Q2 2024 Maximus Inc Earnings Call

Operator: Greetings and welcome to the Maximus Fiscal 2024 Second Quarter Earnings Conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jessica Batt, Vice President of Investor Relations and ESG for Maximus. Thank you, Ms. Batt. You may begin.

Greetings and welcome to the Maximus fiscal 2024 second quarter earnings Conference call.

Operator: At this time all participants are in a listen only mode.

Operator: A brief question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad as a reminder, this conference is being recorded.

Jessica Batt: Is now my pleasure to introduce your host Jessica bat, Vice President of Investor Relations and ESG for Maximus. Thank you Ms. <unk> you may begin.

Jessica Batt: Good morning, and thanks for joining us. With me today is Bruce Caswell, President and CEO, David Mutryn, CFO, and James Francis, Vice President of Investor Relations. I'd like to remind everyone that a number of statements being made today will be forward-looking in nature. Please remember that such statements are only predictions. Actual events and results may differ materially as a result of the risks we face, including those discussed in Item 1A of our most recent Forms 10-Q and 10-K. We encourage you to review the information contained in our recent filings with the SEC and our earnings press release.

Jessica Batt: Good morning, and thanks for joining US with me today is Bruce Caswell, President and CEO, David in your trend CFO and James Francis Vice President of Investor Relations.

Jessica Batt: I'd like to remind everyone that a number of statements being made today will be forward looking in nature.

Jessica Batt: Remember that such statements are only predictions actual events and results may differ materially as a result of risks we face, including those discussed in item one a of our most recent forms 10-Q and 10-K.

Jessica Batt: We encourage you to review the information contained in our recent filings with the SEC and our earnings press release. The company does not assume any obligation to revise or update. These forward looking statements to reflect subsequent events or circumstances, except as required by law todays presentation also contains non-GAAP financial information.

Jessica Batt: The company does not assume any obligation to revise or update these forward-looking statements to reflect subsequent events or circumstances, except as required by law. Today's presentation also contains non-GAAP financial information. Management uses this information internally to analyze results and believes it may be informative to investors, highlighting the quality of our financial performance, identifying trends, and providing meaningful period-to-period comparisons. For a reconciliation of the non-GAAP measures presented, please see the company's most recent forms, 10-Q and 10-K. And with that, I'll hand the call over to David.

David: Management uses this information internally to analyze results and believes it may be informative to investors engaging the quality of our financial performance identifying trends and providing meaningful period to period comparison.

Jessica Batt: For a reconciliation of the non-GAAP measures presented please see the company's most recent forms 10-Q, and 10-K and with that I'll hand, the call over to David.

David W. Mutryn: Thanks, Jessica, and good morning. Our second quarter results were exceptionally strong, driving the second consecutive raise to our fiscal 2024 guidance. Demand remains high across our programs, which elevated volumes this quarter and, perhaps more importantly, is indicative of stability returning following the disruptive years of the pandemic. We are also acutely focused on cost management, which had a positive impact on this quarter and has added potential to further improve our bottom line in future periods.

David: Thanks, Jessica and good morning, our second quarter results were exceptionally strong driving the second consecutive raise to our fiscal 'twenty to 'twenty four guidance demand remains high across our programs, which elevated volumes this quarter and perhaps more importantly is indicative of stability returning following the disruptive years will depend on.

David W. Mutryn: We are also acutely focused on cost management, which had a positive impact to this quarter and has the added potential to further improve our bottom line in future periods.

David W. Mutryn: Turning to results, Maximus reported revenue of $1.35 billion for the second quarter of fiscal year 2024, which represents 11.7% year-over-year growth or 12.6% on an organic basis. Similar to last quarter, growth was driven by expanded programs in the U.S. Federal Services Segment and a combination of resumed and expanded programs in the U.S. Services Segment. Adjusted operating income margin was 11.1%, and adjusted EPS was $1.57 for the quarter, which compares to 7.2% and $0.81, respectively, for the prior year period.

Speaker Change: Turning to result, Maximus reported revenue of $1.35 billion for the second quarter of fiscal year, 'twenty, 'twenty, four which represents 11, 7% year over year growth or 12.6% on an organic basis.

David W. Mutryn: Similar to last quarter growth was driven by expanded programs in the U S. Federal services segment, and a combination of resumed and expanded programs in the U S services segment.

David W. Mutryn: Adjusted operating income margin was 11, 1% and adjusted EPS was $1.57 for the quarter, which compares to seven 2% and 81 cents respectively for the prior year period by our estimation, we set a high Mark for earnings this quarter with the strength coming from no sing.

David W. Mutryn: By our estimates, we set a high mark for earnings this quarter, with the strength coming from no single area but rather across our portfolio of domestic work. A portion of the overdelivery in the quarter came from extra volumes in U.S. services tied to Medicaid redetermination. Now, let's go to the segment.

David W. Mutryn: <unk> area, but rather across our portfolio of domestic work.

David W. Mutryn: A portion of the over delivery in the quarter came from extra volumes in U S services tied to Medicaid Redetermination.

David W. Mutryn: Let's go to the segment.

David W. Mutryn: For the U.S. Federal Services segment, revenue increased 20.1% to $702 million, which was all organic and driven by volume growth on expanded programs, including the VA Medical Disability Examination, or MDE, contract. The operating income margin for U.S. Federal Services in the second quarter was 11.9 percent as compared to 8.2 percent in the prior year period. The segment margin this quarter was slightly better than expected thanks to our MDE contracts exceeding their production goals and continuing to execute well in an environment with high demand for assessments.

David W. Mutryn: For the U S. Federal services segment revenue increased 21% to $702 million, which was all organic and driven by volume growth on expanded programs, including the V. A medical disability examination or M. D E contracts.

David W. Mutryn: The operating income margin for U S. Federal services in the second quarter was 11, 9% as compared to eight 2% in the prior year period.

David W. Mutryn: The segment margin this quarter was slightly better than expected. Thanks to our M. D E contracts exceeding their production goals and continuing to execute well in an environment with high demand for assessment.

David W. Mutryn: For the U.S. services segment, revenue increased 8.1% to $486 million, also all organic. A portion of the growth stemmed from resumed Medicaid redetermination activities, which weren't present last year. The segment also has a large state-based assessment program, which has ramped up in previous periods and contributed to growth on a comparative basis.

David W. Mutryn: For the U S services segment revenue increased eight 1% to $486 million also all organic a portion of the growth stemmed from resumed Medicaid redetermination activities, which werent present last year.

David W. Mutryn: The segment also has a large state based assessment program, which has ramped in previous periods and contributed to growth on a comparative basis.

David W. Mutryn: The U.S. service's operating income margin was 14.0% in the second quarter of this year, but the prior year period's margin of 9.5% was before redetermination activities resumed. It's worth noting that this quarter's margin of 14.0% is likely the high watermark for the segment, at least in the near term, bearing in mind our longer-term target margin for this segment is 11 to 14%. As I mentioned earlier, a portion of this segment's overperformance came from extra volumes tied to the restart of Medicaid redeterminations, which is a process that has been playing out over the last several quarters.

David W. Mutryn: The U S services operating income margin was 14.0% in the second quarter of this year.

David W. Mutryn: The prior year period's margin of nine 5% was before redetermination activities resumed its worth noting that this quarters margin of 14.0% is likely the high watermark for this segment at least in the near term bearing in mind, our longer term target margin for this segment is 11 to 14.

David W. Mutryn: That.

David W. Mutryn: As I mentioned earlier a portion of this segments over performance came from extra volumes tied to the restart of Medicaid Redetermination, which is a process that has been playing out over the last several quarters.

David W. Mutryn: We continue to forecast slight segment margin normalization after this second quarter as the relatively limited amount of extra volumes conclude, meaning landing closer to the middle of that 11 to 14 percent margin range for the back half of the year. That said, the outlook is slightly improved for the back half as well, driven by improvement to other core areas of the business. Compared to this time last year, we are quite pleased that the segment is reflecting stabilized operations after being heavily disrupted during the pandemic, and in the case of Medicaid redetermination, which has occupied the spotlight recently, it should go back to quietly running in the background.

David W. Mutryn: We continue to forecast flight segment margin normalization after the second quarter as the relatively limited amount of extra volumes conclude meaning landing closer to the middle of that 11% to 14% margin range for the back half of the year.

David W. Mutryn: That said the outlook is slightly improved from the back half as well and driven by improvement to other core areas of the business.

