Earnings call transcript: Maximus Inc. beats Q3 2025 earnings expectations

Maximus Inc. reported strong financial results for the third quarter of fiscal year 2025, significantly surpassing analyst expectations. The company posted an earnings per share (EPS) of $2.16, compared to the forecasted $1.56, marking a 38.46% surprise. Revenue reached $1.35 billion, exceeding the anticipated $1.29 billion. Following the announcement, Maximus’s stock price rose by 4.86%, closing at $74.87. According to InvestingPro data, the company maintains impressive financial health metrics, with a current ratio of 1.84 indicating strong liquidity position. InvestingPro analysis reveals 6 key tips about Maximus’s financial strength and growth potential.

Key Takeaways

• Maximus Inc. reported a 24% year-over-year increase in adjusted diluted EPS.
• The company raised its full-year revenue guidance to $5.375-$5.475 billion.
• Stock price increased by 4.86% following the earnings announcement.
• Maximus achieved significant growth in its defense and technology sectors.

Company Performance

Maximus Inc. showcased robust performance in Q3 2025, with a notable 4.3% organic revenue growth. The company continues to strengthen its position in the government IT and consulting sector, despite market uncertainties. Maximus’s strategic investments in technology and defense capabilities have contributed to its solid results, aligning with broader industry trends toward modernization and efficiency.

Financial Highlights

• Revenue: $1.35 billion, reflecting a 4.3% organic growth.
• Earnings per share: $2.16, a 24% increase year-over-year.
• Adjusted EBITDA growth: 15%.

Earnings vs. Forecast

Maximus Inc. delivered an EPS of $2.16, beating the forecasted $1.56 by 38.46%. This significant earnings surprise marks a continuation of the company’s positive trend in surpassing market expectations. Revenue also exceeded projections, coming in at $1.35 billion against the anticipated $1.29 billion, a 4.65% surprise.

Market Reaction

Following the earnings release, Maximus’s stock price climbed 4.86% to $74.87. This movement reflects investor confidence in the company’s ability to consistently outperform expectations. The stock remains within its 52-week range, with a high of $93.94 and a low of $63.77. InvestingPro analysis indicates the stock is currently undervalued, with analyst targets suggesting up to 38% potential upside. The company’s PEG ratio of 0.45 signals attractive valuation relative to its growth rate. Discover detailed valuation metrics and more insights with InvestingPro’s comprehensive research report, part of their coverage of 1,400+ US stocks.

Outlook & Guidance

Maximus has raised its full-year revenue guidance to $5.375-$5.475 billion and adjusted EPS guidance to $7.35-$7.55. The company anticipates stable revenue for FY2026, with potential growth opportunities in defense and state programs. An expected reduction in interest expenses by $20-$25 million in FY2026 could further enhance profitability. The company’s strong financial position is reflected in its 21-year track record of consistent dividend payments and robust return on equity of 17%. InvestingPro subscribers can access detailed financial health scores and growth metrics that provide deeper insights into the company’s future potential.

Executive Commentary

• "We are purpose built to enable us to scale up to meet increasing demand," said David Mutrin, CFO, highlighting the company’s readiness to capitalize on emerging opportunities.
• CEO Bruce Caswell remarked, "A core capability of MAXIMUS is our ability to translate policy changes into operational models," emphasizing the company’s adaptability in the evolving government services landscape.

Risks and Challenges

• Market uncertainty in government IT and consulting sectors.
• Potential impacts from policy changes and government efficiency initiatives.
• Competition in the defense and technology modernization markets.

Q&A

During the earnings call, analysts inquired about growth prospects related to the One Big Beautiful Bill Act and the company’s capacity for processing VA claims. Management addressed these concerns, highlighting strategic initiatives to leverage new legislative opportunities and enhance operational efficiency.

Maximus Inc.’s strong Q3 performance and optimistic outlook underscore its strategic positioning in the government services sector, with ongoing investments in technology and defense paving the way for sustained growth.

Full transcript - Maximus Inc (MMS) Q3 2025:

Conference Operator: welcome to the MAXIMUS Fiscal twenty twenty five Third Quarter Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jessica Bat, Vice President of Investor Relations for Maximus.

Thank you, Ms. Bate. You may begin.

Jessica Bat, Vice President of Investor Relations, MAXIMUS: Good morning, and thanks for joining us. With me today is Bruce Caswell, President and CEO David Mutrin, CFO and James Francis, Vice President of Investor Relations. I’d like to remind everyone that a number of statements being made today will be forward looking in nature. Please remember that such statements are only predictions. Actual events and results may differ materially as a result of risks we face, including those discussed in Item 1A of our most recent Forms 10 Q and 10 ks.

We encourage you to review the information contained in our recent filings with the SEC and our earnings press release. The company does not assume any obligation to revise or update these forward looking statements to reflect subsequent events or circumstances, except as required by law. Today’s presentation also contains non GAAP financial information. Management uses this information internally to analyze results and believes it may be informative to investors in identifying trends, gauging the quality of our financial performance and providing meaningful period to period comparisons. For a reconciliation of the non GAAP measures presented, please see the company’s most recent Forms 10 Q and 10 ks.

And with that, I’ll hand the call over to Bruce.

Bruce Caswell, President and CEO, MAXIMUS: Thanks Jessica, and good morning. I’m excited to share another record breaking quarter for MAXIMUS earnings. For the third quarter fiscal year twenty twenty five, adjusted diluted earnings per share reached $2.16 a 24% increase year over year. We realized 15% growth in adjusted EBITDA. Finally, Q3 revenue of $1,350,000,000 is growth of 4.3% on an organic basis year over year.

Congratulations to the tens of thousands of MAXIMUS team members responsible for these accomplishments. In what has been for many in the government IT and consulting sector an uncertain environment, we have remained resilient, focused on our customers and on consistent quality delivery at scale. Since our Q2 earnings call, we’ve seen clarification of certain priorities of the administration and the introduction of new legislation, the impacts of which will cascade to our state customers. We have come to expect this over decades of serving our government customers and we believe that we are ideally positioned to respond. As I’ve said for years, a core capability of MAXIMUS is our ability to translate policy changes into operational models, largely performance based that deliver accountable outcomes aligned with the mission of our customers.

In short, I believe we are purpose built for the operating tempo of today’s environment. As part of our business update, I’d like to share why we believe that we are well positioned to assist both federal and state clients as the details of recent legislation and regulatory changes become more clearly understood and implementation planning begins. Let’s first look at the One Big Beautiful Bill Act, which we believe could create meaningful addressable opportunities for us following proposed changes in Medicaid and SNAP. Turning to Medicaid. The administration continues to focus on managing federal spend on Medicaid.

