MMS 10-K & 10-Q changes, risk factors and insider trading
Maximus, Inc. · NYSE · Services-Business Services, Nec · CIK 1032220 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “We obtain most of our business through competitive bidding in response to government Requests For Proposals (RFP). We may not be awarded contracts through this process at the same level in the future as in the past, and contracts we are awarded may not be profitable.”
New heading “Within our U.S. federal business, our ability to participate in many competitive bids in response to government RFPs is dependent on us maintaining our status as a contractor on, and/or winning new Government-Wide Acquisition Contracts (GWACs). GWACs are an important process by which agencies of the federal government purchase goods and services. Eligibility to remain on a GWAC changes over time. If we are unsuccessful in maintaining eligibility or are not awarded GWACs, this would have a negative impact on our future opportunities.”
New heading “Our business could be adversely affected by legislative or government budgetary and spending changes, including pricing changes.”
New heading “Government entities have in the past and may in the future conclude their contracts with us earlier than we expect, or they could terminate their contracts with us earlier than we expect, which may result in revenue shortfalls and unrecovered costs.”
New heading “If we fail to establish and maintain important relationships with government officials, entities and agencies, our ability to successfully bid under RFPs, retain existing work, and secure new work on future procurements may be adversely affected.”
New heading “Investments we make in the business may not be recovered on a timely basis, or at all.”
New heading “We may not be successful in our AI initiatives, which could adversely affect our business, reputation, and/or financial results.”
New heading “Our employees or subcontractors may engage in misconduct or other improper activities, which could harm our business.”
New heading “Requirements and expectations related to the manner in which we operate our business, particularly pertaining to environmental, social and governance practices, may differ between our stakeholders, exposing us to additional costs and risks.”
Removed heading “We may incur significant costs before receiving related contract payments, which could result in an increased use of cash and risk of impairment charges.”
Removed heading “We obtain most of our business through competitive bidding in response to government RFPs. We may not be awarded contracts through this process at the same level in the future as in the past, and contracts we are awarded may not be profitable.”
Removed heading “Our business could be adversely affected by future legislative or government budgetary and spending changes.”
Removed heading “Government entities have in the past terminated and may, in the future, terminate their contracts with us earlier than we expect, which may result in revenue shortfalls and unrecovered costs.”
Removed heading “If we fail to establish and maintain important relationships with government officials, entities and agencies, our ability to successfully bid under RFPs and retain existing work and secure new work on future procurements may be adversely affected.”
Removed heading “Within our U.S. Federal business, our ability to participate in many competitive bids in response to government RFPs is dependent on our Government-Wide Acquisition Contracts (GWACs), the most commonly used process by which agencies of the federal government purchase goods and services. Eligibility to remain on a GWAC changes over time. If we are unsuccessful and not awarded GWAC contracts, this would have a negative impact on future opportunities.”
Largest changes
We are required to identify the fair value of assets acquired, such as customer relationships and technology, using estimates that are based upon factors such as expected future operations and the manner in which we will utilize these assets, which may be inaccurate or may change post-acquisition. In addition, we have recorded $1.78 billion of goodwill at September 30,see in full comparison2024.2025. This balance represents the difference between the amount paid for acquisitions and the identifiable assets acquired. Goodwill is allocated to reporting units, consistent with our segments, and is regularly reviewed to ensure that the value of those segments exceeds the carrying value of the assets held, including goodwill. If the carrying value of our assets, including goodwill, exceeds their fair value, we may be required totakeimpairwrite-offs,ourwrite-downs,goodwill,restructuring, impairment, or other charges thatwhich couldnegativelyresultaffectinbusiness,aassets,significantliabilities,effectprospects,onoutlook,our financialcondition,results andresults of operations.condition.
“We may incur significant costs before receiving related contract payments, which could result in an increased use of cash and risk of impairment charges.”see in full comparison
“We may not be successful in our AI initiatives, which could adversely affect our business, reputation, and/or financial results.”see in full comparison
“In fiscal year 2025, approximately 60% of our revenue came from our ten largest contracts. Furthermore, approximately one-fifth of our revenue came from contracts with a single federal agency. If any of our current significant contracts or significant contracts we enter into in the future were terminated or our work under those contracts was decreased, our revenues and net income could significantly decline. Additional potential impacts of the loss of a significant contract or contracts might include impairment charges related to tangible and intangible assets, including goodwill. …”see in full comparison
“In fiscal year 2024, approximately 55% of our revenue came from our ten largest contracts. If any of our current significant contracts or significant contracts we enter into in the future were terminated or our work under those contracts was decreased, our revenues and net income could significantly decline. Additional potential impacts of the loss of a significant contract or contracts might include impairment charges over tangible assets and intangible assets, including our goodwill balance. …”see in full comparison
“Although we make efforts to monitor our employees and subcontractors, it is not always possible to prevent or detect misconduct. Misconduct might include improper use of client information, failure to comply with government procurement operations, engaging in unauthorized activities, misusing authorized access, or falsifying time records. As a result of any such misconduct, we may be subject to fines and civil or criminal penalties, restrictions on bidding or performing work for our customers or potential customers, as well as damage to our reputation. …”see in full comparison
Full comparison: every changed paragraph (90)
In fiscal year 2025, approximately 55% of our total revenue was derived from the U.S. federal government, and approximately 33% of our total revenue was derived from contracts with state and local government agencies. Any significant disruption or deterioration in our relationship with federal, state, and local governments and a corresponding reduction in these contracts would significantly reduce our revenue and could substantially harm our business.
In fiscal year 2025, approximately 60% of our revenue came from our ten largest contracts. Furthermore, approximately one-fifth of our revenue came from contracts with a single federal agency. If any of our current significant contracts or significant contracts we enter into in the future were terminated or our work under those contracts was decreased, our revenues and net income could significantly decline. Additional potential impacts of the loss of a significant contract or contracts might include impairment charges related to tangible and intangible assets, including goodwill. Our success will depend on our continued ability to develop and manage relationships with significant customers and there is no assurance that we will be able to diversify our customer base in the near future, if at all.
The markets in which we sell our services are served by a relatively small number of governmental agencies, which limits the number of potential customers. We cannot provide assurance that we will be able to retain our largest customers, that we will be able to attract additional customers, or that our customers will continue to buy our services in the same volume as in prior years. The loss of one or more of our largest customers, any reduction or delay in sales to these customers, our inability to successfully develop relationships with additional customers, or future price concessions could impact our business.
Our contracts typically run for a fixed number of years and may be extended for an additional specified number of years if the contracting entity or its agent elects to do so. When these contracts expire, they may be opened for bidding to competing bidders, and there is no guarantee that the contracts will be renewed or extended. Our clients may elect to open bidding processes earlier than anticipated, resulting in increased competition prior to the anticipated end of contracts.
We obtain most of our business through competitive bidding in response to government Requests For Proposals (RFP). We may not be awarded contracts through this process at the same level in the future as in the past, and contracts we are awarded may not be profitable.
Substantially all of our customers are government agencies. To secure work with government customers, we are often required to respond to competitive government RFPs, and we will only be issued a contract award when we win such a competition. To do so effectively, we must accurately estimate our cost structure for providing the required services, the time required to establish operations, and attempt to submit a proposal that is more advantageous for the client than our competitors' proposals. We must also assemble and submit a large volume of information that must comply with the RFP's rigid requirements and relatively short timetable. Our ability to successfully respond to RFPs could greatly impact our business. There is no assurance that we will continue to be awarded contracts in response to government RFPs, and when we are awarded such contracts, they may not be profitable. The competitive bidding process has substantial costs, including labor costs and management's time to prepare bids and proposals for contracts that may not be awarded to us, may be split among competitors, or that may be awarded but for which we do not receive a meaningful volume of task orders.
In addition, competitors may protest contracts awarded to us through the RFP process that may cause the award to be delayed, cancelled, or require the customer to reinitiate the RFP process. Any loss or delay of start-up and funding of work under protested contract awards may adversely affect our revenues and profitability. In addition, certain of our multiple-award contracts require that we make post-award efforts to obtain task orders under the contract. Because of these factors, we may not be able to obtain task orders or recognize revenue under these multiple-award contracts.
