Maximus MMS Form 10-Q filing Q3 FY2026

Consolidated Statements of Operations 5

Consolidated Statements of Comprehensive Income 6

Consolidated Balance Sheets 7

Consolidated Statements of Cash Flows 8

Consolidated Statements of Changes in Shareholders’ Equity 9

Notes to Consolidated Financial Statements 11

1. Organization 11

2. Significant Accounting Policies 11

3. Business Segments 12

4. Revenue Recognition 15

5. Earnings Per Share 17

6. Divestitures 17

7. Debt and Derivatives 18

8. Fair Value Measurements 19

9. Equity 21

10. Other Items 21

11. Commitments and Contingencies 22

12. Subsequent Event 23

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 24

Business Overview 24

Financial Overview 25

Results of Operations 25

Liquidity and Capital Resources 30

Critical Accounting Policies and Estimates 33

Non-GAAP and Other Measures 33

Item 3. Quantitative and Qualitative Disclosures About Market Risk 36

Item 4. Controls and Procedures 36

Part II - Other Information 37

Item 1. Legal Proceedings 37

Item 1A. Risk Factors 37

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 37

Item 3. Defaults Upon Senior Securities 37

Item 4. Mine Safety Disclosures 37

Item 5. Other Information 37

Item 6. Exhibits 38

Signatures 39

Unless otherwise specified, references in this Quarterly Report on Form 10-Q to "our," "we," "us," "Maximus," the "Company," and "our business" refer to Maximus, Inc. and its subsidiaries.

PART I - Financial Information

Item 1. Financial Statements

Maximus, Inc.

Consolidated Statements of Operations

(Unaudited)

See accompanying notes to consolidated financial statements.

Maximus, Inc.

Consolidated Statements of Comprehensive Income

(Unaudited)

See accompanying notes to consolidated financial statements.

See accompanying notes to consolidated financial statements.

Maximus, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

See accompanying notes to consolidated financial statements.

Maximus, Inc.

Consolidated Statements of Changes in Shareholders' Equity

(Unaudited)

See accompanying notes to consolidated financial statements.

Maximus, Inc.

Notes to the Consolidated Financial Statements

1. ORGANIZATION

Maximus, a Virginia corporation, is a leading provider of tech-enabled services to government agencies. By moving people, technology, and government forward, Maximus helps improve the delivery of public services for more than 100 million American citizens amid complex technological, health, economic, and social challenges. As a trusted and accountable partner to primarily U.S. federal and state customers, we proudly design, develop, and deliver innovative and efficient programs that are designed to improve government’s effectiveness in serving its citizens.

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements, including the notes, include our accounts and those of our subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP, and the rules and regulations of the Securities and Exchange Commission (SEC). All intercompany balances and transactions have been eliminated in consolidation.

Basis of Presentation for Interim Periods

Certain information and disclosures normally included for the annual financial statements to be prepared in accordance with U.S. GAAP have been condensed or omitted for the interim periods presented. We believe that the unaudited interim financial statements include all adjustments (which are normal and recurring in nature) necessary to present fairly our financial position and the results of operations and cash flows for the periods presented.

The results of operations for the interim periods presented are not necessarily indicative of results that may be expected for the year or future periods. The financial statements should be read in conjunction with our audited consolidated financial statements and the accompanying notes contained in our Annual Report on Form 10-K for the fiscal year ended September 30, 2025. We have continued to follow the accounting policies set forth in those financial statements.

Use of Estimates

The preparation of these financial statements, in conformity with U.S. GAAP, requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities, and the reported amounts of revenue and expenses. At each reporting period end, we make estimates, including those related to revenue recognition and cost estimation on certain contracts, the realizability of long-lived assets, and amounts related to income taxes, certain accrued liabilities, and contingencies and litigation.

At June 30, 2026, our capitalized software balance includes $32.3 million related to technology for new services within our U.S. Services Segment. During the second quarter of fiscal year 2026, we recorded an impairment charge of $6.9 million to an asset following a client decision that resulted in its carrying value no longer being recoverable. At this time, we believe that the remaining balance of these assets is recoverable. We continue to monitor these assets, and if circumstances change, we may be required to further adjust the value or useful life of the remaining assets.

3. BUSINESS SEGMENTS

We conduct our operations through three business segments: U.S. Federal Services, U.S. Services, and Outside the U.S. Our operating segments represent the manner in which our Chief Executive Officer (CEO), who is our Chief Operating Decision Maker (CODM), reviews our financial results. The CODM reviews segment-level revenue, gross profit, and segment operating income/(loss) on a regular basis to assess performance and manage the business. Revenue is used to evaluate growth trends and performance relative to budget, while gross profit and segment operating income/(loss) are used to assess overall profitability, business efficiency, and the effectiveness of cost-reduction initiatives. These measures also inform the CODM’s decisions regarding the allocation of resources across segments, including allocations of management bonus as well as investments in technology, personnel, and strategic transactions, such as mergers and acquisitions.

Our CODM does not evaluate operating segments using asset or liability information.

U.S. Federal Services

Our U.S. Federal Services Segment delivers solutions that help various U.S. federal government agencies better execute their missions, including program operations and management, clinical services, and advanced technology solutions.