David W. Mutryn: Compared to this time last year, we are quite pleased that the segment is reflecting stabilized operations after being heavily disrupted during the pandemic and in the case of Medicaid Redetermination, which has occupied the spotlight recently they should go back to quietly running in the background.

David W. Mutryn: Turning to the Outside the U.S. segment, revenue decreased 7.2 percent year-over-year to $161 million for the quarter. Most of the decline was attributable to less revenue following completed divestitures to date, while the rest of the segment was flat on an organic basis. The segment made a small profit of $0.7 million as compared to an operating loss of $3.7 million in the prior year period.

David W. Mutryn: Turning to the outside the U S segment revenue decreased 7.2% year over year to $161 million for the quarter.

David W. Mutryn: Most of the decline was attributable to less revenue following completed divestitures to date, while the rest of the segment was flat on an organic basis.

David W. Mutryn: The segment made a small profit of zero point $7 million as compared to an operating loss of $3 $7 million in the prior year period our.

David W. Mutryn: Our commitment to reshape the segment is in progress, and we remain on target this fiscal year. In the meantime, recent results demonstrate reduced volatility in the employment services portion of the segment now that the pandemic is behind us, and we expect this trend to continue. Let's now turn to cash flow and balance sheet items. Cash provided by operating activities for the second quarter of this year was $130 million, and free cash flow was $105 million. DSOs finished the quarter at 62 days.

David W. Mutryn: Our commitment to reshape this segment is in progress and we remain on target this fiscal year.

David W. Mutryn: In the meantime, recent results demonstrate reduced volatility to the employment services portion of the segment now that the pandemic is behind us and we expect this trend to continue.

David W. Mutryn: Our free cash flow guidance for the rest of the year has increased due to the improved earnings forecast. We ended the second quarter with total debt of $1.22 billion, and our net debt to EBITDA ratio improved from 2.1 times to 1.7 times. As a reminder, this ratio is our debt net of allowed cash to adjusted EBITDA for the last 12 months as calculated in accordance with our credit agreement. Our long-term target debt ratio remains 2 to 3 times.

David W. Mutryn: Let's now turn to cash flow and balance sheet items cash provided by operating activities for the second quarter of this year with $130 million and free cash flow was $105 million DSO.

David W. Mutryn: Dsos finished the quarter at 62 days.

David W. Mutryn: Our free cash flow guidance for the rest of the year has increased due to the improved earnings forecast.

David W. Mutryn: We ended the second quarter with total debt of one point to $2 billion and our net debt to EBITDA ratio improved from 2.1 times to 1.7 times.

David W. Mutryn: As a reminder, this ratio as our debt net of allowed cash to adjusted EBITDA for the last 12 months as calculated in accordance with our credit agreement.

David W. Mutryn: Our long term target debt ratio remains two to three times. However in the current interest rate environment. Our bias is toward the lower end of that range. We are now below that range and are comfortable in the near term continuing to pay down to build capacity for future M&A, while also maintaining an opportunistic share repurchase.

David W. Mutryn: However, in the current interest rate environment, our bias is toward the lower end of that range. We are now below that range and are comfortable in the near term, continuing to pay down to build capacity for future M&A, while also maintaining an opportunistic share repurchase program. On that front, post-quarter end, in the month of April, we repurchased nearly $20 million worth of shares.

David W. Mutryn: Program on that front post quarter and in the month of April we repurchased nearly $20 million worth of shares.

David W. Mutryn: Turning to fiscal year 2024, we are pleased to be raising guidance for the second time with increases to both the top and bottom line. Revenue is now expected to be between $5.15 billion and $5.25 billion, which is up $75 million at the midpoint compared to the previous guidance. Adjusted operating income is estimated to be between $540 million and $560 million, which is an increase of more than $34 million from prior guidance using the midpoint. Adjusted EPS, excluding intangible samortization and divestiture-related charges, is now projected to be between $5.65 and $5.85 per share.

David W. Mutryn: Turning to fiscal year 'twenty 'twenty four we are pleased to be raising guidance for the second time with increases to both the top and bottom line guidance revenue is now expected to be between 5.15 billion and $5.25 billion, which is up $75 million at the midpoint compared to the previous guide.

David W. Mutryn: Adjusted operating income is estimated to be between $540 million and $560 million, which is an increase of more than $34 million from prior guidance using the midpoint.

David W. Mutryn: Adjusted EPS, excluding intangibles amortization and divestiture related charges is now projected to be between $5 65 and.

David W. Mutryn: And $5 85 per share.

David W. Mutryn: Using the midpoints, this reflects a $0.40 raise from prior guidance and up $0.55 from our initial guidance in November. As a result of the improved earnings forecast, we are raising our free cash flow guidance to between $330 and $370 million for fiscal 2024. The improved outlook reflects higher expectations for both organic revenue growth and margins. At the guidance midpoints, organic growth is projected to be nearly 7 percent, up from 5 percent in prior guidance, and adjusted OI margin is 10.6 percent, up from 10.0 percent in prior guidance.

David W. Mutryn: Using the midpoint. This reflects a 40 cent raise from prior guidance and up 55 cents from our initial guidance in November.

David W. Mutryn: As a result of the improved earnings forecast, we are raising free cash flow guidance to between 330 and $370 million for fiscal 'twenty 'twenty four.

David W. Mutryn: The improved outlook reflects higher expectations for both organic revenue growth and margin.

David W. Mutryn: At the guidance midpoint organic growth is projected to be nearly 7% up from 5% in prior guidance and adjusted Oi margin is 10, 6% up from 10.0% in prior guidance.

David W. Mutryn: Let me add some color on earnings in the back half of the year. We expect higher earnings in our fiscal third quarter compared to the fourth quarter due to a combination of factors in our U.S. federal and U.S. services segments. First, we are planning on some investment costs in the U.S. federal segment in the fourth quarter, which will begin driving further operational efficiency in fiscal year 2025. On a full-year basis, the federal segment margin should be approximately 12%.

Speaker Change: Let me add some color on earnings in the back half of the year we.

David W. Mutryn: We expect higher earnings in our fiscal third quarter compared to the fourth quarter due to a combination of factors in our U S Federal and U S services segment first.

David W. Mutryn: First we are planning on some investment costs in the U S. Federal segment in the fourth quarter, which will begin driving further operational efficiency in fiscal year 2025.

David W. Mutryn: On a full year basis, the federal segment margin should be approximately 12%.

David W. Mutryn: Second, for the U.S. services segment, as mentioned earlier, we expect this segment's margin to be more in the middle of the 11 to 14 percent target range for the back half of the year, as volumes related to Medicaid redeterminations continue to moderate. And given the strong first half, the segment margin should be approximately 13% on a full year basis. The Outside the U.S. segment remains on track to be slightly above break-even for the full year, assuming status quo for the current footprint.

David W. Mutryn: Second for the U S services segment as mentioned earlier, we expect this segment's margin to be more in the middle of the 11% to 14% target range for the back half of the year as volumes related to Medicaid Redetermination continue to moderate.

David W. Mutryn: And given the strong first half the segment margin should be approximately 13% on a full year basis.

David W. Mutryn: The outside the U S segment remains on track to be slightly above breakeven for the full year assuming status quo for the current footprint. We do expect further shaping of the segment to occur this fiscal year in an effort to deliver consistent profitability.

David W. Mutryn: We do expect further shaping of the segment to occur this fiscal year in an effort to deliver consistent profitability. A few other assumptions for fiscal 2024 include interest expense of approximately $77 million and intangibles amortization expense of approximately $89 million.

David W. Mutryn: A few other assumptions for fiscal 'twenty 'twenty four include interest expense of approximately $77 million and intangibles amortization expense of approximately $89 million.

David W. Mutryn: To conclude, I would like to congratulate the entire Maximus team on executing another terrific quarter and reaffirming my comments on prior calls that the business is healthy and able to build momentum from previous quarters. The domestic segments both hit the upper ends of their long-term margin targets this quarter, demonstrating the business has the earnings power that we have long signaled. Work remains on the Outside the U.S. segment, and we have been clear that action in the remaining half of the year is a management priority.

David W. Mutryn: To conclude I would like to congratulate the entire Maximus team on executing another terrific quarter and reaffirming my comments on prior calls that the business is healthy with the ability to build momentum from previous quarters.

David W. Mutryn: The domestic segments both hit the upper ends of their long term margin targets. This quarter demonstrating the business has the earnings power that we have long signaled.

