As filed with the Securities and Exchange Commission on February 3, 2022

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

~~UNITED STATES~~

~~SECURITIES AND EXCHANGE COMMISSION~~

~~Washington, D.C. 20549~~

FORM 10-Q

(Mark ~~One)~~one)

☒ Q~~Quarterly Report Pursuant to Section~~UARTERLY REPORT PURSUANT TO SECTION 13 orOR 15(d) ~~of the Securities Exchange Act of~~OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 30,~~December 31, 2021

☐ ~~Transition Report Pursuant to Section~~TRANSITION REPORT PURSUANT TO SECTION 13 orOR 15(d) ~~of the Securities Exchange Act of~~OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

__________to__________.

Commission ~~File Number:~~file number: 1-12997

~~Maximus, Inc.~~

~~(Exact name of registrant as specified in its charter)~~


Maximus, Inc.
(Exact name of registrant as specified in its charter)

Virginia						54-1000588
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

1891 Metro Center Drive, Reston, Virginia						20190
(Address of principal executive offices)						(Zip Code)

(703) 251-8500
(Registrant's telephone number, including the area code)

~~(703) 251-8500~~

~~(Registrant’s telephone number, including area code)~~

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, no par value

MMS

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of ~~“large~~"large accelerated filer,~~” “accelerated~~" "accelerated filer,~~” “smaller~~" "smaller reporting ~~company”~~company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. ~~(Check one):~~

Large accelerated filer ☒

Accelerated filer ☐

Non-accelerated filer ☐

Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the ~~Exchange~~ Act). Yes ☐ No ☒

~~As of August 2, 2021, there~~There were ~~61,471,783~~61,922,097 shares of the ~~registrant’s common stock (no par value) outstanding.~~

registrant's Common Stock outstanding as of February 1, 2022.

Table of Contents

~~Maximus, Inc.~~

~~Quarterly Report on~~Table of Contents to First Quarter 2022 Form 10-Q

~~For the Quarter Ended June 30, 2021~~

~~INDEX~~


~~PART I. FINANCIAL INFORMATION~~
~~Item 1.~~	~~Consolidated~~ SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS	3
Part I - Fin ancial Information		4
I tem 1.	Financial Statements		14

	Consolidated Statements of Operations ~~for the Three and Nine Months Ended June 30, 2021 and 2020 (unaudited)~~	4		1

	Consolidated Statements of Comprehensive Income ~~for the~~ ~~Three and Nine Months Ended June 30, 2021 and 2020~~ ~~(unaudited)~~		25

	Consolidated Balance Sheets ~~as of June 30, 2021 (unaudited) and September 30, 20~~20	6		3

	Consolidated Statements of Cash Flows ~~for the Nine Months Ended June 30, 2021 and 2020 (unaudited)~~	7		4

	Consolidated Statements of Changes in ~~Shareholders’~~Shareholders' Equity ~~for the~~	~~Three and Nine Months Ended June 30, 2021 and 2020~~8 ~~(unaudited)~~		5

	Notes to ~~Unaudited~~the Consolidated Financial Statements	9
	71. Organization

~~Item 2.~~	~~Management’s~~9
	2. Significant Accounting Policies	9
	3. Business Segments	10
	4. Revenue Recognition	12
	5. Earnings Per Share	14
	6. Business Combinations	14
	7. Debt	16
	8. Derivatives	17
	9. Fair Value	18
	10. Equity	18
	11. Cash and Cash Equivalents and Restricted Cash	19
	12. Accounts Receivable, Net	19
	13. Property and Equipment, Net	20
	14.Commitments and Contingencies	20
	1 5 . Subsequent Event	20
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	21
	Business Overview	21

	Financial Overview	22
	Results of Operations	22
	Liquidity and Capital Resources	28
	Critical Accounting Policies and Estimates	29
	Non-GAAP and Other Measures	29
Item 3.	Quantitative and Qualitative Disclosures ~~about~~About Market Risk	31
33Item 4.

~~Item 4.~~	Controls and Procedures	31
Part II - Other Information		3332

~~PART II. OTHER INFORMATION~~

Item 1.	Legal Proceedings		3432

Item 1A.	Risk Factors		3432

Item 2.	Unregistered Sales of Equity Securities	32
Item 3.	Defaults Upon Senior Securities	32
Item 4.	Mine Safety Disclosures	32
Item 5.	Other Information	32
Item 6.	Exhibits		3633

Signatures			3734

Table of Contents

~~Throughout~~Unless otherwise specified, references in this Quarterly Report on Form 10-Q to "our," "we," "us," "Maximus," the ~~terms “Company,” “we,” “us,” “our”~~"Company," and ~~“Maximus”~~"our business" refer to Maximus, Inc. and its ~~subsidiaries, unless the context requires otherwise.~~subsidiaries.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Included in this Quarterly Report on Form 10-Q are forward-looking statements within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: “anticipate,” “intend,” “plan,” “goal,” “seek,” “opportunity,” “could,” “potential,” “believe,” “project,” “estimate,” “expect,” “strategy,” “future,” “likely,” “may,” “should,” “will,”"anticipate," "intend," "plan," "goal," "seek," "opportunity," "could," "potential," "believe," "project," "estimate," "expect," "strategy," "future," "likely," "may," "should," "will," and similar references to future periods.

