect of unvested RSUs and PSUs	154	268	153	190	Dilutive effect of unvested RSUs and PSUs	149	389	152	272
Denominator for diluted earnings per share	Denominator for diluted earnings per share	62,381	62,294	62,409	62,212	Denominator for diluted earnings per share	61,756	62,453	62,190	62,300
Unvested anti-dilutive stock units excluded from the dilutive effect (stock units)		173	199	192	201
Unvested anti-dilutive stock units excluded from the dilutive effect						Unvested anti-dilutive stock units excluded from the dilutive effect	418	73	178	171

Table of Contents

6. BUSINESS COMBINATIONS

VES Group, Inc. (VES)

On May 28, 2021, the Company acquired 100% of VES for ~~an estimated cash~~a purchase price of $1.37 billion (the "VES Acquisition"). ~~The final purchase price is subject to adjustment and is expected to be finalized during 2022.~~ VES was integrated into our U.S. Federal Services Segment. The VES Acquisition ~~also~~ supports our ongoing strategic priority of expansion into the U.S. Federal market and accelerates our clinical evolution to meet long-term demand for BPS with a clinical dimension. ~~As of March 31, 2022, we~~We have completed our ~~assessment~~valuation of all acquired assets and liabilities ~~assumed, with the exception of income taxes and the working capital true-up.~~assumed.

~~Table of Contents~~


Table 6.1: VES Valuation	Table 6.1: VES Valuation							Table 6.1: VES Valuation
		Allocation of Assets and Liabilities as of September 30, 2021		Adjustments		Estimated Allocation of Assets and Liabilities as of March 31, 2022			Allocation of Assets and Liabilities as of September 30, 2021		Adjustments		Allocation of Assets and Liabilities as of June 30, 2022
		(in thousands)							(in thousands)
Consideration paid:	Consideration paid:							Consideration paid:
Cash consideration paid, net of cash acquired		$	1,360,231	$	—	$	1,360,231
Estimated additional cash payments		4,635		4,988		9,623
Estimated cash consideration, net of cash acquired		1,364,866		4,988		1,369,854

Cash consideration, net of cash acquired								Cash consideration, net of cash acquired	$	1,364,866	$	5,765	$	1,370,631
Assets acquired:	Assets acquired:							Assets acquired:
Accounts receivable - billed, billable and unbilled	Accounts receivable - billed, billable and unbilled	$	44,078	$	—	$	44,078	Accounts receivable - billed, billable and unbilled	$	44,078	$	—	$	44,078
Prepaid expenses and other current assets	Prepaid expenses and other current assets	7,955		—		7,955		Prepaid expenses and other current assets	7,955		—		7,955
Property and equipment, net	Property and equipment, net	9,113		(1,092)		8,021		Property and equipment, net	9,113		(1,092)		8,021
Operating lease right-of-use assets	Operating lease right-of-use assets	18,898		—		18,898		Operating lease right-of-use assets	18,898		—		18,898
Intangible assets	Intangible assets	664,000		—		664,000		Intangible assets	664,000		��		664,000
Other assets	Other assets	7,166		—		7,166		Other assets	7,166		—		7,166
Total identifiable assets acquired	Total identifiable assets acquired	751,210		(1,092)		750,118		Total identifiable assets acquired	751,210		(1,092)		750,118
Liabilities assumed:	Liabilities assumed:							Liabilities assumed:
Accounts payable and accrued compensation	Accounts payable and accrued compensation	42,182		(4,360)		37,822		Accounts payable and accrued compensation	42,182		1,804		43,986
Operating lease liabilities	Operating lease liabilities	18,898		—		18,898		Operating lease liabilities	18,898		—		18,898
Income taxes payable, current	Income taxes payable, current	5,673		—		5,673		Income taxes payable, current	5,673		—		5,673
Deferred income taxes	Deferred income taxes	171,497		1,147		172,644		Deferred income taxes	171,497		(474)		171,023
Other long-term liabilities	Other long-term liabilities	12,270		—		12,270		Other long-term liabilities	12,270		—		12,270
Total identifiable liabilities assumed	Total identifiable liabilities assumed	250,520		(3,213)		247,307		Total identifiable liabilities assumed	250,520		1,330		251,850
Net identifiable assets acquired	Net identifiable assets acquired	500,690		2,121		502,811		Net identifiable assets acquired	500,690		(2,422)		498,268
Goodwill	Goodwill	864,176		2,867		867,043		Goodwill	864,176		8,187		872,363
Net assets acquired	Net assets acquired	$	1,364,866	$	4,988	$	1,369,854	Net assets acquired	$	1,364,866	$	5,765	$	1,370,631

Goodwill represents the value of the assembled workforce and the enhanced knowledge, capabilities, and qualifications held by the business. This goodwill balance is not deductible for tax purposes.

Our evaluation of the intangible assets acquired with VES identified 3 assets. The assets were valued using methods which required a number of estimates and, accordingly, they are considered Level 3 measurements within the Accounting Standard Codification No. 820 (ASC 820) fair value methodology.

•Customer relationships represent the value of the existing contractual relationships with the U.S. federal government. These were valued using the excess earnings method, which required us to utilize estimated future revenues and earnings from contracts and an appropriate rate of return.

•VES maintains a provider network of third-party providers that assist in the performance of their clinical services. This network was valued using the cost method and income approach, which included both the cost of recreating such a network and the profits foregone during the time which would be required to recreate the network and an appropriate rate of return.

•VES maintained proprietary technology which interacted with U.S. ~~Federal Government~~federal government systems, facilitated the transmission of examination data, and supported the performance of the contracts. We valued the technology using a relief-from-royalty method, which required us to estimate future revenues and an arm's length royalty rate that a third-party provider might use to supply this service and an appropriate rate of return.

1516

Table of Contents


Table 6.2: VES Intangible Asset Values and Useful Lives
	Estimated Straight-Line Useful Life	Estimated Fair Value
		(in thousands)
Customer contracts and relationships	12 years	$	580,000
Provider network	12 years	57,000
Technology-based intangible assets	12 years	27,000
Total intangible assets		$	664,000

In connection with certain liabilities acquired in the VES acquisition, we established a liability of $12.0 million for a billing dispute between VES and its customer relating to prior year billings. Our exposure was partially offset by an indemnification asset of $6.0 million. ~~Following~~During the ~~VES Acquisition,~~first nine months of fiscal year 2022, we paid the liability ~~was confirmed at $12.0 million~~ and ~~we have~~ recovered ~~our share of~~ the indemnification asset. ~~We expect to settle the liability in the third quarter of fiscal year 2022. In addition,~~At acquisition, we established a tax liability of $12.3 million for uncertain tax positions within VES, partially offset by another indemnification asset of $7.2 million.

Connect Assist Holdings Limited ("Connect Assist")

On September 14, 2021, we acquired 100% of the share capital of Connect Assist for an estimated purchase price of ~~$21.1~~$19.4 million (£~~15.5~~14.4 million British Pounds). We acquired this business to improve our contact center services and qualifications within the United Kingdom. The business was integrated into our Outside the U.S. Segment. We ~~have~~ completed ~~a preliminary~~our assessment of all acquired assets and liabilities ~~assumed.~~assumed, with the exception of tax balances. We recorded estimated goodwill and intangible assets of $11.3 million and $7.7 million, respectively, related to the acquisition.

Aidvantage

On October 6, 2021, we completed the acquisition of the student loan servicing business from Navient, rebranded as Aidvantage. The purchase price consideration is contingent upon future volumes, with a maximum payment of $65.0 million. The final payment is uncertain as there are a number of potential outcomes. We ~~have~~ estimated the fair value of this liability, based upon a probability weighted assessment of the potential outcomes, of ~~$18.6~~$18.5 million. We ~~will~~ update this liability each quarter as changes are made to our estimate of fair value. These changes ~~will be~~are recorded through our statement of operations. If our obligation is less than anticipated, this will result in a benefit to our earnings. The obligation may be higher, either because the number of student loans we are servicing increases or if the contractual relationship we have acquired is extended beyond its current anticipated end date of December 31, 2023. In that instance, we would record an expense to earnings which we would anticipate being offset by additional benefits from the contract. However, the timing of the adjustment to the obligation and the anticipated financial benefits would be unlikely to be consistent. We recorded a single intangible asset related to the customer contract and relationship of $16.7 million, which we are amortizing over 27 months. The goodwill balance, representing the difference between the assets acquired and the estimated obligation, represents the assembled workforce, as well as the knowledge base acquired. We completed our assessment of all acquired assets and liabilities assumed. This business is a part of our U.S. Federal Services Segment and supplements our existing portfolio of services to the U.S. Department of Education.

During the three months ended ~~March 31,~~June 30, 2022, we reported ~~$47.0~~$47.5 million and ~~$3.4~~$8.8 million of revenue and gross ~~loss,~~profit, respectively, from Aidvantage. During the ~~six~~nine months ended ~~March 31,~~June 30, 2022, we reported ~~$81.7~~$129.2 million and ~~$1.4~~$7.5 million of revenue and gross ~~loss,~~profit, respectively, from Aidvantage. Since acquisition, we have adjusted the fair value of the liability each quarter to reflect the passage of time. During the third quarter of fiscal year 2022, we recorded a benefit of $2.3 million related to the decline in our anticipated obligation to the sellers; this was recorded in our selling, general and administrative expenses. At June 30, 2022, our contingent consideration liability is $16.4 million.

BZ Bodies Limited ("BZB")

On January 31, 2022, we acquired 100% of the share capital of BZB for an estimated purchase price of $2.9 million (£2.2 million British Pounds), which includes an estimate of contingent consideration payable upon future performance. BZB provides weight management services for adults, children and vulnerable groups in the United Kingdom. We acquired this business to complement our services within the United Kingdom. The business was integrated into our Outside the U.S. Segment. We are still in the process of finalizing the allocation of assets acquired and liabilities assumed. We recorded estimated goodwill and intangible assets of $1.5 million and $1.3 million, respectively, related to the acquisition. During the three and ~~six~~nine months ended ~~March 31,~~June 30, 2022, we reported ~~$1.1~~revenue of $1.6 million and ~~$0.6~~$2.7 million ~~of revenue~~ and gross profit of $0.7 million and $1.3 million, respectively, from BZB.

Table of Contents

Stirling Institute of Australia Pty Ltd ("Stirling")

On June 1, 2022, we acquired 100% of the share capital of Stirling for an estimated purchase price of $4.2 million (A$5.8 million Australian Dollars). Stirling provides vocational training to Australians seeking to improve their knowledge and qualifications. We acquired this business to complement our existing employment services. The business was integrated into our Outside the U.S. Segment. We are in the process of finalizing the allocation of assets acquired and liabilities assumed. We recorded estimated goodwill and intangible assets of $2.2 million and $1.9 million, respectively, related to the acquisition. During the three and nine months ended June 30, 2022, we reported revenue of $0.3 million and gross profit of $0.2 million, respectively, from Stirling.

