Q2 2025 Maximus Inc Earnings Call

Speaker Change: Greetings and welcome to the Maximus Fiscal 2025 Second Quarter Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation.

Speaker Change: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.

It is not my pleasure to introduce your host [inaudible]

Jessica Batt, Vice President of Investor Relations for Max

Thank you, Miss Bat, you may begin again.

Bruce Caswell: Good morning and thanks for joining us. With me today is Bruce Caswell, President and CEO, David Mutryn, CFO, and James Francis, Vice President of Investor Relations.

Bruce Caswell: 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 prediction.

Bruce Caswell: 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, thank you and thank you.

Bruce Caswell: 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: 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 in identifying trends, gauging the quality of our financial performance and providing meaningful period to period comparisons.

Bruce Caswell: for a reconciliation of the non-gat measures presented. Please see the company's most recent forms, thank you, and thank you. And with that, I'll hand the call over to Bruce.

Thanks Jessica and good morning.

Speaker Change: Adjusted EBITDA margin was 13.7% in Q2, and is in the upper end of our near-term guidance range, showing we're delivering on an earlier commitment.

Speaker Change: Before diving into an update on the business, I want to address the macro environment in which we are operating.

Speaker Change: As you know, the Department of Government Efficiency or Doge operates within the Executive Office of the President, working closely with the Office of Management and Budget, or OMB.

Speaker Change: The Doge began its work shortly after the inauguration and continues its efforts to streamline government, reflecting the administration's priorities.

Speaker Change: In February when the Doge was beginning their work, we noted that we share the administration's goal of modernizing programs through technology, standardization and performance-based contracting to deliver high quality services in an accountable manner.

Speaker Change: While our sector continues to operate as expected in an environment of some uncertainty, we believe this also presents an important opportunity to showcase our ideas on more effective models for the delivery of critical citizen services.

Speaker Change: Our teams are well prepared for this moment, as the Doge objectives align with many of our recent Maximus Forward initiatives of which I've spoken on prior calls.

Speaker Change: Under our Maximus Forward transformation, we questioned traditional structures and processes sought to apply technology and innovation to drive more efficient operations and focused on customer satisfaction.

Speaker Change: Further, we've emphasized employee engagement and enabled critical reinvestment in the business.

Speaker Change: In the context of applying a similar mindset to the work we do on behalf of our customers, let me share two recent examples of which I'm especially proud.

Speaker Change: First, on our Federal No Surprises Act contract, where we provide arbitration services to resolve out-of-network payment disputes between insurance providers and care facilities. We recently implemented an AI solution that is designed to streamline the independent dispute resolution process.

Speaker Change: This greatly enhanced process efficiency, cutting down on manual effort and boosting throughput. This automation helped clear a backlog of disputes, insured SLA targets were met, reduced temporary labor costs, provided more meaningful work for our employees, and supported significant growth in project volumes.

Speaker Change: Secondly, working with the Department of Veterans Affairs or VA, we've invested significantly to accelerate case preparation on our MDE contract.

Speaker Change: In the past, organizing and categorizing the information in medical records was a labor-intensive and highly repetitive process, with case files averaging between 2,000 and 3,500 pages.

Speaker Change: Given the importance of this program to the VA and our commitment to provide timely service to our nation's veterans, there was an urgent need for investment in automation.

Speaker Change: By leveraging tools such as AWS GovCloud and Amazon Textract, Maximus developed a proprietary AI and machine learning-powered records processing system.

Speaker Change: Since implementation, we have reduced the time required for manual case preparation, enabling us to take on greater volumes in the wake of the Pact Act.

Speaker Change: This solution has also enabled us to shift labor to higher value work, such as quality assurance, contributing to the VA's objective of faster claim resolution for our deserving veterans.

Speaker Change: These are hallmarks of our business model and are best realized when we are aligned with our customers on a common mission objective, in this case providing the best service possible for those who served our nation.

Speaker Change: The implementation of new innovative solutions for these two federal customers are two positive examples of the ways in which we are collaborating and executing unshared priorities.

Speaker Change: We believe these also serve as solid proof points that our investments in AI and our people are paying off.

Speaker Change: We're working closely to support our customers and doge representatives to address questions on certain contracts and program operations. In some cases, it has led to further discussions about opportunities for efficiencies, consolidation and innovation.