Forward-looking statements that are not historical facts, including statements about our confidence, strategies and initiatives, and our expectations about revenues, results of operations, profitability, liquidity, market demand, the impact of the coronavirus ~~(COVID-19)~~("COVID-19") global pandemic and related vaccine mandate implications, and our recent acquisitions are forward-looking statements that involve risks and uncertainties. These risks could cause our actual results to differ materially from those indicated by such forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following:

•a failure to meet performance requirements in our contracts, which might lead to contract termination and actual or liquidated damages;

•our failure to successfully bid for and accurately price contracts to generate our desired profit;

•the effects of future legislative or government budgetary and spending changes;

•the impact of the Biden Administration on federal procurement, federal funding to states' safety-net programs, and the overall decision-making process related to our industry, including our business and customers;

•our ability to manage our growth, including acquired businesses;

•difficulties in integrating or achieving projected revenues, earnings, and other benefits associated with acquired businesses;

•the outcome of reviews or audits, which might result in financial penalties and impair our ability to respond to invitations for new work;

•our ability to manage capital investments and startup costs incurred before receiving related contract payments;

•our ability to manage our debt;

•the extent and impact of the continuation of the global pandemic and the actions taken or to be taken by us, our customers, and the governments or jurisdictions in which we operate in response to COVID-19;

•~~the demand for our services and products, including the impacts of any economic downturns;~~

•~~a failure to meet performance requirements in our contracts, which might lead to contract termination and actual or liquidated damages;~~

•~~the effects of future legislative or government budgetary and spending changes;~~

•~~our failure to successfully bid for and accurately price contracts to generate our desired profit;~~

•our ability to maintain technology systems and otherwise protect confidential or protected information;

•our ability to attract and retain executive officers, senior managers and other qualified personnel to execute our business;

•~~our ability to manage capital investments and startup costs incurred before receiving related contract payments;~~

•~~our ability to manage our growth, including acquired businesses;~~

•~~our ability to manage our debt;~~

•the ability of government customers to terminate contracts on short notice, with or without cause;

•our ability to maintain relationships with key government entities from whom a substantial portion of our revenue is derived;

•~~the outcome of reviews or audits, which might result in financial penalties and impair our ability to respond to invitations for new work;~~

•a failure to comply with laws governing our business, which might result in the Company being subject to fines, penalties, suspension, debarment, and other sanctions;

•the costs and outcome of litigation;

•~~difficulties in integrating or achieving projected revenues, earnings, and other benefits associated with acquired businesses;~~

•the effects of changes in laws and regulations governing our business, including tax laws, and applicable interpretations and guidance thereunder, or changes in accounting policies, rules, methodologies, and practices, and our ability to estimate the impact of such changes;

•matters related to business we disposed of or divested; and

•other factors set forth in Item 1A, ~~of this Quarterly Report on Form 10-Q and in Item 1A,~~ "Risk Factors" inof our Annual Report on ~~Form~~From 10-K, ~~for the year ended September 30, 2020, which was~~ filed with the Securities and Exchange Commission on November ~~19, 2020.~~18, 2021.

Any forward-looking statement made by us in this report is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments, or otherwise.

~~PART I. FINANCIAL INFORMATION~~

~~Item 1. Consolidated Financial Statements.~~

~~Maximus, Inc.~~

~~CONSOLIDATED STATEMENTS OF OPERATIONS~~

~~(Amounts in thousands, except per share data)~~

~~(Unaudited)~~
Three Months Ended June 30, Nine Months Ended June 30,
2021 2020 2021 2020
Revenue $ 1,243,520 $ 901,337 $ 3,148,354 $ 2,537,701
Cost of revenue 951,664 715,734 2,419,785 2,023,550
Gross profit 291,856 185,603 728,569 514,151
Selling, general, and administrative expenses 140,129 89,582 364,498 283,662
Amortization of intangible assets 12,132 8,712 23,718 26,734
Operating income 139,595 87,309 340,353 203,755
Interest expense 3,087 616 4,049 1,565
Other (expense)/income, net (8,289) (671) (9,584) 621
Income before income taxes 128,219 86,022 326,720 202,811
Provision for income taxes 33,724 21,558 87,534 51,963
Net income $ 94,495 $ 64,464 $ 239,186 $ 150,848
Basic earnings per share $ 1.52 $ 1.04 $ 3.86 $ 2.38
Diluted earnings per share $ 1.51 $ 1.04 $ 3.84 $ 2.37
Dividends declared per share $ 0.28 $ 0.28 $ 0.84 $ 0.84
Weighted average shares outstanding:
Basic 62,064 61,882 62,028 63,463
Diluted 62,453 62,102 62,300 63,666