The legislation will impose certain administrative activities while shifting more enforcement responsibility to the states. Most notably, there’s now a twice yearly up from annual requirement to determine eligibility for the Medicaid expansion population. This comprises an estimated 21,000,000 people across the 41 states that have expanded Medicaid coverage to those making up to 138% of the federal poverty level. States must review their program processes and implement changes to ensure compliance by December 2026. Our U.

S. Services team will be working closely with current and prospective state clients to help them meet these new requirements, while continuing to deliver exceptional customer service. As I noted on our last quarterly call, in many cases this could include assisting beneficiaries in transitioning to a marketplace plan to provide continuity of coverage. Secondly, the recent legislation codifies Medicaid work requirements for the expansion population, while some states through waiver authority are seeking to include certain individuals in traditional Medicaid categories. Starting 01/01/2027, states will be required to verify with participants completion of eighty hours per month of qualifying activities.

This is a major policy change, but not one with which we lack familiarity. During President Trump’s prior administration, at the direction of one of our state clients, MAXIMUS developed and implemented operational modifications designed to beneficiary work requirement reporting as accessible and efficient as possible while meeting policy objectives. With this new statute in effect, we are again working with our state customers to demonstrate how to modify program operations to comply with the new law while maintaining a high level of quality of beneficiary engagement. Notably, the new law prohibits managed care plans from performing work activity verifications or handling exemption requests, which would constitute a conflict of interest. As an established conflict free partner, MAXIMUS has the independence necessary to support our state clients with compliance under the new legislation.

Our human centered and technology supported approach to compliance with the new law efficiently leverages existing program investments like contact center infrastructure and digital services. Our goal is for beneficiaries to engage through whatever modality is best for them, call, text, mobile app and so forth, and that their experience is respectful and empathic. The last piece of the bill I’ll discuss is its impact on State Supplemental Nutrition Assistance Programs or SNAP. Driven by a nearly 11% national payment error rate in 2024 according to the USDA, the new legislation enacts eligibility accuracy requirements in order for states to maintain federal funding levels. Beginning with 2025 or 2026 data, states with higher SNAP payment error rates will be required to cover more of the program’s cost, shifting what was once a fully federally funded benefit partially onto state budgets.

Last quarter, we discussed the recent OPM guidance that increases flexibility states have to use contractors and contracted employees to execute programs. This policy change allows companies like MAXIMUS to help states meet new requirements whether in Medicaid, unemployment insurance or in this case SNAP. We are excited to help our current and prospective clients implement technology led solutions that increase efficiencies, accuracy and provide a consistent high quality customer experience. I’m pleased that subsequent to the quarter close, we executed a contract modification with one of our longtime state customers to take on an expanded role in supporting SNAP administration. With a strong track record of partnering with state governments to navigate and implement complex policy changes, we are increasingly confident in the growth trajectory of our U.

S. Services segment over the next eighteen to twenty four months. As implementing regulations are formalized and states move from planning to operationalization of these new policies. Beyond the bill, we are seeing a heightened focus on reducing spending and increased efficiencies and greater use of technology at the agency level. We believe this is an excellent opportunity to implement more efficient technology led models for the delivery of citizen services and program missions.

As I mentioned last quarter, I’m pleased that we had minimal impact this fiscal year from any change in contract actions. We believe this speaks to the nature of the services we provide and our earned reputation for delivering quality outcomes accountably under performance based contracting models. Looking ahead, as has been the case for years, federal and state budget priorities and cycles reflecting macroeconomic trends will shape our FY 2026 outlook. David will share more color in his prepared remarks and how specifically we’ve considered budget headwinds and policy driven tailwinds in our early color for fiscal year 2026. Now let me turn to the business more broadly.

During our twenty twenty two Investor Day, we committed to investing in our leadership team and building strength through client relationships and laid out a strategy for growth through targeting adjacent agencies. This time last year, I shared that we were expanding our growth team through leaders and teams aligned to specific U. S. Federal markets: civilian, defense and health. The combined success of these two strategies is evident in our recently announced win at the Department of Defense.

MAXIMUS secured a $77,000,000 contract with the U. S. Air Force Lifecycle Management Center to provide cybersecurity and cloud based services aiming to enhance innovation and operational readiness across the DoD. The contract spans a base year with four one year options and a potential six month extension. Under this contract, MAXIMUS will work to deliver scalable and resilient cybersecurity, cloud and engineering support across multiple security domains.

Congratulations to the team members who worked diligently to make this possible. We believe this win is further evidence of our ability to expand into adjacent agencies and deliver capabilities aligned with the mission of our Air Force customer. We’re proud to have the opportunity to play an increasing role supporting our country’s national security priorities. Our 2022 strategy also emphasized expanding our technical capabilities, which in the federal government often require independent certification to broaden the aperture of our pipeline. As part of that forward looking approach, we recently achieved Cybersecurity Maturity Model Certification or CMMC Level two, an important milestone.

Effective mid December twenty twenty four, CMMC two point zero is a DoD initiative designed to standardize and elevate cybersecurity practices across the defense industrial base. Our recent CMMC Level two certification validates our enhanced cybersecurity posture as a defense contractor. We also anticipate that it should position us to compete effectively across the entire federal government contracting landscape as these standards are likely to become the norm. This added certification has already resulted in the expansion of our pipeline with potential new work in new addressable areas in FY 2026. Within The U.

S. Federal Segment, we expect that these and other accomplishments will contribute to the ongoing success we are seeing in our financial results. In 2022, we set a target of 10% to 12% operating income in the segment. This year, we are forecasting to meaningfully exceed this target. Now let me turn to awards reporting and the pipeline.

Through the 2025, signed awards totaled $3,400,000,000 of total contract value. Further, at June 30, there were $1,400,000,000 worth of contracts that have been awarded but not yet signed. These awards translate into a book to bill of approximately 0.8 times using our standard reporting for the trailing twelve month or TTM period. In a BPO centric business like ours, with average contract length and values at the higher end of the industry, the TTM book to bill metric is naturally sensitive to rebid timing. We’ve seen this in recent quarters characterized by lower than normal rebid levels.

As such, we view book to bill as only one measure of future growth. To illustrate, our book to bill at the end of the 2024 was 0.6 times. Since then, revenue has grown 4.3% and adjusted EBITDA 15%, underscoring how on contract growth is another important source of organic growth, providing added strength and resilience to our portfolio. We continue to view book to bill as a valuable metric, but one that must be interpreted in the full context of contract timing, backlog dynamics and overall financial performance. Our total pipeline of sales opportunities at June 30 was $44,700,000,000 compared to $41,200,000,000 reported at March 31.