Speaker Change: We will continue to be responsive to questions from the administration as they arise and welcome opportunities to demonstrate how our work delivers value for American taxpayers in support of over 100 million citizens in critical program areas like veterans benefits, student loan servicing and Medicare.

Speaker Change: The impact of doge decisions on the business to date have been limited to a handful of small contracts where a budget or scope has now been modified, some of which were already scheduled

Speaker Change: More specifically, to date, these actions are estimated to total about $4 million in FY25 revenue, a diminimous figure on our base of $5 billion plus dollars of revenue.

Speaker Change: That said, the environment in which we are operating continues to evolve, and we are maintaining a balanced stance of both supporting our customers in response to inquiries, as well as leaning into opportunities to shape the future of certain programs.

Speaker Change: As an example, like others in our sector, we have fielded requests for pricing concessions on certain contracts which leads to a process of mutual negotiation and due course.

Speaker Change: We recognize that this is an ongoing process which may lead to further requests and reflects the systematic review of government spending that has been a communicated priority of the administration.

Speaker Change: Another proof point of our alignment with the administration is at the state level. Recently, federal guidance was issued to reaffirm state's authority to use private sector partners that meet merit system principles.

Speaker Change: This framework, administered by the Office of Personnel Management or OPM, is fundamental to the agency's mandate to ensure transparency, fairness, and merit-based management of employees across the public and private sectors.

Speaker Change: The challenge for states is that managing growing complex populations often exceeds the realistic constraints of a government workforce, leading to reduced service quality and a poor citizen experience.

Speaker Change: For many states, scaling up a permanent workforce is neither a practical nor cost effective solution.

Speaker Change: Maximus was the first organization in our sector to certify that its systems of personnel management meet the high standards government demands of its own workforce, fully complying with government merit system principles.

Speaker Change: We refer to the federal guidance as flexibility to contract, because from the state customer perspective, they can choose what's in their interest, ideally balancing their workforce to perform inherently governmental functions while partnering with private sector providers like Maximus.

Speaker Change: With the anticipated demand for services likely increasing in the near future, as states contemplate possible changes to Medicaid and other benefit programs, there is no better time to have this flexibility.

Speaker Change: We believe our track record in this area is unmatched. During the pandemic, flexibility to contract guidance was attached to emergency pandemic response bills, which enabled the private sector to support states in processing claims for unemployment insurance benefits.

Maximus became the leading provider of these services.

Speaker Change: With flexibility to contract reactivated, we are once again supporting our state customers as the examined the benefits of a hybrid public-private model.

Speaker Change: Last quarter, I had discussed the early developments in the area of Medicaid, specifically potential changes to reduce the level of federal Medicaid spending.

Speaker Change: As we stand here today, three months later, there's been little actionable movement in this area, but the contours of possible legislative actions are emerging.

Speaker Change: While it's too early to speculate on what may make its way into a final bill, interest remains high in areas that include program integrity and work requirements.

Speaker Change: Therefore, a reduction in Medicaid recipients may not necessarily decrease consumer engagement, especially if eligibility verification or activity reporting requirements become more frequent than today.

Speaker Change: Additionally, in many of our largest states, we also manage state-based exchanges where customers can enroll if they no longer are eligible for Medicaid. This helps maintain our ongoing engagement with those consumers.

Speaker Change: Now, let me turn to the business. Beginning with the federal segment, I am pleased to report that the strategic intent of the 2021 acquisition of veterans' valuation services or VES is manifesting beyond our primary goal of becoming a valued partner to the VA.

Speaker Change: The synergies in our pipeline, meaning opportunities that neither legacy company could successfully win, are coming to bid in the near future.

Speaker Change: As a combined entity with the period of proven success behind us, we believe we have qualifications and credibility to be a serious competitor on new programs.

Speaker Change: Combined with the solid, deep customer relationships we've built over time, we're optimistic in our ability to drive scale on new performance and volume-based contracts now in the capture phase.

Speaker Change: Within the U.S. Services segment, our clinical assessments business and programs are particularly strong and continue to see solid growth.

