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 ~~June 30, 2023~~March 31, 2024

☐ 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)

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 60,783,621~~were 60,796,458 shares of the registrant's Common Stock outstanding as of ~~July 31, 2023.~~May 6, 2024.

Table of Contents

Table of Contents to ~~Third~~Second Quarter ~~2023~~2024 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 Consolidated Financial Statements	10
	1. Organization	10
	2. Significant Accounting Policies	10
	3. Business Segments	11
	4. Revenue Recognition	13
	5. Earnings Per Share	15
	6. Debt and Derivatives	15
	7. Acquisitions and Divestitures	16
	8. Fair Value Measurements	16
	9. Equity	18
	10. Other Balance Sheet Items	18
	11. Commitments and Contingencies	19
	12. Subsequent Event	2021
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2122
	Business Overview	2122
	Financial Overview	2223
	Results of Operations	2223
	Liquidity and Capital Resources	27
	Critical Accounting Policies and Estimates	3031
	Non-GAAP and Other Measures	3031
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3233
Item 4.	Controls and Procedures	3233
Part II - Other Information		3334
Item 1.	Legal Proceedings	3334
Item 1A.	Risk Factors	3334
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3334
Item 3.	Defaults Upon Senior Securities	3334
Item 4.	Mine Safety Disclosures	3334
Item 5.	Other Information	3334
Item 6.	Exhibits	34
	Signatures	35

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. F~~orward-looking~~Forward-looking statements can be identified by words such as: "anticipate," "intend," "plan," "goal," "seek," "opportunity," "could," "potential," "believe," "project," "estimate," "expect," "continue," "forecast," "strategy," "future," "likely," "may," "should," "will," and similar references to future periods.

~~Forward-looking~~Any statements herein 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 residual impacts of the coronavirus ("COVID-19") global pandemic,~~demand, and our recent ~~acquisitions,~~acquisitions and divestitures, are forward-looking statements that 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 could lead to penalties, liquidated damages, actual damages, adverse settlement agreements, and/or contract termination;

•our ~~failure~~ability to successfully compete, 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~~U.S. government 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;

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

•our discovery of additional information related to the previously disclosed cybersecurity incident and any potential legal, business, reputational, or financial consequences resulting from the incident;

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

•the effect of union activity and organizing efforts at our U.S. locations;

•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;

•our ability to manage third parties upon whom we depend to provide services to our customers;

•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;

•our ability to manage emerging artificial intelligence and machine learning technologies;

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

•other factors set forth in Item 1A, "Risk Factors" of our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on November ~~22, 2022.~~

16, 2023.

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 Nine Months Ended				For the Three Months Ended		For the Six Months Ended
		June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022		March 31, 2024	March 31, 2023		March 31, 2024		March 31, 2023
		(in thousands, except per share amounts)
	(in thousands, except per share amounts)													(in thousands, except per share amounts)
Revenue	Revenue	$	1,188,677	$	1,125,785	$	3,644,775	$	3,453,987
Cost of revenue	Cost of revenue	924,313		915,564		2,907,061		2,787,160
Gross profit	Gross profit	264,364		210,221		737,714		666,827
Selling, general, and administrative expenses	Selling, general, and administrative expenses	182,545		132,974		471,445		387,502
Amortization of intangible assets	Amortization of intangible assets	23,431		22,690		70,599		67,951
Operating income	Operating income	58,388		54,557		195,670		211,374
Interest expense	Interest expense	21,026		10,791		63,631		29,867
Other expense/(income), net	Other expense/(income), net	1,005		2,497		(79)		2,093
Income before income taxes	Income before income taxes	36,357		41,269		132,118		179,414
Provision for income taxes	Provision for income taxes	5,494		9,934		29,472		44,653
Net income	Net income	$	30,863	$	31,335	$	102,646	$	134,761

Earnings per share:	Earnings per share:
Earnings per share:
Earnings per share:
Basic
Basic
Basic	Basic	$	0.50	$	0.51	$	1.68	$	2.17
Diluted	Diluted	$	0.50	$	0.51	$	1.67	$	2.17
Weighted average shares outstanding:	Weighted average shares outstanding:
Basic	Basic	61,141		61,607		61,125		62,038
Basic
Basic
Diluted	Diluted	61,544		61,756		61,368		62,190

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

See accompanying notes to consolidated financial statements.

Table of Contents

Maximus, Inc.

Consolidated Statements of Comprehensive Income

(Unaudited)


		For the Three Months Ended				For the Nine Months Ended				For the Three Months Ended		For the Six Months Ended
		June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022		March 31, 2024	March 31, 2023		March 31, 2024		March 31, 2023
		(in thousands)
	(in thousands)													(in thousands)
Net income	Net income	$	30,863	$	31,335	$	102,646	$	134,761
Other comprehensive income/(loss), net of tax:
Other comprehensive (loss)/income, net of tax:
Foreign currency translation adjustments	Foreign currency translation adjustments	1,946		(8,935)		10,947		(8,499)
Net (losses)/gains on cash flow hedge, net of tax effect of $2,513, $1,085, $(466), and $5,857, respectively		7,046		3,042		(1,297)		16,416
Foreign currency translation adjustments
Foreign currency translation adjustments
Net gains/(losses) on cash flow hedge, net of tax effect of $957, $(1,630), $(2,212), and $(2,979), respectively
Other comprehensive income/(loss)	Other comprehensive income/(loss)	8,992		(5,893)		9,650		7,917
Comprehensive income	Comprehensive income	$	39,855	$	25,442	$	112,296	$	142,678

See accompanying notes to consolidated financial statements.

Table of Contents

Maximus, Inc.

Consolidated Balance Sheets

~~(in thousands)~~


		June 30, 2023		September 30, 2022
		(unaudited)

	March 31, 2024						March 31, 2024	September 30, 2023
	(unaudited)
		(in thousands)
		(in thousands)
		(in thousands)
Assets:	Assets:
Cash and cash equivalents
Cash and cash equivalents
Cash and cash equivalents	Cash and cash equivalents	$	35,007	$	40,658
Accounts receivable, net	Accounts receivable, net	798,509		807,110
Income taxes receivable	Income taxes receivable	34,435		2,158
Prepaid expenses and other current assets	Prepaid expenses and other current assets	128,085		182,387
Total current assets	Total current assets	996,036		1,032,313
Property and equipment, net	Property and equipment, net	44,808		52,258
Capitalized software, net	Capitalized software, net	88,007		58,740
Operating lease right-of-use assets	Operating lease right-of-use assets	160,563		132,885
Goodwill	Goodwill	1,780,884		1,779,415
Intangible assets, net	Intangible assets, net	727,956		804,904
Deferred contract costs, net	Deferred contract costs, net	45,928		47,732
Deferred compensation plan assets	Deferred compensation plan assets	44,412		37,050
Deferred income taxes	Deferred income taxes	5,771		4,970
Other assets	Other assets	48,819		42,447
Total assets	Total assets	$	3,943,184	$	3,992,714
Liabilities and Shareholders' Equity:	Liabilities and Shareholders' Equity:
Liabilities:	Liabilities:
Liabilities:
Liabilities:
Accounts payable and accrued liabilities
Accounts payable and accrued liabilities
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	$	283,686	$	264,553
Accrued compensation and benefits	Accrued compensation and benefits	140,007		178,199
Deferred revenue, current portion	Deferred revenue, current portion	64,822		87,146
Income taxes payable	Income taxes payable	70		718
Long-term debt, current portion	Long-term debt, current portion	86,901		63,458
Operating lease liabilities, current portion	Operating lease liabilities, current portion	53,385		63,999
Other current liabilities	Other current liabilities	54,430		116,374
Total current liabilities	Total current liabilities	683,301		774,447
Deferred revenue, non-current portion	Deferred revenue, non-current portion	14,860		21,414
Deferred income taxes	Deferred income taxes	207,145		206,099
Long-term debt, non-current portion	Long-term debt, non-current portion	1,223,133		1,292,483
Deferred compensation plan liabilities, non-current portion	Deferred compensation plan liabilities, non-current portion	47,363		40,210
Operating lease liabilities, non-current portion	Operating lease liabilities, non-current portion	120,766		86,175
Other liabilities	Other liabilities	13,763		22,515
Total liabilities	Total liabilities	2,310,331		2,443,343
Commitments and contingencies (Note 11)	Commitments and contingencies (Note 11)					Commitments and contingencies (Note 11)
Shareholders' equity:	Shareholders' equity:
Common stock, no par value; 100,000 shares authorized; 60,784 and 60,774 shares issued and outstanding as of June 30, 2023, and September 30, 2022, respectively		581,338		557,978
Common stock, no par value; 100,000 shares authorized; 61,037 and 60,998 shares issued and outstanding as of March 31, 2024, and September 30, 2023, respectively
Common stock, no par value; 100,000 shares authorized; 61,037 and 60,998 shares issued and outstanding as of March 31, 2024, and September 30, 2023, respectively
Common stock, no par value; 100,000 shares authorized; 61,037 and 60,998 shares issued and outstanding as of March 31, 2024, and September 30, 2023, respectively
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(24,311)		(33,961)
Retained earnings	Retained earnings	1,075,826		1,025,354
Total shareholders' equity	Total shareholders' equity	1,632,853		1,549,371
Total liabilities and shareholders' equity	Total liabilities and shareholders' equity	$	3,943,184	$	3,992,714

See accompanying notes to consolidated financial statements.

Table of Contents

Maximus, Inc.

Consolidated Statements of Cash Flows

(Unaudited)


		For the Nine Months Ended
		June 30, 2023		June 30, 2022
		(in thousands)
	For the Six Months Ended						For the Six Months Ended
	March 31, 2024					March 31, 2024		March 31, 2023
	(in thousands)						(in thousands)
Cash flows from operating activities:	Cash flows from operating activities:
Net income	Net income	$	102,646	$	134,761
Net income
Net income
Adjustments to reconcile net income to cash flows from operations:	Adjustments to reconcile net income to cash flows from operations:
Depreciation and amortization of property, equipment, and capitalized software
Depreciation and amortization of property, equipment, and capitalized software
Depreciation and amortization of property, equipment, and capitalized software	Depreciation and amortization of property, equipment, and capitalized software	37,092		29,875
Amortization of intangible assets	Amortization of intangible assets	70,599		67,951
Amortization of debt issuance costs and debt discount	Amortization of debt issuance costs and debt discount	2,236		1,946

Deferred income taxes	Deferred income taxes	2,375		(7,179)

Deferred income taxes

Deferred income taxes
Stock compensation expense	Stock compensation expense	22,239		22,080
Loss on sale of businesses	Loss on sale of businesses	883		—
Change in assets and liabilities, net of effects of business combinations and disposals:
Change in assets and liabilities, net of effects of business combinations:
Accounts receivable
Accounts receivable
Accounts receivable	Accounts receivable	7,675		(39,997)
Prepaid expenses and other current assets	Prepaid expenses and other current assets	21,101		9,454
Deferred contract costs	Deferred contract costs	2,245		(7,702)
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	16,915		(42,577)
Accrued compensation and benefits	Accrued compensation and benefits	(31,612)		13,846
Deferred revenue	Deferred revenue	(31,747)		342
Income taxes	Income taxes	(33,186)		(12,822)
Operating lease right-of-use assets and liabilities	Operating lease right-of-use assets and liabilities	(3,742)		(1,330)

Other assets and liabilities	Other assets and liabilities	(15,968)		1,128
Other assets and liabilities
Other assets and liabilities
Net cash provided by operating activities	Net cash provided by operating activities	169,751		169,776
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	(58,863)		(35,936)
Acquisitions of businesses, net of cash acquired		—		(14,144)

Proceeds from sale of businesses		9,124		—
Proceeds from sale of land and building		—		2,000
Purchases of property and equipment and capitalized software
Purchases of property and equipment and capitalized software
Asset acquisition
Proceeds from divestitures
Net cash used in investing activities	Net cash used in investing activities	(49,739)		(48,080)
Cash flows from financing activities:	Cash flows from financing activities:
Cash dividends paid to Maximus shareholders	Cash dividends paid to Maximus shareholders	(51,053)		(51,762)
Purchases of Maximus common stock		—		(73,864)
Cash dividends paid to Maximus shareholders
Cash dividends paid to Maximus shareholders

Tax withholding related to RSU vesting
Tax withholding related to RSU vesting
Tax withholding related to RSU vesting	Tax withholding related to RSU vesting	(8,475)		(9,673)
Payments for contingent consideration	Payments for contingent consideration	(6,662)		—

Proceeds from borrowings	Proceeds from borrowings	682,398		415,000
Proceeds from borrowings
Proceeds from borrowings
Principal payments for debt	Principal payments for debt	(730,514)		(442,973)
Restricted cash movements		(54,543)		—
Cash-collateralized escrow liabilities
Net cash used in financing activities	Net cash used in financing activities	(168,849)		(163,272)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	Effect of exchange rate changes on cash, cash equivalents, and restricted cash	3,735		(4,369)
Net change in cash, cash equivalents, and restricted cash	Net change in cash, cash equivalents, and restricted cash	(45,102)		(45,945)
Cash, cash equivalents and restricted cash, beginning of period		136,795		156,570
Cash, cash equivalents and restricted cash, end of period		$	91,693	$	110,625
Cash, cash equivalents, and restricted cash, beginning of period
Cash, cash equivalents, and restricted cash, end of period

See accompanying notes to 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
		Shares	Amount
		(in thousands)
Balance at September 30, 2022		60,774	$	557,978	$	(33,961)	$	1,025,354	$	1,549,371
	Common Stock											Common Stock		Accumulated Other Comprehensive Loss		Retained Earnings	Total Equity
	Shares										Shares		Amount
	(in thousands)														(in thousands)
Balance at September 30, 2023
Net income	Net income	—	—		—		39,995		39,995
Foreign currency translation	Foreign currency translation	—	—		8,036		—		8,036
Cash flow hedge, net of tax	Cash flow hedge, net of tax	—	—		(3,781)		—		(3,781)
Cash dividends	Cash dividends	—	—		—		(17,017)		(17,017)
Dividends on RSUs	Dividends on RSUs	—	298		—		(298)		—