David W. Mutryn: Work remains on the outside the U S segment, and we have been clear that action and the remaining half of the year as a management priority.

David W. Mutryn: While we have been quite successful in navigating a period of higher rebid activity, there are two contracts that have some unique circumstances that Bruce will discuss further and do not change our positive view of the business or disrupt the momentum we have built. Finally, our balance sheet is very strong, as our debt ratio now sits below our long-term target range. This provides us with flexibility and capacity to execute on our capital allocation priorities. With that, I'll hand the call over to Bruce.

David W. Mutryn: While we have been quite successful in navigating a period of higher rebid activity. There are two contracts that have some unique circumstances that Bruce will discuss further and do not change our positive view of the business nor disrupt the momentum we have built.

Bruce: Finally, our balance sheet is very strong as our debt ratio now sits below our long term target range. This provides us flexibility and capacity to execute on our capital allocation priorities.

David W. Mutryn: With that I'll hand, the call over to Bruce.

Bruce L. Caswell: Thanks, David, and good morning. As David presented, we have just completed a very strong quarter. Revenue grew 12.6% on an organic basis, and adjusted EPS was $1.57, up from $0.81 for the prior year period.

Bruce: Thanks, David and good morning.

Bruce: As David presented we have just completed a very strong quarter revenue grew 12, 6% on an organic basis. Adjusted EPS was $1 57 up from 81 for the prior year period. Adjusted operating margin continues to meet our target range of 10% to 14% with updated guidance now implying a 10.6.

Bruce L. Caswell: Adjusted operating margin continues to meet our target range of 10-14%, with updated guidance now implying a 10.6% margin for full fiscal year 2024. And finally, we are increasing guidance for the remainder of the fiscal year. This is a notable accomplishment for the company as a whole, following our solid first quarter. Congratulations to our program teams and our critical support functions, all of whom remained focused on quality delivery and are committed to meeting the needs of our clients. For the last several quarters, the company's top-line revenue growth has been driven by expansion on current programs. This is not new for us.

Bruce L. Caswell: Percent margin for full fiscal year 2024, and finally, we are increasing guidance for the remainder of the fiscal year.

Bruce L. Caswell: This is a notable accomplishment for the company as a whole following our solid first quarter congratulations to our program teams and our critical support functions all of whom remained focused on quality delivery and are committed to meeting the needs of our clients for.

Bruce L. Caswell: For the last several quarters the company's topline revenue growth has been driven by expansion on current programs. This is not new for us building solid customer relationships through quality delivery has reliably enabled our teams to increase volumes and expand scope ultimately benefiting our top and bottom lines.

Bruce L. Caswell: Building solid customer relationships through quality delivery has reliably enabled our teams to increase volumes and expand scope, ultimately benefiting our top and bottom lines. This quarter, in particular, we continued to see increased volumes in our VES business where, as David mentioned, MDE claims exceeded their production goals. Growing current programs, including movement into near adjacencies, is fundamental to the Maximus business model. That said, we're also keenly focused on new work wins, which underpin our long-term growth goals.

Bruce L. Caswell: This quarter in particular, we continued to see increased volumes in our <unk> business, where as David mentioned M. D E claims exceeded their production goals.

Bruce L. Caswell: Growing current programs, including movement into near Adjacencies is fundamental to the Maximus business model that said, we're also keenly focused on new work wins, which underpin our long term growth goals in this vein and in the context of our Maximus forward initiative, we're making investments in our business development.

Bruce L. Caswell: In this vein, and in the context of our Maximus Forward initiative, we are making investments in our business development, capture, and proposal teams, as well as their supporting tools to help ensure their success. Across all segments, we have made a number of key hires. These leaders come to us with years of experience and proven capabilities, more specifically as part of a reorganization within our U.S. Federal Capture and Proposal Team. Our leaders are now aligned to the market areas and agencies where they bring the most expertise. This alignment allows a heightened focus on the customer, enabling us to build better relationships and gain a deeper understanding of our clients.

Bruce L. Caswell: Capture and proposal teams and their supporting tools to help ensure their success.

Bruce L. Caswell: Across all segments, we've made a number of key hires.

Bruce L. Caswell: These leaders come to us with years of experience and proven capabilities.

Bruce L. Caswell: More specifically as part of our reorganization within our U S. Federal capture and proposal teams are leaders are now aligned to the market areas in agencies, where they bring the most expertise.

Bruce L. Caswell: This alignment allows heightened focus on the customer, enabling us to build better relationships and gain a deeper understanding of our clients' needs.

Bruce L. Caswell: We are seeing early success with some of the investments made thus far. Shortly after the quarter close, we were awarded a few contracts that aligned well with our strategy. For example, we were awarded a $70 million single award BPA with the Department of Energy, or DOE, Office of Intelligence and Counterintelligence, providing specialized software, application development, technical advisory, and consulting services.

Bruce L. Caswell: We are seeing early success with some of the investments made thus far shortly after the quarter closed we were awarded a few contracts that align well with our strategy.

Bruce L. Caswell: We were awarded a $70 million single award BPA with the department of energy or D. O E office of intelligence and counterintelligence, providing specialized software application development technical advisory and consulting services.

Bruce L. Caswell: Our support sits at the core of a crucial mission within the DOE enterprise and at a pivotal moment for the agency. The security of our nation's critical infrastructure is an imperative, and Maximus will provide support at the nexus of DOE headquarters, the national laboratories, and the broader intelligence community.

Bruce L. Caswell: Our support sits at the core of a crucial mission within the D O enterprise at a pivotal moment for the agency.

Bruce L. Caswell: Security of our nation's critical infrastructure is an imperative and Maximus will provide support at the Nexus of D. O headquarters the National Labs, and the broader intelligence community.

Bruce L. Caswell: Also in April, we were awarded our first task order on the OPM Customer Support Center, or CSCBPA. Valued at nearly $21 million over three years, including option periods, this win launches our support for OPM's expanded mission to provide benefits enrollment services for certain federal agencies, beginning with U.S. Postal Service employees.

Bruce L. Caswell: Also in April we were awarded our first task order on the OPM customer support center or CSC BPA.

Bruce L. Caswell: Now you'd at nearly $21 million over three years, including option periods. This win launches our support for Opm's expanded mission to provide benefits enrollment services for certain federal agencies, beginning with U S Postal service employees.

Bruce L. Caswell: Under the task order, we will be building out a modern cloud-based contact center platform and delivering customer support services. Delivering both staffed operations and innovative technology, the OPM CSC task order takes full advantage of our recently announced Maximus Total Experience Management, or TXM, solution. The TXM solution supports our customer services digitally-enabled strategy pillar, the goal of which is to elevate the customer experience to achieve higher levels of satisfaction, performance, and outcomes through intelligent automation and cognitive computing. TXM implements our strategy by helping federal agencies deliver trusted information and government services simply, consistently, and securely.

Bruce L. Caswell: Under the task order, we will be building out a modern cloud based contact center platform and delivering customer support services.

Bruce L. Caswell: Delivering both staffed operations and innovative technology. The O P. M. CSC task order takes full advantage of our recently announced Maximus total experience management or T X M solution.

Bruce L. Caswell: The <unk> solution supports our customer services digitally enabled strategy pillar goal of which is to elevate customer experience to achieve higher levels of satisfaction performance and outcomes through intelligent automation and cognitive computing.

Bruce L. Caswell: Dxm implements our strategy by helping federal agencies deliver trusted information and government services simply consistently and securely.

Bruce L. Caswell: This solution seamlessly integrates people, experience, data insights, and secure technologies into one digitally powered platform to reimagine government service delivery across phone, text, and chat channels. While on the topic of new wins, let me turn to our award metrics and pipelines. For the second quarter of fiscal 2024, signed awards totaled $568 million in total contracts. Further, on March 31st, there were $797 million worth of contracts that had been awarded but not yet signed. These awards translate into a book-to-bill of approximately 1.1 times for the trailing 12-month period.

Bruce L. Caswell: This solution seamlessly integrates people experience data insights and secure technologies into one digitally powered platform to re imagine government service delivery seamlessly across phone text and chat channels.

Bruce L. Caswell: While on the topic of new wins, let me turn to our award metrics and pipeline.

Bruce L. Caswell: For the second quarter of fiscal 2024 signed awards totaled $568 million of total contract value. Further at March 31, there were $797 million worth of contracts that had been awarded but not yet signed.

Bruce L. Caswell: These awards translate into a book to Bill of approximately one one times for the trailing 12 month period.

