Q3 2020 Maximus Inc Earnings Call

August 6, 2020

Ladies and gentlemen, thank you for standing by welcome to the Q3 X Y Sweeney maximum earning conference call.

Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Q3 FY 2020 Maximus Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one on your phone.

This time all participants are in listen only mode. After the speakers presentation, there will be a question and answer session.

A question do the session you need to press star one on your phone. Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero I would know what's behind the conference over to your speaker for this morning, Ms. Lisa miles.

Operator 2: I would now like to hand the conference over to your speaker for this morning, Ms. Lisa Miles, Senior Vice President of Investor Relations. Thank you. You may go ahead, madam. Ladies and gentlemen, please stand by. We seem to be having technical difficulties.

Operator: I would now like to hand the conference over to your speaker for this morning, Ms. Lisa Miles, Senior Vice President of Investor Relations. Thank you. You may go ahead, madam. Ladies and gentlemen, please stand by. We seem to be having technical difficulties.

Senior Vice President of Investor Relations. Thank you you May go ahead Madam.

Ladies and gentlemen, please standby we seem to be having technical difficulties.

Ladies and gentlemen, this is the conference operator seems to be technical difficulties, but at least pause for just a moment.

Good luck.

Yes.

[noise] apologies for the delay we were having some technical difficulties this morning.

Lisa Miles: Apologies for the delay. We were having some technical difficulties this morning. If you give us just a couple of seconds, we'll be right back on. Thank you.

If you give us just a couple of second we'll be right back on thank you.

Good.

Rick Nadeau: Let's do it.

Apologies and thank you for being patient with US. This morning, Hi, good morning, and thanks for joining US with me today, today's Bruce Caswell, President and CEO and make NATO Chief Financial Officer.

Lisa Miles: Apologies, and thank you for being patient with us this morning. Good morning, and thanks for joining us. With me today is Bruce Caswell, President and CEO, and Rick Nadeau, Chief Financial Officer. 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 Exhibit 99.1 of our SEC filings. We encourage you to review the information contained in our earnings release today, and our most recent Forms 10-Q and 10-K filed with the SEC. The company does not assume any obligation to revise or update these forward-looking statements to reflect subsequent events or circumstances except as required by law. Today's presentation may contain non-GAAP financial information.

I'd like to remind everyone in a number 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 exhibit 99 that one of our SEC filings.

We encourage you to review the information contained in our earnings release today and our most recent forms 10-Q, and 10-K filed with the SEC.

The company does not assume any obligation to revise or update. These forward looking statements to reflect subsequent events or circumstances, except as required by law.

Today's presentation may contain non-GAAP financial information management uses is information and its internal analyses of results and believes this information may be implemented investors engaging the quality of our financial performance identifying trends in our results and providing meaningful period to period comparisons.

Lisa Miles: Management uses this information in its internal analyses of results and believes this information may be informative to investors in gauging the quality of our financial performance, identifying trends in our results, and providing meaningful period-to-period comparisons. For a reconciliation of the non-GAAP measures presented in this document, please see the company's most recent quarterly earnings press release. With that, I'll hand the call over to Rick.

A reconciliation of the non-GAAP measures presented in this document.

Please see the company's most recent quarterly earnings press release, and with that ill hand, the call over to Rick.

Thank you Lisa we continue to operate in a world affected by the 219 pandemic.

Rick Nadeau: Thank you, Lisa. We continue to operate in a world affected by the COVID-19 pandemic. We are successfully working under a hybrid operational model, which maintains delivery of our services through a mix of safe on-site working arrangements and work-from-home arrangements. The model enables continuity for our government customers and uninterrupted assistance for citizens at a time when their need for healthcare and safety net programs is crucial. Not surprisingly, we have been subjected to both headwinds and tailwinds stemming from the pandemic. Our Outside the US segment continues to experience the greatest headwinds resulting from a temporary halt on face-to-face assessments and a general pandemic-related slowdown in employment services. In our US operations, we are experiencing headwinds on various performance-based contracts as volumes and revenues are lower.

We are successfully working under a hybrid operational model, which maintains delivery of our services through a mix of safe onsite working arrangements and work from home arrangements.

Model enables continuity to our government customers and on interrupted assistance for citizens at a time when their need for healthcare and safety net programs is crucial.

Not surprisingly, we have been subjected to both headwinds and tailwinds stemming from the pandemic.

Our outside the U.S segment continues to experience the greatest headwinds, resulting from a temporary hold on face to face assessments.

And a general pandemic related slowdown in employment services.

And our US operations, we are experiencing headwinds on various performance based contracts as volumes and revenues or lower.

This is resulting from cobot 19 response efforts by our government clients whoever Lex certain program requirements in order to ensure that the most vulnerable citizens continue to access the vital services they need.

Rick Nadeau: This is resulting from COVID-19 response efforts by our government clients, who have relaxed certain program requirements in order to ensure that the most vulnerable citizens continue to access the vital services they need. We also have a multitude of tailwinds that have provided a favorable uptick, most notably new COVID-19 response work and the extension of the Census contract in response to COVID-19. We have made meaningful progress in securing more appropriate contract terms on some employment services contracts to support the goals of our customers as economies gradually reopen and program operations resume. The net result of these puts and takes is a positive update to our revenue and earnings guidance.

We also have a multitude of tailwinds that have provided a favorable uptick most notably newco with 19 response work and the extension of the census contract in response to cope with 19.

We have made meaningful progress in securing more appropriate contract contract terms on some employment services contracts to support the goals of our customers as economies gradually reopened.

And program operations Reserve.

The net result of these puts and takes is a positive update.

To our revenue and earnings guidance.

Revenue and earnings were better than expected principally due to new work and the expansion of the existing were tied to the code 19 response.

Rick Nadeau: Revenue and earnings were better than expected, principally due to new work and the expansion of the existing work tied to the COVID-19 response, including the extension of the Census contract, as well as an improved outlook for Australia employment services operations. As a result, we now expect revenue will range between $3.375 and $3.425 billion and diluted earnings per share to range between $3.20 and $3.30 per share. We expect cash from operations to range between $200 and $220 million, and free cash flow between $180 and $200 million. Cash from operations and free cash flow are being guided downward primarily due to the increased requirement for investment and working capital as a result of increased revenue.

Including the extension of the census contract.

As well as an improved outlook for Australia employment services operations.

As a result, we now expect revenue will range between 3.375, and $3.4 billion to $5 billion and diluted earnings per share to range between $3.20 to $3 in 30 cents per share.

We expect cash from operations to range between 202 hundred $20 million.

And free cash flow between 180 and $200 million.

Cash from operations and free cash flow are being guided downward primarily due to the increased requirement for investment in working capital as a result of increased revenue.

As previously noted delays in collections of receivables can cause significant cash flow variation at quarter or year end.

Rick Nadeau: As previously noted, delays in collections of receivables can cause significant cash flow variation at quarter or year-end. Nevertheless, we are extremely pleased that the teams were able to win and onboard a significant amount of new work to offset the unfavorable impacts. This demonstrates the trust that clients put in us to bring forth our expertise, stand up large operations in tight time frames, and provide high-quality critical services even in the most challenging times. I will now cover Q3 results and related COVID-19 impacts. Revenue for Q3 of fiscal 2020 increased to $901.3 million compared to $730.7 million in the prior period, driven by the Census contract and new COVID-19 response work, such as contact tracing and assistance with unemployment benefits. Excluding the Citizen Engagement Center contracts, which includes the Census contract.

Nevertheless, we're extremely pleased with the teams were able to win and onboard a significant amount of new work to offset the unfavorable impacts.

This demonstrates the trust the clients blip in us to bring forth our expertise standup large operations in tight time frames and provide high quality critical services even.

In the most challenging times.

I will now cover third quarter results and related coded 19 impacts.

Revenue for the third quarter fiscal Twentytwenty increased to $901.3 million compared to $730.7 million in the prior period.

Driven by the census contract in New Cobot, 19 response work such as context racing and assistance with unemployment benefits.

Including the citizen engagement center contracts, which includes the census contract organic growth for the third quarter of fiscal Twentytwenty was 3.5%.

Rick Nadeau: Organic growth for Q3 of fiscal 2020 was 3.5% and was tempered by our outside U.S. segment. Operating margin for Q3 of fiscal 2020 was 9.7%, reflecting lower revenue from performance-based contracts and a greater mix of cost-plus work from the Census contract. Diluted earnings per share were $1.04 and benefited from a change order worth $9 million, or $0.11 per share. As expected, the change order was signed in Q3, but the costs were incurred in the prior periods. Now moving on to the segments. Q3 revenue for the U.S. Health and Human Services segment totaled $337 million, representing a 15.7% increase over the prior period.

And was tempered by our outside the U.S segment.

Operating margin for the third quarter of fiscal Twentytwenty was 9.7%, reflecting lower revenue from performance based contracts and a greater mix of cost plus work from the census contract.

Diluted earnings per share were one dollar and four cents and benefited from a change quarter worth $9 million or 11 cents per share.

As expected the change order was signed in the third quarter, but the costs were incurred in the prior periods.

Now moving on to the segments.

Third quarter revenue for the US health and human services segment totaled $337 million, representing a 15.7% increase over the prior period.

All growth was organic resulting from new contracts, including those tied to the Golden 19 response and expansion of existing work.

Rick Nadeau: All growth was organic, resulting from new contracts, including those tied to the COVID-19 response and expansion of existing work. Operating margin for the U.S. Health and Human Services segment was 18.1% and benefited from the aforementioned change order. Excluding the change order, segment operating margin was 15.9%. Operational disruptions related to the pandemic unfavorably impacted the segment and tempered the segment operating margin this quarter. As an example, on a significant performance-based Medicaid contract, the customer paused renewals to ensure that individuals and families retained access to health care, reducing our volumes and revenues. For the remainder of the year, continued disruptions are expected, but we believe we are still on track for an operating margin between 17% and 18% for the full year for this segment.

Operating margin for the US health and human services segment was 18.1% and benefited from the aforementioned change order.

Excluding the change order segment operating margin was 15.9%.

Operational disruptions related to the pandemic unfavorably impacted the segment and tempered the segment operating margin this quarter.

As an example on a significant performance based Medicaid contract the customer paused renewals to ensure that individuals and families retained access to healthcare, reducing our volumes and revenues for the remainder of the year continued disruptions are expected, but we believe we are still on track for an operating margin.

In between 17 and 18% for the full year for this segment.