U.S. Services

Our U.S. Services Segment provides a variety of services, such as program operations, clinical services, employment services, and advanced technology solutions and related professional services for U.S. state and local government programs. These services support a variety of programs, including those under Medicaid and the Children's Health Insurance Program (CHIP), the Affordable Care Act (ACA) marketplaces, and Temporary Assistance for Needy Families (TANF).

Outside the U.S.

Our Outside the U.S. Segment provides business process services and other solutions for international governments. These services include health and disability assessments, program administration for employment services, wellbeing solutions and other job seeker-related services, digitally-enabled customer services, and advanced technologies for modernization. We support programs and deliver services in the United Kingdom, including the Functional Assessment Services (FAS) contract and the Restart employment program. We also provide services in Canada and the Middle East.

(1) Percentage of respective revenue, as applicable.

(2) Other segment items are principally selling, general, and administrative expenses allocated to segments.

(3) During fiscal years 2026 and 2025, we divested businesses from our U.S. Services and Outside the U.S. Segments, respectively. See "Note 6. Divestitures" for additional information.

(4)Other expenses include credits and costs that are not allocated to a particular segment.

4. REVENUE RECOGNITION

We recognize revenue as, or when, we satisfy performance obligations under a contract. The majority of our contracts have performance obligations that are satisfied over time. In most cases, we view our performance obligations as promises to transfer a series of distinct services to our customers that are substantially the same and which have the same pattern of service. We recognize revenue over the performance period as a customer receives the benefits of our services.

Disaggregation of Revenue

In addition to our segment reporting, we disaggregate our revenues by service type, contract type, and customer type.

Contract balances

Differences in timing between revenue recognition and cash collection result in contract assets and contract liabilities. We classify these assets as accounts receivable — billed and billable and unbilled receivables; the liabilities are classified as deferred revenue.

In many contracts, we bill our customers on a monthly basis shortly after the month end for work performed in that month, and such balances are considered collectible and are included within accounts receivable, net.

Exceptions to this pattern will arise for various reasons, including those listed below.

• Under cost-plus contracts, we are typically required to estimate a contract's share of our general and administrative expenses. This share is based upon estimates of total costs, which may vary over time. We typically invoice our customers at an agreed provisional billing rate, which may differ from actual rates incurred. If our actual rates are higher than the provisional billing rates, an asset is recorded for this variance; if the provisional billing rates are higher than our actual rates, we record a liability.
• Certain contracts include retainage balances, whereby revenue is earned, but some portion of cash payments are held back by the customer for a period of time, typically to allow the customer to confirm the objective criteria laid out by the contract have been met. This balance is classified as accounts receivable-unbilled, until restrictions on billing are lifted. As of June 30, 2026, and September 30, 2025, $27.4 million and $24.1 million, respectively, of our unbilled receivables related to amounts pursuant to contractual retainage provisions.
• In certain contracts, we may receive funds from our customers prior to performing operations. These funds are typically referred to as "set-up costs" and reflect the need for us to make investments in infrastructure prior to providing a service. This investment in infrastructure is not a performance obligation that is distinct from the service that is subsequently provided, and, as a result, revenue is not recognized based upon the establishment of this infrastructure, but rather over the course of the contractual relationship. The funds are initially recorded as deferred revenue and recognized over the term of the contract. Other contracts may not include set-up fees but will provide higher fees in earlier periods of the contract. The premium on these fees is deferred.
• Some of our contracts, notably our employment services contracts in the Outside the U.S. Segment, include payments for specific milestones, such as job placement and job retention, and these outcome payments occur over several months. We are required to estimate these outcome fees ahead of their realization and recognize this estimated fee over the period of delivery.

During the three and nine months ended June 30, 2026, we recognized revenue of $2.0 million and $45.2 million, respectively, included in our deferred revenue balances at September 30, 2025. During the three and nine months ended June 30, 2025, we recognized revenue of $13.8 million and $87.0 million, respectively, included in our deferred revenue balances at September 30, 2024.

Contract estimates

We are required to use estimates in recognizing revenue from some of our contracts.

Certain performance-based contracts include variable consideration in the form of penalties and incentives, based upon our performance under the terms of the contract. The calculation of these penalties and incentives requires the evaluation of both objective and subjective criteria, which may require the use of estimates.

Within our employment services business in our Outside the U.S. Segment, some of our performance-based contract revenue is recognized based upon future milestones defined in each contract, which requires us to make estimates about the attainment of those milestones.

We estimate the total variable consideration we will receive using the expected value method. We recognize the revenue over the expected period of performance. At each reporting period, we update our estimates of the variable fees to represent the circumstances present at the end of the reporting period. We include variable consideration in our estimates to the extent it is probable that a subsequent change in the estimate will not result in a significant reversal of cumulative revenue when the uncertainty is resolved. We do not have a history of significant constraints on these contracts.

Remaining performance obligations

As of June 30, 2026, we had approximately $230 million of remaining performance obligations. We anticipate that we will recognize revenue on approximately 57% of this balance within the next 12 months. This balance excludes contracts with an original duration of twelve months or less, including contracts with a penalty-free termination for convenience clause, and any variable consideration that is allocated entirely to future performance obligations, including variable transaction fees or fees tied directly to costs incurred.

5. EARNINGS PER SHARE

The diluted earnings per share calculations for the three and nine months ended June 30, 2026 exclude approximately 571,000 and 567,000 unvested anti-dilutive restricted stock units, respectively. The diluted earnings per share calculations for the three and nine months ended June 30, 2025 exclude approximately 140,000 and 142,000 unvested anti-dilutive restricted stock units, respectively.