Bruce L. Caswell: Our pipeline at March 31st was $37.8 billion, compared to $37.7 billion reported in the first quarter of fiscal 2020. The March 31st pipeline is comprised of approximately $1.31 billion in proposals pending, $987 million in proposals in preparation, and $35.5 billion in opportunities. Of our total pipeline of sales opportunities, approximately 75% represents new work. Additionally, 56% of the $37.8 billion total pipeline is attributable to our U.S. Federal Services business. Our pipeline figures are reported as of March 31st.

Bruce L. Caswell: Our pipeline at March 31 was $37 $8 billion compared to $37 7 billion reported in the first quarter of fiscal 2024.

Bruce L. Caswell: The March 31st pipeline is comprised of approximately $1.31 billion in proposals pending $987 million in proposals and preparation and $35 5 billion and opportunities tracking.

Bruce L. Caswell: Of our total pipeline of sales opportunities approximately 75% represents new work. Additionally.

Bruce L. Caswell: Additionally, 56% of the $37 $8 billion total pipeline is attributable to our U S Federal services segment.

Bruce L. Caswell: Our pipeline figures are reported as of March 31.

Bruce L. Caswell: As a result, they do not include two important rebids that we were tracking, but on which we have greater clarity today. The first is our contact center operations contract with the Centers for Medicare and Medicaid Services, which we discussed at length last quarter. CMS has recently reported that the RFP is expected to be released on or around May 16.

Bruce L. Caswell: As a result, they do not include two important rebids that we were tracking but on which we have greater clarity today.

Bruce L. Caswell: The first is our contact center operations contract with the centers for Medicare and Medicaid services, which we discussed at length last quarter. CMS has recently reported that the RFP is expected to be released on or around may 16th.

Bruce L. Caswell: As a reminder, CMS is re-competing the program earlier than expected, with the express purpose of including a Labor Harmony Agreement requirement. While we and other industry stakeholders have respectfully communicated our disagreement with this decision, we, of course, remain committed to our customers and the citizens we serve as this matter runs its course. We have and will continue to provide best-in-class customer service to CMS and the tens of millions of Americans we interact with each and every day, most of whom are senior citizens.

Bruce L. Caswell: As a reminder, cms's recompete of the program earlier than expected with the express purpose of including a labor harmony agreement requirement.

Bruce L. Caswell: While we and other industry stakeholders have respectfully communicated our disagreement with this decision we of course remain committed to our customer and the citizens. We serve as this matter runs its course.

Bruce L. Caswell: We have and will continue to provide best in class customer service to CMS and the tens of millions of Americans, we interact with each and every day most of whom are senior citizens.

Bruce L. Caswell: As I mentioned on our first quarter call, since assuming operational responsibility for the CCO contract, we have consistently met or exceeded all contractual service levels with uninterrupted operations, leading to the highest independently measured customer satisfaction in the history of the program, while accommodating occasional labor organizing events which we have unequivocally. The second point I will make relates to our medical disability exams contracts with the Veterans Benefit Administration, or VBA. Several of these contracts will also be up for rebid later this year.

Bruce L. Caswell: As I mentioned on our first quarter call since assuming operational responsibility for the C. C. O contract, we have consistently met or exceeded all contractual service levels with uninterrupted operations, leading to the highest independently measured customer satisfaction in the history of the program, while accommodating occasional labor organizing events, which we have.

Bruce L. Caswell: Unequivocally respected.

Bruce L. Caswell: The second point I would make pertains to our medical disability exams contracts with the veterans benefits administration or VBA.

Bruce L. Caswell: Several of these contracts will also be up for rebid later this year.

Bruce L. Caswell: The early rebid is required because the contracts in place include a ceiling on the claims volume. As we have communicated, volumes have increased significantly since the passing of the Pact. Therefore, VBA must recompete some, but not all, of the contracted regions in which we work.

Bruce L. Caswell: The early rebid is required because the contracts in place include a ceiling on the claims volume.

Bruce L. Caswell: As we have communicated volumes have increased significantly since the passing of the Pacte Act.

Bruce L. Caswell: Therefore, the VBA must recompete, some but not all of the contracted regions in which we work we remain.

Bruce L. Caswell: We remain optimistic about the outcome given our strong relationship with the VBA, demonstrated delivery capabilities, and are continuing to invest in our operations. Our ability to deliver high-quality exams at scale in a complex programmatic and operational environment positions us well to remain a committed partner to the customer and the veterans we are fortunate to serve. Returning to the success of the quarter, David shared that our adjusted operating income margin forecast is a healthy 60 basis point improvement for the full year. That's attributable, in part, to the strong second quarter results, where adjusted margin was 11.1%.

Bruce L. Caswell: Optimistic about the outcome given our strong relationship with the VBA demonstrated delivery capabilities and are continuing to invest in our operations.

Bruce L. Caswell: Our ability to deliver high quality exam that scale in a complex programmatic and operational environment positions us well to remain a committed partner to the customer and the veterans we are fortunate to serve.

Bruce L. Caswell: Returning to the success of the quarter, David shared that our adjusted operating income margin forecast is a healthy 60 basis point improvement for the full year.

Bruce L. Caswell: That's attributable in part.

Bruce L. Caswell: The strong second quarter results were adjusted margin was 11, 1%.

Bruce L. Caswell: Some of this success is driven by the Maximus Forward initiatives I've mentioned on recent earnings calls. Fundamentally, this effort is a structured evaluation of the design, processes, and resources that drive our delivery. We've taken a hard look at both client-facing programs and our corporate functions, asking tough questions, promoting innovative ideas, and making hard but necessary decisions.

Bruce L. Caswell: Some of this success is driven by the Maximus forward initiatives I've mentioned on recent earnings calls fundamentally this effort is a structured evaluation of the design processes and resources that drive our delivery.

Bruce L. Caswell: We've taken a hard look at both client facing programs and our corporate functions asking tough questions promoting innovative ideas and making hard but necessary decisions.

Bruce L. Caswell: Examples of initiatives we've shared with you include the AI Agent Assist and AI Training Pilots presented last quarter, currently in progress, and showing promising results. The hiring of our Chief Digital and Information Officer, or CDIO, was an early decision driven by Maximus Forward. Under the leadership of Derek Pledger, the department is on its way to becoming a technology-based and data-driven organization designed to accelerate the delivery of business outcomes, enhanced customer experiences, and technology differentiation to drive competitive advantage.

Bruce L. Caswell: Example initiatives we've shared with you include the AI agent assist and AI training pilots presented last quarter currently in progress and showing promising results.

Bruce L. Caswell: The hiring of our chief digital and information officer or C. D. I O was an early decision driven by Max Ms forward under the leadership of Derek pleasure. The Department is on its way to becoming a technology based and data driven organization designed to accelerate delivery of business outcomes enhanced customer experiences and technology differentiation to drive <unk>.

Bruce L. Caswell: <unk> advantage.

Bruce L. Caswell: Since joining, Derek has completed a comprehensive review covering a lot of ground in a short amount of time and developed a plan aligned with our expanded vision for technology at Maximus. He is aligning technical solutions to enterprise strategy and business, including Key Pipeline Operators. We are prioritizing investments in research and development activities that can provide greater operating leverage and working with our operations to develop cutting-edge technologies ahead of our customer needs. As part of the changes implemented, Derek has added a Chief Technology Officer to his team.

Bruce L. Caswell: Since joining Derek has completed a comprehensive review covering a lot of ground in a short amount of time and developed a plan aligned with our expanded vision for technology at Maximus.

Bruce L. Caswell: He is aligning technical solutions to enterprise strategy and business needs, including key pipeline opportunities.

Bruce L. Caswell: We are prioritizing investments in research and development activities that can provide greater operating leverage and working with our operations to develop cutting edge technologies ahead of our customer needs.

Bruce L. Caswell: As part of the changes implemented Derek has added a chief technology officer to his team.

Bruce L. Caswell: Our CTO will lead our technology and innovation organization and will be vital for setting and executing our strategic technology direction. Within the CDIO organization, and also driven by the Maximus Forward program, we have recently invested in our supply chain through the acquisition of one of our critical IT suppliers, which is expected to be a creative post-integration. The group has been a long-term contributor to the success of our U.S. services program, bringing extensive engineering and research talent to enable greater depth, scale, and capabilities in administering large critical government programs.

Bruce L. Caswell: Our CTO will lead our technology and innovation organization and will be vital for setting in executing our strategic technology direction.