Stock compensation expense	Stock compensation expense	—	4,403		—		—		4,403

Balance as of December 31, 2022		60,774	$	562,679	$	(29,706)	$	1,048,034	$	1,581,007
Stock compensation expense
Stock compensation expense
Tax withholding adjustment related to RSU vesting
RSUs vested
Balance as of December 31, 2023
Net income	Net income	—	—		—		31,788		31,788
Foreign currency translation	Foreign currency translation	—	—		965		—		965
Cash flow hedge, net of tax	Cash flow hedge, net of tax	—	—		(4,562)		—		(4,562)
Cash dividends	Cash dividends	—	—		—		(17,016)		(17,016)
Dividends on RSUs	Dividends on RSUs	—	413		—		(413)		—

Stock compensation expense	Stock compensation expense	—	9,540		—		—		9,540
Stock compensation expense
Stock compensation expense

RSUs vested	RSUs vested	10	—		—		—		—
Balance as of March 31, 2023		60,784	$	572,632	$	(33,303)	$	1,062,393	$	1,601,722
Net income		—	—		—		30,863		30,863
Foreign currency translation		—	—		1,946		—		1,946
Cash flow hedge, net of tax		—	—		7,046		—		7,046
Cash dividends		—	—		—		(17,020)		(17,020)
Dividends on RSUs		—	410		—		(410)		—

Stock compensation expense		—	8,296		—		—		8,296
Balance as of June 30, 2023		60,784	$	581,338	$	(24,311)	$	1,075,826	$	1,632,853
RSUs vested
RSUs vested
Balance as of March 31, 2024

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, 2021		61,954	$	532,411			$	(39,908)			$	987,826			$	1,480,329
	Common Stock																Common Stock	Accumulated Other Comprehensive Loss	Retained Earnings	Total Equity
	Shares
		(in thousands)
		(in thousands)
		(in thousands)
Balance at September 30, 2022
Net income	Net income	—	—		—				53,330				53,330
Foreign currency translation	Foreign currency translation	—	—		459				—				459
Cash flow hedge, net of tax	Cash flow hedge, net of tax	—	—		2,685				—				2,685
Cash dividends	Cash dividends	—	—		—				(17,347)				(17,347)
Dividends on RSUs	Dividends on RSUs	—	272		—				(272)				—
Purchases of Maximus common stock		(18)	—		—				(1,379)				(1,379)

Stock compensation expense	Stock compensation expense	—	8,248		—				—				8,248
Tax withholding adjustment related to RSU vesting		—	2,101		—				—				2,101
Balance as of December 31, 2021		61,936	$	543,032	$	(36,764)			$	1,022,158			$	1,528,426
Stock compensation expense
Stock compensation expense

Balance as of December 31, 2022

Balance as of December 31, 2022

Balance as of December 31, 2022
Net income	Net income	—	—		—				50,096				50,096
Foreign currency translation	Foreign currency translation	—	—		(23)				—				(23)
Cash flow hedge, net of tax	Cash flow hedge, net of tax	—	—		10,689				—				10,689
Cash dividends	Cash dividends	—	—		—				(17,312)				(17,312)
Dividends on RSUs	Dividends on RSUs	—	392		—				(392)				—
Purchases of Maximus common stock		(330)	—		—				(24,464)				(24,464)

Stock compensation expense	Stock compensation expense	—	6,804		—				—				6,804

Stock compensation expense
Stock compensation expense
RSUs vested	RSUs vested	4	—		—				—				—
Balance as of March 31, 2022		61,610	$	550,228	$	(26,098)			$	1,030,086			$	1,554,216
Net income		—	—		—				31,335				31,335
Foreign currency translation		—	—		(8,935)				—				(8,935)
Cash flow hedge, net of tax		—	—		3,042				—				3,042
Cash dividends		—	—		—				(17,103)				(17,103)
Dividends on RSUs		—	400		—				(400)				—
Purchases of Maximus common stock		(706)	—		—				(48,021)				(48,021)
Stock compensation expense		—	7,028		—				—				7,028
Balance as of June 30, 2022		60,904	$	557,656	$	(31,991)			$	995,897			$	1,521,562
Balance as of March 31, 2023

See accompanying notes to consolidated financial statements.

Table of Contents

Maximus, Inc.

Notes to the Consolidated Financial Statements

1. ORGANIZATION

Maximus, a Virginia corporation established in 1975, is a leading ~~operator~~provider of government ~~health and human~~ services ~~programs and provider of technology solutions to governments.~~worldwide. Under our mission of Moving People Forward, we ~~offer industry-leading expertise, including citizen engagement, eligibility~~help millions of people access the vital government services they need. With over 45 years of experience working with local, state, federal, and ~~program integrity, independent clinical assessments, case management,~~international government clients, we proudly design, develop, and ~~technology modernization services~~deliver innovative and impactful programs that change lives. We are driven to ~~enable citizens around~~strengthen communities and improve the ~~globe to successfully engage with their governments at all levels.~~lives of those we serve. We are a proud partner to government agencies in the United States ~~Australia, Canada, Italy, Saudi Arabia, Singapore, South Korea, United Arab Emirates,~~("U.S.") and ~~the United Kingdom.~~worldwide.

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements, including the notes, include the accounts of the Company and its wholly-owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") and the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). All intercompany balances and transactions have been eliminated in consolidation.

Basis of Presentation for Interim Periods

Certain information and footnote disclosures normally included for the annual financial statements to be 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 accompanying notes ~~thereto for the year ended September 30, 2022 included~~contained in our Annual Report on Form 10-K for the fiscal year ~~then~~ ended ~~(the "2022 10-K").~~September 30, 2023. We have continued to follow the accounting policies set forth in those financial statements.

Use of 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 long-lived assets, including goodwill, and amounts related to income taxes, certain accrued liabilities, and contingencies and litigation.

~~In May 2021,~~At March 31, 2024, our capitalized software balance includes $28.5 million related to technology for new services within our U.S. Services Segment. We continue to evaluate these assets by comparing their carrying value to their estimated future cash flows. At this time, our probability-weighted undiscounted cash flows continue to show that we ~~acquired VES Group, Inc. As part~~will recover the costs of ~~the acquisition, we allocated a valuation~~these assets through our contract pipeline. It is possible that our estimates of ~~$27 million~~future cash flows related to ~~certain technology~~these assets used by the business, which we elected to amortize over twelve years, which was our best estimate of asset life at that time. In fiscal year 2023, we have taken the opportunity to improve our technology portfolio, including the development of technology, which will eventually replace much of the acquired technology. Accordingly, we have revised the asset life on the existing technology assuming the assets will cease being used by September 2026. Thismay change ~~in estimated useful life will~~and result in ~~additional annual amortization expense~~the need to adjust the value of ~~$3.8 million per year. In the three and nine months ended June 30, 2023, this change reduced our diluted earnings per share by approximately $0.01 and $0.03, respectively.~~these assets.

In June 2023, we recorded an expense of $22.1 million for our best estimate of the investigation and remediation costs of a cybersecurity incident, reducing diluted earnings per share by approximately $0.26 for the three and nine months ended June 30, 2023, respectively. The estimated impact and expense is based on information currently available and the actual impact and expense may be greater than our estimates.

Table of Contents

3. BUSINESS SEGMENTS

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

U.S. Federal Services

Our U.S. Federal Services Segment delivers end-to-end solutions that help various U.S. federal government agencies better deliver on their mission, including program operations and management, clinical services, and technology solutions. This segment also includes appeals and assessments services, system and application development, ITInformation Technology ("IT") modernization, and maintenance services. ~~The segment also contains certain~~Certain state-based assessments and appeals work that is part of the segment's heritage ~~which~~ continues to be managed within this segment. Under Technology Consulting Services ("TCS"), 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 through ~~Veterans~~Veteran's Evaluation Services ~~(VES)~~("VES"), a Maximus company, ~~which~~that manages the clinical evaluation process for U.S. veterans and service members on behalf of the U.S. Department of Veterans ~~Affairs.~~Affairs ("VA").

U.S. Services

Our U.S. Services Segment provides a variety of business process services ("BPS"), such as program administration, 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. ~~Over the last three years, many programs in~~Previously, this segment ~~have been~~suffered from reduced operating ~~with depressed margins~~leverage resulting from the pause in Medicaid ~~redeterminations. The depressed margins have resulted from reduced operating leverage in~~redeterminations during the segment as costs cannot scale down at the same rate to meet lower demand due to requirement to fulfill other obligations on these contracts. With the resumption of redeterminations, we expect a full period of volumes coming back into these programs andCOVID-19 pandemic, which enables our operating leverage to recover. A temporary offset to the depressed margins from paused redeterminations was the government's COVID-19 response efforts in prior fiscal years. The segment supported contact tracing, disease investigation, and vaccine distribution support services which concludedresumed in fiscal year 2022. The segment also successfully expanded into the unemployment insurance market where longer term opportunities have materialized. As part of the broader strategy to evolve clinically and address societal macro trends such as aging populations and rising costs, the segment continues to expand its offerings in public health with new work in in-person assessments.2023.

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.,~~United Kingdom, including the Health Assessment Advisory Service ~~("HAAS")~~ and the recently awarded replacement contract to start in 2024, Functional Assessment Services, ~~(“FAS”),~~ and Restart; and Australia, including Workforce Australia, and ~~the Disability Employment Service; Canada, including the Employment Program of British Columbia; in addition to Italy, Saudi Arabia, Singapore, South Korea, and UAE where we predominantly provide~~other employment support and job seeker ~~services.~~services worldwide.

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 Nine Months Ended										For the Three Months Ended																			For the Six Months Ended
		June 30, 2023				June 30, 2022				June 30, 2023				June 30, 2022
		Amount		% (1)		Amount		% (1)		Amount		% (1)		Amount		% (1)
		(dollars in thousands)
	March 31, 2024																											March 31, 2024										March 31, 2023										March 31, 2024											March 31, 2023
	Amount																							Amount						% (1)						Amount						% (1)						Amount							% (1)							Amount							% (1)
	(dollars in thousands)																																																				(dollars in thousands)
Revenue:	Revenue:
U.S. Federal Services	U.S. Federal Services	$	583,960			$	525,519			$	1,786,202			$	1,680,678
U.S. Federal Services
U.S. Federal Services
U.S. Services
U.S. Services
U.S. Services	U.S. Services	449,061				399,320				1,338,242				1,183,814
Outside the U.S.	Outside the U.S.	155,656				200,946				520,331				589,495
Outside the U.S.
Outside the U.S.
Revenue
Revenue
Revenue	Revenue	$	1,188,677			$	1,125,785			$	3,644,775			$	3,453,987
Gross profit:	Gross profit:
Gross profit:
Gross profit:
U.S. Federal Services
U.S. Federal Services
U.S. Federal Services	U.S. Federal Services	$	156,945	26.9	%	$	124,203	23.6	%	$	402,513	22.5	%	$	365,932	21.8	%	$	163,337			23.3			23.3		%				$	122,874			21.0				21.0	%			$	319,999			23.2					23.2		%				$	245,568			20.4					20.4	%
U.S. Services	U.S. Services	98,538		21.9	%	74,135		18.6	%	268,152		20.0	%	248,805		21.0	%	U.S. Services		130,122			26.8				26.8		%				86,016			19.1				19.1	%				248,485				25.5					25.5	%					169,614				19.1				19.1		%
Outside the U.S.	Outside the U.S.	8,881		5.7	%	11,883		5.9	%	67,049		12.9	%	52,090		8.8	%	Outside the U.S.		24,130			15.0				15.0		%				19,713			11.4				11.4	%				49,159				15.3					15.3	%					58,168				16.0				16.0		%
Gross profit	Gross profit	$	264,364	22.2	%	$	210,221	18.7	%	$	737,714	20.2	%	$	666,827	19.3	%	Gross profit		$	317,589		23.6				23.6		%				$	228,603		18.9				18.9	%				$	617,643			23.1					23.1	%					$	473,350			19.3				19.3		%
Selling, general, and administrative expenses:	Selling, general, and administrative expenses:
U.S. Federal Services	U.S. Federal Services	$	82,892	14.2	%	$	69,466	13.2	%	$	229,591	12.9	%	$	203,340	12.1	%
U.S. Federal Services
U.S. Federal Services																				$	79,867					11.4		%				$	75,050						12.8	%			$	167,722							12.2		%				$	146,699							12.2		%
U.S. Services	U.S. Services	51,536		11.5	%	42,351		10.6	%	140,793		10.5	%	115,726		9.8	%	U.S. Services		62,201			12.8				12.8		%				43,415			9.7				9.7	%				114,501				11.7					11.7	%					89,257				10.0				10.0		%
Outside the U.S.	Outside the U.S.	24,122		15.5	%	23,101		11.5	%	75,936		14.6	%	68,452		11.6	%	Outside the U.S.		23,460			14.6				14.6		%				23,425			13.5				13.5	%				48,601				15.2					15.2	%					51,814				14.2				14.2		%

