Q3 2024 Maximus Inc Earnings Call

August 8, 2024

Jessica Batt: And thanks for joining us. With me today are 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.

Operator: And thanks for joining us.

Jessica Batt: With me today is Bruce Caswell, President and CEO; David Mutryn, CFO; and James Francis, Vice President of Investor Relations.

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.

David Mutryn: 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. 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.

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.

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: 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, engaging the quality of our financial performance, identifying trends, and providing meaningful period-to-period comparison.

David Mutryn: 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.

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.

David: 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.

Jessica Batt: And with that, I'll hand the call over to David.

Yeah.

David Mutryn: Thanks, Jessica, and good morning. Our exceptional third quarter results demonstrate our ability to capitalize on volume growth against the backdrop of strong demand in our programs across the board. We are very pleased to raise guidance for the third consecutive quarter. I'll walk you through our thinking for the last quarter of this year, and then I'll share some early color on next fiscal year. Turning to quarterly results, Maximus reported revenue of $1.31 billion for the third quarter of fiscal year 2024, which represents 10.6% year-over-year growth or 11.2% on an organic basis.

David: Thanks, Jessica and good morning, our exceptional third quarter results demonstrate our ability to capitalize on volume growth against the backdrop of strong demand in our programs across the board. We are very pleased to raise guidance for the third consecutive quarter.

David Mutryn: I'll walk you through our thinking for the last quarter of this year, and then I'll share some early color on next fiscal year. Turning to quarterly results, Maximus reported revenue of $1.31 billion for the third quarter of fiscal year 2024, which represents 10.6% year-over-year growth, or 11.2% on an organic basis. All three segments posted organic growth, with our largest U.S. Federal services being the primary driver in the quarter. Adjusted operating income margin was 12.6%, and adjusted EPS was $1.74 for the quarter, which compares to 6.9% and 78%, respectively, for the prior year period.

Speaker Change: I'll walk you through our thinking for the last quarter of this year and then I'll share. Some early color on next fiscal year.

David Mutryn: All three segments posted organic growth, with our largest, U.S. Federal Services, being the primary driver in the quarter. Adjusted Operating Income Margin was 12.6%, and Adjusted EPS was $1.74 for the quarter, which compares to 6.9% and $0.78, respectively, for the prior year period. Results are best explained at the segment level, so let's go there.

Speaker Change: Turning to quarterly results Maximus reported revenue of $1.31 billion for the third quarter of fiscal year, 'twenty, 'twenty, four which represents 10.6% year over year growth or 11.2% on an organic basis, all three segments posted organic growth with our large.

Speaker Change: Just U S federal services being the primary driver in the quarter.

Speaker Change: Adjusted operating income margin was 12.6% and adjusted EPS was $1.74 for the quarter, which compares to six 9% and 78 cents respectively for the prior year period.

David Mutryn: Results are best explained at the segment level, so let's go there. For the U.S. Federal services segment, revenue increased 17.0% to $683 million, which was all organic and driven predominantly by volume growth on expanded clinical programs. The operating income margin for U.S. Federal services in the third quarter was 15.5% as compared to 12.7% in the prior year period. These results reflect our focus on solid execution in a period of high demand, particularly in the assessment space. The higher margin also reflects a temporarily favorable mix of lower cost-plus revenue and higher performance-based revenue. For the U.S.

Speaker Change: Results are best explained at the segment level. So let's go there.

David Mutryn: For the U.S. Federal Services Segment, revenue increased 17.0% to $683 million, which was all organic and driven predominantly by volume growth on expanded clinical programs. The operating income margin for U.S. Federal Services in the third quarter was 15.5%, as compared to 12.7% in the prior year period. These results reflect our focus on solid execution in a period of high demand, particularly in the assessment space.

Speaker Change: For the U S. Federal services segment revenue increased 17.0% to $683 million, which was all organic and driven predominantly by volume growth on expanded clinical program.

Speaker Change: The operating income margin for U S. Federal services in the third quarter was 15.5% as compared to 12.7% in the prior year period. These results reflect our focus on solid execution in a period of high demand, particularly in the assessment space the <unk>.

David Mutryn: The higher margin also reflects a temporarily favorable mix of lower cost-plus revenue and higher performance-based revenue. For the U.S. services segment, revenue increased 5.2% to $472 million. This growth, all organic, was due to strong performance across the Medicaid-related portfolio, a portion of which were excess volumes from the now-completed unwinding exercise. The operating income margin for the third quarter was 13.0%, and this compares to 10.5% for the prior year period. As expected, there was a slight normalization in the segment margin versus last quarter's 14%. However, this quarter still contains some temporary overperformance. Nevertheless, there is a demonstrated good state of health among the large base of programs across this segment.

Speaker Change: Margin also reflects a temporarily favorable mix of lower cost plus revenue and higher performance based revenue.

David Mutryn: Turning to the Outside the U.S. segment, revenue increased 2.3 percent year-over-year to $159 million for the quarter. Organic growth was 6.8 percent and was driven primarily by the U.K. and its diversified base of business today, with the effect of divested businesses partially offsetting the organic growth. The segment realized a small operating loss of $1.4 million compared to $15.2 million in the prior year period, reflecting reduced volatility in the employment services portfolio.

Speaker Change: For the U S services segment revenue increased five 2% to $472 million. This growth all organic was due to strong performance across the Medicaid related portfolio, a portion of which were excess volumes from the now completed unwinding exercise.

David Mutryn: services segment, revenue increased 5.2% to $472 million. This growth, all organic, was due to strong performance across the Medicaid-related portfolio, a portion of which were excess volumes from the now-completed unwinding exercise. The operating income margin for the third quarter was 13.0% and compares to 10.5% for the prior year period. As expected, there was a slight normalization in the segment margin versus last quarter's 14%. So this quarter still contained some temporary overperformance.

Speaker Change: The operating income margin for the third quarter was 13.0% and compares to 10.5% for the prior year period as expected there was a slight normalization in the segment margin versus last quarter's 14% this quarter still contained some temporary over performance.

David Mutryn: Nevertheless, there is a demonstrated good state of health in the large base of programs across this segment.

Speaker Change: Nevertheless, there is a demonstrated good state of health and a large base of programs across this segment.

David Mutryn: Turning to the outside of the U.S. segment, revenue increased 2.3% year-over-year to $159 million for the quarter. Organic growth was 6.8% and driven primarily by the UK and its diversified base of business today, with the effect of divested businesses partially offsetting the organic growth. The segment realized a small operating loss of $1.4 million compared to the $15.2 million in the prior year period, reflecting the reduced volatility to the employment services portfolio. The small loss this quarter was contemplated in our full-year outlook for fiscal 2024, in which we expect to land slightly above break even.

Speaker Change: Turning to the outside the U S segment revenue increased two 3% year over year to $159 million for the quarter organic growth was six 8% and driven primarily by the U K and it's diversified base of business today with the effect of divested businesses, partially offsetting the.

Speaker Change: That growth.

Speaker Change: The segment realized a small operating loss of $1.4 million compared to the $15 $2 million in the prior year period, reflecting the reduced volatility to the employment services portfolio.

David Mutryn: The small loss this quarter was contemplated in our full-year outlook for fiscal 2024, which we expect to land slightly above breakeven. With one quarter left, we remain confident in our ability to continue shaping this segment within this fiscal year, and I'll touch on that more in the guidance discussion. Let's now turn to cash flow and balance sheet items. Cash provided by Operating Activities for the third quarter of this year was $199,000,000, and free cash flow was $165,000,000. DSOs finished the quarter at 59 days.

Speaker Change: The small loss this quarter was contemplated in our full year outlook for fiscal 'twenty, 'twenty, four and which we expect to land slightly above breakeven.

David Mutryn: With one quarter left, we remain confident in our ability to continue shaping this segment within this fiscal year, and I'll touch on that more in the guidance discussion.

Speaker Change: With one quarter left we remain confident in our ability to continue shaping this segment within this fiscal year and I'll touch on that more in the guidance discussion.

David Mutryn: Let's now turn to cashflow and balance sheet items. Cash provided by operating activities for the third quarter of this year was $199 million, and free cashflow was $165 million. DSOs finished the quarter at 59 days. During the quarter, we amended our credit agreement and extended the maturity dates. The terms are broadly similar to our prior agreement and provide us capacity and flexibility to execute on our capital allocation priorities in the coming years. More details, along with the credit agreement itself, are available in the form 8-K we filed in early June. We ended the third quarter with total debt of $1.16 billion, and our net debt to EBITDA ratio improved further from 1.7 last quarter to 1.5 times this quarter.

Speaker Change: Let's now turn to cash flow and balance sheet items cash provided by operating activities for the third quarter of this year with $199 million and free cash flow was $165 million D.

Speaker Change: Dsos finished the quarter at 59 days.

David Mutryn: During the quarter, we amended our credit agreement and extended the maturity date. The terms are broadly similar to our prior agreement and provide us with capacity and flexibility to execute on our capital allocation priorities in the coming year. More details, along with the credit agreement itself, are available in the Form 8K we filed in early June.

Speaker Change: During the quarter, we amended our credit agreement and extended the maturity dates.

Speaker Change: The terms are broadly similar to our prior agreement and provide us the capacity and flexibility to execute on our capital allocation priorities in the coming years more.

Speaker Change: More details along with the credit agreement itself are available in our form 8-K, we filed in early June.

David Mutryn: We ended the third quarter with total debt of $1.16 billion, and our net debt to EBITDA ratio improved further from 1.7 last quarter to 1.5 times this quarter. 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. On our call in November 2023, I noted that, absent M&A, we should be able to delever to 1.5 times by the end of fiscal year 24. We are pleased to have done so one quarter early.

Speaker Change: We ended the third quarter with total debt of $1.16 billion and our net debt to EBITDA ratio improved further from 1.7 last quarter to 1.5 times this quarter.

David Mutryn: As a reminder, this ratio is our debt net of a loud cash to adjusted EBITDA for the last 12 months as calculated in accordance with our credit agreement. On our call in November 2023, I noted that absent M&A, we should be able to deliver to 1.5 times by the end of fiscal year 24. We are pleased to have done so one quarter early. Under our opportunistic share repurchase program, we repurchased 611,000 shares totaling $50.6 million in the third quarter. This works out to an average price of just under $83 per share. In July, subsequent to quarter end, we repurchased an additional 250,000 shares totaling $21.2 million.

Speaker Change: 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.

Speaker Change: On our call in November 2023 I noted that absent M&A, we should be able to delever to 1.5 times by the end of fiscal year 'twenty four we.

Speaker Change: We're pleased to have done so one quarter early.

David Mutryn: Under our Opportunistic Share Repurchase Program, we repurchased 611,000 shares, totaling $50.6 million, in the third quarter. This works out to an average price of just under $83 per share. In July, subsequent to quarter end, we repurchased an additional 250,000 shares, totaling $21.2 million.

Speaker Change: Under our opportunistic share repurchase program, we repurchased 611000 shares totaling $50.6 million in the third quarter. This works out to an average price of just under $83 per share.

Speaker Change: In July subsequent to quarter end, we repurchased an additional 250000 shares totaling $21.2 million.

David Mutryn: Finally, let me summarize our current capital deployment syncing. While we are currently below our long-term target debt ratio of 2-3 times, we are comfortable continuing to pay down debt in the near term to build capacity for M&A opportunities. Acquisitions that enable a platform for accelerated future organic growth remain our preferred use of capital.

David Mutryn: Finally, let me summarize our current capital deployment thinking. While we are currently below our long-term target debt ratio of 2 to 3 times, we are comfortable continuing to pay down debt in the near term to build capacity for M&A opportunities. Acquisitions that enable a platform for accelerated future organic growth remain our preferred use of capital. Meanwhile, we will maintain an opportunistic share repurchase program and pay a dividend that increases with earnings over time.

Speaker Change: Finally, let me summarize our current capital deployment thinking while we are currently below our long term target debt ratio of two to three times, we're comfortable continuing to pay down debt in the near term to build capacity for M&A opportunities acquisitions that enable a platform for accelerated future organic growth.

Speaker Change: Our main our preferred use of capital. Meanwhile, we will maintain an opportunistic share repurchase program and pay a dividend that increases with earnings over time.

David Mutryn: Eddle. Meanwhile, we will maintain an opportunistic share repurchase program and pay a dividend that increases with earnings over time.

David Mutryn: Moving to guidance for the rest of this year, our extraordinary third-quarter results and continued business momentum enable us to raise guidance for the third time on both the top and bottom lines. Revenue is now expected to be between $5.25 billion and $5.35 billion, which is up $100 million at the midpoint compared to the previous guidance and up $175 million from our initial guidance in November. Adjusted operating income is estimated to be between $570 and $590 million, which is an increase of $30 million from prior guidance and about $80 million from initial guidance in November using the Mid-Budget.

David Mutryn: Moving to guidance for the rest of this year, our extraordinary third quarter results and continued business momentum enable us to raise guidance for the third time on both the top and bottom line. Revenue is now expected to be between $5.25 billion and $5.35 billion, which is up $100 million at the midpoint compared to the previous guide, and up $175 million from our initial guidance in November. Adjusted operating income is estimated to be between $570 and $590 million, which is an increase of $30 million from prior guidance and about $80 million from initial guidance in November using the midpoint.

Speaker Change: Moving to guidance for the rest of this year, our extraordinary third quarter results and continued business momentum enabled us to raise guidance for the third time on both the top and bottom line.

Speaker Change: Revenue is now expected to be between 5.25 billion and $5.35 billion, which is up $100 million at the midpoint compared to the previous guide and up $175 million from our initial guidance in November.

Speaker Change: Adjusted operating income is estimated to be between 570 and $590 million, which is an increase of $30 million from prior guidance and about $80 million from initial guidance in November using the midpoint.

David Mutryn: Adjusted EPS, excluding intangible standardization and divestiture-related charges, is now projected to be between $6 and $6.20 per share. This reflects a 35 cent raise from prior guidance and up $0.90 from our initial guidance in November. As a result of the improved earnings forecast, we are raising free cash flow guidance to between $350 and $380 million for fiscal 2024. This is an increase of $15 million at the midpoints and also reflects higher cap-backs during the remainder of the year. The improved outlook implies organic growth of about 9 percent and an adjusted OI margin of approximately 11 percent on a full-year basis.

David Mutryn: Adjusted EPS, excluding intangibles amortization and divestiture-related charges, is now projected to be between $6.00 and $6.20 per share. This reflects a $0.35 raise from prior guidance and up $0.90 from our initial guidance in November. As a result of the improved earnings forecast, we are raising free cash flow guidance to between $350 and $380 million for fiscal 2024. This is an increase of $15 million at the midpoints and also reflects higher CapEx during the remainder of the year.

Speaker Change: Adjusted EPS, excluding intangibles amortization and divestiture related charges is now projected to be between $6 and $6 20 per share.

Speaker Change: This reflects a 35 cent raise from prior guidance and up 90 cents from our initial guidance in November.

Speaker Change: As a result of the improved earnings forecast, we are raising free cash flow guidance to between 350 and $380 million for fiscal 'twenty 'twenty. Four this is an increase of $15 million at the midpoint and also reflects higher capex during the remainder of the year.

David Mutryn: The improved outlook implies organic growth of about 9% and an adjusted OI margin of approximately 11% on a full-year basis. Also implied in the new guidance is a fourth quarter that looks more balanced and representative of the typical profile of the business, especially as compared to the extraordinary results this third quarter. The U.S. federal segment is expected to deliver an adjusted OI margin of around 12.5% on a full-year basis for fiscal 2024, which is also the expectation for the fourth quarter.

Speaker Change: The improved outlook implies organic growth of about 9% and an adjusted Oi margin of approximately 11% on a full year basis.