Third quarter revenue for the U.S Federal services segment increased to $450.1 million compared to $292.3 million in the prior year period.

Rick Nadeau: Q3 revenue for the U.S. Federal Services segment increased to $450.1 million compared to $292.3 million in the prior year period. All growth in the segment was organic. Excluding the Census contract and the remainder of the Citizen Engagement Center contracts, organic growth was 4.1%, driven by new work, including those tied to the COVID-19 response, and growth on existing contracts. The operating margin for the U.S. Federal Services segment was 8.7% for Q3 of fiscal 2020. Operating margin for this segment is lower on a comparative basis due to volume and revenue reductions on several performance-based contracts, and the greater mix of cost-plus contracts this fiscal year, which typically carry lower margins. Let me give an example of reduced volumes which stem from the pandemic.

All grows in the segment was organic.

Excluding the census contract in the remainder of the citizen engagement centers contracts organic growth was 4.1% driven by new work, including those tied to the code 19 response and growth on existing contracts.

The operating margin for the US Federal services segment was 8.7% for the third quarter of fiscal Twentytwenty.

Operating margin for this segment is lower on a comparative basis due to volume and revenue reductions on several performance based contracts.

And the greater mix of cost plus contracts this fiscal year, which typically carry lower margins.

Let me give an example of reduced volumes, which stems from the pandemic.

We are experienced a significant decline in volumes of independent medical reviews due to a precipitous drop in workers' compensation claims in California overall workers' compensation claims have plummeted to approximately 1100 in may compare to more than 50000 claims in January.

Rick Nadeau: We are experiencing a significant decline in volumes of independent medical reviews due to a precipitous drop in workers' compensation claims. In California, overall workers' compensation claims have plummeted to approximately 1,100 in May compared to more than 50,000 claims in January. On a positive note, the Census contract continued to operate at a peak level of operations due to the Census Bureau's extended response period. This contract delivered $170 million of revenue in Q3, yielding year-to-date revenue of approximately $380 million. We continue to support the Census Bureau and estimate that this contract will deliver approximately $500 million of revenue for the full fiscal year 2020, which improves upon the previous revenue forecast of between $430 and 450 million.

On a positive note the census contract continue to operate at a peak level of operations due to the census bureaus extended response period.

This contract delivered $170 million of revenue in the third quarter, yielding year to date revenue of approximately $380 million.

We continue to support the census Bureau, and estimate that this contract will deliver approximately $500 million of revenue for the full fiscal year.

Twentytwenty, which improves upon the previous revenue forecast of between 430 and $450 million.

The us Federal services segment is still estimated to deliver a full year operating margin between eight and 9%.

Rick Nadeau: The U.S. Federal Services segment is still estimated to deliver a full year operating margin between 8% and 9% with a bias toward the lower end of the range. The COVID-19 pandemic continues to have the most pronounced effect on our outside the U.S. segment. Q3 revenue was $114.2 million, and the segment had a loss of $5.8 million. This segment has several significant employment services contracts, most notably the UK, Australia, and the Health Assessment Advisory Service, or HAAS, contract in the UK, all of which continue to operate at reduced levels as these economies wrestle to emerge from the pandemic. The operating loss for Q3 of fiscal 2020 is a better result than we previously forecast, primarily related to an improved outlook and greater visibility of future outcome payments in Australia.

With a bias toward the lower end of the range.

The over 19 pandemic continues to have the most pronounced effect on our outside the U.S segment third quarter revenue was $114.2 million and the segment had a loss of $5.8 million.

This segment has several significant employment services contracts, most notably the UK and Australia, and the health assessment Advisory service or Haas contract in the UK all of which continue to operate at reduced levels as these economies Russell to emerge from the pandemic.

The operating loss for the third quarter of fiscal Twentytwenty is a better results than we previously forecast primarily related to an improved outlook and greater visibility of future outcome payments in Australia.

In Australia, we modified certain contractual terms to reflect more equitable pay points, which will put the segment on an improved trajectory.

Rick Nadeau: In Australia, we modified certain contractual terms to reflect more equitable pay points, which will put the segment on an improved trajectory. As we mentioned last quarter, we modified the UK contracts to a cost reimbursement model. However, other disruptions persist in this segment, including the suspension of face-to-face assessments on the HAAS contract in the UK as our customer navigates toward the optimal path to safely resume this volume of work. This segment is expected to end the full year in an operating loss position, with Q4 improving on the Q3 results and coming in slightly below breakeven. As we look to FY 2021, we believe that as different geographies emerge from the pandemic at different paces, there will be an expanded need for our services and pent-up demand for our role to help governments provide their citizens employment opportunities.

As we mentioned last quarter, we modified the UK contracts to a cost reimbursement model.

However, other disruptions persist in this segment, including the suspension of face to face assessments on the Haas contract in the UK.

As our customer navigates toward the optimal path to safely resume vis volume of work.

This segment is expected to end the full year in an operating loss position with the fourth quarter, improving on the third quarter results and coming in slightly below breakeven.

As we look to F. why 21, we believe that is that as different geographies emerge from the pandemic at different paces.

There will be an expanded need for our services and pent up demand for our role can help governments provide their citizens employment opportunities.

Turning to the balance sheet.

Rick Nadeau: Turning to the balance sheet. We finished Q3 with cash and cash equivalents of approximately $81.5 million. Outstanding draws on our credit facility totaled $145 million, leaving $255 million available for borrowing. Cash from operations were $96.1 million, and free cash flow was $67.6 million for the nine months ended 30 June 2020. Year-to-date cash from operations has been negatively impacted due to the additional investment in working capital required by increases to revenue, the timing of collections, and lower income attributable to the outside the US segment. DSOs of 84 days at 30 June 2020 caused negative cash flows for Q3. DSOs were outside our typical range at 84 days due to delays in two large payments from significant customers.

We finished the third quarter with cash and cash equivalents of approximately $81.5 million outstanding draws on our credit facility totaled $145 million, leaving $255 million available for borrowing.

Cash from operations were $96.1 million and free cash flow was $67.6 million for the nine months ended June 30.

Year to date cash from operations has been negatively impacted due to the additional investment in working capital required by increases to revenue the timing of collections and lower income attributable to the outside the U.S segment.

Dsos of 84 days at June 32020 cause negative cash flows for the third quarter.

Dsos were outside our typical range at 84 days due to delays in two large payments from significant customers.

Shortly after the quarter, we collected more than $90 million of accounts receivable.

Rick Nadeau: Shortly after the quarter, we collected more than $90 million of accounts receivable. DSOs would have been 74 days within our typical range of 65 to 80 days if those payments had been included. We are continuing to monitor collections closely, and as a reminder, one day of DSO is between $9 million and $10 million of receivables and directly impacts our estimates of cash from operations and free cash flow. We are committed to managing the business in a conservative manner with a focus on liquidity and ability to remain flexible. We still face uncertainties, including state budgetary pressures, and recognize that our customers continue to experience significant disruptions to their tax receipts.

Dsos would have been 74 days within our typical range of 65 to 80 days if those payments had been included.

We are monitoring we're continuing to monitor collections closely and as a reminder, one day of Dsos between nine and $10 million of receivables and directly impacts our estimates of cash from operations and free cash flow.

We are committed to managing the business in a conservative manner with a focus on liquidity and ability to remain flexible, we still face uncertainties, including state budgetary pressures and recognize that our customers continue to experience significant disruptions to their tax receipts.

As I have noted before our historical experience during economic downturns is that our designation as an essential service provider in the United States puts us in a favorable position in working with our clients on invoicing and payments.

Rick Nadeau: As I have noted before, our historical experience during economic downturns is that our designation as an essential service provider in the United States puts us in a favorable position in working with our clients on invoicing and payments. The management team and the board of directors have not wavered in taking a prudent and constructive approach to cash deployment for the remainder of our fiscal year, and likely beyond. Currently, we do not anticipate a disruption to our future quarterly cash dividends, but share purchases and significant M&A activity remain paused. Tuck-in transactions that will support future organic growth in a meaningful way will continue in a judicious manner. In closing, let me briefly touch on fiscal year 2021. We thought it was important to provide some color and transparency around our preliminary thoughts.

The management team and the board of directors have not wavered in taking a prudent and constructive approach to cash deployment for the remainder of our fiscal year and likely beyond currently we do not anticipate a disruption to our future quarterly cash dividends, but share purchases and significant M&A activity remain.

Paused tuck in transactions that will support future organic growth in a meaningful way will continue in a judicious manner.

In closing, let me briefly touch on fiscal year 2021, we thought it was important to provide some color and transparency around our preliminary thoughts.

As we contemplate 2021, there was clearly more uncertainty and accordingly more volatility than normal.

Rick Nadeau: As we contemplate 2021, there is clearly more uncertainty and accordingly, more volatility than normal. We currently expect ongoing benefits from the COVID-19 response work into fiscal 2021. We also anticipate improvements in operations outside the US, where we expect favorable tailwinds in our employment services business as the need for support into work will be a key driver to economic recoveries around the world. Lastly, we recognize opportunities for increases to the core health program benefits we administer, particularly in the US. These favorable tailwinds are expected to be at least partially offset by temporary program changes on some of our larger performance-based contracts. It is impossible to predict with certainty when some of these core programs will resume to somewhat normal operations.

We currently expect ongoing benefits from the Coven 19 response work into fiscal 2021.

We also anticipate improvements in operations outside the U.S, where we expect favorable tailwinds in our employment services business as the need for support into work will be a key driver to economic recoveries around the world.

Lastly, we recognize opportunities for increases to the core health program benefits, we administer particularly in the U.S.

These favorable tailwinds are expected to be at least partially offset by temporary program changes on some of our larger performance based contracts.

It is impossible to predict with certainty when some of these core programs will resume to somewhat normal operations.

These dynamics, both positive and negative are highly dependent on the following.

Rick Nadeau: These dynamics, both positive and negative, are highly dependent on the following: the ultimate duration of the pandemic, the threat of future further negative pandemic-related impacts, the recovery pattern of our core programs, the potential impacts resulting from budget challenges with our government clients, the possibility of delayed or missed payments by customers, the potential for further supply chain disruptions impacting IT or safety equipment, the impact of further legislation or government policies on programs we operate. Particularly in the US, the correlation between unemployment and volumes in core benefit programs such as Medicaid and the health benefit exchanges. Additionally, we have noted in the past that portfolio experiences normal course erosion each year, and we count on new work wins to backfill.