Loss on sale of businesses (2)		—		NM		—		NM		883		NM		—		NM
Divestiture-related charges (2)																		Divestiture-related charges (2)		—						NM						883							NM				1,018								NM						883								NM
Other (3)	Other (3)	23,995		NM		(1,944)		NM		24,242		NM		(16)		NM		Other (3)		2,926			NM					NM						(325)			NM				NM						5,807			NM						NM							247			NM					NM
Selling, general, and administrative expenses	Selling, general, and administrative expenses	$	182,545	15.4	%	$	132,974	11.8	%	$	471,445	12.9	%	$	387,502	11.2	%	Selling, general, and administrative expenses		$	168,454		12.5				12.5		%				$	142,448		11.8				11.8	%				$	337,649			12.6					12.6	%					$	288,900			11.8				11.8		%
Operating income/(loss):	Operating income/(loss):
U.S. Federal Services	U.S. Federal Services	$	74,053	12.7	%	$	54,737	10.4	%	$	172,922	9.7	%	$	162,592	9.7	%
U.S. Federal Services
U.S. Federal Services																				$	83,470					11.9		%				$	47,824						8.2	%			$	152,277							11.0		%				$	98,869							8.2		%
U.S. Services	U.S. Services	47,002		10.5	%	31,784		8.0	%	127,359		9.5	%	133,079		11.2	%	U.S. Services		67,921			14.0				14.0		%				42,601			9.5				9.5	%				133,984				13.7					13.7	%					80,357				9.0				9.0		%
Outside the U.S.	Outside the U.S.	(15,241)		(9.8)	%	(11,218)		(5.6)	%	(8,887)		(1.7)	%	(16,362)		(2.8)	%	Outside the U.S.		670			0.4				0.4		%				(3,712)			(2.1)				(2.1)	%				558				0.2					0.2	%					6,354				1.7				1.7		%
Amortization of intangible assets	Amortization of intangible assets	(23,431)		NM		(22,690)		NM		(70,599)		NM		(67,951)		NM		Amortization of intangible assets		(21,641)			NM					NM						(23,650)			NM				NM						(44,990)			NM						NM							(47,168)			NM					NM

Loss on sale of businesses (2)		—		NM		—		NM		(883)		NM		—		NM
Divestiture-related charges (2)																		Divestiture-related charges (2)		—						NM						(883)							NM				(1,018)								NM						(883)								NM
Other (3)	Other (3)	(23,995)		NM		1,944		NM		(24,242)		NM		16		NM		Other (3)		(2,926)			NM					NM						325			NM				NM						(5,807)			NM						NM							(247)			NM					NM
Operating income	Operating income	$	58,388	4.9	%	$	54,557	4.8	%	$	195,670	5.4	%	$	211,374	6.1	%	Operating income		$	127,494		9.5				9.5		%				$	62,505		5.2				5.2	%				$	235,004			8.8					8.8	%					$	137,282			5.6				5.6		%

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

(2)~~During the second quarter of~~We have sold businesses in both fiscal ~~year~~years 2023 ~~we sold a small commercial practice in the United Kingdom~~ and ~~our employment operations business in Sweden, both subsidiaries within our Outside the U.S. Segment, resulting in a loss.~~2024. Refer to "Note 7. Acquisitions and Divestitures" for more details.

(3)Other expenses includes credits and costs that are not allocated to a particular segment. ~~In the three and nine months ended June 30, 2023, these charges include $22.1 million related to the costs~~This includes expenses incurred as part of ~~a previously disclosed cybersecurity incident. Other charges include those related to acquisitions.~~our acquisitions, as well as potential acquisitions which have not been or may not be completed.

Table of Contents

4. REVENUE RECOGNITION

We recognize revenue as, or when, we satisfy performance obligations under a contract. The majority of our contracts have performance obligations that 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. We recognize revenue over the performance period as a customer receives the benefits of our services.

Disaggregation of Revenue

In addition to our segment reporting, we disaggregate our revenues by contract type and customer type. 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 Nine Months Ended
		June 30, 2023				June 30, 2022				June 30, 2023				June 30, 2022
		(dollars in thousands)
	For the Three Months Ended																										For the Three Months Ended										For the Six Months Ended
	March 31, 2024																						March 31, 2024					March 31, 2023					March 31, 2024					March 31, 2023
	(dollars in thousands)																																		(dollars in thousands)
Performance-based	Performance-based	$	617,800	52.0	%	$	520,202	46.2	%	$	1,761,764	48.3	%	$	1,527,368	44.2	%	Performance-based	$	738,888	54.8	54.8		%	$	574,747	47.6		47.6	%	$	1,443,599		54.0		54.0	%		$	1,143,964	46.6	46.6	%
Cost-plus	Cost-plus	281,014		23.6	%	282,578		25.1	%	940,509		25.8	%	945,482		27.4	%	Cost-plus	334,498		24.8	24.8		%	312,176		25.9		25.9	%	676,513			25.3		25.3	%		659,495		26.9	26.9	%
Fixed price	Fixed price	171,809		14.5	%	160,219		14.2	%	527,556		14.5	%	470,591		13.6	%	Fixed price	166,816		12.4	12.4		%	180,674		15.0		15.0	%	343,493			12.8		12.8	%		355,747		14.5	14.5	%
Time and materials	Time and materials	118,054		9.9	%	162,786		14.5	%	414,946		11.4	%	510,546		14.8	%	Time and materials	108,155		8.0	8.0		%	139,255		11.5		11.5	%	211,793			7.9		7.9	%		296,892		12.1	12.1	%
Total revenue	Total revenue	$	1,188,677			$	1,125,785			$	3,644,775			$	3,453,987


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 Nine Months Ended
		June 30, 2023				June 30, 2022				June 30, 2023				June 30, 2022
		(dollars in thousands)
	For the Three Months Ended																										For the Three Months Ended										For the Six Months Ended
	March 31, 2024																						March 31, 2024					March 31, 2023					March 31, 2024					March 31, 2023
	(dollars in thousands)																																		(dollars in thousands)
U.S. federal government agencies	U.S. federal government agencies	$	568,924	47.9	%	$	507,047	45.0	%	$	1,742,739	47.8	%	$	1,624,848	47.0	%	U.S. federal government agencies	$	685,939	50.9	50.9		%	$	569,897	47.2		47.2	%	$	1,348,885		50.4		50.4	%		$	1,173,815	47.8	47.8	%
U.S. state government agencies	U.S. state government agencies	445,855		37.5	%	401,042		35.7	%	1,329,766		36.5	%	1,183,876		34.3	%	U.S. state government agencies	483,147		35.8	35.8		%	446,549		37.0		37.0	%	970,090			36.3		36.3	%		883,911		36.0	36.0	%
International government agencies	International government agencies	148,742		12.5	%	191,753		17.0	%	491,861		13.5	%	557,928		16.2	%	International government agencies	156,796		11.6	11.6		%	161,359		13.4		13.4	%	312,408			11.7		11.7	%		343,119		14.0	14.0	%
Other, including local municipalities and commercial customers	Other, including local municipalities and commercial customers	25,156		2.1	%	25,943		2.3	%	80,409		2.2	%	87,335		2.5	%	Other, including local municipalities and commercial customers	22,475		1.7	1.7		%	29,047		2.4		2.4	%	44,015			1.6		1.6	%		55,253		2.2	2.2	%
Total revenue	Total revenue	$	1,188,677			$	1,125,785			$	3,644,775			$	3,453,987

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, and such balances are considered collectible and are included within accounts receivable, net.

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.

Table of Contents

•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 ~~June 30, 2023~~March 31, 2024, and September 30, ~~2022, $13.7~~2023, $24.1 million and ~~$13.1~~$20.7 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 that 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 ~~nine~~six months ended ~~June 30, 2023,~~March 31, 2024, we recognized revenue of ~~$13.9~~$7.6 million and ~~$75.3~~$45.3 million, respectively, included in our deferred revenue balances at September 30, ~~2022.~~2023. During the three and ~~nine~~six months ended ~~June 30, 2022,~~March 31, 2023, we recognized revenue of ~~$23.7~~$34.8 million and ~~$85.5~~$85.9 million, respectively, included in our deferred revenue balances at September 30, ~~2021.~~2022.

Contract estimates

We are required to use estimates in recognizing revenue from some of our contracts.

Some of our performance-based contract revenue is recognized based upon future milestones 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 milestones, which may take many months to achieve. We recognize revenue over the period of performance. Our estimates vary from contract to contract but may include the number of participants within a portfolio reaching employment milestones and the service delivery periods for participants reaching the employment milestone.

We estimate the total variable fees we will receive using the expected value method. We recognize the fees over the expected period of performance. At each reporting period, we update our estimates of the variable fees to represent the circumstances present at the end of the reporting period. We are required to constrain our estimates to the extent that it is probable that there will not be a significant reversal of cumulative revenue when the uncertainty is resolved. We do not have a history of significant constraints on these contracts.


Table 4.3: Effect of Changes in Contract Estimates	Table 4.3: Effect of Changes in Contract Estimates									Table 4.3: Effect of Changes in Contract Estimates
		For the Three Months Ended				For the Nine Months Ended
		June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
		(in thousands, except per share data)
	For the Three Months Ended											For the Three Months Ended			For the Six Months Ended
	March 31, 2024										March 31, 2024		March 31, 2023	March 31, 2024		March 31, 2023
	(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	$	(2,134)	$	(959)	$	(8,272)	$	(5,174)
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	$	(0.03)	$	(0.01)	$	(0.09)	$	(0.06)

Remaining performance obligations

As of ~~June 30, 2023,~~March 31, 2024, we had approximately ~~$350~~$275 million of remaining performance obligations. We anticipate that we will recognize revenue on approximately ~~65%~~75% of this balance within the next 12 months. This balance excludes contracts with an original duration of twelve months or less, including contracts with a penalty-free termination for convenience clause, and any variable consideration ~~which~~that is allocated entirely to future performance obligations, including variable transaction fees or fees tied directly to costs incurred.

Table of Contents

5. EARNINGS PER SHARE

Table 5: Weighted Average Number of Shares - Earnings Per Share

For the Three Months Ended

For the Nine Months Ended

June 30, 2023

June 30, 2022

June 30, 2023

June 30, 2022

(in thousands)

For the Three Months Ended

For the Six Months Ended

March 31, 2024

March 31, 2023

March 31, 2024

March 31, 2023

(in thousands)

Basic weighted average shares outstanding

61,141

61,607

61,125

62,038

Dilutive effect of unvested RSUs and PSUs

403

149

243

152

Denominator for diluted earnings per share

61,544

61,756

61,368

62,190

The diluted earnings per share calculation for the three and ~~nine~~six months ended ~~June 30, 2023~~March 31, 2024, excludes approximately ~~98,000~~202,000 and ~~105,000~~227,000 unvested anti-dilutive restricted stock units, respectively. For the three and ~~nine~~six months ended ~~June 30, 2022,~~March 31, 2023, approximately ~~418,000~~99,000 and ~~178,000~~300,000 unvested anti-dilutive restricted stock units were excluded from the diluted earnings per share calculation, respectively.

6. DEBT AND DERIVATIVES


Table 6.1: Details of Debt	Table 6.1: Details of Debt					Table 6.1: Details of Debt
		June 30, 2023		September 30, 2022
		(in thousands)
	March 31, 2024						March 31, 2024		September 30, 2023
	(in thousands)							(in thousands)
Term Loan A, due 2026	Term Loan A, due 2026	$	930,000	$	971,250
Term Loan B, due 2028	Term Loan B, due 2028	345,850		395,000
Revolver		39,000		—

Subsidiary loan agreements	Subsidiary loan agreements	3,321		64
Funded Debt		1,318,171		1,366,314
Subsidiary loan agreements
Subsidiary loan agreements
Total debt principal
Less: Unamortized debt-issuance costs and discounts	Less: Unamortized debt-issuance costs and discounts	(8,137)		(10,373)
Total debt	Total debt	1,310,034		1,355,941
Less: Current portion of long-term debt	Less: Current portion of long-term debt	(86,901)		(63,458)
Long-term debt	Long-term debt	$	1,223,133	$	1,292,483

~~We entered into a~~Our credit agreement with JPMorgan Chase Bank, N.A. in May 2021 comprised of Term Loan A, Term Loan B, and a $600.0 million revolving credit facility ("Revolver"). During the first quarter of fiscal year 2023, we converted our interest rate index from the London Interbank Overnight Rate ("LIBOR") to the Secured Overnight Financing Rate ("SOFR").

~~The Credit Agreement requires~~agreements require us to comply with a number of covenants, including leverage and interest coverage ratios. At ~~June 30, 2023,~~March 31, 2024, we are in compliance with all covenants. We do not believe that the covenants represent a significant restriction on our ability to successfully operate the business or to pay dividends.

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 funds to meet any short-term working capital needs.

The following table sets forth future minimum principal payments due under our debt obligations as of ~~June 30, 2023~~March 31, 2024, for the remainder of fiscal year ~~2023~~2024 through fiscal year ~~2027 and thereafter:~~

~~Table of Contents~~

2028:


Table 6.2: Details of Future Minimum Principal Payments Due
	Amount Due
	(in thousands)
~~July~~April 1, ~~2023~~2024 through September 30, ~~2023~~2024	$	~~24,817~~47,906
~~Year ended September 30, 2024~~	~~85,985~~
Year ended September 30, 2025	~~92,860~~92,903
Year ended September 30, 2026	~~779,984~~741,028
Year ended September 30, 2027	~~3,485~~3,528
~~Thereafter~~Year ended September 30, 2028	~~331,040~~330,822
Total Payments	$	~~1,318,171~~1,216,187

Table of Contents

Interest Rate Derivative Instruments

To reduce our interest rate credit risk, we entered into interest-rate swap agreements covering $650 million of our Term Loan A, effectively setting a fixed rate for a portion of our debt. ~~At June 30, 2023, we have arrangements in place that fix our interest rate of $500 million through May 2026 and a further arrangement to fix $150 million through September 2024.~~ The balance of the debt pays interest based upon ana floating index. The floating interest rate on these instruments was converted from LIBOR to SOFR in December 2022, concurrent with our debt agreements. In converting our debt and interest-rate swaps, we utilized the practical expedients allowed under ASU No. 2020-04 ~~Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which allowed us to treat these amendments as though the modification was not substantial.~~ At ~~June 30, 2023,~~March 31, 2024, our effective interest rate, including the original issuance costs and discount rate, was 5.9%.