Speaker Change: We've secured a number of new and rebate contracts in the fiscal year which are proof points of a growing clinical services pipeline and our continued delivery on the strategic pillar we've referred to as future of health.

Speaker Change: Two recent awards in the clinical space include the following. First, in the state of Kansas, we recently secured new work with the Department for Aging and Disability Services to operate the statewide home and community-based services or HCBS assessment organization.

Speaker Change: Our team of clinicians will conduct health assessments to support Kansas's goals for integrated solutions that promote the well-being of people in the physical disability, frail elderly, and brain injury, HCBS wafer programs.

Speaker Change: as well as the programs of all-inclusive care for the elderly known as PACE.

Speaker Change: Maximus will collaborate with community agencies and organizations to improve access to long-term services and supports. We believe this win with an estimated total contract value or TCV of $40 million over a five and a half year period is a solid example of our expertise and growing reputation in state clinical assessments.

Speaker Change: Second, in the state of California, we recently secured the rebid of our independent medical review program.

Speaker Change: This project showcases our partnership with states, in this case between California and Maximus where we conduct independent medical reviews related to disputes between physicians and claims administrators about necessary medical treatment for injured workers.

Speaker Change: New Assessment Programs have kicked off in three additional states, all of which contribute to the bottom line this fiscal year.

Speaker Change: We continue to invest in the growth and optimization of the clinical assessments business through new technology and capabilities, reaffirming our commitment to the future of health strategic

Speaker Change: I would now like to share our pipeline and the trends we're seeing in Federal Procurement. As has been the case for some time now, we're seeing delays in Federal Procurement processes mostly in civilian agencies, resulting in new awards pushing to the right.

Speaker Change: For incumbents, a potential silver lining to these delays are the unexpected bridge or extension contracts on current programs.

Speaker Change: In one such instance, we were recently granted $189 million bridge contract on a program for an 18-month period.

Speaker Change: Consistent with the administration's focus on innovation through performance-based contracting that leverages commercial solutions. Our teams are shaping tomorrow's opportunities.

Speaker Change: We call this shifting left, and our pipeline is building with opportunities to which we believe our capabilities are well positioned Proposals and prep and proposal submitted in aggregate are 25% higher than last quarter, which demonstrates many government customers moving forward with procurements [inaudible]

Speaker Change: We are optimistic that given the recent prioritization of federal procurement reform, the procurement process is anticipated to improve. Now let me share some of our more common data points for awards reporting and the pipeline.

Speaker Change: Through the second quarter of fiscal year 2025, signed awards totaled $2.9 billion of total contract value.

Speaker Change: Further, at March 31st, there were 451 million dollars worth of contracts that had been awarded but not yet signed.

Speaker Change: These awards translate into a book to bill of approximately 0.8 times using our standard reporting for the trailing 12-month period.

Speaker Change: This represents a step up from our book to bill at September 30th and tracks to our expectations for an improved metric in this fiscal year. As we've mentioned on prior calls, the lower book to bill is largely due to the lower than normal period of rebate activity we experienced in fiscal year 2024.

Speaker Change: With many of our larger rebits behind us and well secured, we expect to continue seeing a positive trend in this metric.

Speaker Change: Our total pipeline of sales opportunities at March 31st was $41.2 billion, compared to $41.4 billion reported at December 31st.

Speaker Change: The current pipeline is comprised of approximately $2 billion in proposals pending $3 billion in proposals and preparation and $36 $3 billion and opportunities we are tracking.

Speaker Change: Of our current pipeline approximately 55% represents new work. Additionally, 60% of the $41.2 billion total pipeline is attributable to our U S. Federal services segment.

Speaker Change: In closing, we're proud to share that Maximus has once again been recognized by fortune as one of America's most innovative companies a distinction that places us among the top 300 companies nationwide known for shaping the future through product excellence operational innovation and a strong internal culture of creativity. This recognition.

Speaker Change: Acknowledges our track record in deploying AI robotic process automation and advanced analytics to help government agencies deliver faster more efficient services to the people who need them most and.

David: With that I'll turn the call over to David.

David: Thanks, Bruce and good morning, we're pleased to report second quarter results that exceeded our expectations. Thanks to outstanding execution and ongoing demand for our services. This is driving the second consecutive raise to our fiscal 'twenty twenty-five revenue and earnings guidance, we view the business as being in a healthy state.