David Mutryn: Also implied in the new guidance is a fourth quarter that looks more balanced and representative of the typical profile of the business, especially as compared to the extraordinary results this third quarter. The U.S. Federal segment is expected to deliver adjusted OI margin of around 12.5 percent on a full-year basis for fiscal 2024, which is also the expectation for the fourth quarter. Our view on the U.S. services segment is tracking in line with prior expectations. We still anticipate a segment margin of approximately 13 percent on a full-year basis, meaning the fourth quarter should be in the 11 to 12 percent range, reflecting the completion of extra Medicaid-related activities and overperformance in the segment in early quarters.

Speaker Change: Also implied in the new guidance is the fourth quarter that looks more balanced and representative of the typical profile of the business, especially as compared to the extraordinary results. This third quarter.

Speaker Change: The U S. Federal segment is expected to deliver adjusted Oi margin of around 12.5% on a full year basis for fiscal 'twenty 'twenty four which is also the expectation for the fourth quarter.

David Mutryn: Our view on the U.S. services segment is tracking in line with prior expectations. We still anticipate a segment margin of approximately 13 percent on a full-year basis, meaning the fourth quarter should be in the 11 to 12 percent range, reflecting the completion of extra Medicaid-related activities and overperformance in the segment in early quarters. In the Outside the U.S. segment, we still expect shaping efforts to occur this fiscal year and anticipate a slightly smaller footprint once completed.

Speaker Change: Our view on the U S services segment is tracking in line with prior expectations. We still anticipate the segment margin of approximately 13% on a full year basis, meaning the fourth quarter should be in the 11% to 12% range, reflecting the completion of extra Medicaid related activities and over performance in this segment in <unk>.

Speaker Change: Quarters.

David Mutryn: In the outside U.S. segment, we still expect shaping efforts to occur this fiscal year and anticipate a slightly smaller footprint once completed. While not built into current guidance, we anticipate that such a transaction would result in divestiture-related charges that would not impact our adjusted operating income. Meanwhile, we expect the segment to finish slightly above break even for fiscal year 2024.

Speaker Change: And the outside the U S segment, we still expect shaping efforts to occur this fiscal year and anticipate a slightly smaller footprint once completed while not built into current guidance. We anticipate that such a transaction would result in divestiture related charges that would not impact our adjusted operating income.

David Mutryn: While not built into current guidance, we anticipate that such a transaction would result in divestiture-related charges that would not impact our adjusted operating income. Meanwhile, we expect the segment to finish slightly above breakeven for fiscal year 2024. Rounding out a few other assumptions for fiscal 2024 would be interest expense of approximately $80 million and intangible amortization expense of approximately $90 million. I'll close by providing some early thoughts on next fiscal year and this precedes official fiscal 2025 guidance that we will provide on the year-end call in November.

Speaker Change: Meanwhile, we expect this segment to finished slightly above breakeven for fiscal year 'twenty 'twenty four.

David Mutryn: Rounding out a few other assumptions for fiscal 2024 would be interest expense of approximately $80 million and intangible zammerization expense of approximately $90 million.

Speaker Change: Rounding out a few other assumptions for fiscal 'twenty 'twenty four would be interest expense of approximately $80 million and intangibles amortization expense of approximately $90 million.

David Mutryn: I'll close by providing some early thoughts on next fiscal year, and this proceeds official fiscal 2025 guidance that we will provide on the year-end call in November. We always represent Maximus as a business that should grow organically in the mid-single digits over the longer term. The last two fiscal years have outpaced that with 7 percent in fiscal 23 and 9 percent at the midpoint of our fiscal 24 guidance.

Speaker Change: I'll close by providing some early thoughts on next fiscal year and this proceeds official fiscal 'twenty 25 guidance that we will provide on the year end call in November.

David Mutryn: We always represent Maximus as a business that should grow organically in the mid-single digits over the longer term. However, the last two fiscal years have outpaced that, with 7% in fiscal 23 and 9% at the midpoint of our fiscal 24 guidance. Three consecutive quarterly earnings beats and guidance raises, two of which also increased revenue in a given fiscal year, is atypical for us. Bearing in mind this significant overperformance, our early view is that fiscal 2025 revenue may look roughly similar to the new guidance for this year. This year has benefited from exceptionally strong volumes across many existing programs, some of which, as we have previously said, are likely to moderate, most notably those associated with redetermination.

Speaker Change: We always represent Maximus is a business that should grow organically in the mid single digits over the longer term. The last two fiscal years have outpaced that with 7% in fiscal 'twenty, three and 9% at the midpoint of our fiscal 'twenty four guidance.

David Mutryn: 3 consecutive quarterly earnings, beats, and guidance raises, 2 of which also increased revenue in a given fiscal year, is atypical for us. Baring in mind this significant overperformance, our early view is that fiscal 2025 revenue may look roughly similar to the new guidance for this year. This year has benefited from exceptionally strong volumes across many existing programs, some of which, as we have previously said, are likely to moderate, most notably those associated with redeterminations. A simple way to normalize fiscal 2024 would be to assume more than half of the total $175 million guidance raise on revenue across this year, which has been quite accretive, is attributable to overperformance that is not necessarily expected to recur next year.

Speaker Change: Three consecutive quarterly earnings beats in guidance raises two of which also increased revenue in a given fiscal year is atypical for us.

Speaker Change: Bearing in mind the significant over performance. Our early view is that fiscal 'twenty twenty-five revenue may look roughly similar to the new guidance for this year.

Speaker Change: This year has benefited from exceptionally strong volumes across many existing programs some of which as we have previously said are likely to moderate most notably those associated with Redetermination.

Bruce Caswell: A simple way to normalize fiscal 2024 would be to assume more than half of the total $175 million guidance raise on revenue across this year, which has been quite accretive, is attributable to overperformance that is not necessarily expected to recur next year. Then, off that normalized base, we anticipate organic growth that will roughly replace the revenue falling off. From a bottom-line standpoint, the business continues to demonstrate stability and strength. However, it recognizes that the moderation of non-recurring revenue has an EPS growth and margin impact.

Speaker Change: A simple way to normalized fiscal 'twenty 'twenty four would be to assume more than half of the total 175 million dollar guidance raise on revenue across this year, which has been quite accretive is attributable to over performance that is not necessarily expected to recur next year.

David Mutryn: Then, off that normalized base, we anticipate organic growth that will roughly replace the revenue falling off. From a bottom line standpoint, the business continues to demonstrate stability and strength, recognizing, however, that the moderation of the non-recurring revenue has an EPS growth and margin impact. There has been a total increase to guidance of about 90 cents per share across this year. Similar to revenue, a sizable portion of that would be attributable to overperformance that we don't expect to recur next year. However, we are confident that we could at least partially, or perhaps entirely, cover the earnings impact through continued performance optimization outside the U.S.

Speaker Change: Then off that normalized base, we anticipate organic growth that will roughly replace the revenue falling off.

Speaker Change: From a bottom line standpoint, the business continues to demonstrate stability and strength.

Speaker Change: Recognizing however that the moderation of the nonrecurring revenue has an E P S growth and margin impact.

Bruce Caswell: There has been a total increase to guidance of about $0.90 per share for this year. Similar to revenue, a sizable portion of that would be attributable to overperformance that we don't expect to recur next year. However, we are confident that we could at least partially, or perhaps entirely, cover the earnings impact through continued performance optimization, outside-the-U.S. improvement, and lower interest expense. We're pleased to be tracking to our 10-14% long-term adjusted OI margin range, and while the 11% implied margin in our fiscal 2024 guidance is bolstered by the non-recurring work, we anticipate achieving at least 10% next year.

Speaker Change: There has been a total increase to guidance of about 90 cents per share across this year.

Speaker Change: Similar to revenue a sizable portion of that would be attributable to over performance that we don't expect to recur next year. However, we are confident that we could at least partially or perhaps entirely cover the earnings impact through continued performance optimization outside the U S improvement.

David Mutryn: improvement and lower interest expense. We're pleased to be tracking to our 10 to 14 percent long-term adjusted OI margin range, and while the 11 percent implied margin in our fiscal 2024 guidance is bolstered by the non-recurring work, we anticipate achieving at least 10 percent next year. Also of note, fiscal 2024 CAPX included a number of sizable investments in capitalized software. We expect CAPX to return to a more typical range of 1 to 1.5 percent of revenue for next year, which would enhance free cash flow.

Speaker Change: And lower interest expense.

Speaker Change: We're pleased to be tracking to our 10% to 14% long term adjusted Oi margin range and while the 11% implied margin in our fiscal 'twenty 'twenty four guidance is bolstered by the nonrecurring work, we anticipate achieving at least 10% next year.

Bruce Caswell: Also of note, Fiscal 2024 CapEx included a number of sizable investments in capitalized software. We expect CapEx to return to a more typical range of 1 to 1.5% of revenue for next year, which would enhance free cash flow. Again, this represents our early view, and we plan to provide formal guidance in November as usual. To conclude, we are very pleased with the operational and financial performance that the broader Maximus team has delivered in service to our customers and in many areas of national importance. We remain focused on driving shareholder value with sustainable mid-single-digit organic growth over the long term and disciplined capital allocation. With that, I'll hand the call over to Bruce.

Speaker Change: Also of note fiscal 'twenty 'twenty four capex included a number of sizeable investments in capitalized software we.

Speaker Change: We expect Capex to return to a more typical range of 1% to 1.5% of revenue for next year, which would enhance free cash flow.

David Mutryn: Again, this represents our early view, and we plan to provide formal guidance in November, as usual.

Speaker Change: Again this represents our early view and we plan to provide formal guidance in November as usual to.

David Mutryn: To conclude, we are very pleased with the operational and financial performance that the broader Maximus team has delivered in service to our customers and in many areas of national importance. We remain focused on driving shareholder value with sustainable mid-single digit organic growth over the long term and disciplined capital allocation.

Speaker Change: To conclude we are very pleased with the operational and financial performance that the broader Maximus team has delivered in service to our customers and in many areas of national importance. We remain focused on driving shareholder value with sustainable mid single digit organic growth over the long term and disciplined capital.

Speaker Change: <unk> with that I'll hand, the call over to Bruce.

Bruce Caswell: With that, I'll hand the call over to Bruce.

Bruce Caswell: Thanks, David, and good morning. We are pleased to have delivered another solid quarter, contributing to what we expect will be a strong fiscal year. High quality and efficient delivery of higher than expected volumes across the business reflect the benefits of our business model, enabling the positive financial results David has shared today.

Bruce: Thanks, David and good morning, we're pleased to have delivered another solid quarter contributing to what we expect will be a strong fiscal year high quality and efficient delivery of higher than expected volumes across the business reflect the benefits of our business model, enabling the positive financial results David is shared today.

Bruce Caswell: We continue to focus on executing the strategy outlined in our 2022 Investor Day. Recent awards demonstrate our continued delivery within our three strategic areas: future of health, technology modernization, and customer services digitally enabled. to that end.

Speaker Change: We continue to focus on executing the strategy outlined in our 2022 Investor Day recent awards demonstrate our continued delivery within our three strategic areas future of health technology modernization and customer services digitally enabled.

Bruce Caswell: Recent awards demonstrate our continued delivery within our three strategic areas, the future of health, technology modernization, and customer services digitally enabled. To that end, I'd like to share a few refined areas of focus we're excited about. Let's begin with recent wins.

Speaker Change: To that end I'd like to share a few refined areas of focus we're excited about let's begin with recent wins we.

Bruce Caswell: I'd like to share a few refined areas of focus we're excited about. Let's begin with recent wins. We recently announced the award of our first task order under the IRS Enterprise Development Operations Services or EDOS Blanket Purchase Agreement or BPA. Under the task order, our teams will support the IRS Internal Management Division by designing and developing all functional and technical enhancements for the agency's internal operations and accounting program. Value to $87 million over a five-year period, the award is evidence of our commitment to expanding our technology modernization services. We first announced our inclusion on the BPA last fiscal year, and are pleased to be selected for one of the first few task orders awarded.

Bruce Caswell: We recently announced the award of our first task order under the IRS Enterprise Development Operations Services, or EDOS, Blanket Purchase Agreement, or BPA. Under the task order, our teams will support the IRS Internal Management Division by designing and developing all functional and technical enhancements for the agency's internal operations and accounting program. Valued at $87 million over a five-year period, the award is evidence of our commitment to expanding our technology modernization services. We first announced our inclusion in the BPA last fiscal year and are pleased to have been selected for one of the first few task orders awarded.

Speaker Change: We recently announced the award of our first task order under the I R. S Enterprise development operation services or eat us blanket purchase agreement or PPA under the task order our teams will support the I R. S internal management division by designing and developing all functional and technical enhancements for the agency's internal operations.

Speaker Change: And accounting program Val.

Speaker Change: All you'd at $87 million over a five year period. The award is evidence of our commitment to expanding our technology modernization services.

Speaker Change: We first announced our inclusion on the BPA last fiscal year and are pleased to be selected for one of the first few task orders awarded the IRS has been a valuable client for several decades and we are thrilled to have the opportunity to continue our strong collaborative relationship while supporting the agencies modernization mission.

Bruce Caswell: The IRS has been a valuable client for several decades, and we are thrilled to have the opportunity to continue our strong, collaborative relationship while supporting the agency's modernization mission. Earlier this year, we were successful in winning new work with the Transportation Security Administration for Operations, Technology, Innovation, and Management, or TSA Optima for short, with an approximate total contract value of $171 million over six years. As has been reported in the trade press, an initial protest by the incumbent was resolved in our favor. A second protest was subsequently filed, and is pending.

Bruce Caswell: The IRS has been a valuable client for several decades, and we are thrilled to have the opportunity to continue our strong collaborative relationship while supporting the agency's modernization mission. Earlier this year, we were successful in winning new work with the Transportation Security Administration for Operations, Technology, Innovation, and Management, or TSA Optima for short, with an approximate total contract value of $171 million over six years. As has been reported in the trade press, an initial protest by the incumbent was resolved in our favor. A second protest was subsequently filed and is pending. While awaiting resolution, our teams remain excited to support the TSA in its mission.

Speaker Change: Earlier this year, we were successful in winning new work with the transportation Security administration for operations technology innovation and management or TSA Optima for short.

Speaker Change: Within approximate total contract value of $171 million over six years.

Speaker Change: As has been reported in the trade press and initial protest by the incumbent was resolved in our favor a second protest was subsequently filed and is pending.

Bruce Caswell: While awaiting resolution, our teams remain excited to support the TSA in its mission. This award recognizes our high technical qualifications and illustrates the value proposition we often discuss in acquisition rationale, which is revenue synergy. Here, the value stems from our 2021 acquisition of the Attain Federal Business. Attain held the best technical qualifications to deliver the work, while Maximus was party to the relevant contract vehicle.

Speaker Change: [noise] awaiting resolution our teams remain excited to support the TSA in its mission.

Bruce Caswell: This award recognizes our high technical qualifications and illustrates the value proposition we often discuss on acquisition rationale, which is revenue synergies. Here, the value stems from our 2021 acquisition of the attained federal business. Attain held the best technical qualifications to deliver the work, while Maximus was party to the relevant contract vehicle. Our combined teams leveraged the legacy strengths of each company in our proposal, and we were successful in securing another strategic win to best serve the needs of the TSA.

Speaker Change: This award recognizes our high technical qualifications and illustrates the value proposition, we often discuss on acquisition rationale which is revenue synergies.

Speaker Change: Here the value stems from our 2021 acquisition of the attained federal business attain held the best technical qualifications to deliver the work while Maximus was party to the relevant contract vehicle. Our combined teams leveraged the legacy strengths of each company and our proposal and we were successful in securing another strategic win to best serve the needs of the team.