Bruce L. Caswell: Within the CIO organization and also driven by the Maximus word program. We have recently invested in our supply chain through acquisition of one of our critical suppliers, which is expected to be accretive post integration.

Bruce L. Caswell: The group has been a long term contributor to the success on our U S services programs, bringing extensive engineering and research talent to enable greater depth scale and capabilities in administering large critical government programs.

Bruce L. Caswell: We are excited to bring their team in-house and leverage their capabilities across our portfolio. While the success of the Maximus Forward program is driving shareholder value, it's also allowing us to continue investing in our people. Enhancements to our employee value proposition are driven by employee feedback and the continued effort to be market competitive in the compensation and benefits we provide and a long-term employer of choice. Our driving force is to provide for the physical, mental, and financial well-being of our employees and their families.

Bruce L. Caswell: We are excited to bring their team in house and leverage their capabilities across our portfolio.

Bruce L. Caswell: While the success of the Maximus Board program is driving shareholder value. It's also allowing us to continue investing in our people.

Bruce L. Caswell: Enhancements to our employee value proposition are driven by employee feedback and the continued effort to be market competitive in the compensation and benefits we provide in our long term employer of choice.

Bruce L. Caswell: Our driving force is to provide for the physical mental and financial well being of our employees and their families.

Bruce L. Caswell: Over the past few years, our focus on our employee value proposition has led to significant enhancements to our benefits program. Examples include increasing the employer contribution and reducing deductibles on all HSA plans, launching a PPO plan, and adding free telehealth options, all in the face of a macro backdrop of rising healthcare costs.

Bruce L. Caswell: Over the past few years, our focus on our employee value proposition has led to significant enhancements to our benefits programs.

Bruce L. Caswell: Examples include increasing the employer contribution and reducing deductibles on all HSA plans launching a P. P O plan and adding free telehealth options all in the face of a macro backdrop of rising health care costs.

Bruce L. Caswell: As we look ahead at our 2025 benefits plan, we are excited to continue enhancing our. The return on investments made in our people is clear when analyzing our recent independently conducted Global Employee Engagement Survey. The KPI I find most meaningful is the Employee Net Promoter Score, which measures employee loyalty to the company. Fiscal year 2024 survey results showed an overall net promoter score of plus 31. This is an 11-point increase from the fiscal year 2023 results and a 26-point increase from three years ago when we first asked PwC to conduct this annual survey.

Bruce L. Caswell: As we look ahead at our 2025 benefits plan, we're excited to continue enhancing our offerings.

Bruce L. Caswell: The return on investments made in our people is clear when analyzing our recent independently conducted global employee engagement survey results.

Bruce L. Caswell: K P. I find most meaningful is the employee net promoter score, which measures employee loyalty to the company.

Bruce L. Caswell: Fiscal year 2024 survey results showed an overall net promoter score of plus 31.

Bruce L. Caswell: This is an 11 point increase from the fiscal year 2023 results in a 26 point increase from three years ago. When we first asked Pwc to conduct this annual survey.

Bruce L. Caswell: Maximus has created a positive employee experience by fostering a culture of listening, feedback, transparency, and accountability. I'm very grateful to everyone involved in driving such impactful change throughout our organization. As I wrap up my prepared remarks, I'd like to take a moment to highlight our continued recognition as a leader in veteran employment. Maximus has once again been honored as a Vets Index Five Star Employer, marking the third consecutive year we have been recognized for our commitment to veterans and military-connected individuals.

Bruce L. Caswell: <unk> has created a positive employee experience by fostering a culture of listening feedback transparency and accountability.

Bruce L. Caswell: I'm very grateful to everyone involved in driving such impactful change throughout our organization.

Bruce L. Caswell: As I wrap my prepared remarks, I'd like to take a moment to highlight our continued recognition as a leader in veteran employment Max.

Bruce L. Caswell: Maximus has once again been honored as the Vets index as five star employer, marking the third consecutive year, we've been recognized for our commitment to veterans and military connected individuals.

Bruce L. Caswell: This year, we were also proudly named a Top Veteran Employer by Military.com. These accolades underscore our dedication to recruiting, hiring, retaining, developing, and supporting military personnel and their families. Our initiatives celebrate the unique skills and experiences that veterans bring to our organization, reflecting our deep-rooted respect for military service as a core part of our identity and mission in public service for nearly five decades. In closing, we continue to be pleased with our fiscal year 2024 performance thus far and remain optimistic about the growth of the company through expansion in our core business as well as a heightened focus on investment in new work opportunities. And with that, we'll open the line for Q&A, operator.

Bruce L. Caswell: This year, we were also proudly named a top veteran employer by military Dot com.

Bruce L. Caswell: These accolades underscore our dedication to recruiting hiring retaining developing and supporting military personnel and their families.

Bruce L. Caswell: Our initiatives celebrates the unique skills and experiences that veterans bring to our organization, reflecting our deep rooted respect for military service as a core part of our identity and mission in public service for nearly five decades.

Bruce L. Caswell: In closing we continue to be pleased with our fiscal year 2024 performance, thus far and remain optimistic about the growth of the company through expansion of our core business as well as our heightened focus on investment in new work opportunities.

Bruce L. Caswell: And with that we'll open the line for Q&A.

Bruce L. Caswell: Operator.

Operator: Thank you. The floor is now open for questions. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. We do ask that you please limit yourself to one question and one follow-up before requeuing for any additional questions. Today's first question is coming from Charlie Strauzer of CJS Securities. Please go ahead.

Speaker Change: Thank you the floor is now open for questions. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue. We do ask that you. Please limit yourself to one question and one follow up before re queuing for any additional questions.

Charles S. Strauzer: Today's first question is coming from Charlie.

Charles S. Strauzer: Strausser of CJS Securities. Please go ahead.

Charles S. Strauzer: Hi, good morning.

Charles S. Strauzer: Good morning, Charlie.

Charles S. Strauzer: Just a quick question, obviously, a very robust quarter, especially in federal, you know, sales and margins, kind of, you know, seeing, you know, some good uplift, kind of ahead of schedule versus your, you know, prior guidance. Just when you look at that, and The Drivers, um, you know, did you see any revenue pull forward? Um, you know, maybe give us a little bit more color, you know, behind, you know, the drivers of that, that, that...

Charles S. Strauzer: Just a quick question, obviously very robust quarter, especially in federal sales and margins.

Charles S. Strauzer: Seeing some good uplift kind of ahead of head of schedule versus you.

Charles S. Strauzer: Guidance, just when you look at that.

Charles S. Strauzer: The drivers.

Charles S. Strauzer: Yes.

Charles S. Strauzer: Yes.

Charles S. Strauzer: Do you see any revenue pull forward.

Charles S. Strauzer: Maybe give us a little bit of color behind that.

Charles S. Strauzer: Drivers of that.

Speaker Change: Good quarter.

David W. Mutryn: Sure, great. This is David. Good morning, Charlie.

Charles S. Strauzer: Sure Greg This is David good morning, Charlie.

David: So as I mentioned, there was no real single area.

David: It led to the Q2 over performance it was a broad strong performance across the portfolio.

David W. Mutryn: So, as I mentioned, there was no real single area that led to the Q2 overperformance. It was a broad, strong performance across the portfolio. The VA MDE volumes in the federal segment were certainly a component that was particularly strong in the quarter. I did allude to some benefit from extra volumes tied to the Medicaid unwind effort, which ends soon, though it remains difficult to precisely quantify that. But I would leave you with the impression that this was only some of the Q2 overdelivery.

David W. Mutryn: The VA MDI volumes in the federal segment, where certainly a component that were particularly strong in the quarter I did allude to some benefit from extra volumes tied to the Medicaid unwind effort, which end soon though it remains difficult to precisely quantify that but I would leave you with the impression that this was only some of the Q2 over delivery.

David W. Mutryn: While I'm on the topic more broadly about redeterminations and sharing what we see today, Medicaid enrollments are landing a little higher, and as we expected, we are seeing continued engagement from the portion who have been redetermined and retained on the Medicaid roll. So that effectively means it's back to business as usual for us for the work tied to the annual Medicaid renewals, and the normal base of beneficiaries that existed pre-pandemic is engaging in typical fashion in the post-pandemic environment, which is good since that drives activities in our operation. Lastly, the fact that they have a slightly higher population doesn't hurt either.