The ultimate duration of the pandemic.

The threat of future neck further negative pandemic related impacts.

The recovery pattern of our core programs.

Potential impacts, resulting from budget challenges with our government clients the possibility of delayed or missed payments by customers.

For the potential for further supply chain disruptions impacting ITC or safety equipment.

The impact of further legislation or government policies on programs, we operate and particularly in the us the correlation between unemployment and volumes in core benefit programs, such as Medicaid and the health benefit exchanges.

Additionally, we have noted in the past the portfolio experiences normal course erosion each year and we count on new work wins to backfill.

The census contract will wind down next year as expected delivering less than $70 million of revenue in fiscal 2021 as compared to approximately $500 million of expected revenue for fiscal 2020.

Rick Nadeau: The census contract will wind down next year as expected, delivering less than $70 million of revenue in fiscal 2021, as compared to approximately $500 million of expected revenue for fiscal 2020. We think it is useful to review the analyst consensus estimates for fiscal 2021. On the top line, we are cautiously optimistic that we can exceed the consensus revenue estimate of approximately $2.95 billion. However, on the bottom line, we acknowledge continued uncertainty tied to temporary program changes from the COVID-19 responses of various governments. Therefore, earnings consensus estimates of $3.71 per share is achievable, but a bit optimistic. At this time, we believe there is a wide range of possible outcomes as we look into next year. As is our normal practice, we will provide formal guidance during our year-end call in November.

We think it is useful to review the analyst consensus estimates for fiscal 2021.

On the topline we are cautiously optimistic that we can exceed the consensus revenue estimate of approximately $2.95 billion.

However on the bottom line, we acknowledge continued uncertainty tied to temporary program changes from the code 19 responses of various governance. Therefore earnings consensus estimates of $3.71 per share is achievable, but a bit optimistic.

At this time, we believe there's a wide range of possible outcomes as we look into next year.

As is our normal practice, we will provide formal guidance during our year end call in November.

Bruce and I remain optimistic the maximum this will emerge from this disruption as a stronger company. We believe that our efforts since March have demonstrated our ability to quickly deploy a hybrid operational model.

Rick Nadeau: Bruce and I remain optimistic that Maximus will re-emerge from this disruption as a stronger company. We believe that our efforts since March have demonstrated our ability to quickly deploy a hybrid operational model, safeguard our employees, operate and execute under less than ideal conditions, and be a dependable partner for the wide-ranging needs of our customers and the citizens we are proud to support. With that, I will turn the call over to Bruce Caswell.

Safeguard our employees operate and execute under less than ideal conditions and be a dependable partner for the wide ranging needs of our customers and the citizens. We are proud to support and with that I will turn call over to Bruce Caswell.

Thank you Rick and good morning, everyone and thank you for joining us.

Bruce Caswell: Thank you, Rick, and good morning, everyone, and thank you for joining us. Despite the great uncertainty and significant economic disruption in the global economy as a result of COVID-19, we're pleased today to be raising revenue and diluted earnings per share guidance as a result of our demonstrated ability to modify and scale operations, respond to the priorities of our government clients, and ensure that individuals and families receive uninterrupted access to needed services. At the same time, we are conscious of the fact, as Rick stated, that no one can predict the trajectory of the pandemic.

Despite the great uncertainty in significant economic disruption in the global economy. As a result recovered 19, we're pleased today to be raising revenue and diluted earnings per share guidance. As a result of our demonstrated ability to modify and scale operations respond to the priorities of our government clients and ensure that individuals and families receive uninterrupted access.

To needed services.

At the same time, we're conscious of the fact is Rick stated that no one can predict the trajectory of the pandemic.

While some governments are experiencing fiscal challenges with more limited budget and you have higher demand for services. This impact has primarily been felt at the state level, while federal funding continues to support the administration of many essential benefit programs.

Bruce Caswell: While some governments are experiencing fiscal challenges with more limited budgets and yet higher demand for services, this impact has primarily been felt at the state level while federal funding continues to support the administration of many essential benefit programs and has been a critical lifeline to states to provide COVID-19 services such as expanded unemployment insurance, contact tracing, and testing. As a consequence, while we've experienced disruption in our U.S. Health and Human Services and U.S. Federal Services segments, these are related more to policy changes and the downstream economic consequences of the pandemic, and less to fiscal challenges. That said, I'm pleased that these headwinds have been tempered in the near term by our new COVID-19 work and the Census contract. From a procurement perspective, we've fortunately seen only isolated delays on a global basis.

It has been a critical lifelines as dates to provide over 19 services such as expanded in unemployment insurance contact racing and testing.

As a consequence, while we've experienced disruption in our us, helping human services and us Federal services segments visa related more to policy changes and the downstream economic consequences of the pandemic and less the fiscal challenges.

That said I am pleased that these headwinds have been tempered by the near in the near term by our new covered 19 work and the census contract.

From a procurement perspective, weve, Fortunately thing only isolated delays on a global basis. As you can appreciate many usdeight customer shifted priorities to covert 19 emergency procurement undertaken at unprecedented speed and from which we have benefited for certain customers. This is Matt delaying previously planned Rps and away.

Bruce Caswell: As you can appreciate, many US state customers shifted priorities to COVID-19 emergency procurements undertaken at unprecedented speeds and from which we have benefited. For certain customers, this has meant delaying previously planned RFPs and awards. In some cases, these delays have been a net positive for Maximus, leading to extended contracts and additional option year periods. At the federal level, there's been no material change in the pipeline flow as COVID-19-related emergency procurements have been absorbed into existing agency processes and capacity. Finally, outside the US where our delivery model is more direct and citizen-facing, some procurements have been paused or even canceled as governments rethink policy, program design, and procurement strategy. Taken collectively, these dynamics cause us to be cautiously optimistic that the global pipeline for government services addressable by Maximus will remain robust.

Words in some cases these delays have been a net positive for maximus, leading to extended contracts and additional option year periods.

At the federal level, there's been no material change in the pipeline flow as cobot 19 related emergency procurements had been absorbed into existing agency processes and capacity.

Finally outside the us where our delivery model was more direct and citizen facing some procurements had been pause or even canceled as governments rethink policy program design in procurement strategy taken collectively these dynamics caused us to be cautiously optimistic that the global pipeline for government services addressable by Maximus will remain robust.

Yes.

Although we're not immune to economic slowdowns, our services have historically been counter cyclical in nature as the demand for income health and employment support rose during times of economic decline.

Bruce Caswell: Although we're not immune to economic slowdowns, our services have historically been countercyclical in nature as the demand for income, health, and employment support grows during times of economic decline. The necessity of these health and human services programs is no more apparent than during a health crisis resulting in increased unemployment and needed access to vital services. The unpredictable nature of this pandemic and the disruption it continues to create for economies, governments, and in the lives of individuals and families underscores the importance of our business model. On the one hand, we must continue to deliver critical programs at our core, such as Medicaid, Medicare, and employment services through a highly modified hybrid model. On the other hand, our significant technology investments, coupled with core capabilities in citizen engagement and complex program administration, have enabled us to pivot to new areas and support new government priorities.

The necessity of these health and human services programs is no more apparent than during a help prices, resulting in increased unemployment and needed access to bundle services.

The unpredictable nature of this pandemic and the disruption it continues to create for economies government and in the lives of individuals and families.

Underscores the importance of our business model.

On one hand, we must continue to deliver critical programs at our core such as Medicaid Medicare and employment services through a highly modified hybrid model.

The other hand, our significant technology investments coupled with core capabilities in citizen engagement and complex further administration have enabled us to pivot to new areas and support new government priorities.

As we looked at a future as Rick noted, we see opportunities to provide greater value and to remain more than ever the trusted partner of government as they administer essential citizen services.

Bruce Caswell: As we look to the future, as Rick noted, we see opportunities to provide greater value and to remain more than ever the trusted partner of governments as they administer essential citizen services. Last quarter, I provided updates on some of our new work as a result of COVID-19, as well as highlighted our ongoing efforts to prioritize employee safety and well-being. I want to provide a bit more color in these areas as more understanding and transparency has developed over the past few months of this pandemic. I want to reinforce that our commitment to the safety and well-being of our employees remains our top priority. We continue to rapidly evolve in line with CDC and EPA guidelines with new policies and procedures, continued paid leave opportunities, an expanded work from home policy, mandated social distancing and face coverings, and ongoing enhanced cleaning regimens.

Last quarter I provided updates on some of our new work as a result of pivot 19, as well as highlighted our ongoing efforts to prioritize employee safety and wealth.

I want to provide a bit more color in these areas as more understanding and transparency has developed over the past few months of this pandemic.

I want to reinforce that our commitment to the safety and well being of our employees remains our top priority. We continue to rapidly evolve in line with CDC at EPA guidelines with new policies and procedures continued paid leave opportunities and expanded work from home policy mandated social distancing enphase coverings and ongoing and.

Hands cleaning regiments.

As we mentioned we've responded to increased demand for services by quickly standing up and operating turnkey citizen engagement centers.

Bruce Caswell: As we mentioned, we've responded to increased demand for services by quickly standing up and operating turnkey Citizen Engagement Centers with both on-site, but predominantly home-based service agents. Our ability to recruit, hire, train, and manage service agents enables us to scale and augment program staff quickly and effectively in response to unprecedented demand. We've compared notes with others in related industries and believe that we have accomplished one of the most significant pivots to work from home with more than 18,000 agents on Amazon WorkSpaces and another nearly 10,000 individuals connecting through virtual desktop or virtual private network connections. Our efforts to design a highly secure remote model that supports both corporate provided and bring your own device assets began prior to COVID-19.

With both on site, but predominantly home based service agents, our ability to recruit higher train and manage service agents enables us to scale and augment program staff quickly and effectively in response to unprecedented demand.

We compare notes with others and related industries and believe that we've accomplished one of the most significant pivots to work from home.

With more than 18000 agents on Amazon work spaces, and another nearly 10000 individuals connecting through virtual desktop or virtual private network connections.

Our efforts to design a highly secure remote model that supports both corporate provided and bring your own device assets began prior to cope with 19.

In addition to the contact tracing award in Indiana, We announced last quarter, we added new contracts in Pima County, Arizona, Florida, Kentucky, and North Carolina.