~~Our interest-rate~~At March 31, 2024, we recorded an asset of $22.6 million to reflect the fair value of these interest rate swap agreements, ~~are valued quarterly and recorded on our balance sheet. As of June 30, 2023, we had assets of $29.7 million,~~ compared to an asset of ~~$31.4~~$31.0 million ~~as of~~at September 30, ~~2022. These balances were~~2023. The asset is recorded inas "other assets" onwithin our consolidated balance sheet. ~~As these hedges are considered effective, all gains and losses are reported within other comprehensive income on~~

Our interest rate agreement for a notional amount of $150 million expires in September 2024; the remaining balance of our ~~consolidated statement~~swap agreements expires in May 2026, concurrent with the maturity of ~~comprehensive income.~~Term Loan A.

7. ACQUISITIONS AND DIVESTITURES

On ~~March 6,~~February 14, 2024, we acquired part of a vendor who has performed IT services for us over several years for cash consideration of $18.0 million. Almost all of the consideration was allocated directly to the most significant asset, the acquired workforce. The value of this asset will be amortized over eight years. This asset is anticipated to provide support across all three of our operating segments.

We have sold a number of components of our Outside the U.S. Segment:

•In November 2023, we sold our businesses in Italy and Singapore, as well as our employment services business in Canada, recording a ~~small~~loss on sale of $1.0 million. During the fourth quarter of fiscal year 2023, we recorded an impairment charge of $2.9 million related to these assets.

•In March 2023, we sold our commercial practice in the United Kingdom, ~~part of our Outside the U.S. Segment,~~ resulting in a pre-tax loss of $0.6 million. The cash consideration ~~will be received in installments, with~~had a fair value of ~~$16.0~~$16 million, to be received in installments. At March 31, 2024, we have collected $12.2 million. ~~The installment payments are unconditional.~~

On•In March ~~30,~~ 2023, we sold our Swedish subsidiary for cash consideration of $0.4 million, resulting in a small loss.

8. FAIR VALUE MEASUREMENTS

The following assets and liabilities are recorded at fair value on a recurring basis.

•We hold mutual fund assets within a Rabbi Trust to cover liabilities in our deferred compensation plan. These assets have prices quoted within active markets and, accordingly, are classified as level 1 within the fair value hierarchy.

•We have ~~three~~ interest rate swap agreements serving to reduce our interest rate risk on our debt. These ~~assets and liabilities~~agreements can be valued using observable data and, accordingly, are classified as level 2 within the fair value hierarchy.

•We anticipate paying additional consideration for certain acquisitions based upon the subsequent performance of the businesses acquired. This liability is based upon our internal assumptions ~~over~~regarding revenues, margins, volumes, and contract terms. Accordingly, these inputs are not observable and are classified as level 3 within the fair value hierarchy.

•We will receive payments from the sale of a small commercial practice in the United Kingdom over the next three years. We have discounted the asset based upon our cost of capital, which is not an observable input. The balance at the sale of the business was $6.8 million. These assets are held in "Prepaid expenses and other current assets" and "Other assets" on our consolidated balance sheet.

~~Table of Contents~~

The tables below present assets and liabilities measured and recorded at fair value in our consolidated balance sheets on a recurring basis and their corresponding level within the fair value hierarchy. No transfers between Level 1, Level 2, and Level 3 fair value measurements occurred for the ~~nine~~three months ended ~~June 30, 2023.~~March 31, 2024.

Table 8.1: Fair Value Measurements
As of June 30, 2023
Level 1 Level 2 Level 3 Balance
(in thousands)
Assets:
Deferred compensation assets - Rabbi Trust $ 27,306 $ — $ — $ 27,306
Interest rate swaps - $650 million notional value — 29,647 — 29,647
Notes receivable — — 7,397 7,397
Total assets $ 27,306 $ 29,647 $ 7,397 $ 64,350
Liabilities:
Contingent consideration — — 12,700 12,700
Total liabilities $ — $ — $ 12,700 $ 12,700

Table of Contents


Table 8.1: Fair Value Measurements
	As of March 31, 2024
	Level 1		Level 2		Level 3		Balance
	(in thousands)
Assets:
Deferred compensation assets - Rabbi Trust	$	31,969	$	—	$	—	$	31,969
Interest rate swaps - $650 million notional value	—		22,614		—		22,614

Total assets	$	31,969	$	22,614	$	—	$	54,583
Liabilities:

Contingent consideration	—		—		2,795		2,795
Total liabilities	$	—	$	—	$	2,795	$	2,795

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).

Accumulated Other Comprehensive Loss

All amounts recorded in accumulated other comprehensive loss are related to our foreign currency translations and interest rate ~~swap,~~swaps, net of tax. The following table shows changes in accumulated other comprehensive ~~loss:~~loss. Amounts reclassified from other comprehensive income were recorded within our selling, general and administrative expenses (for foreign currency translation adjustments) and within interest expense (for gains on derivatives).


Table 8.2: Details of Changes in Accumulated Other Comprehensive Loss by Category	Table 8.2: Details of Changes in Accumulated Other Comprehensive Loss by Category							Table 8.2: Details of Changes in Accumulated Other Comprehensive Loss by Category
		Foreign currency translation adjustment		Net unrealized gain on derivatives, net of tax		Total
		(in thousands)
Balance as of September 30, 2022		$	(57,109)	$	23,148	$	(33,961)
	Foreign currency translation adjustment								Foreign currency translation adjustment	Net unrealized gain on derivatives, net of tax		Total
	(in thousands)										(in thousands)
Balance as of September 30, 2023
Other comprehensive income before reclassifications	Other comprehensive income before reclassifications	10,831		4,554		15,385
Amounts reclassified from accumulated other comprehensive loss	Amounts reclassified from accumulated other comprehensive loss	116		(5,851)		(5,735)
Net current period other comprehensive losses	Net current period other comprehensive losses	10,947		(1,297)		9,650
Balance as of June 30, 2023		$	(46,162)	$	21,851	$	(24,311)
Balance as of March 31, 2024

Contingent Consideration

The fair value of our contingent considerations are based upon estimates of the likely payments, which are based upon assumptions over future performance. The liabilities are reviewed on a quarterly basis and, where changes in estimates arise, these are recorded to selling and general administrative expenses.

Our contingent consideration relates to the businesses below:

•In October 2021, we acquired the student loan servicing business from Navient, rebranded as Aidvantage. Future payments are based upon volumes, up to a maximum payment of $65.0 million. At ~~June 30, 2023~~March 31, 2024, and September 30, ~~2022,~~2023, the Aidvantage contingent consideration was ~~$10.2~~$2.8 million and ~~$13.8~~$7.5 million, respectively.

•In January 2022, we acquired BZ Bodies Limited. Future payments ~~are~~were based upon the performance of the business through December 2023, up to a maximum payment of $2.5 million (£2.0 million British Pounds). At ~~June~~September 30, 2023, ~~and September 30, 2022,~~ we recorded a contingent consideration liability for the maximum payment, which we ~~anticipate making~~made in the second quarter of fiscal year 2024.

•

In December 2015, we acquired companies doing business as Assessments Australia. Future payments were based upon future revenue earnings. The deadline for the payment expired on December 31, 2022, with no payment being required.

Table of Contents

Movement in our contingent consideration balance is as follows:


Table 8.3: Fair Value Measurement Using Significant Unobservable Inputs (Level 3)
	Contingent Consideration
	(in thousands)
Opening contingent consideration as of September 30, ~~2022~~2023	$	~~16,236~~9,903
Adjustments to fair value recorded in the period	~~2,810~~971
Cash payments	~~(6,662)~~(8,168)
Foreign currency translations	~~316~~89
Closing contingent consideration as of ~~June 30, 2023~~March 31, 2024	$	~~12,700~~2,795

9. EQUITY

Stock Compensation

We grant restricted stock units ("RSUs") and performance stock units ("PSUs") to eligible participants under our 2021 Omnibus Incentive Plan, which was approved by the Board of Directors and stockholders. The RSUs granted to employees vest ratably over ~~service periods of~~ three to five years and over one year for members of the ~~board~~Board of ~~directors,~~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 ~~nine~~six months ended ~~June 30, 2023,~~March 31, 2024, we issued approximately ~~337,000~~335,000 RSUs, which will vest ratably over one to four years, and approximately ~~137,000~~128,000 PSUs, which will vest after three years.

Share Purchase Program

Under a resolution adopted in March 2020, the Board of Directors authorized the purchase, at management's discretion, of up to $200 million of our common stock. No purchases were made during the first six months of fiscal year 2024; since March 31, 2024, we have purchased approximately 242,000 common shares at a cost of $19.3 million.

10. OTHER BALANCE SHEET ITEMS

Cash, Cash Equivalents, and Restricted Cash

Table 10.1: Details of Cash and Cash Equivalents and Restricted Cash

June 30, 2023

September 30, 2022

(in thousands)

March 31, 2024

September 30, 2023

(in thousands)

Cash and cash equivalents

35,007

40,658

Restricted cash

56,686

96,137

Cash, cash equivalents, and restricted cash

91,693

136,795

Restricted cash is recorded within "Prepaid expenses and other current assets" on the Consolidated Balance Sheets. At September 30, 2022, this balance included $60.7 million of funds received from a customer which had previously been sold under our Receivables Purchase Agreement; this is offset by a corresponding liability in "Other current liabilities". No similar arrangements existed at June 30, 2023. The remaining balance includes funds held in trust on behalf of certain clients, offset with a corresponding liability in "Other current liabilities", and certain collateral obligations on contracts.

Table 10.2: Supplemental Disclosures of Cash Flow Information

For the Nine Months Ended

June 30, 2023

June 30, 2022

(in thousands)

For the Six Months Ended

March 31, 2024

March 31, 2023

(in thousands)

Interest payments

59,580

28,251

Income tax payments

60,460

64,057

Table of Contents

Accounts Receivable, Net

Table 10.3: Details of Accounts Receivable, Net

June 30, 2023

September 30, 2022

(in thousands)

March 31, 2024

September 30, 2023

(in thousands)

Billed and billable receivables

683,180

723,979

Unbilled receivables

120,097

91,404

Allowance for credit losses

(4,768)

(8,273)

Accounts receivable, net

798,509

807,110

InOn September 21, 2022, we entered into a Receivables Purchase Agreement with Wells Fargo Bank N.A., under which we may sell certain U.S.-originated accounts receivable balances up to a maximum amount of $200.0 million at any given time. In return for these sales, we receive a cash payment equal to the face value of the receivables less a financing charge.

We account for these transfers as sales. We have no retained interest in the transferred receivables other than administrative responsibilities, and Wells Fargo has no recourse for any credit risk. We estimate that the implicit servicing fees for an arrangement of this size and type would be immaterial.

For the ~~nine~~six months ended ~~June 30, 2023,~~March 31, 2024, the gross fair value of accounts ~~receivable~~receivables transferred to Wells Fargo and derecognized from our balance sheet was ~~$378.4~~$133.0 million. In exchange for these sales, we received ~~$376.3~~$132.2 million inof cash. The balance, representing a loss on sale from these transfers, is included within our selling, general, and administrative expenses. We have recorded these transactions within our operating cash flows. ~~The effective annual interest rate under this program was 5.2%.~~

11. 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.~~governments. 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.

We evaluate, on a regular basis, developments in our litigation matters and establish or make adjustments to our accruals as appropriate. A liability is accrued if a loss is probable and the amount of such loss can be reasonably estimated. If the risk of loss is probable, but the amount cannot be reasonably estimated, or the risk of loss is only reasonably possible, a potential liability iswill be disclosed but not ~~accrued.~~accrued, if material. Due to the inherent uncertainty in the outcome of litigation, our estimates and assessments may prove to be incomplete or inaccurate and could be impacted by unanticipated events and circumstances, adverse outcomes, or other future determinations.

MOVEit Cybersecurity Incident Litigation

As the Company has previously disclosed, on May 31, 2023, Progress Software Corporation, the developer of MOVEit (“MOVEit”), a file transfer application used by many organizations to transfer data, announced a critical zero-day vulnerability in the application that allowed unauthorized third parties to access its customers’ MOVEit environments. ~~It appears that a significant number of commercial and government customers worldwide were affected by this vulnerability.~~ Maximus uses MOVEit for internal and external file sharing purposes, including to share data with government customers ~~pertaining~~related to Maximus's services in support of certain government programs. Based on its review of the impacted files to date, the Company has provided notices to individuals ~~who participate in various government programs. The Company believes that the~~whose personal information, ~~of a significant number of individuals was accessed by an unauthorized third party by exploiting this MOVEit vulnerability.~~including social security numbers, protected health information, and/or other personal information, may have been included in the impacted files.

Table of Contents

On August 1, 2023, a purported class action was filed against Maximus Federal Services, Inc. (a wholly-owned subsidiary of Maximus, Inc.) in the U.S. District Court for the Eastern District of Virginia arising out of the MOVEit cybersecurity incident – Bishop v. Maximus Federal Services,, Case No. 1:23-cv-01019 (U.S. Dist. Ct. E. D. VA). The plaintiff, who purports to represent a nationwide class of individuals, alleges, among other things, that the Company’s negligence resulted in the compromise of the plaintiff’s personally identifiable ~~Information~~information and protected health information.

Since August 1, 2023, approximately ten additional cases arising out of the MOVEit cybersecurity incident have been filed in federal courts against Maximus, Inc. and its subsidiaries. The ~~plaintiff seeks~~most recent case, Forsyth ex rel. S.F. v. Maximus, Inc., et al., No. 1:24-cv-10218-ADB was filed January 26, 2024. These cases each allege substantially similar allegations on behalf of putative nationwide classes and on behalf of various putative state subclasses.

