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Image source: The Motley Fool. Thursday, Aug. 6, 2026 at 9:00 a.m. ET Vice President of Investor Relations - James Francis President and CEO - Bruce Caswell CFO - David Mutryn Operator: Greetings, and welcome to the Maximus Fiscal 2026 Third Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce James Francis, Vice President of Investor Relations. Please go ahead. James Francis: Good morning, and thanks for joining us. With me today is Bruce Caswell, President and CEO; and David Mutryn, 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 Form 10-K. We encourage you to review the information contained in our recent filings with the SEC and our earnings 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 a reconciliation of the non-GAAP measures presented, please see the company's most recent Forms 10-Q and 10-K. And with that, I'll hand the call over to David. David Mutryn: Thanks, James, and good morning. We are pleased to report strong third quarter results today, which demonstrate solid execution and support of our customers' important missions. I'll begin by reviewing the third quarter results and also address the customer-directed contract modification that impacts our near-term outlook. I'll move to our forecast for the remainder of this fiscal year and conclude with early thoughts on fiscal year 2027, which precedes formal guidance this November. For the third quarter, Maximus reported revenue of $1.28 billion, which was in line with our expectations and enables us to reiterate full year revenue guidance. The prior year period benefited from higher temporary natural disaster support and also contained temporary clinical volume surges in primarily the U.S. Federal Services segment. On the bottom line, adjusted EBITDA margin was 15.0% and adjusted EPS was $2.22 for the quarter, which compares to 14.7% and $2.16, respectively, for the prior year period. Across fiscal year 2026, we've driven margin improvement through strong execution and selective deployment of efficiency-enhancing technology and have not had to rely as much on incremental or surge volumes that defined the prior fiscal year. Let's go to the segment results. Third quarter revenue for U.S. Federal Services was $721 million and in line with our revenue expectations for the segment. As I shared before, the prior year period benefited from elevated natural disaster support that has not recurred at the same levels and was responsible for close to half of the revenue change. The remaining portion of the year-over-year revenue decline was primarily attributable to the temporary clinical volume surges. The operating income margin for this segment in the third quarter was 18.6% as compared to 18.1% in the prior year period. Our ability to drive efficiencies amidst solid volumes across the various program areas continued to benefit third quarter margins in this segment. A customer-directed pause in the performance incentives on our Department of Veterans Affairs Medical Disability Exam or VA MDE program is expected to impact profitability of the segment beginning in the fourth quarter, which I'll expand on in the guidance discussion. Turning to the U.S. Services segment. Third quarter revenue was $418 million and was consistent with our expectation of continuing to close the gap to prior year revenues ahead of a return to positive growth in the fourth quarter. Our fourth quarter revenue forecast for this segment continues to be positive mid-single-digit organic growth over the prior year as activities and engagements with the Medicaid population are anticipated to pick up. This stems from several current state customers using Maximus to enact and administer legislative-driven required changes to their programs. The segment's operating income margin for the third quarter was 10.8% and reflects solid upward progression across this fiscal year as we have previously communicated. Turning to the Outside the U.S. segment. Third quarter revenue was $140 million, and the segment recognized an operating profit of $1.2 million. Variances to volumes across several programs ranging from clinical to employment services are responsible for the revenue delta versus the prior year. As we've stated before, our goal remains to drive growth and further margin improvement in the segment by successful conversion of this segment's sales pipeline. Moving to cash flow items. Cash flows used in operating activities was $125 million and free cash flow was an outflow of $137 million for the third quarter. As we anticipated and communicated last quarter, DSO remained elevated at 98 days, driven by administrative delays at a major federal customer. I'm pleased to report that collections from this customer have accelerated in July with approximately $245 million received since June 30. I'll share more about our expectations for the remainder of Q4 when I come to the guidance update. During the third quarter, as detailed in our Form 8-K filed on May 28, we raised $325 million of Term Loan B, some of which was used to pay down our revolver and provide additional flexibility as we manage temporary working capital timing. We ended the third quarter with total debt of $1.65 billion, up from $1.55 billion as of March 31. Our consolidated net total leverage ratio per our credit agreement was 2.0x, up from 1.8x in the prior quarter. We remain within our stated target leverage ratio range of 2x to 3x. During the third quarter, we repurchased approximately 0.75 million shares totaling $50 million. As of June 30, 2026, the entire $400 million from the Board of Directors authorization in May remained available for future repurchases. Turning to capital allocation priorities. Our overall priorities have not changed. We prioritize organic investments, most of which are expensed and have committed to a dividend that we intend to grow over time with earnings. After that, we consider M&A opportunities and opportunistic share repurchases. In the recent past, between these 2, we have deployed capital exclusively on share repurchasing. Since the beginning of our fiscal year 2025, we have repurchased approximately 8.3 million shares, representing about 14% of our beginning outstanding shares. As we have been saying for the past several quarters, even amidst market conditions that remain favorable to share repurchases, we also continue to seek acquisition targets that can expand capabilities, customer access and longer-term organic growth opportunities. We remain disciplined in our evaluation of targets and seek high probability revenue synergies capable of driving long-term organic growth and shareholder value. We consider valuation carefully in the context of current market conditions and growth potential and the expected return must exceed our cost of capital. Looking forward, we plan to continue to execute on these capital deployment priorities while considering market dynamics, near-term liquidity, the potential M&A opportunity set and all within the constraint of our stated target net debt ratio of 2x to 3x. Moving to fiscal year 2026 guidance. As I mentioned, a modification to our VA MDE contract has impacted our earnings expectations for the fourth quarter of this fiscal year. In the just completed third quarter, our customer notified all vendors of a temporary pause of performance incentives and disincentives. These are assessed on an individual basis to each vendor based on performance metrics, including timeliness, accuracy and quality. Our strong performance in these areas enabled by our direct investments into this program's operations and technology means that positive incentives have been included in our reporting each quarter of fiscal year 2026 to date. The pause arises from the customers' priority to improve their review and validation process after vendors submit their detailed monthly invoices. With this pause effective July 1, 2026, we have removed any assumed fourth quarter fiscal year 2026 contribution from incentives, which reduces our diluted EPS guidance by approximately $0.35, which is in line with the contribution of these incentives in each of the first 3 quarters of the fiscal year. As I mentioned, this contractual modification related solely to the incentive mechanism, and we do not expect an impact to our DSO assumption. So with that, we have revised our adjusted diluted EPS guidance and expect it to range between $7.90 and $8.20 per share. The new midpoint is $8.05 and $0.35 less than the prior guidance midpoint of $8.40. This revised EPS guidance translates to a full year adjusted EBITDA margin guidance of approximately 13.7% for fiscal year 2026. Our updated full year guidance implies fourth quarter adjusted diluted EPS at the midpoint of $1.91 and adjusted EBITDA margin of approximately 13% (sic) [ 13.7% ]. We are adjusting free cash flow guidance to reflect the earnings guidance change and free cash flow is now expected to range between $425 million and $475 million. As always, the timing of specific receivable collections has the potential to cause significant cash flow variation at the end of a given period, and our guidance reflects our unchanged expectation that DSO will finish the fiscal year below 70 days. As I said, we continue to make solid progression in catching up collections with a major federal customer that we disclosed on the prior call. Finally, we are reiterating fiscal year 2026 revenue guidance, which is expected to range between $5.2 billion and $5.35 billion, albeit with a bias towards the lower end. Let me touch on full year operating margin assumptions for the segments. We expect the U.S. Federal Services full year segment operating margin to now range between 16.5% and 17.0%. For Q4, we expect the U.S. Federal Services operating margin to be between 14.5% and 15.0%. For the U.S. Services segment full year operating margin, we expect a range of 9.5% to 