Bruce Caswell: In addition to the contact tracing award in Indiana we announced last quarter, we added new contracts in Pima County, Arizona, Florida, Kentucky, and North Carolina. In Florida, we're providing surge capacity for the state's contact tracing efforts. The total contract value is $73 million over six months, which covers two separate statements of work managed by the Florida Department of Health. In Pima County, Arizona, we provide a team of case investigators to augment the county's disease investigation activities related to COVID-19 and contact tracers to follow up on contacts identified as part of the disease investigation process. The total contract value is $10 million, with a six-month base term and 3 six-month option periods. Contact tracing is important work as we continue to evolve our clinical BPO strategy and demonstrate our ability to deliver clinical services at scale.

In Florida, we're providing surge capacity for the state's contact racing efforts. The total contract value is $73 million over six months, which covers two separate statements of work managed by quarter Department of health.

In Pima County, Arizona, we provide a team case investigators to augment the counties disease investigation activities related to covered 19 and contact razors to follow up on contacts identified as part of the disease investigation process.

The total contract value is $10 million with a six month base term and three six month option period.

Contact racing is important work as we continue to evolve our clinical depot strategy and demonstrate our ability to deliver clinical services at scale.

As part of this effort we've made several key hires of national experts in public health monitoring data science and epidemiology. These resources are available to our state and local clients to augment the efforts of health Department officials and staff.

Bruce Caswell: As part of this effort, we've made several key hires of national experts in public health monitoring, data science, and epidemiology. These resources are available to our state and local clients to augment the efforts of health department officials and staff. We're now also helping 12 states manage the surge in unemployment insurance and pandemic unemployment assistance claims, having expanded into Delaware, Idaho, Louisiana, New Hampshire, Pennsylvania, South Carolina, and Virginia, most recently. Within the federal segment, we're supporting the IRS Wage and Investment Division to respond to general inquiries regarding the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, and Economic Impact Payment, or EIP, service plan. The EIP program provides stimulus payments to households based on a number of factors. We were initially tasked with providing up to 500 call agents and have since expanded to approximately 1,600.

We're now also helping 12 states manage the surgeon unemployment insurance and pandemic unemployment assistant claim having expanded into Delaware, Idaho, Louisiana, New Hampshire, Pennsylvania, South Carolina, and Virginia, Most recently.

Within the federal segment, we're supporting the IRS wage and investment division to respond to general inquiries regarding the Corona virus aid relief and economics security or cares act and economic impact payment or IP service plan.

VIP program provides stimulus payments the households based on a number of factors. We were initially tasked with providing up to 500 to call agents and have since expanded to approximately 1600.

This is the first time the IRS has used contracted agents on this larger scale and we are pleased have been interested with this effort.

Bruce Caswell: This is the first time the IRS has used contracted agents on this large of a scale, and we're pleased to have been entrusted with this effort. This contract is valued at $26 million over six months. As Rick noted, we've experienced lower than normal volume levels on certain performance-based contracts domestically, particularly those where government has loosened program participation requirements as a result of COVID-19. As a result of these puts and takes, we've experienced less disruption and meaningful near-term organic growth in both of our US segments. Meanwhile, as Rick noted, our outside the US segment has experienced a negative impact from the pandemic within our HAAS and Workforce Services contracts.

This contract is valued at $26 million over six months.

As Rick noted.

We've experienced lower than normal volume levels on certain performance based contracts domestically, particularly those where government has loosened program participation requirements as a result of cobot 19.

As a result of these puts and takes we've experienced less disruption in meaningful near term organic growth in both of our U.S segment.

Well as Rick noted our outside the U.S segment has experienced a negative impact from the pandemic within our Haas and workforce services contracts.

We believe that the pandemic driven cause unemployment placement efforts is creating a backlog of demand for governments to support more jobseekers down the road, creating opportunities for our role as we emerge out of his health crisis.

Bruce Caswell: We believe that the pandemic-driven pause in employment placement efforts is creating a backlog of demand for governments to support more job seekers down the road, creating opportunities for our role as we emerge out of this health crisis. As you're likely personally experiencing during a time of social distancing, flexible and scalable technology and digital capabilities are more important than ever before. Before the pandemic, we were already transitioning operational infrastructure to the cloud to help government agencies benefit from the security, scalability, and flexibility through a singular platform solution. This encompassed both our core application environments, such as the microservices effort that I've mentioned on prior calls, and a major investment in enterprise-wide cloud-based telephony. This gives us the ability to not only dynamically scale and allocate capacity in response to demand, but also to provide a true omni-channel customer experience.

As you are likely personally experiencing during a time of social distancing flexible and scalable technology and digital capabilities are more important than ever before.

Before the pandemic, we're already transitioning operational infrastructure to the cloud is to help government agencies benefit from the security scalability and flexibility through a singular platform solution.

His encompass both our core application environments, such as the Microservices effort that I mentioned on prior calls and a major investment in enterprise wide cloud based to lessening.

And it gives us the ability to not only dynamically scale and allocate capacity in response to demand, but also to provide a true omni channel customer experience. This means being able to integrate calls E mails chats messages and social comments into one uninterrupted conversation, including leveraging more than one channel at a time.

Bruce Caswell: This means being able to integrate calls, emails, chats, messages, and social comments into one uninterrupted conversation, including leveraging more than one channel at a time for multimodal communications and customer convenience, all without losing critical context. In light of COVID-19, this platform also enables agencies to handle surges in inquiry volumes, as seen in the recent unemployment insurance state programs, and equip a remote workforce, accommodating not only more flexible, diverse, and inclusive workforce structure, but also ensuring additional health and safety protections during the pandemic, all while providing essential services without disruption. In fact, the IRS contract I mentioned earlier, supporting the CARES Act and EIP service plan, was migrated to our cloud-based infrastructure, enabling us to provide a work-from-home workforce and to seamlessly route specific calls to higher-level agents at IRS contact centers. Of course, federal government work continues amidst the global health crisis.

For multi modal communications and customer convenience, all without losing critical context.

In light of covered 19. This platform also enabled agencies to handle surges in inquiry volumes as seen in the recent unemployment insurance state programs and equip a remote workforce accommodating not only more flexible diverse and inclusive workforce structure, but also ensuring additional health and safety protections during the pandemic all while providing.

Essential services without disruption.

In fact, the IRS contract I mentioned earlier supporting the cares Act any IP service plan was migrated to our cloud based infrastructure.

Enabling us to provide a work from home workforce and to seamlessly routes specific calls to higher level agents at IRS contact centers.

Of course vital government work continues amidst the global health crisis.

Government of Alberta recently awarded Maxim is Canada services, the enabling new models of care or end market program to replace our old mainframe with new flexible and Configurable solution to better support new models of healthcare.

Bruce Caswell: Government of Alberta recently awarded Maximus Canada Services the Enabling New Models of Care, or ENMOC program, to replace their old mainframe with a new flexible and configurable solution to better support new models of healthcare. This has an estimated total contract value of CAD 75 million over an 81-month base and five one-year option periods. This is an important new client for Maximus and the first large-sized Canadian jurisdiction to undertake this type of modernization of its provincial health insurance technical platform. This program will help reinforce Maximus as a leader in digital transformation throughout Canada and a primary option for other large jurisdictions.

This has an estimated total contract value of $75 million over in any one month base and five one year option periods.

This is an important new client from accidents in the first large sized Canadian jurisdiction to undertake this type of modernization of its provincial health insurance technical platform.

This program will help reinforce Maxim is a leader and digital transformation throughout Canada, and a primary option for other large jurisdictions.

Turning stateside, the California Department of Health care services re awarded Magnus there optional targeted low income children program. The state's children's health insurance program or chip funded Medicaid program for children from birth to age 19, the would have been eligible for the California healthy families program before it was merged in.

Bruce Caswell: Turning stateside, the California Department of Health Care Services re-awarded Maximus their Optional Targeted Low-Income Children program, the state's Children's Health Insurance Program, or CHIP, funded Medicaid program for children from birth to age 19 who would have been eligible for the California Healthy Families program before it was merged into Medi-Cal. An important rebid for Maximus, this is a 5-year base contract with three 1-year options to renew for a total contract value of $136 million if all options are exercised. Moving on to new awards and pipeline as of June 30. For Q3 of fiscal year 2020, signed awards were $1.466 billion of total contract value at June 30. Further, at June 30, there were another $672 million worth of contracts that had been awarded but not yet signed.

To Medicare.

An important rebid for Maximus. This is a five year based contract with three one your options to renew for a total contract value of $136 million. If all options are exercised.

Moving onto New awards and pipeline as of June Thirtyth.

For the third quarter fiscal year 2020 signed awards were $1.466 billion, a total contract value at June 30.

Further at June 30, there were another $672 million worth of contract that had been awarded but not yet sign.

Let's turn our attention to our pipeline of addressable sales opportunity.

Bruce Caswell: Let's turn our attention to our pipeline of addressable sales opportunities. Our total contract value pipeline at 30 June 2020 was $28.9 billion, compared to $29.2 billion reported in Q2 of FY 2020. Of our total pipeline of sales opportunities, 67.7% represents new work. As I mentioned in my opening remarks, regarding pipeline dynamics amid this global health pandemic, we are cautiously optimistic. However, I want to reiterate the difficulty in predicting the impact these events may have on erosion, timing on new work, and simply getting some of our operations back to more normal cadence. As Rick mentioned, the new COVID-related work is temporary in nature, and it's difficult to predict how long some of this work will continue.

Our total contract value pipeline at June 30 was $28.9 billion compared to $29.2 billion reported in the second quarter of acquired 20.

Of our total pipeline sales opportunities, 67.7% represent new work.

As I mentioned in my opening remarks regarding pipeline dynamics amid this global health pandemic, we're cautiously optimistic however, I want to reiterate the difficulty in predicting the impact. These events may have on erosion timing on new work and simply getting some of our operations back to more normal cadence.

As Rick mentioned, the new covered related work is temporary in nature and it's difficult to predict how long some of this work will continue.

It's also important to point out that some of this new work is backfilling. The unfavorable impacts we are experiencing on some programs where volumes are lower due to covert relief efforts.

Bruce Caswell: It's also important to point out that some of this new work is backfilling the unfavorable impacts we are experiencing on some programs where volumes are lower due to COVID relief efforts. Our earned reputation as an effective and cost-efficient partner to government lends credence to our strength and success despite a challenging environment. Lastly, I want to take a moment to discuss current events and our responsibility to be a leader through employee engagement and direct action. Our people are our business. They provide essential services, serving in the front lines of support and working hand in hand with government customers. Their diverse backgrounds, experience, and insight enable us to represent the citizens and communities we serve, provide compassionate and empathetic service in a time of great uncertainty, and continue to be transformational and impactful for clients and customers.