On October 4, 2023, the United States Judicial Panel on Multidistrict Litigation granted a Motion to Transfer that created a Multidistrict Litigation (“MDL”) in the District of Massachusetts for all cases in federal court related to the MOVEit cybersecurity incident, including cases filed against Maximus and other defendants, including Progress Software Corporation, the creator of MOVEit. All of the cases against Maximus, Inc. and its subsidiaries initially filed in federal courts outside of the District of Massachusetts that are related to the MOVEit cybersecurity incident have now been transferred to the MDL under the caption In re: MOVEit Customer Data Security Breach Litigation and are currently stayed pending the filing of consolidated amended compliant(s). The plaintiffs in Bishop and the other cases against the company in the MDL seek damages to be proved at trial. The Company is not able to determine or predict the ultimate outcome of ~~this proceeding~~these proceedings or reasonably provide an estimate or range of the possible outcome or loss, if any.

On ~~August 2,~~September 6, 2023, ~~a purported class~~an individual action was filed ~~against Maximus, Inc. and~~in state court in the Florida Circuit Court for the 7th Judicial Circuit, Volusia County: Taylor v. Maximus Federal Services, ~~Inc. in the U.S. District Court for the Eastern District of Virginia~~Case No. 2023-12349 (Fla. Cir. Ct., 7th Jud. Cir., Volusia Cnty.), also arising out of the MOVEit cybersecurity ~~incident –~~ ~~Buzzell v. Maximus, Case No. 1:23-cv-01028 (U.S. Dist. Ct. E. D. VA).~~incident. The plaintiff ~~who purports to represent a nationwide class of individuals,~~ alleges, among other things, that the Company’s negligence resulted in the compromise of the plaintiff’s personally identifiable ~~Information~~information and protected health information. Since September 6, 2023, approximately eight additional individual actions have been filed against Maximus, Inc. and its subsidiaries in Florida state courts, one of which has been dismissed. The ~~plaintiff seeks~~Taylor matter pending in Volusia County, Florida has been stayed. The remaining seven matters pending in Florida’s state courts are pending in Miami-Dade County court. Each of the actions pending in Florida courts raise substantially similar allegations and legal claims. The plaintiffs in these individual actions seek damages to be proved at trial. The Company is not able to determine or predict the ultimate outcome of ~~this proceeding~~these proceedings or reasonably provide an estimate or range of the possible outcome or loss, if any.

On October 27, 2023, a purported class action was filed in state court in Marion Superior Court in Marion County, Indiana, against Maximus Health Services, Inc. (a wholly owned subsidiary of Maximus, Inc.): Solis Garcia v. Maximus Health Services, Inc., Case No. 49D12-2310-CT-042115 (Ind. Super. Ct., Marion Cnty.), again arising out of the MOVEit cybersecurity incident. The plaintiff, who purports to represent a class comprised of Indiana residents, alleges, among other things, that the Company’s negligence resulted in the compromise of the plaintiff’s personally identifiable information and protected health information. The plaintiff seeks damages to be proved at trial. The Company has removed this case to federal court in the Southern District of Indiana and it has been transferred to the MDL. The Company is not able to determine or predict the ultimate outcome of any of these proceedings or reasonably provide an estimate or range of the possible outcome or loss, if any.

The Company is not able to determine or predict the ultimate outcome of any of these proceedings or reasonably provide an estimate or range of the possible outcome or loss, if any.

Census Project – Civil Investigation Demand (“CID”)

In 2021, Maximus received a CID from the U.S. Department of Justice (“DOJ”) pursuant to the False Claims Act seeking records pertaining to the Census project. The CID requested the production of documents related to the Company’s compliance with telephone call quality assurance scoring and reporting requirements. The Company is cooperating with the DOJ in its investigation and providing responses and information on an ongoing basis. As of March 31, 2024, the Company has reserved $3.5 million in connection with this matter. While it is reasonably possible that losses exceeding the amount accrued may be incurred, it is not possible at this time to estimate the additional possible loss in excess of the amount already accrued.

Table of Contents

12. SUBSEQUENT EVENT

On ~~July 7, 2023,~~April 5, 2024, our Board of Directors declared a quarterly cash dividend of ~~$0.28~~$0.30 for each share of our common stock outstanding. The dividend is payable on ~~August~~May 31, ~~2023,~~2024, to shareholders of record on ~~August~~May 15, ~~2023.~~2024. Based on the number of shares outstanding, we anticipate a cash payment of approximately ~~$17.0~~$18.3 million.

2021

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," "Special Note Regarding Forward-Looking Statements," and our financial statements and related notes in Item 1 and in the 'Special Note Regarding Forward-Looking Statements' in this Quarterly Report on Form 10-Q and the audited financial statements and related notes, risk factors and Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for fiscal year ~~2022~~2023 filed with the Securities and Exchange Commission on November ~~22, 2022.~~16, 2023 (the "2023 Form 10-K") and elsewhere in this Quarterly Report on Form 10-Q, as applicable.

Business Overview

~~We are a global company with approximately 39,500 employees and 12,550 contingent workers dedicated to helping governments on four continents to administer their citizen-facing programs. Under our~~Maximus, under its mission of Moving People Forward,, helps millions of people access the vital government services they need. With over 45 years of experience working with local, state, federal, and international government clients, we ~~offer industry-leading expertise,~~proudly design, develop, and deliver innovative and impactful programs that change lives. We are driven to strengthen communities and improve the lives of those we serve.

We create value for our customers through our ability to translate health and human services public policy into operating models that achieve outcomes for governments at scale. Our work covers a broad array of services, including ~~citizen engagement,~~the operation of large health insurance eligibility and ~~program integrity,~~enrollment programs; clinical services, including assessments, appeals, and independent ~~clinical assessments and case management,~~medical reviews; and technology ~~modernization~~services. These services benefit from a market with increasing demographic demand, constrained government budgets, and an increased focus on technology. We have also shown the ability to ~~enable citizens around~~move quickly, most notably with the ~~globe~~swift establishment of public health and safety initiatives during the recent COVID-19 pandemic, such as vaccine information hotlines and unemployment insurance services. Our organic growth through increased contract scope and entry into new markets has been supplemented by strategic acquisitions. Most notably, our acquisitions of VES Group, Inc. ("VES"), a leading provider of medical disability examinations ("MDE") to ~~successfully engage with their governments at all levels. We are instrumental in helping people who need governmental support get it.~~

~~Over~~ the ~~past five years, we have executed~~United States ("U.S.") Department of Veterans Affairs ("VA"); the Federal business of Attain, LLC ("Attain"), a ~~three-pronged growth strategy: we have evolved through our digital transformation to meet the modernization needs~~provider of ~~our clients; we have expanded our clinical assessment capabilities to meet growing demand for independent~~technology consulting and ~~conflict-free clinical~~systems integration services; and wea service contract with the U.S. Department of Education, rebranded as "Aidvantage," have ~~expanded~~supplemented our ~~markets, both organically~~organic growth and ~~through acquisitions.~~allowed expansion into new markets.

In fiscal year 2022, we introduced our refreshed three-to-five-year strategic plan, which we believe will further expand our ~~strategy and updated~~business. Having moved past the major impacts of the COVID-19 pandemic, we believe we are in a strong position to capitalize on organic growth opportunities in our core business, as reflected in the following three pillars ~~on which we will focus growth efforts for the next three to five years:~~of our refreshed strategy.

•Customer Services, Digitally Enabled. We apply proven technologies, data, and best practices to make government programs more customer-focused, effective, and deserving of the public's trust. We make it easier for people to connect to government services based on their individual preferences and abilities. We are elevatingElevate the customer experience to achieve higher levels of satisfaction, performance, and outcomes through intelligent automation and cognitive computing.

•Future of Health. ~~We are expanding~~Help governments meet the rising demand for health services by growing our ~~clinical-related services~~clinical capabilities to improve the health of people and are experienced in delivering clinical BPS services 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.their communities.

•Advanced Technologies for ~~Modernization.~~Modernization~~We are furthering~~. Further our credibility as a technology leader, enabling the transformation of government programs to be resilient, dynamic, integrated, and equitable. Leveraging our deep relationships and program knowledge, we are delivering technology-driven business transformation of government missions with a strategic near-term focus on hybrid cloud solutions, information intelligence, and hyper-automation.

2122

Table of Contents

Financial Overview

A number of factors have affected our results for the ~~third quarter of fiscal year 2023, the most significant of which we have listed below.~~three and six months ended March 31, 2024. More detail on these changes is presented below within our "Results of Operations" section.

•Our results in the third quarter of fiscal year 2023 include a $22.1 million expense for our best estimate of the investigation and remediation costs of a previously disclosed cybersecurity incident. As previously disclosed, the Company believes that the personal information of a significant number of individuals was accessed by an unauthorized third party by exploiting a vulnerability in a file transfer application used by the Company for internal and external file sharing purposes. Based on the review of impacted files to date, the Company believes those files contain personal information, including social security numbers, protected health information and/or other personal information, of at least 14.5 to 17.5 million individuals to whom the Company anticipates providing notice of the incident. The estimated number of impacted individuals and estimated expenses is based on currently available information and the actual number of impacted individuals or actual costs incurred could be greater than our estimates.

•~~Our SG&A cost base has expanded with the growth of the business, including investments in our workforce and business infrastructure.~~

•~~Our international business results have been tempered by the strength of the U.S. Dollar against the other currencies in which we operate.~~

•~~The cost of financing our debt has increased year-over-year as interest rates have increased.~~

Results of Operations

The following table sets forth items from our consolidated statements of operations for the three ~~months~~ and ~~nine~~six months ended ~~June 30, 2023~~March 31, 2024, and ~~June 30, 2022.~~March 31, 2023.

Table MD&A 1: Consolidated Results of Operations
For the Three Months Ended For the Nine Months Ended
June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022
(dollars in thousands, except per share data)
Revenue $ 1,188,677 $ 1,125,785 $ 3,644,775 $ 3,453,987
Cost of revenue 924,313 915,564 2,907,061 2,787,160
Gross profit 264,364 210,221 737,714 666,827
Gross profit percentage 22.2 % 18.7 % 20.2 % 19.3 %
Selling, general, and administrative expenses 182,545 132,974 471,445 387,502
Selling, general, and administrative expenses as a percentage of revenue 15.4 % 11.8 % 12.9 % 11.2 %
Amortization of intangible assets 23,431 22,690 70,599 67,951
Operating income 58,388 54,557 195,670 211,374
Operating margin 4.9 % 4.8 % 5.4 % 6.1 %
Interest expense 21,026 10,791 63,631 29,867
Other expense/(income), net 1,005 2,497 (79) 2,093
Income before income taxes 36,357 41,269 132,118 179,414
Provision for income taxes 5,494 9,934 29,472 44,653
Effective tax rate 15.1 % 24.1 % 22.3 % 24.9 %
Net income $ 30,863 $ 31,335 $ 102,646 $ 134,761
Earnings per share:
Basic $ 0.50 $ 0.51 $ 1.68 $ 2.17
Diluted $ 0.50 $ 0.51 $ 1.67 $ 2.17

~~Table of Contents~~


Table MD&A 1: Consolidated Results of Operations
	For the Three Months Ended						For the Six Months Ended
	March 31, 2024			March 31, 2023			March 31, 2024			March 31, 2023
	(dollars in thousands, except per share data)
Revenue	$	1,348,357		$	1,206,852		$	2,675,398		$	2,456,098
Cost of revenue	1,030,768			978,249			2,057,755			1,982,748
Gross profit	317,589			228,603			617,643			473,350
Gross profit percentage	23.6		%	18.9		%	23.1		%	19.3		%
Selling, general, and administrative expenses	168,454			142,448			337,649			288,900
Selling, general, and administrative expenses as a percentage of revenue	12.5		%	11.8		%	12.6		%	11.8		%
Amortization of intangible assets	21,641			23,650			44,990			47,168
Operating income	127,494			62,505			235,004			137,282
Operating margin	9.5		%	5.2		%	8.8		%	5.6		%
Interest expense	20,366			20,999			41,873			42,605
Other expense/(income), net	(822)			(818)			(334)			(1,084)
Income before income taxes	107,950			42,324			193,465			95,761
Provision for income taxes	27,440			10,536			48,807			23,978
Effective tax rate	25.4		%	24.9		%	25.2		%	25.0		%
Net income	$	80,510		$	31,788		$	144,658		$	71,783
Earnings per share:
Basic	$	1.31		$	0.52		$	2.36		$	1.17
Diluted	$	1.31		$	0.52		$	2.35		$	1.17

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 June 30, 2023
Revenue Cost of Revenue Gross Profit
Dollars % Change Dollars % Change Dollars % Change
(dollars in thousands)
Three Months Ended June 30, 2022 $ 1,125,785 $ 915,564 $ 210,221
Organic effect 74,912 6.7 % 21,393 2.3 % 53,519 25.5 %
Disposal of businesses (9,097) (0.8) % (9,474) (1.0) % 377 0.2 %
Acquired growth 731 0.1 % 354 — % 377 0.2 %
Currency effect compared to the prior period (3,654) (0.3) % (3,524) (0.4) % (130) (0.1) %
Three Months Ended June 30, 2023 $ 1,188,677 5.6 % $ 924,313 1.0 % $ 264,364 25.8 %


Table MD&A 2: Changes in Revenue, Cost of Revenue, and Gross Profit for the Three Months Ended March 31, 2024
	Revenue				Cost of Revenue				Gross Profit
	Dollars		% Change		Dollars		% Change		Dollars		% Change
	(dollars in thousands)
Three Months Ended March 31, 2023	$	1,206,852			$	978,249			$	228,603
Organic effect	152,614		12.6	%	65,360		6.7	%	87,254		38.2	%
Disposal of businesses	(14,267)		(1.2)	%	(15,442)		(1.6)	%	1,175		0.5	%

Currency effect compared to the prior period	3,158		0.3	%	2,601		0.3	%	557		0.2	%
Three Months Ended March 31, 2024	$	1,348,357	11.7	%	$	1,030,768	5.4	%	$	317,589	38.9	%