Within our U.S. federal business, our ability to participate in many competitive bids in response to government RFPs is dependent on us maintaining our status as a contractor on, and/or winning new Government-Wide Acquisition Contracts (GWACs). GWACs are an important process by which agencies of the federal government purchase goods and services. Eligibility to remain on a GWAC changes over time. If we are unsuccessful in maintaining eligibility or are not awarded GWACs, this would have a negative impact on our future opportunities.
A GWAC is a procurement instrument intended for use by multiple U.S. federal government agencies. GWACs are pre-competed, multiple-award, indefinite-delivery, indefinite-quantity (IDIQ) contracts that are intended to provide flexibility and streamline the acquisition process, enabling the U.S. federal government to buy total information technology (IT) solutions more efficiently. All IDIQs, including GWACs, are regulated by the FAR, which sets forth rules and regulations that must be followed by federal agencies and providers of goods and services to the government in the procurement process. This includes competing for the award of task orders pursuant to GWACs. For instance, in 2018, Maximus was named a recipient of the U.S. General Services Administration's (GSA) Alliant 2 GWAC. Alliant 2 is an unrestricted, multi-vendor IDIQ award with a contract ceiling of $50 billion. Later, we competed for and won a contract that was awarded as a task order under the Alliant 2 GWAC. If we are unable to adapt to changing eligibility requirements for strategic GWAC competitions, we would risk losing access to related contracts and awards. If we are unable to win task orders under GWACs, our profitability and results of operations could be adversely affected.
Our business could be adversely affected by legislative or government budgetary and spending changes, including pricing changes.
The market for our services depends largely on domestic and international legislative programs and the budgetary capability to support programs, including the continuance of existing programs. Many of our contracts are not fully funded at inception and rely upon future appropriations of funds. Accordingly, a failure to receive additional anticipated funding for any reason, including as a result of government shutdowns, may result in early termination of a contract. In addition, many of our contracts include clauses that allow clients to unilaterally modify or terminate contracts with little or no recompense.
Changes in state or federal government initiatives or in the level of government spending due to budgetary or deficit considerations may have a significant impact on our future financial performance. In recent quarters, the U.S. federal government has placed a significant focus on efficiency, including with respect to contracting with private companies. These efforts may have a number of effects on our business.
•Changes in priorities may result in procurement changes, delays or cancellations, as well as changes or cancellations of existing contracts.
•Changes in priorities may also affect the level of demand or funding for our state programs in the United States, which are typically mandated and fully or partially funded by the U.S. federal government.
•Changes to procurement rules may result in additional competition, scrutiny and costs of compliance.
•Changes in federal regulations may require us to change our existing business practices, may be disruptive to our business, may create a level of uncertainty within our workforce and may conflict with local laws and regulations.
•The U.S. Government may seek to lower barriers to entry to allow greater involvement by the private sector. While this may provide additional opportunities for us, it may also expose us to greater levels of competition.
These efficiency efforts are occurring in a highly volatile regulatory environment, which may limit our ability to make long-term planning decisions as these efforts may be curtailed or redirected with a change in administration or change in administration priorities. In addition, disputes over the efficiency efforts may result in legislative delays, including government shutdowns, which could result in additional costs and uncertainty. Furthermore, another prolonged government shutdown could adversely impact our operations, revenue, and cash flow, as the government may issue stop work orders on our contracts and delay payment on work already performed.
Government entities have in the past and may in the future conclude their contracts with us earlier than we expect, or they could terminate their contracts with us earlier than we expect, which may result in revenue shortfalls and unrecovered costs.
Many of our government contracts contain base periods of one or more years, as well as option periods covering more than half of the contract's potential duration. Government agencies do not have to exercise these option periods, and they may elect not to exercise them for budgetary, performance, or any other reason. Our contracts also typically contain provisions permitting a government customer to terminate the contract fully or partially without notice, with or without cause. Termination without cause provisions generally allow the government to terminate a contract entirely or partially for particular services at any time and enable us to recover only our costs incurred or committed and settlement expenses and profit, if any, on the work completed prior to termination. We may not be able to recover all the costs incurred during the start-up phase of a terminated contract.
In addition, in the past, we have experienced performance issues under certain contracts. Some of our contracts involve the development and implementation of complex systems and products to achieve formidable customer goals in a competitive procurement environment. As a result, we sometimes experience technological, scheduling or other performance difficulties, which have in the past and may in the future result in delays, cost overruns and failures in our performance under these contracts. If a government customer terminates a contract for default, we could be exposed to liability, including for excess costs incurred by the customer in procuring undelivered services and products from another source.
The unexpected termination of significant contracts could result in significant declines in revenues. If revenue declines occur and are not offset by corresponding reductions in expenses, our business could be adversely affected. We cannot anticipate if, when, or to what extent a customer might terminate their contracts with us.
If we fail to establish and maintain important relationships with government officials, entities and agencies, our ability to successfully bid under RFPs, retain existing work, and secure new work on future procurements may be adversely affected.
To facilitate our ability to prepare bids in response to competitive procurements, retain existing work, and secure new work on future procurements, we rely in part on establishing and maintaining relationships with officials of various government entities and agencies. These relationships enable us to provide informal feedback and advice to government entities and agencies prior to the development of competitive procurement requirements, and our capabilities to support government objectives. We also engage third-party consultants and coalitions to establish and maintain relationships with elected officials and appointed members of government agencies. The effectiveness of these resources may be reduced or eliminated if a significant political change or policy occurs. In that circumstance, we may be unable to successfully manage our relationships with government entities and agencies and with elected officials and appointees. Any failure to maintain active relationships with government entities and agencies may adversely affect our business.
Governments could limit or prohibit private contractors like us from operating or performing elements of certain programs. Within the United States, state or local governments could be required to operate such programs with government employees as a condition of receiving federal funding. Moreover, under current law, in order to privatize certain functions of government programs, the U.S. federal government must grant a consent and/or waiver to the petitioning state or local agency. If the U.S. federal government does not grant a necessary consent or waiver, the state or local agency will be unable to outsource that function to a private entity, such as us. This situation could eliminate or reduce the value of an existing contract.
Our contracts may be terminated due to our failure to satisfy our contractual obligations or to meet performance standards and often require us to indemnify customers for their damages. In addition, some of our contracts contain substantial liquidated damages provisions and financial penalties related to performance failures. The policy coverage and limits in our errors and omissions insurance may not be adequate to provide protection against all potential liabilities. Further, for certain contracts, we may post significant performance bonds or issue letters of credit to secure our performance, indemnification, and other obligations. If a claim is made against a performance bond or letter of credit, we may be required to reimburse the issuer for the amount of the claim. Consequently, we may incur significant costs or liabilities, including penalties, which could adversely impact our operating results, cash flows, financial condition, and our ability to compete for future contracts. WeThe resulting reputational damage may also incuraffect impairmentour costs on assets relatedability to thesecompete contracts.for and win work elsewhere.
During fiscal year 2024,2025, we derived approximately 55%54% of our revenue from performance-based contracts and 13% from fixed-price contracts. For performance-based contracts, we receive our fee on a per-transaction basis or upon meeting specified milestones. These contracts include workforce services contracts in which we receive a payment for performing an independent medical examination or placing a participant in sustained employment for a specified time period. For fixed-price contracts, we receive our fee based on services provided. Those services include operating a Medicaid enrollment center pursuant to specified standards, designing and implementing information systems or applications, or delivering a planning document under a consultingprofessional services arrangement. To earn a profit on these contracts, we must accurately estimate the likely volume of work that will occur, costs, and resource requirements involved, and assess the probability of completing individual transactions or milestones within the contracted time period. If our estimates prove to be inaccurate, we may not achieve the level of profit we expected, or we may incur a net loss on a contract.
WeOur strategic plan seeks to expand our existing business and identify new organic growth opportunities. In seeking these opportunities, we may encounter start-up challenges, new compliance requirements, unforeseen costs, and other risks as we enter new markets, including identifying appropriate opportunities, differentiating ourselves from competitors, managing our ramp-up, recruiting and retaining appropriately experienced and qualified employees, managing customer expectations, and appropriately budgeting and pricing new work. If we are unable to manage the risks of operating in these new markets, our reputation and profitability could be adversely affected.
