Maximus, Inc.

Greetings and welcome to the Maximus Fiscal 2026 First 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, James Francis, VP of Investor Relations. Thank you. You may begin.

Good morning, and thanks for joining us. With me today is Bruce Caswell, President and CEO, and David Mutrin, CFO. 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 SEC and our earnings press release. The company does not assume any obligation to revise or update these forward-looking statements to reflect subsequent events or circumstances except required by law. Today's presentation also contains non-GAAP financial information. For 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, James, and good morning. Our ability to deliver consistent performance is evidenced in our first quarter results and enables us to raise earnings guidance and narrow our revenue guidance for the full fiscal year 2026. Maximus operates in a resilient sector of government spend, and the delivery of essential services in a high quality and efficient manner is a hallmark of our business. The performance and outcomes-based nature of our portfolio has aligned well with administration priorities and has historically operated largely unaffected through temporary shutdowns. The strength of that foundation enabled us to expand to support new customers, as with the U.S. Air Force, and to focus on the pursuit of opportunities ahead that we see both in our federal and state markets. Most currently, that's Medicaid and SNAP on the state side, and I'll share how those are tracking. Finally, I'll update you on our continued strategic evolution as a trusted provider of technology-driven solutions and services to our government customers. This strategy includes expanding our use of automation, including in some instances AI, to augment how work is done, enhance citizen satisfaction, and improve financial performance, enabling reinvestment to support our customers and drive shareholder value. Our first quarter results reflect virtually no direct impact to our contract portfolio from the shutdown last fall. Historically, a significant majority of our programs are deemed essential when a temporary shutdown occurs, resulting in the ability to maintain our P&L forecast. However, two secondary impacts tend to be slower payments from customers, which David will touch on, and temporary delays in award decisions. Both of these dynamics occurred, so let's go through the awards and pipeline metrics now. For the first quarter of fiscal year 2026, signed awards totaled $246 million of total contract value. In addition, at December 31st, we had a balance of $699 million worth of contracts that had been awarded but not yet signed. These awards translate into a book-to-bill ratio of approximately 0.5 times using our standard reporting for the trailing 12-month period. The lower TTM book-to-bill ratio was impacted by very light award activity in our just completed first quarter, which had a quarterly book-to-bill ratio of 0.2 times. The awards in the quarter comprised primarily several smaller re-compete wins for the U.S. services business, which we typically have on a rolling basis. The government shutdown had a direct impact on our U.S. federal award activity, which has also been noted recently by others in our industry. We view it as a timing dynamic and not a structural change and we anticipate award activity will pick up across the three remaining quarters of this fiscal year. Our fiscal 2026 guidance assumes virtually no contribution from new work and that subsequent award activity likely fuels our fiscal year 2027 and beyond. Turning to our pipeline of sales opportunities, we had $59.1 billion at December 31st compared to $51.3 billion reported at September 30th. The current pipeline is comprised of approximately $3.8 billion in proposals pending, $2.4 billion in proposals in preparation, and $52.9 billion in opportunities we are tracking. The share of new work in the total pipeline is 59%, and the U.S. Federal Services segment's share of the total pipeline is 61%. Two elements of our pipeline are noteworthy. First, our reporting is beginning to include a small number of potential opportunities in Medicaid and SNAP related to the Working Families Tax Cut, or WFTC, legislation. We had messaged on prior calls and noted that the September 30th pipeline did not yet include such opportunities. While not a major driver of the pipeline increase this quarter, discussions with certain states are progressing such that we're adding specific opportunities that we believe represent actionable paths to support implementation of the new legislation. I'll touch on that momentarily. Second, proposals pending or submitted and proposals that we are currently preparing total a combined $6.2 billion of total contract value. This is a 55% increase from the combined figure of $4.0 billion one year ago, which we believe is an indicator that positive pressure is building to both secure our normal course re-competes, as well as enable future new work awards that contribute to our long-term organic growth target. Let's go to updates on the current challenges facing state customers, starting with the expanded Medicaid and will soon be required to conduct twice-yearly eligibility determinations for their expansion populations. Cumulatively, the expansion population nationwide is roughly one-quarter of the total Medicaid population. We're fortunate to have strong working relationships through existing contracts with many of the expansion states for whom we already perform eligibility support services. We continue to see more frequent eligibility support driving up engagement with Medicaid beneficiaries. As we've noted previously, more frequent engagement is the principal driver of volumes on many of our state contracts. In other words, activity levels per beneficiary, not absolute enrollment, are the key drivers for many contracts. Where practicable, we anticipate states will leverage existing contracts and established program infrastructure to meet the legislative requirement for semiannual eligibility determinations, which begins next January 1st. Another new requirement for states that I've spoken to previously, and also pertains to the Medicaid expansion population, is community engagement, also known as work requirements. Also effective January 1st, 2027, This will compel states to implement new compliance processes and expand overall program administration. Community engagement comprises employment, education, and training in volunteering for those beneficiaries not qualifying for an exemption. For years, Maximus has supported programs designed for employment as an end goal in adjacent programs like TANF and SNAP. We believe our ability to not only determine compliance with work requirements, but to also connect beneficiaries to local job opportunities builds on capabilities we have developed in these adjacent programs and further differentiates Maximus. Presently, we're working closely with current and prospective state customers on paths to modify program operations and leverage our technology investments while delivering a high-quality customer experience. To that end, In a January 29th press release, CMS announced Maximus as one of 10 companies with existing