~~See notes to unaudited consolidated financial statements.~~

~~Maximus, Inc.~~

~~CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME~~

~~(Amounts in thousands)~~

~~(Unaudited)~~
Three Months Ended June 30, Nine Months Ended June 30,
2021 2020 2021 2020
Net income $ 94,495 $ 64,464 $ 239,186 $ 150,848
Net unrealized losses on cash flow hedge, net of taxes of $379, $0, $379 and $0, respectively (1,062) 0 (1,062) 0
Foreign currency translation adjustments (24) 3,432 7,669 (1,304)
Comprehensive income $ 93,409 $ 67,896 $ 245,793 $ 149,544

~~See notes to unaudited consolidated financial statements.~~

~~Maximus, Inc.~~

~~CONSOLIDATED BALANCE SHEETS~~

~~(Amounts in thousands)~~
June 30,
2021 September 30,
2020
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 96,110 $ 71,737
Accounts receivable — billed and billable, net of allowance of $6,607 and $6,051 794,653 622,871
Accounts receivable — unbilled 334,666 163,332
Income taxes receivable 454 2,075
Prepaid expenses and other current assets 81,479 72,543
Total current assets 1,307,362 932,558
Property and equipment, net 67,794 66,721
Capitalized software, net 45,739 38,033
Operating lease right-of-use assets 186,944 177,159
Goodwill 1,757,795 593,129
Intangible assets, net 892,487 145,893
Deferred contract costs, net 37,020 20,891
Deferred compensation plan assets 47,041 36,819
Deferred income taxes 506 1,915
Other assets 27,905 11,584
Total assets $ 4,370,593 $ 2,024,702
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 420,510 $ 253,338
Accrued compensation and benefits 181,559 137,101
Deferred revenue 68,846 51,655
Income taxes payable 19,763 5,377
Current portion of long-term debt and other borrowings 60,586 10,878
Operating lease liabilities 82,572 80,748
Other current liabilities 26,768 22,071
Total current liabilities 860,604 561,168
Deferred revenue, less current portion 36,051 27,311
Deferred income taxes 204,174 24,737
Long-term debt, less current portion 1,633,135 18,017
Deferred compensation plan liabilities, less current portion 44,076 38,654
Operating lease liabilities, less current portion 118,341 104,011
Other liabilities 20,765 8,985
Total liabilities 2,917,146 782,883
Shareholders’ equity:
Common stock, no par value; 100,000 shares authorized; 61,472 and 61,504 shares issued and outstanding at June 30, 2021, and September 30, 2020, respectively 535,990 513,959
Accumulated other comprehensive loss (36,031) (42,638)
Retained earnings 953,488 770,498
Total shareholders' equity 1,453,447 1,241,819
Total liabilities and shareholders' equity $ 4,370,593 $ 2,024,702

~~See notes to unaudited consolidated financial statements.~~

Table of Contents

PART I - Financial Information

Item 1. Financial Statements

Maximus, Inc.

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~Consolidated Statements of Operations

~~(Amounts in thousands)~~(Unaudited)