There are inherent risks in our expansion goals. Even if our efforts are successful, growth initiatives may divert management's focus from our core business, and we may be unable to realize the levels of profitability we anticipated. If we are unable to manage the risks of operating in these new markets, our reputation and profitability could be adversely affected.
Investments we make in the business may not be recovered on a timely basis, or at all.
We may incur significant costs before receiving related contract payments, which could result in an increased use of cash and risk of impairment charges.
From time to time, when we are awarded a contract, we incur significant expenses before we receive any contract payments. These expenses include leasing and outfitting office space, purchasing office equipment, developing internal-use software, and hiring personnel. In other situations, contract terms provide for billing upon achievement of specified project milestones. In these situations, we are required to expend significant sums of money before receiving related contract payments. In addition, payments due to us from government agencies may be delayed due to billing cycles or as a result of failures by the government to approve governmental budgets in a timely manner. In addition to these factors, poor execution on project start-ups could impact us by increasing our use of cash.
In certain circumstances, we may defer recognition of costs incurred at the inception of a contract. That deferral assumes we will be able to recover these costs over the life of the contract. To the extent that a project does not perform as anticipated, these deferred costs may not be considered recoverable, resulting in an impairment charge.
We are continuously making investments in our business, enhancing resources for company-wide, business line or specific contract initiatives, including technology investments. These expenses include leasing and outfitting office space, purchasing office equipment, developing internal-use software, and hiring personnel. We may also make broad investments in resources, such as technology or personnel, to address new or adjacent markets. These investments may not be recovered if we are unsuccessful in our entrance into these markets.
When making these investments we assume that we will be able to recover these costs through future revenues or anticipated cost savings. If these future revenues or cost savings do not materialize, or fall short of the amounts anticipated, or if our investments exceed our anticipated budgets, we may not be able to realize these anticipated benefits. If our anticipated benefits are delayed, this may result in greater cash outflows and cause us to increase our borrowings. In addition, payments due to us from government agencies may be delayed due to administrative delays, billing cycles, or as a result of failures by the government to approve governmental budgets in a timely manner. To the extent that we have deferred the cost of these upfront investments as balance sheet assets, an anticipated failure to realize the benefits of these costs may result in impairment charges.
We face competition from a number of different organizations depending upon the market and geographic location in which we are competing. Some of our most significant competitors are included in Item 11. Business of this Annual Report on Form 10-K.
Many of these companies are international in scope, larger than us, and have greater financial resources, name recognition, and larger technical staff. Merger and acquisition activity is widespread in our industry and could result in the emergence of companies which are better able to compete against us. Substantial resources could enable certain competitors to initiate severe price cuts or take other measures in an effort to gain market share. In addition, we may be unable to compete for the limited number of large contracts because we may not be able to meet aan Request For Proposal's (RFP) requirement to obtain and post a large performance bond. In some cases, competitors may choose to take greater risks or lower profit margins in order to enter a market or build market share. Also, in some geographic areas, we face competition from smaller firms with established reputations and political relationships. We also compete with smaller, more specialized companies that concentrate their resources on particular areas. Additionally, we may compete with the U.S. federal government's own capabilities. There can be no assurance that we will be able to compete successfully against our existing or any new competitors.
From time to time, we engage subcontractors, teaming partners, or other third parties to provide our customers with a single-source solution. We cannot guarantee that those parties will comply with the terms set forth in their agreements or remain financially sound. We have in the past and may in the future have disputes with our subcontractors, teaming partners, or other third parties arising from the quality and timeliness of their work, customer concerns about them, or other matters. Subcontractor or teaming partner performance deficiencies couldcan result in a customer terminating our contract for default. We may be exposed to liability, and we and our clients may be adversely affected if a subcontractor or teaming partner fails to meet its contractual obligations.
Risks Pertaining to Technology, Data and Data Security
Our use of artificial intelligence (AI) involves risks such as potential liability, regulatory issues, competition, and reputational damage. AI technologies create specific risks that require tailored governance and use case specific review. Insufficient oversight could lead to legal liability, financial loss, and reputational harm.
We use artificial intelligence (AI) to sort, organize, analyze, and generate data for business purposes. AI encompasses machine learning, generative AI, and other standard techniques. The comprehensive lifecycle utilization of AI, whether implemented directly by us or in collaboration with third parties, will necessitate ongoing investment in governance and security resources to help ensure itsour responsible use of AI and to safeguard against potential risks and vulnerabilities.
AI-related legal and regulatory frameworks are evolving due to concerns about bias, discrimination, transparency, and security. The use of AI technologies involves issues associated with intellectual property, data privacy, consumer protection, competition, and equal opportunity, with potential for new regulations. AI is under review by U.S. Federalfederal and Statestate and international agencies, and thechanges recentin electionsadministration may influence the regulatory landscape for AI in the United States. New or expanded AI laws could raise compliance costs and pose unpredictable risks, potentially affecting our operations and results.
We may not be successful in our AI initiatives, which could adversely affect our business, reputation, and/or financial results.
AI presents new risks and challenges that may affect our business. We have made, and expect to continue to make, investments to integrate AI and machine learning technology into our products and solutions, as well as to use AI to enhance our own business operations. Given the nature of AI technology, we face significant competition from other companies and an evolving regulatory landscape. Our AI efforts may not be successful and our competitors may incorporate AI into their products more successfully than us, which could impair our ability to compete effectively and adversely affect our financial results. Our competitors may be larger, more diversified, better funded, and have access to more advanced technology, including AI. These competitive advantages may enable our competition to innovate better and more quickly and to compete more effectively on quality and price, causing us to lose business and profitability. Burgeoning interest in AI may increase our competition and disrupt our business model. AI may lower barriers to entry in our industry and we may be unable to effectively compete with the products or services offered by new competitors. AI-related changes to the products and services we offer may affect our customers’ expectations, requirements, or tastes in ways we cannot adequately anticipate or adapt to, causing our business to lose sales, customers, or the ability to operate profitably and sustainably.
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 persistentpersistent, substantial, and substantialincreases 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 prevent disclosure of or 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 pastpast, and have continued to experience cybersecurity incidents, that were immaterial,immaterial. and inIn 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 zero-day vulnerability in a third-party vendor's file transfer application used by many organizations, including us. We have recorded expenses in connection with our investigation and remediation activities related to this incident; further details are included in "Note 15. Commitments and Contingencies" in Item 8 of this Annual Report on Form 10-K. We may continue to experience cybersecurity incidents in the future. There can be no guarantee that our preventative and remediation efforts will be sufficient to protect the company'sour information systems, information, and other assets from significant harm and that future cybersecurity incidents will not have a material adverse effect on the companyus or itsour results of operations or financial condition or cause reputational or other harm to the company.us. For more information regarding our cybersecurity risk management, see "Item 1C. Cybersecurity" of this Annual Report on Form 10-K.
We obtain most of our business through competitive bidding in response to government RFPs. We may not be awarded contracts through this process at the same level in the future as in the past, and contracts we are awarded may not be profitable.
Substantially all of our customers are government agencies. To market our services to government customers, we are often required to respond to government RFPs, which may result in contract awards on a competitive basis. To do so effectively, we must accurately estimate our cost structure for providing the required services, the time required to establish operations, and likely terms of the proposals submitted by competitors. We must also assemble and submit a large volume of information within an RFP's rigid timetable. Our ability to respond successfully to RFPs will greatly impact our business. There is no assurance that we will continue to obtain contracts in response to government RFPs, and our proposals may not result in profitable contracts. In addition, competitors may protest contracts awarded to us through the RFP process that may cause the award to be delayed, overturned, or require the customer to reinitiate the RFP process.
Our business could be adversely affected by future legislative or government budgetary and spending changes.
The market for our services depends largely on domestic and international legislative programs and the budgetary capability to support programs, including the continuance of existing programs. Many of our contracts are not fully funded at inception and rely upon future appropriations of funds. Accordingly, a failure to receive additional anticipated funding may result in early termination of a contract. In addition, many of our contracts include clauses that allow clients to unilaterally modify or terminate contracts with little or no recompense.
