Maximus, Inc.

Greetings and welcome to the Maximus Fiscal 2025 Third Quarter Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jessica Batt, Vice President of Investor Relations for Maximus. Thank you, Ms. Bates. You may begin.

Good morning and thanks for joining us. With me today is Bruce Caswell, President and CEO, David Mutron, CFO, and James Francis, Vice President of Investor Relations. I'd like to remind everyone that a number of statements being made today will be forward-looking in nature. Please remember that such statements are only predictions. Actual events and results may differ materially as a result of risks we face, including those discussed in Item 1A of our most recent forms, 10Q and 10K. We encourage you to review the information contained in our recent filings with the FCC and our earnings press release. The company does not assume any obligation to revise or update these forward-looking statements to reflect subsequent events or circumstances, except as required by law. Today's presentation also contains non-GAAP financial information. Management uses this information internally to analyze results and believes it may be informative to investors in identifying trends, gauging the quality of our financial performance, and providing meaningful -to-period comparisons. For a reconciliation of the non-GAAP measures presented, please see the company's most recent forms, 10Q and 10K. And with that, I'll hand the call over to Bruce.

Thanks Jessica, and good morning. I'm excited to share another record-breaking quarter for Maximus earnings. For the third quarter, fiscal year 2025, adjusted diluted earnings per share reached $2.16, a 24% increase -over-year. We realized 15% growth in adjusted EBITDA. Finally, Q3 revenue of $1.35 billion is growth of .3% on an organic basis, -over-year. Congratulations to the tens of thousands of Maximus team members responsible for these accomplishments. In what has been for many in the government IT and consulting sector an uncertain environment, we have remained resilient, focused on our customers, and on consistent quality delivery at scale. Since our Q2 earnings call, we've seen clarification of certain priorities of the administration and the introduction of new legislation, the impacts of which will cascade to our state customers. We have come to expect this over decades of serving our government customers, and we believe that we are ideally positioned to respond. As I've said for years, a core capability of Maximus is our ability to translate policy changes into operational models, largely performance-based, that deliver accountable outcomes aligned with the mission of our customers. In short, I believe we are purpose-built for the operating tempo of today's environment. As part of our business update, I'd like to share why we believe that we are well positioned to assist both federal and state clients as the details of recent legislation and regulatory changes become more clearly understood and implementation planning begins. Let's first look at the One Big Beautiful Bill Act, which we believe could create meaningful, addressable opportunities for us following proposed changes in Medicaid and SNAP. Turning to Medicaid, the administration continues to focus on managing federal spend on Medicaid. The legislation will impose certain administrative activities while shifting more enforcement responsibility to the states. Most notably, there's now a twice-yearly -for-manual requirement to determine eligibility for the Medicaid expansion population. This comprises an estimated 21 million people across the 41 states that have expanded Medicaid coverage to those making up to 138 percent of the federal poverty level. States must review their program processes and implement changes to ensure compliance by December 2026. Our U.S. Services team will be working closely with current and prospective state clients to help them meet these new requirements while continuing to deliver exceptional customer service. As I noted on our last quarterly call, in many cases this could include assisting beneficiaries in transitioning to a marketplace plan to provide continuity of coverage. Secondly, the recent legislation codifies Medicaid work requirements for the expansion population while some states, through waiver authority, are seeking to include certain individuals in traditional Medicaid categories. Starting January 1, 2027, states will be required to verify with participants completion of 80 hours per month of qualifying activities. This is a major policy change, but not one with which we lack familiarity. During President Trump's prior administration, at the direction of one of our state clients, Maximus developed and implemented operational modifications designed to make beneficiary work requirement reporting as accessible and efficient as possible while meeting policy objectives. With this new statute in effect, we are again working with our state customers to demonstrate how to modify program operations to comply with the new law while maintaining a high level of quality of beneficiary engagement. Notably, the new law prohibits managed care plans from performing work activity verifications or handling exemption requests, which would constitute a conflict of interest. As an established conflict-free partner, Maximus has the independence necessary to support our state clients with compliance under the new legislation. Our human-centered and technology-supported approach to compliance with the new law efficiently leverages existing program investments, like contact center infrastructure and digital services. Our goal is for beneficiaries to engage through whatever modality is best for them, call, text, mobile app, and so forth, and that their experience is respectful and empathic. The last piece of the bill I'll discuss is its impact on State Supplemental Nutrition Assistance Programs, or SNAP. Driven by a nearly 11% national payment error rate in 2024, according to the USDA, the new legislation enacts eligibility accuracy requirements in order for states to maintain federal funding levels. Beginning with 2025 or 2026 data, states with higher SNAP payment error rates will be required to cover more of the program's cost, shifting what was once a fully federally funded benefit partially onto state budgets. Last quarter, we discussed the recent OPM guidance that increases flexibility states to use contractors and contracted employees to execute programs. This policy change allows companies like Maximus to help states meet new requirements, whether in Medicaid, unemployment insurance, or in this case, SNAP. We are excited to help our current and prospective clients implement technology-led solutions that increase efficiencies, accuracy, and provide a consistent, high-quality customer experience. I'm pleased that subsequent to the quarter close, we executed a contract modification with one of our longtime state customers to take on an expanded role in supporting SNAP administration. With a strong track record of partnering