7. DEBT


Table 7.1: Details of Debt	Table 7.1: Details of Debt					Table 7.1: Details of Debt
		March 31, 2022		September 30, 2021			June 30, 2022		September 30, 2021
		(in thousands)					(in thousands)
Term Loan A, due 2026	Term Loan A, due 2026	$	1,058,750	$	1,086,250	Term Loan A, due 2026	$	1,045,000	$	1,086,250
Term Loan B, due 2028	Term Loan B, due 2028	397,000		399,000		Term Loan B, due 2028	396,000		399,000
Subsidiary loan agreements	Subsidiary loan agreements	3,971		38,281		Subsidiary loan agreements	3,645		38,281

Revolver						Revolver	50,000		—
Total debt principal	Total debt principal	1,459,721		1,523,531		Total debt principal	1,494,645		1,523,531
Less: Unamortized debt-issuance costs and discounts	Less: Unamortized debt-issuance costs and discounts	(12,424)		(13,839)		Less: Unamortized debt-issuance costs and discounts	(11,671)		(13,839)
Total debt	Total debt	1,447,297		1,509,692		Total debt	1,482,974		1,509,692
Less: Current portion of long-term debt	Less: Current portion of long-term debt	(59,911)		(80,555)		Less: Current portion of long-term debt	(59,698)		(80,555)
Long-term debt	Long-term debt	$	1,387,386	$	1,429,137	Long-term debt	$	1,423,276	$	1,429,137

On May 28, 2021, we entered into a credit agreement with JPMorgan Chase Bank, N.A., as Administrative Agent ("Credit Agreement"), which replaced our existing revolving credit facility. The Credit Agreement provided for the following three components.

•$1.10 billion term loan facility ("Term Loan A") which matures on May 28, 2026;

•$400.0 million term loan facility ("Term Loan B") which matures May 28, 2028; and

•$600.0 million revolving credit facility ("Revolver") which matures May 28, 2026. As of June 30, 2022, we had $50.0 million outstanding balance on the Revolver.

The interest rates applicable to loans under the Credit Agreement are floating rates based upon the London Interbank Offered Rate ("LIBOR") plus a margin. Term Loan A and the Revolver margins are dependent upon our leverage ratio. At the execution of the Credit Agreement, the interest rates were based upon LIBOR plus 1.75% during the first quarter of 2022, which was reduced to LIBOR plus 1.50% as our total leverage ratio declined to below 2.50:1.00. As of June 30, 2022, the net total leverage ratio was 2.90:1.00, which we anticipate will result in an interest rate of LIBOR plus 1.75%.

Term Loan B is set to LIBOR plus 2.00% subject to a LIBOR floor of 0.50%.

At execution of the Credit Agreement, the interest rates for Term Loan A and the Revolver was LIBOR plus 1.75%. During the first quarter of fiscal quarter 2022, we were able to lower our interest rates on both Term Loan A and the Revolver to LIBOR plus 1.50% based on the attainment of a total leverage ratio of 2.50 or better. As of March 31, 2022, the net total leverage ratio was 2.4. If we can achieve a net total leverage ratio of less than 2.00, the interest rates for Term Loan A and the Revolver could be further lowered to LIBOR plus 1.375%; conversely if the net leverage ratio increases to 2.50 or greater, the rate would revert back to LIBOR plus 1.75%. LIBOR is anticipated to be phased out over the next 18 months, and alternative benchmark rates have been identified in this agreement. This is our only significant arrangement that utilizes LIBOR. As of ~~March 31,~~June 30, 2022, the annual effective interest rate, including original issue discount and amortization of debt issuance costs, was ~~2.4%~~3.4%.

The Credit Agreement is available for general corporate purposes, including the funding of working capital, capital expenditures, and possible future acquisitions. In addition to borrowings, it allows us to continue to issue letters of credit when necessary. ~~As of March 31, 2022, we had no outstanding balance on the Revolver.~~

Under the terms of the Credit Agreement, we are required to comply with certain covenants, the terms of which are customary and include a net total leverage ratio and a net interest coverage ratio. The net total leverage ratio is calculated as total outstanding debt less the lower of (a) unrestricted cash or (b) $75.0 million divided by adjusted earnings before interest, taxes, depreciation, and amortization ("EBITDA"). With certain exceptions, the covenant requires the net total leverage ratio, as defined by the Credit Agreement to be less than ~~4.0,~~4.00:1.00, calculated over the previous twelve months. The net interest coverage ratio is calculated as EBITDA divided by interest expense, over the previous ~~twelve~~12 months. The covenant requires a net interest coverage ratio of ~~3.0~~3.00:1.00 or greater. As of ~~March 31,~~June 30, 2022, as defined by the Credit Agreement, we calculated a net total leverage ratio of ~~2.4~~2.90:1.00 and net interest coverage ratio of ~~15.3.~~12.0. We were in

Table of Contents

compliance with all applicable covenants under the Credit Agreement as of ~~March 31,~~June 30, 2022, and September 30, 2021. We do not believe that the covenants represent a significant restriction to our ability to successfully operate the business or to pay our dividends.

Costs incurred in establishing the Credit Agreement have been reported as a reduction to the gross debt balance and will be amortized over the respective lives of the arrangements. In addition to the corporate Credit Agreement, we hold smaller credit facilities in Australia, Canada, and the United Kingdom. These allow our businesses to borrow to meet any short-term working capital needs.

~~Table of Contents~~


Table 7.2: Details of Future Minimum Principal Payments Due
	Amount Due
	(in thousands)
~~April~~July 1, 2022 through September 30, 2022	$	~~32,963~~18,328
Year ~~ended~~ending September 30, 2023	~~66,383~~65,942
Year ~~ended~~ending September 30, 2024	86,500
Year ~~ended~~ending September 30, 2025	93,375
Year ~~ended~~ending September 30, 2026	~~801,500~~851,500
Thereafter	379,000
Total payments	$	~~1,459,721~~1,494,645

~~8. DERIVATIVES~~

Interest Rate Derivative Instrument

In June 2021, the Company entered into an interest rate swap agreement for a notional amount of $300.0 million, effective June 28, 2021, with an expiration date of May 28, 2026, which hedges the floating LIBOR on a portion of the term loan (Term Loan A, $1.10 billion balance) under the Credit Agreement to a fixed rate of 0.986%. The Company elected to designate this interest rate swap as a cash flow hedge for accounting purposes.

As this cash flow hedge is considered effective, any future gains and losses are reflected within Accumulated Other Comprehensive Income in the Consolidated Statements of Comprehensive Income. Derivatives in a net asset position are recorded in ~~"Prepaid expenses and other current~~"Other assets" on our Consolidated Balance Sheets and derivatives in a net liability position are recorded in "Other ~~current~~ liabilities" on our Consolidated Balance Sheets. No ineffectiveness was recorded on this contract during the ~~six~~nine months ended ~~March 31,~~June 30, 2022.


Table ~~8.1:~~7.3: Details of Derivatives Fair Value
	~~March 31,~~June 30, 2022		September 30, 2021
	(in thousands)
Assets:
Interest rate swap	$	~~17,737~~21,864	$	—
Total assets	$	~~17,737~~21,864	$	—
Liabilities:
Interest rate swap	$	—	$	410
Total liabilities	$	—	$	410

Table 8.2: Gains on Derivatives
For the Three Months Ended For the Six Months Ended
March 31, 2022 March 31, 2021 March 31, 2022 March 31, 2021
(in thousands)
Net gains recognized in AOCI on derivatives, net of tax (1) $ 10,225 $ — $ 12,401 $ —
Amounts reclassified to earnings from accumulated other comprehensive loss (2) 464 — 973 —
Net current period other comprehensive income $ 10,689 $ — $ 13,374 $ —

Table of Contents


Table 7.4: Gains on Derivatives
	For the Three Months Ended				For the Nine Months Ended
	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
	(in thousands)
Net gains/(losses) recognized in AOCI on derivatives, net of tax (1)	$	2,904	$	(1,062)	$	15,306	$	(1,062)
Amounts reclassified to earnings from accumulated other comprehensive loss (2)	138		—		1,110		—
Net current period other comprehensive income	$	3,042	$	(1,062)	$	16,416	$	(1,062)

(1)Amount is net of tax expense of ~~$3.7~~$1.0 million and ~~$4.4~~$5.5 million for the three and ~~six~~nine months ended ~~March 31,~~June 30, 2022, respectively. For the three and nine months ended June 30, 2021, $0.4 million was recorded as a tax benefit.

(2)Amount is net of a tax ~~benefit~~expense of ~~$0.2~~$0.0 million and ~~$0.3~~$0.4 million for the three and ~~six~~nine months ended ~~March 31,~~June 30, 2022, respectively. No tax credit or expense was recorded for the three and nine months ended June 30, 2021.

~~Counterparty Risk~~

~~The Company is~~We are exposed to credit losses in the event of nonperformance by the counterparty to our derivative instrument. Our counterparty has investment grade credit ratings; accordingly, we anticipate that the counterparty will be able to fully satisfy its obligations under the contracts. Our agreements outline the conditions upon which it or the counterparty are required to post collateral. As of ~~March 31,~~June 30, 2022, there was no collateral posted with its counterparty related to the derivatives.

~~Table of Contents~~

9.8. FAIR VALUE MEASUREMENTS

The Company had 2 assets recorded at fair value on a recurring basis as of ~~March 31,~~June 30, 2022, the deferred compensation asset, related to the portion invested in mutual funds and the interest rate swap. For the deferred compensation asset, the mutual funds prices are quoted in active markets and therefore are classified as Level 1. For the interest rate swap, the Company obtains its Level 2 pricing inputs from its counterparty for the interest rate swap. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data, or are supported by observable levels at which transactions are executed in the marketplace. As of ~~March 31,~~June 30, 2022, the Company had liabilities recorded at fair value on a recurring basis for contingent consideration related to acquisitions. The contingent consideration liability is considered Level 3, as the inputs are not observable and based on internal assumptions about forecasted revenues, margins, volumes, and probability of contract extensions on businesses acquired.

The fair values of receivables, prepaids, other assets, accounts payable, accrued costs, and other current liabilities approximate the carrying values as a result of the short-term nature of these instruments. The carrying value of our debt is consistent with the fair value as the stated interest rates in the agreements are consistent with the current market rates used in notes with similar terms in the markets (Level 2 inputs).


Table 9: Fair Value
Table 8.1: Fair Value Measurements										Table 8.1: Fair Value Measurements
		As of March 31, 2022									As of June 30, 2022
		Level 1		Level 2		Level 3		Balance			Level 1		Level 2		Level 3		Balance
		(in thousands)									(in thousands)
Assets:	Assets:									Assets:
Deferred compensation assets - Rabbi Trust	Deferred compensation assets - Rabbi Trust	$	28,231	$	—	$	—	$	28,231	Deferred compensation assets - Rabbi Trust	$	23,970	$	—	$	—	$	23,970
Interest rate swap	Interest rate swap	—		17,737		—		17,737		Interest rate swap	—		21,864		—		21,864
Total assets	Total assets	$	28,231	$	17,737	$	—	$	45,968	Total assets	$	23,970	$	21,864	$	—	$	45,834
Liabilities:	Liabilities:									Liabilities:
Contingent consideration	Contingent consideration	$	—	$	—	$	21,340	$	21,340	Contingent consideration	$	—	$	—	$	18,892	$	18,892
Total liabilities	Total liabilities	$	—	$	—	$	21,340	$	21,340	Total liabilities	$	—	$	—	$	18,892	$	18,892

Table of Contents

The following table presents a reconciliation of the contingent consideration which is measured and recorded at fair value on a recurring basis using Level 3 inputs:


Table 8.2: Fair Value Measurement Using Significant Unobservable Inputs (Level 3)
	Contingent Consideration
	(in thousands)
Balance as of September 30, 2021	$	270
Contingent consideration from current year acquisitions	20,967
Adjustments to fair value recorded in the current year	(2,095)
Foreign currency translations	(250)
Balance as of June 30, 2022	$	18,892

~~10. STOCK COMPENSATION~~9. EQUITY

Stock Compensation

The Company grants restricted stock units ("RSUs") and performance stock units ("PSUs") to eligible participants under its 2021 Stock Incentive Plan, which was approved by the Board of Directors and stockholders. The RSUs granted to employees vest ratably over three to five years and one year for members of the board of directors, in each case from the grant date. PSU vesting is subject to the achievement of certain performance and market conditions and the number of PSUs earned could vary from 0% to 200% of the number of PSUs awarded. The PSUs will vest at the end of a three year-performance period. We issue new shares to satisfy our obligations under these plans. The fair value of each RSU and PSU is calculated at the date of the grant.