~~(Unaudited)~~
Nine Months Ended June 30,
2021 2020
Cash flows from operations:
Net income $ 239,186 $ 150,848
Adjustments to reconcile net income to cash flows from operations:
Depreciation and amortization of property and equipment and
capitalized software 33,664 47,496
Amortization of intangible assets 23,718 26,734
Deferred income taxes 3,632 (5,210)
Stock compensation expense 20,823 17,558
Gain on sale of a business 0 (1,706)
Costs related to debt financing 8,509 0
Change in assets and liabilities, net of effects of business combinations
Accounts receivable — billed and billable (83,881) (147,626)
Accounts receivable — unbilled (170,423) (80,267)
Prepaid expenses and other current assets 7,542 529
Deferred contract costs (15,773) (1,396)
Accounts payable and accrued liabilities 116,873 48,622
Accrued compensation and benefits 34,387 33,647
Deferred revenue 23,624 2,806
Income taxes 15,165 563
Operating lease right-of-use assets and liabilities 1,077 (1,071)
Other assets and liabilities (11,464) 4,556
Cash flows from operations 246,659 96,083
Cash flows from investing activities:
Purchases of property and equipment and capitalized software costs (32,133) (28,436)
Acquisitions of businesses, net of cash acquired (1,779,473) (2,611)
Proceeds from the sale of a business 0 3,250
Other 0 385
Cash used in investing activities (1,811,606) (27,412)
Cash flows from financing activities:
Cash dividends paid to Maximus shareholders (51,625) (52,988)
Purchases of Maximus common stock (3,363) (166,959)
Tax withholding related to RSU vesting (9,818) (10,614)
Payments for debt financing (22,759) 0
Borrowings under new credit facilities 1,700,000 0
Other debt borrowings 585,000 421,488
Other debt repayments (607,880) (278,971)
Other (2,763) (957)
Cash provided by/(used in) financing activities 1,586,792 (89,001)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash 2,830 (174)
Net increase in cash, cash equivalents, and restricted cash 24,675 (20,504)
Cash, cash equivalents, and restricted cash, beginning of period 88,561 116,492
Cash, cash equivalents, and restricted cash, end of period $ 113,236 $ 95,988


	For the Three Months Ended
	December 31, 2021		December 31, 2020
	(in thousands, except per share amounts)
Revenue	$	1,150,876	$	945,554
Cost of revenue	922,721		739,499
Gross profit	228,155		206,055
Selling, general, and administrative expenses	124,221		111,967
Amortization of intangible assets	22,405		6,516
Operating income	81,529		87,572
Interest expense	(9,638)		(206)
Other expense, net	(311)		(775)
Income before income taxes	71,580		86,591
Provision for income taxes	18,250		22,514
Net income	$	53,330	$	64,077

Earnings per share:
Basic	$	0.86	$	1.03
Diluted	$	0.85	$	1.03
Weighted average shares outstanding:
Basic	62,262		62,038
Diluted	62,445		62,135

Dividends declared per share	$	0.28	$	0.28

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

Maximus, Inc.

~~CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY~~

~~(Amounts in thousands)~~Consolidated Statements of Comprehensive Income

(Unaudited)

Common
Shares
Outstanding Common
Stock Accumulated
Other
Comprehensive
Loss Retained
Earnings Total
Balance at March 31, 2021 61,472 $ 528,205 $ (34,945) $ 876,645 $ 1,369,905
Net income — — — 94,495 94,495
Foreign currency translation — — (24) — (24)
Cash flow hedge, net of income taxes — — (1,062) — (1,062)
Cash dividends — — — (17,211) (17,211)
Dividends on RSUs — 441 — (441) —
Stock compensation expense — 7,344 — — 7,344
Balance at June 30, 2021 61,472 $ 535,990 $ (36,031) $ 953,488 $ 1,453,447

Common
Shares
Outstanding Common
Stock Accumulated
Other
Comprehensive
Loss Retained
Earnings Total
Balance at September 30, 2020 61,504 $ 513,959 $ (42,638) $ 770,498 $ 1,241,819
Net income — — — 239,186 239,186
Foreign currency translation — — 7,669 — 7,669
Cash flow hedge, net of income taxes — — (1,062) — (1,062)
Cash dividends — — — (51,625) (51,625)
Dividends on RSUs — 1,208 — (1,208) —
Purchases of Maximus common stock (52) — — (3,363) (3,363)
Stock compensation expense — 20,823 — — 20,823
RSUs vested 20 — — — —
Balance at June 30, 2021 61,472 $ 535,990 $ (36,031) $ 953,488 $ 1,453,447


	For the Three Months Ended
	December 31, 2021		December 31, 2020
	(in thousands)
Net income	$	53,330	$	64,077
Other comprehensive income, net of tax:
Foreign currency translation adjustments	459		6,923
Net gains on cash flow hedge, net of tax	2,685		—
Other comprehensive income	3,144		6,923
Comprehensive income	$	56,474	$	71,000

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

Maximus, Inc.