Our earned reputation as an effective and cost efficient partner to government lends credence to our strengthened success, despite a challenging environment.

Lastly, I want to take a moment to discuss current events and our responsibility to be a leader through employee engagement and direct action.

Our people our business they provide essential services, serving the frontline to support and working hand in hand with government customers.

They are diverse backgrounds experience and insight enable us to represent the citizens in communities we serve.

Provide compassionate and empathetic service in a time of great uncertainty and continue to be transformational and impactful for clients and customers.

At the same time many of our employees come from community that had been disproportionately affected by the pandemic.

Bruce Caswell: At the same time, many of our employees come from communities that have been disproportionately affected by the pandemic. Our commitment to the safety and well-being of all employees remains paramount. Diversity, equity, and inclusion are central to our company identity. Empathy is a mainstay of our relationships, and positively impacting and contributing to our communities is embedded in our mission. In light of recent events, I'm reminded that we have an opportunity to further lead by example. Maximus can and will do more. To start, we're looking inward and listening to our people. For instance, we recently held our first US diversity, equity, and inclusion town hall, where I was joined by our new Chief Human Resources Officer, Michelle Link, as part of our developing strategy to listen to employees and continue crucial discussions that will inform and guide our ongoing efforts.

Our commitment to the safety and well being of all employees remains Paramount.

Diversity equity and inclusion are central to our company identity.

Empathy is a mainstay of our relationships.

And positively impacting and contributing to our communities is embedded in our mission.

In light of recent events I'm reminded that we have an opportunity to further lead by example, Maximus can and will do more.

To start we're looking inward and listening to our people for instance, we recently held our first use diversity equity and inclusion town Hall, where I was joined by our new Chief Human Resources Officer, Michel link as part of our developing strategy to listen to employees and continue crucial discussions that will inform and guide our ongoing efforts.

Additionally, I was moved by our employees record breaking rates of participation and access solidarity, making it possible for us to donate more than $150000 to the NAACP legal defense in Education Fund.

Bruce Caswell: Additionally, I was moved by our employees' record-breaking rates of participation and acts of solidarity, making it possible for us to donate more than $150,000 to the NAACP Legal Defense and Educational Fund. I look forward to sharing more about our ongoing efforts in the coming months. Our government clients are facing hard choices in an increasingly challenging environment due to the global and uncontained health pandemic. At the same time, people are looking to government to lead the way to recovery as we emerge from this crisis. As a result, Maximus is well positioned during these unprecedented times. Our reputation for quality and accountable service earned over decades, combined with the investments we have made in transforming our delivery capabilities, underscores the resilience of our business model and positions us as a continued trusted partner to government and the people we serve.

I look forward to sharing more about our ongoing efforts in coming months.

Our government clients are facing hard choices in an increasingly challenging environment due to the global and Uncontained health pandemic at the same time people are looking to government to lead the way to recovery as we emerged from this crisis.

As a result Maximus is well positioned during these unprecedented.

Our reputation for quality and accountable service earned over decades, combined with the investments, we've made and transforming our delivery capabilities.

Underscores the resilience of our business model and positions us as a continued trusted partner to government and the people we serve.

Meanwhile, we'll continue to execute upon our three strategic goals of digital transformation clinical evolution and market expansion.

Bruce Caswell: Meanwhile, we'll continue to execute upon our three strategic goals of digital transformation, clinical evolution, and market expansion, the importance and value of which has been underscored in the face of this global pandemic. As Rick mentioned, our employees have worked tirelessly to help consumers navigate challenging circumstances and to continue to drive the business forward. The board of directors and I are extremely impressed by and deeply appreciative of our Maximus team. Together, we will emerge a more resilient, cohesive, and capable organization. With that, we'll open up the line for Q&A. Operator?

The importance and value of which has an underscored in the face of his global pandemic.

As Rick mentioned, our employees have worked tirelessly to help consumers navigate challenging circumstances and to continue to drive the business forward.

The board of directors and I are extremely impressed by and deeply appreciative of our Max Miss team.

Together, we will emerge more resilient cohesive and capable organization.

And with that.

Opened up the line for Q in a.

Operator.

Please hold while the operator keys at first question Jim.

Operator 2: Please hold while the operator queues up the first question. Thank you. Okay, the first question comes from David Stabile.

Operator: Please hold while the operator queues up the first question. Thank you. Okay, the first question comes from David Stabile.

Yes.

Okay and the first question comes from Dave Styblo.

Hi, there Dave Good morning, good morning, our guests Amy.

David Stabile: Hi there.

Bruce Caswell: Good morning, Dave.

David Stabile: Good morning.

Bruce Caswell: Hi there.

David Stabile: Can you guys hear me okay?

Yes, just fine.

Bruce Caswell: Yeah, just fine.

Okay, great. Thanks for all the color today very comprehensive appreciate all that and I certainly appreciate how challenging it is to give us an update forward looking for all the uncertainty.

David Stabile: Okay, great. Thanks for all the color today. Very comprehensive. Appreciate all that. I certainly appreciate how challenging it is to give us an update forward looking for all the uncertainty. That said, I'm wondering if you can help us understand how much of the revenue increase this year, the $200 million, was perhaps more temporary in nature or maybe even an aggregate for the full year. How much of the revenue is just temporary in nature versus something that has more durability? Obviously, COVID has some positive impacts for higher unemployment for your job services, but then there's other things where, as you guys talked about, there's a few contracts that are shorter-term in nature. Any way to quantify that as we're thinking about the bridge from this year to next year?

Said I'm wondering if you can help us understand.

How much of the revenue increase this year. The 200 million was was perhaps more temporary in nature.

Or or maybe even an aggregate for the full year, how much of the revenue is a temporary in nature versus.

Something that has more durability, obviously cobot cobot had some positive impacts for for higher unemployment.

For your job services, but then there's other things where as you guys talked about there's there's few contracts that are shorter terminate or so anyway to quantify that as we're thinking about the bridge from this year to next year.

Yes, Dave Rick I'll take that curious yes.

Bruce Caswell: Yeah. Dave, Rick will take that. Here he is.

Rick Nadeau: Yeah. Dave, it's a good question. I talked and used the term COVID response type of work. You know, it's coming in every day and, you know, our estimates change, but I think it'll be something in the $150 to 200 million of revenue for this year. You know, the awards number that Bruce gave you is comprehensive in that it goes past FY 2021 year-end and into FY 2020 year-end. It goes into FY 2021. We will have some of this, you know, in both years. That really is basically the level that we're talking about. You know, this work is coming in. RFPs are coming in every day, and we're bidding them every day.

Dave's good question and I don't want and I talked and use the term Cove and response type of work.

It's coming in every day and.

In our estimates change, but I think it will be something in the $150 million to $200 million of revenue for this year.

The awards number that Bruce gave you is it was comprehensive in that it goes past stiff slide 21 year end in India flight.

For a 20 year end goes into flight 21, So we will have some of this.

In both years, but that really is.

Basically the level that we're talking about.

This work is coming in.

Our fees are coming in every day and we're bidding them everyday. So I mean this is part of one when I talk about the uncertainty in the in the variability that we face.

Rick Nadeau: I mean, this is part of when I talk about the uncertainty and the variability that we face, you know, this is a very dynamic situation. Does that help you?

This is a very dynamic situation does that help you should it does sure.

David Stabile: Sure. It does. Sure. I'm just trying to think. I think investors oftentimes are trying to understand when things do hopefully return to normal sooner than later, what the earnings power looks like, and what are some of the contracts that are under the most pressure right now. What's the rebound on those? I guess from my outside view, I think the HAAS contract might be the one that could be the biggest mover. Maybe you guys have a different view and could share that. Maybe at least on that one, what is embedded in guidance this year for the earnings drag on that contract? Is there any early view on how that might progress to improving some face-to-face meetings in the UK?

And I'm just trying to think I think investors often times, which are trying to understand when things do hopefully returned to normal sooner than later what it what is the earnings power look like and what are some of the the contracts that are under the most pressure right now what with the rebound on those and and I guess from outside you I think the hot contract might be the one that that could be the biggest move or maybe you guys have.

A different view and good share that but maybe at least on that one how what is embedded in guidance. This year for for the earnings drag on on that contract and is there any.

Early view on on how that might progress to improving some face to face meetings in the UK or are we still.

David Stabile: Are we still in a total standstill on that contract for now?

And its whole standstill on on that contract for now.

Well days, that's a very complex question. So let me make sure I get them, all and Bruce will help me with with some of that.

Rick Nadeau: Well, David Stabile, that's a very complex question, so let me make sure I get them all, and Bruce Caswell will help me with some of that. So look, in my prepared remarks, I noted that there are positive and negative dynamics that we're facing as we go into FY 2021. As I said more than once, you know, compared to our prior year experiences, we are facing a wider range of possible scenarios, and much of this is COVID-related. Look, the ultimate duration of the pandemic. Let me give you an example. You know, we're providing unemployment insurance assistance and contact tracing. You know, we're sitting here asking ourselves, how long is this going to last? We're asking ourselves, how much more work are we actually gonna win in this area? You know, there's a threat, you know, of worsening unfavorable pandemic-related impacts.

So look in my prepared remarks, I noted that there are positive and negative dynamics that we're facing as we go into F. White 21.

And as I said more than once compared to our prior year experiences we are facing a wider range of possible scenarios and much of this is coated related.

But the ultimate duration of the pandemic, let me give you. An example, we're providing unemployment insurance assistance in contact tracing yes, we're sitting here asking ourselves how long is this going to last and we're asking ourselves how much more worker, we actually going to win in this area.

Theres a threat.

Worsening unfavorable pandemic related impacts.

In my prepared remarks, I mentioned, a significant drop in workers' compensation claims I think also in my prepared remarks I talked about.

Rick Nadeau: In my prepared remarks, I mentioned a significant drop in workers' compensation claims. I think also in my prepared remarks, I talked about states that are pausing renewals and allowing citizens to stay on the health benefit programs without being challenged as to their eligibility. You know, those are some of the, you know, the core programs that we have that, you know, we would expect to return to normal volumes at some point, but we really can't predict when they will. You know, you can talk about student loans. I mean, those things, you know, there are people who are in default of their student loans, but they're not being challenged at this point, another example. We really don't know what kind of budget challenges we're gonna face from our customers.