6. DIVESTITURES

U.S. Services Segment

In December 2025, we sold our child support business within the United States for approximately $15.0 million. This business had been reporting approximately $25.0 million of annual revenue. We recorded a gain on sale of $10.1 million.

Outside the U.S. Segment

In December 2024, we sold our businesses in Australia and Korea for a nominal sum. The sale agreement includes up to $5.0 million of contingent consideration based upon future performance. As of June 30, 2026, we have not recorded any potential contingent consideration. Our total divestiture-related charges of $39.5 million included approximately $21.3 million of previously unrealized foreign exchange losses, which we had recorded through other comprehensive income. We also provided an indemnification to the buyer that has been recorded at fair value in our consolidated balance sheets. No tax benefit is anticipated from this transaction.

7. DEBT AND DERIVATIVES

On May 27, 2026, we amended our existing credit agreement (the "Amendment") with J.P. Morgan Chase Bank, N.A. The Amendment increased our TLB by $325 million.

Our credit agreements require us to comply with a number of covenants, including leverage and interest coverage ratios. At June 30, 2026, we are in compliance with all covenants. We do not believe that the covenants represent a significant restriction on our ability to successfully operate the business or to pay dividends.

The following table sets forth future minimum principal payments due under our debt obligations as of June 30, 2026 for the remainder of fiscal year 2026 through fiscal year 2031:

Interest Rate Derivative Instruments

Both our TLA and TLB interest payments are comprised of an applicable margin rate and a floating rate, the latter being based on SOFR. We utilize interest rate swaps that are designed to reduce our risk from changes in floating rates, which we have designated as cash flow hedges. Effective June 1, 2026, we entered into new interest rate swap agreements to reduce interest rate risks in both our TLA and TLB. The following table presents our active interest rate swaps:

The fixed interest rate on the table above identifies the payment rate to our counterparties in lieu of the floating rate.

The balance of the debt pays interest based upon the Secured Overnight Financing Rate (SOFR). At June 30, 2026, our effective interest rate, including the original issuance costs and discount rate, was 5.6%.

At June 30, 2026, we recorded an asset of $3.9 million and a liability of $0.8 million to reflect the fair value of our interest rate swap agreements, compared to an asset of $5.5 million and a liability of $1.7 million at September 30, 2025. The assets and liabilities are recorded as "other assets" and "other liabilities," respectively, within our consolidated balance sheets. As these instruments are effective cash flow hedges, gains and losses based upon interest rate fluctuations are recorded within "accumulated other comprehensive loss" on our consolidated financial statements.

8. FAIR VALUE MEASUREMENTS

We record the following assets and liabilities at fair value on a recurring basis.

• We hold mutual fund assets within a Rabbi Trust to cover liabilities in our deferred compensation plan. These assets have prices quoted within active markets and, accordingly, are classified as level 1 within the fair value hierarchy.
• We have interest rate swap agreements that are designed to manage our interest rate exposure. These agreements can be valued using observable data and, accordingly, are classified as level 2 within the fair value hierarchy.
• In connection with the businesses sold in Australia and Korea, we indemnified the buyer related to certain potential losses, which are recorded at fair value, based on an assessment of probability-weighted outcomes. Accordingly, these inputs are not observable and are classified as level 3 within the fair value hierarchy. Changes in the fair value of the indemnification liability are recorded in the consolidated statements of operations.

The table below presents assets and liabilities measured and recorded at fair value in our consolidated balance sheets on a recurring basis, along with their corresponding level within the fair value hierarchy. No transfers between Level 1, Level 2, and Level 3 fair value measurements occurred for the nine months ended June 30, 2026.

The fair values of receivables, prepaid assets, other assets, accounts payable, accrued costs, and other current liabilities approximate the carrying values as a result of the short-term nature of these instruments. The carrying value of our debt is consistent with the fair value, as the stated interest rates in the agreements are consistent with the current market rates used in notes with similar terms in the markets (Level 2 inputs).

Accumulated Other Comprehensive Loss

All amounts recorded in accumulated other comprehensive loss are related to our foreign currency translations and interest rate swaps, net of tax. The following table shows changes in accumulated other comprehensive loss. Amounts reclassified from other comprehensive income were recorded within our selling, general, and administrative expenses (for foreign currency translation adjustments) and within interest expense (for gains on derivatives).

Indemnification Liability

The fair value of our indemnification liability is recorded at fair value as of the disposal date, based on an assessment of probability-weighted outcomes. This liability is reviewed on a quarterly basis. Changes in estimates are recorded to selling and general administrative expenses and foreign currency translation adjustments are recorded in other income/expenses on our Consolidated Statement of Operations.

Movement in our indemnification liability balance is as follows:

9. EQUITY

Stock Compensation

We grant restricted stock units (RSUs) and performance stock units (PSUs) to eligible participants under our 2021 Omnibus Incentive Plan, which was approved by our Board of Directors and stockholders. The RSUs granted to employees vest ratably over three to four years, with a small number that cliff vest after three years. The RSUs granted to directors cliff vest one year from the grant date. PSU vesting is subject to the achievement of certain performance and market conditions, and the number of PSUs earned could vary from 0% to 200% of the number of PSUs awarded. The PSUs will vest at the end of a three-year performance period if the performance conditions are met. We issue new shares to satisfy our obligations under these plans. The fair value of each RSU and PSU is calculated at the date of the grant.