~~CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY~~Consolidated Balance Sheets

~~(Amounts in thousands)~~

~~(Unaudited)~~

Common
Shares
Outstanding Common
Stock Accumulated
Other
Comprehensive
Loss Retained
Earnings Noncontrolling
Interest Total
Balance at March 31, 2020 61,313 $ 511,023 $ (50,116) $ 677,561 $ 0 $ 1,138,468
Net income — — — 64,464 — 64,464
Foreign currency translation — — 3,432 — — 3,432
Cash dividends — — — (17,175) — (17,175)
Dividends on RSUs — 419 — (419) — 0
Stock compensation expense — 5,758 — — — 5,758
Balance at June 30, 2020 61,313 $ 517,200 $ (46,684) $ 724,431 $ 0 $ 1,194,947

Common
Shares
Outstanding Common
Stock Accumulated
Other
Comprehensive
Loss Retained
Earnings Noncontrolling
Interest Total
Balance at September 30, 2019 63,979 $ 498,433 $ (45,380) $ 794,739 $ 409 $ 1,248,201
Net income — — — 150,848 — 150,848
Foreign currency translation — — (1,304) — — (1,304)
Cash dividends — — — (52,988) (409) (53,397)
Dividends on RSUs — 1,209 — (1,209) — —
Purchases of Maximus common stock (2,767) — — (166,959) — (166,959)
Stock compensation expense — 17,558 — — — 17,558
RSUs vested 101 — — — — —
Balance at June 30, 2020 61,313 $ 517,200 $ (46,684) $ 724,431 $ 0 $ 1,194,947


	December 31, 2021		September 30, 2021
	(unaudited)
	(in thousands)
Assets:
Cash and cash equivalents	$	181,790	$	135,061
Accounts receivable, net	849,410		834,819
Income taxes receivable	2,826		5,413
Prepaid expenses and other current assets	114,303		104,201
Total current assets	1,148,329		1,079,494
Property and equipment, net	53,627		62,627
Capitalized software, net	40,349		42,868
Operating lease right-of-use assets	177,866		179,349
Goodwill	1,776,239		1,774,406
Intangible assets, net	871,761		879,168
Deferred contract costs, net	43,319		36,486
Deferred compensation plan assets	49,376		46,738
Deferred income taxes	1,745		990
Other assets	19,257		16,839
Total assets	$	4,181,868	$	4,118,965
Liabilities and Shareholders' Equity:
Liabilities:
Accounts payable and accrued liabilities	$	273,289	$	305,565
Accrued compensation and benefits	118,891		186,809
Deferred revenue, current portion	111,578		98,588
Income taxes payable	14,897		6,782
Long-term debt, current portion	78,703		80,555
Operating lease liabilities, current portion	70,345		76,077
Other current liabilities	43,089		35,057
Total current liabilities	710,792		789,433
Deferred revenue, non-current portion	29,072		35,932
Deferred income taxes	196,144		194,638
Long-term debt, non-current portion	1,515,089		1,429,137
Deferred compensation plan liabilities, non-current portion	53,013		47,405
Operating lease liabilities, non-current portion	119,654		121,771
Other liabilities	29,678		20,320
Total liabilities	2,653,442		2,638,636
Commitments and contingencies (Note 14)	0		0
Shareholders' equity:
Common stock, no par value; 100,000 shares authorized; 61,936 and 61,954 shares issued and outstanding as of December 31, 2021 and September 30, 2021, respectively (shares in thousands)	543,032		532,411
Accumulated other comprehensive loss	(36,764)		(39,908)
Retained earnings	1,022,158		987,826
Total shareholders' equity	1,528,426		1,480,329
Total liabilities and shareholders' equity	$	4,181,868	$	4,118,965

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

Maximus, Inc.

Consolidated Statements of Cash Flows

(Unaudited)


	For the Three Months Ended
	December 31, 2021		December 31, 2020
	(in thousands)
Cash flows from operating activities:
Net income	$	53,330	$	64,077
Adjustments to reconcile net income to cash flows from operating activities:
Depreciation and amortization of property, equipment and capitalized software	11,365		11,817
Amortization of intangible assets	22,405		6,516
Amortization of debt issuance costs and debt discount	649		—
Deferred income taxes	(229)		1,298
Stock compensation expense	8,248		6,062
Change in assets and liabilities, net of effects of business combinations:
Accounts receivable	(14,114)		7,809
Prepaid expenses and other current assets	(5,115)		4,893
Deferred contract costs	(6,811)		(205)
Accounts payable and accrued liabilities	(32,452)		11,199
Accrued compensation and benefits	(56,305)		(35,682)
Deferred revenue	5,929		5,757
Income taxes	10,321		16,947
Operating lease right-of-use assets and liabilities	(6,370)		(4,927)
Other assets and liabilities	6,230		2,554
Net cash (used in)/provided by operating activities	(2,919)		98,115
Cash flows from investing activities:
Purchases of property and equipment and capitalized software	(6,327)		(9,094)
Other	—		(159)
Net cash used in investing activities	(6,327)		(9,253)
Cash flows from financing activities:
Cash dividends paid to Maximus shareholders	(17,347)		(17,207)
Purchases of Maximus common stock	(1,379)		(3,363)
Tax withholding related to RSU vesting	(9,673)		(9,818)
Proceeds from borrowings	100,000		147,852
Principal payments for debt	(16,685)		(146,188)
Other	—		(2,763)
Net cash provided by/(used in) financing activities	54,916		(31,487)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	372		3,882
Net change in cash, cash equivalents, and restricted cash	46,042		61,257
Cash, cash equivalents and restricted cash, beginning of period	156,570		88,561
Cash, cash equivalents and restricted cash, end of period	$	202,612	$	149,818

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

Maximus, Inc.