Medicaid eligibility and enrollment contracts with states that have voluntarily pledged to help states successfully prepare for and implement Medicaid community engagement requirements. We anticipate making digital tools and resources, such as our community engagement tracking tool and job boards, available to existing state Medicaid clients at reduced costs through this investment. I'm pleased to see pipeline opportunities that anticipate both RFP-based procurements and contract amendments to begin implementation activities in the coming months. Let's turn to the SNAP program, touching on a couple high points as reminders. SNAP represents an emerging opportunity for Maximus, as it is a program that has traditionally been administered by states and counties themselves. SNAP has a smaller administrative funding component, which historically has been shared by states and the federal government on a 50-50 basis. as well as a larger benefit funding component, the food assistance itself, which is 100% federally funded. Beginning in government fiscal year 2028, if a state has a payment error rate greater than 6%, which an estimated 43 states including D.C. do, they're required to begin contributing to the benefit in a manner correlated to their error rate. States may either use their FY25 or FY26 error rate for calculation of their share of food costs, making actions this year potentially consequential for many to reduce their payment error rates. Finally, under the WFDC Act, beginning in government fiscal year 2027, all states will be responsible for 75% of the administrative funding for SNAP. Put together, it's expected to highly incentivize states to work swiftly to reduce, if needed, and maintain their error rate at or below 6%. Last week, we announced the launch of our Accuracy Assistant tool that is purpose-built to help states reduce their SNAP payment error rate. Using predictive analytics and intelligent automation to help detect data inconsistencies and flag potential errors before they occur and become costly, We are proud to offer this AI-powered solution that's designed to help provide states with real-time error prevention and reporting to support continuous improvement. Our Accuracy Assistant tool has the capability to integrate into existing state data environments, making it an attractive option as states consider costs of implementation and timelines. We anticipate states will prioritize tools such as Accuracy Assistant, in the near term to help drive error root cause analysis while considering longer term process redesign, technology, and operating models to deliver consistent higher quality determinations. With our decades of experience delivering outcomes for our customers, we believe Maximus is well equipped to support both near and longer term state objectives. Moving to what is clearly becoming a game changer in the government services arena, Maximus' strategic expansion of automation, including the use of AI, is impacting the way we work, the technology solutions we offer our customers, and the delivery of customer outcomes and the public experience, or PX, through the programs we administer. I'll highlight a few recent examples. We recently unseated a well-established incumbent, scoring 98% of available technical points on a bid in our Outside the U.S. segment, the scope of which includes the technology platform to support the determination of government compensation based on clinical evidence accompanying claims submissions. Our solution represented an evolution of our AI-powered intelligent document processing tool in current production in our U.S. business. Overall, the bid scored nearly 97% out of the 100% scoring criteria. This win demonstrates our ability to leverage AI-driven technology capabilities that are designed to help meet customer demand across our business while de-risking delivery through component modularity and standardized deployment models. Our AI solutions and capabilities consist of a combination of in-house development, especially in areas where our proprietary process knowledge and data provide the most value, and carefully chosen partnerships with leading providers, more standardized use cases such as employee self-service we're now demonstrating practical applications of agentic ai tools within clearly defined and controlled environments we believe that these tools recognized for their goal-oriented behavior adaptability and context awareness have the potential to deliver greater business value as i've mentioned before within our business we're acting as customer zero from which we develop capabilities and experience to then demonstrate for our customers. Our data shows that staff at all levels and departments are quickly adopting AI tools and participating in training. In fact, in some cases, our frontline employees are the most active, underscoring the human-centered transformation that blends advanced technology with cultural and operational change. With positive proof points already achieved, we're excited to deploy the next wave of capabilities through which we can show the art of the possible to our customers. Continuing on AI, I'd like to highlight another program where we implemented an AI-based solution to significantly streamline the processing of payment-related disputes. Our solution automated data extraction and validation of electronic records, followed by empirical non-subjective evaluation against state laws. This approach has led to 45% of disputes being resolved autonomously and significantly increased throughput capacity for our customers. We also measured material improvements to financial performance on the program on a year-over-year basis, thereby enabling further technical investment on behalf of our government customers. Finally, as further evidence of our evolution as a trusted provider of increasingly AI-driven solutions to our government customers, I am pleased to announce that Maximus was very recently selected as the single awardee of the US General Services Administration or GSA blanket purchase agreement or BPA to support the agency's government experience contact center or GX CC services transformation. Which is still subject to the regulatory protest period previously known as the GSA public experience portfolio. GXCC supports the channels including telephone, email, and web chat that help the public navigate government programs and services and information. As described in the solicitation, the BPA performance period is up to five years, including options, and has no maximum orders or ceiling amount. As included in the solicitation, the GSA anticipates awarding five orders within two months of this award. and this BPA can support new customer agency programs under their own call orders. I'll close today with the exciting news that Maximus just won a spot on the Forbes list of America's best employers for 2026. This is our second year being recognized for this annual award, which is conducted through an independent survey. The full award list and corresponding details are scheduled for announcement by Forbes next week on February 10th. We are honored to be recognized and appreciate all of our employees that contribute to the trust placed in us by our customers. And with that, I'll turn the call over to David.