Bruce Caswell: Our combined teams leveraged the legacy strengths of each company in our proposal, and we were successful in securing another strategic win to best serve the needs of the TSA. In our U.S. Services segment, we were recently awarded the renewal of our Independent Enrollment Broker contract in the Commonwealth of Pennsylvania. Under the new contract, valued at $263 million over 5 years, we'll deliver additional new scope that supports our customer services digitally enabled area of focus by supporting our contact center agents with technologies that should increase efficiencies in the enrollment process, providing a better experience for the consumer.

Speaker Change: S a.

Bruce Caswell: In our U.S. services segment, we were recently awarded the Revit of our independent enrollment broker contract in the Commonwealth of Pennsylvania. Under the new contract, valued at $263 million over five years, we'll deliver additional new scope that supports our customer services digitally enabled area of focus by supporting our contact center agents with technologies that should increase efficiencies in the enrollment process, providing a better experience for the consumer.

Speaker Change: In our U S services segment, we were recently awarded the rebid of our independent enrollment broker contract in the Commonwealth of Pennsylvania.

Speaker Change: Under the new contract valued at $263 million over five years will deliver additional new scope that supports our customer services digitally enabled area of focus by supporting our contact center agents with technologies that should increase efficiencies in the enrollment process, providing a better experience for the consumer.

Bruce Caswell: Finally, to close the discussion on recent wins, I'm excited to announce a new seasonal contract with the Federal Emergency Management Agency, or FEMA, where we have a long history of staffing up quickly to support urgent needs of individuals around the country impacted by disasters. Under this contract, which has a total of nearly 700 skilled agents will be answering calls and accepting applications from those impacted by recently declared federal disasters, with a focus on supporting those affected by Hurricane Barrel and Texas.

Bruce Caswell: Finally, to close the discussion on recent wins, I am excited to announce a new seasonal contract with the Federal Emergency Management Agency, or FEMA, where we have a long history of staffing up quickly to support urgent needs of individuals around the country impacted by disasters. Under this contract, which has a total potential value of $75 million, our team of nearly 700 skilled agents will be answering calls and accepting applications from those impacted by a recently declared federal disaster, with a focus on supporting those affected by Hurricane Beryl in Texas.

Speaker Change: Finally to close the discussion on recent wins I'm excited to announce a new seasonal contract with the federal Emergency management agency or FEMA, where we have a long history of staffing up quickly to support urgent needs of individuals around the country impacted by disasters.

Speaker Change: Under this contract, which has a total potential value of $75 million. Our team of nearly 700 skilled agents will be answering calls and accepting applications from those impacted by recently declared federal disasters with a focus on supporting those affected by hurricane barrel in Texas at.

Bruce Caswell: At a time when so many companies, Maximus included, are considering the potential impact of artificial intelligence in our operations, our work with FEMA is a general reminder that, at the end of the day, connecting with a live agent to get the urgent and empathetic support needed is a priority of our government.

Speaker Change: At a time when so many companies Maximus included are considering the potential impact of artificial intelligence in our operations. Our work with FEMA is a gentle reminder, that at the end of the day connecting with a live agent to get the urgent and empathetic support needed is a priority of our government customers.

Bruce Caswell: We continue to be excited about the technology solutions we're developing and deploying under the leadership of our Chief Digital and Information Officer, Derek Pledger. Last quarter, I mentioned our total experience management solution, or TXM. At Maximus, we take pride in our history of implementing complex public policy with efficient technology-based solutions. The contact center as a service or CCAS capability that TXM provides will be an added differentiator for Maximus as governments seek single providers to deliver secure, scalable, cloud-based solutions to serve employees and citizens. We are pleased with our growing pipeline of TXM opportunities in our Federal Services segment.

Bruce Caswell: We continue to be excited about the technology solutions we're developing and deploying under the leadership of our Chief Digital and Information Officer, Derek Pledger. Last quarter, I mentioned our Total Experience Management Solution, or TXM. At Maximus, we take pride in our history of implementing complex public policy with efficient technology-based solutions. The Contact Center as a Service, or CCAS, capability that TXM provides will be an added differentiator for Maximus as governments seek single providers to deliver secure, scalable, cloud-based solutions to serve employees and citizens.

Speaker Change: We continue to be excited about the technology solutions, we're developing and deploying under the leadership of our chief digital and information Officer Derek pleasure.

Speaker Change: Last quarter I mentioned, our total experience management solution or T X M.

Speaker Change: At Maximus, we take pride in our history of implementing complex public policy with efficient technology based solutions. The contact center as a service or see Cas capability that T. X M provides will be an added differentiator for maximus as governments seek single providers to deliver secure scalable cloud based solutions to <unk>.

Speaker Change: Served employees and citizens. We are pleased with our growing pipeline of T X M opportunities in our federal services segment.

Bruce Caswell: We are pleased with our growing pipeline of TXM opportunities in our federal services. We're also encouraged about the growing transition to modular solutions supporting the delivery of state Medicaid programs, an area we term Medicaid Enterprise Systems, or MES, in our U.S. services segment. Guided by CMS's Medicaid Information Technology Architecture, or MIDA, our MES solutions support the goal of best-in-class technology for specific Medicaid functions, reducing implementation risk and program disruptions while providing greater configurability.

Bruce Caswell: We are also encouraged about the growing transition to modular solutions supporting the delivery of state Medicaid programs, in the area we term Medicaid Enterprise Systems, or MES, in our U.S. Services segment. Guided by CMS's Medicaid Information Technology Architecture, or MITA, our MES solutions support the goal of best-in-class technology for specific Medicaid functions, reducing implementation risk and program disruptions while providing greater configurability. With the deep understanding of Medicaid systems and policy, we are well positioned to support our state clients as they make this transition. The industry move to MES further validates our strategic areas of both technology modernization and customer services digitally enabled.

Speaker Change: We're also encouraged about the growing transition to modular solutions supporting the delivery of state Medicaid programs in area, we term Medicaid enterprise systems or Mes in our U S services segment.

Speaker Change: Guided by CMS as Medicaid information technology architecture, or Mitre, our Mes solutions support the goal of best in class technology for specific Medicaid functions, reducing implementation risk and program disruptions, while providing greater configure ability.

Bruce Caswell: With a deep understanding of Medicaid systems and policy, we are well positioned to support our state clients as they make this transition. The industry move to MES further validates our strategic areas of both technology modernization and customer services digitally enabled. We expect this to be a positive contributor over the coming year. In the context of our future of health strategic pillar, we're pleased to see states acknowledging the benefits of bringing together assessment programs that have been historically disparate.

Speaker Change: With a deep understanding of Medicaid systems and policy, we are well positioned to support our state clients as they make this transition.

Speaker Change: The industry moved to Mes further validates our strategic areas of both technology modernization and customer services digitally enabled.

Bruce Caswell: We expect this to be a positive contributor over the coming years.

Speaker Change: We expect this to be a positive contributor over the coming years.

Bruce Caswell: In the context of our Future of Health strategic pillar, we are pleased to see states acknowledging the benefits of bringing together assessment programs that have been historically disparate. We are working closely with our customers to consolidate assessment programs with the goal of a far better experience for the consumer and increased quality and efficiency for the state. We anticipate that much of our ongoing opportunity shaping will have top and bottom line impact in the medium term.

Speaker Change: In the context of our future of health strategic pillar, we're pleased to see states acknowledging the benefits of bringing together assessment programs that had been historically disparate.

Bruce Caswell: We're working closely with our customers to consolidate assessment programs with the goal of a far better experience for the consumer and increased quality and efficiency for the state. We anticipate that much of our ongoing opportunity shaping will have top and bottom line impact in the medium term. Finally, in the U.S. services segment, we're seeing a greater number of states interested in establishing their own state-based exchanges.

Speaker Change: We're working closely with our customers to consolidate assessment programs with the goal of a far better experience for the consumer and increased quality and efficiency for the state we.

Speaker Change: We anticipate that much of our ongoing opportunity shaping we'll have top and bottom line impact in the medium term.

Bruce Caswell: Finally, in the U.S. Services segment, we are seeing a greater number of states interested in establishing their own state-based exchanges. Given the timing and complexity of moving from the federal marketplace, we expect this pipeline dynamic will also contribute in the medium term.

Speaker Change: Finally in the U S services segment, we're seeing a greater number of states interested in establishing their own state based exchanges, given the timing and complexity of moving from the federal marketplace. We expect this pipeline dynamic will also contribute in the medium term.

Bruce Caswell: Given the timing and complexity of moving from the federal marketplace, we expect this pipeline dynamic will also contribute in the medium term. Let me turn now to our award metrics and pipeline. For the third quarter of fiscal year 2024, signed awards totaled $1.3 billion in total contract value. Furthermore, at June 30th, there were $398 million worth of contracts that had been awarded but not yet signed. These awards translate into a book-to-bill of approximately 0.6 times for the trailing 12-month period, reflecting, in part, a lower-than-normal period of Revit activity.

Bruce Caswell: Let me turn now to our award metrics and pipeline. For the third quarter of fiscal year 2024, signed awards totaled $1.3 billion of total contract value. Further, at June 30, there were $398 million worth of contracts that had been awarded but not yet signed. These awards translate into a book-to-bill of approximately 0.6 times for the trailing 12-month period, reflecting, in part, a lower-than-normal period of rebate activity. Our rebate win rates remain at historic levels near 90%. We anticipate our book to bill to remain below one through the end of our fiscal year and expect to see it rise again as the volume of adjudications, both rebeds and new work, is expected to increase over the next 12 months.

Bruce Caswell: Our rebid win rates remain at historic levels, near 90%. We anticipate our book-to-bill to remain below 1 through the end of our fiscal year and expect to see it rise again as the volume of adjudications, both rebids and new work, is expected to increase over the next 12 months. Our pipeline at June 30th was $44.1 billion, compared to $37.8 billion reported in the second quarter of fiscal 2024. The June 30th pipeline is comprised of approximately $2.9 billion in proposals pending, $7.3 billion in proposals in preparation, and $33.8 billion in opportunities tracking.

Speaker Change: Let me turn now to our award metrics and pipeline.

Speaker Change: For the third quarter of fiscal year 'twenty 'twenty four signed awards totaled $1.3 billion of total contract value.

Speaker Change: Further at June 30th there were $398 million worth of contracts that had been awarded but not yet signed.

Speaker Change: These awards translate into a book to Bill of approximately 0.6 times for the trailing 12 months period, reflecting in part a lower than normal period of rebid activity.

Speaker Change: A rebid win rates remain at historic levels near 90%, we anticipate our book to Bill to remain below one through the end of our fiscal year and expect to see it rise again as the volume of adjudication, both Rebids and new work is expected to increase over the next 12 months.

Bruce Caswell: Our pipeline at June 30 was $44.1 billion, compared to $37.8 billion reported in the second quarter of fiscal 2024. The June 30 pipeline is comprised of approximately $2.9 billion in proposals pending, $7.3 billion in proposals in preparation, and $33.8 billion in opportunities tracking. One explanation for the increased pipeline is the CMS Contact Center Operations or CCO contract valued at $6.6 billion. as expected. The RP was issued on May 16, and in June we filed a pre-award protest with the Government Accountability Office. Based on processing times of the GAO, which can take up to 100 days, we expect to receive a response by September 30.

Speaker Change: Our pipeline at June 30th was $44 $1 billion compared to $37.8 billion reported in the second quarter of fiscal 2020 for.

Speaker Change: The June 30th pipeline is comprised of approximately $2.9 billion in proposals pending $7.3 billion in proposals and preparation and $33 $8 billion in opportunities tracking.

Bruce Caswell: One explanation for the increased pipeline is the CMS Contact Center Operations, or CCO, contract, valued at $6.6 billion. As expected, the RFP was issued on May 16th, and in June, we filed a pre-award protest with the Government Accountability Office. Based on processing times of the GAO, which can take up to 100 days, we expect to receive a response by September 30.

Speaker Change: One explanation for the increase pipeline as the CMS contact center operations or C. C O contract valued at $6.6 billion.

Speaker Change: As expected the RFP was issued on May 16th and in June We filed a pre award protest with the government Accountability office.

Speaker Change: Based on processing times, a G E O, which can take up to 100 days, we expect to receive a response by September 30th.

Bruce Caswell: As I've mentioned the last several quarters, we have received top customer satisfaction scores and, while we do not agree with the stated purpose of this unprecedented rebid, we remain focused on delivering services critical to tens of millions of seniors. We will simultaneously pursue all appropriate paths to achieve a fair resolution to this matter.

Bruce Caswell: As I've mentioned in the last several quarters, we have received top customer satisfaction scores, and while we do not agree with the stated purpose of this unprecedented rebid, we remain focused on delivering services critical to tens of millions of seniors. We will simultaneously pursue all appropriate paths to achieve a fair resolution to this matter. The jump in our third-quarter pipeline is also driven by the inclusion of our Medical Disability Exams, or MDE, contracts with the Veterans Benefit Administration, or VBA.

Speaker Change: As I've mentioned the last several quarters, we've received top customer satisfaction scores and while we do not agree with the stated purpose of this unprecedented rebid, we remain focused on delivering services critical to tens of millions of seniors, we will simultaneously pursue all appropriate paths to achieve a fair resolution to this matter.

Jessica Batt: 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.

Jessica Batt: I'd like to remind everyone that a number of statements being made today will be forward-looking in nature. Please remember that such statements are only predictions. Actual events and results may differ materially as a result of risks we face, including those discussed in item 1A of our most recent forms, 10Q and 10K. We encourage you to review the information contained in our recent filings with the SEC and our earnings press release. The company does not assume any obligation to revise or update these forward-looking statements to reflect subsequent events or circumstances, except as required by law.

Bruce Caswell: The jump in our third quarter pipeline is also driven by the inclusion of our medical disability exams or MDE contracts with the Veterans Benefit Administration or VBA. As we shared last quarter, the agency will be rebidding these contracts due to exceeding the ceilings on claim volume in the current contracts. Of our total pipeline of sales opportunities, approximately 55 percent represents new work. Additionally, 62 percent of the $44.1 billion total pipeline is attributable to our U.S. Federal services segment.

Speaker Change: The jump in our third quarter pipeline is also driven by the inclusion of our medical disability exams or M. D E contracts with the veterans benefits administration or VBA as we shared last quarter. The agency will be rebidding. These contracts due to exceeding the ceilings on claim volume in the current contracts.

Bruce Caswell: As we shared last quarter, the agency will be rebidding these contracts due to exceeding the ceilings on claim volume in the current contract. Additionally, 62% of the $44.1 billion total pipeline is attributable to our U.S. Federal Services segment. I would be remiss not to address the upcoming election in my prepared remarks.

Speaker Change: Of our total pipeline of sales opportunities approximately 55% represents new work. Additionally, 62% of the $44 $1 billion total pipeline is attributable to our U S. Federal services segment.

Jessica Batt: Today's presentation also contains non-gap financial information. 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. For a reconciliation of the non-gap measures presented, please see the company's most recent forms, 10Q and 10K.

Bruce Caswell: I would be remiss not to address the upcoming election in my prepared remarks. We have a demonstrated history of delivering strong financial results under both parties. In fact, while one party tends to support expanded public safety net programs for which maximum is best known, the other has opened new markets for us and shown strong support for flexibility in state level program delivery. Given this spectrum, we are confident that our continued success will not be materially impacted by the results in November. Delivery on our three to five-year strategic plan will continue to be our focus.

Speaker Change: I would be remiss not to address the upcoming election in my prepared remarks, we have a demonstrated history of delivering strong financial results under both parties in fact, while one party tends to support expanded public safety net programs for which Maximus is best known.

Bruce Caswell: We have a demonstrated history of delivering strong financial results under both parties. In fact, while one party tends to support expanded public safety net programs, for which Maximus is best known, the other has opened new markets for us and shown strong support for flexibility in state-level program delivery. Given this spectrum, we are confident that our continued success will not be materially impacted by the results in November.

Speaker Change: The other has opened new markets for us and shown strong support for flexibility in state level program delivery gives.