10.0%, which, as a reminder, includes the $6.9 million noncash charge in the prior quarter. And for Outside the U.S., we still expect the segment to breakeven on a full year basis, which implies a profitable fourth quarter. Other updated assumptions include expected interest expense of roughly $88 million, and we anticipate our full year tax rate to range between 24% and 24.5%. I'll close my remarks today with some comments on next year, which precedes official fiscal year 2027 guidance that we anticipate providing on the year-end call in November. I'll start with the contract modification on the VA MDE program. Our assumption based on customer guidance is the temporary pause continues through December 31, 2026. Therefore, we presume that in the first quarter of fiscal year 2027, we will not be eligible to earn incentives. While a range of scenarios could play out across the remainder of next year with this major program, we remain confident in securing the rebid and continuing to serve this important customer and mission. Looking at the overall Maximus financial profile, I'd point to this fourth quarter of fiscal year 2026 as a reasonable run rate for earnings power and adjusted EBITDA margin going into next fiscal year under the current incentive suspension, while recognizing it remains to be seen how the successor contract is ultimately structured. For the Federal Services segment as a whole, on a revenue basis, we remain focused on a combination of new work pipeline opportunities and volume-based prospects on current programs that we desire to increase. As we spoke to on the last call, we have submitted opportunities and continue to await award decisions and in one case, final protest resolution. We are confident that our pipeline is sufficient to drive sustainable growth, but the pace of procurement and corresponding timing of awards remains difficult to predict. Turning to U.S. Services. We are forecasting a positive revenue growth inflection beginning in the fourth quarter of fiscal 2026. We remain optimistic that this segment will see positive organic growth continuing into fiscal year 2027, and Bruce will provide an update on the Medicaid and SNAP opportunities tied to the H.R. 1 legislation. We look forward to providing formal fiscal year 2027 guidance in November. And with that, I'll turn the call over to Bruce. Bruce L. Caswell: Thanks, David, and good morning. Our third quarter results reflect another period of strong execution across the business and reinforce our confidence in the opportunities ahead even as our updated outlook reflects a customer-driven change on our VA MDE program. We continue to see the benefits of our technology investments, improving both the customer experience and financial performance of programs at scale. We believe that our deal shaping efforts focused on traditional RFP and nontraditional pipeline opportunities such as other transaction authorities or OTAs, align with the goals and direction of the federal government. Further, awards in the quarter, pending execution ramped nicely, setting the stage for sequential book-to-bill improvement. As David mentioned, during the quarter, the VA implemented a temporary pause in the performance incentive and disincentive mechanism covering all vendors. While affecting our outlook for that program in the near term, we believe that our ability to deliver solid earnings performance and continue investing in our long-term growth priorities remains intact. Our model is to support our customers as they navigate their own program environment, which can include responding to their legislative, regulatory and compliance needs. Importantly, we believe that our relationship with the customer remains strong as we continue to deliver high-quality work in a timely and cost-effective manner while making investments to further improve the veteran experience. On that front, a Draft Performance Work Statement or PWS, was just released, which is a key component of the draft RFP that we've been waiting on. While it's not a comprehensive view of the future contract, our preliminary analysis indicates that the scope of work, including all 6 regions that comprise our work today are included in this PWS. This bolsters our optimism about the next contract, and we believe our delivery track record, operational expertise, investments and trusted partnership position us well moving forward. More broadly, we believe that the encouraging demand signals across our markets, growing adoption of our technology-enabled solutions and a healthy set of opportunities support a positive outlook for the long term. Let's turn to an update on those opportunity metrics as well as awards as they provide an important lens into both the current procurement environment and where we see growth emerging over the medium and long term. Our total pipeline sales opportunities was $50.4 billion at June 30, comprised of approximately $2.9 billion in proposals pending, $2.4 billion in proposals in preparation and $45.1 billion in opportunities we are tracking. The share of new work in the total pipeline is 57%, and the U.S. Federal Services segment's share of the total pipeline is 55%. While some of the change in pipeline value compared to last quarter reflects normal pipeline maturation and portfolio management, it also reflects a larger dynamic, particularly in the federal civilian market, where certain opportunities have experienced procurement delays, scope revisions or in some cases, cancellation as agencies continue to navigate evolving priorities, budget considerations and the policy environment. As a result and reflecting this dynamic, in some cases, agencies are awarding more bridge contracts and short-term extensions and opportunities are maturing more slowly. That said, we continue to view the underlying demand environment as constructive with the latest total value of opportunities remaining substantial and supporting our long-term growth objectives. We strive to maintain a disciplined target-rich pipeline that reflects opportunities where we believe there's a clear path to award and successful execution. Our year-to-date signed contract awards as of the end of the third quarter were $1.25 billion of total contract value. These awards translate into a book-to-bill ratio of approximately 0.5x using our standard reporting for the trailing 12-month period. In addition, at June 30, we had a balance of another $1.35 billion worth of contracts that have been awarded but not yet signed. Encouragingly, our balance of awarded but not yet signed contracts represents a significant step-up from the last quarter and was driven primarily by successful longer-term recompete activity. There are a number of attractive new work opportunities in our pipeline associated with H.R. 1, also known as the Working Families Tax Cut Act, which we believe will increasingly contribute to growth as we exit the fourth quarter. We adjusted our timing expectations as customers digest recently published interim federal rules and navigate their state legislative and program environments. Let me share what we're seeing at the moment with regard to Medicaid community engagement or work requirements. As planned, organic growth in U.S. Services is expected to return in the fourth quarter as beneficiary outreach and engagement activity drives higher volumes on several existing contracts. Prospective customer discussions, while highly active, have progressed in many cases, more slowly than expected, considering they are less than 6 months until the go-live date. There's little doubt that the complexity of the recently released interim final rule by CMS has created additional uncertainty for states as they determine how best to operationalize compliance requirements, particularly as they relate to medically frail beneficiaries within existing program structures. We know from experience that large-scale program changes involving technology, operations, policy and constituent communications simply take time to implement, particularly when they affect programs serving millions of beneficiaries and state government customers are deliberate with their decisions. That said, absent a change in statute, the underlying need for administrative support, beneficiary engagement, compliance monitoring and technology enablement is expected to remain intact. Altogether, we believe that the demand for community engagement solutions remains positive. And as states continue to evaluate options, we remain optimistic that Maximus has an important role to play. SNAP meanwhile, continues to advance in some ways more quickly than Medicaid-related opportunities. With more than 40 demonstrations of our Accuracy Assistant tool completed and 150 customer meetings, the level of interest and engagement has grown in recent months. We've responded to active procurements, submitted unsolicited proposals and continue to engage with customers regarding approaches to improving program integrity and payment accuracy. Notably, the latest SNAP performance data indicates that payment error rates have not materially improved. The recently released USDA fiscal year 2025 payment error rate or PER data showed a national average of approximately 10.6% compared to roughly 10.9% in fiscal year 2024. The newly released data reinforces what many states have been anticipating as they evaluate future financial exposure and operational priorities. While the PER varies across states, the overall results indicate that payment accuracy remains a significant challenge across much of the country. As a reminder, under H.R. 1, states may elect to use either the just released fiscal year 2025 PER or fiscal year 2026 PER due out in June 2027 when determining their SNAP benefit cost share, which becomes effective October 1, 2027. However, regardless of their PER, states will be responsible for a 25% increase in the SNAP administrative cost share