During the nine months ended June 30, 2026, we issued approximately 341,000 RSUs, which will vest ratably over one to four years, and approximately 146,000 PSUs, which will vest after three years if the performance conditions are met.

Stock Repurchase Programs

In May 2026, our Board of Directors authorized an increase to our existing stock repurchase program that allows us to repurchase, at management's discretion, up to $400 million of our common stock; this resolution superseded a similar resolution authorized in September 2025.

During the nine months ended June 30, 2026, we purchased approximately 2.6 million common shares at a cost of $192.4 million, which includes an additional charge from the 1% excise tax on share repurchases. During the nine months ended June 30, 2025, we repurchased approximately 4.1 million common shares at a cost of $309.5 million under a similar program.

At June 30, 2026, approximately $400.0 million remained available for future stock repurchases.

10. OTHER ITEMS

Cash, Cash Equivalents, and Restricted Cash

Restricted cash is recorded within "Prepaid expenses and other current assets" on the Consolidated Balance Sheets.

Accounts Receivable, Net

We have a Receivables Purchase Agreement (RPA) with Wells Fargo Bank N.A., under which we may sell certain U.S.-originated accounts receivable balances up to a maximum amount of $350.0 million at any given time. In return for these sales, we receive a cash payment equal to the face value of the receivables less a financing charge.

We account for these transfers as sales. We have no retained interest in the transferred receivables other than administrative responsibilities, and Wells Fargo has no recourse for any credit risk. We estimate that the implicit servicing fees for an arrangement of this size and type would be immaterial.

For the nine months ended June 30, 2026 and 2025, the value of accounts receivables transferred to Wells Fargo and derecognized from our balance sheet was $1.28 billion and $574.2 million, respectively. In exchange for these sales, we received cash of $1.27 billion and $570.7 million for the same periods, respectively. The difference, representing a loss on sale from these transfers, is included within our selling, general, and administrative expenses. We have recorded these transactions within our operating cash flows.

11. COMMITMENTS AND CONTINGENCIES

Litigation

We are subject to audits, investigations, and reviews relating to compliance with the laws and regulations that govern our role as a contractor to agencies and departments of federal, state, local, and foreign governments. Adverse findings could lead to criminal, civil, or administrative proceedings, and we could be faced with penalties, fines, suspension, or debarment. Adverse findings could also have a material adverse effect on us because of our reliance on government contracts. We are subject to periodic audits by federal, state, local, and foreign governments for taxes. We are also involved in various claims, arbitrations, and lawsuits arising in the normal conduct of our business, which include, but are not limited to, bid protests, employment matters, contractual disputes, and charges before administrative agencies. Except for the matters described below for which we cannot predict the outcome, we do not believe the outcome of any existing matter would likely have a material adverse effect on our consolidated financial position, results of operations, or cash flows.

We evaluate developments in our litigation matters and establish or make adjustments to our accruals as appropriate. A liability is accrued if a loss is probable and the amount of such loss can be reasonably estimated. If the risk of loss is probable, but the amount cannot be reasonably estimated, or the risk of loss is only reasonably possible, a potential liability will be disclosed but not accrued, if material. Due to the inherent uncertainty in the outcome of litigation, our estimates and assessments may prove to be incomplete or inaccurate and could be impacted by unanticipated events and circumstances, adverse outcomes, or other future determinations.

MOVEit Cybersecurity Incident Litigation

As previously disclosed, on May 31, 2023, Progress Software Corporation, the developer of MOVEit, a file transfer application used by many organizations to transfer data, announced a critical zero-day vulnerability in the application that allowed unauthorized third parties to access its customers’ MOVEit environments. Maximus uses MOVEit for internal and external file sharing purposes, including to share data with government customers related to Maximus' services in support of certain government programs. Based on our review of the impacted files to date, we have provided notices to individuals whose personal information, including Social Security numbers, protected health information, and/or other personal information, may have been included in the impacted files.

On August 1, 2023, a purported class action was filed against Maximus Federal Services, Inc. (a wholly-owned subsidiary of Maximus, Inc.) in the U.S. District Court for the Eastern District of Virginia arising out of the MOVEit cybersecurity incident – Bishop v. Maximus Federal Services, Case No. 1:23-cv-01019 (U.S. Dist. Ct. E. D. VA). The plaintiff, who purports to represent a nationwide class of individuals, alleges, among other things, that our negligence resulted in the compromise of the plaintiff’s personally identifiable information and protected health information. The plaintiff seeks damages to be proved at trial. Since then, thirteen similar cases have been filed in federal courts across the country (inclusive of one case filed in state court and removed to federal court by us).

On October 4, 2023, the United States Judicial Panel on Multidistrict Litigation granted a Motion to Transfer creating a Multidistrict Litigation (MDL) in the District of Massachusetts for all cases related to the MOVEit cybersecurity incident. Each of the actions pending in federal courts are centralized in the MDL.

On December 12, 2024, the Court granted in part Defendants' omnibus motion to dismiss Plaintiffs’ claims pursuant to Rule 12(b)(1), challenging Plaintiffs’ standing to bring this suit, dismissing claims brought by four of the Plaintiffs in the MOVEit MDL. None of the dismissed claims were asserted against us.