Jessica Batt: And with that, I'll hand the call over to David.

Speaker Change: Given the spectrum, we are confident that our continued success will not be materially impacted by the results in November delivery on our three to five year strategic plan, we will continue to be our focus.

Bruce Caswell: Delivery on our 3-5 year strategic plan will continue to be our focus. Within an election year, we often find ourselves navigating many cross-currents driven by changes in policies and administrations, making for a more dynamic management environment for our business and industry. Current examples include the CCO Rebid, as well as the ever-changing policies and updates announced by Federal Student Aid, or FSA.

Bruce Caswell: Within an election year, we often find ourselves navigating many cross-currence driven by changes in policies and administrations, making for a more dynamic management environment for our business and industry. Current examples include the CCO rebid, as well as the ever-changing policies and updates announced by federal student-nader, FSA. As we enter this more dynamic period, I remain optimistic. Over the long run, a hallmark of the Maximus business model is our ability to navigate periods of volatility and view them as opportunities to demonstrate our capabilities to best serve citizens. In fact, we did just this during the COVID pandemic, when we pivoted to address immediate needs, capturing $1.7 billion of additional revenue.

Speaker Change: Within an election year, we often find ourselves navigating many crosscurrents driven by changes in policies and administrations, making for a more dynamic management environment for our business and industry.

David Mutryn: I'll walk you through our thinking for the last quarter of this year, and then I'll share some early color on next fiscal year. Turning to quarterly results, Maximus reported revenue of $1.31 billion for the third quarter of fiscal year 2024, which represents 10.6% year-over-year growth, or 11.2% on an organic basis. All three segments posted organic growth, with our largest U.S, federal services being the primary driver in the quarter. Adjusted operating income margin was 12.6%, and adjusted EPS was $1.74 for the quarter, which compares to 6.9% and 78% respectively for the prior year period.

Speaker Change: Current examples include the C C O rebid as well as the ever changing policies and updates announced by federal student aid or FSA.

David Mutryn: Results are best explained at the segment level, so let's go there.

Bruce Caswell: As we enter this more dynamic period, I remain optimistic. In the long run, a hallmark of the Maximus business model is our ability to navigate periods of volatility and view them as opportunities to demonstrate our capabilities to best serve citizens. In fact, we did just this during the COVID pandemic when we pivoted to address immediate needs, capturing $1.7 billion of additional revenue. We will continue to de-risk and sharpen our view forward as we move toward providing formal guidance in November.

Speaker Change: As we enter this more dynamic period I remain optimistic over the long run a hallmark of the Maximus business model is our ability to navigate periods of volatility and view them as opportunities to demonstrate our capabilities to best serve citizens.

Speaker Change: In fact, we did just this during the Covid pandemic, when we pivoted to address immediate needs capturing $1.7 billion of additional revenue.

Bruce Caswell: We will continue to de-risk and sharpen our view forward as we move toward providing formal guidance in November.

Speaker Change: We will continue to Derisk and sharpen our view forward as we move toward providing formal guidance in November.

Bruce Caswell: As I near the end of my remarks, I'd like to celebrate the recent recognition we receive from Time magazine. As part of its inaugural list, recognizing companies that are setting benchmarks in the U.S., Maximus was named one of America's best mid-sized companies. The award recognizes companies based on three elements: employee satisfaction, revenue growth, and transparency of sustainability efforts. This recognition from Time underscores Maximus' role as a leader among America's mid-sized companies. Congratulations to the entire team at Maximus for achieving this milestone.

Bruce Caswell: As I near the end of my remarks, I'd like to celebrate the recent recognition we received from Time Magazine, as part of its inaugural list recognizing companies that are setting benchmarks in the U.S. Maximus was named one of America's best mid-sized companies. The award recognizes companies based on three elements, employee satisfaction, revenue growth, and transparency of sustainability efforts. This recognition from Time Magazine underscores Maximus' role as a leader among America'

Speaker Change: As I near the end of my remarks, I'd like to celebrate the recent recognition. We received from time magazine as part of its inaugural list recognizing companies that are setting benchmarks in the U S.

David Mutryn: For the U.S, federal services segment, revenue increased 17.0% to $683 million, which was all organic and driven predominantly by volume growth on expanded clinical programs. The operating income margin for U.S, federal services in the third quarter was 15.5% as compared to 12.7% in the prior year period.

Speaker Change: Maximus was named one of America's Best Midsize companies.

Speaker Change: The award recognizes companies based on three elements employee satisfaction revenue growth and transparency of our sustainability efforts.

Speaker Change: This recognition from time underscores Maximus his role as a leader among America's mid sized companies.

Bruce Caswell: Congratulations to the entire team at Maximus for achieving this milestone. In closing, I remain pleased with the progress we're making in many of the strategic areas of our business. Most notably, I continue to be impressed with the strong coordination between our enterprise technology and operations teams, who are collaborating in new and exciting ways tied directly to our top pipeline opportunities. As we strengthen relationships with current and new customers, we're helping to shape opportunities and provide technology capabilities that will underpin the delivery of government programs well into the future. While supporting the early successes I've mentioned today, the greater benefits of these efforts will ultimately be realized in the next 12 to 24 months. And with that, we'll open the line for Q&A.

Speaker Change: Congratulations to the entire team at Maximus for achieving this milestone.

Bruce Caswell: In closing, I remain pleased with the progress we're making in many of the strategic areas of our business. Most notably, I continue to be impressed with the strong coordination between our enterprise technology and operations teams, who are collaborating in new and exciting ways tied directly to our top pipeline opportunities. As we strengthen relationships with current and new customers, we're helping to shape opportunities and provide technology capabilities that will underpin the delivery of government programs well into the future. While supporting the early successes I've mentioned today, the greater benefits of these efforts will ultimately be realized in the next 12-24 months.

Speaker Change: In closing I remain pleased with the progress we're making in many of the strategic areas of our business, most notably I continue to be impressed with the strong coordination between our enterprise technology and operations teams, who are collaborating in new and exciting ways tied directly to our top pipeline opportunities as we strengthen our relationships with current and new customer.

David Mutryn: These results reflect our focus on solid execution in a period of high demand, particularly in the assessment space. The higher margin also reflects a temporarily favorable mix of lower cost-plus revenue and higher performance-based revenue.

David Mutryn: For the U.S, services segment, revenue increased 5.2% to $472 million. This growth, all organic, was due to strong performance across the Medicaid-related portfolio, a portion of which were excess volumes from the now-completed unwinding exercise.

Speaker Change: There's we're helping to shape opportunities and provide technology capabilities that will underpin the delivery of government programs well into the future.

Speaker Change: While supporting the early successes Ive mentioned today, the greater benefits of these efforts will ultimately be realized in the next 12 to 24 months and with that we'll open the line for Q&A operator.

Operator: And with that, we'll open the line for Q&A.

David Mutryn: The operating income margin for the third quarter was 13.0% and compares to 10.5% for the prior year period. As expected, there was a slight normalization in the segment margin versus last quarter's 14%. So this quarter still contained some temporary overperformance. Nevertheless, there is a demonstrated good state of health in the large base of programs across this segment.

Operator: Operator? 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 at this time. 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. For participants using speaker equipment, they may be necessary to pick up the handset before pressing the star keys.

Operator: Thank you. The floor is now open to questions. If you would like to ask a question, please press star 1 on your telephone keypad at this time. 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. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star key.

Speaker Change: Thank you the floor is now open for questions.

Speaker Change: I'd like to ask a question. Please press star one on your telephone keypad at this time.

Speaker Change: Information tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up the handset before pressing the star keys.

Operator: We do ask that you please limit yourself to one question and one follow-up before rejoining for any additional questions. Again, that's star one to register a question at this time.

Operator: We do ask that you please limit yourself to one question and one follow-up before rejoining for any additional questions. Again, that's star 1 to register a question at this time. Today's first question is coming from Charlie Strauzer of CJS Securities. Please go ahead. Hi, good morning.

Speaker Change: We do ask you please limit yourself to one question and one follow up before rejoining for any additional questions.

David Mutryn: Turning to the outside of the U.S, segment, revenue increased 2.3% year-over-year to $159 million for the quarter. Organic growth was 6.8% and driven primarily by the UK and its diversified base of business today with the effect of divested businesses partially offsetting the organic growth.

Speaker Change: Again, Thats Star one to register a question at this time.

Operator: Today's first question is coming from Charlie Strauser of CJA Securities.

Speaker Change: Today's first question is coming from Charlie Strausser of CJS Securities. Please go ahead.

Charlie Strauzer: Please go ahead.

Charlie Strauzer: Hi, good morning. We can pick up on the CCO commentary. Since the process has been filed, are there any updates in terms of timeline or conversations or color that you've gotten back from CMS?

Charlie Strauzer: Hi, good morning. If we could pick up on the CCO commentary, Bruce, since the protest has been filed, are there any updates in terms of timeline or conversations or color that you've gotten back from the

Charlie Strausser: Hi, good morning, Jeff.

Charlie Strausser: If you can just.

Speaker Change: You can pick up on the CCL commentary Bruce.

David Mutryn: The segment realized a small operating loss of $1.4 million compared to the $15.2 million in the prior year period reflecting the reduced volatility to the employment services portfolio. The small loss this quarter was contemplated in our full-year outlook for fiscal 2024 in which we expect to land slightly above break even. With one quarter left, we remain confident in our ability to continue shaping this segment within this fiscal year, and I'll touch on that more in the guidance discussion.

Speaker Change: Since the protest has been filed.

Speaker Change: Any updates in terms of timeline for.

Speaker Change: Conversations or color that you've gotten back from the <unk>.

Speaker Change: From CMS.

David Mutryn: Sure, Charlie. I don't have really much to add from my prepared remarks. I mean, we noted that the protest is now with the Government Accountability Office. We expect that they'll respond by September 30th at the latest. They could respond sooner. This protest action, I guess one thing that's worth noting is that the 100-day stay is a stay on award that you get as a consequence of filing with the GAO. It doesn't keep the agency from progressing the procurement process itself. So interestingly, the next phase of the procurement has proposed volumes 2-5. We've already passed the phase where Volume 1, which is an initial qualification process, was due in June, but Volumes 2-5 are due, I believe, September 13th or so.

Bruce Caswell: Sure, Charlie. Yeah, I don't really have much to add from my prepared remarks. I mean, we noted that the protest is now with the Government Accountability Office. We expect that they'll respond by September 30th at the latest. They could respond sooner. In this protest action, I guess one thing that's worth noting is that the 100-day stay is a stay on award that you get as a consequence of filing with the GAO.

Charlie: Sure Charlie Yeah.

Charlie: Not really much to add from my prepared remarks, I mean, we noted that the protest is now with the government Accountability office, we expect that they'll reach.

Charlie: Bond by September 30th at the latest they could respond sooner.

Speaker Change: This protest action I guess, one thing that's worth noting is that the 100 day stay.

Speaker Change: Stay stay on award that you got as a consequence of filing with the Jal It doesn't.

Bruce Caswell: It doesn't keep the agency from progressing with the procurement process itself. So, interestingly, the next phase of the procurement has proposal volumes 2 through 5. We've already, you know, passed the phase where volume 1, which is an initial qualification process, was due in June, but volumes 2 through 5 are due, I believe, September 13th or so. And as a consequence, as I said, we are, you know, in the process of considering that volume response because it would have to precede a final response from the GAO, which could occur as late as September 30th.

Speaker Change: Keep the agency from progressing the procurement process itself. So interestingly the next phase of that procurement has proposal volumes to two five we've already passed.

David Mutryn: More details along with the credit agreement itself are available in the form 8K we filed in early June. We ended the third quarter with total debt of $1.16 billion and our net debt to EBITDA ratio improved further from 1.7 last quarter to 1.5 times this quarter. As a reminder, this ratio is our debt net of a loud cash to adjusted EBITDA for the last 12 months as calculated in accordance with our credit agreement.

Speaker Change: Past, the phase where volume one which is international qualification process was due in June volumes to two five or do I believe September 13th or so and as a consequence.

David Mutryn: As I said, we're in the process of considering that volume response because it would have to proceed final response from the GAO, which could occur as late as September 30th. So we would only see the GAO process having a real impact to the anticipated award date, which was publicly stated as intended award coming out January 16th.

Speaker Change: We like as I said, where we are in the process of considering that volume response, because it would have to proceed.

Speaker Change: Final response from the G I L, which could occur as late as September 30, So we would only see the jal process, having a real impact to the anticipated Award date, which was publicly stated is our intend to award coming out of January 16th if.

Bruce Caswell: So we would only see the GAO process having a real impact on the anticipated award date, which was publicly stated as intended award coming out January 16th. If, subsequent to this initial GAO process, there were subsequent processes either back through the GAO or through higher-level appeals to the Court of Federal Claims or what have you that could affect the actual award date itself. So that's the sense of the timing. I would say that there are, you know, many potential paths that this could take. And I just know two things.

David Mutryn: If subsequent to this initial GAO process, there were subsequent processes either back through the GAO or through higher-level appeals to court of federal claims or what have you, that could affect the actual award date itself. So that's the sense of the timing.

Speaker Change: Subsequent.

Speaker Change: To this initial G. A L. A the process there were subsequent processes either back through the <unk> or through higher level appeals to quarter Federal claims and what have you that could affect the actual award data itself. So that some sense of the timing.

David Mutryn: On our call in November 2023, I noted that absent M&A, we should be able to deliver to 1.5 times by the end of fiscal year 24. We are pleased to have done so one quarter early. Under our opportunistic share repurchase program, we repurchased 611,000 shares totaling $50.6 million in the third quarter. This works out to an average price of just under $83 per share. In July, subsequent to quarter end, we repurchased an additional 250,000 shares totaling $21.2 million.

David Mutryn: I would say that the, you know, many potential paths remain here that this could take, and I just note two things. We are, remain super focused on delivering top quality service as we have. We are thrilled that the independently measured customer satisfaction scores of this program were really the highest since we took over responsibility for the contract this last open enrollment period. And, you know, we'll continue to deliver exceptional service in that process, play itself out. And I also mentioned that we're, you know, really committed to achieving a fair outcome here, and we're going to fully intend to pursue all potential paths necessary to do that.

Speaker Change: I would say that the.

Speaker Change: Many potential pads remain here that this could take and.

Bruce Caswell: We are, and will remain super focused on delivering top quality service as we have. We are thrilled that the independently measured customer satisfaction scores of this program were really the highest since we took over responsibility for the contract during that last open enrollment period. And, you know, we'll continue to deliver exceptional service and let the process play itself out. And I also mentioned that we're really committed to achieving a fair outcome here, and we're going to fully intend to pursue all potential paths necessary to do that. So, David, would you add anything? Yeah, Charlie.

Speaker Change: I'd just note two things we are remain super focused on delivering top quality service as we have we are thrilled that the the independently measured customer satisfaction scores with this program or really the highest since we took over responsibility for the contract. This last open enrollment period, and we'll continue to look to deliver.

Speaker Change: Exceptional service in that process.

Speaker Change: Itself out and I also mentioned that we're really committed to it.

David: Using a fair outcome here and we're going to fully intend to pursue all potential paths necessary to do that so David would you add anything that Charlie on P. C. O I'll just add some investors have been interested in the profitability of this contract I wanted to point out the contract is cost plus award fee as we've said, which does traditionally carry low single digit margin.

David Mutryn: So David, would you add anything? Yeah, Charlie, on CCO, I'll just add, since investors have been interested in the profitability of this contract, I wanted to point out the contract is cost-plus-award-fee, as we've said, which does traditionally carry low single-digit margin. Although given the contract, the absorption of indirect costs, the impact to our total operating income from the absence of the contract would likely be more significant interest, low single-digit margin. And that depends in part on the extent to which we'd be able to mitigate the effect of that law, that lost indirect absorption. But regardless of the recompute outcome, we don't expect it to have a significant impact on our current view of fiscal year 25.