beginning October 1 of this year. This creates both a near-term administrative burden and a longer-term financial incentive to reduce error rates. Ultimately, we believe our combination of program expertise, delivery capabilities, analytical tools and technology integration know-how positions Maximus well as states seek practical paths to improving accuracy while preserving the citizen experience. I'd like to turn to the pace of AI adoption, which continues to accelerate inside Maximus and with our customers in alignment with our strategy and investments. Importantly, we're not simply reacting to customer requirements. We're helping shape practical AI-enabled solutions often through our own internal use that customers can adopt with confidence. Today, approximately 75% to 80% of the new bids and rebids in our pipeline contain explicit requirements or evaluation criteria related to AI. We are also seeing AI procurements become more sophisticated with agencies placing greater emphasis on governance, security, transparency, human oversight, responsible AI practices and the ability to demonstrate measurable mission outcomes. Increasingly, AI is no longer treated as an innovation add-on, but is becoming an expected component of modern service delivery and operational transformation strategies. Similarly, AI enablement through continuous innovation has become part of our operating rhythm inside Maximus. As just one example, AI-based improvements to core business processes such as IVR and script optimization, chatbot enhancement and proactive text and e-mail engagement in just 5 contracts yielded a better customer experience and a 3.5% operating margin improvement for that group. So in addition to building AI into our solutions for new work, we are systematically updating existing operations that are designed to better meet our customers' needs. Further, through Maximus Ventures, our strategic investment arm, we continue to identify innovative and differentiated technologies that we believe can strengthen future customer solutions and create new pathways for growth by accelerating adoption across government markets. One example is our direct investment in Spectro Cloud, which is an AI infrastructure management software provider rather than an AI model company, providing an advanced platform that helps enterprises, public sector organizations, neo clouds and sovereign clouds build and operate production AI infrastructure with greater control over cost, security and governance. We believe that capabilities like these are what allow government customers to move beyond experimentation and deploy AI securely at scale, particularly those in highly regulated areas, including defense. We view Spectro Cloud as one component of a broader ecosystem necessary to help government customers accelerate AI adoption while maintaining the security, governance and operational controls that those mission environments require. Our objective through these venture investments is to bring differentiated capabilities to our customers, including preferred access and co-development arrangements where appropriate, creating strategic partnerships that are designed to accelerate deployment, strengthen our competitive position, support revenue growth and increase customer value. Let me close with an update on the defense and national security market, which remains a priority in our long-term growth strategy. While many civilian agencies continue to experience procurement delays and budget uncertainty, we believe the Department of War procurement engine is functioning more consistently. Demand signals remain strong and our engagement with customers continues to expand. As part of our strategic planning, we identified a total Maximus addressable market of defense-related opportunities of nearly $47 billion, only a small portion of which is reflected in our reported pipeline. Our objective is to ensure we are positioned to participate in that opportunity set, both through traditional and nontraditional procurement paths. In addition to the OTAs I mentioned earlier, I'm pleased that the Hackathon platform we created, bringing government, industry and academia together has generated pathways to new programs of record for our customers. We're evaluating how we expand our capabilities, customer access and relevance, past performance qualifications and market presence, particularly in advance of the arrival of opportunities we believe will emerge over the next several years. Customer intimacy remains paramount, understanding mission needs, helping agencies address technical debt and bringing modern technology-enabled delivery models to government customers through highly accountable performance-based arrangements are all areas where we believe Maximus can differentiate. Importantly, our defense and national security business is already demonstrating success with notable key wins at the Air Force and Transportation Security Administration. We continue to see evidence that large government customers are increasingly willing to consider capable alternatives outside of the traditional provider ecosystem. We believe this is a sustainable direction of travel and one that creates opportunities for differentiated companies with proven execution. More broadly, our strategy helps support a continued diversification of the company by expanding our exposure to durable growth markets while reducing concentration over time. In closing, we continue to see a healthy mix of opportunities and navigable challenges as we look ahead to fiscal year 2027. The procurement environment remains understandably uneven. Certain legislative opportunities continue to evolve and customers continue to navigate a complex budget and operating environment. At the same time, we're encouraged by the momentum we're seeing in areas such as SNAP, AI-enabled solutions and defense and national security. We are continuing to invest thoughtfully, strengthen our capabilities and position the company for long-term growth. As always, our focus remains on controlling the controllables, delivering for our customers, executing with discipline and urgency and creating sustainable value for our shareholders. And with that, we'll open the line for Q&A. Operator? Operator: [Operator Instructions] Our first question is from Will Gildea with CJS Securities. Will Gildea: So just starting with the temporary contract modification at the VA. Maybe can you just give us any more color on that? And what kind of went into the VA's decision-making process to pause incentives? Bruce L. Caswell: Sure. Happy to start and David to add to that. We've been told by the customer that it's a temporary pause. I mentioned the current contract lasts until December 31. And we have seen, interestingly, a Draft Performance Work Statement issued by the VA that's come out that has a comment period for the vendor community that closes on August 12. So we understand that they're moving ahead, obviously, with their plans for the next procurement. It becomes then a question of will that procurement potentially be completed in time to align with the December 31 deadline or not. And while it wouldn't be unprecedented to get something done in that amount of time, we also, in the procurement have noticed that the volumes that they lay out for the community to respond to suggest that the base contract would begin in the middle of next year. So that leaves us presently working with information from the customer where they've indicated that the current incentive pause is 180 days in nature and would be completed in December -- at December 31 when the current contracts are scheduled to terminate, but also with the likelihood that we could see up to a 6-month extension to the current contracts to align with the timing that we've seen in the Performance Work Statement. And as it relates to just the nature of the administrative action that they're taking that's led to this, I know we get the question, is this something that's uncommon? Do you see it from time to time? And I would just say that it's not uncommon for our customers to need to respond over the life of the contract. And these are long-term contracts, the changes in the legislative and the policy and the compliance environment. So while it's not common for a significant contractual term like this to be suspended, it's also not unprecedented. And our model actually is to support customers as their needs change through the administration of contracts over the life of those contracts. So another example that you'll know we've seen before is when customers modify their invoicing requirements in response to their own environment internally or their environment is such that they have extended periods where they're trying to get contract amendments executed and so forth that can lead to the delays in executions or payments on contracts. We view that as just a part of doing business as a responsible government contractor being flexible and adroit and being able to use our scale and our agility to help our customers manage through those processes and those times. So -- and overall, honestly, I'd say that it's a contributing factor to the trust that our customers place in us to administer programs on their behalf. So that's why part of our business model is to have contracts for decades and to support our customers through times like this, we see this as no different. David Mutryn: Well, I might just add one more point that these incentives have become a bigger contribution for us in our fiscal year '26 than they have been in prior years, which is really a testament to the investments we've made into the program over the past several years that have brought us to the high level of performance across the incentive metrics. Will Gildea: Yes, that is super helpful. So just for, I guess, the initial early look at fiscal year '27 when you say our earnings power in Q4 is