Table MD&A 3: Changes in Revenue, Cost of Revenue, and Gross Profit for the Nine Months Ended June 30, 2023
Revenue Cost of Revenue Gross Profit
Dollars % Change Dollars % Change Dollars % Change
(dollars in thousands)
Nine Months Ended June 30, 2022 $ 3,453,987 $ 2,787,160 $ 666,827
Organic effect 239,575 6.9 % 164,961 5.9 % 74,614 11.2 %
Disposal of businesses (12,552) (0.4) % (12,817) (0.5) % 265 — %
Acquired growth 4,179 0.1 % 2,297 0.1 % 1,882 0.3 %
Currency effect compared to the prior period (40,414) (1.2) % (34,540) (1.2) % (5,874) (0.9) %
Nine Months Ended June 30, 2023 $ 3,644,775 5.5 % $ 2,907,061 4.3 % $ 737,714 10.6 %

Table of Contents


Table MD&A 3: Changes in Revenue, Cost of Revenue, and Gross Profit for the Six Months Ended March 31, 2024
	Revenue				Cost of Revenue				Gross Profit
	Dollars		% Change		Dollars		% Change		Dollars		% Change
	(dollars in thousands)
Six Months Ended March 31, 2023	$	2,456,098			$	1,982,748			$	473,350
Organic effect	239,413		9.7	%	98,195		5.0	%	141,218		29.8	%
Disposal of businesses	(28,003)		(1.1)	%	(30,050)		(1.5)	%	2,047		0.4	%

Currency effect compared to the prior period	7,890		0.3	%	6,862		0.3	%	1,028		0.2	%
Six Months Ended March 31, 2024	$	2,675,398	8.9	%	$	2,057,755	3.8	%	$	617,643	30.5	%

Selling, general, and administrative ~~expenses ("SG&A")~~

~~Selling, general, and administrative expenses~~ ("SG&A") ~~consist~~expenses

SG&A expense 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 expense 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 ~~expenses have expanded through our~~expense increased by $48.7 million for the six months ended March 31, 2024 compared to the same period in fiscal year 2023, primarily driven by growth ~~as well as investments made~~ in our ~~workforce and infrastructure. In addition, our SG&A includes charges which are not directly connected to our day-to-day operations.~~business, including additional spending in anticipation of future work.

•Amortization of intangible assets

Our ~~costs in~~intangible asset amortization for the three and ~~nine~~six months ended ~~June 30, 2023, include $22.1 million of estimated expenses for investigation and remediation activities related~~March 31, 2024 has declined compared to the previously disclosed cybersecurity incident, including expenses for providing appropriate notifications to individuals affected by this incident and free credit monitoring and identity restoration services to such individuals.

•We include costs related to our acquisitions within SG&A. Included within these costs in the three and nine months ended June 30, 2023 are $1.6 million and $2.9 million, respectively, related to increases in our anticipated consideration for our Aidvantage business, which we acquiredsame period in fiscal year ~~2022 for consideration based upon future performance.~~2023. This decline reflects the amortization in full of intangible assets from our Aidvantage acquisition.

•Our balance sheet includes~~Our SG&A expense for~~ intangible assets of $502 million and $40 million from the 2021 VES and 2019 GDIT acquisitions, respectively. These assets, comprising customer relationships, technology, and a medical provider network, continue to support contracts acquired with these acquisitions. The greater part of these assets are being amortized over the remaining nine ~~months ended June 30, 2023 also includes losses~~and five years, respectively. In the event that our expectations change with respect to these acquired contracts, the value of ~~$0.8 million relating~~these assets and the estimated remaining lives of these assets may need to ~~the sale of two small businesses.~~be adjusted.

~~Table of Contents~~

Interest Expense

~~Interest~~Our interest expense ~~for the three months ended June 30, 2022 and June 30, 2023,~~has remained consistent year-over-year as declines in our debt balance are offset by increased from $10.8 million to $21.0 million. Interest expense for the nine months ended June 30, 2022 and June 30, 2023 increased from $29.9 million to $63.6 million. These increases are principally due to market rate increases.

~~Our effective~~ interest ~~rate was 5.9% at June 30, 2023, compared to 3.4% at June 30, 2022.~~rates. We have ~~mitigated~~sought to mitigate our risk by fixing interest rates on ~~$650 million~~approximately half of our debt, and our ~~near term~~near-term capital allocation plan continues to prioritize reducing our debt using our free cash flow. ~~At our current debt balances, a 100 basis point change in SOFR would result in an increased annual interest expense of $6.7 million.~~

Provision for Income Taxes

Our effective income tax rate for the three and ~~nine~~six months ended ~~June 30, 2023,~~March 31, 2024, was ~~15.1%~~25.4% and ~~22.3%~~25.2%, respectively, compared to ~~24.1%~~24.9% and ~~24.9%~~25.0% for the three and ~~nine~~six months ended ~~June 30, 2022. Our effective income tax rate for the three months ended June 30, 2023 received discrete benefits from tax credits, as well as some benefits from U.S. state tax rates.~~March 31, 2023. For fiscal year ~~2023,~~2024, we expect the effective tax rate to be between ~~23.0%~~24.5% and ~~23.5%~~25.5%.

Table of Contents

U.S. Federal Services Segment

Our U.S. Federal Services Segment delivers end-to-end solutions that help various U.S. federal government agencies better deliver on their mission, including program operations and management, clinical services, and technology solutions. This segment also includes appeals and assessments services, system and application development, ITInformation Technology ("IT") modernization, and maintenance services. ~~The segment also contains certain~~Certain state-based assessments and appeals work that is part of the segment's heritage ~~which~~ continues to be managed within this segment. Under Technology Consulting Services ("TCS"), 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 through ~~Veterans Evaluation Services (VES), a Maximus company,~~VES, which manages the clinical evaluation process for U.S. veterans and service members on behalf of the ~~U.S. Department of Veterans Affairs.~~VA.


Table MD&A 4: U.S. Federal Services Segment - Financial Results	Table MD&A 4: U.S. Federal Services Segment - Financial Results									Table MD&A 4: U.S. Federal Services Segment - Financial Results
		For the Three Months Ended				For the Nine Months Ended
		June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
		(dollars in thousands)
	For the Three Months Ended														For the Three Months Ended					For the Six Months Ended
	March 31, 2024												March 31, 2024			March 31, 2023			March 31, 2024				March 31, 2023
	(dollars in thousands)																		(dollars in thousands)
Revenue	Revenue	$	583,960	$	525,519	$	1,786,202	$	1,680,678
Cost of revenue	Cost of revenue	427,015		401,316		1,383,689		1,314,746
Gross profit	Gross profit	156,945		124,203		402,513		365,932
Selling, general, and administrative expenses	Selling, general, and administrative expenses	82,892		69,466		229,591		203,340
Operating income	Operating income	74,053		54,737		172,922		162,592
Gross profit percentage	Gross profit percentage	26.9 %		23.6 %		22.5 %		21.8 %		Gross profit percentage	23.3	%		21.0	%		23.2	%			20.4	%
Operating margin percentage	Operating margin percentage	12.7 %		10.4 %		9.7 %		9.7 %		Operating margin percentage	11.9	%		8.2	%		11.0	%			8.2	%

Our revenue and cost of revenue for the three months ended ~~June 30, 2023,~~March 31, 2024, increased ~~11.1%~~20.1% and ~~6.4%~~16.7%, respectively. For the ~~nine~~six months ended ~~June 30, 2023,~~March 31, 2024, revenue and cost of revenue growth was ~~6.3%~~14.7% and ~~5.2%~~10.7%, respectively. All growth in fiscal year ~~2023~~2024 was organic.

Our ~~U.S. Federal Services~~ revenue and ~~profit margins for the three months ended June 30, 2023 received the benefit of~~margin growth has principally been driven by volume growth and strong performance on our contracts with the ~~VES contracts.~~

~~Our results for the nine months ended June 30, 2023, received revenue growth from VES and Aidvantage. Profitability improvements from VES scaling were partially offset by our need~~VA relating to ~~ramp-up staffing for VES during the early part of the year in anticipation of the current higher volumes.~~MDEs.

We anticipate that our U.S. Federal Services ~~business~~Segment will continue to grow for the remainder of fiscal year ~~2023,~~2024, driven primarily by additional volumes anticipated in ~~the VES business.~~MDEs. We anticipate ~~full~~that our full-year operating margin will be around 12%.

Recently, unique circumstances have led to potential recompetes of two significant contracts held by Maximus:

•The Centers for Medicare & Medicaid Services (CMS) has taken steps to recompete the Contact Center Operations (CCO) contract awarded to us in 2022 at a value of $6.6 billion over a base plus nine-year period of performance. The earlier-than-expected action is for the express purpose of including a labor harmony agreement requirement. Meanwhile, Maximus has consistently met or exceeded all contractual service levels with uninterrupted operations and driven the highest independently measured customer satisfaction in the history of the program. CMS indicates a formal Request for Proposal (RFP) process is expected to commence on or around May 16, 2024. We anticipate continuing to work on this contract uninterrupted until the recompete process is completed and that, as the incumbent, we have significant operational advantages.

•A majority of the MDE contracts under the VA, which comprise our acquired VES business, had ceilings on claims volumes at the time of award in 2018. Volumes have significantly increased since the passage of the PACT Act, thereby requiring a rebid process. In fiscal year ~~operating margins will range~~2023, these contracts together represented between 10% and ~~11%.~~

15% of total Company revenue. We anticipate continuing to work on these contracts uninterrupted until the recompete process is completed and that, as the incumbent, we have significant operational advantages.

2425

Table of Contents

U.S. Services Segment

Our U.S. Services Segment provides a variety of business process services ("BPS"), such as program administration, 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. ~~Over the last three years, many programs in~~Previously, this segment ~~have been~~suffered from reduced operating ~~with depressed margins~~leverage resulting from the pause in Medicaid ~~redeterminations. The depressed margins have resulted from reduced~~redeterminations during the COVID-19 pandemic. Redeterminations resumed in late fiscal year 2023, meaning fiscal year 2024 and beyond are demonstrating and should continue to demonstrate recovery of operating leverage in the segment as costs cannot scale down at the same rate to meet lower demand due to requirement to fulfill other obligations on these contracts. With the resumption of redeterminations, we expect a full period of volumes coming back into these programs and which enables our operating leverage to recover. A temporary offset to the depressed margins from paused redeterminations was the government's COVID-19 response efforts in prior fiscal years. The segment supported contact tracing, disease investigation, and vaccine distribution support services which concluded in fiscal year 2022. The segment also successfully expanded into the unemployment insurance market where longer term opportunities have materialized. As part of the broader strategy to evolve clinically and address societal macro trends such as aging populations and rising costs, the segment continues to expand its offerings in public health with new work in in-person assessments.related margin improvement.


Table MD&A 5: U.S. Services Segment - Financial Results	Table MD&A 5: U.S. Services Segment - Financial Results									Table MD&A 5: U.S. Services Segment - Financial Results
		For the Three Months Ended				For the Nine Months Ended
		June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
		(dollars in thousands)
	For the Three Months Ended														For the Three Months Ended					For the Six Months Ended
	March 31, 2024												March 31, 2024			March 31, 2023			March 31, 2024				March 31, 2023
	(dollars in thousands)																		(dollars in thousands)
Revenue	Revenue	$	449,061	$	399,320	$	1,338,242	$	1,183,814
Cost of revenue	Cost of revenue	350,523		325,185		1,070,090		935,009
Gross profit	Gross profit	98,538		74,135		268,152		248,805
Selling, general, and administrative expenses	Selling, general, and administrative expenses	51,536		42,351		140,793		115,726
Operating income	Operating income	47,002		31,784		127,359		133,079
Gross profit percentage	Gross profit percentage	21.9 %		18.6 %		20.0 %		21.0 %		Gross profit percentage	26.8	%		19.1	%		25.5	%			19.1	%
Operating margin percentage	Operating margin percentage	10.5 %		8.0 %		9.5 %		11.2 %		Operating margin percentage	14.0	%		9.5	%		13.7	%			9.0	%

Our revenue and cost of revenue for the three months ended ~~June 30, 2023,~~March 31, 2024, increased ~~12.5%~~8.1% and ~~7.8%~~decreased 2.1%, respectively, compared to the three months ended ~~June 30, 2022.~~March 31, 2023. For the ~~nine~~six months ended ~~June 30, 2023,~~March 31, 2024, our revenue and cost of revenue increased ~~13.0%~~9.8% and ~~14.4%~~1.1%, respectively, compared to the ~~nine~~six months ended ~~June 30, 2022.~~March 31, 2023. All ~~movement~~growth was ~~organic and net of anticipated declines in short-term work related to the pandemic.~~organic.

~~U.S. Services revenue and profitability~~Growth in the ~~three months ended June 30, 2023,~~first half of fiscal year 2024 was principally from Medicaid redetermination activities, supplemented by a large, state-based assessment program which has ramped up in recent quarters.

Our margins in the first half of fiscal year 2024 have received the benefit of ~~new work and Medicaid eligibility~~additional volumes from redetermination ~~work commencing.~~

~~Our profit margins for~~activity, that we anticipate returning to normal levels through the ~~full fiscal year remain tempered, compared to fiscal year 2022, by the decline in higher-margin, pandemic related services.~~

This segment is expected to see the greater benefit from the resumption of Medicaid eligibility redeterminations. The nature and timing of the benefit is dependent on each states individual plans for the return of these services, but we continue to anticipate that services will have a greater contribution in the final quartersecond half of the year. We anticipate a ~~full year~~full-year operating profit margin ~~will be~~of between 9%11% and ~~11%~~14%.