Consolidated Statements of Changes in Shareholders' Equity

(Unaudited)


	Common Stock			Accumulated Other Comprehensive Loss		Retained Earnings		Total Equity
	Shares	Amount
	(in thousands)
Balance at September 30, 2021	61,954	$	532,411	$	(39,908)	$	987,826	$	1,480,329
Net income	—	—		—		53,330		53,330
Foreign currency translation	—	—		459		—		459
Cash flow hedge, net of tax	—	—		2,685		—		2,685
Cash dividends	—	—		—		(17,347)		(17,347)
Dividends on RSUs	—	272		—		(272)		—
Purchases of Maximus common stock	(18)	—		—		(1,379)		(1,379)
Stock compensation expense	—	8,248		—		—		8,248
Tax withholding adjustment related to RSU vesting	—	2,101		—		—		2,101
Balance as of December 31, 2021	61,936	$	543,032	$	(36,764)	$	1,022,158	$	1,528,426


	Common Stock			Accumulated Other Comprehensive Loss		Retained Earnings		Total Equity
	Shares	Amount
	(in thousands)
Balance at September 30, 2020	61,504	$	513,959	$	(42,638)	$	770,498	$	1,241,819
Net income	—	—		—		64,077		64,077
Foreign currency translation	—	—		6,923		—		6,923
Cash dividends	—	—		—		(17,207)		(17,207)
Dividends on RSUs	—	336		—		(336)		—
Purchases of Maximus common stock	(52)	—		—		(3,363)		(3,363)
Stock compensation expense	—	6,062		—		—		6,062
Balance as of December 31, 2020	61,452	$	520,357	$	(35,715)	$	813,669	$	1,298,311

See accompanying notes to unaudited consolidated financial statements.

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Maximus, Inc.

Notes to the Unaudited Consolidated Financial Statements

~~For~~

1. ORGANIZATION

Maximus, a Virginia corporation established in 1975, is a leading provider of government services worldwide. Maximus operates under its founding mission of Helping Government Serve the ~~Three~~People®, enabling citizens around the globe to successfully engage with their governments at all levels and ~~Nine Months Ended June 30, 2021~~across a variety of health and ~~2020~~

human services programs. Maximus delivers innovative business process management and technology solutions that contribute to improved outcomes for citizens and higher levels of productivity, accuracy, accountability, and efficiency of government-sponsored programs. Maximus is a proud partner to government agencies in the United States, Australia, Canada, Italy, Saudi Arabia, Singapore, South Korea, Sweden, and the United Kingdom.

~~1. Organization and~~ 2. SIGNIFICANT ACCOUNTING POLICIES

(a)Basis of Presentation

The accompanying ~~unaudited~~ consolidated financial statements include the accounts of the Company and its subsidiaries over which the Company has a controlling financial interest, and have been prepared in accordance with accounting principles generally accepted in the United States, ~~for interim financial information~~or U.S. GAAP, and the ~~instructions to Form 10-Q~~rules and ~~Article 10 of Regulation S-X. As permitted by these instructions, they do not include all~~regulations of the ~~information~~U.S. Securities and notes required by generally accepted accounting principles (GAAP) for complete financial statements. In the opinion of management, all adjustments, including normal recurring adjustments, considered necessary for a fair presentation are included.Exchange Commission, or SEC. All intercompany balances and transactions have been eliminated in consolidation.

(b)Basis of Presentation for Interim Periods

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

The results of operations for the ~~three and nine months ended June 30, 2021,~~interim periods presented are not necessarily indicative of ~~the~~ results that may be expected for the ~~full fiscal year.~~year or future periods. The balance sheet at September 30, 2020, has been derived from the audited financial statements at that date but does not include all of the information and notes required by GAAP for complete financial statements.

~~These~~ financial statements should be read in conjunction with ~~the~~our audited consolidated ~~audited~~ financial statements and the notes thereto ~~at September 30, 2020 and 2019, and~~ for ~~each of~~ the ~~three years in the period~~year ended September 30, ~~2020,~~2021 included in our Annual Report on Form 10-K ~~which was filed with~~for the ~~Securities and Exchange Commission on November 19, 2020.~~fiscal year then ended (the "2021 10-K"). The Company has continued to follow the accounting policies set forth in those financial statements.