Changes in state or federal government initiatives or in the level of government spending due to budgetary or deficit considerations may have a significant impact on our future financial performance. For example, regulatory steps taken in response to the COVID-19 pandemic in the United States affected the level of work on many of our contracts.
Similarly, increased or changed spending on defense, security, or anti-terrorism threats may impact the level of demand or funding for the health and human services programs that we operate. Many state programs in the United States, such as Medicaid, are federally mandated and fully or partially funded by the U.S. Federal Government. Changes to those programs, such as program eligibility, benefits, or the level of federal funding, including a government shutdown, could reduce the level of demand for our services, which could materially adversely impact our future financial performance.
Government entities have in the past terminated and may, in the future, terminate their contracts with us earlier than we expect, which may result in revenue shortfalls and unrecovered costs.
Many of our government contracts contain base periods of one or more years, as well as option periods covering more than half of the contract's potential duration. Government agencies do not have to exercise these option periods, and they may elect not to exercise them for budgetary, performance, or any other reason. Our contracts also typically contain provisions permitting a government customer to terminate the contract on short notice, with or without cause. Termination without cause provisions generally allow the government to terminate a contract at any time and enable us to recover only our costs incurred or committed and settlement expenses and profit, if any, on the work completed prior to termination. We may or may not be able to recover all the costs incurred during the start-up phase of a terminated contract. The unexpected termination of significant contracts could result in significant revenue shortfalls. If revenue shortfalls occur and are not offset by corresponding reductions in expenses, our business could be adversely affected. We cannot anticipate if, when, or to what extent a customer might terminate their contracts with us.
If we fail to establish and maintain important relationships with government officials, entities and agencies, our ability to successfully bid under RFPs and retain existing work and secure new work on future procurements may be adversely affected.
To facilitate our ability to prepare bids in response to RFPs and retain existing work and secure new work on future procurements, we rely in part on establishing and maintaining relationships with officials of various government entities and agencies. These relationships enable us to provide informal input and advice to government entities and agencies prior to the development of an RFP and our capabilities to support government objectives. We also engage marketing consultants and other third-party consultants to establish and maintain relationships with elected officials and appointed members of government agencies. The effectiveness of these consultants may be reduced or eliminated if a significant political change occurs. In that circumstance, we may be unable to successfully manage our relationships with government entities and agencies and with elected officials and appointees. Any failure to maintain positive relationships with government entities and agencies may adversely affect our business.
Governments could limit or prohibit private contractors like us from operating or performing elements of certain programs. Within the U.S., state or local governments could be required to operate such programs with government employees as a condition of receiving federal funding. Moreover, under current law, in order to privatize certain functions of government programs, the U.S. federal government must grant consent and/or waiver to the petitioning state or local agency. If the U.S. federal government does not grant a necessary consent or waiver, the state or local agency will be unable to outsource that function to a private entity, such as us. This situation could eliminate or reduce the value of an existing contract.
In fiscal year 2024, approximately 50% of our total revenue was derived from the U.S. federal government, and approximately 37% of our total revenue was derived from contracts with state and local government agencies. Any significant disruption or deterioration in our relationship with federal, state, and local governments and a corresponding reduction in these contracts would significantly reduce our revenue and could substantially harm our business.
In fiscal year 2024, approximately 55% of our revenue came from our ten largest contracts. If any of our current significant contracts or significant contracts we enter into in the future were terminated or our work under those contracts was decreased, our revenues and net income could significantly decline. Additional potential impacts of the loss of a significant contract or contracts might include impairment charges over tangible assets and intangible assets, including our goodwill balance. Our success will depend on our continued ability to develop and manage relationships with significant customers and there is no assurance that we will be able to diversify our customer base in the near future, if at all.
The markets in which we sell our products are served by a relatively small number of governmental agencies, which limits the number of potential customers. We cannot provide assurance that we will be able to retain our largest customers, that we will be able to attract additional customers, or that our customers will continue to buy our services in the same volume as in prior years. The loss of one or more of our largest customers, any reduction or delay in sales to these customers, our inability to successfully develop relationships with additional customers, or future price concessions could impact our business.
Management's Discussion & Analysis (MD&A)
Largest changes
“Our SG&A expenses have expanded through our 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. Our costs for the year ended September 30, 2024 and 2023, include charges of $2.9 million and $29.3 million, respectively, for the investigation and remediation costs of a previously disclosed cybersecurity incident. …”see in full comparison
“•The Centers for Medicare & Medicaid Services is currently recompeting the Contact Center Operations contract awarded to us in 2022, which is earlier-than-expected, and for the express purpose of including a labor harmony agreement requirement. In June 2024, we filed a pre-award protest which will be adjudicated by the Government Accountability Office. In September 2024, the Government Accountability Office partially sustained our pre-award protest thereby requiring redrafting of the labor harmony requirement. In November 2024, we filed a lawsuit in the U.S. …”see in full comparison
“•Our results in fiscal year 2023 included significant costs related to the investigation and remediation of a cybersecurity incident. Although we continue to incur costs to resolve this matter, the level of costs in fiscal year 2024 was significantly lower.”see in full comparison
•During an acquisition, we are required to estimate the fair value of all acquired tangible and intangible assets, as well as liabilities assumed, in order to allocate the purchase price. For many assets acquired and liabilities assumed, the calculation of fair value requires little judgment as balances may be readily convertible to cash receipts or cash payments, or there may be an active market against which to measure value. For the valuation of intangible assets, significant judgment is necessary in identifying and valuing such assets. This valuation will also involve identifying the useful economic life of this asset. Our estimates of these fair values and useful economic lives are based upon assumptions we believe to be reasonable and, where appropriate, include assistance from third-party appraisal firms.see in full comparisonThe accounting for our acquisitions included determining the fair value of intangible assets representing customer relationships, the VES provider network, technology, and an assembled workforce. In making our determination of the fair value of these assets, we utilized estimates, the most significant of which were forecasts related to future revenues and profit margins. These assumptions relate to the future performance of the acquired business, are forward-looking, and could be affected by future economic and market conditions. The asset values and asset lives determined at acquisition may change based on circumstances such as contract terminations or changes in strategy. When this occurs, we may need to accelerate our amortization charges. These assets are also subject to impairment if events indicate that the carrying value of the assets may not be recoverable. For example, our intangible asset balance includes customer relationship assets which, if the customer relationship ends, would require evaluation of the remaining asset life and asset value.
Oursee in full comparisonrecentprevious 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. During fiscalyearyears2023,2025 and 2024, wehavealso incurred losses on sales ofbusinesses and taken an impairment charge on a business sold in early fiscal year 2024.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 net income and diluted earnings per share, excluding the effect of the amortization of intangible assets and divestiture-related charges. In addition, AdjustedEBITDAEBITDA, as calculated by us, is also a useful measure of performance that focuses on the cash generating capacity of the business as it excludes the non-cash expenses ofdepreciation,depreciation and amortization of property, equipment, and capitalized software, amortization of intangible assets, and divestiture-relatedcharges,charges.andWemakesbelieveforthateasierthese non-GAAP measures assist investors in making comparisons between the operating performance of companies with different capital structures by excluding interest expense and therefore, the impacts of financing costs.Accordingly, we have calculated our operating income, Adjusted EBITDA, net income, and diluted earnings per share, excluding the effect of the amortization of intangible assets and divestiture-related charges.Asnoteddisclosed above, Adjusted EBITDA is calculated in a different manner from Consolidated EBITDA, as defined by our Credit Agreement.We have included a table showing our reconciliation of these income measures to their corresponding GAAP measures.
“Our medical assessment revenue benefitted from increased volumes, including those driven by the Honoring our Pact Act, which had necessitated a contract rebid to expand the scale of these arrangements, as well as volume increases from underlying assessment demands. Improvements in performance also reduced our share of penalties incurred, benefitting our profit margin.”see in full comparison
Full comparison: every changed paragraph (70)
This Management's Discussion and Analysis of Financial Condition and Results of Operations should be read together with the Company'sour audited consolidated financial statements and the related notes thereto for the fiscal years ended September 30, 2025, 2024, 2023, and 2022,2023, included in Item 8. Financial Statements and Supplementary Data.