Outside the U.S. Segment

~~Table of Contents~~

Table MD&A 6: Outside the U.S. Segment - Financial Results
For the Three Months Ended For the Nine Months Ended
June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022
(dollars in thousands)
Revenue $ 155,656 $ 200,946 $ 520,331 $ 589,495
Cost of revenue 146,775 189,063 453,282 537,405
Gross profit 8,881 11,883 67,049 52,090
Selling, general, and administrative expenses 24,122 23,101 75,936 68,452
Operating loss (15,241) (11,218) (8,887) (16,362)
Gross profit percentage 5.7 % 5.9 % 12.9 % 8.8 %
Operating margin percentage (9.8) % (5.6) % (1.7) % (2.8) %

Table MD&A 7: Outside the U.S. Segment - Changes in Revenue, Cost of Revenue, and Gross Profit for the Three Months Ended June 30, 2023
Revenue Cost of Revenue Gross Profit
Amount % Change Amount % Change Amount % Change
(dollars in thousands)
Three Months Ended June 30, 2022 $ 200,946 $ 189,063 $ 11,883
Organic effect (33,270) (16.6) % (29,644) (15.7) % (3,626) (30.5) %
Disposal of businesses (9,097) (4.5) % (9,474) (5.0) % 377 3.2 %
Acquired growth 731 0.4 % 354 0.2 % 377 3.2 %
Currency effect compared to the prior period (3,654) (1.8) % (3,524) (1.9) % (130) (1.1) %
Three Months Ended June 30, 2023 $ 155,656 (22.5) % $ 146,775 (22.4) % $ 8,881 (25.3) %

Table MD&A 8: Outside the U.S. Segment - Changes in Revenue, Cost of Revenue, and Gross Profit for the Nine Months Ended June 30, 2023
Revenue Cost of Revenue Gross Profit
Amount % Change Amount % Change Amount % Change
(dollars in thousands)
Nine Months Ended June 30, 2022 $ 589,495 $ 537,405 $ 52,090
Organic effect (20,377) (3.5) % (39,063) (7.3) % 18,686 35.9 %
Disposal of businesses (12,552) (2.1) % (12,817) (2.4) % 265 0.5 %
Acquired growth 4,179 0.7 % 2,297 0.4 % 1,882 3.6 %
Currency effect compared to the prior period (40,414) (6.9) % (34,540) (6.4) % (5,874) (11.3) %
Nine Months Ended June 30, 2023 $ 520,331 (11.7) % $ 453,282 (15.7) % $ 67,049 28.7 %

Our results for the three and nine months ended June 30, 2023, were tempered by challenges within our welfare-to-work services, both at the macroeconomic level, where markets with low unemployment reduce the demand for our services, and at a contract level, where the reduction in scope of our Australian contract has reduced both revenue and profitability.

This segment also had revenue and margins tempered by slower ramping of a major new program, as well as challenges in achieving volumes in some of our employment programs as a result of low unemployment in our emerging markets.

~~In March 2023, we sold a small commercial practice in the United Kingdom and our employment operations in Sweden. Prospectively, we anticipate this will marginally improve our profit margins.~~

~~This segment also experienced declines in revenue and cost from currency movements, with the major currencies in which we do business declining year-over-year against the United States Dollar.~~


Table MD&A 6: Outside the U.S. Segment - Financial Results
	For the Three Months Ended						For the Six Months Ended
	March 31, 2024			March 31, 2023			March 31, 2024			March 31, 2023
	(dollars in thousands)
Revenue	$	160,540		$	173,074		$	320,658		$	364,675
Cost of revenue	136,410			153,361			271,499			306,507
Gross profit	24,130			19,713			49,159			58,168
Selling, general, and administrative expenses	23,460			23,425			48,601			51,814
Operating income/(loss)	670			(3,712)			558			6,354
Gross profit percentage	15.0		%	11.4		%	15.3		%	16.0		%
Operating margin percentage	0.4		%	(2.1)		%	0.2		%	1.7		%

Table of Contents

~~Much~~


Table MD&A 7: Outside the U.S. Segment - Changes in Revenue, Cost of Revenue, and Gross Profit for the Three Months Ended March 31, 2024
	Revenue				Cost of Revenue				Gross Profit
	Amount		% Change		Amount		% Change		Amount		% Change
	(dollars in thousands)
Three Months Ended March 31, 2023	$	173,074			$	153,361			$	19,713
Organic effect	(1,425)		(0.8)	%	(4,110)		(2.7)	%	2,685		13.6	%
Disposal of businesses	(14,267)		(8.2)	%	(15,442)		(10.1)	%	1,175		6.0	%

Currency effect compared to the prior period	3,158		1.8	%	2,601		1.7	%	557		2.8	%
Three Months Ended March 31, 2024	$	160,540	(7.2)	%	$	136,410	(11.1)	%	$	24,130	22.4	%


Table MD&A 8: Outside the U.S. Segment - Changes in Revenue, Cost of Revenue, and Gross Profit for the Six Months Ended March 31, 2024
	Revenue				Cost of Revenue				Gross Profit
	Amount		% Change		Amount		% Change		Amount		% Change
	(dollars in thousands)
Six Months Ended March 31, 2023	$	364,675			$	306,507			$	58,168
Organic effect	(23,904)		(6.6)	%	(11,820)		(3.9)	%	(12,084)		(20.8)	%
Disposal of businesses	(28,003)		(7.7)	%	(30,050)		(9.8)	%	2,047		3.5	%

Currency effect compared to the prior period	7,890		2.2	%	6,862		2.2	%	1,028		1.8	%
Six Months Ended March 31, 2024	$	320,658	(12.1)	%	$	271,499	(11.4)	%	$	49,159	(15.5)	%

This segment recorded a break-even margin in the first quarter of fiscal year 2024 as management undertakes steps to improve performance and deliver consistent profitability in this part of our ~~revenue growth stems~~organization. These steps included the divestiture in fiscal year 2024 of our employment services business in Canada and all of our operations in Italy and Singapore. In fiscal year 2023, we disposed of our commercial practice in the United Kingdom and our Swedish operations.

In the first quarter of fiscal year 2023, this segment received a significant benefit from higher employment services volumes, which did not recur in the second quarter. Revenue from our employment services contracts ~~where we are paid~~include payments based upon our ability to place individuals in long-term, sustained employment. We recognize this revenue over ~~our~~the period of performance using estimates of ~~our ability to place people~~these outcomes, which are typically based upon past performance. Changes in ~~work and the time that this will take can~~these estimates may have a significant ~~effects~~effect on our revenue. ~~Our estimates are based upon historical performance, where appropriate~~

The improvement in the valuation of the British Pound provided an additional benefit to revenue and ~~available, and are constantly updated. This may result~~profit in ~~volatility within revenue as changes in estimates~~the first six months of ~~future performance impact the revenue recognized in any period.~~fiscal year 2024.

We anticipate our Outside the ~~segment~~United States Segment will ~~finish~~yield slightly above break-even operating margin for the year in a loss position. We are continuing our efforts to improve the performance of this segment. As we establish our plans for fiscal year 2024 and beyond, the actions we consider may result in additional charges, including impairment of assets.full year.

Liquidity and Capital Resources

Our primary sources of liquidity are cash on hand, cash from operations, and availability under our revolving credit facilities. As of ~~June 30, 2023,~~March 31, 2024, we had ~~$35.0~~$77.4 million in cash and cash equivalents. We believe that our current cash position, access to our revolving debt, and cash flow generated from operations should be ~~not only~~ sufficient for our operating requirements ~~but also to enable~~for the next 12 months and beyond, including enabling us to fund required long-term debt repayments, dividends and any share purchases we might choose to make. See "Note 6. Debt and Derivatives" to the Consolidated Financial Statements for a more detailed discussion of our debt financing arrangements.

~~During the first nine months of fiscal year 2023, we entered into a number of debt-related transactions.~~

•We entered into additional interest rate swaps, to bring the total balance of our credit facility subject to fixed rates to $650 million. This allows us greater opportunity to predict and manage our interest payments.

•~~We amended both our debt and the corresponding interest rate swaps to use interest rates based upon the Secured Overnight Financing Rate (SOFR), replacing the previous LIBOR basis.~~

•~~As part of the transition to SOFR, we took the opportunity to redeem some of our Term Loan B debt.~~

We have included the following table showing our debt balances as of ~~June 30, 2023~~March 31, 2024, and their effective interest rates.

Table MD&A 9: Balances and interest rates as of June 30, 2023
June 30, 2023
Carrying value Effective cash interest rate Interest rate basis
(dollars in thousands)
Term Loan A - Unhedged $ 280,000 6.70% Term SOFR reset monthly plus margin. (1)
Term Loan A - Hedged though May 2026 500,000 3.81% Fixed rate of 2.31% plus margin. (1)
Term Loan A - Hedged through September 2024 150,000 5.98% Fixed rate of 4.48% plus margin. (1)
Term Loan B 345,850 7.20% Term SOFR (variable reset) plus 2% margin.
Revolver 39,000 6.69% Term SOFR reset monthly plus margin. (1)
Debt held by international subsidiaries 3,321 5.48% Floating rate, reset quarterly.
Debt Principal $ 1,318,171

Table of Contents


Table MD&A 9: Balances and interest rates as of March 31, 2024
	March 31, 2024
	Carrying value		Effective cash interest rate	Interest rate basis
	(dollars in thousands)
Term Loan A - Unhedged	$	218,125	6.93%	Term SOFR reset monthly plus margin. (1)
Term Loan A - Hedged though May 2026	500,000		3.91%	Fixed rate of 2.31% plus margin. (1)
Term Loan A - Hedged through September 2024	150,000		5.98%	Fixed rate of 4.38% plus margin. (1)
Term Loan B	343,170		7.43%	Term SOFR (variable reset) plus 2% margin.

Debt held by international subsidiaries	4,892		6.16%	Floating rate, reset quarterly.
Debt Principal	$	1,216,187

(1) Applicable margin ranges between 1% and 2%, based on our leverage ratio.

Our effective cash interest rate reflects the drivers of our cash interest payments as of ~~June 30, 2023,~~March 31, 2024, which can change based upon the reset of the rates. Including the amortization of the upfront payments, our effective interest rate as of ~~June 30, 2023~~March 31, 2024, is 5.9%.

~~Table of Contents~~

The below table summarizes our change in cash, cash equivalents, and restricted cash.

Table MD&A 10: Net Change in Cash and Cash Equivalents and Restricted Cash

For the Nine Months Ended

June 30, 2023

June 30, 2022

(in thousands)

For the Six Months Ended

March 31, 2024

March 31, 2023

(in thousands)

Operating activities:

Net cash provided by operating activities

169,751

169,776

Net cash used in investing activities

(49,739)

(48,080)

Net cash used in financing activities

(168,849)

(163,272)

Effect of foreign exchange rates on cash and cash equivalents and restricted cash

3,735

(4,369)

Net change in cash and cash equivalents and restricted cash

(45,102)

(45,945)

Net Cash Provided By Operating Activities

~~Net cash provided by operating activities was $169.8 million in~~Our net income for the ~~nine~~first six months of fiscal year ~~2023, which was consistent with~~2024 increased by $72.9 million compared to the ~~prior year~~six months ended March 31, 2023; notwithstanding this, our operating cash flows for the same period declined by $22.9 million. The principal reason for the decline ~~in net income. Our cash flows from operations received benefits from:~~

•~~increased revenue and improved collections, with our DSO declining from 62 days to 61 days between September 30, 2022 and June 30, 2023; the corresponding movement in fiscal year 2022~~ was ~~an increase of two days; and~~

•the timing of certain cash ~~payments, including a reduction in income tax payments.~~collections, with approximately $100 million received during the first week of April 2024.

~~These benefits~~Our Days Sales Outstanding ("DSO") at March 31, 2024, were ~~partially offset by increased interest payment on our debt and an additional payroll cycle in fiscal~~62 days, compared with 60 days at year ~~2023.~~end.

Net Cash Used In Investing Activities

~~Investing cash outflows~~We continue to make investments in our capital base, most notably in upgrading technology on our Federal MDE contracts. In addition:

•In the first half of fiscal ~~years 2023 and 2022 reflect acquisitions~~year 2024, we have invested $18 million in acquiring part of ~~property and equipment and investment in software.~~ one of our long-term vendors;

•In the first half of fiscal year 2023, we received ~~payments for~~payment from the sale of our Swedish business and ~~an installment payment on the sale of~~ a small commercial practice in the United ~~Kingdom.~~Kingdom;

•In the first half of fiscal year 2024, we received a further installment payment on the sale of the U.K. business, as well as payment from the sale of our businesses in Italy, Singapore and our Canadian employment business.

Table of Contents

Net Cash Used In Financing Activities

~~Net~~Financing activities in the first half of fiscal year 2024 include approximately $40 million of net debt repayment and $50 million related to servicing of stock through dividends or net settlement of RSU and PSU vesting. A further $8 million was incurred in payments for the acquisitions of Aidvantage in the U.S., and BZ Bodies (BZB), in the United Kingdom, which were based upon post-acquisition performance of the businesses.

Our financing cash ~~outflows reflect mandatory and~~flows in the first half of fiscal year 2023 included early ~~payments on our debt.~~

~~At September 30, 2022, our restricted cash balance was inflated by~~debt payments. We also made a ~~large customer receivable~~payment of $60.7 million ~~which was paid~~ to ~~us after we had sold~~ the ~~balance~~acquirer of some of our accounts receivable balances, relating to a third party, resulting in a financing cash inflow. During the period ended June 30, 2023, the payment was made and no similar timing differences existed as of June 30, 2023, resulting in a net cash outflow.funds received on their behalf.

Credit Facilities

Our principal debt agreement is with JPMorgan Chase Bank N.A. (the ~~Credit Agreement)~~"Credit Agreement"). At ~~June 30, 2023,~~March 31, 2024, we owed ~~$1.31~~$1.21 billion under the Credit Agreement, with access to an additional ~~$561~~$600 million through a revolving credit facility. Mandatory repayments are required under this agreement through May 2028, when the agreement ends, and must be renegotiated or the funds repaid.

The Credit Agreement contains a number of covenants with which we are expected to comply. Failure to meet these requirements would result in a need to renegotiate the agreement or a requirement to repay our outstanding debt in full. There are two financial covenants, both defined in the Credit Agreement.