David W. Mutryn: While I'm on it more broadly about the topic of Redetermination and sharing what we see today Medicaid enrollments are landing a little higher and as we expected. We are seeing continued engagement from the portion who have been re determined and retained on the Medicaid role. So that effectively means it's back to business as usual for us for the work tied to the annual Medicaid.

David W. Mutryn: The walls and the normal base of beneficiaries that existed pre pandemic is engaging in typical fashion in the post pandemic environment, which is good since that drives activities in our operation.

David W. Mutryn: Lastly, the fact that there's slightly higher population doesn't hurt either.

David W. Mutryn: And while I've got the mic, as I reflect on the quarter, I'll offer one last thing that I'm especially proud of the quarter for the team delivering on the financial commitments that we laid out back two years ago to the month of May of 2022 at our Investor Day. So we had said sustainable mid-single-digit organic growth, and we delivered 7% in fiscal year 23, and we are now guiding to near 7% this year.

Speaker Change: And while I've got the mic as I reflect on the quarter I'll offer one last thing that I'm, especially proud is reflecting on the quarter for the team delivering on the financial commitments that we laid out back two years ago to the month in May of 2022 at our Investor Day. So we had said sustainable mid single digit organic growth and we delivered 7%.

David W. Mutryn: In fiscal year, 'twenty, three and now guiding to near 7%. This year U S services in particular, which was in the midst of the public health emergency, we guided 11% to 14% margin once the Redetermination resumed we just posted 14% in a peak quarter and guiding to the middle of that range going forward.

David W. Mutryn: In U.S. services, in particular, which was in the midst of the public health emergency, we guided 11% to 14% margin. Once the redeterminations resumed, we just posted 14% in a peak quarter and guiding to the middle of that range going forward. U.S. federal operating at the high end of their 10% to 12% guidance we gave, and then for the total company, we guided 9% to 12% adjusted OI margin. Our guidance for this year is now just above the midpoint of that, and now we're really focused on moving up further in the longer-term range that we gave of 10% to 14%.

David W. Mutryn: U S federal operating at the high end of their 10% to 12% guidance. We gave and then for the total company, we guided 9% to 12% adjusted Oi margin our guidance for this year is now just above the midpoint of that and now we're really focused on moving up further in the longer term range that we gave of 10% to 14%.

David W. Mutryn: And then last week, we've also met our commitment to de-lever in the near term, having just crossed below the two to three times target. So a lot of milestones that we're proud of, and much credit to the team here for delivering on these commitments.

David W. Mutryn: And lastly, we've also met our commitment to Delever in the near term, having just cross below that.

David W. Mutryn: The two to three times target. So a lot of milestones that we're proud of and much credit to the team here for delivering on these commitments.

Charles S. Strauzer: Great, thank you for that. Housekeeping on the guidance, you talked about Q3 being stronger than Q4 in the back half. Any sense of the cadence from Q2 to Q3 that we should factor in?

Speaker Change: Great. Thank you for that.

Charles S. Strauzer:

Speaker Change: Housekeeping on the guidance you talked about Q3 being.

Charles S. Strauzer: That's stronger than Q4 in the back half.

Charles S. Strauzer: Any sense of the cadence from Q2 to Q3 that we should factor in.

David W. Mutryn: Sure. Well, yeah, a couple things.

Speaker Change: Sure well a couple of things I mentioned in my remarks that we have some planned investments in the fourth quarter. So first I'll talk about kind of Q3 to Q4 and why we are a little more color on why we guided Q3 being higher than Q4.

David W. Mutryn: I mentioned in my remarks that we have some planned investments in the fourth quarter. So first, I'll talk about kind of Q3 to Q4 and why we – a little more color on why we guided Q3 being higher than Q4. So a component of those investments is the start of expensing on some new internally capitalized software efforts. I've shared before on prior calls that we have increased investments in technology, particularly in the federal business, that will provide enhanced efficiency, especially in highly scaled areas of the business.

David W. Mutryn: So a component of those investments are the startup expenses on some new internal capitalized software effort.

David W. Mutryn: I've shared before on prior calls that we have increased investments in technology, particularly in the federal business that will provide enhanced efficiency, especially in highly scaled areas of the business. So in this area in particular, the fourth quarter is expected to be a transition period, where we've been prudent in anticipating some duplicative costs.

David W. Mutryn: So in this area, in particular, the fourth quarter is expected to be a transition period where we've been prudent in anticipating some duplicative costs. So, in fiscal year 25, we expect the legacy cost to sunset while the savings and the return on those investments continue forward. So all that means is the fourth quarter is more of an outlier, in our view, that may be a bit below the core run rate, which would be manifest in the U.S. services margin.

David W. Mutryn: So in fiscal year 'twenty five we expect the legacy costs to sunset, while the savings and the return on those investments would continue forward. So all that means is the fourth quarter. It's more of the outlier in our view that may be a bit below the core run rate, which would be manifest in the U S Federal services margin.

David W. Mutryn: We are also forecasting some moderation in U S services volume both from Q2 to Q3, and then also a little bit more from Q3 to Q4. So that's a piece of the Q2 to Q3.

David W. Mutryn: We are also forecasting some moderation in U.S. services volume, both from Q2 to Q3 and then also a little bit more from Q3 to Q4. So that's a piece of the Q2 to Q3. So, you know, looking forward from Q4, our continued efforts that Bruce mentioned in his prepared remarks, including the Maximus Forward Initiative that we described, do give us confidence that there's more opportunity for continued margin improvement beyond fiscal year 24, which would mean continuing to move up in that range that I just quoted, the longer-term range of 10 to 14% adjusted OI margin. And then, of course, outside the U.S., our continued work shaping and improving profitability there should also support further improvement.

David W. Mutryn: So.

David W. Mutryn: Looking forward.

David W. Mutryn: From Q4, our continued efforts at Bruce mentioned in his prepared remarks, including the Maxim with forward initiatives that we described do give us confidence that there's more opportunity for continued margin improvement beyond fiscal year, 'twenty, four which wouldn't be continuing to move up in that range that I just quoted the longer term range of 10% to 14% adjusted Oi margin and then of course.

Operator: Thank you. The next question is coming from Bert Subin of CIFO. Please go ahead.

Bert William Subin: The U S. Our continued work shaping and improving the profitability there should also support further improvement.

Bert William Subin: Great. Thank you.

Bert William Subin: Thank you. The next question is coming from Curt <unk> of Stifel. Please go ahead.

Bert William Subin: Hey, good morning, Bruce and David.

Bert William Subin: Hey, good morning, Bruce and David.

Bruce L. Caswell: Good morning, Bert. I hope you're well.

Bert William Subin: Good morning, Brian Hope Youre well.

Bert William Subin: Thank you. Maybe I'll start on the VA side. So, I mean, look, if we look back last year, you know, thought that was going to be a table with the PACT Act, and I think that's played out more so than anyone could have anticipated. And if we look at where current inventories are and sort of where the burn rate is, you know, changes, but would indicate somewhere in the one and a half to two and a half years of sort of continued excess demand.

Bert William Subin: Thank you maybe I'll start on the VA side.

Bert William Subin: I mean look if we look go back last year thought that was going to be a tailwind with backpacks and I think that's played out more so than anyone could have anticipated.

Bert William Subin: And if we look at where our current inventories are and sort of where the burn rate is.

Bert William Subin: Changes, but would indicate somewhere in the one and a half to two and a half years of sort of continued excess demand.

Speaker Change: I guess as you think about the Recompete, but what do you think changes one of your competitors said they think that'll wrap up by September and I'm curious if you think that's the case.

Bert William Subin: I guess, as you think about the recompete, what changes do you think will happen? One of your competitors said they think that'll wrap up, you know, by September. I'm curious if you think that's the case. Does that become, or does that drive pressure on your margins in the business? Is it an opportunity to get more share? And I guess, do you agree with the runway, sort of, laid out, potential of the runway for MDEs to be strong for a longer period of time?

Bert William Subin: Does that become does that drive pressure to your margins in the business is it an opportunity to get more share and I guess do you agree with the runway sort of laid out of a potential sort of the runway for MDA mds to be strong for a longer period of time.

David W. Mutryn: Bert, David's going to take this one, and I may add a little color commentary at the end. Great. Yeah.

Bert William Subin: Yes, Bert David is going to take this one and I may add a little color commentary again, great. Yeah, a few things about the pending revert as Bruce mentioned in his remarks the way we view this as a required action by the government, which is more procedural in nature due to hitting the ceiling on those claims volume. So really the result of some good news with the volume growth.