The Court has also named us as a bellwether defendant in the MDL. We and the other bellwether defendants submitted motions to dismiss the pending actions pursuant to Rule 12(b)(6), which the Court granted in part and denied in part on July 31, 2025. Approximately half of the claims asserted against us remain, and we are proceeding to discovery regarding those claims.

Separately, there is currently an individual action pending against us in Florida state court. On September 6, 2023, an individual action related to the MOVEit incident was filed in state court in the Florida Circuit Court for the 7th Judicial Circuit, Volusia County: Taylor v. Maximus Federal Services, Case No. 2023-12349 (Fla. Cir. Ct., 7th Jud. Cir., Volusia Cnty.). The plaintiff alleges, among other things, that our negligence resulted in the compromise of the plaintiff’s personally identifiable information and protected health information. The plaintiff seeks damages to be proved at trial. On April 3, 2024, the Court stayed this action pending further developments in the MOVEit MDL. This case remains stayed.

While we are unable to predict the ultimate outcome of any of the remaining proceedings, we have accrued an amount within a range of possible outcomes expected to be incurred to resolve the matters.

12. SUBSEQUENT EVENT

On July 6, 2026, our Board of Directors declared a quarterly cash dividend of $0.33 for each share of our common stock outstanding. The dividend is payable on August 31, 2026, to shareholders of record on August 14, 2026. Based upon the number of shares outstanding, we anticipate a cash payment of approximately $17.3 million.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion is intended to help the reader understand our business, financial condition, results of operations, liquidity and capital resources. You should read this discussion in conjunction with "Risk Factors," "Special Note Regarding Forward-Looking Statements," and our financial statements and related notes included in our Annual Report on Form 10-K for fiscal year 2025 filed with the SEC on November 20, 2025 and elsewhere in this Quarterly Report on Form 10-Q, as applicable.

Business Overview

Maximus is a leading provider of tech-enabled services to government agencies. By moving people, technology, and government forward, Maximus helps improve the delivery of public services for more than 100 million American citizens, as well as citizens in the United Kingdom (U.K.), Canada, and the Middle East, amid complex technological, health, economic, and social challenges. As a trusted and accountable partner to primarily U.S. federal and state customers, we proudly design, develop, and deliver innovative and efficient programs that are designed to improve government’s effectiveness in serving its citizens.

We create value for our customers by translating public policy into operating models that deliver outcomes for governments at scale. Our work covers a broad array of services, including the operation of large health insurance eligibility and enrollment programs; clinical services, including assessments, appeals, and independent medical reviews; and technology services. These services benefit from an industry with increasing demand, constrained government budgets, and an increased focus on technology as governments prioritize modernization. We also demonstrate the ability to move quickly, ranging from digitally enabled contact center support services for natural disaster response to swift establishments of public health and safety initiatives.

Financial Overview

A number of factors have affected our results for the third quarter of fiscal year 2026. More detail on these changes is presented below within our "Results of Operations" section.

Results of Operations

The following table sets forth items from our consolidated statements of operations for the three and nine months ended June 30, 2026, and June 30, 2025.

Our business segments have different factors driving revenue fluctuations and profitability. The sections that follow cover these segments in greater detail. Our revenue reflects fees earned for services provided. Cost of revenue consists of direct costs related to labor and its associated overhead, subcontractor labor, outside vendors, rent, and other direct costs. The largest component of cost of revenue, approximately two-thirds, is labor, including subcontracted labor.

Selling, general, and administrative expenses

Selling, general, and administrative (SG&A) expenses consist of indirect costs related to general management, marketing, and administration. It is primarily composed of labor costs. These costs may be incurred at a segment level, for dedicated resources that are not client-facing, or at a corporate level. We allocate corporate costs to segments on a consistent and rational basis. Fluctuations in our SG&A are primarily driven by changes in our administrative cost base, which are not directly driven by changes in our revenue. As part of our work for the U.S. federal government and many states, we allocate these costs using a methodology driven by the U.S. Federal Cost Accounting Standards.

Our SG&A expense for the nine months ended June 30, 2026, includes $10.1 million of divestiture-related gain from the sale of our child support business within the United States, which we divested in December 2025. Our SG&A expense for the nine months ended June 30, 2025, includes divestiture-related charges of $39.3 million from our sale of businesses in the Outside the U.S. Segment. These charges included accumulated foreign currency losses incurred over two decades of operations, as well as indemnifications provided to the buyer.

Amortization of intangible assets

Amortization of intangible assets has declined for the three and nine months ended June 30, 2026, as compared to the same periods in fiscal year 2025, since the amortization of technology-based assets acquired in fiscal year 2021 was completed prior to fiscal year 2026.

Our balance sheet includes $367.2 million of intangible assets from a 2021 acquisition. These assets, comprised of customer relationships and a medical provider network, continue to support medical disability examinations (MDE) contracts with the U.S. Department of Veterans Affairs. These assets are being amortized over their remaining useful life of approximately seven years. In the event that our expectations change with respect to these acquired contracts, the value of these assets and the estimated remaining lives of these assets may need to be adjusted.

Interest Expense

During fiscal years 2026 and 2025, we expanded our Term Loan B and Term Loan A Credit Facilities, respectively. This has resulted in an increase to our interest expense in the current year. We continue to mitigate a portion of our interest rate risk through hedging transactions on a portion of our outstanding debt.