•Our Consolidated Net Total Leverage Ratio means, for any twelve-month period, the ratio of our Funded Debt (as defined by our Credit Agreement), offset by up to $75 million of unrestricted cash (Consolidated Net Total Leverage), against our Consolidated EBITDA (as defined by the Credit Agreement). To comply with our Credit Agreement, this ratio cannot exceed 4.00:1.00 at the end of each quarter, with a ~~step-up~~step up to 4.50:1.00 under certain circumstances. This ratio also determines both our interest rate and the charge we pay on the unused component of our revolving credit facility, with the charge increasing as the leverage ratio increases.

~~Table of Contents~~

•Our Consolidated Net Interest Coverage Ratio means, for any twelve-month period, the ratio of our Consolidated EBITDA against our Consolidated Net Interest Expense, as defined by the Credit Agreement. To comply with our Credit Agreement, this ratio cannot be less than 3.00:1.00 at the end of each quarter.

Consolidated EBITDA also drives certain permissions within the Credit Agreement, such as the level of investment we are entitled to make without seeking additional approval from our lenders.

Our Credit Agreement defines Consolidated EBITDA, as well as other components of the calculations above. The definition of Consolidated EBITDA requires us to include adjustments not typically included within EBITDA, including unusual, non-recurring expenses, certain non-cash adjustments, the pro forma effects of acquisitions and disposals, and estimated synergies from acquisitions. As a result, Consolidated EBITDA as defined by the Credit Agreement may not be comparable to EBITDA or related or similarly-titled measures presented by other companies.

We have summarized below the components of our two financial ratio calculations, including the components of Consolidated EBITDA as defined by the Credit Agreement which are included within our financial statements. At ~~June 30, 2023,~~March 31, 2024, we were in compliance with all applicable covenants of our Credit Agreement. We do not believe that these covenants represent a significant restriction in our ability to operate our business or to pay our dividends.

Table MD&A 11: Reconciliation of Net Income to Consolidated EBITDA as defined by our Credit Agreement
For the Three
Months Ended For the Trailing Twelve
Months Ended
June 30, 2023 June 30, 2023
(in thousands)
Net income $ 30,863 $ 171,713
Adjustments:
Interest expense 21,026 79,729
Other expense, net 1,005 663
Provision for income taxes 5,494 58,089
Amortization of intangibles 23,431 93,113
Stock compensation expense 8,296 30,635
Acquisition-related expenses 1,587 2,909
Gain on sale of land and building — (11,046)
Loss on sale of businesses — 883
Depreciation and amortization of property, equipment, and capitalized software 10,771 49,547
Pro forma and other adjustments permitted by our Credit Agreement 35,970 47,437
Consolidated EBITDA (as defined by our Credit Agreement) $ 138,443 $ 523,672

Table of Contents


Table MD&A 11: Reconciliation of Net Income to Consolidated EBITDA as defined by our Credit Agreement
	For the Three Months Ended		For the Trailing Twelve Months Ended
	March 31, 2024		March 31, 2024
	(in thousands)
Net income	$	80,510	$	234,667
Adjustments:
Interest expense	20,366		83,406
Other expense/(income), net	(822)		1,112
Provision for income taxes	27,440		73,330
Amortization of intangibles	21,641		92,413
Stock compensation expense	8,697		33,703
Acquisition-related expenses	226		1,257

Loss on sale of businesses	—		1,018

Depreciation and amortization of property, equipment, and capitalized software	8,205		45,020
Pro forma and other adjustments permitted by our Credit Agreement	19,594		89,692
Consolidated EBITDA (as defined by our Credit Agreement)	$	185,857	$	655,618


Table MD&A 12: Consolidated Net Total Leverage Ratio
	For the Trailing Twelve Months Ended
	March 31, 2024		~~June 30, 2023~~
	(in thousands, except ratio data)
Funded Debt (as defined by our Credit Agreement)	$	~~1,318,171~~1,216,187
Cash and cash equivalents up to $75 million	~~35,007~~75,000
Consolidated Net Total Leverage (as defined by our Credit Agreement)	$	~~1,283,164~~1,141,187

Consolidated Net Total Leverage Ratio (as defined by our Credit Agreement)	~~2.45~~1.74

~~Table of Contents~~


Table MD&A 13: Consolidated Net Interest Coverage Ratio
	For the Trailing Twelve Months Ended
	March 31, 2024		~~June 30, 2023~~
	(in thousands, except ratio data)
Consolidated EBITDA (as defined by our Credit Agreement)	$	~~523,672~~655,618

Interest expense	~~79,729~~83,406
Components of other income/expense, net allowed in ratio calculation	~~2,208~~4,252

Consolidated Net Interest Expense (as defined by our Credit Agreement)	$	~~81,937~~87,658

Consolidated Net Interest Coverage Ratio (as defined by our Credit Agreement)	~~6.39~~7.48

Cash in Foreign Locations

We have no requirement to remit funds from our foreign locations to the United States. 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 United States.

Table of Contents

Free Cash Flow (Non-GAAP)

Table MD&A 14: Free Cash Flow

For the Nine Months Ended

June 30, 2023

June 30, 2022

(in thousands)

Table MD&A 14: Free Cash Flow (Non-GAAP)

For the Six Months Ended

March 31, 2024

March 31, 2023

(in thousands)

Net cash provided by operating activities

169,751

169,776

Purchases of property and equipment and capitalized software

(58,863)

(35,936)

Free cash flow

110,888

133,840

Free cash flow (Non-GAAP)

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 ~~2022~~2023 Form 10-K, as filed with the SEC on November ~~22, 2022,~~16, 2023, 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 three or ~~nine~~six months ended ~~June 30, 2023.~~March 31, 2024.

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.

~~Table of Contents~~

For the three months ended ~~June 30, 2023, 13%~~March 31, 2024, 12% 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 that excludes the effect of year-over-year exchange rate fluctuations. To calculate year-over-year currency movement, we determine the current fiscal ~~year's~~period's results for all foreign businesses using the exchange rates in the prior fiscal ~~year.~~period.

In recent years, we have made a number of ~~acquisitions.~~acquisitions and divestitures. 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~~period results excluding transactions from acquisitions or disposals, to our prior fiscal ~~year~~period 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 excludes the amortization of our intangible assets. For the six months ended March 31, 2023 and 2024, we also incurred losses on sales of businesses. We believe that providing supplemental measures that exclude the impact of the items detailed below is useful to investors in evaluating our core operations and results in relation to past periods. Accordingly, we have calculated our operating ~~profit,~~income, net income, and diluted earnings per share, excluding the effect of the amortization of intangible ~~assets.~~assets and divestiture-related charges. We have included ~~the following~~a table showing our reconciliation of these income measures to their corresponding ~~U.S.~~ GAAP measures.

Table MD&A 15: Non-GAAP Adjusted Results Excluding Amortization of Intangible Assets
For the Three Months Ended For the Nine Months Ended
June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022
(dollars in thousands, except per share data)
Operating income $ 58,388 $ 54,557 $ 195,670 $ 211,374
Add back: Amortization of intangible assets 23,431 22,690 70,599 67,951
Adjusted operating income excluding amortization of intangible assets (Non-GAAP) $ 81,819 $ 77,247 $ 266,269 $ 279,325
Adjusted operating income margin excluding amortization of intangible assets (Non-GAAP) 6.9 % 6.9 % 7.3 % 8.1 %
Net income $ 30,863 $ 31,335 $ 102,646 $ 134,761
Add back: Amortization of intangible assets, net of tax 17,276 16,750 52,082 50,164
Adjusted net income excluding amortization of intangible assets (Non-GAAP) $ 48,139 $ 48,085 $ 154,728 $ 184,925
Diluted earnings per share $ 0.50 $ 0.51 $ 1.67 $ 2.17
Add back: Effect of amortization of intangible assets on diluted earnings per share 0.28 0.27 0.85 0.80
Adjusted diluted earnings per share excluding amortization of intangible assets (Non-GAAP) $ 0.78 $ 0.78 $ 2.52 $ 2.97

Table of Contents


Table MD&A 15: Non-GAAP Adjusted Results Excluding Amortization of Intangible Assets and Divestiture-Related Charges
	For the Three Months Ended						For the Six Months Ended
	March 31, 2024			March 31, 2023			March 31, 2024			March 31, 2023
	(dollars in thousands, except per share data)
Operating income	$	127,494		$	62,505		$	235,004		$	137,282
Add back: Amortization of intangible assets	21,641			23,650			44,990			47,168
Add back: Divestiture-related charges	—			883			1,018			883
Adjusted operating income excluding amortization of intangible assets and divestiture-related charges (Non-GAAP)	$	149,135		$	87,038		$	281,012		$	185,333
Adjusted operating income margin excluding amortization of intangible assets and divestiture-related charges (Non-GAAP)	11.1		%	7.2		%	10.5		%	7.5		%

Net income	$	80,510		$	31,788		$	144,658		$	71,783
Add back: Amortization of intangible assets, net of tax	15,949			17,446			33,158			34,806
Add back: Divestiture-related charges	—			883			1,018			883
Adjusted net income excluding amortization of intangible assets and divestiture-related charges (Non-GAAP)	$	96,459		$	50,117		$	178,834		$	107,472

Diluted earnings per share	$	1.31		$	0.52		$	2.35		$	1.17
Add back: Effect of amortization of intangible assets on diluted earnings per share	0.26			0.28			0.53			0.57
Add back: Effect of divestiture-related charges on diluted earnings per share	—			0.01			0.02			0.01
Adjusted diluted earnings per share excluding amortization of intangible assets and divestiture-related charges (Non-GAAP)	$	1.57		$	0.81		$	2.90		$	1.75

In order to sustain our cash flows from operations, we regularly refresh our fixed assets and technology. We believe that 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 that 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 our 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 operations 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.~~quarter. Revenue per day for a quarter is determined by dividing total revenue by 91 days.

3132

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 ~~2022~~2023 Form 10-K, as filed with the SEC on November ~~22, 2022,~~16, 2023, have not changed materially during the ~~nine~~six month period ended ~~June 30, 2023.~~March 31, 2024.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our principal executive officer and principal financial officer concluded that these disclosure controls and procedures were effective and designed to ensure that the information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) identified in connection with the evaluation of our internal control that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

3233

Table of Contents

PART II - Other Information

Item 1. Legal Proceedings

Refer to our disclosures included in "Note 11. Commitments and Contingencies" included in Part 1, Item 1 of this Quarterly Report on Form 10-Q.

Item 1A. Risk Factors

~~Our systems and networks are and have been subject to cybersecurity breaches.~~

We are a trusted provider to government and other clients of critical health and human services that rely heavily upon technology systems, software, and networks to receive, input, maintain, and communicate participant and client data. The risk of a security breach, system disruption, ransom-ware attack, or similar cyber-attack or intrusion, including by computer hackers, cyber terrorists, or foreign governments, is persistent and substantial as the volume, intensity, and sophistication of attempted attacks, intrusions and threats from around the world increase daily. If our systems or networks are compromised, we could be adversely affected by losing confidential or protected information of program participants and clients or by facing a demand for ransom to restore access to such information. The loss, theft, or improper disclosure of that information could subject us to sanctions under the relevant laws, breach of contract claims, contract termination, class action, or individual lawsuits from affected parties, negative press articles, reputational damage, and a loss of confidence from our government clients, all of which could adversely affect our existing business, future opportunities, and financial condition. Additionally, if our internal networks were compromised, we could suffer the loss of proprietary, trade secret, or confidential technical and financial data. That could make us less competitive in the marketplace and adversely affect our existing business, future opportunities, and financial condition.

We have experienced cybersecurity incidents in the past which were immaterial, and in the third quarter of fiscal year 2023, we experienced a material cybersecurity incident as the personal information of a significant number of individuals was accessed by an unauthorized third party by exploiting a vulnerability in a file transfer application used by many organizations, including us. We have recorded expenses in connection with the investigation and remediation activities related to this incident but we are unable to predict other potential liabilities or consequences that may arise from this incident. Despite our remediation efforts, we may continue to experience cybersecurity incidents in the future.

~~Except as set forth above, there~~There were no material changes during the ~~nine~~six months ended ~~June 30, 2023,~~March 31, 2024, to the risk factors previously disclosed in the ~~2022~~2023 Form 10-K, as filed with the SEC on November ~~22, 2022.~~16, 2023.

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

(a)None.

(b)None.

(c)None.

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.

(c)During the three months ended ~~June 30, 2023,~~March 31, 2024, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

~~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 pursuant to Section 906 of Sarbanes-Oxley Act of 2002.

32.2

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

101.INS

Inline XBRL Instance Document.

101.SCH

Inline XBRL Taxonomy Extension Schema Document.

101.CAL

Inline XBRL Taxonomy Calculation Linkbase Document.

101.DEF

Inline XBRL Taxonomy Definition Linkbase Document.

101.LAB

Inline XBRL Taxonomy Label Linkbase Document.

101.PRE

Inline 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.

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	~~August 3, 2023~~May 9, 2024
By:	Bruce L. Caswell
	President and Chief Executive Officer
	(Principal Executive Officer)

	/s/ David W. Mutryn	~~August 3, 2023~~May 9, 2024
By:	David W. Mutryn
	Chief Financial Officer
	(Principal Financial Officer)


Table 8.1: Fair Value Measurements
	As of June 30, 2023
	Level 1		Level 2		Level 3		Balance
	(in thousands)
Assets:
Deferred compensation assets - Rabbi Trust	$	27,306	$	—	$	—	$	27,306
Interest rate swaps - $650 million notional value	—		29,647		—		29,647
Notes receivable	—		—		7,397		7,397
Total assets	$	27,306	$	29,647	$	7,397	$	64,350
Liabilities:

Contingent consideration	—		—		12,700		12,700
Total liabilities	$	—	$	—	$	12,700	$	12,700