David Mutryn: Yeah, Charlie, on CCO, I'll just add, since investors have been interested in the profitability of this contract, I wanted to point out the contract is cost plus award fee, as we've said, which traditionally carries low single-digit margins. However, given the contract's absorption of indirect costs, the impact to our total operating income from the absence of the contract would likely be more significant than just low single-digit margins. And that depends in part on the extent to which we'd be able to mitigate the effect of that loss, that lost indirect absorption. But regardless of the recompute outcome, we don't expect it to have a significant impact on our current view of fiscal year 25.

David Mutryn: Eddle. Meanwhile, we will maintain an opportunistic share repurchase program and pay a dividend that increases with earnings over time.

Speaker Change: Given the contracts the absorption of indirect costs the impact to our total operating income from the absence of the contract would likely be.

Speaker Change: More significant than just low single digit margin and that depends in part on the extent to which we'd be able to mitigate the effect of that law that lost indirect absorption.

Speaker Change: But regardless of the Recompete outcome, we don't expect it to have a significant impact to our current view of fiscal year 'twenty five.

Charlie Strauzer: Great, thank you, and just in years to guidance that we could, looking at Q4 and the early color you gave us for 25, it's a little bit more color as to the incremental revenue not expected to reoccur in 25. Where does the implied growth rate behind that, and the comments that you said it may look similar to the latest revenue guidance? Are we talking kind of, you know, flat year over year, low single digit growth? Is this a performer basis, I kind of think. Sure, yeah, so for fiscal year 24, you know, with less than a quarter remaining, our visibility is very strong.

David Mutryn: Great, thank you. And just shifting gears to guidance, if we could, looking at Q4 and the early color you gave us for 25. Is it possible to get a little bit more color as to the incremental revenue not expected to reoccur in 25? You know, what is the implied growth rate behind that? And, you know, the comment that you said it may look similar to, you know, the latest revenue guidance. Are we talking kind of, you know, flat year-over-year, low single-digit growth? Is this on a pro-forma basis, that kind of thing?

Speaker Change: Great. Thank you and just shifting gears to guidance, if we could look at Q4 and the early call you gave us for 25.

Speaker Change: Is it possible to get a little bit more color as to the incremental revenue is not expected to reoccur in 'twenty five.

Speaker Change: Whereas implied growth what is the implied growth rate behind that.

Speaker Change: The comment that you said it may look similar to the latest revenue guidance are we talking kind of flat year over year low single digit growth.

Speaker Change: Hum.

Speaker Change: On a pro forma basis.

Speaker Change: That kind of thing.

David Mutryn: Sure. Yeah, so for fiscal year 24, you know, with less than a quarter remaining, our visibility is very strong. We feel good and confident in, you know, raising that guidance both as a result of the Q3 overperformance and continued momentum in Q4. Looking to 25, yeah, so my commentary was that our current view, which let me reemphasize is an early view; we'll be giving our formal guidance in November, but our early view is that fiscal year 25 would be roughly similar to where we now expect fiscal year 24 to land, which, of course, is now $100 million higher than our prior guidance.

Speaker Change: Sure Yeah, so for fiscal year 'twenty four with wood.

Speaker Change: In a quarter remaining our visibility is very strong we feel good and confident in.

David Mutryn: We feel good and confident and, you know, raising that guidance both as a result of the Q3 overperformance and continued momentum in Q4.

Speaker Change: Isn't that guidance, but.

Speaker Change: The result of the Q3 over performance and continued momentum in Q4.

David Mutryn: Looking at 25, yes, my commentary was that our current view, which, let me re-emphasize as an early view, we'll be giving our formal guidance in November. But our early view is that fiscal year 25 would be roughly similar to where we now expect fiscal year 24 to land, which, of course, is now $100 million higher than our prior guidance. We've been consistent that we do expect some top and bottom line moderation in U.S. services in particular as a result of the re-determination volumes that were historically high given the three years of continuous Medicaid enrollment. And while we've maybe on prior calls focused a bit more on the bottom line and margin impact of that surge in volumes, we do recognize there's a top line impact as well, which we've wanted to call out here.

Speaker Change: Looking to twenty-five yeah. My my commentary was that our current view, which let me reemphasize is an early view will be giving a formal guidance in November.

David Mutryn: The improved outlook implies organic growth of about 9 percent and an adjusted OI margin of approximately 11 percent on a full-year basis. Also implied in the new guidance is a fourth quarter that looks more balanced and representative of the typical profile of the business, especially is compared to the extraordinary results this third quarter.

Speaker Change: Our early view is that fiscal year 'twenty five would be roughly similar to where we now expect fiscal year 'twenty four to land.

Speaker Change: Of course, there's now a $100 million higher than our prior guidance.

David Mutryn: We've been consistent that we do expect some top and bottom line moderation in U.S. services, in particular as a result of the redetermination volumes that were historically high given the three years of continuous Medicaid enrollment. And while we've maybe on prior calls focused a bit more on the bottom line and margin impact of that surge in volumes, we do recognize there's a top line impact as well, which we wanted to call out here.

Speaker Change: We've been consistent that we do expect some top and Bottomline moderation.

Speaker Change: And U S services in particular as a result of the Redetermination volume.

David Mutryn: The U.S. Federal segment is expected to deliver adjusted OI margin of around 12.5 percent on a full-year basis for fiscal 2024, which is also the expectation for the fourth quarter. Our view on the U.S, services segment is tracking in line with prior expectations.

Speaker Change: That were historically high given the three year that continue its Medicaid enrollment and while we've maybe on prior calls focused a bit more on the bottom line and margin impact of that surge in volume, we do recognize that the topline impact as well.

Speaker Change: We wanted to call out here, so that the strength in fiscal year 'twenty four has been really in both U S segment services and U S federal but the portion that's not expected to recur as concentrated in U S services much of that related to the Redetermination volumes, which we talked about.

David Mutryn: So the strength in fiscal year 24 has been really in both U.S. segments, U.S. services and U.S. federal, but the portion that's not expected to recur is concentrated in U.S. services, much of that related to the redetermination volumes, which we talked about. One last point, while we reiterate our belief that long-term demand for our business will continue to grow and support mid-single-digit organic growth, there can be fluctuations year-to-year, bearing in mind that we're on track to deliver a second year of high single-digit organic growth at 9% at the midpoint of our guidance.

David Mutryn: So, the strength in fiscal year 24 has been really in both U.S. segments, U.S. services and U.S. Federal, but the portion that's not expected to occur is concentrated in U.S. services, much of that related to the re-determination volumes, which we talked about.

David Mutryn: We still anticipate a segment margin of approximately 13 percent on a full-year basis, meaning the fourth quarter should be in the 11 to 12 percent range, reflecting the completion of extra Medicaid-related activities and overperformance in the segment in early quarters.

David Mutryn: But one last point, while we reiterate our beliefs that long-term demand for our business will continue to grow and support mid-single-digit organic growth, there can be fluctuations year-to-year, bearing in mind that we've, we're on track to deliver a second year of high single-digit organic growth at 9% at the midpoint of our guidance.

Speaker Change: One last point, while we reiterate our belief that long term demand for our business will continue to grow and support mid single digit organic growth there can be fluctuations year to year bearing in mind that we were.

David Mutryn: In the outside U.S, segment, we still expect shaping efforts to occur this fiscal year and anticipate a slightly smaller footprint once completed.

David Mutryn: While not built into current guidance, we anticipate that such a transaction would result in divestiture-related charges that would not impact our adjusted operating income. Meanwhile, we expect the segment to finish slightly above break even for fiscal year 2024. Rounding out a few other assumptions for fiscal 2024 would be interest expense of approximately $80 million and intangible zammerization expense of approximately $90 million.

Speaker Change: We're on track to deliver a second year.

Speaker Change: High single digit organic growth at 9% at the midpoint of our guidance.

Charlie Strauzer: Great, thank you. This is very helpful.

Operator: Great, thank you. That's very helpful.

Speaker Change: Great. Thank you that's very.

Speaker Change: Help me.

Operator: Great, thanks, Charlie.

Charlie Strausser: Great. Thanks, Charlie.

Operator: Thanks, question. Thank you.

Bert Subin: Thank you. The next question is coming from Bert Subin of Stiefel. Please go ahead. Hey, good morning.

Speaker Change: Next question. Thank you. The next question is coming from the Burgh <unk> of Stifel. Please go ahead.

Operator: The next question is coming from Bert Subin of Stiefel.

Bert Subin: Please go ahead. Hey, good morning, and thank you for the questions. Sure.

Bert Subin: Hey, good morning, and thank you for the question. Sure. Good morning, Bert.

Speaker Change: Hey, good morning, Thank you for the questions.

Bert: Sure Good morning Bert.

Bert Subin: Um, maybe just to, I guess, pick up where we think about, um, you know, the potential for excess. It seems like you're mostly calling out the redetermination side. I guess if we think about VES and the VA side of things, um, substantial growth in the fiscal third quarter, um, and it helped boost your margin quite a bit for U.S. Federal. Um, I guess next week, I think we're looking at an industry day for that rebid, and there's an expectation that there could be an RFP next month and then an award by November.

David Mutryn: I'll close by providing some early thoughts on next fiscal year, and this proceeds official fiscal 2025 guidance that we will provide on the year end call in November. We always represent Maximus as a business that should grow organically in the mid-single digits over the longer term. The last two fiscal years have outpaced that with 7 percent and fiscal 23 and 9 percent at the midpoint of our fiscal 24 guidance. 3 consecutive quarterly earnings, beats, and guidance raises, 2 of which also increased revenue in a given fiscal year is atypical for us.

Speaker Change: Maybe just to I guess pick up there as we think about you know the potentially the access it seems like you're mostly calling out the redetermination side I guess, if we think about the yes, and the VA side of things.

Speaker Change: Substantial growth in the fiscal third quarter.

Speaker Change: And it helped to boost your margin quite a bit for U S. Federal.

Bert Subin: I guess next week, I think we're looking at an industry day for that re-bid, and there's an expectation that it could be an RFP next month and then an award by November. Obviously, right now, the VA is grappling with some funding issues. Can you just give us your thoughts on maybe what your near-term expectations are for that business and then what they are as you think about FY25? because it would seem like, as you roll out automation tools, that should be a pretty solid margin boost next year that would help potentially offset, which you've been at least partially offset the tailwinds that are turning the headwinds into re-determination.

Speaker Change: I guess next week I think we're looking at an industry day for that rebid and expect an expectation that there could be an RFP next month, and then award by November.

Speaker Change: Right now the VA is grappling with some funding issues can you just give us your thoughts on maybe what your near term expectations are for that business and then what they are as you think about FY 'twenty five because it would seem like as you roll out automation tools that should be a pretty solid margin boost next year that would help.

Bert Subin: Obviously, right now, the VA is grappling with some funding issues. Can you just give us your thoughts on maybe what your near-term expectations are for that business and then what they are as you think about FY25? Because it would seem like as you roll out automation tools, that should be a pretty solid margin boost next year that would help, um, you know, potentially offset what you've been dealing with, or at least partially offset, the tailwinds that are turning the headwinds for redetermination. So just curious if you can provide some color there.

David Mutryn: Baring in mind this significant overperformance, our early view is that fiscal 2025 revenue may look roughly similar to the new guidance for this year. This year has benefited from exceptionally strong volumes across many existing programs, some of which, as we have previously said, are likely to moderate, most notably those associated with redeterminations. A simple way to normalize fiscal 2024 would be to assume more than half of the total $175 million guidance raise on revenue across this year, which has been quite accretive, is attributable to overperformance that is not necessarily expected to recur next year.

Speaker Change: The offset which you've been at least partially offset the.

Speaker Change: The tailwind that are turning to headwinds redetermination. So I'm just curious if you could provide some color there.

Bert Subin: So, just curious if you could provide some color there.

Bruce Caswell: A lot of dynamics there, Bert, and it's a great series of questions, compound questions. So the first piece, I'll start, and then I'll turn it over to David to comment a little bit more on the margin expectations. So first of all, as it relates to the re-bid, you're absolutely correct. Our information is similar to yours in that there was a revised RFI that was issued in late June, and the intent of that, as expressed in the RFI, is to award a two-year contract, and these would be contracts for Regions 1 through 4 of the MDE program.

Bruce Caswell: A lot of dynamics there, Bert, and it's a great series of questions, compound questions.

Bert: A lot of dynamics there Bert.

Bert: Great series of questions compound question.

Bruce Caswell: So the first piece, I'll start, and then I'll turn it over to David to comment a little bit more on the margin expectations. So, first of all, as it relates to the review, you're absolutely correct. Our information is similar to yours, in that there was a revised RFI that was issued in late June, and the intent of that, as expressed in the RFI, is to award a two-year contract, and these would be contracts for Regions One through Four of the MDE program. The RFP is expected to be released in August, submittals due in September, and an award before November 1st.

Bert: So the first piece I'll start and then I'll turn it over to David to comment a little bit more on the margin expectations.

David: So first of all as it relates to rebid, you're absolutely correct.

David: Our our information is similar to yours in that there was a revised RFP that was issued in late June and the intent of that is expressed in the archives to award a two year contract and that will be these would be contracts for regions. One through four of the MGE program. The RFP is expected to be released in August I said middle of students.

Bruce Caswell: The RFP is expected to be released in August, submittals due in September, and an award before November 1st. Interestingly, the period of performance will be from November 1st, 2024, through October 31st, 2026. So, a two-year contract award there.

David: September and an award before November 1st.

Bruce Caswell: Interestingly, the period of performance will be from November 1st, 2024, through October 31st, 2026. So, two-year contract award there. You know, further, not much more to comment on the rebate, except to just reiterate, I think, what all in the industry are quite aware, which is that they're recompeting this due to the volume limits that have been approached or being approached on the existing contract, and provide extra capacity to the vendors. We can't comment any more specifically on the rebate dynamic, even how imminent it is, but you also talked a little bit about the budget. The increased case loaded disability claims that have resulted from the packback to put pressure, obviously, not just on the funding for the program to complete C&P exams for the MDE process, but also, I would say, for the benefits themselves for veterans.

Speaker Change: Interestingly the period of performance will be from November one 2024 through October 31 2026.

Speaker Change: So two year contract award there.

Bruce Caswell: You know, further, not much more to comment on the rebid, except to just reiterate what all in the industry are quite aware, which is that they're re-competing due to the volume limits that have been approached or are being approached on the existing contracts and to provide extra capacity to the vendors. We can't comment any more specifically on the rebid dynamic given how imminent it is, but you also talked a little bit about the budget.

Speaker Change: Further not much more to comment on the rebate, except to just reiterate I think what all in the industry are quite aware, which is out there competing in the stupid that volume limits that have been our approach are being approached on the existing contracts and the right extra capacity to the vendors.

David Mutryn: However, we are confident that we could at least partially, or perhaps entirely, cover the earnings impact through continued performance optimization outside the U.S, improvement and lower interest expense. We're pleased to be tracking to our 10 to 14 percent long-term adjusted OI margin range, and while the 11 percent implied margin in our fiscal 2024 guidance is bolstered by the non-recurring work, we anticipate achieving at least 10 percent next year. Also of note, fiscal 2024 CAPX included a number of sizable investments in capitalized software.

Speaker Change: We can't comment any more specifically on the read the dynamic given how imminent. It is but you also talked a little bit about the budget.

Bruce Caswell: You know, the increased caseload of disability claims that have resulted from the PACT Act has put pressure obviously not just on the funding for the program to complete C&P exams for the MDE process but also obviously on the benefits themselves for veterans. And it's a broadly bipartisan program, and while the budget request was not acted on prior to adjournment, we think that will continue to be a congressional priority in the near term to prevent any shortfall for the VA in FY24.