Provision for Income Taxes

Our effective income tax rate for the three and nine months ended June 30, 2026, was 25.0% and 24.4%, respectively, compared to 25.9% and 29.2% for the three and nine months ended June 30, 2025, respectively. Our effective tax rate for the nine months ended June 30, 2026 includes approximately $4.5 million of benefit from research and development tax credits identified and claimed in the period. Our tax rate in fiscal year 2025 was affected by the disposal of our businesses in Australia and Korea and other non-recurring items. For fiscal year 2026, we expect an overall effective tax rate between 24% and 24.5%.

U.S. Federal Services Segment

Our U.S. Federal Services Segment delivers solutions that help various U.S. federal government agencies better execute their missions, including program operations and management, clinical services, and advanced technology solutions.

Our revenue and cost of revenue for the three months ended June 30, 2026 and 2025 decreased 5.3% and 6.8%, respectively. Our revenue and cost of revenue for the nine months ended June 30, 2026 and 2025 decreased 2.5%and 7.0%, respectively.

Our results for the three and nine months ended June 30, 2026 have been affected by the following, when compared to the prior year comparative periods.

• Much of the revenue decline relates to year-over-year declines in volumes on our large, transaction-based contracts. During fiscal year 2025 and early fiscal year 2026, these volumes had been running at higher levels.
• Short-term disaster recovery work in fiscal year 2025 did not recur to the same extent in fiscal year 2026.
• Across the remainder of this segment, we received the benefit of growth on profitable contracts, resulting in improvements to margin.

Below is a reconciliation of revenue for the three and nine months ended June 30, 2026 compared to the prior year periods, including the impact of short‑term disaster recovery work and our organic revenue movement excluding this work.

In late May 2026, we received notification from a major customer regarding a temporary contractual modification effective July 1, 2026 through December 31, 2026. We anticipate that this modification will reduce our diluted earnings per share by approximately $0.35 per quarter through the remainder of fiscal year 2026 and the first quarter of fiscal year 2027. Accordingly, we anticipate operating margin for the U.S. Federal Services Segment in fiscal year 2026 to range between 16.5% and 17%.

U.S. Services Segment

Our U.S. Services Segment provides a variety of services, such as program operations, clinical services, employment services, and advanced technology solutions and related professional services for U.S. state and local government programs. These services support a variety of programs, including those under Medicaid and the Children's Health Insurance Program (CHIP), the Affordable Care Act (ACA) marketplaces, and Temporary Assistance for Needy Families (TANF).

Our revenue and cost of revenue for the three months ended June 30, 2026 and 2025 decreased 4.9% and 6.7%, respectively. For the nine months ended June 30, 2026 and 2025, our revenue and cost of revenue decreased 6.4% and 6.3%, respectively.

Our U.S. Services Segment continues to experience lower volumes and demand across a broad range of contracts compared to prior years. We believe the contracts and relationships held by this segment provide it with strong opportunities to assist state customers who will require higher engagement across their federally-funded social programs. As these activities pick up, we anticipate that we will return to organic growth in the fourth quarter of the current fiscal year.

As noted above, we sold our US-based child support business during the first quarter of the current fiscal year.

During the second quarter of fiscal year 2026, we recorded an impairment charge of $6.9 million related to a capitalized software asset following a client decision, which resulted in its carrying value no longer being recoverable.

We anticipate operating margins for the U.S. Services Segment in fiscal year 2026 to range between 9.5% and 10%.

Outside the U.S. Segment

Our Outside the U.S. Segment provides business process services and other solutions for international governments. These services include health and disability assessments, program administration for employment services, wellbeing solutions and other job seeker-related services, digitally-enabled customer services, and advanced technologies for modernization. We support programs and deliver services in the U.K., including the Functional Assessment Services (FAS) contract and the Restart employment program. We also provide services in Canada and the Middle East.

The organic decline in this segment relates to lower volumes on a number of our contracts.

The divestiture of our businesses in Australia and Korea occurred in December 2024.

The effects of the organic decline and the divestiture were partially offset by the strengthening of the British Pound against the U.S. Dollar.

Following the divestitures in both fiscal years 2024 and 2025, we have taken the opportunity to expand our business development initiatives. We are tracking a number of opportunities, with the aim of driving growth and margin improvement in this segment. For fiscal year 2026, we anticipate a breakeven operating margin.

Liquidity and Capital Resources

Our primary sources of liquidity are cash on hand, cash from operations, our $750 million revolving credit facility, and our $350 million Receivables Purchase Agreement (RPA). As of June 30, 2026, we had $57.0 million in cash and cash equivalents. We believe that our current cash position, access to our debt facilities, and cash flow generated from operations should be sufficient for our operating requirements and should enable us to fund required long-term debt repayments, dividends, and any share repurchases we might choose to make. See "Note 7. Debt and Derivatives" to the Consolidated Financial Statements for a more detailed discussion of our debt financing arrangements.

We have included the following table showing our debt balances as of June 30, 2026, and their effective interest rates.

• June 30, 2026
• (dollars in thousands)_

(1) The applicable margin for Term Loan A ranges from 1% to 2%, depending on our leverage ratio as determined based on our most recently filed financial statements. As of June 30, 2026, the applicable margin was 1.375%.

Our effective interest rate reflects the drivers of our cash interest payments as of June 30, 2026, which can change based upon the reset of the rates. Including the amortization of the upfront payments, our effective interest rate as of June 30, 2026, was 5.6%.

The table below summarizes our change in cash, cash equivalents, and restricted cash.