(c)Estimates

The preparation of these financial statements, in conformity with U.S. GAAP, ~~in the United States,~~ 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 goodwill, and amounts related to income taxes, certain accrued liabilities, and contingencies and litigation.

We base our estimates on historical experience and expectations of the future that we believe to be reasonable. The economic and political effects of the ~~coronavirus (COVID-19)~~COVID-19 global pandemic increase uncertainty, which has reduced our ability to use past results to estimate future performance. Accordingly, our estimates may be subject to greater volatility than has been the case in the past.

•Our balance sheet includes goodwill valued at $1.76 billion. This balance is allocated between reporting units, which are consistent with our 3 operating segments. Goodwill is not amortized but is tested for impairment when necessary and no less than once per year. We performed our last annual goodwill impairment test as of July 1, 2020, using a qualitative assessment. There has been no indication of impairment of any reporting unit at this time or since.

•Our balance sheet includes a number of long-lived assets, including property and equipment, capitalized software, operating lease right-of-use assets, deferred contract costs and intangible assets. These assets are depreciated or amortized over their estimated useful economic lives but are subject to impairment if events indicate that the carrying amounts may not be recoverable. At this time, there are no balances which we believe are not recoverable.

•Included within our long-lived assets are $892.5 million of intangible assets, which have been acquired through business combinations. We use judgment in identifying, valuing, and assigning a useful economic life to assets as they are acquired. The judgments required vary with the type of asset but may include projections of future results, estimated costs to recreate or replace assets, the cost of utilizing other, similar assets provided by a third party and an appropriate cost of capital. Where appropriate, we utilize the services of a third-party specialist to assist us in these valuations.

•Our balance sheet includes $1.13 billion of billed, billable and unbilled accounts receivable, net of allowance for credit losses. Beginning October 1, 2020, we have evaluated credit risk under ASC Topic 326, as further described below. Credit risk has not historically been significant to our business due to the nature of our customers. During the three and nine months ended June 30, 2021, we recorded changes to our estimated credit losses of $0.1 million and $1.0 million, respectively.

•As disclosed in "Note 3. Revenue Recognition," revenue for some of our employment services contracts in the Outside the U.S. Segment is based upon achievement of future outcomes as defined in each contract. Specifically, we are paid as individuals attain employment goals, which may take many months to achieve. Revenue is recognized on these contracts over the period of performance. Employment markets worldwide

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suffered a significant shock during fiscal year 2020 due to COVID-19, which resulted in significant reductions in work performed and outcomes reached. Although we are seeing recovery in fiscal year 2021, this revenue remains subject to volatility.

•As disclosed in "Note 5. Business Combinations," we have acquired 2 businesses during fiscal year 2021. For assets acquired and liabilities assumed, we are required to identify and recognize these balances at their fair value as of the date of acquisition. We are still in the process of completing the valuations of these assets and, accordingly, there may be changes in these balances.

~~Changes in financial reporting~~

~~In August 2018, the Financial Accounting Standards Board (FASB) issued ASU No. 2018-15,~~ ~~Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40) - Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract~~. This accounting guidance requires customers in cloud-computing arrangements to identify and defer certain implementation costs in a manner broadly consistent with that of existing guidance on the costs to develop or obtain internal-use software. Costs capitalized under this guidance will be expensed over the term of the cloud computing arrangement. We adopted this guidance on October 1, 2020, using a prospective approach.

~~In June 2016, the FASB issued ASU No. 2016-13,~~ ~~Financial Instruments - Credit Losses (Topic 326):Measurement of Credit Losses on Financial Instruments~~. This update introduces a new model for recognizing credit losses on financial instruments, including losses on accounts receivable. This update replaced the existing incurred loss impairment model with an expected loss model. We adopted this guidance on October 1, 2020, with no material impact to our financial statements.

~~In January 2017, the FASB issued ASU No. 2017-04,~~ ~~Simplifying the Test for Goodwill Impairment~~. This standard will not change the manner in which we would identify a goodwill impairment but would change any subsequent calculation of an impairment charge. We adopted this standard on October 1, 2020. The effect of this new standard will depend upon the outcome of future goodwill impairment tests.

~~2. Segment Information~~3. BUSINESS SEGMENTS

We conduct our operations through 3 business segments: U.S. Services, U.S. Federal Services, and Outside the U.S.