A discussion of our results of operations, backlog, and liquidity and capital resources for fiscal year 2023,September 30, 2024, including comparisons to fiscal year 2022,2023, can be found in last year's Annual Report on Form 10-K.
•Our business has grown organically, mostly from the expansion of our U.S. Federal Services Segment.
•During the first quarter of fiscal year 2025, we sold our businesses in Australia and Korea. This sale resulted in a loss and increased our full-year tax rate. However, this sale, and similar sales made in fiscal year 2024, have streamlined our international businesses and resulted in improved results in our Outside the U.S. Segment.
•Our operating cash flows remain strong and our overall leverage is relatively low, allowing us to make significant purchases of our own common stock.
•We experienced significant organic growth within our United States businesses. This growth was driven by volume growth on our core programs, a return to full volumes on programs tied to Medicaid-related activities, such as redeterminations, and incremental work on Medicaid-related activities that provided surplus volumes. This growth is reflected in our improved profitability and operating cash flows.
•Our results in fiscal year 2023 included significant costs related to the investigation and remediation of a cybersecurity incident. Although we continue to incur costs to resolve this matter, the level of costs in fiscal year 2024 was significantly lower.
•Our Outside the U.S. Segment has tempered losses through divestitures of businesses and a rebalancing of its portfolio. It has also received a benefit in fiscal year 2024 from the strength of the British Pound.
•Our interest costs have declined slightly despite fluctuating interest rates through a combination of reduced principal and our use of interest rate swaps.
Our SG&A expenses for fiscal year 2025 include a charge of $39.5 million related to the sale of certain of our businesses in our Outside the U.S. Segment. These charges included accumulated foreign currency losses incurred over two decades of operations, as well as indemnifications provided to the buyer. Absent this charge, SG&A was broadly consistent with fiscal year 2024.
Our SG&A expenses have expanded through our 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. Our costs for the year ended September 30, 2024 and 2023, include charges of $2.9 million and $29.3 million, respectively, for 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 zero-day vulnerability in a file transfer application used by the Company for internal and external file sharing purposes. We have provided notices to individuals whose personal information, including social security numbers, protected health information, and/or other personal information, may have been included in the impacted files.
Our interest expense is principally driven by our debt facility in the United States. During fiscal year 2025, delays in payments from customers resulted in additional borrowings under our revolving credit facility, resulting in higher borrowings than in the prior year. This additional cost was partially offset by lower interest rates.
Interest expense for fiscal year 2024 and 2023 decreased from $84.1 million to $82.4 million. Our exposure to increasing interest rates in the United States was mitigated by a reduction in our debt balance and by maintaining interest rate swap agreements on approximately 50% of our gross debt.
Our effective interest rate was 5.37% at September 30, 2025, compared to 5.52% at September 30, 2024, compared to 5.97% at September 30, 2023, and 4.69% at September 30, 2022.2024. We have mitigated our risk by fixing interest rates on $650approximately millionhalf of our debt and our 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 changeincrease in the Secured Overnight Financing Rate (SOFR) would result in an increased annual interest expense of $5.0$7.0 million.
Our effective income tax rate for the yearfiscal years ended September 30, 20242025 and 2023,2024, was 24.5%28.3% and 23.1%,24.5%, respectively. Our tax rate in fiscal year 2023 received the benefit of higher tax credits. For fiscal year 2025, we expect the effective2025 tax rate towas benegatively betweenaffected 24.5%by the disposal of our businesses in Australia and 25.5%.Korea.
For fiscal year 2026, we expect the effective tax rate to be between 25.0% and 26.0%. On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed in the United States. We do not believe the OBBBA will have a significant effect on our fiscal year 2026 tax rate but we anticipate that it could have a favorable cash flow impact in fiscal year 2026.
Our U.S. Federal Services Segment delivers solutions that help various U.S. federal government agencies better execute on their mission, including program operations and management, clinical services, and advanced technology solutions.
Our U.S. Federal Services Segment delivers solutions that help various U.S. federal government agencies better deliver on their mission, including program operations and management, clinical services, and technology solutions. The segment also includes system and application development, Information Technology (IT) modernization, and maintenance services. Clinical services comprises appeals and assessments services, which includes managing the evaluation process for U.S. veterans and service members on behalf of the U.S. Department of Veterans Affairs (VA) and certain state-based assessments and appeals work that is part of the segment's heritage. 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.
Our revenue and cost of revenue for the fiscal year ended September 30, 2024,2025, increased 13.9%12.1% and 12.2%,9.0%, respectively, compared to the fiscal year 2023.ended September 30, 2024. All movement was organic.
Our revenue growth was driven by our clinical programs, including medical assessments, as well as from support provided to the Federal Emergency Management Agency (FEMA). We have long-standing arrangements with FEMA to provide short-term assistance for natural disasters, the extent and timing of which are difficult to predict.
Our medical assessment revenue benefitted from increased volumes, including those driven by the Honoring our Pact Act, which had necessitated a contract rebid to expand the scale of these arrangements, as well as volume increases from underlying assessment demands. Improvements in performance also reduced our share of penalties incurred, benefitting our profit margin.
Our margins received a benefit from the implementation of technology initiatives, which increased the productivity of our operations.
Our revenue and margin growth has principally been driven by volume growth and strong performance on our contracts relating to clinical assessments.
We anticipate that revenue and profit margins will remain consistent through fiscal year 2025. We continue to monitor the status of announced recompetes of two of our significant contracts.
•The Centers for Medicare & Medicaid Services is currently recompeting the Contact Center Operations contract awarded to us in 2022, which is earlier-than-expected, and for the express purpose of including a labor harmony agreement requirement. In June 2024, we filed a pre-award protest which will be adjudicated by the Government Accountability Office. In September 2024, the Government Accountability Office partially sustained our pre-award protest thereby requiring redrafting of the labor harmony requirement. In November 2024, we filed a lawsuit in the U.S. Court of Federal Claims challenging the rebid of the contract awarded to us. The delayed procurement timeline now assumes an anticipated award in late second quarter of fiscal year 2025 and we remain engaged in the process to maintain leverage in advocating for our legal rights. Meanwhile, a subsequent contract option year has been executed by the customer which extends the current contract through September 2025. The $6.6 billion contract value over a base plus a nine-year period of performance, is equivalent to approximately 10% to 15% of total Company revenue on an annual basis. The contract type is cost-plus-award-fee which traditionally carries low single digit margins. Given the contract's absorption of indirect costs, the impact to consolidated operating income from the absence of this contract would likely be more significant than just the low single digit margin, depending in part on the extent to which we would be able to mitigate the effects. Maximus has consistently met or exceeded contractual service levels with uninterrupted operations and driven the highest independently measured customer satisfaction in the history of the program. We anticipate continuing to work on this contract uninterrupted until the recompete process, including any subsequent protest actions, is completed. We also believe 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 2024, these contracts together represented approximately 30% to 35% of this segment's 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.
We anticipate operating margins for the U.S. Federal Services Segment in fiscal year 20252026 ofto approximatelyrange 12%.between 15.5% and 16%.
Our U.S. Services Segment provides a variety of BPS,services, such as program operations, clinical services, employment services,services and technology solutions and related consultingprofessional services work for U.S. state and local government programs. These services support a variety of programs, including the programs under ACA,Medicaid Medicaid, theand Children's Health Insurance Program (CHIP), the Affordable Care Act (ACA) marketplaces, Temporary Assistance to Needy Families (TANF), and child support programs. In fiscal years 2020 through 2023, many programs in this segment were operating with depressed margins resulting from the pause in Medicaid redeterminations. The depressed margins resulted from reduced operating leverage in the segment as costs could not scale down at the same rate to meet lower demand due to the requirements to fulfill other obligations on these contracts. Fiscal year 2024 reflected a full period of volumes. The middle two quarters of the fiscal year experienced slightly elevated volumes from excess temporary work. This work was concluded by the last fiscal quarter with the segment’s margin appropriately aligned.
Our revenue and cost of revenue for the year ended September 30, 2024,2025, increaseddecreased 5.5%7.7% and cost5.5%, of revenue slightly declined compared to fiscal year 2023.respectively. All movement was organic.