During the ~~six~~nine months ended ~~March 31,~~June 30, 2022, we issued approximately ~~340,000~~333,000 RSUs, which will vest ratably over ~~three~~one orto four years, and approximately 87,000 PSUs, which will vest after three years.

~~11. ACCUMULATED OTHER COMPREHENSIVE INCOME~~

Table 11: Details of Changes in Accumulated Other Comprehensive Loss by Category
Foreign currency translation adjustment Net unrealized (loss)/gain on derivatives, net of tax Total
(in thousands)
Balance as of September 30, 2021 $ (39,605) $ (303) $ (39,908)
Other comprehensive income before reclassifications 436 12,401 12,837
Amounts reclassified from accumulated other comprehensive loss — 973 973
Net current period other comprehensive income 436 13,374 13,810
Balance as of March 31, 2022 $ (39,169) $ 13,071 $ (26,098)

~~Table of Contents~~

~~12. STOCK PURCHASES~~Stock Purchases

Under a resolution adopted in March 2020, the Board of Directors authorized the purchase, at management's discretion, of up to $200.0 million of our common stock. As of ~~March 31,~~June 30, 2022, ~~$120.8~~$72.8 million remained available for future stock purchases.


Table 12: Stock Purchase Activity
Table 9: Stock Purchase Activity										Table 9: Stock Purchase Activity
		For the Three Months Ended				For the Six Months Ended					For the Three Months Ended				For the Nine Months Ended
		March 31, 2022		March 31, 2021		March 31, 2022		March 31, 2021			June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
		(in thousands, except per share data)									(in thousands, except per share data)
Amount paid for shares repurchased	Amount paid for shares repurchased	$	24,464	$	—	$	25,843	$	3,363	Amount paid for shares repurchased	$	48,021	$	—	$	73,864	$	3,363
Number of shares repurchased	Number of shares repurchased	330		—		348		52		Number of shares repurchased	706		—		1,054		52
Average per share price paid	Average per share price paid	$	74.22	$	—	$	74.26	$	64.98	Average per share price paid	$	68.01	$	—	$	70.07	$	64.98

Since ~~March 31,~~June 30, 2022, we have acquired an additional ~~238,431~~353,848 shares of our common stock for ~~$17.7~~$22.3 million.

~~13.~~

Table of Contents

10. CASH AND CASH EQUIVALENTS AND RESTRICTED CASH


Table 13.1: Details of Cash and Cash Equivalents and Restricted Cash
Table 10.1: Details of Cash and Cash Equivalents and Restricted Cash						Table 10.1: Details of Cash and Cash Equivalents and Restricted Cash
		March 31, 2022		September 30, 2021			June 30, 2022		September 30, 2021
		(in thousands)					(in thousands)
Cash and cash equivalents	Cash and cash equivalents	$	92,638	$	135,061	Cash and cash equivalents	$	93,748	$	135,061
Restricted cash (1)	Restricted cash (1)	19,330		21,509		Restricted cash (1)	16,877		21,509
Cash, cash equivalents, and restricted cash	Cash, cash equivalents, and restricted cash	$	111,968	$	156,570	Cash, cash equivalents, and restricted cash	$	110,625	$	156,570

(1)Restricted cash is recorded within "Prepaid expenses and other current assets" on the Consolidated Balance Sheets.


Table 13.2: Supplemental Disclosures of Cash Flow Information
Table 10.2: Supplemental Disclosures of Cash Flow Information								Table 10.2: Supplemental Disclosures of Cash Flow Information
			For the Six Months Ended						For the Nine Months Ended
				March 31, 2022		March 31, 2021					June 30, 2022		June 30, 2021
		(in thousands)								(in thousands)
Interest payments	Interest payments			$	17,755	$	783	Interest payments			$	28,251	$	4,751
Income tax payments	Income tax payments			50,531		42,495		Income tax payments			64,057		68,031

~~14.~~11. ACCOUNTS RECEIVABLE, NET

Table 14: Details of Accounts Receivable, Net
March 31, 2022 September 30, 2021
(in thousands)
Billed and billable receivables $ 742,713 $ 718,728
Unbilled receivables 148,122 124,135
Allowance for credit losses (5,150) (8,044)
Accounts receivable, net $ 885,685 $ 834,819


Table 11: Details of Accounts Receivable, Net
	June 30, 2022		September 30, 2021
	(in thousands)
Billed and billable receivables	$	762,456	$	718,728
Unbilled receivables	112,588		124,135
Allowance for credit losses	(7,034)		(8,044)
Accounts receivable, net	$	868,010	$	834,819

~~Table of Contents~~

~~15.~~12. PROPERTY ~~AND EQUIPMENT, NET~~

Table 15: Details of Property and Equipment, Net
March 31, 2022 September 30, 2021
(in thousands)
Land $ — $ 1,738
Building and improvements — 11,981
Office furniture and equipment 247,100 254,102
Leasehold improvements 88,236 79,938
Property and equipment, at cost 335,336 347,759
Accumulated depreciation (277,391) (285,132)
Property and equipment, net $ 57,945 $ 62,627
HELD FOR SALE

As of ~~March 31,~~June 30, 2022, we classified as held for sale 1 building and the associated land with a carrying value of $5.4 million within "Prepaid expenses and other current assets" on our Consolidated Balance Sheets. ~~As of March 31, 2022, we concluded the~~The fair value of this property less the expected selling costs ~~to sell exceeds~~exceed the carrying value of ~~this asset.~~these assets.

~~16.~~13. COMMITMENTS AND CONTINGENCIES

Litigation

We are subject to audits, investigations, and reviews relating to compliance with the laws and regulations that govern our role as a contractor to agencies and departments of federal, state, local, and foreign governments, and otherwise in connection with performing services in countries outside of the U.S. Adverse findings could lead to criminal, civil, or administrative proceedings, and we could be faced with penalties, fines, suspension, or debarment. Adverse findings could also have a material adverse effect on us because of our reliance on government contracts. We are subject to periodic audits by federal, state, local, and foreign governments for taxes. We are also involved in various claims, arbitrations, and lawsuits arising in the normal conduct of our business. These include but are not limited to bid protests, employment matters, contractual disputes, and charges before administrative agencies. Although we can give no assurance, based upon our evaluation and taking into account the advice of legal counsel, we do not believe that the outcome of any existing matter would likely have a material adverse effect on our consolidated financial position, results of operations, or cash flows.

Medicaid claims

The Centers for Medicare and Medicaid Services (CMS) asserted 2 disallowances against a state Medicaid agency. The state contested the first disallowance and ultimately settled that claim for approximately $7.3 million. The second disallowance of approximately $19.9 million is still being contested by the state. The state is seeking reimbursement from

Table of Contents

us for the first disallowance of $7.3 million and has indicated its intention to seek reimbursement of the second disallowance if its legal challenge is unsuccessful. From 2004 through 2009, we had a contract with the state agency in support of its school-based Medicaid claims. We entered into separate agreements with the school districts under which we assisted the districts with preparing and submitting claims to the state Medicaid agency which, in turn, submitted claims for reimbursement to CMS. The state has asserted that its agreement with us requires us to reimburse the state for the amounts owed to CMS. However, our agreements with the school districts require them to reimburse us for such amounts, and therefore we believe the school districts are responsible for any amounts that ultimately must be refunded to CMS. Although it is reasonably possible that a court could conclude we are responsible for the full balance of the disallowances, we believe our exposure in this matter is limited to our fees associated with this work and that the school districts will be responsible for the remainder. We have recorded a liability of our estimated fees earned from this engagement relating to the disallowances. We exited the federal healthcare-claiming business in 2009 and no longer provide the services at issue in this matter.

~~17.~~

14. SUBSEQUENT EVENT

On ~~April~~July 8, 2022, our Board of Directors declared a quarterly cash dividend of $0.28 for each share of our common stock outstanding. The dividend is payable on ~~May~~August 31, 2022, to shareholders of record on ~~May 13,~~August 15, 2022. Based upon the number of shares outstanding, we anticipate a cash payment of approximately ~~$17.3~~$17.1 million.

2123

Table of Contents

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion is intended to help the reader understand our business, financial condition, results of operations, liquidity and capital resources. You should read this discussion in conjunction with "Risk Factors," "Forward-Looking Statements," and our financial statements and related notes included in our Annual Report on Form 10-K for fiscal year 2021 filed with the Securities and Exchange Commission on November 18, 2021 (the "2021 Form 10-K") and elsewhere in this Quarterly Report on Form 10-Q, as applicable.

Business Overview

We are a leading operator of government health and human services programs worldwide. ~~We are a responsible and reliable partner to governments under our mission of~~ ~~Helping Government Serve the People~~®~~. Governments rely on our financial stability and proven expertise in helping people connect to and use critical government programs.~~ We use our experience, business process management expertise, innovation, and technology solutions to help government agencies run effective, efficient, and accountable programs. Our customers include civilian agencies of governments worldwide, including those at federal, national, state and local levels.

~~Our primary portfolio of work is tied to business process services ("BPS") in~~Over the ~~health services and human services markets. Our~~past five years, we have executed a three-pronged growth ~~over the last decade was driven by new work, such as that from the Affordable Care Act ("ACA") in the U.S., an evolving~~strategy: we have evolved through our digital transformation to meet the modernization needs of our ~~clients, and~~clients; we have expanded our clinical assessment capabilities to meet growing demand for independent and conflict-free clinical ~~services including assessments, appeals,~~services; and ~~independent medical reviews in multiple geographies. Our growth has been supplemented by strategic~~we have expanded our markets, both organically and through acquisitions.

We experienced both favorable and unfavorable impacts as a result of the Coronavirus ("COVID-19") global pandemic. While some of the programs we support have experienced reduced volumes due to the pandemic, we have also been successful in winning new contracts to meet the immediate needs of our customers, including ~~contract~~contact tracing and disease investigation, vaccine information lines, and unemployment insurance administration. Demonstrating the value of our business model, we have converted a number of these relationships into longer-term contract opportunities. The individuals and families served under these programs are those considered some of the most vulnerable to COVID-19. As a result, we believe our operations support programs that are vital for their safety and wellbeing.

~~We continue~~In 2022, we underwent a strategy refresh which focused on leveraging our successful foundation and strong technology portfolio to ~~execute upon our three-fold strategy to accelerate our progress and drive~~create the strategic focus for the next ~~phase of our growth through:~~three to five years.

•~~Digital transformation.~~Customer Services, Digitally Enabled.We will elevate the customer experience to achieve higher levels of satisfaction, performance, and outcomes through intelligent automation and cognitive computing. This strategy builds on our success and focuses on those capabilities and technologies most relevant to the future of citizen interactions with government programs.