The current pipeline is comprised of approximately $3,100,000,000 in proposals pending, dollars 1,200,000,000.0 in proposals in preparation and $40,400,000,000 in opportunities we are tracking. Of our current pipeline, approximately 63% represents new work. Additionally, 67% of the $44,700,000,000 total pipeline is attributable to our U. S. Federal Services segment.

I’ll wrap my remarks with a brief recognition of MAXIMUS’ fifty years of service, which we celebrate this year. Since 1975, MAXIMUS has served as a delivery partner for government, turning legislation and policy into real world results. Our work spans some of the nation’s most complex, high volume programs delivered with speed, precision, efficiency and accountability. Leveraging this strong fifty year foundation, we are excited about the MAXIMUS of the future and our rapid transformation as a technology partner and solution provider to government. Let me give you an example of where this is showing up today.

I’m excited about our role in the upcoming National Defense Industrial Association or NDIA hackathon, which we are co sponsoring with organizations including AWS and Palantir. This first of its kind event will be held at George Mason University’s FUSE facility and the Washington Convention Center in late August. The hackathon is intentionally designed to address real operational problems facing The U. S. Military today and accelerate the access to innovative technology for our servicemen and women.

Championed by our Chief Digital Information Officer and Chief Technology Officer and reflecting the impact of our defense and national security team, we believe this is another demonstration of MAXIMUS leading the way with innovation. Our drive to accelerate access to technology and its practical application to national security mission objectives reflects an imperative of our nation and a strategic differentiator for MAXIMUS. And with that, I’ll turn the call over to David.

David Mutrin, CFO, MAXIMUS: Thanks, Bruce, and good morning. We had outstanding third quarter results, particularly on the earnings side, driven by solid execution on programs where our government customers increasingly rely on us for efficient handling of greater work output. These results reflect high demand in what are predominantly performance based arrangements across our contracts. We are raising guidance again this year to not only account for the performance this quarter, but to also capture improved clarity for the upcoming fourth quarter as compared to our thinking on the last call. I’ll end my remarks today by sharing early thinking on our expectations for fiscal year twenty twenty six, which precedes formal guidance this November.

Turning to the results for this 2025, MAXIMUS reported revenue of $1,350,000,000 representing 2.5% year over year growth or 4.3% on an organic basis. The U. S. Federal Services and the Outside The U. S.

Segments both posted positive organic growth with the U. S. Federal Services segment being the main driver of our consolidated results. The U. S.

Services segment delivered results in line with expectations. On the bottom line, the MAXIMUS adjusted EBITDA margin was 14.7 and adjusted EPS was $2.16 for the quarter, which compares to thirteen point one percent and $1.74 respectively for the prior year period. This quarter’s adjusted EBITDA margin is noticeably above the high end of our target range. This can happen in periods where volumes are stronger than anticipated, thanks to our ability to gain operating leverage on incremental volumes. This leverage is partly the result of our intentional investments in technology, workflow optimization and cost models.

Turning to segments. Revenue for the U. S. Federal Services segment increased 11.4% to $761,000,000 Growth was all organic. We’ve seen a favorable trend this year where volumes on certain programs, especially in our clinical portfolio, have continued to come in at an elevated run rate.

Two years ago, we deliberately invested and added capacity for our clinical work and that action is now paying dividends as we can scale up to meet the high demand. The operating income margin for the segment in the third quarter was 18.1% as compared to 15.5% in the prior year period. This has set a new high watermark for the segment margin and is a testament to our ability to process elevated levels of work to help our customers. As I mentioned, those elevated levels, which can be unplanned, have a significant effect on the bottom line. For The U.

S. Services segment, revenue decreased slightly to $440,000,000 as compared to the prior year period revenue of $472,000,000 Last year’s results were positively impacted by the excess volumes tied to the Medicaid unwinding exercise that was largely completed during the 2024. I’d like to acknowledge our success in addressing the unwinding exercise last year, demonstrating how change can promote opportunity. As noted in Bruce’s prepared remarks regarding Medicaid and SNAP, we see a similar opportunity for MAXIMUS to rapidly implement policy and legislative changes in support of our customers. The segment’s operating income margin for the third quarter was 10.2% compared to 13% for the prior year period, which benefited from the excess unwinding volumes.

In our view, the segment continues to perform and execute well and we are focused on driving bottom line improvement headed into next fiscal year when we expect stronger volume levels even before taking into account new market opportunities. Turning to the Outside The U. S. Segment, revenue decreased to $147,000,000 for the quarter, primarily due to divestitures of multiple employment services businesses in prior periods. The related decrease in revenue was partially offset by organic growth of 7.3% and a slight currency benefit.

The segment’s operating income margin this quarter was 4% and compares to a small loss in the prior year period. We’re pleased to report ongoing margin stability in the segment with our goal over the longer term to drive further margin improvement through continued scaling in our present markets. Turning to cash flow items. Cash provided by operating activities was a net outflow of $183,000,000 and free cash flow was a net outflow of $198,000,000 for the quarter. As we saw last quarter and anticipated for this current quarter, we saw a continued cash flow impact by payment delays.

Days sales outstanding or DSO stepped up again to ninety six days for this quarter, which as I remarked on the last call, we expect to be at peak. It’s also well above our historical range and a dynamic that we view as temporary. The payment delays and corresponding higher DSO were primarily driven by two programs, both of which have had positive updates in July that I will take a moment to describe. The first is one of our major U. S.

Federal programs. We experienced administrative delays that led to a significant increase in our build AR balance as of June 30. I’m pleased to report that we made meaningful progress and collected more than $300,000,000 related to this major U. S. Federal program in July.

The second is one of our large state based programs that we disclosed last quarter. We faced administrative delays tied to a pending contractual extension of our work, which drove an increase to our unbilled AR balance. The positive update is that we received the fully executed extension in July, which prompted $224,000,000 moving from unbilled AR to billed AR. This alone brings our unbilled AR back into a normal range. We anticipate collecting this balance in the fourth quarter.

The positive impact of these two items give us confidence in our expectations for a strong fourth quarter of free cash flow as evident in our updated free cash flow guidance. As a reminder, the exact timing of payments can impact reported free cash flow at September 30. We ended the third quarter with total debt of $1,670,000,000 resulting in a consolidated net total leverage ratio of 2.1 times. High near term borrowings necessary to cover the higher DSO has increased this ratio, yet we are still at the low end of our target range of two to three times. As a reminder, this ratio is our debt net of allowed cash to consolidated EBITDA for the last twelve months as calculated in accordance with our credit agreement.