Our fiscal year 2024 results received the benefit of higher volumes as Medicaid redetermination activities continued, resulting in benefits to our revenue and profit margins. As anticipated, our results have returned to a steady state with the conclusion of this additional work.
The OBBBA, signed into law in 2025, requires changes to the manner and funding of some of our state-based programs. Although these changes are not anticipated in fiscal year 2026, states may make changes to programs in anticipation of these changes. The nature, extent and timing of these changes is still uncertain.
We anticipate operating margins for the U.S. Services Segment in fiscal year 2026 to range between 10% and 11%.
Growth in fiscal year 2024 was principally from Medicaid-related activities returning to normal levels, supplemented by some additional volumes from catch-up work. This resulted in improvements to our profit margins. At this time, much of the additional volume and extra services related to the unwinding have ended and, accordingly, we anticipate that our results in fiscal year 2025 will revert to a run-rate consistent with the fourth quarter of fiscal year 2024. We anticipate profit margins of approximately 11% in fiscal year 2025.
Our Outside the U.S. Segment provides BPSbusiness process services and technologyother solutions for international governments. These services include health and disability assessments, program administration for employment services, wellbeing solutions and other job seeker-related services, digitally-enabled customer services, and advanced technologies for modernization. We support programs and deliver services in the United Kingdom, including the newly awarded Functional Assessment Services (FAS) contract, which replaced the Health Assessment Advisory Service (HAAS) contract,contract and the Restart employment program;program. andWe Australia,also including Workforce Australia, and other employment support and job seekerprovide services in aCanada numberand ofthe otherMiddle countries.East.
We have divested a number of businesses from this segment across fiscal years 2024 and 2025. In December 2024, we completed the sale of our operations in Australia and Korea. These divestitures resulted in reduced revenues and profits, but provided a significant benefit to our segment operating margin.
Organic growth within the segment came from across the portfolio, including the FAS contract and other volume-based arrangements.
We anticipate operating margins for the Outside the U.S. Segment in fiscal year 2026 to range between 3% to 5%.
The Outside the U.S. Segment has tempered losses through a rebalancing of its contract portfolio and the divestiture of a number of operations as part of an effort to improve performance and deliver consistent profitability. We are prioritizing these efforts and anticipate a smaller footprint once completed. We expect these actions would result in divestiture-related charges that would not impact our adjusted operating income.
The divestitures include the sale of a small commercial practice in the United Kingdom and our Swedish business in fiscal year 2023 and the sale of our businesses in Italy and Singapore, as well as our Canadian employment services contract, in fiscal year 2024. These disposals had a positive effect on our overall profit margins.
Margins also received the benefit of improved organic performance, where costs were reduced. Much of this benefit was from our contracts in the United Kingdom, which also received the benefit of stronger currency than in fiscal year 2023.
We recognize revenue over our period of performance, using estimates of our ability to place people in work and the time that this will take. Our estimates are based upon historical performance, where appropriate and available, and are constantly updated. This may result in volatility within revenue as changes in estimates of future performance impact the revenue recognized in any period.
Increases in backlog result from the award of new contracts and the extension or renewal of existing contracts. Reductions in backlog come from fulfilling contracts or the early termination of contracts, which our experience shows to be a rare occurrence. The backlog associated with our performance-based contracts is an estimate based upon management's experience of caseloads and similar transaction volume, which is subject to revision based upon the latest information available. Additionally, backlog estimates may be affected by foreign currency fluctuations. For further discussion of the risks related to our backlog, see "Risk Factors" in Item 1A of this Annual Report,Report on Form 10-K, notably "We may not be able to realize the full value of our backlog."
We believe that comparisons of backlog period-to-period are difficult. We also believe that it is difficult to predict with certainty future revenue solely based on an analysis of backlog.backlog or period-to-period comparisons. The actual timing of revenue from projects included in backlog will vary. We also may experience periods in which there is a greater concentration of rebids, resulting in a comparatively reduced backlog balance until subsequent award or extension on those contracts.
The longevity of these contracts assists management in predicting revenue, operating income, and cash flows for the purposes of business planning. Our standard forecasting process includes analyzing new work pipelines and submitted responses to requests for proposals (RFPs) when predicting future revenue, operating income, and cash flows.
Our primary sources of liquidity are cash on hand, cash from operations, and availability under our revolving credit facilities. As of September 30, 2024,2025, we had $183.1$222.4 million in cash and cash equivalents. We believe that our current cash position, access to our revolvers, and cash flow generated from operations should be not only sufficient for our operating requirements but also to enable us to fund required long-term debt repayments, dividends, and any share purchases we might choose to make. We believe we have access to sufficient funds to manage through a potentialanother shutdown of the U.S. federal government. See "Note 8.6. Debt and Derivatives" to the Consolidated Financial Statements for a more detailed discussion of our debt financing arrangements.
Net cash provided by operating activities increaseddecreased by $200.9$85.9 million in fiscal year 20242025 compared to fiscal year 2023. Almost all of this increase was a result of our increased profitability.2024.
The decline has been driven by movements in cash collections and tax payments.
•Our Days Sales Outstanding (DSO) has remained broadly consistent fromat September 30, 2022, when it2025 was 62 days, throughup from 61 days at September 30, 20232024. (60Although days),we andhave experienced payment delays during fiscal year 2025, these have been resolved as of September 30, 2024 (61 days). Excluding the effect of our Receivables Purchase Agreement, our DSO would have been 65 days at both September 30, 2024 and 2023.2025.
•In fiscal year 2024, we had received advanced payment on a single, large U.S.-based contract. These advanced payments did not recur in fiscal year 2025.
•Our U.S. income tax payments in fiscal year 2025 were approximately $50 million higher than in the prior fiscal year, reflecting increased profitability.
Our investing cash outflows were $60.3 million in fiscal year 2025, declining from $129.1 million in the prior fiscal year.
•We continuehave tobeen makemaking significant investments in our capital base, most notablybase in fiscal years 2024 and 2025, including upgrading technology onin our Federalfederal medical disability examinations (MDE) contracts;contracts. weThis anticipatework thiswas capitallargely spend will declinecompleted in the middle of fiscal year 2025.
In•Fiscal addition,year we2024 investedincluded $18an investment of $18.0 million into acquiringacquire one of our established vendors.
During fiscal year 2024, we sold our businesses in Italy and Singapore, as well as our Canadian employment business. In fiscal year 2023, we sold a small commercial practice in the United Kingdom on payments terms which included installment payments.
We have utilized $447.5 million in fiscal year 2025 to purchase 5.8 million shares of our common stock. These purchases were funded by our operating cash flows, as well as a $250 million expansion of our credit facility.
The principal drivers of financing cash flows are the Credit Agreement, our equity transactions, and restricted cash flows where we hold funds on behalf of customers or vendors.
During both fiscal years 2023 and 2022, we utilized our operating cash inflows to pay down debt and pay our dividends. In fiscal year 2024, we also used funds to purchase Maximus common stock.
(1) The applicable margin for Term Loan A ranges from 1% to 2%, depending on our leverage ratio as determined based on our most recently filed financial statements. As of September 30, 2025, the applicable margin was 1.5%.
(1) Applicable margin ranges between 1% and 2%, based on our leverage ratio.
The Credit Agreement contains a number of covenants with which we are expected to comply.covenants. Failure to meet these requirements would result in a need to renegotiate the agreementagreement, seek a waiver, or arequire requirementus to repay our outstanding debt in full. There are two financial covenants, both defined in the Credit Agreement.Agreement:
What changed in the latest 10-Q
Risk Factors
There were no material changes during the nine months ended June 30, 2026 to the risk factors previously disclosed in our Annual Report on Form 10-K, filed with the SEC on November 20, 2025.
Full comparison: every changed paragraph (1)
There were no material changes during the sixnine months ended MarchJune 31,30, 2026 to the risk factors previously disclosed in our Annual Report on Form 10-K, filed with the SEC on November 20, 2025.