David: <unk>, resulting from our demonstrated ability to deliver critical citizen services and a high quality manner. Looking ahead, we believe our pipeline of opportunities remains healthy and as Bruce noted we have seen an uptick in our business proposals volume as we pursue those opportunities to fuel our growth in the years to come.

Speaker Change: Let me take you through quarterly results, where Maximus reported revenue of $1.36 billion for the second quarter of fiscal year, 2000, and twenty-five representing 1.0% year over year growth or a 3.0% on an organic basis.

Speaker Change: The U S. Federal services segment was the primary driver of growth in the quarter, which offset the expected normalization of revenue in the U S services segment following last year's over performance from the Medicaid unwinding effort.

Speaker Change: The outside the U S segment also posted solid mid single digit organic growth.

Speaker Change: Adjusted EBITA margin was 13.7% and adjusted EPS was $2.01 for the quarter, which compares to 11.7% and $1.57 respectively for the prior year period.

Speaker Change: Turning to results for the U S. Federal services segment revenue increased 10.9% to $778 million, which was all organic.

Speaker Change: Similar to last quarter revenue growth stemmed from multiple areas throughout the segment, including clinical assessments, which were particularly strong this quarter across several contracts.

Speaker Change: The operating income margin for this segment in the second quarter was 15, 3% as compared to 11.9% in the prior year period.

Speaker Change: The strong margins resulted from operational efficiencies, coupled with the opportunity to process extra volumes to meet higher assessment demand the outsized volumes and certain smaller clinical programs helped to bolster this quarter's margin and are expected to continue but not to this extent for.

Speaker Change: For the U S services segment revenue decreased as expected to $442 million as compared to the prior year period revenue of $486 million.

Speaker Change: The change in revenue reflects the prior year periods outsized growth from excess volumes tied to the now completed Medicaid unwinding exercise.

Speaker Change: The segment's operating income margin for the second quarter was 12.2% and compares to 14.0% for the prior year period, resulting from the excess volumes.

Speaker Change: This quarter's margin demonstrated the sequential margin improvement over the first quarter that we had anticipated with our full year outlook for this segment remaining unchanged.

Speaker Change: Turning to the outside the U S segment revenue decreased as anticipated to $142 million for the quarter and driven by previously divested businesses that were present in the prior year period.

Speaker Change: Meanwhile, organic growth was 4.6% thanks to the healthier components of the segment that remain.

Speaker Change: The segment's operating income margin this quarter was 3.4% and compares to 0.4% in the prior year period, we have a continued goal to improve the profitability profile of this segment. This does not rule out further reshaping actions, though we do not presently see any significant area of the segment that is performing.

Speaker Change: Below our expectations.

Speaker Change: Turning to cash flow items cash provided by operating activities with $43 million and free cash flow was $26 million for the second quarter of fiscal 2000 and twenty-five the lighter cash flow stemmed from a period of lighter collections, which we believe to be temporary and.

Speaker Change: This is reflected in a higher days sales outstanding or DSO that were 73 days for this quarter, which compares to DSO of 62 days for the prior quarter.

Speaker Change: The primary driver of the higher DSO is one of our large state based programs that has administrative delays tied to our pending extension of our work. This one item was worth seven days of DSO alone. We anticipate this extension will be finalized and executed this fiscal year, which would catch up the delayed.

Speaker Change: Collection and benefit cash flows in the fourth quarter of the fiscal year. The remaining few days increase is across the portfolio and not tied to any one customer set to international government customers have been responsible for a slight increase as well as one or two agencies on the U S. Federal side of the business, where we are seeing.

Speaker Change: <unk> of delays given the dynamic environment.

Speaker Change: Over the course of this recently completed quarter and in the near term ahead, we continue to take a disciplined approach to capital allocation.

Speaker Change: While we have not witnessed widespread payment disruptions, we do recognize the potential for broader delays and have planned accordingly. Additionally.

Speaker Change: Additionally, we keep our interests focused on potential opportunities on the M&A front. For example, we may be interested in a tuck in type deal, especially if the valuation where attractive in the present environment.