Going forward, by September 30, we expect the ratio to be comfortably below two times. The delay in collections has also prompted a more constrained approach to capital allocation, though we believe the recent improvements should enable us to return to our historic approach. This includes seeking potential opportunities on the M and A front and resuming opportunistic share repurchases utilizing the approximately $66,000,000 remaining under the current $200,000,000 Board of Directors share repurchase authorization. Moving to updated guidance for fiscal year twenty twenty five, we’re announcing our third consecutive guidance raise, which reflects the exceptional results this quarter as well as an improvement to our outlook for the fourth quarter, thanks to better visibility and less uncertainty compared to our prior thinking. For revenue, the midpoint is increasing by $100,000,000 to a range of $5,375,000,000 to $5,475,000,000 Our implied full year organic growth rate now stands at about 4% over the prior year.

Our full year adjusted EBITDA margin guidance for fiscal year twenty twenty five is now approximately 13%, which is a 130 basis point improvement from prior guidance. Our adjusted EPS guidance increases by $1 at the midpoint to range between $7.35 and $7.55 per share. At the midpoint, this reflects year over year earnings growth of 22%. With the positive updates to the temporary conditions impacting DSO that I mentioned, we expect a strong finish to the year for free cash flow. We are raising our free cash flow guidance to between $370,000,000 and $390,000,000 We anticipate DSO falling back to more normal levels next quarter, thanks in part to the now finalized state extension and expected imminent payment.

To be clear, our guidance assumes that we will collect the $224,000,000 now billed related to that contract prior to 09/30/2025. A few words on segment operating margin assumptions. The U. S. Federal segment is now forecasted to deliver a margin of approximately 15%.

U. S. Services segment is expected to be around 10.5% and outside The U. S. Is expected to be between 35% for the full fiscal year.

We expect interest expense of approximately $81,000,000 and our full year tax rate expectation of between 2829% is unchanged. As a reminder, the higher tax rate on a full year basis is tied to the divestiture related charges in the first quarter. The weighted average shares expectation is also unchanged at 58,000,000 shares on a full year basis. I’ll wrap up by sharing our early thinking on our expectations for next fiscal year. As always, this proceeds official guidance that we will provide for fiscal year twenty twenty six on the year end call in November.

As context, a year ago, we expressed some caution on fiscal year twenty twenty five year over year growth given the excess volumes we experienced in fiscal year twenty twenty four, most notably related to our support of Medicaid programs. Our initial guidance for the year that we provided in November then adjusted in December for the divestiture was revenue of $5,250,000,000 and adjusted EPS of $5.85 at the midpoint. Since then, our midpoints have increased by $175,000,000 for revenue and $1.6 for adjusted EPS. We have successfully delivered on higher volumes, particularly in our clinical portfolio in The U. S.

Federal segment, while also continuing to drive technology and process efficiencies in our cost structure. We are purpose built to enable us to scale up to meet increasing demand, recognizing that from time to time components of our business that are volume sensitive can be less easy to precisely predict. As we now look to fiscal year twenty twenty six revenue, it’s still early enough to have wide ranging scenarios. Two areas of focus that are dynamic and create a wider range of scenarios are: first, volume based contributions that we are not certain will recur at the same level as they have in fiscal year twenty twenty five second, we are carefully watching for signs of budget constraints and efficiency objectives from customers, which may create opportunities in the long run, but may create near term headwinds on both the federal and state side. We are staying equally focused on the opportunities in front of us, some of a material nature that could be decided in early fiscal year twenty twenty six.

This includes proposals sitting in both our in preparation and submitted buckets that if successful, we anticipate could mildly contribute to fiscal year twenty twenty six and then make stronger contributions to fiscal year twenty twenty seven. We’re also spending time now preparing for opportunities tied to the one big beautiful bill. The exact implementation timeline related to these opportunities is uncertain and therefore we are prudently forecasting the revenue contribution in fiscal year twenty twenty seven, although it is possible some portion could come in fiscal year twenty twenty six. All that said, at this stage, our preliminary thinking is we have visibility into an anticipated revenue range that is roughly in line with or possibly just slightly below our now raised fiscal year twenty twenty five guidance. There are also scenarios of modest revenue growth, which we believe would result from some combination of less volume moderation on current programs, less impact from budget constraints coming to fruition and acceleration in revenue from the opportunities we’ve discussed and updates to the administration’s priorities that increase demand for our services.

I’ll add that our early view also contemplates that in fiscal year twenty twenty seven, we could see acceleration of organic growth that maps to these opportunities. Stepping back, we believe this demonstrates the business is running in a disciplined manner while we execute on our growth strategy that aligns with our customers’ priorities. On the margin front, our current view is we expect next year’s adjusted EBITDA margin to remain near the high end of our 10% to 13% target range. This was consistent with the implied guidance for our fourth quarter of about 12.5%. This represents a significant improvement to our fiscal year twenty twenty four adjusted EBITDA margin of 11.6% and our initial fiscal year twenty twenty five guidance of approximately 11%.

We believe the sustainability of these higher levels reflects our continuous improvement of productivity and efficiency in our delivery, while accommodating our growth investments. The final component to this early view is interest expense, where we anticipate a meaningful reduction next fiscal year. Once more, this represents our early view of our expectations and we plan to provide formal guidance in November as usual. In conclusion, we’re pleased that recent performance shows us meeting our targets that we have set for ourselves and communicated to shareholders in recent years with respect to both our organic revenue growth rate target and our goal to grow earnings faster than revenue. From fiscal year twenty twenty two to today’s fiscal year twenty twenty five guidance, organic revenue growth averages 7%, comfortably achieving our mid single digit target.

In addition, during that same period, we have been able to grow earnings by almost 20% on a compound annual growth rate basis. Looking forward into fiscal year twenty twenty six and beyond, we believe that our organic revenue growth potential remains well intact. And with that, we will open the line for Q and A. Operator?

Conference Operator: Thank you. We will now be conducting a question and answer session. Thank you. Our first question comes from the line of Charlie Straezer with CJS Securities. Please proceed.

Charlie Straezer, Analyst, CJS Securities: Hi, good morning.

Bruce Caswell, President and CEO, MAXIMUS: Hey, good morning, Charlie. Hope you’re well.

Brian Gesold, Analyst, Raymond James: Good. Thank you. Likewise. And just if we could start off with the big beautiful bill and where MAXIMUS could or should benefit from potential work. Talk about what the key drivers are kind of behind that those opportunities.

And you have some flexibility now to go up to some more outsourcing type projects at the state level and the federal level like unemployment or social security, things like that?