Management's Discussion & Analysis (MD&A)
Largest changes
“Our prior year revenue included the benefit of short-term disaster recovery work, which did not recur in fiscal year 2026. Absent this work, revenue would have grown approximately 1.5% for the three months ended March 31, 2026 compared to March 31, 2025, and 3.0% for the six months ended March 31, 2026 compared to six months ended March 31, 2025, principally driven by volume growth. …”see in full comparison
“In late May 2026, we received notification from a major customer regarding a temporary contractual modification effective July 1, 2026 through December 31, 2026. We anticipate that this modification will reduce our diluted earnings per share by approximately $0.35 per quarter through the remainder of fiscal year 2026 and the first quarter of fiscal year 2027. Accordingly, we anticipate operating margin for the U.S. Federal Services Segment in fiscal year 2026 to range between 16.5% and 17%.”see in full comparison
Our effective income tax rate for the three andsee in full comparisonsixnine months endedMarchJune31,30, 2026, was22.5%25.0% and24.0%,24.4%, respectively, compared to27.1%25.9% and31.6%29.2% for the three andsixnine months endedMarchJune31,30, 2025, respectively. Our effective tax rate for thefirstninehalfmonthsofendedfiscalJuneyear30, 2026 includes approximately$4.2$4.5 million of benefit from research and development tax credits identified and claimed in the period. Our tax rate in fiscal year 2025 was affected by the disposal of our businesses in Australia and Korea and othernon recurringnon-recurring items. For fiscal year 2026, we expect an overall effective tax rate between 24% and25%.24.5%.
“During fiscal years 2026 and 2025, we expanded our term loans to provide additional capital for our operations, as well as funds to support share repurchases. We have utilized $204.9 million and $306.4 million in fiscal years 2026 and 2025, respectively, to purchase our common shares.”see in full comparison
We reported net cash used in operations ofsee in full comparison$54.9$179.9 million for the firstsixnine months of fiscal year 2026, compared to$37.3$220.0 million for the firstsixnine months of fiscal year 2025. We continue to experience administrative delays on payments from one of our large contracts with the U.S. federal government.WeSubsequent to June 30, 2026, we have received $245 million of cash due from this customer, and we anticipatethat ouradditional cashflowscollectionswill improve inthrough thesecondfourthhalfquarter of fiscal year 2026.
see in full comparisonWe have utilized our credit facilities in both years to cover the short-term delays in collections noted above. In addition, we have utilized $155.0 million and $306.4 million, in fiscal years 2026 and 2025, respectively, to purchase our common shares.We have certain contracts where we hold cash on behalf of our customers. We show these funds as restricted cash and include their movement within financing cash flows. During the current fiscal year, the customer under a single large contract has increased their volume of work with us, resulting in significant growth in this balance. The restricted cash asset is offset by a current liability.
Full comparison: every changed paragraph (41)
We create value for our customers throughby our ability to translatetranslating public policy into operating models that achievedeliver outcomes for governments at scale. Our work covers a broad array of services, including the operation of large health insurance eligibility and enrollment programs; clinical services, including assessments, appeals, and independent medical reviews; and technology services. These services benefit from an industry with increasing demand, constrained government budgets, and an increased focus on technology as governments prioritize modernization. We also demonstrate the ability to move quickly, ranging from digitally enabled contact center support services for natural disaster response to swift establishments of public health and safety initiatives.
A number of factors have affected our results for the secondthird quarter of fiscal year 2026. More detail on these changes is presented below within our "Results of Operations" section.
The following table sets forth items from our consolidated statements of operations for the three and sixnine months ended MarchJune 31,30, 2026, and MarchJune 31,30, 2025.
Our SG&A expense for the sixnine months ended MarchJune 31,30, 2026, includes $9.0$10.1 million of divestiture-related gain from the sale of our child support business within the United States, which we divested in December 2025. Our SG&A expense for the sixnine months ended MarchJune 31,30, 2025, includes divestiture-related charges of $39.3 million from our sale of businesses in the Outside the U.S. Segment. These charges included accumulated foreign currency losses incurred over two decades of operations, as well as indemnifications provided to the buyer.
Amortization of intangible assets has declined for the three and sixnine months ended MarchJune 31,30, 2026, as compared to the same periods in fiscal year 2025, since the amortization of technology-based assets acquired in fiscal year 2021 was completed prior to fiscal year 2026.
During fiscal yearyears 2026 and 2025, we expanded our Term Loan B and Term Loan A Credit Facility,Facilities, whichrespectively. This has resulted in an increase to our interest expense in the current year. We continue to mitigate a portion of our interest rate risk through hedging transactions on a portion of our outstanding debt.
Our effective income tax rate for the three and sixnine months ended MarchJune 31,30, 2026, was 22.5%25.0% and 24.0%,24.4%, respectively, compared to 27.1%25.9% and 31.6%29.2% for the three and sixnine months ended MarchJune 31,30, 2025, respectively. Our effective tax rate for the firstnine halfmonths ofended fiscalJune year30, 2026 includes approximately $4.2$4.5 million of benefit from research and development tax credits identified and claimed in the period. Our tax rate in fiscal year 2025 was affected by the disposal of our businesses in Australia and Korea and other non recurringnon-recurring items. For fiscal year 2026, we expect an overall effective tax rate between 24% and 25%.24.5%.
Our U.S. Federal Services Segment delivers solutions that help various U.S. federal government agencies better execute on their mission,missions, including program operations and management, clinical services, and advanced technology solutions.
Our revenue and cost of revenue for the three months ended MarchJune 31,30, 2026 and 2025 decreased 3.2%5.3% and 8.4%,6.8%, respectively. Our revenue and cost of revenue for the sixnine months ended MarchJune 31,30, 2026 and 2025 decreased 1.2%2.5%and and 7.1%,7.0%, respectively.
Our results for the three and nine months ended June 30, 2026 have been affected by the following, when compared to the prior year comparative periods.
•Much of the revenue decline relates to year-over-year declines in volumes on our large, transaction-based contracts. During fiscal year 2025 and early fiscal year 2026, these volumes had been running at higher levels.
•Short-term disaster recovery work in fiscal year 2025 did not recur to the same extent in fiscal year 2026.
•Across the remainder of this segment, we received the benefit of growth on profitable contracts, resulting in improvements to margin.
Our prior year revenue included the benefit of short-term disaster recovery work, which did not recur in fiscal year 2026. Absent this work, revenue would have grown approximately 1.5% for the three months ended March 31, 2026 compared to March 31, 2025, and 3.0% for the six months ended March 31, 2026 compared to six months ended March 31, 2025, principally driven by volume growth. Our margins have improved through a combination of efficiency savings through the use of technology and the absence of short-term disaster recovery work, which operated at lower margins than the core of our business.
Below is a reconciliation of revenue for the three and sixnine months ended MarchJune 31,30, 2026 compared to the prior year period,periods, including the impact of short‑term disaster recovery work and our organic revenue growthmovement excluding this work.
In late May 2026, we received notification from a major customer regarding a temporary contractual modification effective July 1, 2026 through December 31, 2026. We anticipate that this modification will reduce our diluted earnings per share by approximately $0.35 per quarter through the remainder of fiscal year 2026 and the first quarter of fiscal year 2027. Accordingly, we anticipate operating margin for the U.S. Federal Services Segment in fiscal year 2026 to range between 16.5% and 17%.
We anticipate operating margin for the U.S. Federal Services Segment in fiscal year 2026 to be approximately 17.5%.
Our U.S. Services Segment provides a variety of services, such as program operations, clinical services, employment servicesservices, and advanced technology solutions and related professional services work for U.S. state and local government programs. These services support a variety of programs, including the programsthose under Medicaid and the Children's Health Insurance Program (CHIP), the Affordable Care Act (ACA) marketplaces, and Temporary Assistance tofor Needy Families (TANF).
Our revenue and cost of revenue for the three months ended MarchJune 31,30, 2026 and 2025,2025 decreased 6.0%4.9% and 4.6%,6.7%, respectively. For the sixnine months ended MarchJune 31,30, 2026 and 2025, our revenue and cost of revenue decreased 7.1%6.4% and 6.1%,6.3%, respectively.
Our U.S. Services Segment continues to experience lower volumes and demand across a broad range of contracts compared to prior years. We believe the contracts and relationships held by this segment provide it with strong opportunities to assist state customers who will require higher engagement across their federally-funded social programs. Accordingly,As these activities pick up, we anticipate that we will return to organic growth towardsin the endfourth quarter of the current fiscal year.