a good run rate for the rest of the year, you're kind of implying that it's likely that the pause will be longer than for 180 days. Is that -- do I have the right idea? David Mutryn: Yes. I mean I think there's a range of scenarios there is what we said. So during a period where there's an absence of incentives, yes, I think that Q4 run rate, which, as I mentioned, based on our full year guidance, that's 13% implied EBITDA margin in Q4. I do think that's a reasonable run rate for this period. I'd point out it's still inside the near-term adjusted EBITDA margin range that we laid out in May of 12% to 15%. And maybe go even further to say, we still believe that 12% to 15% is an appropriate range for the business in the near term. So setting incentives on this one program aside, margins have been steadily increasing over the past several quarters, and we see continued opportunity to drive further technology and improvement to that. Will Gildea: Yes. And then just on the preliminary VA PWS, can you discuss maybe the economics or market share? Are there any changes we should be aware of? Was there any language about incentives in it? Just anything about the initial RFP? Bruce L. Caswell: Yes. Well, the short answer is not there, really wasn't. So the Draft PWS that's been released is Section B-3 of a larger RFP that will, I'm sure, be released with all the other components to comprise the RFP in due course. And as I mentioned, the VA is seeking vendor community input by August 12 just on the PWS. So there's really nothing there that speaks to the pricing mechanisms that they intend or incentive structures or anything. It really just lays out the scope of work. And I would say we like the fact that, first of all, the scope of work and the nature of the work and what the requirements are for the vendor and so forth are entirely consistent with the way the work is currently done by the vendor community and also the regions comprised in the PWS are all 6 regions. So that's not just the 4 domestic regions, but also the predischarge region as well as the international region. So it's a comprehensive PWS. It's consistent. And it appears from it that the areas that the VA is really valuing in terms of -- as it relates to the veteran experience, and that is making sure that we're able to schedule veterans efficiently and use their time wisely and only see them when they need to be seen and ensure that we're doing everything we can to shorten our component of the overall cycle time that comprises the handling of a veteran claim are all -- they are ongoing priorities of the VA, and they align perfectly to the areas where we've been making investments in capacity and technology as a company. So we feel good about what we're seeing, and we're eager to provide some feedback to the VA as part of the process. Will Gildea: That is helpful. Switching gears, a nice step-up in unsigned but awarded contracts. Maybe you can talk about what some of those opportunities are? And are you expecting them to convert to signed in the current procurement environment? Bruce L. Caswell: Yes. I will say that, first of all, I like the characteristics of what we're seeing here because what's in that awarded but unsigned category is really longer contracts with a longer duration. And I mentioned in my earlier remarks that sometimes you're seeing in an environment like this short-term actions, short-term extensions and so forth. So the kind of the durability of those awards is great. The second thing I would note is that we've been operating in an environment where the probability of protest has been pretty high. Every time something gets awarded inevitably, especially if it's a light award environment, vendors tend to protest. And there's no consequence often for protests. So why not do it, right? If you're an incumbent, it extends your period of performance on your current contract. Without getting to specific contract gains, I'm pleased that what we're seeing in the awarded but unsigned category includes deals that have been through that protest process and successfully resolved. So they're really just pending the administrative process of contract execution. So that's why I felt confident to say we'll see that ripple through in sequential improvements to book-to-bill in subsequent quarters. Will Gildea: Sounds great. And then I guess, turning pages -- turning to SNAP and Medicaid work requirements, et cetera. A couple of quarters ago, you guys gave an outlook for high single-digit growth in 2027. It seems like you're optimistic on Q4 growth, which is great. Just maybe you can talk about the puts and takes to hitting that outlook in 2027. Can you reaffirm that outlook? Yes. David Mutryn: Yes. I think as we look to 2027, first of all, we've reiterated that this current fourth quarter of '26, we have -- we believe can achieve mid-single-digit organic growth in that segment. So that's an important turning point for the segment, and we do see that momentum carrying into 2027. Why don't I turn it to Bruce for some of the details behind the various policies. Bruce L. Caswell: Yes. I really love to talk about the policy side of it. The interesting thing is that there was a couple of dozen state -- Democratic states attorneys general that sued the Trump administration over the recently released interim final rule for the implementation of Medicaid work requirements, as it relates specifically to the definitions around medical frailty and whether individuals who are medically frail, what additional information might they need to provide to demonstrate that they cannot comply with the work requirement? Well, The Federal District Court judge ruled, I want to say, back on maybe the 29th of July, that they declined to stop the Trump administration. So it enabled the Trump administration to proceed with the implementation of the requirements under the act. So that at least at this point maybe pending an appeal process, but that suggests that the work requirements will continue and need to be implemented as of January 1, 2027. And recall also that, that also begins a period where for the expansion population, Medicaid expansion population, which is about 21 million people nationally, semiannual redeterminations also begin. Now that work doesn't begin all on January 1 because if you think about it, somebody who's determined eligible as of January 1 would then have to have their eligibility rechecked in July, 6 months later would be the first time that happens. So we would see activities ramping up around that over the next calendar year. And then also because presently, states now are scrambling candidly to figure out how do we operationalize the interim final rule? It's worth noting that for at least 2027, beneficiaries will be able to self-attest to medical frailty. So there is some time that states have and the activities are funded on a 90-10 basis to help states come into compliance. So we have a year here where states will figure out what does this mean in terms of the additional attestation requirements? Will they need to be evidenced by doctor's note? How do we do that within the construct of our health systems and maybe our managed care plans? All of that has to get sorted out, but the implementation is, as we understand, and proceeding according to plan. So we're out there having conversations with our customers. And as David has said, we're pleased that already in some of our current contracts, we've gotten the green light to ramp up activities in the fourth quarter related to beneficiary outreach and engagement and so forth, and we'll expect that to continue. The other element, of course, of H.R. 1 is SNAP. I commented on that in my prepared remarks. And again, that's an area where the states have this looming deadline for having to shoulder an increased component of the administrative cost of the program beginning in October this year and then increased benefit costs subsequent to that. So we continue to get significant interest from state customers and remain engaged with them on that front. Will Gildea: Can you provide any more color -- a question for David. Can you provide any more color on the collections expected in Q4? What are the puts and takes to hitting your free cash flow guidance, if there are any? David Mutryn: Yes. So the one area is DSO that I talked to in my prepared remarks. As I talked about in some detail on last quarter's call, there's a federal -- large federal customer that we are catching up on collections from. As I said, it's a federal agency. It's a funded contract. So we have full confidence that the outstanding invoices will be collected. And I shared an update in my remarks that since June 30, we've had great momentum with this single customer collecting $245 million since July 1. So our expectation is that, that healthy pace will continue and bring us to that expectation we set of DSO dropping below 70 by the end of September. Will Gildea: And with that in mind, the balance sheet is strong. You talked about your priorities for capital allocation. Is M&A becoming a more important short-term focus? What are your criteria for acquisitions? David Mutryn: Yes. As I said, we consider both share repurchasing and M&A as important considerations over the long term. On the M&A front, we do see it as an important tool despite market conditions as we look toward long-term organic growth. We want to make sure we are investing in capabilities, customer sets, those sorts of things that can unlock pipeline and high probability of revenue synergies. So that remains something we're focused on. I think it's consistent with what we've been saying for several quarters now that we continue to evaluate opportunities on that front. James Francis: Thanks, Will. Operator, back to you. Operator: Thank you. This does conclude today's conference. We thank you again for your participation. You may disconnect your lines at this time. Before you buy stock in Maximus, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Maximus wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. 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As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Maximus (MMS) Q3 2026 Earnings Call Transcript was originally published by The Motley Fool