Bruce Caswell, President and CEO, MAXIMUS: Sure, Charlie. I’d be happy to. And appreciate, the last point of your comment, especially because as we’ve looked at the market opportunities, what may be a bit counterintuitive is that the opportunities within those other program areas, are actually collectively more substantial than even the immediate opportunities within the Medicaid area. So let me kind of walk through all of that because that’s a very important area. So as you well know, the one big beautiful bill actor, OBDBA, has some significant outcomes for our US services segment in the areas primarily of Medicaid and SNAP initially.

There’s an increased in the Medicaid area, I’ll just kind of unpack each of them. There’s an increased emphasis on program eligibility and on work requirements as I discussed in my prepared remarks. And we together view those as having a positive impact, and really an important lever for U. S. Services organic growth, although we’re presently really not incorporating that in our FY 2026 guidance to any substantive level.

We really see it as an FY 2027 growth factor for the company. The main reason being that it takes time to get from the legislation itself to the implementing regulations. Our understanding is that the implementing regulations for work requirements won’t be finalized until June 2026. Giving states, you know, this kind of sets up a bit of a squeeze, right? Because they then have until December 2026 to get ready and get implemented and be underway in January 2027.

So we think that this putting this in the context of growth, historically, we characterize the U. S. Services segment as capable of low to mid single digit organic growth and whereas federal would be more mid to high. So collectively, the total company would be a mid single digit grower. This area that we’re discussing, just the Medicaid work requirements and program integrity, which relates to needing to redetermine eligibility for the expansion population, twice a year rather than once a year, we expect to be a positive uplift to that U.

S. Services growth rate. And while it’s early days, it could bring that growth rate more to the mid to high single digit range over time. And we think also that, given our history and the work that we’ve done for so many states over the years for Medicaid, but maybe more importantly from an economic standpoint, the invested infrastructure that’s already out there that exists, We’re really very well positioned as a company to go address that. So now broadening the aperture, when we think about opportunities in SNAP and even beyond that unemployment insurance, there are macro factors already in play.

We’re seeing some budget pressures that are really indicating early headwinds for FY 2026 from states. But at the same time, we always view these as creating opportunity. And I feel like the table is set for more opportunity now than we’ve seen historically because we have the ability under the guidance that was provided by OMB back on March 11 to give states greater flexibility in working with contracted vendors or contracted resources provided they meet merit principles, which we have certified we do, in delivering these programs. We have a great track record also having served, I think about 17 states from an unemployment insurance standpoint back during the pandemic. And so depending on how things play out, states could easily say, look, these are kind of tighter times.

We want to focus on working efficiently with private sector partners and MAXIMUS is in an excellent position to assist them in that regard. From an opportunity sizing perspective, we actually are the way we look at those markets, we see them as having larger average capture size than the Medicaid work that I described. And so it’s early innings and we’ve got less certainty around how all this comes together at the state level and which states might move sooner than others. I mentioned in my prepared remarks that I was thrilled that we already have had one of our large state customers expand the contract to enable us to do more work in the SNAP area. So as that plays out, those net new opportunities could collectively tip the U.

S. Services segment into double digit growth over time. Again, we’ve taken a cautious view for FY 2026 of that, but we really feel like it could be a significant tailwind for us as we go into FY 2027. So the conversations we’re having with our customers are early days. They remain in planning mode.

Many customers wanted to wait to engage until the legislation was passed. Some customers are saying, we need to explore what their implementing regulations might mean. But there’s another element of this to keep in mind is that this is not our first rodeo when it comes to implementing some of these requirements. During the prior administration, as I mentioned in my remarks, we really worked with the state all the way through an operating model to enable them to address work requirements. And so we’ve got a playbook that’s ready on the shelf.

We’ve updated it. And it doesn’t require significant investments in new systems and technology. It’s more investments to enable us to configure the infrastructure that we already have in place to handle things like Medicaid eligibility and so forth and consumer engagement, as I mentioned. So with all that said, that’s why we’re taking a view that we characterize it mostly as an FY 2027 opportunity, but really, a great opportunity for U. S.

Services. I don’t know, David, would you add anything to that?

Charlie Straezer, Analyst, CJS Securities: Nothing to

Bruce Caswell, President and CEO, MAXIMUS: add. Okay. Hope that helps, Charlie. Other questions?

Brian Gesold, Analyst, Raymond James: Yes. Certainly. Taking on from the looking at these opportunities, I mean, obviously, it’s very early, but any chance of any kind of quantification of what the benefit might look like or given the wide range obviously?

Bruce Caswell, President and CEO, MAXIMUS: Well, I tried to provide a little bit of that just in terms of what it could mean for the growth rate for the overall segment. So I think you can impute from that with work requirements and the enhanced eligibility requirements, we think it could lift U. S. Services from mid single digit to high single digit. And certainly depending on the timing and size of opportunities in other areas, including helping assisting states with SNAP and assisting states with UI.

It could take it conceivably into the low double digit area. The SNAP one is, a particularly interesting one because many states are looking at their payment error rates and doing the math and saying, look, we stand to lose, in some cases, hundreds of millions of dollars of federal funding. So the cost benefit is pretty straightforward. If they can make an investment of, a fraction of that in addressing some of the key items that are bottlenecks in that process leading to higher error rates, then there’s a huge return for them. And that always can, you know, becomes a compelling, platform for, you know, for, for seeking assistance from companies like Maximus.

Brian Gesold, Analyst, Raymond James: Great. Thanks, Bruce. And just looking at your competitive advantage against potential competitors that are out there. When you think about the conflict free nature of your business, are there many competitors that can claim the same level of conflict free?

Bruce Caswell, President and CEO, MAXIMUS: Well, we’ve said for many years that we’re we’ve made a very deliberate decision to remain independent and conflict free and in particular have no direct or indirect financial relationships with payers or providers, which is very critical to the work that we do in the Medicaid space and to a certain degree as well the Medicare space. And because of that, it was very important to us as well, as I mentioned in my remarks that from a work requirement standpoint, this is work that needs to be done in a very conflict free manner, where beneficiaries are reporting obviously, whether they’re engaged in work, but more importantly, whether they may have a qualifying condition that could exempt them from those requirements. And as I noted, that then becomes really off limits in terms of managed care plan engagement with beneficiaries. That’s an important very important element of the law that’s been passed that I think is only now becoming recognized within, the state community and we’re helping ensure that that’s the case. In terms of other companies in a similar position, we’ve from time to time noted smaller privately held companies that have similar characteristics.

But I would just say side matters in this market and we have an established presence as the Medicaid managed care enrollment broker in, I think it’s about 23 states presently. We probably serve, would say roughly 60% of the individuals nationally on the Medicaid program. And as you’ve seen, even just from evidence in this the results this quarter, scale is everything in this area of the business. And we think that the invested infrastructure that’s been bought and paid for by government that can be easily modified at an incremental expense and not a massive new cost of investment puts MAXIMUS in a great position to help address these opportunities and creates candidly a bit of a competitive barrier. And I think that that’s important because in this era of just intense focus on greater efficiency and greater capital utilization, the government deserves to benefit from the investments they’ve already made.