•Future of Health. We are ~~using digital technologies~~continuing our focus of clinical evolution by helping governments meet rising demand for health services. We will do this by growing our clinical capabilities to ~~transform~~improve the ~~experience~~health of ~~our customers~~people and ~~our employees. We believe that these technologies can help our government clients run~~ their ~~programs in a more streamlined manner and make it easier for individuals to interact with these programs.~~communities.

•~~Clinical evolution.~~Advanced Technologies for Modernization. We ~~are expanding~~will leverage our ~~clinical-related services~~deep relationships and are experienced at delivering clinical BPS at scale. We have established an extensive set of services that frequently requires a network of healthcare professionals who can complete clinical assessments, provide occupational health and independent medical review services, and adjudicate complicated benefits appeals. With the formation of Maximus Public Health ("MPH"), we serveprogrammatic knowledge to further our credibility as a ~~resource~~technology leader enabling the transformation of government programs to ~~governments as they respond to public health threats. These efforts include providing health information~~be resilient, dynamic, integrated, and ~~COVID-19 testing access, test results, and vaccination information through our citizen engagement centers in key states and counties across the U.S.~~equitable.

•~~Market expansion.~~We continue with our existing strategy to expand our markets by bringing our core capabilities to new programs and clients, adding new capabilities to access adjacent markets, and through geographic expansion. In fiscal year 2021, we expanded our clinical assessments and public health work, and completed two acquisitions in the U.S. to increase our digital and clinical capabilities, as well as create stronger relationships in key U.S. federal government agencies.

~~The macro-trends for our business remain unchanged. As the pandemic has underscored, governments~~Governments around the world need ~~better solutions to deliver on policy priorities that can change rapidly. Social welfare programs that reflect long-term societal commitments and priorities increasingly face~~help meeting the rising demand ~~shifting demographics,~~for health services and ~~unsustainable program costs. We believe~~to be able to do so in a manner that ~~Maximus is well positioned~~provides higher levels of customer satisfaction, performance and outcomes through the use of technology. Through our focus on health, customer services and technology, we look to ~~address these~~partner with governments to respond to complex challenges they face in delivering their largest and ~~be a transformative partner through our scalable, cost-effective, and operationally efficient services for a wide range of government~~most critical programs.

2224

Table of Contents

Financial Overview

A number of factors have affected our results for the ~~second~~third quarter of fiscal year 2022, the most significant of which we have listed below. More detail on these changes is presented below within our "Results of Operations" section.

•During fiscal year 2021, we acquired VES Group, Inc. ("VES"), the Federal Division of Attain, LLC ("Attain") and Connect Assist Holdings Limited ("Connect Assist"). ~~At the start of~~During fiscal year 2022, we acquired the student loan servicing business from Navient, rebranded as ~~Aidvantage.~~Aidvantage, BZ Bodies Limited ("BZB"), and Stirling Institute of Australia Pty Ltd ("Stirling"). From the date of each acquisition, we have received the benefit of additional revenue, as well as additional operating costs. In completing these acquisitions, we have allocated a portion of each purchase price to identifiable intangible assets, which we are amortizing over the estimated useful lives of each asset.

•To fund the acquisition of VES, we entered into a new credit facility comprised of fixed term debt and a new revolving credit facility. The cost of servicing this debt, as well as the cost of the debt facilities, has resulted in an increase in our interest expense.

•Our services in fiscal years 2022 and 2021 were affected by the COVID-19 pandemic. We received the benefit from new, short-term work, assisting governments with their responses to the pandemic, which was often highly profitable. This mitigated the effect of declines in established programs where our transaction volume has been reduced. ~~At this time, much~~Many of our core Medicaid programs are anticipated to continue operating at reduced levels due to the ongoing Public Health Emergency. As a condition of receiving supplemental funding under the PHE, those programs are required to pause eligibility redetermination. This has resulted in a revenue decline, and an outsized profit impact, where our contracts are compensated based on volumes of transactions.

•In our OUS Segment, we recorded a charge of $11.7 million on a single project, anticipating a loss over the life of the ~~short-term work has concluded, but~~contract. If our ~~established programs are still at reduced capacity.~~current forecast remains unchanged, this project should record a breakeven profit for the remainder of its life.

Results of Operations


Table MD&A 1: Consolidated Results of Operations	Table MD&A 1: Consolidated Results of Operations											Table MD&A 1: Consolidated Results of Operations
		For the Three Months Ended						For the Six Months Ended						For the Three Months Ended						For the Nine Months Ended
		March 31, 2022			March 31, 2021			March 31, 2022		March 31, 2021				June 30, 2022			June 30, 2021			June 30, 2022		June 30, 2021
		(dollars in thousands, except per share data)												(dollars in thousands, except per share data)
Revenue	Revenue	$	1,177,326		$	959,280		$	2,328,202	$	1,904,834		Revenue	$	1,125,785		$	1,243,520		$	3,453,987	$	3,148,354
Cost of revenue	Cost of revenue	948,875			728,622			1,871,596		1,468,121			Cost of revenue	915,564			951,664			2,787,160		2,419,785
Gross profit	Gross profit	228,451			230,658			456,606		436,713			Gross profit	210,221			291,856			666,827		728,569
Gross profit percentage	Gross profit percentage	19.4		%	24.0		%	19.6 %		22.9 %			Gross profit percentage	18.7		%	23.5		%	19.3 %		23.1 %
Selling, general, and administrative expenses	Selling, general, and administrative expenses	130,307			112,402			254,528		224,369			Selling, general, and administrative expenses	132,974			140,129			387,502		364,498
Selling, general, and administrative expenses as a percentage of revenue	Selling, general, and administrative expenses as a percentage of revenue	11.1		%	11.7		%	10.9 %		11.8 %			Selling, general, and administrative expenses as a percentage of revenue	11.8		%	11.3		%	11.2 %		11.6 %
Amortization of intangible assets	Amortization of intangible assets	22,856			5,070			45,261		11,586			Amortization of intangible assets	22,690			12,132			67,951		23,718
Operating income	Operating income	75,288			113,186			156,817		200,758			Operating income	54,557			139,595			211,374		340,353
Operating income margin	Operating income margin	6.4		%	11.8		%	6.7 %		10.5 %			Operating income margin	4.8		%	11.2		%	6.1 %		10.8 %
Interest expense	Interest expense	(9,438)			(756)			(19,076)		(962)			Interest expense	(10,791)			(3,087)			(29,867)		(4,049)
Other expense, net	Other expense, net	715			(520)			404		(1,295)			Other expense, net	(2,497)			(8,289)			(2,093)		(9,584)
Income before income taxes	Income before income taxes	66,565			111,910			138,145		198,501			Income before income taxes	41,269			128,219			179,414		326,720
Provision for income taxes	Provision for income taxes	16,469			31,296			34,719		53,810			Provision for income taxes	9,934			33,724			44,653		87,534
Effective tax rate	Effective tax rate	24.7		%	28.0		%	25.1 %		27.1 %			Effective tax rate	24.1		%	26.3		%	24.9 %		26.8 %
Net income	Net income	$	50,096		$	80,614		$	103,426	$	144,691		Net income	$	31,335		$	94,495		$	134,761	$	239,186
Earnings per share:	Earnings per share:												Earnings per share:
Basic	Basic	$	0.81		$	1.30		$	1.66	$	2.33		Basic	$	0.51		$	1.52		$	2.17	$	3.86
Diluted	Diluted	$	0.80		$	1.29		$	1.66	$	2.33		Diluted	$	0.51		$	1.51		$	2.17	$	3.84

2325

Table of Contents

Our business segments have different factors driving revenue fluctuations and profitability. The sections that follow cover these segments in greater detail. Our revenue reflects fees earned for services provided. Cost of revenue consists of direct costs related to labor and related overhead, subcontractor labor, outside vendors, rent, and other direct costs. The largest component of cost of revenue, approximately two-thirds, is labor, including subcontracted labor.


Table MD&A 2: Changes in Revenue, Cost of Revenue, and Gross Profit for the Three Months Ended March 31, 2022
Table MD&A 2: Changes in Revenue, Cost of Revenue, and Gross Profit for the Three Months Ended June 30, 2022														Table MD&A 2: Changes in Revenue, Cost of Revenue, and Gross Profit for the Three Months Ended June 30, 2022
		Revenue				Cost of Revenue				Gross Profit					Revenue				Cost of Revenue				Gross Profit
		Dollars		% Change		Dollars		% Change		Dollars		% Change			Dollars		% Change		Dollars		% Change		Dollars		% Change
		(dollars in thousands)													(dollars in thousands)
Three Months Ended March 31, 2021		$	959,280			$	728,622			$	230,658
Three Months Ended June 30, 2021														Three Months Ended June 30, 2021	$	1,243,520			$	951,664			$	291,856
Organic effect	Organic effect	4,084		0.4	%	58,853		8.1	%	(54,769)		(23.7)	%	Organic effect	(251,277)		(20.2)	%	(137,342)		(14.4)	%	(113,935)		(39.0)	%
Acquired growth	Acquired growth	220,405		23.0	%	166,139		22.8	%	54,266		23.5	%	Acquired growth	150,217		12.1	%	116,490		12.2	%	33,727		11.6	%
Currency effect compared to the prior period	Currency effect compared to the prior period	(6,443)		(0.7)	%	(4,739)		(0.7)	%	(1,704)		(0.7)	%	Currency effect compared to the prior period	(16,675)		(1.3)	%	(15,248)		(1.6)	%	(1,427)		(0.5)	%
Three Months Ended March 31, 2022		$	1,177,326	22.7	%	$	948,875	30.2	%	$	228,451	(1.0)	%
Three Months Ended June 30, 2022														Three Months Ended June 30, 2022	$	1,125,785	(9.5)	%	$	915,564	(3.8)	%	$	210,221	(28.0)	%


Table MD&A 3: Changes in Revenue, Cost of Revenue, and Gross Profit for the Six Months Ended March 31, 2022
Table MD&A 3: Changes in Revenue, Cost of Revenue, and Gross Profit for the Nine Months Ended June 30, 2022														Table MD&A 3: Changes in Revenue, Cost of Revenue, and Gross Profit for the Nine Months Ended June 30, 2022
		Revenue				Cost of Revenue				Gross Profit					Revenue				Cost of Revenue				Gross Profit
		Dollars		% Change		Dollars		% Change		Dollars		% Change			Dollars		% Change		Dollars		% Change		Dollars		% Change
		(dollars in thousands)													(dollars in thousands)
Six Months Ended March 31, 2021		$	1,904,834			$	1,468,121			$	436,713
Nine Months Ended June 30, 2021														Nine Months Ended June 30, 2021	$	3,148,354			$	2,419,785			$	728,569
Organic effect	Organic effect	(28,680)		(1.5)	%	69,706		4.7	%	(98,386)		(22.5)	%	Organic effect	(279,979)		(8.9)	%	(67,612)		(2.8)	%	(212,367)		(29.1)	%
Acquired growth	Acquired growth	456,171		23.9	%	336,317		22.9	%	119,854		27.4	%	Acquired growth	606,410		19.3	%	452,782		18.7	%	153,628		21.1	%
Currency effect compared to the prior period	Currency effect compared to the prior period	(4,123)		(0.2)	%	(2,548)		(0.2)	%	(1,575)		(0.4)	%	Currency effect compared to the prior period	(20,798)		(0.7)	%	(17,795)		(0.7)	%	(3,003)		(0.4)	%
Six Months Ended March 31, 2022		$	2,328,202	22.2	%	$	1,871,596	27.5	%	$	456,606	4.6	%
Nine Months Ended June 30, 2022														Nine Months Ended June 30, 2022	$	3,453,987	9.7	%	$	2,787,160	15.2	%	$	666,827	(8.5)	%

Selling, General and Administrative

Selling, general, and administrative expenses ("SG&A") consists of indirect costs related to general management, marketing, and administration. It is primarily composed of labor costs. These costs may be incurred at a segment level, for dedicated resources that are not client-facing, or at a corporate level. Corporate costs are allocated to segments on a consistent and rational basis. Fluctuations in our SG&A are primarily driven by changes in our administrative cost base, which is not directly driven by changes in our revenue. As part of our work for the U.S. federal government and many states, we allocate these costs using a methodology driven by the U.S. Federal Cost Accounting Standards.