Maximus, Inc. MMS faces near-term earnings reset after a temporary change to a major federal contract removed a meaningful profitability contributor for the second half of fiscal 2026. The central issue for investors is whether that setback stays temporary or underscores the company’s sensitivity to large government programs, even as other operating improvements provide some support. The Department of Veterans Affairs paused performance incentives and disincentives tied to the Medical Disability Exam program from July 1 through Dec. 31, 2026. The mechanism rewards vendors based on measures such as timeliness, accuracy and quality. Those incentives contributed about 35 cents per share in each of the first three quarters of fiscal 2026. Their removal therefore takes away a material earnings benefit in the fourth quarter and is also expected to affect the first quarter of fiscal 2027 while the pause remains in place. Maximus lowered fiscal 2026 adjusted earnings guidance to $7.90-$8.20 per share from $8.25-$8.55. The midpoint declined by 35 cents, matching the approximate quarterly contribution from the paused VA incentives. Adjusted EBITDA margin guidance fell to about 13.7% from 14.2%. Free cash flow guidance was also reduced to $425-$475 million, showing that the contract changes affects both earnings expectations and cash-generation assumptions, even though full-year revenue guidance remained $5.2-$5.35 billion. Image Source: Zacks Investment Research U.S. federal agencies generated 55% of Maximus’ fiscal 2025 revenues, compared with nearly 32% from U.S. state agencies and almost 11% from foreign governments. That mix provides scale and recurring demand but can magnify the impact of contract changes, procurement delays and agency-specific decisions. The sensitivity is familiar across federal-services peers. Booz Allen Hamilton Holding Corporation BAH says it depends on U.S. government contracts for substantially all of its revenues. Leidos Holdings, Inc. LDOS identifies the U.S. government as its largest customer and serves agencies including the Department of Veterans Affairs. U.S. Services is moving in a more favorable direction. Third-quarter operating margin improved to 10.8% from 10.2% a year earlier, and management expects positive mid-single-digit organic revenue growth in the fourth quarter, with positive organic growth continuing into fiscal 2027. Technology is another offset. Maximus said third-quarter adjusted EBITDA margin of 15.0% reflected automation and AI-enabled efficiencies, while management cited broader use of efficiency-enhancing technology across programs. These gains can support profitability, but they do not immediately replace the earnings contribution lost from the paused VA incentives. The contract modification looks temporary based on current customer guidance, but it has already reduced fiscal 2026 earnings and cash flow expectations. That makes the pace of any incentive reinstatement, along with execution in U.S. Services and federal procurement timing, important variables for the next phase of earnings momentum. MMS currently carries a Zacks Rank #5 (Strong Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Maximus carries a VGM Score of A, Value Score of A, Growth Score of B and Momentum Score of B. The favorable Style Scores point to noteworthy valuation, growth and momentum characteristics, but the Zacks Rank reflects weakening earnings estimate revisions and therefore argues for caution in the near term. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Maximus, Inc. (MMS) : Free Stock Analysis Report Booz Allen Hamilton Holding Corporation (BAH) : Free Stock Analysis Report Leidos Holdings, Inc. (LDOS) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Interested in Maximus, Inc.? Here are five stocks we like better. Maximus lowered its full-year earnings and cash-flow guidance after the Department of Veterans Affairs paused performance incentives on its Medical Disability Exam program. Adjusted EPS is now expected at $7.90–$8.20 and free cash flow at $425–$475 million, while revenue guidance was maintained at $5.2–$5.35 billion. Third-quarter revenue reached $1.28 billion, with adjusted EBITDA margin improving to 15.0% and adjusted EPS rising to $2.22. Cash collection also improved after quarter-end, with approximately $245 million received from a major federal customer amid elevated days sales outstanding. Management highlighted a $50.4 billion sales pipeline and potential growth from Medicaid, SNAP administration and AI-enabled government services. Maximus said AI requirements now appear in roughly 75%–80% of new bids and cited a 3.5% operating-margin improvement across five contracts using AI tools. Maximus (NYSE:MMS) reported fiscal 2026 third-quarter revenue of $1.28 billion, with adjusted EBITDA margin of 15.0% and adjusted diluted earnings per share of $2.22. Revenue was in line with the company’s expectations, while adjusted EBITDA margin improved from 14.7% a year earlier and adjusted EPS rose from $2.16. The company reiterated its full-year revenue outlook but reduced its earnings and free-cash-flow guidance after the Department of Veterans Affairs temporarily paused performance incentives and disincentives on its Medical Disability Exam, or VA MDE, program. → Sandisk Just Delivered a Blowout Quarter—Here's Why the Stock Is Falling CFO David Mutryn said the VA notified all program vendors of a pause in the incentive mechanism, effective July 1, as the agency works to improve its invoice review and validation process. Maximus had recorded positive performance incentives during each of the first three quarters of fiscal 2026, reflecting results on measures including timeliness, accuracy and quality. The company removed assumed VA MDE incentive contributions from its fourth-quarter forecast. That action lowered its full-year adjusted EPS outlook by approximately $0.35 per share. Adjusted diluted EPS is now expected to be $7.90 to $8.20, compared with the prior midpoint of $8.40. Full-year adjusted EBITDA margin is expected to be about 13.7%. Free cash flow is now expected to be $425 million to $475 million. Revenue guidance was reiterated at $5.2 billion to $5.35 billion, with a bias toward the lower end of the range. → 4 Oil and Gas ETF Plays as Prices Stay Sky-High For the fourth quarter, Maximus’ revised guidance implies adjusted diluted EPS of $1.91 at the midpoint and adjusted EBITDA margin of approximately 13%. Mutryn said the company views that quarterly margin level as a reasonable earnings run rate entering fiscal 2027 while the incentive suspension remains in place. The company assumes the pause will continue through Dec. 31, 2026, meaning Maximus does not expect to be eligible for incentives in the first quarter of fiscal 2027. CEO Bruce Caswell said the VA has released a draft performance work statement for the successor contract, covering all six regions currently served by the company. He said the document did not include details about pricing or future incentive structures. → No Hangover: Revisiting Microsoft One Week After Earnings Caswell said the company remains confident in its ability to win the rebid, citing its delivery record, operating investments and relationship with the customer. The current contracts are scheduled to end Dec. 31, though the company said an extension of up to six months could be possible based on the timing suggested in the draft work statement. U.S. Federal Services generated third-quarter revenue of $721 million. Revenue declined from the prior-year period, which included higher natural-disaster support and temporary clinical volume surges. Segment operating income margin rose to 18.6%, from 18.1% a year earlier, aided by operating efficiencies. U.S. Services revenue was $418 million, and operating income margin was 10.8%. Management said it expects positive mid-single-digit organic revenue growth in the segment in the fourth quarter, driven by increased outreach and engagement work involving Medicaid beneficiaries and legislative changes at current state customers. The Outside the U.S. segment reported revenue of $140 million and operating profit of $1.2 million. Management attributed lower revenue versus the prior year to volume changes across clinical and employment-services programs. The company continues to expect the segment to break even for the full fiscal year, implying a profitable fourth quarter. Cash flow used in operations totaled $125 million in the third quarter, while free cash flow was an outflow of $137 million. Days sales outstanding stood at 98 days due to administrative delays at a major federal customer. Mutryn said Maximus collected approximately $245 million from that customer after June 30 and continues to expect DSO to finish the fiscal year below 70 days. Maximus ended the quarter with $1.65 billion in total debt and a consolidated net leverage ratio of 2.0 times, within its targeted range of two to three times. The company repurchased about 750,000 shares for $50 million during the quarter. Its full $400 million share-repurchase authorization approved in May remained available as of June 30. Maximus reported a total sales pipeline of $50.4 billion at June 30, including $2.9 billion in pending proposals, $2.4 billion in proposals in preparation and $45.1 billion in tracked opportunities. New work represented 57% of the pipeline, while U.S. Federal Services accounted for 55%. Caswell said portions of the federal civilian market have faced procurement delays, scope revisions and cancellations amid changing