Speaker Change: You know the increased caseload and disability claims that resulted from the pack that could put pressure obviously not just on the funding for the program to complete C. N P exams for the MTA process, but also obviously for the benefits themselves for veterans.

Bruce Caswell: And it's broadly bipartisan-supported program, and while the budget request was not acted on prior to adjournment, presently, we think that it will continue to very much be a congressional priority in the near term, to prevent any shortfall for the VA in FY24. I think my recollection is that the budget request is just $3 billion for FY24, and then another 12 billion or so for FY25, which is an important point. It's a biennial budget process that the VA has. So the request, when it's acted on by Congress, would provide that bridge funding to cover our next fiscal year, obviously contemporaneous with theirs as well for FY25.

Speaker Change: Ah broadly bipartisan supported program and while the budget request was not acted on prior to that.

David Mutryn: We expect CAPX to return to a more typical range of 1 to 1.5 percent of revenue for next year, which would enhance free cash flow. Again, this represents our early view, and we plan to provide formal guidance in November as usual. To conclude, we are very pleased with the operational and financial performance that the broader Maximus team has delivered in service to our customers and in many areas of national importance.

Speaker Change: Jeremy I presently we think that will continue to very much be a congressional priority in the near term.

Speaker Change: To prevent any shortfall for the VA in FY 'twenty four I think my recollection is is that the budget request is just shy of $3 billion scrap on 24, and then another 12 billion or so for FY 'twenty five which is an important point at the biannual budget process that the VA has said they request when does that go down by Congress would provide that.

Bruce Caswell: I think my recollection is that the budget request is just shy of $3 billion for FY24 and then another $12 billion or so for FY25, which is an important point. It's a biannual budget process that the VA has, so the request, when it's acted on by Congress, would provide that bridge funding to cover our next fiscal year, obviously contemporaneous with theirs as well for FY25.

David Mutryn: We remain focused on driving shareholder value with sustainable mid-single digit organic growth over the long term and disciplined capital allocation.

Speaker Change: Funding to cover our next fiscal year, obviously contemporaneous with theirs as well for FY 'twenty five so that would address the issues related to.

Bruce Caswell: So that would address the issues related to the rebate in the budget.

Bruce Caswell: With that, I'll hand the call over to Bruce.

Speaker Change: The rebid in the budget, let me turn to volume expectations technology, and then give it over to David from a volume standpoint.

Bruce Caswell: Let me turn to volume expectations, technology, and then give it over to David. From a volume standpoint, I think we all follow, obviously, the public information that the Veterans Benefit Administration publishes on the claims inventory. And it occurs to me that while it's come down a little bit in recent months, it remains well above the prior historical peak that was a dozen years ago. And so when we talk about the pace at which a new equilibrium will be reached, our view is that it's two things. First, the ongoing PAC Act volumes that will become part of the process, and it's important to note that veterans have the ability to be seen and, in many cases, are seen and have exams related to their conditions more than once during their lifetimes, because if they have fluctuating conditions and their circumstances change, they get seen again.

Bruce Caswell: So that would address the issues related to the rebid and the budget. Now, let me turn to volume expectations and technology and then give it over to David. From a volume standpoint, I think we all follow the obviously public information that the Veterans Benefit Administration publishes on the claims inventory, and it occurs to me that while it's come down a little bit in recent months, it remains well above the prior historical peak that was a dozen years ago.

Bruce Caswell: Thanks, David, and good morning. We are pleased to have delivered another solid quarter contributing to what we expect will be a strong fiscal year. High quality and efficient delivery of higher than expected volumes across the business reflect the benefits of our business model, enabling the positive financial results David has shared today.

Speaker Change: I think we all follow obviously the public information that the veterans benefits administration publishes on the claims inventory and it occurs to me that one.

David: It's come down a little bit in recent months it remains well above the prior historical peak that was a dozen years ago and so when we talk about the pace at which a new equilibrium will be reached our view is that it's two things first the ongoing pack that volumes that will become part of the process and.

Bruce Caswell: We continue to focus on executing the strategy outlined in our 2022 investor day. Recent awards demonstrate our continued delivery within our three strategic areas, future of health, technology modernization, and customer services digitally enabled, to that end.

Bruce Caswell: And so when we talk about the pace at which a new equilibrium will be reached, our view is that there are two things. First, the ongoing PACT Act volumes that will become part of the process. It's important to note that veterans have the ability to be seen and, in many cases, are seen and have exams related to their conditions more than once during their lifetimes because if they have fluctuating conditions and their circumstances change, they get seen again.

Speaker Change: And it's important to note that veterans they have the ability to be seen and in many cases are seen and have exams related to their conditions.

Bruce Caswell: I'd like to share a few refined areas of focus we're excited about.

Bruce Caswell: Let's begin with recent wins. We recently announced the award of our first task order under the IRS Enterprise Development Operations Services or Edos Blanket Purchase Agreement or BPA. Under the task order, our teams will support the IRS Internal Management Division by designing and developing all functional and technical enhancements for the agency's internal operations and accounting program. Value to $87 million over a five-year period, the award is evidence of our commitment to expanding our technology modernization services.

David: More than once during their lifetimes, because if they are fluctuating conditions in their circumstances change they get seen again, so that there'll be a new equilibrium, but they've equilibrium, we expect would be at a higher level than the prior equilibrium. We also would say that there is certainly sufficient volumes in the system.

Bruce Caswell: So there will be a new equilibrium, but that equilibrium we expect would be at a higher level than the prior equilibrium. We also would say that there's certainly sufficient volumes in the system to sustain the production level that we've been seeing at least through our fiscal year 2025. So I'll note that our early color on FR-25 reflects that dynamic.

Bruce Caswell: So there will be a new equilibrium, but that equilibrium, we expect, would be at a higher level than the prior equilibrium. We also would say that there are certainly sufficient volumes in the system to sustain the production levels that we've been seeing at least through our fiscal year 2025. So I'll note that our early color on FY25 reflects that dynamic, and we remain committed and of the viewpoint that volumes would remain elevated, but also note that the significant ramp-up in capacity across the system has really occurred at this point.

Speaker Change: Two two.

Speaker Change: <unk> the production levels that we've been seeing at least through fiscal year 2025. So I will note that our early color on FY 'twenty five reflects that dynamic and we remain committed and then of the viewpoint that volumes would remain elevated but also note that the significant ramp up in capacity across the system has really.

Bruce Caswell: We first announced our inclusion on the BPA last fiscal year, and are pleased to be selected for one of the first few task orders awarded. The IRS has been a valuable client for several decades, and we are thrilled to have the opportunity to continue our strong collaborative relationship while supporting the agency's modernization mission.

Bruce Caswell: And we remain committed and of the viewpoint that volumes would remain elevated, but also note that the significant ramp up in capacity across the system has really occurred at this point, so that then bring this to technology your last point. Technology is certainly a major investment that we're making, and I'm excited about it because it will have the ability to really improve the veteran experience. There are areas like self-scheduling that need further automation, and certainly providing veterans the visibility to the status of their claims as they walk their way through the process will be very important elements.

Speaker Change: [noise] occurred at this point so that then brings us to technology last points technology. It's certainly a it's a major investment that we're making and I'm excited about it because it will have the ability to really improve the veteran experience.

Bruce Caswell: So that then brings us to technology, your last point. Technology is certainly a major investment that we're making, and I'm excited about it because it will have the ability to really improve the veteran experience. There are areas like self-scheduling that need further automation, and certainly, providing veterans with visibility to the status of their claims as they work their way through the process will be very important elements. The investments we're making in technology, though, very prudently require that we operate both the legacy system environment as well as the new system environment in parallel during a certain period to assure a very clean cutover into the new system environment.

Bruce Caswell: Earlier this year, we were successful in winning new work with the Transportation Security Administration for Operations, Technology, Innovation, and Management, or TSA Optima for short, with an approximate total contract value of $171 million over six years. As has been reported in the trade press, an initial protest by the incumbent was resolved in our favor. A second protest was subsequently filed and is pending. While awaiting resolution, our teams remain excited to support the TSA in its mission.

Speaker Change: There are areas like self scheduling that need audit further automation and certainly providing veterans the visibility to the status of their claims as they work their way through the process will be very important elements. The investments, we're making in technology, though I'm very prudently required that we would operate on both the legacy system environment as well.

Bruce Caswell: The investments we're making in technology, though very prudently, require that we would operate both a legacy system environment as well as the new system environment in parallel during a certain period to assure a very clean cut over into the new system environment. And so we would anticipate the economic benefits of the technology introduction to really be, if anything, backhand loaded in the F-25 period. But I'll pause at this point and turn it to David for further commentary.

Speaker Change: As the new system environment in parallel.

Speaker Change: During a certain period to assure a very clean cut over into new systems environment, and so we would anticipate the economic benefits of the technology introduction to really be if anything backend loaded in the FY 'twenty five period, but I'll pause at this point and turn it to David for further commentary yeah.

Bruce Caswell: And so we would anticipate the economic benefits of the technology introduction to really be, if anything, back-end loaded in the FY25 period, but I'll pause at this point and turn it to David for further commentary.

David Mutryn: Yeah, thanks, Bruce. Just a little more commentary on the Q3 margins in the federal segment since this is a component. So I mentioned in my prepared remarks that one driver was the unusual mix of higher performance-based revenue and lower cost-plus revenue. I probably shouldn't even say unusual because we have seen this somewhat seasonal impact with lower cost-plus revenue in the third quarter, which has occurred in the past. So that played a part in the higher margin this quarter.

David Mutryn: Yeah, thanks. There's just a little more commentary on the Q3 margins in the federal segment, since this is the component. So I mentioned in that the paragraph marks that is one driver was the unusual mix of higher performance-based revenue and lower cost-plus revenue.

Speaker Change: Thanks.

David: A little more commentary on the Q3 margins in the Federal segment I think this is a component. So I mentioned in my prepared remarks that is one driver was the.

David: Unusual mix of higher performance based revenue and lower cost plus revenue.

David Mutryn: I probably shouldn't even say unusual because we have seen this somewhat a seasonal impact with the lower cost-plus revenue in the third quarter, which has occurred in the past. So that played a part in a higher margin this quarter. And then, in addition, our assessment programs did have particularly strong volume. Our production was strong, and essentially some volume was pulled into Q3 from other quarters, which drove performance on both the top and bottom line. So it's boosted going forward.

Bruce Caswell: In our U.S, services segment, we were recently awarded the Revit of our independent enrollment broker contract in the Commonwealth of Pennsylvania. Under the new contract, valued at $263 million over five years, we'll deliver additional new scope that supports our customer services digitally enabled area of focus by supporting our contact center agents with technologies that should increase efficiencies in the enrollment process, providing a better experience for the consumer.

David: Probably I shouldn't even say unusual because we have seen that somewhat seasonal impact with lower cost both revenue in the third quarter.

David: Which has occurred in the past so that that played a part in the higher margin. This quarter and then in addition, our assessment program did have particularly strong volume or production with strong and essentially some volume was pulled into Q3 from other quarters.

David Mutryn: And then, in addition, our assessment programs did have particularly strong volumes. Our production was strong, and essentially, some volume was pulled into Q3 from other quarters, which drove performance on both the top and bottom lines. So, as Bruce said, going forward, we expect Q4 volumes on the clinical work to moderate slightly as a result of that pulling in from other quarters in Q3, but then remain steady for the foreseeable future.

David: Which drove performance on both the top and bottom line.

Bruce Caswell: Finally, to close the discussion on recent wins, I'm excited to announce a new seasonal contract with the Federal Emergency Management Agency or FEMA, where we have a long history of staffing up quickly to support urgent needs of individuals around the country impacted by disasters. Under this contract, which has a total of nearly 700 skilled agents will be answering calls and accepting applications from those impacted by recently declared federal disasters, with a focus on supporting those affected by Hurricane Barrel and Texas.

David: Going forward, we expect Q4 volumes on the clinical work to moderate slightly as a result of that pulling in from other quarters in Q3, but then remained steady for.

David Mutryn: We expect Q4 volumes on the clinical work to moderate slightly as a result of that pulling in from other quarters in Q3, but then remain steady for the foreseeable future. Thank you for that commentary.

David: For the foreseeable future.

Bruce Caswell: Got it. That was extremely helpful, so thank you for that commentary. Just a clarification, as we've gone into this period where the VA is grappling with some underfunding, have you seen yet, at least early indications in F4Q, of a material change in volumes, or has it been fairly steady so far and sort of waiting for that to ripple through?

Speaker Change: Got it that was extremely helpful. So thank you for that commentary I've just a clarification.

Bert Subin: Just a clarification as we've gone into this period where the VA is grappling with some underfunding. Have you seen yet, at least I guess early indications in F4Q of a material change in volumes, or has it been fairly steady so far and sort of waiting for that to ripple through? Really, the latter, Bert; it's been steady. Got it.

Speaker Change: As we've gone into this period, where the VA is grappling with some underfunding have you seen yet at least I guess early indications in <unk>.

Speaker Change: Of a material change in volumes or has it been fairly steady so far and sort of waiting for that to ripple through.

Bruce Caswell: At a time when so many companies, Maximus included, are considering the potential impact of artificial intelligence in our operations. Our work with FEMA is a general reminder that at the end of the day, connecting with a live agent to get the urgent and empathetic support needed is a priority of our government customers. We continue to be excited about the technology solutions we're developing and deploying under the leadership of our Chief Digital and Information Officer, Derek Pledger.

Bruce Caswell: Really, it's been the latter, Bert. It's been steady.

Speaker Change: Really the latter, but it's been steady.

Speaker Change: Got it.

Bert Subin: Okay, in terms of, I guess, for a follow-up, as we think about, you know, the early commentary for FY25, I mean, the book to bill you noted has been running a little lower, and I guess what gives you confidence that that's going to sort of snap back to a 1.0 or above and that'll give you sort of the ability to offset some of the revenue headwinds you talked about as you go into next year

Bert Subin: Okay, in terms of, I guess for a follow-up, as we think about, you know, the early commentary for F525, I mean, the book to Bill, you noted it's been running a little lower. And I guess what gives you confidence that that's going to sort of snap back to a 1.0 or above, that'll give you sort of the ability to offset some of the revenue ahead what he talked about as you go into make sure. Great, great question.

Speaker Change: Okay in terms of I guess for a follow up as we think about.

Speaker Change: The early commentary for FY 'twenty five I mean, the book to Bill you noted has been running a little lower.

Speaker Change: And I guess, what gives you confidence that that's going to sort of snap back to two or one <unk> or above.

Bruce Caswell: Last quarter, I mentioned our total experience management solution, or TXM. At Maximus, we take pride in our history of implementing complex public policy with efficient technology-based solutions. The contact center as a service or CCAS capability that TXM provides will be an added differentiator for Maximus as governments seek single providers to deliver secure, scalable, cloud-based solutions to serve employees and citizens. We are pleased with our growing pipeline, of TXM opportunities, in our Federal Services segment.

Speaker Change: That'll give you a sort of the ability to offset some of the revenue headwinds you talked about as you go into next year.

Bruce Caswell: Great question, and I guess, as you might expect, I have a bit of a multi-part answer, so bear with me. First of all, there are a number of dynamics in play. There are some macro dynamics, and then there are some dynamics related just to Maximus. The TSA Optima procurement, we commented on that because, in my prepared remarks, it's a bit of an extreme example, but it really demonstrates the propensity for opportunities in our business to shift to the right. And not just by quarters, but at times for a year or more than a year with multiple protests and so on and so forth.

Speaker Change: Great Great question.

Bruce Caswell: And I guess, as you might expect, that a bit of a multi-part answer, so bear with me. First of all, there are a number of dynamics in play. There are some macro dynamics in there, some dynamics related just to maximum. The TSA optimum procurement, we commented on that because in my prepared remarks, it's an extreme, bit of an extreme example, but it really demonstrates the propensity for opportunities in our business to shift to the right. And not just by quarters, but at times, you know, a year or more than a year, with multiple protests and so on and so forth.