Our SG&A expense ~~has~~ increased year-over-year primarily due ~~primarily~~ to the additional cost base from our acquisitions.

Table of Contents

Amortization of Intangible Assets

Our amortization of intangible assets increased by ~~$17.8~~$10.6 million and ~~$33.7~~$44.2 million for the three and ~~six~~nine months ended ~~March 31,~~June 30, 2022, compared to same periods ended ~~March 31,~~June 30, 2021. The increase is a result of acquisitions during fiscal years 2021 and 2022. This increase is partially offset by the intangible asset amortization related to the Census Questionnaire Assistance (CQA) contract, which was fully amortized through November 2020.

Table MD&A 4: Changes in Amortization of Intangible Assets Expense for Three and Six Months Ended March 31, 2022
For the Three Months Ended March 31, 2022 For the Six Months Ended March 31, 2022
Dollars Dollars
(dollars in thousands)
Period Ending March 31, 2021 $ 5,070 $ 11,586
VES acquisition 13,833 27,667
Attain acquisition 1,750 4,375
Aidvantage acquisition 2,060 3,716
Connect Assist acquisition 151 313
CQA contract — (2,313)
Other (8) (83)
Period Ending March 31, 2022 $ 22,856 $ 45,261


Table MD&A 4: Changes in Amortization of Intangible Assets Expense for Three and Nine Months Ended June 30, 2022
	For the Three Months Ended June 30, 2022		For the Nine Months Ended June 30, 2022
	Dollars		Dollars
	(dollars in thousands)
Period Ending June 30, 2021	$	12,132	$	23,718
VES acquisition	9,249		36,916
Attain acquisition	—		4,375
Aidvantage acquisition	1,858		5,574
Other 2022 acquisitions	296		609
CQA contract	—		(2,313)
Other, including foreign exchange	(845)		(928)
Period Ending June 30, 2022	$	22,690	$	67,951

~~Table of Contents~~


Table MD&A 5: Non-GAAP Adjusted Results Excluding Amortization of Intangible Assets	Table MD&A 5: Non-GAAP Adjusted Results Excluding Amortization of Intangible Assets													Table MD&A 5: Non-GAAP Adjusted Results Excluding Amortization of Intangible Assets
		For the Three Months Ended						For the Six Months Ended							For the Three Months Ended						For the Nine Months Ended
		March 31, 2022			March 31, 2021			March 31, 2022			March 31, 2021				June 30, 2022			June 30, 2021			June 30, 2022			June 30, 2021
		(dollars in thousands, except per share data)													(dollars in thousands, except per share data)
Operating income	Operating income	$	75,288		$	113,186		$	156,817		$	200,758		Operating income	$	54,557		$	139,595		$	211,374		$	340,353
Add back: Amortization of intangible assets	Add back: Amortization of intangible assets	22,856			5,070			45,261			11,586			Add back: Amortization of intangible assets	22,690			12,132			67,951			23,718
Adjusted operating income excluding amortization of intangible assets (Non-GAAP)	Adjusted operating income excluding amortization of intangible assets (Non-GAAP)	$	98,144		$	118,256		$	202,078		$	212,344		Adjusted operating income excluding amortization of intangible assets (Non-GAAP)	$	77,247		$	151,727		$	279,325		$	364,071
Adjusted operating income margin excluding amortization of intangible assets (Non-GAAP)	Adjusted operating income margin excluding amortization of intangible assets (Non-GAAP)	8.3		%	12.3		%	8.7		%	11.1		%	Adjusted operating income margin excluding amortization of intangible assets (Non-GAAP)	6.9		%	12.2		%	8.1		%	11.6		%

Net income	Net income	$	50,096		$	80,614		$	103,426		$	144,691		Net income	$	31,335		$	94,495		$	134,761		$	239,186
Add back: Amortization of intangible assets, net of tax	Add back: Amortization of intangible assets, net of tax	16,884			3,756			33,414			8,578			Add back: Amortization of intangible assets, net of tax	16,750			8,941			50,164			17,364
Adjusted net income excluding amortization of intangible assets (Non-GAAP)	Adjusted net income excluding amortization of intangible assets (Non-GAAP)	$	66,980		$	84,370		$	136,840		$	153,269		Adjusted net income excluding amortization of intangible assets (Non-GAAP)	$	48,085		$	103,436		$	184,925		$	256,550

Diluted earnings per share	Diluted earnings per share	$	0.80		$	1.29		$	1.66		$	2.33		Diluted earnings per share	$	0.51		$	1.51		$	2.17		$	3.84
Add back: Effect of amortization of intangible assets on diluted earnings per share	Add back: Effect of amortization of intangible assets on diluted earnings per share	0.27			0.06			0.53			0.13			Add back: Effect of amortization of intangible assets on diluted earnings per share	0.27			0.15			0.80			0.28
Adjusted diluted earnings per share excluding amortization of intangible assets (Non-GAAP)	Adjusted diluted earnings per share excluding amortization of intangible assets (Non-GAAP)	$	1.07		$	1.35		$	2.19		$	2.46		Adjusted diluted earnings per share excluding amortization of intangible assets (Non-GAAP)	$	0.78		$	1.66		$	2.97		$	4.12

Our intangible asset amortization is based upon our assumptions of the value and economic life, typically established at the acquisition date. If these assumptions change, the pattern of future expense may be accelerated. At this time, we have a significant asset related to the Customer Center Operations (CCO) contract which is subject to a rebid anticipated towards the end of this fiscal year. If this rebid is unsuccessful, the asset life of this asset may need to be reduced.

Interest Expense

Interest expense for the three months ended ~~March 31,~~June 30, 2022, increased by ~~$8.7~~$7.7 million to ~~$9.4~~$10.8 million, while interest expense for the ~~six~~nine months ended ~~March 31,~~June 30, 2022, increased by ~~$18.1~~$25.8 million to ~~$19.1~~$29.9 million. This increase is driven by the costs of our cash borrowings utilized to acquire VES. Interest expense is expected to be ~~in the range of $40 million to~~about $42 million for fiscal year 2022 as the debt is expected to be outstanding for the entire fiscal year. Our interest rate will vary based upon both

Table of Contents

prevailing interest rates and our leverage ratio.

Provision for Income Taxes

Our effective income tax rate for the three and ~~six~~nine months ended ~~March 31,~~June 30, 2022, was ~~24.7%~~24.1% and ~~25.1%~~24.9%, respectively, compared to ~~28.0%~~26.3% and ~~27.1%~~26.8% for the three and ~~six~~nine months ended ~~March 31,~~June 30, 2021. For fiscal year 2022, we expect the effective tax rate to be between ~~24.5%~~25.0% and 25.5%.

~~Table of Contents~~

U.S. Services Segment


Table MD&A 6: U.S. Services Segment - Financial Results	Table MD&A 6: U.S. Services Segment - Financial Results											Table MD&A 6: U.S. Services Segment - Financial Results
		For the Three Months Ended				For the Six Months Ended							For the Three Months Ended				For the Nine Months Ended
		March 31, 2022		March 31, 2021		March 31, 2022			March 31, 2021				June 30, 2022		June 30, 2021		June 30, 2022			June 30, 2021
		(dollars in thousands)											(dollars in thousands)
Revenue	Revenue	$	398,077	$	448,215	$	784,494		$	833,149		Revenue	$	399,320	$	436,338	$	1,183,814		$	1,269,487
Cost of revenue	Cost of revenue	313,106		328,775		609,824			614,707			Cost of revenue	325,185		331,524		935,009			946,231
Gross profit	Gross profit	84,971		119,440		174,670			218,442			Gross profit	74,135		104,814		248,805			323,256
Selling, general, and administrative expenses	Selling, general, and administrative expenses	38,273		36,593		73,375			74,049			Selling, general, and administrative expenses	42,351		42,606		115,726			116,655
Operating income	Operating income	46,698		82,847		101,295			144,393			Operating income	31,784		62,208		133,079			206,601
Gross profit percentage	Gross profit percentage	21.3 %		26.6 %		22.3		%	26.2		%	Gross profit percentage	18.6 %		24.0 %		21.0		%	25.5		%
Operating margin percentage	Operating margin percentage	11.7 %		18.5 %		12.9		%	17.3		%	Operating margin percentage	8.0 %		14.3 %		11.2		%	16.3		%

Our revenue and cost of revenue for the three months ended ~~March 31,~~June 30, 2022, decreased ~~11.2%~~8.5% and ~~4.8%~~1.9%, compared to three months ended ~~March 31,~~June 30, 2021, respectively. For the ~~six~~nine months ended ~~March 31,~~June 30, 2022, our revenue and cost of revenue decreased ~~5.8%~~6.7% and ~~0.8%~~1.2%, respectively. All movement was organic.

~~In fiscal year~~

For the three months ended June 30, 2021, we received ~~a large volume~~$164 million of ~~short term~~short-term COVID-19 related work, typically at higher margins. This work has contracted or moved into longer-term work, resulting in a reduced workload at lower margins. We estimate that our COVID related revenue has declined by approximately $120 million and $150 million forFor the three ~~and six~~ months ended ~~March 31,~~June 30, 2022, ~~respectively, compared~~COVID-19 related work provided $24 million of revenue. As a result, both revenue and profit margins have decreased year-over-year. Conversely, we are still awaiting the return of many of our core programs to ~~fiscal year 2021.~~

~~Our core established programs have been operating at depressed~~pre-pandemic levels ~~during the COVID-19 pandemic as~~of operation, in particular those where we are paid based upon the volume of ~~transaction-based work has declined. In particular, we continue to report lower volumes of transactions on~~ redetermination ~~activities as states have paused Medicaid redeterminations.~~activities. The Federal public health emergency declaration has been extended through ~~mid-July~~mid-October which will further delay the commencement of redeterminations. Accordingly, we do not expect recoveries in these contracts until ~~late in this~~ fiscal ~~year.~~year 2023. For the full fiscal year, we anticipate an operating margin between 9%10% and 11%~~, with the timing of the end of the public health emergency being a significant factor in the return to higher margins.~~.