priorities, budget considerations and policy developments. Still, he said demand remains constructive. Year-to-date signed awards totaled $1.25 billion, producing a trailing 12-month book-to-bill ratio of about 0.5 times. Another $1.35 billion of awards had not yet been signed at quarter-end, primarily tied to longer-term recompete activity. Management also highlighted potential work associated with H.R. 1, including Medicaid community-engagement requirements and SNAP program administration. Caswell said state discussions around Medicaid have moved more slowly than anticipated because of the complexity of recently released federal rules, but Maximus expects beneficiary outreach activity on existing contracts to support fourth-quarter growth. On SNAP, the company said it has completed more than 40 demonstrations of its Accuracy Assistant tool and held 150 customer meetings. Caswell noted that USDA data showed a national SNAP payment error rate of approximately 10.6% in fiscal 2025, compared with about 10.9% in fiscal 2024. The company also said artificial intelligence has become increasingly important in government procurements, with roughly 75% to 80% of new bids and rebids containing explicit AI requirements or evaluation criteria. Caswell said AI-based improvements across five contracts, including call-routing, chatbot and customer-engagement tools, produced a 3.5% operating-margin improvement for that group of contracts. Maximus, Inc (NYSE: MMS) is a global provider of government services focused on delivering health and human services programs. The company partners with federal, state, and local agencies to administer and manage programs that support individuals and families across various stages of life. Key service areas include eligibility determination and enrollment services for Medicaid, Medicare, Children's Health Insurance Program (CHIP) and other public assistance programs, as well as call center operations, case management and program integrity solutions. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Maximus Q3 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Performance in the third quarter was driven by strong execution and efficiency-enhancing technology rather than the temporary volume surges that characterized the prior year. The U.S. Federal Services segment maintained margin strength through operational efficiencies despite a year-over-year revenue decline caused by lower natural disaster support and clinical volume normalization. Management attributes the temporary pause in VA MDE performance incentives to the customer's internal priority to improve their review and validation processes for vendor invoices. The U.S. Services segment is approaching a positive revenue growth inflection point as state customers begin administering legislative changes to Medicaid and SNAP programs. Strategic technology investments, particularly in AI, are yielding measurable outcomes, including a 3.5% operating margin improvement across a group of five specific contracts. The company is actively diversifying into the defense and national security market, identifying a $47 billion addressable market where procurement cycles are currently more consistent than civilian agencies. Management assumes the VA MDE incentive pause will continue through at least December 31, 2026, impacting the first quarter of fiscal year 2027. The fourth quarter of fiscal 2026 is characterized as a reasonable run rate for earnings power and adjusted EBITDA margins entering the next fiscal year under current incentive suspensions. U.S. Services is forecasted to return to positive organic growth in the fourth quarter of 2026, driven by beneficiary outreach and engagement activities related to H.R. 1 legislation. DSO is expected to finish the fiscal year below 70 days, supported by accelerated collections from a major federal customer that provided $245 million in July. The company anticipates sequential book-to-bill improvement as $1.35 billion in awarded but unsigned contracts, many of which have cleared protest hurdles, move toward execution. A customer-directed pause on VA MDE performance incentives reduced the fiscal 2026 adjusted EPS guidance by approximately $0.35. Procurement delays and scope revisions in the federal civilian market have led to slower pipeline maturation and an increase in short-term bridge contracts. The company raised $325 million in Term Loan B during the quarter to pay down revolving credit and manage temporary working capital timing. Implementation of Medicaid work requirements faces uncertainty as states navigate complex interim final rules and potential legal challenges, though a recent court ruling allowed federal plans to proceed. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Management clarified the pause is an administrative action to allow the VA to refine its invoice validation process and is not a reflection of Maximus' performance. While the current pause is slated for 180 days, management noted the possibility of a 6-month extension to the current contract to align with the timing of the successor procurement. The recently released Draft PWS includes all six regions currently served by Maximus, reinforcing management's optimism regarding the upcoming rebid. The draft does not yet include pricing or incentive structures, but the scope remains consistent with current operational requirements. Medicaid work requirements are expected to drive significant activity starting January 1, 2027, with states currently utilizing 90-10 federal funding to operationalize compliance. SNAP opportunities are advancing quickly as states face a 25% increase in administrative cost-sharing starting October 1, 2026, creating immediate demand for accuracy-improving tools. Management confirmed that the elevated DSO was due to administrative delays at one major federal customer, not a dispute over funding or performance. The receipt of $245 million in July provides high confidence in meeting the year-end target of sub-70 days DSO.

Maximus, Inc. MMS reported mixed third-quarter fiscal 2026 results, with earnings beating the Zacks Consensus Estimate but revenues missing the same. MMS’ adjusted earnings of $2.22 per share surpassed the consensus mark of $2.20 by 0.9% and increased 2.8% year over year. Maximus, Inc. price-consensus-eps-surprise-chart | Maximus, Inc. Quote Revenues of $1.28 billion missed the consensus mark of $1.32 billion by 3.2% and declined 5.1% year over year. Prior-year revenues benefited from elevated natural disaster support and temporary clinical volume surges. Adjusted EBITDA margin improved to 15% from 14.7%. MMS’ shares have declined 28.4% over the past year against the industry’s 2.4% growth. The Zacks S&P 500 composite has risen 23.5% over the same time frame. U.S. Federal Services segment revenues declined 5.3% year over year to $721 million. The prior-year period benefited from elevated natural disaster response work and temporary clinical volume surges that did not recur at the same level in the reported quarter. Segment operating margin improved to 18.6% from 18.1% a year ago. Productivity improvements, technology-enabled efficiencies and stable performance across core program areas aided profitability. U.S. Services segment revenues were $418.2 million, down 4.9% year over year. Management expects the segment to achieve positive organic year-over-year growth by the fourth quarter of fiscal 2026, supported by work for existing customers related to legislative-driven program changes. The segment's operating income increased 0.5% to $45.2 million. Operating margin expanded to 10.8% from 10.2% in the prior-year quarter, reflecting continued sequential improvement during fiscal 2026. Outside the U.S. segment revenues fell 5.2% year over year to $139.8 million. The decline was due to volume variances across several clinical and employment services programs. Operating income totaled $1.2 million compared with $5.9 million a year earlier. Operating margin contracted to 0.9% from the year-ago quarter’s 4%. Maximus continues to focus on converting pipeline opportunities to support growth and margin improvement in the segment. Operating income totaled $161.4 million, down 2.6% year over year. However, operating margin improved by 30 basis points to 12.6%, reflecting better profitability despite lower revenues. Adjusted EBITDA was $192.3 million compared with $198.3 million in the year-ago period. The margin expansion reflected ongoing efficiency initiatives across multiple program areas, including broader deployment of automation and AI-enabled tools. About 75-80% of new bids and rebids now include AI-related requirements or evaluation criteria. Year-to-date signed contract awards totaled $1.25 billion at June 30, 2026, while awarded but unsigned contracts totaled $1.35 billion. The trailing 12-month book-to-bill ratio was 0.5 times. The sales pipeline stood at $50.4 billion, including $2.86 billion of proposals pending, $2.42 billion of proposals in preparation and $45.1 billion of opportunities being tracked. New work represented about 57% of the pipeline, while U.S. Federal Services accounted for roughly 55%. MMS exited the quarter with unrestricted cash and cash equivalents of $57 million and gross debt of $1.65 billion. Its net leverage ratio was 2X, within the company's target range of 2-3X. Cash used in operating activities totaled $125 million, while free cash flow was an outflow of $137 million. Days sales outstanding reached 98 days due to administrative delays at a major federal customer. Collections accelerated after quarter-end, with $245 million received subsequently. Maximus reiterated fiscal 2026 revenue guidance of $5.2-$5.35 billion, with results expected toward the lower end of the range. The midpoint ($5.275 billion) of the guided figure is lower than the Zacks Consensus Estimate of $5.29 billion for the same period. Adjusted