Speaker Change: Let me turn to our share repurchase activity, which totaled approximately 947000 shares for $73 million. During the second quarter. This includes the 700000 shares in January that we announced on the previous call. We have approximately $66 million remaining under the current $200 million board of.

Speaker Change: Actors authorization and will remain opportunistic in our approach to repurchasing additional shares in the future.

Speaker Change: We ended the second quarter with total debt of $1.51 billion, which yields and net total leverage ratio of 1.9 times this quarter and below our stated target range of two to three times as a reminder, this ratio as our debt net of allowed cash to consolidated EBITDA for the last 12 months.

Speaker Change: As calculated in accordance with our credit agreement.

Speaker Change: I'll finish by covering our second consecutive raise to fiscal year 'twenty twenty-five guidance, our intent with the new revenue and earnings guidance is to reflect the over performance in Q2 and effectively maintained prior guidance for Q3 and Q4.

Speaker Change: As Bruce expressed we continued to take a cautious approach given the dynamic environment, particularly in the U S Federal segment for.

Speaker Change: For revenue our guidance increases by $50 million to yield a range of $5.25 billion to $5.4 billion.

Speaker Change: Our implied full year organic growth rate now stands at about 2% over the prior year.

Speaker Change: Our full year adjusted EBITDA margin guidance for fiscal year 'twenty twenty-five is now, 11.7%, which is 50 basis points up from the previous guidance.

Speaker Change: Our adjusted EPS guidance increases by 40.

Speaker Change: To range between $6.30 and $6 60 per share.

Speaker Change: The 40 cents represents the over performance relative to our forecast for Q2.

Speaker Change: We are maintaining our free cash flow guidance of $355 million to $385 million, which reflects a slightly higher DSO assumption at year end. We currently anticipate DSO, peaking next quarter and then expect a normalization in our fourth quarter when as I said, we expect the state extension to be <unk>.

Finalized and collections catching up.

Speaker Change: At this stage of the year, our projections are based on existing contracts said differently. We are not dependent on new work to deliver on this year's guidance.

Speaker Change: Let me add some color on segment margin assumptions. The U S. Federal segment is now forecasted to deliver between 12.5% and 13% on a full year basis, meaning the back half of the year is expected to be between 11, and 12% and reflect a more typical operating profile following an exceptionally strong.

Speaker Change: Wrong first half of the fiscal year.

Speaker Change: Both the U S services segment and outside the U S segment margin expectations are unchanged at 11% and between three and 5% respectively for the full year.

Speaker Change: We expect interest income of approximately $78 million and our full year tax rate expectation of between 28 and 29% is unchanged as.

Speaker Change: As a reminder, the higher tax rate on a full year basis is tied to the divestiture related charges in the first quarter. The effective tax rate in Q3, and Q4 is expected to be between 25 and 26%.

Speaker Change: Finally on a full year basis, the weighted average shares are expected to be about 58 million shares.

Speaker Change: I'll conclude by recognizing that two consecutive quarters of over performance are a testament to our operation teams focus and commitment to successful delivery of essential programs on behalf of government and enabled by our portfolio of performance based contracts that align us with our customers and demonstrate efficient spend.

Speaker Change: And with that we will open the line for Q&A operator.

Speaker Change: Thank you.

Speaker Change: At this time, we'll conduct a Q&A session to ask a question press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two tier move yourself from the queue.

Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Speaker Change: And our first question comes from Charlie Strausser with C. J S Securities. Please state your question.

Speaker Change: Hi, good morning.

Speaker Change: Good morning, Charlie.

Speaker Change: Hum.

Speaker Change: Question for David I guess on this one.

Speaker Change: Yet the guidance obviously.

Speaker Change: Very strong quarter it looks like.

Speaker Change: Basically encompassing.

Speaker Change: In the quarter.

Speaker Change: Back half of the year largely unchanged.

Speaker Change: How should we think about.

Speaker Change: That.

Speaker Change: Also the weightings between Q3 and Q4.

Speaker Change: Yes.

Speaker Change: The segments how.

Speaker Change: How should we think about that as well.

Speaker Change: Okay.

Speaker Change: Sure. Thanks, Charlie.

Speaker Change: As I said in our prepared remarks, our intent with the guidance range with to reflect the Q2 performance as he said and then effectively maintained guidance for Q3 and Q4.