As noted above, we sold our US-based child support business during the first quarter of the current fiscal year.
During the second quarter of thefiscal year,year 2026, we recorded an impairment charge of $6.9 million related to a capitalized software asset following a client decisiondecision, which resulted in its carrying value no longer being recoverable. We anticipate operating margins for the U.S. Services Segment in fiscal year 2026 to be approximately 10%.
We anticipate operating margins for the U.S. Services Segment in fiscal year 2026 to range between 9.5% and 10%.
Our primary sources of liquidity are cash on hand, cash from operations, our $750 million revolving credit facility, and our $350 million Receivables Purchase Agreement (RPA). As of MarchJune 31,30, 2026, we had $157.5$57.0 million in cash and cash equivalents. We believe that our current cash position, access to our debt facilities, and cash flow generated from operations should be sufficient for our operating requirements and should enable us to fund required long-term debt repayments, dividends, and any share repurchases we might choose to make. See "Note 7. Debt and Derivatives" to the Consolidated Financial Statements for a more detailed discussion of our debt financing arrangements.
We have included the following table showing our debt balances as of MarchJune 31,30, 2026, and their effective interest rates.
(1) The applicable margin for Term Loan A ranges from 1% to 2%, depending on our leverage ratio as determined based on our most recently filed financial statements. As of MarchJune 31,30, 2026, the applicable margin was 1.375%.
Our effective interest rate reflects the drivers of our cash interest payments as of MarchJune 31,30, 2026, which can change based upon the reset of the rates. Including the amortization of the upfront payments, our effective interest rate as of MarchJune 31,30, 2026, was 5.0%.5.6%.
We reported net cash used in operations of $54.9$179.9 million for the first sixnine months of fiscal year 2026, compared to $37.3$220.0 million for the first sixnine months of fiscal year 2025. We continue to experience administrative delays on payments from one of our large contracts with the U.S. federal government. WeSubsequent to June 30, 2026, we have received $245 million of cash due from this customer, and we anticipate that ouradditional cash flowscollections will improve inthrough the secondfourth halfquarter of fiscal year 2026.
These short-term delays in collections are reflected in Days Sales Outstanding ("DSO") at MarchJune 31,30, 2026, which were 7898 days, compared with 62 days at September 30, 2025. Excluding the effects of the RPA, DSO would have been 102123 days and 73 days, respectively.
We reported net cash used in investing activities of $3.9$14.4 million for the first sixnine months of fiscal year 2026, compared to net cash used in investing activities of $41.6$57.1 million for the first sixnine months of fiscal year 2025.
Our cash flows in fiscal year 2026 include the cash received from the sale of our child support business within the United States.States, Theas well as the final purchaseinstallments priceon willour be2023 calculatedsale basedof uponour acommercial workingpractice capital calculation, which should be concluded duringin the thirdUnited fiscal quarter of this year.Kingdom.
We reported net cash provided by financing activities of $43.6$87.5 million for the first sixnine months of fiscal year 2026, compared to $0.7$146.8 million for the first sixnine months of fiscal year 2025.
During fiscal years 2026 and 2025, we expanded our term loans to provide additional capital for our operations, as well as funds to support share repurchases. We have utilized $204.9 million and $306.4 million in fiscal years 2026 and 2025, respectively, to purchase our common shares.
We have utilized our credit facilities in both years to cover the short-term delays in collections noted above. In addition, we have utilized $155.0 million and $306.4 million, in fiscal years 2026 and 2025, respectively, to purchase our common shares. We have certain contracts where we hold cash on behalf of our customers. We show these funds as restricted cash and include their movement within financing cash flows. During the current fiscal year, the customer under a single large contract has increased their volume of work with us, resulting in significant growth in this balance. The restricted cash asset is offset by a current liability.
Our principal debt agreement is with JPMorgan Chase Bank N.A. (the "Credit Agreement"). At MarchJune 31,30, 2026, we owed $1.55$1.65 billion under the Credit Agreement, with access to approximately $525.0$730.0 million through a revolving credit facility. Mandatory repayments are required under this agreement through May 2031, when the agreement ends, and must be renegotiated or the funds repaid.
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 MarchJune 31,30, 2026, we were in compliance with all applicable covenants of our Credit Agreement. We do not believe that these covenants represent a significant restriction on our ability to operate our business or to pay our dividends.
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. Our Annual Report on Form 10-K, filed with the SEC on November 20, 2025, 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 sixnine months ended MarchJune 31,30, 2026.
For the three months ended MarchJune 31,30, 2026, 10%11% of our revenue was generated outside the U.S. We believe that users of our financial statements want 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 results for all foreign businesses using the exchange rates in the prior fiscal year.
From time to time, we enter into acquisitions and divestitures. We believe users of our financial statements want 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 hashave been disposed of in a similar manner. This information is supplemented by our calculations of organic growth. To calculate organic growth, we compare current fiscal year results, excluding transactions from acquisitions or disposals, to our prior fiscal year results.
Our previous acquisitions have resulted in significant intangible assets, which are amortized over their estimated useful lives. We believe users of our financial statements want to understand the performance of the business by using a methodology that excludes the amortization of our intangible assets. For the sixnine months ended MarchJune 31,30, 2026 and 2025, we also incurred gains and 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 net income and diluted earnings per share, excluding the effects of the amortization of intangible assets and divestiture-related gains and charges. Although these measures exclude the amortization of intangible assets acquired as part of our acquisitions, they do include the post-acquisition revenue from the acquired businesses. In addition, Adjusted EBITDA, as calculated by us, is also a useful measure of performance that focuses on the cash generating capacity of the business as it excludes the non-cash expenses of depreciation and amortization of property, equipment, and capitalized software, amortization of intangible assets, capitalized software impairment charges, and divestiture-related activity. We believe that these non-GAAP measures assist investors in making comparisons between the operating performance of companies with different capital structures by excluding interest expense and therefore, the impacts of financing costs. Although Adjusted EBITDA excludes the amortization of intangible assets acquired as part of our acquisitions, it does include the post-acquisition revenue from the acquired businesses. As disclosed above, Adjusted EBITDA is calculated in a different manner from Consolidated EBITDA, as defined by our Credit Agreement.
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 want 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, purchasesrepurchases 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."
MMS insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 1 filing (1 insider, 1 trade date, 3,208 shares, about $174.0K; 1 of these filings say the sales were made under a Rule 10b5-1 trading plan). Net open-market shares: -3,208 (purchases minus sales); net value about -$174.0K.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-10-01 | Link Michelle F. |
Open-market sale |
3,208 | $54.23 | $174.0K |
| 2026-09-30 | Mutryn David |
Shares withheld for tax | 4,749 | $53.19 | $252.6K |
| 2026-09-30 | Moellering Elizabeth |
Shares withheld for tax | 713 | $53.19 | $37.9K |
| 2026-09-30 | Golinvaux Theresa D |
Shares withheld for tax | 1,244 | $53.19 | $66.1K |
| 2026-09-30 | Baylinson Ilene R. |
Shares withheld for tax | 3,945 | $53.19 | $209.8K |
| 2026-09-30 | Link Michelle F. |
Shares withheld for tax |
2,637 | $53.19 | $140.3K |
Well-known investors holding MMS (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 617,787 | $33.2M | 0.02% | Added 517% |
| AQR Capital Management (Cliff Asness) | 2026-06-30 | 395,510 | $21.3M | 0.01% | Added 34% |
| Point72 Asset Management (Steve Cohen) | 2026-06-30 | 256,453 | $13.8M | 0.02% | Added 26% |
| Two Sigma Investments | 2026-06-30 | 137,026 | $7.4M | 0.01% | Added 435% |
| D. E. Shaw & Co. | 2026-06-30 | 104,761 | $5.6M | 0.0% | Reduced 34% |
| Bridgewater Associates | 2026-06-30 | 98,469 | $5.3M | 0.02% | Added 713% |
| Millennium Management (Israel Englander) | 2026-06-30 | 64,451 | $3.5M | 0.0% | Added 51% |
| Gotham Asset Management (Joel Greenblatt) | 2026-06-30 | 15,388 | $986.4K | — | Sold out |