States that are are pausing renewals and.

And allowing citizens to stay on the health benefit programs without being challenged as to their eligibility. So those are some of the core programs that we have that we would expect to return to normal volumes at some point, but we really can't predict when they will.

You can talk about student loans I mean those things.

There are people who are in default of their student loans, but they're not being challenged at this point. Another example, so we really don't know what kind of budget challenges, we're going to face from our customers where customers tax receipts are under great.

Rick Nadeau: You know, our customers' tax receipts are under great pressure and, you know, and that sometimes can, you know, impact us with respect to how much work they can give us. I mean, there is some discretionary work that makes sense for them to do, but if the budget isn't there, then they can't do that. There are risks of supply chain disruptions, including IT and, you know, personal protective equipment, and obviously legislation and government policies. You know, the HAAS is a great question. We've wrestled with that. You know, we gave you guidance for FY 2020, and I think we've got a pretty good sense of what this next quarter is going to be, through September 30. After that, you know, it's more of a question mark in our mind. Bruce, do you wanna-

Pressure and.

Thats sometimes can.

Impact us with respect to how much work they can give us I mean, there is some discretionary work that makes sense for them to do but as the budget isn't there than the than they can't do that.

There are risks of supply chain disruptions, including 90, and personal protective equipment, and obviously legislation and government policies.

The Haas is a great question, we've wrestled with that we gave you guidance for a flight 20, and I think we've got a pretty good sense of what this next quarter is going to being so through September 30. After that it's more of a question Mark in our mind, but Bruce do you want to yes, it costs, a little bit add a little more color. So.

Bruce Caswell: Yeah.

Rick Nadeau: Help with HAAS a little bit?

Bruce Caswell: Yeah. To add a little more color. Obviously for all these programs, it's gonna be a function of the pace at which these economies can reopen, obviously, and the progression of the pandemic. There's so much uncertainty around what the fall and winter might bring. It's difficult to speculate. You know, when you think about HAAS, it's a program that's historically been delivered kind of three-fourths face-to-face, one-fourth paper-based, and 0% basically telephonic or video-based, right? It's a program that's delivered through about 150 clinical locations, many which could have narrow corridors and adjacent assessment rooms, where obviously operating at any kind of volume in waiting rooms where people have to congregate, where it's very difficult to operate at volume with respect to social distancing.

Obviously.

For all these programs, it's going to be a function of the pace at which these economies can reopen obviously and the progression of the pandemic and there's so much uncertainty around what the fall and winter might bring it's difficult to speculate but.

When when you think about Haas High Department has historically been delivered three fourth space to phase one fourth of paper based and zero percent basically telephonic or video based right and it's a program that's delivered through about 150 clinical locations, many which could have neuro corridors and adjacent.

Assessment rooms, where obviously operating at any kind of volume and waiting rooms, where people have to congregate, where it's very difficult to operate at volume with respect to social distancing. So I'm pleased that we've been able to work with our customers to to think through alternate delivery models and actually move a number of investment types to telephonic based assessments.

Bruce Caswell: I'm pleased that we've been able to work with our customers to think through alternate delivery models and actually move a number of assessment types to telephonic-based assessments. We've been piloting that for the first time ever in the program. Another historical constraint that we may have spoken to you about, you know, when we talked about video-based assessments, was that historically, the networks into our assessment centers have not been sufficient to support a video assessment model. There's a kind of a complicated mix, if you will, between, you know, operating procedures, IT infrastructure, and then the third piece I'd make is policy that have to support a movement like this or a shift to more of a remote model.

And we've been piloting that for the first time ever in the program. Another historical constraint that we may have spoken you about.

But when we talk about video based assessments was that historically the networks into our.

The into our assessment centers have not been sufficient to support a video assessment model and so there is a kind of a complicated mix if you will between.

Operating procedures.

Infrastructure and then the third piece I'd make it policy that have to support on movement like this or a shift to more of a remote model now it could be a an excellent model for this program because.

Bruce Caswell: Now, it could be an excellent model for this program because some of the most vulnerable populations that are served through the HAAS program are the long-term sick, and it's difficult for them to often get into the locations. I think that we're on the cusp of reinventing the model a bit, but it's gonna take some time. You know, the technology will be there first, but the policy has to catch up as well. The final point I'd make within that regard is that historically, final determinations of an outcome of an assessment could not be made, to my understanding, based on just a telephonic assessment for certain categories of individuals. The policy has to be modified and then the operating model, and then obviously the technology has to be in place.

Some of those vulnerable populations that are certainly the Haas program are the long term Dick and it's difficult for them, it's difficult for them too often get into the the locations I think that were on the cost of reinventing the model a bit but it's going to take some time the technology will be there first that the policy has to catch up as well the final point I'd make within that.

Regarded that historically final determinations of an outcome of an assessment could not be made as my understanding based on just a telephonic assessment for certain categories of individuals. So the policy has to be modified and then the operating model and then obviously technology has to be in place, but I think thats the path toward resuming some level of volume in the program.

Bruce Caswell: I think that's the path toward resuming some level of volume in the program in combination with socially distanced face-to-face assessment at the appropriate time.

In combination with socially distance face to face assessment at the appropriate time.

Got it thanks, and at least elected to so I'll yield.

David Stabile: Got it.

David Stabile: Thanks.

Bruce Caswell: Thanks.

David Stabile: Thanks. I know Lisa like to get it too, so I'll yield.

Hi, Thanks, Dave Dave.

Bruce Caswell: Thanks.

Rick Nadeau: Thanks, Dave.

Lisa Miles: Thanks, Dave. Operator, next question, please.

Operator next question please.

Okay next question comes from Charlie Strauzer.

Operator 2: Okay, next question comes from Charlie Strauzer.

Operator: Okay, next question comes from Charlie Strauzer.

Good morning, good morning. This.

Rick Nadeau: Good morning, Charlie.

This is brendan on for Charlie.

Bruce Caswell: Good morning.

Brendan Popson: This is Brendan on for Charlie.

Yes.

Rick Nadeau: Okay.

Brendan Popson: Just looking at Health and Human Services first. You beat our model by probably $30 to $40 million on the top line. Is there any way you could talk about, you know, break down, I guess, reading versus your own expectations, what you thought for the quarter, how much was, you know, new COVID work for contract tracing or other things versus just, you know, an expansion within current, you know, Medicaid work just because of the, you know, the spike in unemployment, et cetera, more people looking for Medicaid?

Looking at.

Often human services first.

Our model by probably 30 40 ish million dollars topline is there anyway, you could talk about.

Break down I guess green versus your expectations, what you thought for the quarter how much was.

New coveted work for contract tracing or other things versus just.

And expansion within current.

Medicaid work, just because of the spike in and yet on unemployment et cetera, more people looking for Medicaid.

Yes, youre talking about us health and human services.

Rick Nadeau: Yes. You're talking about U.S. Health and Human Services. Yes, that COVID response work was about $35 to 40 million in the quarter.

Sectors that response work was about $35 million to $40 million in the quarter.

Okay.

Brendan Popson: Okay. Follow up to that, what did you see with your Medicaid work? I know you did call out one customer who stopped doing renewals, so was there some push and pull there with Medicaid?

And then follow up to that with.

What did you see with your Medicare work I know you did call out one customer is doctoring renewals. So is there some.

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Push and pull their Medicaid.

Yes, let me just give you a little more color on that Brendan if I can.

Bruce Caswell: You know, let me just give you a little more color on that, Brendan, if I can. You may be aware that under the federal legislation, states were eligible for an increased match. We call it the federal matching rate or FMAP rate of 6.2 points. In order to do that, they had to suspend renewals. There were a number of conditions that had to be met, but the suspension of renewals was one of them. You know, it's not uncommon to some of the things we've seen historically, where, when in exchange for enhanced funding, there's like a maintenance of effort requirement, so you can't degrade the program in any way. That was a string that was attached to the 6.2 percent increase in FMAP.

You may be aware that under the federal legislation states were eligible for an increased match that we felt the federal matching radar f. map rate of 6.2 points.

And in order to do that they had to you.

To suspend renewals there were a number of conditions I had to be met but the suspension of renewals was one of its not uncommon to some of the things we've seen historically, where when in exchange for enhanced funding, there's like a maintenance of effort requirements you can't degrade the program in anyway. So that was a string that was attached to the 6.2% increase in Fms and so the question that is okay.

Bruce Caswell: The question then is, okay, how long will that last? I think the 6.2% increase is presently in place through 31 December 2020. There are some cases, you know, in some instances or scenarios it could be extended. That was clearly linked to federal policy, and it's the right thing to do, right? You wanna keep as many people on the program as you can.

How long will that last well the 6.2 I think the 6.2% increases.

Currently in place through December 30, Onest of this year there are some cases.

Is it could be in or scenarios. It could be extended so that was clearly linked to federal policy and it's the right thing to do right you want to keep as many people on the program as you can it also means that as we go through.

Bruce Caswell: It also means that as we go through a period where folks transition from unemployment and the loss of employer-sponsored insurance into other types of health supports like Medicaid, we likely will see a period of relaxed eligibility rules, which could lead to backlogs in eligibility support requirements and ultimately program integrity work down the road, way down the road as the economy recovers. That's the color on that, and it was really just in one specific contract where that policy impacted the renewal volumes substantially. The only other kind of Medicaid color I'd give you is, you know, historically our work in Medicaid is a very small component of total state Medicaid budgets. Often less than 10% is spent on administration, right? You well know, you know, the money's in the benefits.

A period, where folks transition from unemployment and the loss of employer sponsored insurance into other types of helps support like Medicaid, we likely will see a period of relaxed eligibility rules, which could lead to backlogs in eligibility support requirements and ultimately program integrity work down the road way down the road as.

As the economy recovers. So that's that's the color on that and it was really just in one specific contract where that policy.

Impacted the renewal volumes substantially on the only other kind of Medicaid color I give you is.

Historically.

Our work in Medicaid is a very small component of total state Medicaid budgets, often less than 10% is spent on administration right and so as you well know the monies in the benefits and so states will pull a number of levers and we saw this during the global financial crisis in response to that the first level levers they'll turn you is.