Speaker Change: So that does result in a natural step down from the exceptional Q2 performance.

As always we assessed the risks and the opportunities as we see them today and and as you can imagine the range of outcomes is a bit wider than typical for us at this point of the year.

Speaker Change: And our intent with guidance is to provide a range that we have a high probability of delivering that.

Speaker Change: Said differently in a normal environment, we may have raised the guidance a bit more but in this environment of both risks and opportunities we felt it prudent to hold the remainder of the year guidance.

Speaker Change: Just a few more points I'll make to be clear about what our guidance assumes a first a natural step down from Q2 to Q3 that we do have visibility into and that would be some moderation to clinical volumes as I said in my prepared remarks.

Speaker Change: So less seasonal work such as disaster response support that we provide that FEMA.

Speaker Change: And in some cases, the ramping up of cost on certain contracts.

Speaker Change: Second a reminder, that we have no reliance on new work contributing to the fiscal year, which we had also derisked in our prior guidance and that's despite our continued optimism on the new business front, which includes of course the opportunities that may arise from emerging customer priorities and then laughed by holding it flat. We've also allowed for some level of uncertain.

Speaker Change: D to be accommodated related to headwind that we don't have visibility to that may potentially arise from the macro environment. So we're deliberately taking a cautious approach that can accommodate some downside by design.

Speaker Change: And then as it relates to the quarterly profile I'd say nothing nothing major between Q3 and Q4 to call out at this point.

Speaker Change: I think that could look somewhat similar.

Speaker Change: Great. Thank you and maybe.

Bruce Caswell: Maybe for Bruce on this one.

Speaker Change: This strength.

Bruce Caswell: The margin performance in the quarter.

Bruce Caswell: Pretty exceptional.

Bruce Caswell: Perhaps provide a little bit more color on that front.

Bruce Caswell: Yes.

Bruce Caswell: The drivers behind that.

Bruce Caswell: Highlight for us.

Bruce Caswell: Sure sure Charlie Yes.

Bruce Caswell: In our business volumes matter, we've always said and we had a great quarter and a number of program areas as it relates to just the volume of work that we were able to get through a part of that is just that the customers were asking us to take on more work and we were happy to rise to that challenge in and use the scale of the business to do that but as I noted in my prepared.

Bruce Caswell: There's also a very clear connection here to the investments that we've been making in technology and we kind of talk about this all the time that we bring together people process and technology to solve these these large programmatic challenges that our customers face I was really pleased with some of the automation that we've been able to drive into the business that has reduced kind of manner.

Bruce Caswell: We'll work and so forth and has enabled us to scale the business up redirect our staff to higher value functions I mentioned in my my comments about shifting staff from doing case preparation to actually doing quality assurance and much more valuable role within the team and and ultimately be able to increase productivity and take on greater volumes. So you know it.

Bruce Caswell: It's a great early indicator that the investments that we've been focused on in terms of.

Bruce Caswell: Robotic process automation initially, but then into machine learning and artificial intelligence are really starting to pay off and that's all been done under the broader umbrella of the Maximus for transformation project that we.

Bruce Caswell: Undertook what 18 months or two years ago that have really kept going with a proper transformation office and our pipeline of opportunities. So I'm really pleased with the cadence that we're moving and moving things through from idea or concept to implementation.

Speaker Change: And I will still say that there's even further opportunity to then bring some of those pilot areas our concepts to scale. So let me turn it over to David for any Additionally, I think you answered that well breath, maybe the only thing I would add just reiterating from my prior answer that we do see some visibility to some moderation for for the reasons I mentioned from Q.

Bruce Caswell: Two to Q3.

Speaker Change: That helps Charlie for that yes, definitely thank you. Thank you for that.

Speaker Change: Looking at the your commentary about pricing decisions et cetera.

Speaker Change: There's more scrutiny from the federal government.

Speaker Change: Vendors contracts.

Speaker Change: Are you seeing any potential delays.

Speaker Change: Essentially new work coming into the pipeline.

Speaker Change: Also.

Speaker Change: Contrary to that.

Speaker Change: The new opportunities that you hadn't seen before flowing into the pipeline.

Speaker Change: Sure.

Speaker Change: Commenting on the pipeline.