Speaker Change: And I guess as you might expect to have a bit of a multipart answer so bear with me.

Speaker Change: First of all there are a number of dynamics in play there are some macro demand dynamics and then there are some dynamics related just to maximize the TSA optima procurement, we commented on that because.

Speaker Change: In my prepared remarks, it's a it's an extreme did have an extreme example, but it really demonstrates the propensity for opportunities in our business to shift to the right and not just by quarters, but at times, a year or more than a year with multiple protests and so on and so forth. So we yeah.

Bruce Caswell: We are also encouraged about the growing transition to modular solutions supporting the delivery of state Medicaid programs, in area we term Medicaid Enterprise Systems, or MES, in our U.S. Services segment. Guided by CMS's Medicaid Information Technology Architecture, or MITA, our MES solutions support the goal of best-in-class technology for specific Medicaid functions, reducing implementation risk, and program disruptions while providing greater configurability. With the deep understanding of Medicaid Systems and Policy, we are well positioned to support our state clients as they make this transition. The industry move to MES further validates our strategic areas of both technology modernization and customer services digitally enabled. We expect this to be a positive contributor over the coming years.

Bruce Caswell: So we see that dynamic, unfortunately, playing itself out. And you wonder at some point whether there will be a correction to that because customers become familiar with the companies that are protesting. And it's a small contracting community, but I won't comment further on that. I'll just say that it's illustrative of some of the considerations that impact the book to bill.

Bruce Caswell: So we, you know, we see that dynamic, unfortunately, playing itself out, and you wonder at some point whether that there'll be a correction to that because customers become familiar, you know, with the companies that are protesting, and that's, you know, and it's a small contracting community, but I won't comment further on that. I'll just say that it's illustrative of some of the considerations that impact the book to Bill. It also illustrates that what we're seeing is more of a volume issue than a win rate issue for new work from our perspective. Other market factors that include one important one is the target they've established for small business.

Speaker Change: We see that dynamic Unfortunately, playing itself out and you wonder at some point whether that.

Speaker Change: There'll be a correction to that because customers become familiar with the companies that are are protesting and that's you know and it's a small contracting community that all I won't comment further on that I'll, just say that it's illustrative of some of the considerations that impact the book to Bill. It also illustrates that what we're seeing is more of a volume issue than a win rate issue.

Bruce Caswell: It also illustrates that what we're seeing is more of a volume issue than a win rate issue for new work from our perspective. Other market factors that include, one important one is the targets that have been established for small business. The Biden administration has indicated that by FY25, they want to see 15% spending for small disadvantaged businesses.

Speaker Change: New work from our perspective other market factors that include.

Speaker Change: One one important one is the targets that have been established for a small business you know the by the administration has indicated that by FY 'twenty five they wanted up could see 15% spending for small disadvantaged businesses and that's up from our preliminary goal or that has been achieved at 12% in FY 'twenty. Three so we've seen a number of higher value awards that historically would have been competed full and open.

Bruce Caswell: You know, the Biden administration has indicated that by FY25, they want to see 15% spending for small disadvantaged businesses, and that's up from a preliminary goal that has been achieved at 12% in FY23. So we've seen a number of higher value awards that historically would have been competed full and open through agency level IDIQs get pulled back and then reclassified for small business. And we acknowledge, of course, that a thriving small business ecosystem is important for the dovecon sector. Larger companies therefore have to adapt through greater use, for example, of joint venture arrangements, and it can take time to establish those and get them in place for opportunities that you may have thought were going to be full and open that then shift to small business.

Bruce Caswell: And that's up from a preliminary goal that was achieved at 12% in FY23. So we've seen a number of higher-value awards that historically would have been competed full and open through agency-level IDIQs get pulled back and then reclassified for small business. And we acknowledge, of course, that a thriving small business ecosystem is important for the GovCon sector. Larger companies, therefore, have to adapt to greater use, for example, of joint venture arrangements.

Bruce Caswell: In the context of our Future of Health Strategic Pillar, we are pleased to see states acknowledging the benefits of bringing together assessment programs that have been historically disparate. We are working closely with our customers to consolidate assessment programs with the goal of a far better experience for the consumer and increased quality and efficiency for the state. We anticipate that much of our ongoing opportunity shaping will have top and bottom line impact in the medium term.

Speaker Change: Through agency level IDI cues get pulled back and then reclassify for small business and we acknowledge of course that is driving small business ecosystem is important for the Gov con sector large companies. Therefore have to adapt to greater use for example, or joint venture arrangements and it can take time to establish that doesn't get them in place for opportunity that you.

Bruce Caswell: And it can take time to establish those and get them in place for opportunities that you may have thought were going to be full and open, which then shift to small business. Another macro factor I would note is that the silver tsunami continues to be a real event in the government procurement community. Agencies are dealing with reduced capacity to effectuate procurements, leading to longer cycles. Now, in the near term, our book-to-bill ratio reflects a period of unusually low rebid volumes.

Bruce Caswell: Finally, in the U.S. Services segment, we are seeing a greater number of states interested in establishing their own state-based exchanges. Given the timing and complexity of moving from the Federal marketplace, we expect this pipeline dynamic will also contribute in the medium term.

Speaker Change: May have thought we're gonna be full and open that then shift to small business. Another macro factor I would notice that the silver tsunami continues to be a real event and the government procurement community agencies youre dealing with reduced capacity to effectuate procurements, we didnt go longer cycles now.

Bruce Caswell: Another macro factor I would note is that the silver tsunami continues to be a real event in the government procurement community. The agencies are dealing with reduced capacity to effectuate procurement, leading to longer cycles. Now, in the near term, our book-to-bill ratio reflects a period of unusually low rebit volumes.

Speaker Change: Near term our book to Bill ratio reflects a period of unusually low rebate volumes and so in terms of your question you know when will it snapped back in we'll see one again or better we do expect that to normalize in the coming quarters. As we worked through some of the rebates like a D. A M E. One that we've been discussing.

Bruce Caswell: And so in terms of your question of, you know, when will it snap back and we'll see one again, or better, we do expect that to normalize in the coming quarters as we work through some of the rebids like the BAMDE one that we've been discussing. But also, I'm pleased that for the rebids that we have had adjudicated, we've been maintaining our historical rebid win rates, It's also not inconsistent, all of that said, with some of the dynamics we've observed with even some of our counterparts in the industry.

Bruce Caswell: And so in terms of your question of, you know, when will it snap back and we'll see one again or better, we do expect that to normalize in the coming quarters as we work through some of the rebits like the D-A-M-D-E one that we've been discussing. But also, I'm pleased that for the rebits that we have had it shoot-a-cated, we've been maintaining our historical rebit win rates, which is great. It's also not inconsistent. All of that said, with some of the dynamics we've observed with even some of our counterparts in the industry. And we are very much focused on igniting the growth engine across our federal business.

Speaker Change: But also I'm pleased that for the rebates that we have had an adjudicated we've named than maintaining our historical we did our win rates, which is which is great.

Speaker Change: It's also not inconsistent all of that said with some of the dynamics, we've observed with even some of our counterparts in the industry and we are very much focused on igniting the growth engine across our federal business. This is not something new but I've commented on it a bit in prior calls and I wanted to offer a few more remarks in that regard we see.

Bruce Caswell: We anticipate our book to bill to remain below one through the end of our fiscal year and expect to see it rise again as the volume of adjudications, both rebeds and new work, is expected to increase over the next 12 months. Our pipeline at June 30 was $44.1 billion, compared to $37.8 billion reported in the second quarter of fiscal 2024. The June 30 pipeline is comprised of approximately $2.9 billion in proposals pending, $7.3 billion in proposals in preparation, and $33.8 billion in opportunities tracking.

Bruce Caswell: And we are very much focused on igniting the growth engine across our federal business. This is not something new, but I've commented on it a bit in prior calls, and I wanted to offer a few more remarks in that regard. We see a very strong pipeline out there and one that we need to capitalize on. And so we've been making investments now in filling out the teams of business development leaders and capture leaders underneath the market leads that I introduced on a prior call that we put in place in our civilian, defense, and health businesses.

Bruce Caswell: This is not something new, but I've commented on it a bit in prior calls, and I wanted to offer a few more remarks in that regard. We see a very strong pipeline out there and one that we need to capitalize on. And so we've been making investments now in filling out the teams of business development leaders and capture leaders underneath of the market leads that I introduced on a prior call that we put in place in our civilian defense and health businesses. We've, number two, as I mentioned previously, really driven close collaboration between the market leads and our technology teams to coin a phrase from our CDIO to shift left and ensure that we're shaping key pipeline opportunities, positioning our solutions, such as the Total Experience Management cloud-based telephony platform as an example in advance of procurement.

Speaker Change: A very strong pipeline out there and one that we need to capitalize on and so we've been making investments now and filling out the teams have business development leaders and capture leaders underneath of the market leads that I introduced on our prior call that we put in place in our civilian defense and health businesses. We've number two as I mentioned previously really driven.

Bruce Caswell: We've, number two, as I mentioned previously, really driven close collaboration between the market leads and our technology teams to coin a phrase from our CDIO to shift left and ensure that we're shaping key pipeline opportunities, positioning our solutions, such as the total experience management cloud-based telephony platform, as an example, in advance of procurements. And then, lastly, we're really optimizing our processes. Some of the initiatives we're focused on through our Maximus Forward broader initiative on transformation are investing in the tools for early opportunity qualification, proposal development, GWAC and IDIQ task order response execution, live test demonstration capability, and so forth.

Speaker Change: Most collaboration between the market leads and our technology teams to coin a phrase from our C. D. I O to shift left and ensure that we're shaping key pipeline opportunities positioning our solution such as the total experience management cloud based telephony platform. As an example in advance of procurement and then lastly, we're really optimizing our processes.

Bruce Caswell: One explanation for the increased pipeline is the CMS contact center operations or CCO contract valued at $6.6 billion, as expected. The RP was issued on May 16 and in June we filed a pre-award protest with the government accountability office. Based on processing times of the GAO, which can take up to 100 days, we expect to receive a response by September 30.

Bruce Caswell: And then, lastly, we're really optimizing our processes. Some of the initiatives we're focused on through our Maximus Forward broader initiative on transformation are to invest in the tools for early opportunity qualification, proposal development, GWAC and IDIQ task order response execution, live test demonstration capability, and so forth. And like others in the sector that you're well aware of, some of those areas are really excellent use cases for GNI applications, as well that we're investing in. So, you know, this is all in addition to the growth drivers and areas of opportunity that I mentioned in my prepared remarks, which we think will contribute in the medium term.

Speaker Change: The initiatives, we're focused on through our Maximus forward broader initiative on transformation or to invest in the tools for early opportunity qualification proposal development G. WAC and idea IQ task order response execution life tests demonstration capability, and so forth and like others in the sector that you're well aware of.

Bruce Caswell: As I've mentioned the last several quarters, we have received top customer satisfaction scores and, while we do not agree, with the stated purpose of this unprecedented rebid, we remain focused on delivering services, critical to tens of millions of seniors. We will simultaneously pursue all appropriate paths to achieve a fair resolution to this matter.

Bruce Caswell: And like others in the sector, which you're well aware of, several of those areas are really excellent use cases for Gen AI applications as well, which we're investing in. So this is all in addition to the growth drivers and areas of opportunity that I mentioned in my prepared remarks, which we think will contribute in the medium term. And so, if I, you know, look at all this together, I would say that gives us the confidence that we'll be seeing that book-to-bill snapping back and then heading north again in the coming quarter.

Speaker Change: Several of those areas are really excellent use cases for gen AI applications as well that we're investing in so you know this is all in addition to the growth drivers in areas of opportunity that I mentioned in my prepared remarks, which we think will contribute in the medium term and so if I look at all of this together I would say that's what gives us the confidence that will be.

Bruce Caswell: The jump in our third quarter pipeline is also driven by the inclusion of our medical disability exams or MDE contracts with the Veterans Benefit Administration or VBA.

Bruce Caswell: As we shared last quarter, the agency will be rebidding these contracts due to exceeding the ceilings on claim volume in the current contracts. Of our total pipeline of sales opportunities, approximately 55 percent represents new work. Additionally, 62 percent of the $44.1 billion total pipeline is attributable to our U.S, federal services segment.

Bruce Caswell: And so, if I, you know, look at all of this together, I would say that's what gives us the confidence that we'll be seeing that look to build, snapping back and then heading north again in the coming quarter. So with that, I maybe would leave you with one final thought, and that it's organic growth takes many forms at Maximus, and a key contributor to organic growth, of course, is always growth on base. And so then we see the pipeline and conversion and work awards as contributing as well to that. Collectively, that's what gets us to the organic growth rates that we've been talking about.

Speaker Change: Saying that book to Bill snapping back and then.

Speaker Change: Adding more if again in.

Speaker Change: In the coming quarters.

Bruce Caswell: So with that, I may leave you with one final thought, and that is that organic growth takes many forms at Maximus, and a key contributor to organic growth, of course, is always growth on base. And so then we see the pipeline, conversion, and work awards as contributing as well to that collectively. That's what gets us to the organic growth rates that we've been talking about. Thanks for your patience.

Speaker Change: So with that I will leave you with one final thought embedded organic growth takes many forms that Max mentioned, a key contributor to organic growth of course, there's always growth on base and so we then we'd see in the pipeline and conversion of New work awards as contributing as well to that collectively that's what gets us to the organic growth rates that we've been talking about.

Bert Subin: Thanks very much.

Matt: Thanks, Matt.

Bert Subin: I just have one more question for David. In terms of, you said sort of at least 10% margin for next year. Obviously, early comments are still going to do that process. But if we go back to the 22 and yesterday, sort of talking about a 9 to 12 meet the in term 10 to 14 longer term, I guess 9 to 12 near term 10 to 14 longer term. If we were to end up seeing Maximus closer to 10 O next year, is that going to be a function of, I guess, a combination of OUS running lower and then maybe running those multiple systems for the VA.

Speaker Change: I don't know.

Speaker Change: First ive always very helpful. I just have one more question for David.

Bert Subin: I just have one more question. In terms of, you said... 10% margin for next year. Obviously, it's early comments; we're still getting through that process. But if we go back, yesterday, sort of talking about a 9 to 12 medium term, 10 to 14 longer term, or I guess 9 to 12. 14 longer term, if we were to end up seeing Maximus, he would become the right person to rule it out, excluding some of the excess. Redetermination, so I'm just curious why you would potentially take a full point.

Speaker Change: In terms of you said sort of at least 10% margin for next year. Obviously, it's early comments, we're still getting through that process, but if we go back to the 22 Investor day sort of talking about a nine to 12 medium term 10 to 14 longer term.

Bruce Caswell: Delivery on our three to five-year strategic plan will continue to be our focus. Within an election year, we often find ourselves navigating many cross-currence driven by changes in policies and administrations, making for a more dynamic management environment for our business and industry. Current examples include the CCO rebid, as well as the ever-changing policies and updates announced by federal student-nader, FSA. As we enter this more dynamic period, I remain optimistic. Over the long run, a hallmark of the Maximus business model is our ability to navigate periods of volatility and view them as opportunities to demonstrate our capabilities to best serve citizens. In fact, we did just this during the COVID pandemic, when we pivoted to address immediate needs, capturing $1.7 billion of additional revenue.

Speaker Change: I guess I just wont near term 10 to 14 longer term. If if we were to end up seeing Maxim is closer to 10 O next year is that going to be a function of I guess, a combination of O U S running lower and then maybe running those multiple systems for the VA I'm just curious it seems like your progress on margins have been really good even.