earnings guidance was lowered to $7.90-$8.20 per share from $8.25-$8.55 per share. The Zacks Consensus Estimate for the same is pegged at $8.43 per share. A temporary contractual modification with a major federal customer prompted the company to reduce its profitability outlook. Adjusted EBITDA margin guidance was cut to approximately 13.7% from 14.2%, while free cash flow guidance was reduced to $425-$475 million from $450-$500 million. Currently, Maximus carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Trane Technologies plc TT reported impressive second-quarter 2026 results. TT’s adjusted earnings of $4.31 per share outpaced the consensus mark by 0.9% and rose 11.1% from the year-ago quarter’s actual. TT’s total revenues of $6.35 billion surpassed the consensus mark by 2.9% and increased 6.4% year over year. Clean Harbors, Inc. CLH posted better-than-expected second-quarter 2026 results. CLH’s adjusted earnings of $3.22 per share beat the Zacks Consensus Estimate by 17.5% and rose 36.4% year over year. Total revenues of $1.74 billion surpassed the consensus estimate by 6.8% and increased 12% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Maximus, Inc. (MMS) : Free Stock Analysis Report Clean Harbors, Inc. (CLH) : Free Stock Analysis Report Trane Technologies plc (TT) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Strong earnings performance reflects disciplined execution TYSONS, Va., August 06, 2026--(BUSINESS WIRE)--Maximus (NYSE: MMS), a leading provider of government services, reported financial results for the three and nine months ended June 30, 2026. Highlights for the third quarter of fiscal year 2026 include: Revenue of $1.28 billion, compared to $1.35 billion for the prior year period, was in line with expectations and supports our full year revenue guidance outlook. Diluted earnings per share were $1.95 and adjusted diluted earnings per share were $2.22, compared to $1.86 and $2.16, respectively, for the prior year period. Revenue guidance is reiterated and expected to range between $5.2 billion and $5.35 billion for fiscal year 2026. Earnings guidance for fiscal year 2026 is updated to reflect a temporary customer-directed contractual modification on a major federal program. Adjusted diluted earnings per share are now expected to range between $7.90 and $8.20 per share, and adjusted EBITDA margin is expected to be approximately 13.7% for fiscal year 2026. Free cash flow guidance is updated to range between $425 million and $475 million. Repurchases of Maximus common stock in the quarter totaled 0.75 million shares for $50.4 million. A quarterly cash dividend of $0.33 per share is payable on August 31, 2026, to shareholders of record on August 14, 2026. "Our third quarter results demonstrate the resilience of the Maximus business and our ability to deliver strong earnings performance while continuing to invest in long-term growth opportunities," said Bruce Caswell, President and Chief Executive Officer. Caswell continued, "More broadly, we continue to see encouraging demand signals across our markets, increased adoption of AI-enabled solutions, growing interest in our SNAP-related offerings, and a substantial opportunity set in the defense and national security markets." Third Quarter Results Revenue for the third quarter of fiscal year 2026 was $1.28 billion and was consistent with our expectations entering the quarter. Prior year period revenue was $1.35 billion and benefited from elevated natural disaster support activity as well as temporary clinical volume surges within the U.S. Federal Services Segment. For the third quarter of fiscal year 2026, operating margin was 12.6% and adjusted EBITDA margin was 15.0%. This compares to margins of 12.3% and 14.7%, respectively, for the prior year period. Diluted earnings per share were $1.95, and adjusted diluted earnings per share were $2.22. This compares to $1.86 and $2.16, respectively, for the prior year period. Consolidated earnings improved over the prior year period primarily due, in part, to ongoing efficiency initiatives across multiple program areas, including broader deployment of automation and AI-enabled tools. U.S. Federal Services Segment U.S. Federal Services Segment revenue for the third quarter of fiscal year 2026 was $721 million. Prior year period revenue of $761 million benefited from elevated natural disaster response work and temporary clinical volume surges that did not recur at the same level in the current quarter. The segment operating margin for the third quarter of fiscal year 2026 was 18.6%, compared to 18.1% reported for the prior year period. Productivity improvements, technology-enabled efficiencies, and stable performance across core program areas contributed to the improvement. During the quarter, we received notification from a major customer regarding a temporary contractual modification effective July 1, 2026, through December 31, 2026, which affects profitability expectations for the remainder of fiscal year 2026. This is reflected in updated fiscal year 2026 guidance as well as the full-year operating margin for the U.S. Federal Services Segment, which is now expected to range between 16.5% and 17.0%. U.S. Services Segment U.S. Services Segment revenue for the third quarter of fiscal year 2026 was $418 million and was consistent with our expectation for continued sequential improvement as we progress toward the positive revenue growth anticipated by the end of the fiscal year. The prior year period segment revenue was $440 million. The segment operating margin for the third quarter of fiscal year 2026 was 10.8%, reflecting continued progression throughout the fiscal year, and compares to the prior year period segment operating margin of 10.2%. The full-year fiscal 2026 operating margin for the U.S. Services Segment is expected to range between 9.5% and 10.0%. Outside the U.S. Segment Outside the U.S. Segment revenue for the third quarter of fiscal year 2026 was $140 million, compared to $147 million in the prior year period. Variances in volumes across several programs, including both clinical and employment services contracts, were primarily responsible for the year-over-year revenue change. The segment operating margin for the third quarter of fiscal year 2026 was 0.9%, compared to 4.0% reported for the prior year period. With the segment still expected to break even for fiscal year 2026, we continue to focus on driving growth and further margin improvement through the successful conversion of this segment's sales pipeline. Sales and Pipeline Year-to-date signed contract awards at June 30, 2026, totaled $1.25 billion, and contracts pending (awarded but unsigned) totaled $1.35 billion. The sales pipeline at June 30, 2026, totaled $50.4 billion, comprised of approximately $2.86 billion in proposals pending, $2.42 billion in proposals in preparation, and $45.1 billion in opportunities we are tracking. New work opportunities represent approximately 57% of the total sales pipeline, and U.S. Federal Services Segment opportunities represent approximately 55% of the total sales pipeline. Balance Sheet and Cash Flows At June 30, 2026, unrestricted cash and cash equivalents totaled $57 million, and gross debt was $1.65 billion. The ratio of debt, net of allowed cash, to consolidated EBITDA for the quarter ended June 30, 2026, as calculated on a trailing twelve-month basis in accordance with our credit agreement, was 2.0x, compared to 1.8x at March 31, 2026. The ratio remains within our target net leverage ratio of 2x to 3x. For the third quarter of fiscal year 2026, cash used in operating activities totaled $125 million, and free cash flow was an outflow of $137 million. DSO were 98 days at June 30, 2026. Collections from a major federal customer accelerated during July, and we continue to expect DSO to finish fiscal year 2026 below 70 days. During the third quarter of fiscal year 2026, we purchased approximately 0.75 million shares of Maximus common stock totaling $50.4 million. In May 2026, the Board of Directors authorized a refresh to the repurchase program for Maximus common stock up to an aggregate of $400 million. As of June 30, 2026, the entire $400 million authorization remained available for future repurchases. On July 6, 2026, our Board of Directors declared a quarterly cash dividend of $0.33 for each share of our common stock outstanding. The dividend is payable on August 31, 2026, to shareholders of record on August 14, 2026. Fiscal Year 2026 Guidance Update We reiterate our fiscal year 2026 revenue guidance, which is expected to range between $5.2 billion and $5.35 billion, with results anticipated toward the lower end of the range. We are updating fiscal year 2026 earnings guidance to account for the temporary contractual modification. We now expect our adjusted EBITDA margin to be approximately 13.7% and adjusted diluted earnings per share to range between $7.90 and $8.20 per share for fiscal year 2026. We now expect free cash flow to range between $425 million and $475 million for fiscal year 2026, which corresponds to the earnings guidance change. Interest expense is estimated to be $88 million, and the full fiscal year tax rate is expected to range between 24.0% and 24.5% for fiscal year 2026. Conference Call and Webcast Information Maximus will host a conference call this morning, August 6, 2026, at 9:00 a.m. ET. The call is open to the public and available by webcast or by phone at: 877.407.8289 (Domestic) / +1.201.689.8341 (International) For those unable to listen to the live call, a recording of the webcast will be available on investor.maximus.com. About Maximus As a leading strategic partner to government, Maximus helps improve the delivery of public services amid complex technology, health, economic, and social challenges. With a deep understanding of program service delivery, acute insights that achieve operational excellence, and an extensive