Net Cash Used in Operating Activities

We reported net cash used in operations of $179.9 million for the first nine months of fiscal year 2026, compared to $220.0 million for the first nine months of fiscal year 2025. We continue to experience administrative delays on payments from one of our large contracts with the U.S. federal government. Subsequent to June 30, 2026, we have received $245 million of cash due from this customer, and we anticipate additional cash collections through the fourth quarter of fiscal year 2026.

These short-term delays in collections are reflected in Days Sales Outstanding ("DSO") at June 30, 2026, which were 98 days, compared with 62 days at September 30, 2025. Excluding the effects of the RPA, DSO would have been 123 days and 73 days, respectively.

Net Cash Used in Investing Activities

We reported net cash used in investing activities of $14.4 million for the first nine months of fiscal year 2026, compared to net cash used in investing activities of $57.1 million for the first nine months of fiscal year 2025.

In fiscal year 2025, we made significant investments in our capital base, most notably in updating technology on our Federal MDE contracts. Much of this update was completed in the third quarter of that year.

Our cash flows in fiscal year 2026 include the cash received from the sale of our child support business within the United States, as well as the final installments on our 2023 sale of our commercial practice in the United Kingdom.

Net Cash Provided by Financing Activities

We reported net cash provided by financing activities of $87.5 million for the first nine months of fiscal year 2026, compared to $146.8 million for the first nine months of fiscal year 2025.

During fiscal years 2026 and 2025, we expanded our term loans to provide additional capital for our operations, as well as funds to support share repurchases. We have utilized $204.9 million and $306.4 million in fiscal years 2026 and 2025, respectively, to purchase our common shares.

We have certain contracts where we hold cash on behalf of our customers. We show these funds as restricted cash and include their movement within financing cash flows. During the current fiscal year, the customer under a single large contract has increased their volume of work with us, resulting in significant growth in this balance. The restricted cash asset is offset by a current liability.

Credit Facilities

Our principal debt agreement is with JPMorgan Chase Bank N.A. (the "Credit Agreement"). At June 30, 2026, we owed $1.65 billion under the Credit Agreement, with access to approximately $730.0 million through a revolving credit facility. Mandatory repayments are required under this agreement through May 2031, when the agreement ends, and must be renegotiated or the funds repaid.

The Credit Agreement contains a number of covenants. Failure to meet these requirements would result in a need to renegotiate the agreement, seek a waiver, or a requirement to repay our outstanding debt in full. There are two financial covenants, both defined in the Credit Agreement:

• Our Consolidated Net Total Leverage Ratio means, for any twelve-month period, the ratio of our Funded Debt (as defined by the Credit Agreement), offset by up to $150 million of unrestricted cash (Consolidated Net Total Leverage), against our Consolidated EBITDA (as defined by the Credit Agreement). To comply with our Credit Agreement, this ratio cannot exceed 4.00:1.00 at the end of each quarter, with a step up to 4.50:1.00 under certain circumstances. This ratio also determines both our interest rate and the charge we pay on the unused component of our revolving credit facility, with the charge increasing as the Consolidated Net Total Leverage Ratio increases.
• Our Consolidated Net Interest Coverage Ratio means, for any twelve-month period, the ratio of our Consolidated EBITDA against our Consolidated Net Interest Expense, as defined by the Credit Agreement. To comply with our Credit Agreement, this ratio cannot be less than 3.00:1.00 at the end of each quarter.

Consolidated EBITDA also drives certain permissions within the Credit Agreement, such as the level of investment we are entitled to make without seeking additional approval from our lenders.

Our Credit Agreement defines Consolidated EBITDA, as well as other components of the calculations above. The definition of Consolidated EBITDA requires us to include adjustments not typically included within EBITDA, including unusual, non-recurring expenses, certain non-cash adjustments, the pro forma effects of acquisitions and disposals, and estimated synergies from acquisitions. As a result, Consolidated EBITDA as defined by the Credit Agreement may not be comparable to EBITDA or related or similarly titled measures presented by other companies.

We have summarized below the components of our two financial ratio calculations, including the components of Consolidated EBITDA as defined by the Credit Agreement which are included within our financial statements. At June 30, 2026, we were in compliance with all applicable covenants of our Credit Agreement. We do not believe that these covenants represent a significant restriction on our ability to operate our business or to pay our dividends.

Cash in Foreign Locations

We have no requirement to remit funds from our foreign locations to the United States. We will continue to explore opportunities to remit additional funds, taking into consideration the working capital requirements and relevant tax rules in each jurisdiction. When we are unable to remit funds back without incurring a penalty, we will consider these funds indefinitely reinvested until such time as these restrictions are changed. As a result, we do not record U.S. deferred income taxes on any funds held in foreign jurisdictions. We have not attempted to calculate our potential liability from any transfer of these funds, as any such transaction might include tax planning strategies that we have not fully explored. Accordingly, it is not possible to estimate the potential tax obligations if we were to remit all of our funds from foreign locations to the United States.

Free Cash Flow (Non-GAAP)

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires us to make estimates, judgments, and assumptions that affect the amounts reported. Actual results could differ from those estimates. Our Annual Report on Form 10-K, filed with the SEC on November 20, 2025, includes a summary of critical accounting policies we believe are the most important to aid in understanding our financial results. There have been no changes to those critical accounting policies that have had a material impact on our reported amounts of assets, liabilities, revenues, or expenses during the nine months ended June 30, 2026.