David Mutryn: I'm just curious; it seems like your progress and margins have been really good, even excluding some of the access for redetermination. So I'm just curious why you would potentially take a full point step back.

Speaker Change: Excluding some of the excess redetermination.

Speaker Change: And so I'm just curious why you would potentially take a full point step back.

David Mutryn: Yeah, Bert, again, it's a wide range in early color. I wanted to acknowledge that there will just be a little pressure on margins as a result of that accretive revenue falling off. So I wanted to lay out the 10% as some level of assurance that it won't have a dramatic margin impact.

David Mutryn: Yeah, but again, it's a wide range in early color. I wanted to acknowledge that there will just be a little pressure to margin as a result of that accretive revenue falling off. So I wanted to lay out the 10% is some level of assurance that not a dramatic margin impact.

Speaker Change: Yeah, but again, it's a it's a wide range in early color I wanted to acknowledge that there there will just be a little pressure to margins as a result of that accretive revenue falling off.

Bert Subin: Great, thank you for all the questions.

Speaker Change: I wanted to.

Speaker Change: Lay out the 10% and some level of assurance.

Speaker Change: Not dramatic.

Bruce Caswell: We will continue to de-risk and sharpen our view forward as we move toward providing formal guidance in November.

Speaker Change: Margin impact.

Operator: Great. Thank you for all the questions.

Speaker Change: Great. Thank you for all the questions.

Operator: Thank you.

Bruce Caswell: As I near the end of my remarks, I'd like to celebrate the recent recognition we receive from Time Magazine. As part of its inaugural list, recognizing companies that are setting benchmarks in the U.S., Maximus was named one of America's best mid-sized companies. The award recognizes companies based on three elements, employee satisfaction, revenue growth and transparency of sustainability efforts. This recognition from Time underscores Maximus' role as a leader among America's mid-sized companies.

Speaker Change: Thank you.

Operator: Thank you. Ladies and gentlemen, this brings us to the end of the question and answer session and concludes today's event. We thank you for your participation and interest in Maximus. You may disconnect your lines and 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 and concludes today's event.

Operator: Ladies and gentlemen, this brings us to the end of the question-and-answer session and concludes today's event. We thank you for your participation and interest in Maximus. You may disconnect your lines and log off the webcast at this time, and enjoy the rest of your day.

Speaker Change: Thank you for your participation and interest in an accident you may disconnect your lines and log off the webcast at this time and enjoy the rest of your day.

Speaker Change: [music].

Speaker Change:

Bruce Caswell: Congratulations to the entire team at Maximus for achieving this milestone. In closing, I remain pleased with the progress we're making in many of the strategic areas of our business. Most notably, I continue to be impressed with the strong coordination between our enterprise technology and operations teams, who are collaborating in new and exciting ways tied directly to our top pipeline opportunities. As we strengthen relationships with current and new customers, we're helping to shape opportunities and provide technology capabilities that will underpin the delivery of government programs well into the future, while supporting the early successes I've mentioned today, the greater benefits of these efforts will ultimately be realized in the next 12 to 24 months.

Operator: And with that, we'll open the line for Q&A.

Operator: Operator? Thank you.

Operator: The floor is now open for questions. If you would like to ask a question, please press star one on your telephone keypad at this time. 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. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys.

Operator: We do ask you please them yourself to one question and one follow up before rejoining for any additional questions. Again, that's star one to register a question at this time.

Charlie Strauzer: Today's first question is coming from Charlie Strauzer of CJA Securities. Please go ahead. Hi, good morning. Just[inaudible] Great, thank you, and just in years to guidance that we could, looking at Q4 and the early color you gave us for 25, it's a little bit more color as to the incremental revenue not expected to reoccur in 25. Where does the implied growth rate behind that, and the comments that you said it may look similar to the latest revenue guidance are we talking kind of, you know, flat year over year, low single digit growth, is this a performer basis, I kind of think.

Charlie Strauzer: Sure, yeah, so for, for fiscal year 24, you know, with less than a quarter remaining, our visibility is very strong. We feel good and confident and, you know, raising that guidance both as a result of the Q3 overperformance and continued momentum in Q4. Looking at 25, yes, my commentary was that our current view, which, let me re-emphasize as an early view, we'll be giving our formal guidance in November. But our early view is that fiscal year 25 would be roughly similar to where we now expect fiscal year 24 to land, which of course is now $100 million higher than our prior guidance.

Charlie Strauzer: We've been consistent that we do expect some top and bottom line moderation in U.S, services in particular as a result of the re-determination volumes that were historically high given the three years of continuous Medicaid enrollment. And while we've maybe on prior calls focused a bit more on the bottom line and margin impact of that surge in volumes, we do recognize there's a top line impact as well, which we've wanted to call out here.

Charlie Strauzer: So the, the strength in fiscal year 24 has been really in both U.S, segments, U.S, services and U.S, federal, but the portion that's not expected to occur is concentrated in U.S, services, much of that related to the re-determination volumes, which we talked about. But one last point, while we reiterate our beliefs that long-term demand for our business will continue to grow and support mid-single-digit organic growth, there can be fluctuations year-to-year bearing in mind that we've, we're on track to deliver a second year of high single-digit organic growth at 9% at the midpoint of our guidance. Great, thank you. This is very helpful. Great, thanks, Charlie. Thanks, question. Thank you.

Bert Subin: The next question is coming from Bert Subin of Stiefel.

Bert Subin: Please go ahead. Hey, good morning, and thank you for the questions. Sure.

Bert Subin: Good morning, Bert. Maybe just to, I guess, pick up there as we think about, you know, the potentially the excess. It seems like you're mostly calling out the re-determination side. I guess if we think about VES and the VA side of things, you know, substantial growth in the fiscal third quarter and it helps boost your margin quite a bit for U.S, federal. I guess next week, I think we're looking at an industry day for that re-bid, and there's an expectation that it could be an RFP next month and then an award by November.

Bert Subin: Obviously right now, the VA is grappling with some funding issues. Can you just give us your thoughts on maybe what your near-term expectations are for that business and then what they are as you think about FY25? because it would seem like, as you roll out automation tools, that should be a pretty solid margin boost next year that would help potentially offset, which you've been at least partially offset the tailwinds that are turning the headwinds into re-determination.

Bert Subin: So just curious if you could provide some color there. A lot of dynamics there, Bert, and it's a great series of questions, compound questions. So the first piece, I'll start and then I'll turn it over to David to comment a little bit more on the margin expectations. So, first of all, as it relates to the review, you're absolutely correct. Our information is similar to yours, in that there was a revised RFI that was issued in late June, and the intent of that, as expressed in the RFI, is to award a two-year contract, and these would be contracts for regions one through four of the MDE program.

Bert Subin: The RFP is expected to be released in August, submittals due in September, and an award before November 1st. Interestingly, the period of performance will be from November 1st, 2024, through October 31st, 2026. So two-year contract award there. You know, further, not much more to comment on the rebate, except to just reiterate, I think, what all in the industry are quite aware, which is that they're recompeting this due to the volume limits that have been approached or being approached on the existing contract, and provide extra capacity to the vendors.

Bert Subin: We can't comment any more specifically on the rebate dynamic, even how imminent it is, but you also talked a little bit about the budget. The increased case loaded disability claims that have resulted from the packback to put pressure, obviously, not just on the funding for the program to complete C&P exams for the MDE process, but also, I would say, for the benefits themselves for veterans. And it's broadly by partisan-supported program, and while the budget request was not acted on prior to adjournment, presently, we think that it will continue to very much be a congressional priority in the near-term, to prevent any shortfall for the VA in FY24.

Bert Subin: I think my recollection is that the budget request is just $3 billion for FY24, and then another 12 billion or so for FY25, which is an important point. It's a biennial budget process that the VA has. So the request, when it's acted on by Congress, would provide that bridge funding to cover our next fiscal year, obviously, contemporaneous with theirs as well for FY25. So that would address the issues related to the rebate in the budget.

Bert Subin: Let me turn to volume expectations, technology, and then give it over to David. From a volume standpoint, I think we all follow, obviously, the public information that the Veterans Benefit Administration publishes on the claims inventory. And it occurs to me that while it's come down a little bit in recent months, it remains well above the prior historical peak that was a dozen years ago. And so when we talk about the pace at which a new equilibrium will be reached, our view is that it's two things.

Bert Subin: First, the ongoing PAC Act volumes that will become part of the process, and it's important to note that Veterans have the ability to be seen and in many cases are seen and have exams related to their conditions more than once during their lifetimes, because if they have fluctuating conditions and their circumstances change, they get seen again. So there will be a new equilibrium, but that equilibrium we expect would be at a higher level than the prior equilibrium.

Bert Subin: We also would say that there's certainly sufficient volumes in the system to sustain the production level that we've been seeing at least through our fiscal year 2025. So I'll note that our early color on FR-25 reflects that dynamic. And we remain committed and of the viewpoint that volumes would remain elevated, but also note that the significant ramp up in capacity across the system has really occurred at this point, so that then bring this to technology your last point.

Bert Subin: Technology is certainly a major investment that we're making, and I'm excited about it because it will have the ability to really improve the veteran experience. There are areas like self-scheduling that need further automation, and certainly providing veterans the visibility to the status of their claims as they walk their way through the process will be very important elements. The investments we're making in technology, though, very prudently, require that we would operate both a legacy system environment as well as the new system environment in parallel during a certain period to assure a very clean cut over into the new system environment.

Bert Subin: And so we would anticipate the economic benefits of the technology introduction to really be, if anything, backhand loaded in the F-25 period, but I'll pause at this point and turn it to David for further commentary. Yeah, thanks. There's just a little more commentary on the Q3 margins in the federal segment, since this is the component. So I mentioned in that the paragraph marks that is one driver was the unusual mix of higher performance-based revenue and lower cost-plus revenue.

Bert Subin: I probably shouldn't even say unusual because we have seen this somewhat a seasonal impact with the lower cost-plus revenue in the third quarter, which is occurred in the past. So that played a part in a higher margin this quarter. And then in addition, our assessment programs did have particularly strong volume. Our production was strong and essentially some volume was pulled into Q3 from other quarters, which drove performance on both the top and bottom line.

Bert Subin: So it's boosted going forward. We expect Q4 volumes on the clinical work to moderate slightly as a result of that pulling in from other quarters in Q3, but then remain steady for the foreseeable future. Thank you for that commentary. Just a clarification as we've gone into this period where the VA is grappling with some underfunding, have you seen yet, at least I guess early indications in F4Q of a material change in volumes or has it been fairly steady so far and sort of waiting for that to ripple through?

Bert Subin: Really the latter, Bert, it's been steady. Got it. Okay, in terms of, I guess for a follow-up, as we think about, you know, the early commentary for F525, I mean, the book to Bill, you noted, it's been running a little lower. And I guess what gives you confidence that that's going to sort of snap back to a 1.0 or above, that'll give you sort of the ability to offset some of the revenue ahead what he talked about as you go into make sure.

Bert Subin: Great, great question. And I guess as you might expect that, a bit of a multi-part answer so bear with me. First of all, there are a number of dynamics in play. There are some macro dynamics in there, some dynamics related just to maximum. The TSA optimum procurement, we commented on that because in my prepared remarks, it's an extreme, bit of an extreme example, but it really demonstrates the propensity for opportunities in our business to shift to the right.

Bert Subin: And not just by quarters, but at times, you know, a year or more than a year, with multiple protests and so on and so forth. So we, you know, we see that dynamic unfortunately playing itself out, and you wonder at some point whether that, there'll be a correction to that because customers become familiar, you know, with the companies that are protesting and that's, you know, and it's a small contracting community, but I won't comment further on that.

Bert Subin: I'll just say that it's illustrative of some of the considerations that impact the book to Bill. It also illustrates that what we're seeing is more of a volume issue than a win rate issue for new work from our perspective. Other market factors that include one important one is the target they've established for small business. You know, the Biden administration has indicated that by FY25, they want to see 15% spending for small disadvantaged businesses and that's up from a preliminary goal that has been achieved at 12% in FY23.

Bert Subin: So we've seen a number of higher value awards that historically would have been competed full and open through agency level IDIQs get pulled back and then reclassified for small business. And we acknowledge, of course, that a thriving small business ecosystem is important for the dovecon sector. Larger companies therefore have to adapt through greater use, for example, of joint venture arrangements and it can take time to establish those and get them in place for opportunities that you may have thought were going to be full and open that then shift to small business.

Bert Subin: Another macro factor I would note is that the Silver tsunami continues to be a real event in the government procurement community. The agencies are dealing with reduced capacity to effectuate procurement leading to longer cycles. Now, in the near term, our book to Bill ratio reflects a period of unusually low rebit volumes. And so in terms of your question of, you know, when will it snap back and we'll see one again or better, we do expect that to normalize in the coming quarters as we work through some of the rebits like the D-A-M-D-E one that we've been discussing.

Bert Subin: But also, I'm pleased that for the rebits that we have had it shoot-a-cated, we've been maintaining our historical rebit win rates, which is great. It's also not inconsistent. All of that said, with some of the dynamics we've observed with even some of our counterparts in the industry. And we are very much focused on igniting the growth engine across our federal business. This is not something new, but I've commented on it a bit in prior calls and I wanted to offer a few more remarks in that regard.

Bert Subin: We see a very strong pipeline out there and one that we need to capitalize on. And so we've been making investments now in filling out the teams of business development leaders and capture leaders underneath of the market leads that I introduced on a prior call that we put in place in our civilian defense and health businesses. We've, number two, as I mentioned previously, really driven close collaboration between the market leads and our technology teams to coin a phrase from our CDIO to shift left and ensure that we're shaping key pipeline opportunities, positioning our solutions, such as the total experience management cloud-based telephony platform as an example in advance of procurement.

Bert Subin: And then, lastly, we're really optimizing our processes. Some of the initiatives we're focused on through our Maximus Forward broader initiative on transformation are to invest in the tools for early opportunity qualification, proposal development, GWAC and IDIQ task order response execution, live test demonstration capability, and so forth. And like others in the sector that you're well aware of, some of those areas are really excellent use cases for GNI applications, as well that we're investing in.

Bert Subin: So, you know, this is all in addition to the growth drivers and areas of opportunity that I mentioned in my prepared remarks, which we think will contribute in the medium term. And so, if I, you know, look at all of this together, I would say that's what gives us the confidence that we'll be seeing that look to build snapping back and then heading north again in the coming quarter. So with that, I maybe would leave you with one final thought and that it's organic growth takes many forms at Maximus and a key contributor to organic growth of course is always growth on base.

Bert Subin: And so then we see the pipeline and conversion and work awards as contributing as well to that collectively, that's what gets us to the organic growth rates that we've been talking about. Thanks very much. I just have one more question for David in terms of you said sort of at least 10% margin for next year, obviously early comments are still going to do that process. But if we go back to the 22 and yesterday, sort of talking about a 9 to 12 meet the in term 10 to 14 longer term, I guess 9 to 12 near term 10 to 14 longer term.

Bert Subin: If we were to end up seeing Maximus closer to 10 O next year, is that going to be a function of I guess a combination of OUS running lower and then maybe running those multiple systems for the VA. I'm just curious, it seems like your progress and margins have been really good, even excluding some of the access for redetermination. So I'm just curious why you would potentially take a full point step back.

Bert Subin: Yeah, but again, it's a wide range in early color. I wanted to acknowledge that there will just be a little pressure to margin as a result of that accretive revenue falling off. So I wanted to lay out the 10% is some level of assurance that not a dramatic margin impact. Great. Thank you for all the questions. Thank you.

Operator: Ladies and gentlemen, this brings us to the end of the question and answer session and concludes today's event. We thank you for your participation and interest in Maximus.

Operator: You may disconnect your lines and log off the webcast at this time and enjoy the rest of your day.

Q3 2024 Maximus Inc Earnings Call

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