U.S. Federal Services Segment

From technology solutions to program administration and operations, our U.S. Federal Services Segment delivers end-to-end solutions that help various U.S. federal government agencies better deliver on their mission. This also includes appeals and assessments services, system and application development, IT modernization, and maintenance services. The segment also contains certain state-based assessments and appeals work that is part of the segment's heritage within the Medicare Appeals portfolio which continues to be managed within this segment. Benefiting from the Maximus Federal Consulting (formerly Attain Federal) platform, the segment executes on its digital strategy to deliver technology solutions that advance agency missions, including the challenge to modernize, provide better customer experience, and drive process efficiencies. The segment continues to expand its clinical solutions with the acquisition of VES which manages the clinical evaluation process for U.S. veterans and service members on behalf of the U.S. Department of Veterans Affairs. The segment further supports clinical offerings in public health with new work supporting the U.S. ~~Federal Government's~~federal government's COVID-19 response efforts. This included expanded work with the Centers for Disease Control and Prevention ("CDC") for their helpline and increased support for the IRS Wage and Investment Division's response efforts to general inquiries regarding the Coronavirus Aid Relief & Economic Security ("CARES") Act and Economic Impact Payment Service Plan.

Table of Contents


Table MD&A 7: U.S. Federal Services Segment - Financial Results	Table MD&A 7: U.S. Federal Services Segment - Financial Results													Table MD&A 7: U.S. Federal Services Segment - Financial Results
		For the Three Months Ended						For the Six Months Ended							For the Three Months Ended						For the Nine Months Ended
		March 31, 2022			March 31, 2021			March 31, 2022			March 31, 2021				June 30, 2022			June 30, 2021			June 30, 2022			June 30, 2021
		(dollars in thousands)													(dollars in thousands)
Revenue	Revenue	$	573,288		$	330,136		$	1,155,159		$	735,381		Revenue	$	525,519		$	617,601		$	1,680,678		$	1,352,982
Cost of revenue	Cost of revenue	458,135			256,003			913,430			578,752			Cost of revenue	401,316			461,825			1,314,746			1,040,577
Gross profit	Gross profit	115,153			74,133			241,729			156,629			Gross profit	124,203			155,776			365,932			312,405
Selling, general, and administrative expenses	Selling, general, and administrative expenses	68,949			50,978			133,874			103,230			Selling, general, and administrative expenses	69,466			69,647			203,340			172,877
Operating income	Operating income	46,204			23,155			107,855			53,399			Operating income	54,737			86,129			162,592			139,528
Gross profit percentage	Gross profit percentage	20.1		%	22.5		%	20.9		%	21.3		%	Gross profit percentage	23.6		%	25.2		%	21.8		%	23.1		%
Operating margin percentage	Operating margin percentage	8.1		%	7.0		%	9.3		%	7.3		%	Operating margin percentage	10.4		%	13.9		%	9.7		%	10.3		%

Table MD&A 8: U.S. Federal Services Segment - Changes in Revenue, Cost of Revenue, and Gross Profit for the Three Months Ended March 31, 2022
Revenue Cost of Revenue Gross Profit
Amount % Change Amount % Change Amount % Change
(dollars in thousands)
Three Months Ended March 31, 2021 $ 330,136 $ 256,003 $ 74,133
Organic effect 29,055 8.8 % 39,740 15.5 % (10,685) (14.4) %
Acquired growth 214,097 64.9 % 162,392 63.4 % 51,705 69.7 %
Three Months Ended March 31, 2022 $ 573,288 73.7 % $ 458,135 79.0 % $ 115,153 55.3 %


Table MD&A 8: U.S. Federal Services Segment - Changes in Revenue, Cost of Revenue, and Gross Profit for the Three Months Ended June 30, 2022
	Revenue				Cost of Revenue				Gross Profit
	Amount		% Change		Amount		% Change		Amount		% Change
	(dollars in thousands)
Three Months Ended June 30, 2021	$	617,601			$	461,825			$	155,776
Organic effect	(235,221)		(38.1)	%	(172,738)		(37.4)	%	(62,483)		(40.1)	%
Acquired growth	143,139		23.2	%	112,229		24.3	%	30,910		19.8	%
Three Months Ended June 30, 2022	$	525,519	(14.9)	%	$	401,316	(13.1)	%	$	124,203	(20.3)	%

Table MD&A 9: U.S. Federal Services Segment - Changes in Revenue, Cost of Revenue, and Gross Profit for the Six Months Ended March 31, 2022
Revenue Cost of Revenue Gross Profit
Amount % Change Amount % Change Amount % Change
(dollars in thousands)
Six Months Ended March 31, 2021 $ 735,381 $ 578,752 $ 156,629
Organic effect (24,284) (3.3) % 5,685 1.0 % (29,969) (19.1) %
Acquired growth 444,062 60.4 % 328,993 56.8 % 115,069 73.5 %
Six Months Ended March 31, 2022 $ 1,155,159 57.1 % $ 913,430 57.8 % $ 241,729 54.3 %


Table MD&A 9: U.S. Federal Services Segment - Changes in Revenue, Cost of Revenue, and Gross Profit for the Nine Months Ended June 30, 2022
	Revenue				Cost of Revenue				Gross Profit
	Amount		% Change		Amount		% Change		Amount		% Change
	(dollars in thousands)
Nine Months Ended June 30, 2021	$	1,352,982			$	1,040,577			$	312,405
Organic effect	(259,527)		(19.2)	%	(167,028)		(16.1)	%	(92,499)		(29.6)	%
Acquired growth	587,223		43.4	%	441,197		42.4	%	146,026		46.7	%
Nine Months Ended June 30, 2022	$	1,680,678	24.2	%	$	1,314,746	26.3	%	$	365,932	17.1	%

WeOur results for the three months ended June 30, 2022 received ~~significant acquired~~the benefit of growth ~~from:~~

•from VES, which we acquired in May 2021,

•~~Attain, which we acquired in March 2021,~~ and

•~~The~~ Aidvantage, ~~business,~~ which we acquired in October 2021. Our year-to-date results also include the benefit of the Attain acquisition, which was completed in March 2021.

~~Our profit margins on VES and Attain are higher than~~The decline in our organic ~~work, resulting~~business is driven by a small number of large, pandemic-related contracts which ended in ~~improvements to our profit margins.~~late 2021 or early 2022. These ~~were partially tempered by our Aidvantage contract, which has recorded a loss~~contracts resulted in approximately $24 million and $280 million of revenue for the three months ended ~~March 31, 2022. The deferral of student loan repayments by the government has reduced~~June 30, 2022 and 2021, respectively. This short-term work was typically at higher margins than our ~~revenue and we~~standard services. We have ~~incurred costs related to the transition of the program.~~

~~Our organic work~~ also ~~tempered our gross profit margins. This was driven by a large contract on which we agreed to accept~~accepted a lower ~~margin~~return on an existing contract in return for increased funding and anticipated future revenue. ~~Our operating profit~~

Following a loss in the second quarter, Aidvantage returned to profitability in the three months ended June 30, 2022. This has improved our quarterly margins ~~received~~but still acts as a ~~benefit from~~detriment on our margins over the ~~increased scale~~first nine months of the ~~segment.~~year.

We anticipate operating margins between 10% and 11% for the full fiscal year. ~~At this time,~~These margins will be tempered by an expected $8 million to $10 million of additional costs as we ~~assume that student loan repayments will commence~~staff up VES to address additional volumes in ~~September 2022, but any further delays will temper our revenue and profit.~~fiscal year 2023.

Outside the U.S. Segment

~~Table of Contents~~

Advisory Service ("HAAS")~~, the Work & Health Programme, Fair Start,~~ and Restart; Australia, including ~~jobactive~~Workforce Australia and the Disability Employment Service; Canada, including Health Insurance British Columbia and the Employment Program of British Columbia; in addition to

Table of Contents

Italy, Saudi Arabia, Singapore, South Korea, and Sweden, where we predominantly provide employment support and job seeker services.


Table MD&A 10: Outside the U.S. Segment - Financial Results	Table MD&A 10: Outside the U.S. Segment - Financial Results													Table MD&A 10: Outside the U.S. Segment - Financial Results
		For the Three Months Ended						For the Six Months Ended							For the Three Months Ended						For the Nine Months Ended
		March 31, 2022			March 31, 2021			March 31, 2022			March 31, 2021				June 30, 2022			June 30, 2021			June 30, 2022			June 30, 2021
		(dollars in thousands)													(dollars in thousands)
Revenue	Revenue	$	205,961		$	180,929		$	388,549		$	336,304		Revenue	$	200,946		$	189,581		$	589,495		$	525,885
Cost of revenue	Cost of revenue	177,634			143,844			348,342			274,662			Cost of revenue	189,063			158,315			537,405			432,977
Gross profit	Gross profit	28,327			37,085			40,207			61,642			Gross profit	11,883			31,266			52,090			92,908
Selling, general, and administrative expenses	Selling, general, and administrative expenses	24,011			22,013			45,351			42,045			Selling, general, and administrative expenses	23,101			22,973			68,452			65,018
Operating income/(loss)	Operating income/(loss)	4,316			15,072			(5,144)			19,597			Operating income/(loss)	(11,218)			8,293			(16,362)			27,890
Gross profit percentage	Gross profit percentage	13.8		%	20.5		%	10.3		%	18.3		%	Gross profit percentage	5.9		%	16.5		%	8.8		%	17.7		%
Operating margin percentage	Operating margin percentage	2.1		%	8.3		%	(1.3)		%	5.8		%	Operating margin percentage	(5.6)		%	4.4		%	(2.8)		%	5.3		%


Table MD&A 11: Outside the U.S. Segment - Changes in Revenue, Cost of Revenue, and Gross Profit for the Three Months Ended March 31, 2022
Table MD&A 11: Outside the U.S. Segment - Changes in Revenue, Cost of Revenue, and Gross Profit for the Three Months Ended June 30, 2022														Table MD&A 11: Outside the U.S. Segment - Changes in Revenue, Cost of Revenue, and Gross Profit for the Three Months Ended June 30, 2022
		Revenue				Cost of Revenue				Gross Profit					Revenue				Cost of Revenue				Gross Profit
		Amount		% Change		Amount		% Change		Amount		% Change			Amount		% Change		Amount		% Change		Amount		% Change
		(dollars in thousands)													(dollars in thousands)
Three Months Ended March 31, 2021		$	180,929			$	143,844			$	37,085
Three Months Ended June 30, 2021														Three Months Ended June 30, 2021	$	189,581			$	158,315			$	31,266
Organic effect	Organic effect	25,167		13.9	%	34,782		24.2	%	(9,615)		(25.9)	%	Organic effect	20,962		11.1	%	41,735		26.4	%	(20,773)		(66.4)	%
Acquired growth	Acquired growth	6,308		3.5	%	3,747		2.6	%	2,561		6.9	%	Acquired growth	7,078		3.7	%	4,261		2.7	%	2,817		9.0	%
Currency effect compared to the prior period	Currency effect compared to the prior period	(6,443)		(3.6)	%	(4,739)		(3.3)	%	(1,704)		(4.6)	%	Currency effect compared to the prior period	(16,675)		(8.8)	%	(15,248)		(9.6)	%	(1,427)		(4.6)	%
Three Months Ended March 31, 2022		$	205,961	13.8	%	$	177,634	23.5	%	$	28,327	(23.6)	%
Three Months Ended June 30, 2022														Three Months Ended June 30, 2022	$	200,946	6.0	%	$	189,063	19.4	%	$	11,883	(62.0)	%