Hope that helps.

Brian Gesold, Analyst, Raymond James: Very helpful. Thank you, Bruce. And then looking at the recent DoD win, for the Air Force, is defense going to become more of a kind of an increasing focus for you guys?

Bruce Caswell, President and CEO, MAXIMUS: The short answer is yes. And I appreciate the question. I feel like I’m disadvantaging David here in terms of question. So I hope you have one for him too. We’ve long recognized that our core capabilities across the company have a role to play in the defense community.

But candidly, we had so much work on our plate historically, integrating acquisitions and expanding in certain areas of the civilian world that had not been a focus. But this has been something we’ve been planning for quite some time. In 2021, when we combined our business with Veterans Evaluation Services, we identified what we call a synergy pipeline. And those are the opportunities where we know that once combined with VES, we’ve now got the right to win in areas that include the DoD and in particular the defense health community, which is something we’ve been focused on. In prior calls, I’ve mentioned that I’ve been pleased that of the three pipelines that we look at, which is the civilian pipeline and federal, the health pipeline and then the defense pipeline, that defense health area has been really moving nicely.

It’s kept going. So we are now seeing pipeline opportunities that we first identified back in 2021 coming to fruition and going through adjudication and that could lead to growth drivers for the company as we, traverse 2026 and really get into FY 2027. So little bit back end loaded, but another area to point to as we think about our FY 2027 modeling. The other point I’d make is

Speaker 6: that the

Bruce Caswell, President and CEO, MAXIMUS: technology modernization challenges that we’re seeing in the civilian area in terms of modernizing antiquated legacy applications, migrating to the cloud, and so forth are obviously seen in the defense community as well. So some of the core competencies and skills that we need to bring to bear in terms of, assisting customers in moving, if you will, kind of payloads, application stacks into the cloud, modernizing them, even in some cases then buying those back as a service that can be delivered are important to the defense community. And that’s why the achievement recently of the CMMC Level two for us that I mentioned is was so critical. And it was critical that we got it done quickly. And I would say compared to many in the community, we got it done faster than others.

And we’re I’m super proud of the team for doing that. The third point I make is that in terms of the positioning is that we’ve really brought in some amazing, excellent new leaders in the technology organization. And these individuals and the teams that they’ve built around them have deep experience working for defense customers. So we’re better aligned now overall to the direction of travel of the DoD. We’re seeing this all pay off in the Air Force win that I mentioned, and that really showcases the capability of MAXIMUS to be a trusted partner in the delivery of mission oriented work for a defense customer.

Overall, if we back up a little bit, the administration is saying they want a greater focus on performance based contracts where it’s practical. They want to open up the supplier community and engage more of the commercial providers. And as you know, because you’ve followed us for so many years, Charlie, that MAXIMUS has deep experience and capabilities when it comes to performance based contracting. And further, we’ve got strategic relationships that we’ve been developing and that we have been kind of bringing to the market with key commercial software providers that are addressing the government marketplace. So we’re putting all of these pieces together and we feel that while the defense pipeline is substantive portion of our pipeline presently, it’s got a much greater potential for us over the longer term and then the current defense revenues we have today.

So I’d wrap it all up by just saying that we view a very strong opportunity set that’s out there that’s really untapped by us. We’re encouraged by the early indications of our right to win as evidenced by the Air Force award. And in particular, we’ve been doing things like demonstrating thought leadership, whether it’s through the work in artificial intelligence and creating an AI roadmap for a certain defense customer that I’ve mentioned on previous calls or the NDIA hackathon that’s coming up in August, where we’re front and center as a sponsor and participant in that. I really feel like we’ve got a bright future ahead and we’re taking it in a very thoughtful, pragmatic way that allows us to leverage our capabilities, move adjacently into these areas and deliver greater value for our nation. That’s As very, very I like to say, hope that helps.

Brian Gesold, Analyst, Raymond James: It certainly does. And David, not to leave you out, Looking at the guidance for the rest of the year, thank you for giving us the operating margin ranges. But any chance you can share with us the splits of the top line for Q4 by segment?

Charlie Straezer, Analyst, CJS Securities: I’m sorry, what was the last part of your question?

Brian Gesold, Analyst, Raymond James: Just looking at the total revenue, any chance you could give us some guidance for how that should split up by segment?

Charlie Straezer, Analyst, CJS Securities: Yes. Good question. It’s probably a little too early to say because I think some of the same kind of risks and opportunities that I pointed to are present in both of the larger two segments and the two U. S. Segments.

So I think both have a wide range of scenarios in a similar manner. Some a little different than other, with The U. S. Services market more sensitive to the timing of any opportunities that could result from the areas that Bruce highlighted in your first question. And certainly, on the federal front, budget constraints as agencies are looking to become more efficient and whether that results in near term opportunity or risk and whether or not the timing aligns on the two, even though we think the opportunity the great opportunity to bring new ideas and look for potential growth such as contract consolidations and that sort of thing.

That sometimes comes along with potentially giving up revenue elsewhere. So I’m hesitant to give segment level guidance at this stage.

Brian Gesold, Analyst, Raymond James: Got it. Okay. That’s fair. Just looking at the overall early thoughts, obviously, if you come in line with FY twenty twenty five revenue in FY 2026, is there given the operating leverage of the model and the efficiencies you’ve been able to realize by segments, if you look at the bottom line, the EPS if you will, is there a chance that we should see some growth there even with flat revenue for next year?

Charlie Straezer, Analyst, CJS Securities: Yes, good question. So we were pretty specific with our thinking for the EBITDA margin, which of course you could think of a range around in my prepared remarks, I pointed to the implied margin for Q4 of this year is about 12.5%. As we look at FY 2025, we’ve just reported here an extraordinary quarter with EBITDA margin at 14.7%. And so I think we’d be reticent to expect another quarter like that to recur and lift the future period. So that kind of explains maybe why we’re looking at 12.5% next year versus closer to 13% in our guide for fiscal year twenty twenty five.

But I guess the other thing I would point out on the earnings front, which said in my prepared remarks, I didn’t quantify is that our interest expense could be another tailwind to our EPS. If we look at our projected cash flow, right, just here ahead of us in the fourth quarter as well as through next year, absent M and A or share repurchases, the delevering, we anticipate would drive interest expense being 20,000,000 to $25,000,000 lower next year. So that could be like a $0.30 EPS type year over year improvement there. So that provides some bottom line potential as well.