Speaker Change: I mentioned in my prepared remarks that we're pleased with the overall pipeline volume, which is great and another key metric that we offered this quarter, which I thought was with a nice improvement over what we've talked about previously was the progression of proposals in preparation and awaiting decision, which we said is up 25% to the prior quarter. So things are moving there has been some.

Speaker Change: Slowdown, however, and reduction even in the pipeline in the civilian agency space.

Speaker Change: To double click on that what's behind that we think are two things one just the ongoing kind of work of the administration as they go through the agencies in their programs in their contracts and so forth, but also there's a broader effort by the administration and intent to reduce the use of agency specific indefinite quantity indefinite delivery actually I just flipped the two around.

Speaker Change: Different delivery indefinite quantity idea Iq contracts or basic ordering agreements, but what type contracts and consolidate those to the GSA level I think all of industry is waiting to see kind of the path that that will take going forward, but as a consequence you know.

Speaker Change: As we also said work needs to be done and so this has led to contract bridges and extensions that benefit incumbents, including Max Smith and I mentioned, an example of that in my remarks.

Speaker Change: I would also note regarding the pipeline that we've reviewed the President's proposed budget and if that's any indicator ultimately of what will come out of the congressional budgetary process hard to say, we don't see any significant impact on the programs that we administer across our current civilian portfolio of contracts.

Speaker Change: So then opportunities yes, we have our teams out there shifting lampkin shaping opportunities.

Speaker Change: Everyday and I mentioned.

Speaker Change: I mentioned this on earlier in the call and I really feel like we are in a very good position to be an effective and valued partner in the process to government.

Speaker Change: Some of the synergy pipeline opportunities as we call them are now coming to market that we had our eyes on several years ago. When we first combined with veteran devaluation services I mentioned that either company alone could never had been on our one those contracts that we talk about having right to win and we feel that we've got right to win now as these are coming to market. So we're excited about them.

Speaker Change: I'd also note that some opportunities in terms of shaping and the shifting left and so forth don't necessarily lead or don't necessarily correspond to planned procurements that you've got you know years of visibility too and by that I mean, the discussions and conversations that we can have with our customers about.

Speaker Change: Ways to bring greater efficiencies and innovation to program areas that we presently administer that could lead to things like consolidation.

Speaker Change: And streamlining and reengineering.

Speaker Change: Simplification of technology, that's being used and all types of opportunities that we could kind of step it too in the existing contracts that we have or through alternative procurement methods that would would be developed and then and then brought out I'm not saying it says.

Speaker Change: Kind of quick turn as we saw during the pandemic when much of our growth came from opportunities that never really worked their way through the pipeline there were volume related and they were kind of expansions on existing programs, but there is a certain component of that because things are moving quickly and and opportunities for modernization and further growth in some of these contracts are a bit organic at this time.

Speaker Change: Seth.

Seth: Hope that helps.

Seth: Great stasis very helpful. Bruce.

Seth: Looking now at the outside the U S segment.

Seth: This is the second quarter of organic growth obviously the.

Seth: Treasury and editors showing highlighting so some good things there and just.

Seth: Maybe provide some additional color as to you know some of it the.

Seth: The drivers behind that to pick up.

Seth: Organic growth there.

Seth: Sure happy to we're pleased with the outcome of reshaping that.

Seth: <unk> taken place over the past couple of years now and at this point our operations are now only in the United Kingdom, Canada, and the Gulf region.

Seth: And of these the U K business is the largest where we're really a well established provider to governments across multiple program.

Seth: One of our largest programs. There is also what is driving the organic growth this quarter and that's the functional assessment services contract, which we.

Seth: Yes.

Seth: Recompete of our prior Haas contract.

Seth: And as you recall from you know about a year ago, when we announced that and then that went live in the fall. So now we are operating under the new contract at a different structure than the old and as we said it provides a modest step up in revenue compared to the predecessor contract.

Seth: That's really the single most important driver of that healthy growth and as I said in my prepared remarks of course, our goal is to continue to improve margins in this segment as well.

Seth: Great. Thank you that's all I have for you today. Thank you.

Seth: Operator back to you.

Speaker Change: Thank you.

Speaker Change: That will conclude today's conference you may disconnect. Your lines at this time. Thank you all for your participation.