David W. Mutryn: Yeah, a few things about the pending rebid. As Bruce mentioned in his remarks, the way we view it, this is a required action by the government, which is more procedural in nature due to hitting the ceiling on those claims volumes.

David W. Mutryn: So really, the result of some good news with the volume growth. Not only do we anticipate continuing to work uninterrupted until the process is complete, but we're still making investments to increase capacity in an effort to drive high quality and ongoing improvements to the veteran's experience. The key really for us and any provider is the ability to operate at scale. This is a large program. Our experience tells us it's complex, with an extensive nationwide network of clinicians.

David W. Mutryn: Not only do we anticipate continuing to work uninterrupted until the process is complete but we're still making investments to increase capacity in an effort to drive high quality and ongoing improvements to the veterans experience.

David W. Mutryn: The key really for us and any provider has the ability to operate at scale. This is a large program. Our experience tells us it's complex with an extensive nationwide network of clinicians.

David W. Mutryn: And while we'll be appropriately paranoid in the re-compete process, as always, we do anticipate being able to maintain scale and volumes given the significant operational advantages and experience that we believe we possess. So, Rob, we would agree with your assertion about the volumes remaining elevated for the foreseeable future, as evidenced by the inventory, as you said, and we think it will take some time for that to return to kind of normal levels.

David W. Mutryn: And while we'll be appropriately paranoid and the recompete process as always we do anticipate being able to maintain scale and volumes given.

David W. Mutryn: Given significant operational advantages and experience that we believe we possess.

David W. Mutryn: Therefore, we would agree with your assertion about the the volumes remaining elevated for the foreseeable future as evidenced by the inventory as he said that we think it will take some time for that to return to kind of normal levels.

David W. Mutryn: Based on the timeline for the rebid we've seen thus far, we also agree with what you said that the new contracts would essentially align with the start of our next fiscal year, so around the September 30th timeframe. So we're pointing out that there will be no impact on our fiscal year 24 expected. And as far as, you know, the financial details, I think at this point, we can't really speculate about what may or may not change as a result of them.

Rob: Based on the timeline for the rebid, we've seen thus far we also agree with what you said that the new contract would essentially align with the startup of our next fiscal year. So around September 30th timeframe.

David W. Mutryn: So worth pointing out no impact on our fiscal year 'twenty for expected and.

David W. Mutryn: And as far as the financial details I think at this point, we can't really speculate what may or may not change as a result of those.

Bruce L. Caswell: I would agree with that, Bert, and in fact, I'd only add one thing, and that's that David mentioned we're making significant investments in internal use software to further streamline processes and build capacity in that business. So we feel that those investments and when they will come online and be productive for us overlap well with this redecrement process. And so, you know, in total, as we exit this fiscal year and go into the next fiscal year, we should be in a solid position in terms of capacity to handle the volumes in the newly completed program.

Speaker Change: I would agree with that burden and in fact, I would only add one thing and that's that David mentioned, we're making significant investments in internal use software to further streamline processes and build capacity in that business. So we feel that those investments and when they will come online and be productive for us overlap well with this we have the permit process.

Bruce L. Caswell: And so that.

Bruce L. Caswell: In total as we exit this fiscal year and go into the next fiscal year, we should be in a solid position in terms of capacity to handle the volumes in the new newly completed program.

Bert William Subin: Got it. Very helpful. Thank you.

Speaker Change: Got it very helpful. Thank you.

Speaker Change: I guess, maybe following on to that like if we think about some of the outperformance is here <unk> have definitely helped redetermination returning in the peak activity have helped.

Bert William Subin: I guess maybe following on to that, like, if we think about, you know, some of the performances here, MDs have definitely helped. Redeterminations, returning, and peak activity have helped. Can you maybe just give us or frame for us what your expectation for the next leg of growth is? It sounds like, you know, MDs will continue to contribute to growth and profit. Redeterminations, I guess there's some opportunity, perhaps to pick up states and just a higher population count.

Speaker Change: Could you, maybe just give us a frame for us.

Bert William Subin: Whats your expectation for like the next leg of growth as it sounds like MTS will continue to contribute to growth and profit.

Bert William Subin: We'll keep that steady. But you're operating sort of on the higher end of mid-single digits, almost on the high single digit organic growth range, and your margins have been pretty strong. And just trying to get a feeling for sort of your confidence for that to continue as some of those tailwinds, at some point, start to moderate.

Bert William Subin: The terminations I guess theres, some opportunity perhaps to pick up states in just a higher population count will keep that steady, but your operating sort of on the higher end of mid single digits almost of the high single digit organic growth range and your margins have been pretty strong and just trying to get a feeling for sort of your confidence for that to continue as some of those.

Bert William Subin: And at some point start to moderate.

Bruce L. Caswell: Sure, Bert, I'll take that. First of all, we continue to be very focused on executing on the three pillars of the strategy that we laid out back in May of 2022. And the one that I'd focus on right now is the technology solutions or technology modernization initiatives. Clearly, an area that's had a lot of focus and attention is the IRS-EDOS contract. And that contract, in our view, is really just getting started and so still very much in the early stages. It has been noted that the original awardee, alongside of us, has been awarded one award funded at a funded value of about $35 million, and that's the highest award thus far.

Speaker Change: Sure Bert I'll take that so I would say look at first of all we continue to be very focused on executing on the three pillars of the strategy that we laid out back in may of 2022, and the one that I'd focus on right now.

Bruce L. Caswell: Is the technology solutions or technology modern it modernization initiatives.

Bruce L. Caswell: Clearly an area that's had a lot of focus and attention is the IRR IRS ethos contract and that contract in our view, it's really just getting started in terms of and so still very much in the early stages.

Bruce L. Caswell: Been noted that.

Bruce L. Caswell: The original warranty alongside less has been awarded one award funded at a funded value of about $35 million and Thats. The highest award thus far so we feel like we're still early days on ethos and that there remain excellent opportunities and we remain very bullish on our ability to be recognized as a valuable partner in providing solutions to the IRS through that VF.

Bruce L. Caswell: So we feel like we're still in the early days on EDOS and that there remain excellent opportunities, and we remain very bullish on our ability to be recognized as a valuable partner in providing solutions to the IRS through that vehicle. But at the same time, it's probably worth broadening the aperture and just speaking for a moment about IT modernization more generally in the federal environment. And I noted in my prepared remarks that we're very pleased to have been awarded the BPA with the Department of Energy, which includes specialized software, application development, and technology consulting services.

Bruce L. Caswell: At the same time, it's probably worth broadening the aperture and just speaking for a moment about it modernization more generally in the federal environment and I noted in my prepared remarks that we're very pleased to have been awarded the BPA with the department of energy, which includes specialized software application development technology consulting services.

Bruce L. Caswell: And as I take that and kind of look at the broader pipeline that we see out there, we do see a strong pipeline of new work opportunities that really align well with the technology-focused competencies of the organization that are really a combination of the two combinations we did or acquisitions we did going back to 2015 with the Accenture business and then the Attain federal business in 2021. Those competencies, and they're in high demand presently, are digital modernization, cyber, hybrid cloud, and infrastructure, AI, and advanced analytics, and data management because you can't do AI well without having the data in order, and then low-code, no-code solutions.

Bruce L. Caswell: And as I take that and kind of look at the broader pipeline that we see out there we do see a strong pipeline of new work opportunities that really align well with the technology focused competencies of the organization that are really a combination.

Bruce L. Caswell: The two combinations, we did our acquisitions, we've said going back to 2015 with the essential business and then the attain federal business in 2021, those competencies and they are in high demand presently our digital modernization cyber hybrid cloud and infrastructure AI and advanced analytics and data management, because you can't do AI well without having the data in <unk>.

Bruce L. Caswell: And then low code no code solutions. So we continue to build out our competencies in those five areas and and I would say you got to make sure of course that the demand single table aligns with that so I'd go back to some comments I made on the last quarter call that spoke to our confidence.

David W. Mutryn: So we continue to build out our competencies in those five areas, and I would say you've got to make sure, of course, that the demand signal aligns with that. So I'd go back to some comments I made on the last quarter call that spoke to our confidence in the customer demand that we're seeing for longer-term IT modernization initiatives. So like EDOS, we think that trend will continue, particularly for agencies that have been thoughtful and have planned out their procurements, many of which are already in process.

David W. Mutryn: And the customer demand that we're seeing for longer term IP monetization initiatives. So like ethos. We think those will continue particularly for agencies that have been thoughtful and planned out their procurements and many of which are already in process.