Table MD&A 12: Outside the U.S. Segment - Changes in Revenue, Cost of Revenue, and Gross Profit for the Six Months Ended March 31, 2022
Table MD&A 12: Outside the U.S. Segment - Changes in Revenue, Cost of Revenue, and Gross Profit for the Nine Months Ended June 30, 2022														Table MD&A 12: Outside the U.S. Segment - Changes in Revenue, Cost of Revenue, and Gross Profit for the Nine Months Ended June 30, 2022
		Revenue				Cost of Revenue				Gross Profit					Revenue				Cost of Revenue				Gross Profit
		Amount		% Change		Amount		% Change		Amount		% Change			Amount		% Change		Amount		% Change		Amount		% Change
		(dollars in thousands)													(dollars in thousands)
Six Months Ended March 31, 2021		$	336,304			$	274,662			$	61,642
Nine Months Ended June 30, 2021														Nine Months Ended June 30, 2021	$	525,885			$	432,977			$	92,908
Organic effect	Organic effect	44,259		13.2	%	68,904		25.1	%	(24,645)		(40.0)	%	Organic effect	65,221		12.4	%	110,638		25.6	%	(45,417)		(48.9)	%
Acquired growth	Acquired growth	12,109		3.6	%	7,324		2.7	%	4,785		7.8	%	Acquired growth	19,187		3.6	%	11,585		2.7	%	7,602		8.2	%
Currency effect compared to the prior period	Currency effect compared to the prior period	$	(4,123)	(1.2)	%	$	(2,548)	(0.9)	%	(1,575)		(2.6)	%	Currency effect compared to the prior period	$	(20,798)	(4.0)	%	$	(17,795)	(4.1)	%	(3,003)		(3.2)	%
Six Months Ended March 31, 2022		$	388,549	15.5	%	$	348,342	26.8	%	$	40,207	(34.8)	%
Nine Months Ended June 30, 2022														Nine Months Ended June 30, 2022	$	589,495	12.1	%	$	537,405	24.1	%	$	52,090	(43.9)	%

This segment experienced organic growth in revenue and costs, as well as acquired growth, during the three and ~~six~~nine months ended ~~March 31,~~June 30, 2022. These were mitigated by declines in the values of the currencies in which we operate against the U.S. Dollar.

~~Our~~Fiscal year 2022 has seen revenue and cost growth from our United Kingdom business, where the Restart contract continued to ramp up. Whereas results in fiscal year 2021 included a significant revenue benefit from the recovery of our welfare-to-work contracts in ~~Australia. Fiscal year 2022 has also seen revenue and cost growth from our United Kingdom business, where the Restart~~Australia, this contract ~~continued to ramp up. Margins on the Restart contract are tempered as we have not yet reached our full service capacity.~~

~~Acquired growth is from the Connect Assist and BZB acquisitions.~~

~~A large employment services contract in Australia ends~~ended in June 2022 and we ~~have been~~were awarded a significantly lower caseload for the follow-on contract. This ~~will result~~resulted in reduced revenues infor the ~~latter half of this year,~~three months ended June 30, 2022, as well as costs related to the ramping down of our existing case load, including severance. Profit margins were also tempered by a charge of $11.7 million related to a single large modernization contract. We anticipate that we will record a ~~small~~ loss for this segment in the current fiscal year.

Acquired growth is from the Stirling, Connect Assist and BZB acquisitions.

Table of Contents

Much of our revenue, including that on the Restart contract, stems from our employment services contracts. On many contracts, we recognize revenue based upon estimates of future employment outcomes, which have become more volatile due to the effects of the COVID-19 pandemic, including those actions adopted by governments and employers. We update our estimates regularly based upon actual performance and updated expectations, but a sudden change in employment markets may result in significant fluctuations in our revenue.

Liquidity and Capital Resources

Our primary sources of liquidity are cash on hand, cash flows from operating activities, and availability under our credit facilities, including our $600 million revolving credit ~~facilities.~~facility. As of ~~March 31,~~June 30, 2022, we had ~~$92.6~~$93.7 million in cash and cash equivalents. We believe that our current cash position, access to our credit facility, and cash flows generated from operations should be not only sufficient for our operating requirements but also to enable us to fund share repurchases and any required long-term debt payments through the next several fiscal years. See Note 7 to the Consolidated Financial Statements for a more detailed discussion of our debt financing arrangements.


Table MD&A 13: Net Change in Cash and Cash Equivalents and Restricted Cash	Table MD&A 13: Net Change in Cash and Cash Equivalents and Restricted Cash					Table MD&A 13: Net Change in Cash and Cash Equivalents and Restricted Cash
		For the Six Months Ended					For the Nine Months Ended
		March 31, 2022		March 31, 2021			June 30, 2022		June 30, 2021
		(in thousands)					(in thousands)
Operating activities:
Net income		$	103,426	$	144,691
Non-cash adjustments		79,491		55,851
Changes in working capital		(71,058)		79,156

Net cash provided by operating activities	Net cash provided by operating activities	111,859		279,698		Net cash provided by operating activities	169,776		246,659
Net cash used in investing activities	Net cash used in investing activities	(22,902)		(437,524)		Net cash used in investing activities	(48,080)		(1,811,606)
Net cash (used in)/provided by financing activities	Net cash (used in)/provided by financing activities	(133,883)		185,967		Net cash (used in)/provided by financing activities	(163,272)		1,586,792
Effect of foreign exchange rates on cash and cash equivalents and restricted cash	Effect of foreign exchange rates on cash and cash equivalents and restricted cash	324		3,263		Effect of foreign exchange rates on cash and cash equivalents and restricted cash	(4,369)		2,830
Net change in cash and cash equivalents and restricted cash	Net change in cash and cash equivalents and restricted cash	$	(44,602)	$	31,404	Net change in cash and cash equivalents and restricted cash	$	(45,945)	$	24,675

Net Cash Provided By Operating Activities

Net cash provided by operating activities decreased by ~~$167.8~~$76.9 million for the ~~six~~nine months ended ~~March 31,~~June 30, 2022, compared to ~~six~~nine months ended ~~March 31,~~June 30, 2021. This decrease is primarily caused ~~by:~~

•Aby the decline in operating ~~income;~~

•~~The timing of cash receipts, which provided a significant benefit in fiscal year 2021;~~

•~~The timing of cash payments, including tax payments previously deferred in the U.S. under the CARES Act;~~

•~~Increased~~income and increased interest payments related to our ~~new~~ credit ~~facility; and~~

•~~The timing of income tax payments.~~facility.

Our Days Sales Outstanding ("DSO") as of ~~March 31,~~June 30, 2022, and September 30, 2021, were 70 days and 68 days, ~~and 67~~respectively. Approximately $80 million of outstanding receivables were collected in the first two business days ~~respectively.~~of July.

Net Cash Used In Investing Activities

The net cash used in investing activities ~~were $22.9~~was $48.1 million for the ~~six~~nine months ended ~~March 31,~~June 30, 2022. ~~These are primarily investments in~~In addition to capital ~~expenditure. Further working capital true-up~~expenditures, we made payments to acquire BZB and Stirling, as well as a final payment for ~~our recent business combinations are anticipated in~~ the ~~latter half~~acquisition of ~~the year.~~VES. The prior year comparative total includes payments for the ~~acquisition~~acquisitions of VES and Attain.

Net Cash (Used In)/Provided By Financing Activities

The ~~$133.9~~$163.3 million cash used in financing activities during the ~~six~~nine months ended ~~March 31,~~June 30, 2022, includes ~~$34.7~~$73.9 million for share repurchases, $51.8 million in dividend payments and $9.7 million in tax withholding payments for stock ~~compensation, and $25.8 million for share repurchases.~~awards. We have made ~~$63.7~~$28.0 million of net repayments of debt related to the mandatory repayments on our U.S. credit facility ~~voluntary repayments of our U.S. revolver~~ and a mix of mandatory and voluntary payments related to our subsidiary debt.

~~Table of Contents~~

The prior year cash inflows include the proceeds from our new Credit Facility.

With the acquisition of Aidvantage, we have incurred a liability to the seller based upon future performance, which we have estimated at ~~$18.6~~$16.4 million. We expect these payments to be made through fiscal year 2024.

Cash in Foreign Locations

We have no requirement to remit funds from our foreign locations to the ~~U.S..~~U.S. We will continue to explore opportunities to remit additional funds, taking into consideration the working capital requirements and relevant tax rules in each jurisdiction. When we are unable to remit funds back without incurring a penalty, we will consider these funds indefinitely reinvested until such time as these restrictions are changed. As a result, we do not record U.S. deferred income taxes on any funds held in foreign jurisdictions. We have not attempted to calculate our potential liability from any transfer of these funds as any such transaction might include tax planning strategies that we have not fully explored. Accordingly, it is not possible to estimate the potential tax obligations if we were to remit all of our funds from foreign locations to the U.S.

Table of Contents

Free Cash Flow (Non-GAAP)


Table MD&A 14: Free Cash Flow (Non-GAAP)	Table MD&A 14: Free Cash Flow (Non-GAAP)					Table MD&A 14: Free Cash Flow (Non-GAAP)
		For the Six Months Ended					For the Nine Months Ended
		March 31, 2022		March 31, 2021			June 30, 2022		June 30, 2021
		(in thousands)					(in thousands)
Net cash provided by operating activities	Net cash provided by operating activities	$	111,859	$	279,698	Net cash provided by operating activities	$	169,776	$	246,659
Purchases of property and equipment and capitalized software	Purchases of property and equipment and capitalized software	(22,898)		(23,584)		Purchases of property and equipment and capitalized software	(35,936)		(32,133)
Free cash flow (Non-GAAP)	Free cash flow (Non-GAAP)	$	88,961	$	256,114	Free cash flow (Non-GAAP)	$	133,840	$	214,526

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires us to make estimates, judgments, and assumptions that affect the amounts reported. Actual results could differ from those estimates. The 2021 Form 10-K, as filed with the SEC on November 18, 2021, includes a summary of critical accounting policies we believe are the most important to aid in understanding our financial results. There have been no changes to those critical accounting policies that have had a material impact on our reported amounts of assets, liabilities, revenues, or expenses during the ~~six~~nine months ended ~~March 31,~~June 30, 2022.

Non-GAAP and Other Measures

We utilize non-GAAP measures where we believe it will assist users of our financial statements in understanding our business. The presentation of these measures is meant to complement, but not replace, other financial measures in this document. The presentation of non-GAAP numbers is not meant to be considered in isolation, nor as an alternative to revenue growth, cash flows from operating activities, net income, or earnings per share as measures of performance. These non-GAAP measures, as determined and presented by us, may not be comparable to related or similarly titled measures presented by other companies.

For the ~~six~~nine months ended ~~March 31,~~June 30, 2022, 17% of our revenue was generated outside the U.S. We believe that users of our financial statements wish to understand the performance of our foreign operations using a methodology which excludes the effect of year-over-year exchange rate fluctuations. To calculate year-over-year currency movement, we determine the current fiscal year's results for all foreign businesses using the exchange rates in the prior fiscal year. We refer to this adjusted revenue on a "constant currency basis."

In recent years, we have made a number of acquisitions. We believe users of our financial statements wish to evaluate the performance of our operations, excluding changes that have arisen due to businesses acquired or disposed of. We identify acquired revenue and cost of revenue by showing these results for periods for which no comparative results exist within our financial statements. We identify revenue and cost of revenue that has been disposed of in a similar manner. This information is supplemented by our calculations of organic growth. To calculate organic growth, we compare current fiscal year results excluding results from acquisitions or disposals, to our prior fiscal year results.

Our recent acquisitions have resulted in significant intangible assets which are amortized over their estimated useful lives. We believe users of our financial statements wish to understand the performance of the business by using a methodology that allows them to compare operating activities excluding the effects of the amortization of intangible assets. Accordingly, we have calculated our operating profit, net income, and earnings per share excluding the effect of the amortization of intangible assets. We have included a table showing our reconciliation of these income measures to their corresponding GAAP measures.