awareness of the needs of the people being served, our employees advance the critical missions of our partners. Maximus provides tech-enabled services to government agencies, including innovative business process management and technology solutions, that provide improved outcomes for the public and higher levels of productivity and efficiency of government-sponsored programs. For more information, visit maximus.com. Non-GAAP Measures and Forward-Looking Statements This release contains non-GAAP measures and other indicators, including adjusted net income, free cash flow, diluted EPS adjusted for amortization of intangible assets and divestiture-related charges and gains, adjusted EBITDA, adjusted EBITDA margin, consolidated EBITDA (as defined by our Credit Agreement), and other non-GAAP measures. A description of these non-GAAP measures and details as to how they are calculated are included with our earnings presentation and forthcoming Form 10-Q. The presentation of these non-GAAP numbers is not meant to be considered in isolation, nor as alternatives to cash flows from operations, revenue growth, operating income, or net income as measures of performance. These non-GAAP financial measures, as determined and presented by us, may not be comparable to related or similarly titled measures presented by other companies. Included in this release are forward-looking statements within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: "anticipate," "intend," "plan," "goal," "seek," "on track," "opportunity," "could," "potential," "believe," "project," "estimate," "expect," "continue," "forecast," "strategy," "future," "likely," "may," "should," "will," and similar references to future periods. Forward-looking statements that are not historical facts, including statements about our confidence, strategies and initiatives, guidance and expectations about revenues, results of operations, profitability, future contracts, liquidity, market opportunities, market demand, acceptance of our products and service offerings, or acquisitions and divestitures, are forward-looking statements that involve risks and uncertainties. These risks could cause our actual results to differ materially from those indicated by such forward-looking statements. A summary of risk factors can be found in Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended September 30, 2025, filed on November 20, 2025, and subsequent filings with the Securities and Exchange Commission (SEC). Our SEC filings are accessible on maximus.com. Any forward-looking statement made by us in this release is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to update the guidance herein or any other forward-looking statement as circumstances evolve. View source version on businesswire.com: https://www.businesswire.com/news/home/20260806885274/en/ Contacts James Francis, VP - [email protected]

Government services provider Maximus (NYSE:MMS) missed Wall Street’s revenue expectations in Q2 CY2026, with sales falling 5.1% year on year to $1.28 billion. On the other hand, the company’s outlook for the full year was close to analysts’ estimates with revenue guided to $5.28 billion at the midpoint. Its non-GAAP profit of $2.22 per share was 0.7% above analysts’ consensus estimates. Is now the time to buy Maximus? Find out in our full research report. Revenue: $1.28 billion vs analyst estimates of $1.33 billion (5.1% year-on-year decline, 3.7% miss) Adjusted EPS: $2.22 vs analyst estimates of $2.21 (0.7% beat) Adjusted EBITDA: $192.3 million vs analyst estimates of $192.5 million (15% margin, in line) The company reconfirmed its revenue guidance for the full year of $5.28 billion at the midpoint Management lowered its full-year Adjusted EPS guidance to $8.05 at the midpoint, a 4.2% decrease Operating Margin: 12.6%, in line with the same quarter last year Free Cash Flow was -$137 million compared to -$198.2 million in the same quarter last year Market Capitalization: $3.32 billion With nearly 50 years of experience translating public policy into operational programs that serve millions of citizens, Maximus (NYSE:MMS) provides operational services, clinical assessments, and technology solutions to government agencies in the U.S. and internationally. Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. With $5.25 billion in revenue over the past 12 months, Maximus is one of the larger companies in the business services industry and benefits from a well-known brand that influences purchasing decisions. As you can see below, Maximus’s 5.2% annualized revenue growth over the last five years was decent. This shows its offerings generated slightly more demand than the average business services company, a helpful starting point for our analysis. We at StockStory place the most emphasis on long-term growth, but within business services, a half-decade historical view may miss recent innovations or disruptive industry trends. Maximus’s recent performance shows its demand has slowed as its revenue was flat over the last two years. This quarter, Maximus missed Wall Street’s estimates and reported a rather uninspiring 5.1% year-on-year revenue decline, generating $1.28 billion of revenue. Looking ahead, sell-side analysts expect revenue to grow 5.2% over the next 12 months, an improvement versus the last two years. This projection is above average for the sector and implies its newer products and services will fuel better top-line performance. ONE MORE THING: 3 Hidden Platforms Growing 3X Faster than Amazon, Google, and PayPal. Amazon, Google, and Meta all followed the same playbook: Dominate an ignored market. Build an unbeatable moat. Scale until you’re unstoppable. These three platforms are running that exact playbook right now. The early investors in Amazon made fortunes. The early investors in these could do the same. Get All 3 Stocks Here for FREE. Adjusted operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses — everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies because it excludes non-recurring expenses, interest on debt, and taxes. Maximus was profitable over the last five years but held back by its large cost base. Its average adjusted operating margin of 9% was weak for a business services business. On the plus side, Maximus’s adjusted operating margin rose by 4.3 percentage points over the last five years, as its sales growth gave it operating leverage. This quarter, Maximus generated an adjusted operating margin profit margin of 13.2%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable. We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable. Maximus’s EPS grew at 9.9% compounded annual growth rate over the last five years, higher than its 5.2% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded. We can take a deeper look into Maximus’s earnings quality to better understand the drivers of its performance. As we mentioned earlier, Maximus’s adjusted operating margin was flat this quarter but expanded by 4.3 percentage points over the last five years. On top of that, its share count shrank by 15%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth. Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business. For Maximus, its two-year annual EPS growth of 14.3% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base. In Q2, Maximus reported adjusted EPS of $2.22, up from $2.16 in the same quarter last year. This print was close to analysts’ estimates. Over the next 12 months, Wall Street expects Maximus’s full-year EPS to grow 18.5% from $7.76 to $9.20. We struggled to find many positives in these results. Its full-year EPS guidance missed and its revenue fell short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock traded down 3.6% to $60.86 immediately after reporting. Maximus didn’t show its best hand this quarter, but does that create an opportunity to buy the stock right now? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.

Maximus (MMS) came out with quarterly earnings of $2.22 per share, beating the Zacks Consensus Estimate of $2.2 per share. This compares to earnings of $2.16 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of +0.91%. A quarter ago, it was expected that this government health services provider would post earnings of $1.98 per share when it actually produced earnings of $2.07, delivering a surprise of +4.55%. Over the last four quarters, the company has surpassed consensus EPS estimates three times. Maximus, which belongs to the Zacks Government Services industry, posted revenues of $1.28 billion for the quarter ended June 2026, missing the Zacks Consensus Estimate by 3.2%. This compares to year-ago revenues of $1.35 billion. The company has not been able to beat consensus revenue estimates over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Maximus shares have lost about 26.8% since the beginning of the year versus the S&P 500's gain of 12.8%. While Maximus has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for Maximus was mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $2.30 on $1.31 billion in revenues for the coming quarter and $8.43 on $5.29 billion in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Government Services is currently in the top 21% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. One other stock from the broader Zacks Business Services sector, Klarna (KLAR), is yet to report results for the quarter ended June 2026. The results are expected to be released on August 18. This Swedish buy now, pay later company is expected to post quarterly loss of $0.07 per share in its upcoming report, which represents a year-over-year change of +50%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days. Klarna's revenues are expected to be $987.94 million, up 20% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Maximus, Inc. (MMS) : Free Stock Analysis Report Klarna Group plc (KLAR) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research