Bruce Caswell: States will pull a number of levers, and we saw this during, you know, the global financial crisis in the response to that. The first levers they'll turn to is, you know, the benefit packages. Maybe they'll look at prescription drug coverage. Maybe they'll look at other benefit enhancements like, you know, dental and vision and stuff like that they've added into programs. They may also look at expanded populations that they've offered benefits to through higher income levels. Some of the states that have richer Medicaid programs might cut back on coverage models or create waiting lists. Then, lastly, of course, states, there's been some talk about this may wanna renegotiate provider reimbursement rates, whether it's directly in a fee for service model or through their capitated arrangements with their MCOs.

The benefit packages, so maybe they'll look at prescription drug coverage, maybe they'll look at other benefit enhancements like dental and vision and stuff like that that they've added into programs. They also look at expanded populations that they've offered benefits to through higher income levels. So some of the states that have Richard Medicaid programs might cut back on coverage models or create waiting list.

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And then.

Lastly of course state Theres been some talk about this may want to renegotiate provider reimbursement rates, whether it's directly in a fee for service model or through their capitated arrangements with our Mcs. So you know I feel like generally the work that we do.

Bruce Caswell: You know, I feel like generally the work that we do is kind of one of the last things they turn to. As a consequence, we, like I said in my prepared remarks, are affected more by policy effects than necessarily kind of client negotiations for extreme changes in programs.

Is kind of one of the last thing they turn to and as a consequence, we like I said in my prepared remarks are affected more by policy effect than necessarily kind of client negotiations for extreme changes in programs.

And then does that address your question.

Rick Nadeau: Brendan, does that address your question?

Lisa Miles: Brendan, does that address your question?

Yes.

Brendan Popson: Yes, it does.

Great excellent. Thank you our next question please.

Rick Nadeau: Great. Excellent. Thank you. Next question, please.

Lisa Miles: Great. Excellent. Thank you. Next question, please.

Okay. If you like to ask a question simply press Star then a number one on your telephone keypad again that is diamond number one and we'll pause for just a moment.

Operator 2: Okay. If you would like to ask a question, simply press star, then the number one on your telephone keypad. Again, that is star and the number one, and we'll pause for just a moment. Okay. We have a question from Richard Close.

Operator: Okay. If you would like to ask a question, simply press star, then the number one on your telephone keypad. Again, that is star and the number one, and we'll pause for just a moment. Okay. We have a question from Richard Close.

Okay. We have a question from Richard close.

Great. Thank you.

Richard Close: Great. Thank you.

Bruce Caswell: Yeah.

With respect to the sensors and I appreciate you, giving the expected contribution.

Richard Close: With respect to the Census, I appreciate you giving the expected contribution through the remainder of the year, does that include the recent chatter this week in terms of possibly ending the Census count early? I'm just curious your thoughts there.

Through the remaining of the year.

Does that include or the recent chatter.

This week in terms of possibly ending the sent senses count early.

I'm just curious your thoughts there.

Yes, Richard I'll take that.

Bruce Caswell: Yeah, Richard, I'll take that. Well, there's been talk about, as you've noted, about having the Census complete one month earlier than was previously discussed. We're in dialogue with our customer, and we've not been instructed at this time to make any kind of programmatic changes, and we'll follow their lead as that develops. It's important to note also, though, that two other dynamics. One is that we don't handle the boots on the ground work, the door knocking efforts, what they call the enumeration work. So to that end, we could be asked actually to ramp up outbound calling and or retain staff a little longer as they would push toward that revised deadline in order to ensure they get the participation rates that they're seeking to achieve.

Well, there's been talk about as you've noted about having the census complete one month earlier one month early than was previously.

Discussed.

And we're in dialogue with our customer and we've not been instructed.

This time to make any kind of programmatic changes and will follow their lead as that develops.

It's important to note also note that the two other dynamics one is that we don't handle the boots on the groundwork the door knocking efforts with the call. The enumeration work so to that end, we could be asked actually to ramp up outbound calling.

And or retain staff, a little longer as we as they would push toward that.

Revised deadline in order to ensure they get the participation rates that they're seeking to achieve.

Also the second point I noted that it's a cost reimbursement contract in some any modifications to our timelines that it could ultimately trigger through the worn act notices and severance for employees would be considered reimbursable costs. So at this point, it's too early to really say, what the financial impact might be and we'll continue to take.

Bruce Caswell: Also the second point I'd note is that it's a cost reimbursement contract, and so any modifications to our timelines that it could ultimately trigger through the WARN Act notices and severance for employees would be considered reimbursable costs. At this point, it's too early to really say what the financial impact might be, and we'll continue to take guidance from our customer.

Earnings from our customer.

Okay, that's helpful and Rick.

Richard Close: Okay, that's helpful. Rick, you know, just talking about the financial uncertainty with states that you just mentioned with respect to, you know, continued work or new work. You know, thinking about cash flows and DSOs and whatnot, you know, any thoughts there in terms of the financial uncertainty in the states and, you know, potential impact to cash flows, maybe longer term? I know you adjusted your expectations for this fiscal year, but obviously there's a logjam on the federal side in terms of, you know, whether to give support to states. Just thoughts in and around that would be helpful.

I was talking about the.

Financial uncertainty with states.

That you just mentioned.

With respect to continued work or new work.

Thank you about cash flows and.

Yes, those and whatnot.

Yes, any thoughts there in terms of the financial uncertainty in the states.

Potential impact the cash flows maybe longer term I know you adjusted.

Your expectations for this fiscal year.

But obviously theres a log jam.

In the federal side in terms of.

Whether to give support to state so just thoughts in and around that would be helpful.

Sure.

Rick Nadeau: Sure. You know, one thing I do feel good about is our liquidity. You know, as of today, our draws on our credit facility are $105 million, and that gives us a lot of liquidity. If our states are struggling, you know, I don't think that will impact ultimately our liquidity. You obviously saw our DSOs grow, and so they're getting, you know, a little slower in some of the payments. I think that the thing I look to and that makes me feel good is that most of what we do is deemed essential, and so they're gonna have to, you know, use us for a great variety of the work that they do. Now, obviously, some of the work is discretionary, as I indicated during a prior answer.

One thing I do feel good about is our liquidity.

As of today, our draws on our credit facility or 105 million.

And that gives us a lot of liquidity. So if those states are struggling I.

I don't think that will impact ultimately our liquidity now.

Obviously, Saar dsos grow and so they're getting a little slower in in some of the payments.

I don't think that the thing I look to and that makes me feel good is that most of what we do is deemed essential and so they're going to have too.

Use us for a great variety of the work that they do now obviously some of the work is discretionary as I as I indicated during our prior answers so that will impact us.

Rick Nadeau: That will impact us, you know, going the other way. You know, the Medicaid program is a program that is administered on a state-by-state basis. You know, I think it's gonna get into some policy issues, as Bruce talked about. In the long term, you know, it's obviously early days, but, you know, I think the fact that these are essential programs gives us some degree of insulation. You know, will our DSO, you know, continue to be higher? Yes, that's possible. You know, it's only $9 to 10 million per day. You know, if it grows and it's $100 million worse, that's obviously not a good answer. The interest on that is not a devastating impact to us.

Going the other way.

On.

The.

The Medicaid program is a program that is administered on a state by state basis. So.

I think it's going to get into some policy issues as Bruce talked about but in the long term notes. Obviously, it's early days, but I think the fact that these are essential programs gives us some degree of insulation.

Well, our dsos continue to be higher yes, that's possible, but it's only $9 million to $10 million per per day, weve grows and as a $100 million worse. That's obviously not a good answer but the interest on that is is not a devastating impact to us so I do it.

Specs, some slowness, but I do I do think that it's not going to affect our liquidity, which is ultimately what what I think people should be most.

Rick Nadeau: I do expect some slowness, but I do think that it's not gonna affect our liquidity, which is ultimately what I think people should be most, you know, mindful of.

Mindful of.

Okay. Thank you thank him for your questions.

Richard Close: Okay. Thank you.

Lisa Miles: Does that answer all your questions, Richard?

Well one last one in terms of the 3.5% organic growth.

Richard Close: Well, one last one. In terms of the 3.5% organic growth, excluding, I guess the census, or contract, whatever, the dynamics are there. Was that compared to -0.5% in the immediately preceding quarter? Just, I wanted apples to apples.

Excluding it.

I guess the census.

ER contract.

Whatever the dynamics are there was that compared to negative 0.5% in.

Media lead proceeding corridor so.

Just I want to apples to apples.

You know Richard we're going to file our form 10-Q.

Rick Nadeau: You know, Richard, we're gonna file our Form 10-Q shortly after this call. There is an excellent table that is in the MD&A section that shows you exactly how we do that calculation. It starts with the revenue in the comparable period. It shows you what the acquisitions. We do it by segment. It shows you what the acquired revenue is. It shows you what the currency impact is, and the plug is obviously the organic. I think that is a very, you know, that's something that we've done for several years now, but I think that'll give you exactly how we calculated that number.

Shortly after this call there is an excellent table that is in the end DNA section that shows you exactly how we do that calculation and it starts with it starts with the revenue in the comparable period. It shows you what the acquisitions and we do it by segment. It shows you what the acquired revenue is it shows you what the currency.

The impact is.

In it and the plug is obviously the orange is the organic so I think that that is a very.

That's something that we've done for several years now that I think that will give you exactly how we calculated that number.

Okay. Thank you.

Richard Close: Okay. Thank you.

Thank you Richard add next question. Please.

Rick Nadeau: Uh-huh.

Lisa Miles: Thank you, Richard. Next question, please.

Next question comes from Donald Hooker.

Operator 2: Next question comes from Donald Hooker.

Operator: Next question comes from Donald Hooker.

Great.

Donald Hooker: Great. Good morning, everyone. Thank you for taking my question. I'll go off a little bit off script here. I don't think you guys talked about the November election. I know you've been asked this question in the past, but it's always good to revisit it because it's an important question. When you look at your portfolio of projects, I mean, how what would you guess would be the percentage that are discretionary or administration specific, if there were a change in president?

Good morning, everyone. Thank you for taking my question talk off a little bit off script here.

I don't think you guys talked about the November election, I know Youve been asked this question in the past.

But it's always good to revisit it is an important question. When you look at your portfolio projects and then how how how what is sort of where would you guess would be the percentage that are discretionary or administration specific.

If there weren't changing president.

Hi, Donlins Bruce Thanks for the question and yes, we've actually thought about that very question and not specifically offered percentages as much as maybe.