In order to sustain our cash flows from operations, we regularly refresh our fixed assets and technology. We believe that

~~Table of Contents~~

users of our financial statements wish to understand the cash flows that directly correspond with our operations and the investments we must make in those operations using a methodology which combines operating cash flows and capital expenditures. We provide free cash flow to complement our statement of cash flows. Free cash flow shows the effects of the Company's operations and replacement capital expenditures and excludes the cash flow effects of acquisitions, purchases of our common stock, dividend payments, and other financing transactions. We have provided a reconciliation of cash flows from operating activities to free cash flow in "Liquidity and Capital Resources."

To sustain our operations, our principal source of financing comes from receiving payments from our customers. We believe that users of our financial statements wish to evaluate our efficiency in converting revenue into cash receipts. Accordingly, we provide DSO, which we calculate by dividing billed and unbilled receivable balances at the end of each quarter by revenue per day for the period. Revenue per day for a quarter is determined by dividing total revenue by 91 days.

Table of Contents

As noted above, we have a $2.10 billion corporate credit facility. Our credit agreement includes the defined term Consolidated EBITDA and our calculation of Adjusted EBITDA conforms to the credit agreement definition. We believe our investors appreciate the opportunity to understand the possible restrictions which arise from our credit agreement.

•Adjusted EBITDA is also a useful measure of performance which focuses on the cash generating capacity of the business as it excludes the non-cash expenses of depreciation and amortization, and makes for easier comparisons between the operating performance of companies with different capital structures by excluding interest expense and therefore the impacts of financing costs.

•The measure of Adjusted EBITA is a step in calculating Adjusted EBITDA and facilitates comparisons to similar businesses as it isolates the amortization effect of business combinations.

•Our corporate credit facility requires us to calculate Adjusted EBITDA on a pro forma basis, as though we had owned any significant acquired business for a full twelve months. Accordingly, we have included pro forma data for VES, Aidvantage, ~~and~~ Connect Assist, BZB and Stirling in the table below. Our corporate credit facility also allows other adjustments to Adjusted EBITDA for the purposes of calculating our leverage ratio, including anticipated synergies from acquisitions and one-time costs.

We have provided a reconciliation from net income to Non-GAAP Adjusted EBITA, Non-GAAP Adjusted EBITDA, and Non-GAAP Pro Forma Adjusted EBITDA as shown below. ~~Our current credit facilities utilized a different version of EBITDA from that of the credit facility used in prior years.~~


Table MD&A 15: Reconciliation of Net Income to Non-GAAP Adjusted EBITA, Non-GAAP Adjusted EBITDA, and Non-GAAP Pro Forma Adjusted EBITDA	Table MD&A 15: Reconciliation of Net Income to Non-GAAP Adjusted EBITA, Non-GAAP Adjusted EBITDA, and Non-GAAP Pro Forma Adjusted EBITDA					Table MD&A 15: Reconciliation of Net Income to Non-GAAP Adjusted EBITA, Non-GAAP Adjusted EBITDA, and Non-GAAP Pro Forma Adjusted EBITDA
		For the Three Months Ended		For the Trailing Twelve Months Ended			For the Three Months Ended		For the Trailing Twelve Months Ended
		March 31, 2022		March 31, 2022			June 30, 2022		June 30, 2022
		(in thousands)					(in thousands)
Net income	Net income	$	50,096	$	249,935	Net income	$	31,335	$	186,774
Adjustments:	Adjustments:					Adjustments:
Interest expense	Interest expense	9,438		32,858		Interest expense	10,791		40,562
Other expense, net	Other expense, net	(715)		8,406		Other expense, net	2,497		2,614
Provision for income taxes	Provision for income taxes	16,469		73,390		Provision for income taxes	9,934		49,601
Amortization of intangibles	Amortization of intangibles	22,856		78,032		Amortization of intangibles	22,690		88,590
Stock compensation expense	Stock compensation expense	6,804		30,127		Stock compensation expense	7,028		29,810
Acquisition-related expenses	Acquisition-related expenses	175		9,154		Acquisition-related expenses	(1,957)		1,501
Adjusted EBITA - Non-GAAP measure	Adjusted EBITA - Non-GAAP measure	105,123		481,902		Adjusted EBITA - Non-GAAP measure	82,318		399,452
Depreciation and amortization of property, equipment, and capitalized software	Depreciation and amortization of property, equipment, and capitalized software	9,834		44,725		Depreciation and amortization of property, equipment, and capitalized software	8,676		42,572
Adjusted EBITDA - Non-GAAP measure	Adjusted EBITDA - Non-GAAP measure	114,957		526,627		Adjusted EBITDA - Non-GAAP measure	90,994		442,024
Pro forma adjusted EBITDA related to acquisitions - Non-GAAP measure	Pro forma adjusted EBITDA related to acquisitions - Non-GAAP measure	—		40,089		Pro forma adjusted EBITDA related to acquisitions - Non-GAAP measure	—		8,709
Other pro forma adjustments allowed by our debt agreement		$	9,633	$	20,931
Other pro forma adjustments permitted by our debt agreement						Other pro forma adjustments permitted by our debt agreement	$	23,163	$	38,272
Pro forma adjusted EBITDA - Non-GAAP measure	Pro forma adjusted EBITDA - Non-GAAP measure	$	124,590	$	587,647	Pro forma adjusted EBITDA - Non-GAAP measure	$	114,157	$	489,005

3133

Table of Contents

Item 3. Quantitative and Qualitative Disclosures About Market Risk

In the normal course of business, we are exposed to financial risks such as changes in interest rates, foreign currency exchange rates, and counterparty risk. We use derivative instruments to manage selected interest rate exposures. The Company's market rate risk disclosures set forth in Part II, Item 7A, "Quantitative and Qualitative Disclosures About Market Risk" on the 2021 Form 10-K, as filed with the SEC on November 18, 2021, have not changed materially during the ~~six~~nine month period ended ~~March 31,~~June 30, 2022.

Item 4. Controls and Procedures

Management's Evaluation of Disclosure Controls and Procedures. The Company maintains disclosure controls and procedures designed to ensure that information required to be disclosed in its periodic filings under the Securities Exchange Act of 1934 ("Exchange Act"), including this Quarterly Report on Form 10-Q, is recorded, processed, summarized, and reported on a timely basis. These disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed under the Exchange Act is accumulated and communicated to the Company's management on a timely basis to allow decisions about required disclosure. Management, including the Company's Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of Maximus' disclosure controls and procedures (as defined under Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of ~~March 31,~~June 30, 2022.

Maximus carried out the evaluation of the effectiveness of its disclosure controls and procedures, required by paragraph (b) of Exchange Act Rules 13a-15 and 15d-15, under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer. Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of ~~March 31,~~June 30, 2022.

Changes in Internal Control Over Financial Reporting. There were no changes in the Company's internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the three months ended ~~March 31,~~June 30, 2022, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

3234

Table of Contents

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Refer to our disclosures included in Note ~~16.~~13. Commitments and Contingencies included in Part 1, Item 1 of this Quarterly Report on Form 10-Q.

Item 1A. Risk Factors

There were no material changes during the ~~six~~nine months ended ~~March 31,~~June 30, 2022, to the risk factors previously disclosed in the 2021 Form 10-K, as filed with the SEC on November 18, 2021.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a)None.

(b)None.

(c)Under a resolution adopted in March 2020, the Board of Directors authorized the purchase, at management's discretion, of up to $200.0 million of our common stock.

Common Stock Purchase Activity During the Three Months Ended March 31, 2022
Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of the Publicly Announced Plans or Programs Maximum Dollar Value that May Yet Be Purchased Under the Plans or Programs
(in thousands, except per share data)
January 1 - January 31, 2022 13,767 $ 74.87 13,767 $ 144,256
February 1 - February 28, 2022 94,200 74.70 94,200 $ 137,219
March 1 - March 31, 2022 221,500 73.98 221,500 $ 120,832
Total 329,467 $ 74.22 329,467


Common Stock Purchase Activity During the Three Months Ended June 30, 2022
Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of the Publicly Announced Plans or Programs	Maximum Dollar Value that May Yet Be Purchased Under the Plans or Programs
	(in thousands, except per share data)
April 1 - April 30, 2022	189,631	74.65		189,631	$	106,705
May 1 - May 30, 2022	337,579	69.10		337,579	$	83,388
June 1 - June 30, 2022	178,600	59.38		178,600	$	72,833
Total	705,810	$	68.01	705,810

Item 3. Defaults Upon Senior Securities

(a)None.

(b)None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

(a)None.

(b)None.

3335

Table of Contents

Item 6. Exhibits

Exhibit
No.

Description of Exhibit

31.1

Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002.

31.2

Certification of Chief Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002.

32.1

Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002.

101.INS

XBRL Instance Document.

101.SCH

XBRL Taxonomy Extension Schema Document.

101.CAL

XBRL Taxonomy Calculation Linkbase Document.

101.DEF

XBRL Taxonomy Definition Linkbase Document.

101.LAB

XBRL Taxonomy Label Linkbase Document.

101.PRE

XBRL Taxonomy Presentation Linkbase Document.

104

Cover Page Interactive Data File. (formatted as Inline XBRL tags and contained in Exhibit 101)



v			Filed herewith.
Φ			Furnished herewith.

3436

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


Maximus, Inc.

	/s/ Bruce L. Caswell	~~May 5,~~August 4, 2022
By:	Bruce L. Caswell
	President and Chief Executive Officer
	(Principal Executive Officer)

	/s/ David. W. Mutryn	~~May 5,~~August 4, 2022
By:	David W. Mutryn
	Chief Financial Officer
	(Principal Financial Officer)

3537


Table 8.2: Gains on Derivatives
	For the Three Months Ended				For the Six Months Ended
	March 31, 2022		March 31, 2021		March 31, 2022		March 31, 2021
	(in thousands)
Net gains recognized in AOCI on derivatives, net of tax (1)	$	10,225	$	—	$	12,401	$	—
Amounts reclassified to earnings from accumulated other comprehensive loss (2)	464		—		973		—
Net current period other comprehensive income	$	10,689	$	—	$	13,374	$	—


Table 11: Details of Changes in Accumulated Other Comprehensive Loss by Category
	Foreign currency translation adjustment		Net unrealized (loss)/gain on derivatives, net of tax		Total
	(in thousands)
Balance as of September 30, 2021	$	(39,605)	$	(303)	$	(39,908)
Other comprehensive income before reclassifications	436		12,401		12,837
Amounts reclassified from accumulated other comprehensive loss	—		973		973
Net current period other comprehensive income	436		13,374		13,810
Balance as of March 31, 2022	$	(39,169)	$	13,071	$	(26,098)


Table MD&A 4: Changes in Amortization of Intangible Assets Expense for Three and Six Months Ended March 31, 2022
	For the Three Months Ended March 31, 2022		For the Six Months Ended March 31, 2022
	Dollars		Dollars
	(dollars in thousands)
Period Ending March 31, 2021	$	5,070	$	11,586
VES acquisition	13,833		27,667
Attain acquisition	1,750		4,375
Aidvantage acquisition	2,060		3,716
Connect Assist acquisition	151		313
CQA contract	—		(2,313)
Other	(8)		(83)
Period Ending March 31, 2022	$	22,856	$	45,261