Brian Gesold, Analyst, Raymond James: Excellent. Great. It’s been very helpful. Thanks so much.

Bruce Caswell, President and CEO, MAXIMUS: Thank you. Charlie.

Conference Operator: Our next question comes from the line of Brian Gesold with Raymond James. Please proceed.

Bruce Caswell, President and CEO, MAXIMUS: Hey, good

Speaker 6: morning. Morning. Appreciate the color and really strong results here. A couple of questions. I want to maybe start off with the VA.

You had made a lot of investments in the back office to increase both efficiency and capacity. Can you talk about where we’re at with those investments you’ve made?

Bruce Caswell, President and CEO, MAXIMUS: Sure. I’d be happy to, Brian. I’ll start and then I’m going turn it over to David for some additional thoughts. So yes, we have we began by investing in building out our network. The key, we believe, this contract is to have a very broad national network that includes the ability to reach into rural areas.

We’ve also invested heavily in rural in the infrastructure field, the vehicles that we use for mobile clinics so we can meet veterans on their terms, often in places like Walmart parking lots and so forth, to make sure we’re serving veterans wherever we possibly can. So there have been infrastructure investments, brick and mortar, vehicles, modernized vehicles and so forth. There’s been investments in building out the clinical network so that we’ve got the broad array of specialists that are needed, particularly because with the PACT Act, for example, logical case would be there’s a lot more folks that need pulmonary lung function tests and so forth. So you have to build that out. Then there’s been technology investments.

And we’ve been thoughtful and I would say phase wise in our approach of introducing technology, because in some ways you’re changing the engine in the plane while you’re flying it, to use that analogy. The technology, that we had been using, I would say, a way to characterize it would be it was not as modern as other technologies in the sense of allowing us to, for example, identify potential errors in a process early on and avoid them being created. So you end up putting more time and effort into the quality control function downstream if you’re not catching the potential errors earlier. The new technology that we’re introducing, it’s all focused on the veteran experience and on expediting claims through the process with a high, high degree of accuracy and less need for individuals involved in more routine and mundane tasks tasks in processing the claims. And so it’s still early days, and we’ll be rolling those capabilities out as we close out this fiscal year and enter the next fiscal year.

We expect that, that will enable us to really step up, again, and now in that area, the throughput of the business and the quality process of the business should become simplified in that regard. The last thing I’d say is that we are real partners with the VA and wanting to make sure veterans, have the best experience possible. And in some cases, means doing, a greater job as we possibly can to get through very, very complicated medical records. It’s not uncommon in this business to have an average case file include a medical record that’s 3,000 to 5,000 pages, in length. That’s a lot of information for a clinical reviewer to get through.

So without giving up a lot of details, I will just say we’ve invested heavily in two areas, where artificial intelligence and machine learning can be of great assistive value. Initially, one area, and I talked about this on a prior call, is in just helping organize that information, which is heterogeneous in nature. It could be a printout from an electronic medical record, it could be case file notes, it could be, results from clinical tests or exams. Getting that all organized in a manner where there’s a common taxonomy to it and can be navigated quickly is something that’s not simple to do, but something that we’ve done an excellent job of. And that’s enabled us to present information to clinical reviewers in a much more streamlined fashion.

The next thing we’ll do and that we’ll work on is making sure that if there is information in that medical record that’s relevant, timely, meets the requirements of the VA, that we extract it and make use of it so that we’re minimizing the requirement for veterans to necessarily be seen. If they may have been seen previously in the last, say, last six months and the results of that visit could be sufficient to meet the requirement of the exam. So a little bit down in the weeds for you, but those are examples of where those technology investments are just progressing over time, will take hold, will continue to improve the veteran experience and streamline the way we operate the business. And with that, I’ll turn it over to David for a few comments.

Charlie Straezer, Analyst, CJS Securities: Yes. Maybe just well said, just more of a housekeeping item that reminded me of the technology rollout that Bruce noted, taking place around the end of our fiscal year here. Is one driver that we expect to have our depreciation expense grow next year. On the other hand, as you can see in our 10 ks charts, for example, our intangibles amortization is anticipated to go down by about $11,000,000 from 25,000,000 to 26,000,000 So our total depreciation and amortization should be somewhat similar year over year, but wanted to point out that dynamic.

Speaker 6: Appreciate all that commentary. I want to since the business is so sensitive on volumes, particularly with this the VA work, how are you thinking about over the next few quarters? I mean we’re looking at inventory levels, packed, non packed, greater than 700,000. You’ve added capacity, and it seems like some of that capacity is benefiting the customer in that we saw a 23 sequential increase in process claims. How are we thinking about that over the next few quarters?

Obviously, they’re not in hand, but what would be reasons to slow that down? It seems like we have a very good line of sight for very good VA growth through June at least.

Bruce Caswell, President and CEO, MAXIMUS: Well, I’ll begin and then turn it over to David. First of all, the VA has been very public about their effort to push to reduce the overall backlog of inventory levels. And they issued a press release, in fact, in late June stating that they’re ahead of their goal to for the highest number of claims process in FY 2025 and so forth. We know it’s been a big push and we know that their efforts are to really complete that by the end of this fiscal year and make great progress in that regard. Our current view is that the unprecedented levels that we saw in the June are likely to moderate somewhat as a result.

And we’ve reflected that in our guidance. You asked kind of what are the factors that would cause that? Well, the main one would be that as, each of the vendors ends up, with the capacity they now have working through their component of the backlog, we’re going to reach an equilibrium or a steady state, where the processing timeliness, for the entire system is in a good place. And, veterans, the cases coming in are being processed and handled timely, and veterans are getting great service. And the inventory becomes more kind of at a working level over time.

And we think that we’re kind of on that path and obviously the vendors collectively have made a great progress with working with the customer to reduce the inventory levels. You see that reflected in the charts that are published publicly. So we’re going to continue to focus on that objective, which they’ve clearly stated is a key one. But I’d also note that over time, there appears to be kind of a long term, steady state inventory level and backlog level that these programs operate at, where you’re going to there’s always going to be some. And the, and the fact is you can carry that with the capacity in the system and still meet the timeliness requirements and the quality requirements that are are required for the program for veterans.

Another point that I’d leave you with is that veterans are, as you well know, often, needing to be seen and requesting to be seen and to be reassessed when they believe that there’s a change in their condition that requires a rerating of their benefit. And in fact, you know, than half, maybe closer to two thirds of the incoming volumes in program are those types of cases. And so these are, you know, these are veterans that have ongoing needs and as they progress in their journey, need to be reassessed. And there’ll always be that inventory, if you will, that incoming volume of reassessments, to help ensure veterans are getting the level of benefit that they deserve. So with that, I’ll turn it over to David for his thoughts.