David W. Mutryn: To give you an example, many businesses in the industry are tracking an anticipated BPA from the Department of Energy that has a $10 billion ceiling on it that's expected to go into the procurement process later this year, and that would span any potential change in the political setting in Washington. So to summarize, we feel that this area of IT modernization, technology, services, and particularly the competencies that I mentioned represents an excellent organic growth vector for the company as we move forward, but at the same time, we remain focused, and I think this is one of the company's greatest strengths, in combining technology with business process services to deliver programs at scale.

David W. Mutryn: To give you. An example, many businesses in the industry are tracking and anticipated BPA from the department of energy that has a $10 billion ceiling on it thats expected to go into the procurement process later this year and that would span any potential change in the political.

David W. Mutryn: Setting in Washington.

David W. Mutryn: So to summarize yes, we feel that this area of it modernization technology services, particularly the competencies that I mentioned represent an excellent organic growth vector for the company as we move forward, but at the same time, we remain focused and I think this is one of the company's greatest competencies and combining technology with business.

David W. Mutryn: Process services to deliver programs at scale and more and more of these days.

David W. Mutryn: And more and more these days, the RFPs that we see do show a flavor or a combination of those where you need to deliver, for example, a cloud-based technology solution that meets federal certification requirements, which themselves are changing with CMNC coming along, but also combined with the labor component to meet the mission requirements of the procuring agency. So we feel strongly that those two areas, when taken together, represent a solid underpinning for the growth target that we've laid out for the business.

David W. Mutryn: <unk> that we see do show a flavor or a combination of those where you need to deliver for example, our cloud based technology solution that meets federal certification requirements, which themselves are changing with CMC coming along.

David W. Mutryn: But also combined with the labor component to meet the mission requirements of the procuring agency. So we feel strongly that those those two areas really when taken together represent a solid underpinning for the growth targets that we've laid out for the business and I think David is going to add something to that yet and we're just further on your margin question at the risk of being repetitive.

David W. Mutryn: And I think Dave is going to add something to that. Yeah, and Bert, just further on your margin question, at the risk of being repetitive, we do intend to continue to drive margin improvement up in that 10% to 14% range with what I mentioned before, kind of the continued focus on standardization and operational efficiency through the Maximus Forward program, as well, of course, with our ongoing efforts with the Outside the U.S. portfolio.

Dave: Do intend to continue to drive margin improvement up in that 10% to 14% range with what I mentioned before kind of the continued focus on standardization and operational efficiency through the maximum forward program.

Dave: Well of course with our ongoing efforts with the outside the U S portfolio.

Bert William Subin: Great, just one last one for me. Can you give us, you highlighted the VAMD recompete and the CCO recompete. I guess maybe a two-part clarification on the CCO: would you still be interested in bidding on that if the terms change significantly? Like what's the timeline on that in your view? And then are there other recompetes to be aware of, or is your profile pretty thin otherwise?

David W. Mutryn: Great.

Speaker Change: One last one for me.

Bert William Subin: Can you give us a you highlighted the <unk> recompete and the CCL recompete.

Bert William Subin: I guess, just maybe like a two part clarification on the <unk>.

Bert William Subin: Would you still be interested in bidding that if the terms changed significantly.

Bert William Subin: Like what's the timeline on that in your view and then are there other re competes to be aware of or is your profile pretty thin otherwise.

Bruce L. Caswell: I'll go ahead and address the first piece, the CCO rebid, and I don't want to offer too many comments as it relates to strategy here, obviously, because it's an active procurement process. But when you really, you know, look at the context of the re-procurement and consider that, as I outlined in my prepared remarks, it's interesting but not entirely surprising that we're seeing continued action by the government here I noted that there was communication posted last week suggesting an RFP date on or around May 16th and that the procurement would cover a contract for a transition period plus nine option years.

Bert William Subin: I'll go ahead and address the first piece the CTO rebid.

Bruce L. Caswell: I don't want to offer too many comments as it relates to strategy here, obviously, because it's enacted procurement process.

Bruce L. Caswell: When you really.

Bruce L. Caswell: We look at the context of the re procurement and consider that as I outlined in my prepared remarks. It is interesting, but not entirely surprising that we're seeing continued action by the government here.

Bruce L. Caswell: Did that there was communication posted last week, suggesting an RFP date on or around may 16th and that the procurement would cover a contract for a transition period plus nine option years.

Bruce L. Caswell: It's important to note that no further details are provided, including any specifics related to the Planned Labor Harmony Agreement requirement, which we understand is really the sole basis for triggering this premature rebid of a successfully performing contract. Also, as I mentioned on the last call, a procurement of this size and complexity can typically take up to a year or more to complete, and it's not uncommon for the process to take up to three years.

Bruce L. Caswell: It's important to note that no further details are provided including any specifics related to the planned labor harmony agreement requirement, which we understand is really the sole basis for triggering this premature readout of a successfully performing contract.

Bruce L. Caswell: Also as I mentioned on the last call. The procurement of this size and complexity can typically typically take up to a year or more to complete and it is not uncommon for the process to take up to three years.

Bruce L. Caswell: So we'll note that there is a strong likelihood that an RFP could trigger pre-award protests to the GAO and potentially further, given the unprecedented nature of the anticipated labor harmony requirement. It's also important to note here that further complicating the path forward is that there are significant operational impacts that would need to be accommodated and considered under the resulting new contract, including flow-down requirements to significant small business subcontractors who may be, in our view, least equipped to comply. So it begins to get complicated when you kind of take the theory and put it into practice.

Bruce L. Caswell: So we will note that there is a strong likelihood that an RFP could trigger pre award protest to the <unk> and potentially further given the unprecedented nature of the anticipated labor harmony requirement.

Bruce L. Caswell: It's also important to note here that further complicating the path forward is that there are significant operational impacts that would need to be accommodated and considered under resulting new contract, including slowdown requirements. It's insignificant small business subcontractors, who may be in our view at least equipped to comply.

Bruce L. Caswell: It begins to get complicated when you kind of take theory and put it into practice I mentioned in my prepared remarks that we remain very committed to the continued high quality services, while the rebid matter plays out.

Bruce L. Caswell: I mentioned in my prepared remarks that we remain very committed to continued high-quality services while the rebid matter plays out, but we do have genuine concerns regarding the impact of the rebid on the ecosystem of small disadvantaged businesses that have been put together to support this program, and in many communities, they're the primary employer. So the theory behind the Labor Harmony Agreement is to ensure continuity of operations, and yet we've repeatedly noted our record of service continuity, and indeed, our view of the evidence suggests that any re-procurement only increases the risk of service failure to tens of millions of seniors.

Bruce L. Caswell: But we do have genuine concerns regarding the impact of the rebid on the ecosystem of small disadvantaged businesses that have been put together to support this program and in many communities. They are the primary employer.

Bruce L. Caswell: So the theory behind the labor Harmony agreement is to ensure continuity of operations and yet we have repeatedly noted.

Bruce L. Caswell: Our record of service continuity and indeed, our view of the evidence suggests that any re procurement only increases the risk of service failure to tens of millions of seniors. So in summary, while the ERP. When the RFP is released we will evaluate it comprehensively will determine our appropriate course of action at that point in time, giving due consideration to all of our available option.

Bruce L. Caswell: So in summary, when the RP is released, we'll evaluate it comprehensively, and we'll determine our appropriate course of action at that point in time, giving due consideration to all of our available options. So at this point, I'd probably stay away from speculating further on the competitive environment, but I'll just note that it's a major area of focus for the business.

Bruce L. Caswell: <unk>.

Bruce L. Caswell: So at this point I would probably stay away from speculating further on the competitive environment, but I will just note that it is a major area of focus for the business.

David W. Mutryn: And Bert, on your second point, there is nothing else large in the near-term horizon to call out.

Bruce L. Caswell: And on your second point nothing else large on the in the near term horizon to call out.

Bert William Subin: Great, great color guy, thank you.

Speaker Change: Great Great color guys. Thank you.

Bert William Subin: Yes.

Operator: Thank you. Ladies and gentlemen, this brings us to the end of the question and answer session. We would like to thank everyone for their participation in today's conference. You may disconnect your line to log off the webcast at this time and enjoy the rest of your day.

Speaker Change: Thank you ladies and gentlemen, this brings us to the end of the question and answer session I would like to thank everyone for their participation in today's conference. You may disconnect. Your lines of log off the webcast at this time and enjoy the rest of your day.

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