Non-GAAP and Other Measures

We utilize non-GAAP measures where we believe it will assist users of our financial statements in understanding our business. The presentation of these measures is meant to complement, but not replace, other financial measures in this document. The presentation of non-GAAP numbers is not meant to be considered in isolation, nor as an alternative to revenue growth, net cash used in operating activities, operating income, net income, or earnings per share as measures of performance or liquidity. These non-GAAP measures, as determined and presented by us, may not be comparable to related or similarly titled measures presented by other companies.

For the three months ended June 30, 2026, 11% of our revenue was generated outside the U.S. We believe that users of our financial statements want to understand the performance of our foreign operations using a methodology that excludes the effect of year-over-year exchange rate fluctuations. To calculate year-over-year currency movement, we determine the current fiscal year's results for all foreign businesses using the exchange rates in the prior fiscal year.

From time to time, we enter into acquisitions and divestitures. We believe users of our financial statements want to evaluate the performance of our operations, excluding changes that have arisen due to businesses acquired or disposed of. We identify acquired revenue and cost of revenue by showing these results for periods for which no comparative results exist within our financial statements. We identify revenue and cost of revenue that have been disposed of in a similar manner. This information is supplemented by our calculations of organic growth. To calculate organic growth, we compare current fiscal year results, excluding transactions from acquisitions or disposals, to our prior fiscal year results.

Our previous acquisitions have resulted in significant intangible assets, which are amortized over their estimated useful lives. We believe users of our financial statements want to understand the performance of the business by using a methodology that excludes the amortization of our intangible assets. For the nine months ended June 30, 2026 and 2025, we also incurred gains and losses on sales of businesses. We believe that providing supplemental measures that exclude the impact of the items detailed below is useful to investors in evaluating our core operations and results in relation to past periods. Accordingly, we have calculated our net income and diluted earnings per share, excluding the effects of the amortization of intangible assets and divestiture-related gains and charges. Although these measures exclude the amortization of intangible assets acquired as part of our acquisitions, they do include the post-acquisition revenue from

the acquired businesses. In addition, Adjusted EBITDA, as calculated by us, is also a useful measure of performance that focuses on the cash generating capacity of the business as it excludes the non-cash expenses of depreciation and amortization of property, equipment, and capitalized software, amortization of intangible assets, capitalized software impairment charges, and divestiture-related activity. We believe that these non-GAAP measures assist investors in making comparisons between the operating performance of companies with different capital structures by excluding interest expense and therefore, the impacts of financing costs. Although Adjusted EBITDA excludes the amortization of intangible assets acquired as part of our acquisitions, it does include the post-acquisition revenue from the acquired businesses. As disclosed above, Adjusted EBITDA is calculated in a different manner from Consolidated EBITDA, as defined by our Credit Agreement.

We have included a table showing our reconciliation of these income measures to their corresponding GAAP measures.

In order to sustain our cash flows from operations, we regularly refresh our fixed assets and technology. We believe that users of our financial statements want to understand the cash flows that directly correspond with our operations and the investments we must make in those operations using a methodology that combines operating cash flows and capital expenditures. We provide free cash flow to complement our statement of cash flows. Free cash flow shows the effects of our operations and replacement capital expenditures and excludes the cash flow effects of acquisitions, repurchases of our common stock, dividend payments, and other financing transactions. We have provided a reconciliation of cash flows from operations to free cash flow in "Liquidity and Capital Resources."

To sustain our operations, our principal source of financing comes from receiving payments from our customers. We believe that users of our financial statements want to evaluate our efficiency in converting revenue into cash receipts. Accordingly, we provide DSO, which we calculate by dividing billed and unbilled receivable balances at the end of each quarter by revenue per day for the quarter. Revenue per day for a quarter is determined by dividing total revenue by 91 days.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

In the normal course of business, we are exposed to financial risks such as changes in interest rates, foreign currency exchange rates, and counterparty risk. We use derivative instruments to manage selected interest rate exposures. The Company's market rate risk disclosures set forth in Part II, Item 7A, "Quantitative and Qualitative Disclosures About Market Risk" on our Annual Report on Form 10-K, filed with the SEC on November 20, 2025, have not changed materially during the nine month period ended June 30, 2026.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective and designed to ensure that the information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified by the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) identified in connection with the evaluation of our internal control that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - Other Information

Item 1. Legal Proceedings

Refer to our disclosures included in "Note 11. Commitments and Contingencies" included in Part 1, Item 1 of this Quarterly Report on Form 10-Q.

Item 1A. Risk Factors

There were no material changes during the nine months ended June 30, 2026 to the risk factors previously disclosed in our Annual Report on Form 10-K, filed with the SEC on November 20, 2025.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a)None.

(b)None.

(c)The following table sets forth the information required regarding repurchases of common stock that we made during the three months ended June 30, 2026.

(1) In May 2026, the Board of Directors authorized an increase to our existing stock repurchase program whereby we may purchase, at management's discretion, up to $400 million of our common stock. This resolution superseded a similar resolution passed in September 2025.

Item 3. Defaults Upon Senior Securities

(a)None.

(b)None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

(a)None.

(b)None.

(c)During the three months ended June 30, 2026, no director or officer of the Company adopted, modified, or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

Item 6. Exhibits

v Filed herewith.

Φ Furnished herewith.