Charlie Straezer, Analyst, CJS Securities: Thanks. Well said. I agree. Just to characterize the June in particular, yes, as Bruce said, I think it was a quarter where on top of high volumes coming in, we improved our own speed to process claims that we saw that kind of double benefit to our own caseload claims completed. So they were especially strong results.

We actually saw as an aside a similar dynamic on some of our smaller clinical programs in the segment where we just had a tremendous execution quarter that drove down our own caseload. So as Bruce said, while we expect some moderation from the especially high levels in Q3, we also see sustained ongoing demand on the program.

Speaker 6: Right. And I guess so I guess a few questions off of that. One, if I recall last quarter, the Federal segment had a FEMA positive FEMA that went away sequentially. Can you maybe quantify that? And in fact, if that did occur because these numbers still look really good absorbing that.

And then secondly, I guess the previous kind of equilibrium run rate or capacity in the industry was about 640,000, call it, claims per quarter completed. It was 800,000. Are you suggesting we go back to 640 because the comps just seem very easy to me?

Charlie Straezer, Analyst, CJS Securities: Could you repeat that last part? Go back to six forty?

Speaker 6: The last part was, so this quarter the process completed claims packed and non packed were over 800,000 units or people versus what had been running at about six forty. And I’m just the comps for the next few quarters seem very easy to me because I wouldn’t imagine even if we’re not running at 800, we wouldn’t drop down and start running at the prior run rate when the whole industry is adding capacity.

Charlie Straezer, Analyst, CJS Securities: Yes. No, I follow you. Yes. I mean, so those are the metrics for the overall program of which we’re one of four vendors. So I think the point we were making about our own Q3 was that we had especially high volume ourselves as we not only addressed the high demand, but also improved our own speed to from receiving the claims to completing the claims.

I think you’re correct on the whole program, especially with the stated intent of the VA that that they intend to continue to drive this high level for the next few quarters.

Speaker 6: Fantastic. And was there a FEMA contribution last quarter that was not in this quarter? And can you maybe size that a little bit if that’s the case?

Charlie Straezer, Analyst, CJS Securities: Yes. So for FEMA, one of the areas of work we do is supporting disaster response, which can be obviously difficult to predict and we’re there ready to help as needed. I don’t have the kind of precise size off the top of my head for what it was. I would point out it’s more of a BPO type work. So the it’s really staffing up and staffing down, not the same dynamic as the volume based program where we just have more volume come in that we can work.

So the bottom line is not as sensitive.

Speaker 6: Okay. Appreciate that color. Just maybe a couple of quick ones to wrap up here. As I look at the margin kind of set up over the next few quarters, you mentioned that it will be on the higher end of your range that you typically guide to. I also want to kind of weave in the Big Beautiful Bill Act as well.

If I think about VA volumes being above what they had been, that’s generally a very good contribution on those volume increases. And then I guess you mentioned 27 for some OBB impacts favorable impacts. Would it be possible to see some of those Medicaid redeterminations that come in at extremely high margin levels incrementally come in 2026? I would assume the timing would be a little bit earlier than fiscal twenty twenty seven for that part.

Charlie Straezer, Analyst, CJS Securities: Well, on the twice yearly redetermination. So first recognize that requirement only applies to the expansion population, which is about 20% of the overall Medicaid population. And that one too is required to be, in place by the end of calendar 2026.

Bruce Caswell, President and CEO, MAXIMUS: So I guess I would agree with David that it’s it’s maybe not likely that states would want to begin sooner with that. But again, it’s still early days and those conversations are just starting. So states have the flexibility to begin sooner, they may seek to do that in some cases.

Speaker 6: Okay. Yes, that’s exactly what we’re hearing that some of the states are moving ahead quicker than the bill requires. Just final one for me to sneak in and then I’ll jump back into the queue. Can you talk about some of the dose headwinds? It seems like everything else is pretty much going well above anything we could have foreseen.

We’re hearing about some Doge impacts. Maybe you could talk about what’s going on at the SEC as well as maybe anything with IRS or any other customers that you want to discuss?

Bruce Caswell, President and CEO, MAXIMUS: Yes. I’ll begin with some high level and let David address the specifics as it relates to the SEC and so forth. I noted in my prepared remarks that we’re really pleased that the impact of contract actions across our portfolio has been really minimal. I’d say if we had to put a number on it conservatively less than one half of 1% of our FY twenty twenty five revenues. And we’d expect that as well as we look at FY twenty twenty six.

As everybody has seen, the shift now that’s occurred is, where Doge, individuals who were previously assigned to the Doge in some cases have taken positions within the agencies to continue to address really the kind of primary objectives that the Doge was set up to address and that’s really software modernization, process modernization, driving efficiencies and so forth. And the agenda has really become that of the agency heads and department heads themselves working in conjunction with the White House and with OMB. So what does that mean? We’re now seeing a shift in terms of phase, And we’ve talked kind of about phases here historically. So we’re having conversations about less about kind of the immediate cost cutting objectives, which were characterized by the earlier stages of this and more about how efficiencies can be gained and thoughtful ways to structure programs going forward and delivery going forward.

One area I think that is on a lot of people’s minds is how student loan servicing will be handled going forward with the trajectory of the Department of Education presently. If that function as has been widely reported were to move over to another department like Treasury, how will that be done? And what will the contractual structures be to support that? And how does that perhaps present an opportunity to relook at the entire borrower experience, as they navigate return to repayment and as we see, the volume metrics in the default program likely, shift into the fall and the winter. So a lot of conversations going on right now that are, candidly very operationally focused and there are opportunities now that are presented, given this environment and given the budget environment that we’re working in to talk about things like contract consolidations and ways to use technology more effectively, move to more performance based contracting models.

So I actually, feel like we’re through an important first stage and the business model of MAXIMUS and the value that MAXIMUS delivers in critical programs held up well during that stage. And now we’re moving to the next stage where we’re focused on efficiencies and on, in some cases redesign of the way programs are delivered. So, with that, David can add some additional color as it relates to specific customers or the sectors that you mentioned.

Charlie Straezer, Analyst, CJS Securities: Yes. I think Bruce summed it up well upfront that as we look at what specifically have we seen in price of straight cuts that were initiated by Doge still relatively small given the base of our revenue of less than 0.5 our total revenue. And that would include the SEC piece that you mentioned, not all that impactful given the revenue base.

Speaker 6: Perfect. Appreciate it guys. Nice job on the quarter and I’ll hop back in the queue.

Bruce Caswell, President and CEO, MAXIMUS: Okay, great. Thanks Brian.

Speaker 6: Operator, back to you.

Conference Operator: This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.

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