Bruce Caswell: Donald, it's Bruce. Thanks for the question. Yeah, we've actually thought about that very question and not specifically offered percentages as much as maybe some guidance, as a way to think about it. I mean, as Rick said, a very large percentage of the programs that we administer are entitlement programs. They're essential programs that trace back to very large pieces of legislation, you know, going back 40, 50 years and some more recently with the Affordable Care Act. We could take great comfort in that. There are other programs, I would say, probably more related to the IT services part of our business in the US federal area that might be seen as more discretionary or priorities of existing administration, cabinet secretaries or undersecretaries.

Some guidance as a way to think about it I mean as Rick said.

A very large percentage of the programs that we administer our entitlement programs. They are essential programs at traced back to very large pieces of legislation going back 40, 50 years and some more recently with the Affordable Care Act and.

Thats, we could take great comfort in that there are other programs I would say probably more related to.

The IP services part of our business in the U.S federal area that might be seen as more discretionary or priorities of existing administration.

Cabinet secretaries or under Secretary.

But thats, it's much smaller portion of our total revenue as a business. So.

Bruce Caswell: That's a much smaller portion of our total revenue as a business. I thought I might just take a moment and talk about, you know, our thinking in the event of a Biden administration and walk through just a couple of points, since you opened the topic. We've always said that Democratic administrations tend to spend more and outsource less, and Republican administrations, it's kind of the opposite. Generally, our sense is that social welfare and, importantly, public health programs would likely see an increase in funding under a Biden administration. These are far from normal times, and there are a number of important macro issues to consider, such as, you know, what will the greatest priorities of government be at that time, and how will demand for accountability in government execution shape the decision-making?

I thought it might just take a moment and talk about our thinking.

In the event of the Biden administration and walk through just a couple of points we've done.

Thank you opened to open the topic, we've always said that Democratic administration tend to spend more and outsource less and Republican administrations, it's kind of the opposite so generally our sense is that social welfare and importantly, public health programs would likely see an increase in funding under abide administration.

So these are far from normal times and there are a number of important macro issues to consider such as you know what will the greatest priorities of government be at that time, how will demand for accountability and government execution shape the decision, making our budget constraints typically the state level like we've talked about effect procurement decisions and what role because.

Bruce Caswell: How will budget constraints, particularly at the state level, like we've talked about, affect procurement decisions? What role could the private sector have, therefore, as a partner in achieving those priorities in an accountable fashion? We know that access to affordable healthcare is and remains a priority of the former vice president. He certainly advocated publicly to build on the Affordable Care Act and consider something like a public option, as opposed to something like Medicare for All. I see the former vice president being very pragmatic in this area. Like President Obama, we expect that he would have the view of leveraging the private sector to meet the health insurance coverage goals, but probably not emphasize that. The Affordable Care Act created a number of opportunities for us at the federal level and the state level.

The sector have therefore as a partner in achieving those priorities in an accountable fashion, we know that.

Access to affordable health care is and remains a priority of.

The former Vice President and he certainly advocated publicly to build on the affordable care Act and consider something like a public option as opposed to something like Medicare for all so I see the former vice president being very pragmatic in this area and like President Obama, we expect that he would have a view of leverage.

In the private sector to meet the health insurance coverage goals, but probably not emphasize that.

Before it'll carry it created a number of opportunities for us at the federal level and the state level and we think that the course informed that Biden health policy I would take obviously depend on a number of factors that probably the most important one is the outcome of the the Senate in November as well, but.

Bruce Caswell: We think that the course and form that a Biden health policy would take obviously depends on a number of factors. Probably the most important one is the outcome of the Senate in November as well. If we think about what form that could take, some of the levers that might be pulled could include rolling back certain measures that were instituted during the current administration, like winding down navigator programs, restricting funding for marketing, and shortening open enrollment periods. Secondly, providing maybe more certainty to governors considering Medicaid expansion funding, and enhanced federal funding, as well as maybe continuing the CARES Act enhancement of the FMAP that I mentioned earlier. Lastly, continuing the extraordinary investments in public health that we've seen over the past six months.

If we think about what form that could take some of the levers that might be pulled could include rolling back certain measures that were instituted during the current administration like winding down navigator programs restricting funding for marketing and shortening open enrollment periods.

Secondly, providing maybe more certainty to governors considering Medicaid expansion funding.

And enhanced federal funding.

As well as may be continuing to cares act enhancement of the F. map that I mentioned earlier and lastly, continuing the extraordinary investments in public health that we've seen over the past six months so.

Bruce Caswell: I see a Biden administration probably being focused on public health, like we said, coverage expansion. With all those factors taken together, we feel like we're in a solid position in the event that the election goes in favor of the former vice president.

I see a vital ministration, probably being focused on public health like we said coverage expansion and with all those factors taken together, we feel like we're in a solid position in the event that the election goes in favour of the former Vice President.

Yes ill, maybe just yeah mood and just.

Donald Hooker: Gotcha. Maybe just hitting you back on that. Has there been any sense from you in anything that Biden has said publicly that he might roll back the OPM memo? I think there was some optimism over the long term that, you know, the Trump administration sort of is giving states more flexibility to outsource, I think. We talked about this entire call, that memo. Has there been any commentary from the other side around the state of that or not?

Hitting you back on that.

They are going any sense from you.

Anything that Biden said publicly that he might roll back the Opn memo I think there was some optimism over the long term that you know the Trump administration sort of giving states more flexibility to outsource. Thanks.

We talked about this in prior calls that memo.

Has there been any commentary from the other side around the state of that.

We're not no no no the short answer is no.

Bruce Caswell: No, no. The short answer is no. I think the point I would make there is, look, in these times of tough budgets, it's obvious that kinda keeping as many of your costs variable as possible and not making long-term commitments to significantly enhanced workforces to handle the kind of surge in demand that we're seeing across these programs is important. That type of flexibility is critical. Don't forget, the OPM memo talks about giving governors the option, the flexibility-

I think the point I would make there is.

Look in these types of tough these times of tough budgets.

It's obvious that kind of keeping as many of your cost variable as possible and not making long term commitments.

To significantly enhance workforces to handle the surge in demand that we're seeing across these programs is important so that type of flexibility is critical and don't forget the LPM memo talks about getting governors the option the flexibility to either continue kind of current course and speed or use the private.

Donald Hooker: Mm.

Bruce Caswell: to either, you know, continue kind of current course and speed or use the private sector partners. It's also worth noting that under the CARES Act, there was explicit language included to clarify that states could use private partners to help with unemployment insurance benefits administration. In fact, to date, I think the total number of states is upwards of 33, with, I think, a recent count, 19 Democratic states and 14 Republican states that have implemented unemployment insurance expansion contracts using private partners. My view is that our model is a model that really should enjoy bipartisan support because it's an effective model for the taxpayer and the citizens that are getting served.

Sector.

Private sector.

Partners. It's also worth noting that under the care that there was explicit language included to clarify that states could use private partners.

To help with unemployment.

Insurance benefits administration and in fact to date I think the total number of states is upwards of 33 with I think a recent count 19 Democratic States in 14 Republican States that have implemented unemployment insurance expansion contracts using private partners. So my view is that our model as a model that really should.

Enjoyed bipartisan support because it's an effective model for the taxpayer and the citizens that are getting sir.

Super Thank you for commentary.

Donald Hooker: Super. Thank you for the commentary.

Yes. So on next question please.

Bruce Caswell: Yep.

Lisa Miles: Thanks, Don. Next question, please.

Okay next question comes from Brendan Boston.

Operator 2: Okay. Next question comes from Brendan Popson.

Operator: Okay. Next question comes from Brendan Popson.

Okay.

Hi, Brenda.

Brendan Popson: Hi, Brendan.

Yeah, just a quick follow up.

Brendan Popson: Hi. Yeah, just a quick follow-up. You gave some, you know, thoughts on FY 21. Could you just speak to the organic growth expenses, kind of what your expectations are, given the color you guys provided?

Looking at you gave some.

Thoughts on 5001 could you just speak to the organic growth ex census, count your expectations are given given the.

You guys provided.

Sure. It's Rick Yes, let me, let me walk you through the baseline math that is.

Rick Nadeau: Sure. It's Rick. Let me walk you through the baseline math that is in our thinking. I think if you take the midpoint of the FY 2020 revenue guidance, that number would be $3.4 billion. If you normalize for the census contract, which is expected to deliver $500 million of revenue in fiscal year 2020 and less than $70 million of revenue in FY 2021, you really have a baseline of $2.97 billion. You know, we are seeing some modest organic growth potential in FY 2021. I said that our expectations, as compared to the consensus, was that we could beat that revenue number that was in that consensus.

In our thinking I think if you take the midpoint of the F. wide 20 revenue guidance.

Number would be 3.4 billion.

If you normalized for the census contract, which is expected to deliver $500 million of revenue in fiscal year 20.

And less than 70 million of revenue in F. 121, you really have a baseline of $2.97 billion. We are seeing some modest organic growth potential in flight 21, I said that.

Our.

Expectations of as these as compared to the the consensus was that we could beat that revenue number that was in that consensus.

But.

Rick Nadeau: you know, you'll have to bear in mind that, you know, the next fiscal year will be significantly influenced by volumes and the cadence of opportunities and possible erosion that we have. We do know that we will have COVID-19 related work. We do note that that is temporary, but I think we have expectations for modest growth next year.

You'll have to repair in mind that the next fiscal year will be significantly influenced by volumes.

And the cadence of opportunities and possible erosion that have do know that we will have coated 19 related work. We do note that that is temporary but I think we have expectations for modest growth next year.

Thanks, Brian did you have another follow up.

Lisa Miles: Thanks, Brendan. Did you have another follow-up?

Thank you.

Brendan Popson: Nope. That's it. Thank you.

Great. Thanks, before we wrap the call I just want to thank everyone for their patients this morning, and dealing with some of the technical difficulties that we had early on in the call. So thanks again for display with that that wraps up our call for today and have a great. Thanks.

Lisa Miles: Great. Thanks. Before we wrap up the call, I just wanna thank everyone for their patience this morning in dealing with some of the technical difficulties that we had early on in the call. Thanks again for the support. With that wraps up our call for today, and have a great day.

Ladies and gentlemen. This concludes today's conference. Thank you for participating you may now disconnect.

Operator 2: Ladies and gentlemen, this concludes today's conference. Thank you for participating. You all may now disconnect.

Operator: Ladies and gentlemen, this concludes today's conference. Thank you for participating. You all may now disconnect.

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Q3 2020 Maximus Inc Earnings Call

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