with state governments to navigate and implement complex policy changes, we are increasingly confident in the growth trajectory of our U.S. services segment over the next 18 to 24 months. As implementing regulations are formalized and states move from planning to operationalization of these new policies. Beyond the bill, we are seeing a heightened focus on reducing spending and increased efficiencies and greater use of technology at the agency level. We believe this is an excellent opportunity to implement more efficient, technology-led models for the delivery of citizen services and program missions. As I mentioned last quarter, I'm pleased that we had minimal impact this fiscal year from any change in contract actions. We believe this speaks to the nature of the services we provide and our earned reputation for delivering quality outcomes, accountably under performance-based contracting models. Looking ahead, as has been the case for years, federal and state budget priorities and cycles reflecting macroeconomic trends will shape our FY26 outlook. David will share more color in his prepared remarks and how specifically we've considered budget headwinds and policy-driven tailwinds in our early color for fiscal year 2026. Now let me turn to the business more broadly. During our 2022 Investor Day, we committed to investing in our leadership team and building strength through client relationships and laid out a strategy for growth through targeting adjacent agencies. This time last year, I shared that we were expanding our growth team through leaders and teams aligned to specific U.S. federal markets, civilian, defense, and health. The combined success of these two strategies is evident in our recently announced win at the Department of Defense. Maximus secured a $77 million contract with the U.S. Air Force Lifecycle Management Center to provide cybersecurity and cloud-based services aiming to enhance innovation and operational readiness across the DoD. The contract spans a base year with four one-year options and a potential six-month extension. Under this contract, Maximus will work to deliver scalable and resilient cybersecurity, cloud, and engineering support across multiple security domains. Congratulations to the team members who worked diligently to make this possible. We believe this win is further evidence of our ability to expand into adjacent agencies and deliver capabilities aligned with the mission of our Air Force customer. We're proud to have the opportunity to play an increasing role supporting our country's national security priorities. Our 2022 strategy also emphasized expanding our technical capabilities, which in the federal government often require independent certification to broaden the aperture of our pipeline. As part of that forward-looking approach, we recently achieved Cybersecurity Maturity Model Certification, or CMMC, Level 2, an important milestone. Effective mid-December 2024, CMMC 2.0 is a DoD initiative designed to standardize and elevate cybersecurity practices across the Defense Industrial Base. Our recent CMMC Level 2 certification validates our enhanced cybersecurity posture as a defense contractor. We also anticipate that it should position us to compete effectively across the entire federal government contracting landscape, as these standards are likely to become the norm. This added certification has already resulted in the expansion of our pipeline with potential new work in new addressable areas in FY26. Within the U.S. federal segment, we expect that these and other accomplishments will contribute to the ongoing success we are seeing in our financial results. In 2022, we set a target of 10 to 12 percent operating income in the segment. This year, we are forecasting to meaningfully exceed this target. Now let me turn to awards reporting and the pipeline. Through the third quarter of fiscal year 2025, signed awards totaled $3.4 billion of total contract value. Further, at June 30, there were $1.4 billion worth of contracts that had been awarded but not yet signed. These awards translate into a -to-bill of approximately 0.8 times, using our standard reporting for the trailing 12-month or TTM period. In a BPO-centric business like ours, with average contract length and values at the higher end of the industry, the TTM -to-bill metric is naturally sensitive to rebid timing. We've seen this in recent quarters, characterized by lower than normal rebid levels. As such, we view -to-bill as only one measure of future growth. To illustrate, our -to-bill at the end of the third quarter of fiscal year 2024 was 4.6 times. Since then, revenue has grown .3% and adjusted deep at about 15%, underscoring how on-contract growth is another important source of organic growth, providing added strength and resilience to our portfolio. We continue to view -to-bill as a valuable metric, but one that must be interpreted in the full context of contract timing, backlog dynamics, and overall financial performance. Our total pipeline of sales opportunities at June 30th was $44.7 billion, compared to $41.2 billion reported at March 31st. The current pipeline is comprised of approximately $3.1 billion in proposals pending, $1.2 billion in proposals in preparation, and $40.4 billion in opportunities we are tracking. Of our current pipeline, approximately 63% represents new work. Additionally, 67% of the $44.7 billion total pipeline is attributable to our U.S. Federal Services segment. I'll wrap my remarks with a brief recognition of Maximus's 50 years of service, which we celebrate this year. Since 1975, Maximus has served as a delivery partner for government, turning legislation and policy into real-world results. Our work spans some of the nation's most complex, high-volume programs, delivered with speed, precision, efficiency, and accountability. Leveraging this strong 50-year foundation, we are excited about the Maximus of the future, and our rapid transformation as a technology partner and solution provider to government. Let me give you an example of where this is showing up today. I'm excited about our role in the upcoming National Defense Industrial Association, or NDIA, hackathon, which we are cosponsoring with organizations including AWS and Palantir. This -its-kind event will be held at George Mason University's FUSE facility and the Washington Convention Center in late August. The hackathon is intentionally designed to address real operational problems facing the U.S. military today and accelerate the access to innovative technology for our servicemen and women. Championed by our Chief Digital Information Officer and Chief Technology Officer and reflecting the impact of our defense and national security team, we believe this is another demonstration of Maximus leading the way with innovation. Our drive to accelerate access to technology and its practical application to national security mission objectives reflects an imperative of our nation and a strategic differentiator for Maximus. And with that, I'll turn the call over to David.