•U.S. Services

Our U.S. Services Segment provides a variety of business process services ~~(BPS)~~("BPS") such as program administration, appeals and assessments, and related consulting work for U.S. state and local government programs. These services support a variety of programs, including the Affordable Care Act ~~(ACA)~~("ACA"), Medicaid, the ~~Children’s~~Children's Health Insurance Program ~~(CHIP)~~("CHIP"), Temporary Assistance to Needy Families ~~(TANF)~~("TANF"), and child support programs. Addressing societal macro trends such as aging populations and rising costs, the segment continues to execute on its clinical evolution strategy by expanding its clinical offerings in public health with new work in contact tracing, disease investigation, and vaccine distribution support services as part of the governments' COVID-19 response efforts. The segment also successfully expanded into the unemployment insurance market, supporting more than 15 states in their unemployment insurance programs.

U.S. Federal Services

•From technology solutions to program administration and operations, our U.S. Federal Services Segment delivers end-to-end solutions that help various U.S. ~~federal agencies~~Federal Government Agencies better deliver on their mission. This also includes appeals and assessments services, system and application development, IT modernization, and maintenance services. The segment also contains certain state-based assessments and appeals work that is part of the segment's heritage within the Medicare Appeals portfolio which continues to be managed within this segment. ~~Propelled by~~Benefiting from the Maximus Federal Consulting (formerly Attain Federal) platform, the segment executes on its digital strategy to deliver technology solutions that advance agency missions, including the ~~charge~~challenge to modernize, provide better customer experience, and drive process efficiencies. The segment continues to expand its clinical solutions ~~and~~with the acquisition of VES which manages the clinical evaluation process for U.S. veterans and service members on behalf of the U.S. Department of Veterans Affairs. The segment further supports clinical offerings in public health with new work supporting the U.S. Federal Government's COVID-19 response efforts. This included expanded work with the Centers for Disease Control and Prevention ~~(CDC)~~("CDC") for their helpline and increased support for the IRS Wage and Investment Division's response efforts to general inquiries regarding the Coronavirus Aid Relief & Economic Security ~~(CARES)~~("CARES") Act and Economic Impact Payment Service Plan.

Outside the U.S.

•~~Delivering support to people from different backgrounds, cultures and communities, our~~Our Outside the U.S. Segment provides BPS for international governments and commercial ~~clients.~~clients, transforming the lives of people around the world. Helping people find

employment, access vital support, and remain healthy, these services include health and disability assessments, program administration for employment services, wellbeing solutions, and other job ~~seeker-related~~seeker related services. We support programs and deliver services in the ~~United Kingdom (U.K.)~~U.K., including the Health Assessment Advisory Service ~~(HAAS)~~("HAAS"), the Work & Health Programme, Fair Start, and Restart; Australia, including jobactive and the Disability Employment Service; Canada, including Health Insurance British Columbia and the Employment Program of British Columbia; in addition to Italy, Saudi Arabia, Singapore, South Korea, and Sweden, where we predominantly provide employment support and job seeker services.

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Table 3: Results of Operation by Business Segment (1)
	For the Three Months Ended
	December 31, 2021			December 31, 2020
	Amount		% (2)	Amount		% (2)
	(dollars in thousands)
Revenue:
U.S. Services	$	386,417		$	384,934
U.S. Federal Services	581,871			405,245
Outside the U.S.	182,588			155,375
Revenue	$	1,150,876		$	945,554
Gross profit:
U.S. Services	$	89,699	23.2 %	$	99,002	25.7 %
U.S. Federal Services	126,576		21.8 %	82,496		20.4 %
Outside the U.S.	11,880		6.5 %	24,557		15.8 %
Gross profit	$	228,155	19.8 %	$	206,055	21.8 %
Selling, general, and administrative expenses:
U.S. Services	$	35,102	9.1 %	$	37,456	9.7 %
U.S. Federal Services	64,925		11.2 %	52,252		12.9 %
Outside the U.S.	21,340		11.7 %	20,032		12.9 %
Other (3)	2,854		NM	2,227		NM
Selling, general, and administrative expenses	$	124,221	10.8 %	$	111,967	11.8 %
Operating income:
U.S. Services	$	54,597	14.1 %	$	61,546	16.0 %
U.S. Federal Services	61,651		10.6 %	30,244		7.5 %
Outside the U.S.	(9,460)		(5.2) %	4,525		2.9 %
Amortization of intangible assets	(22,405)		NM	(6,516)		NM
Other (3)	(2,854)		NM	(2,227)		NM
Operating income	$	81,529	7.1 %	$	87,572	9.3 %

(1)Expenses that are not specifically included in the segments are included in other categories, including amortization of intangible assets and the direct costs of acquisitions. These costs are excluded from measuring each segment's operating performance.
Three Months Ended June 30, Nine Months Ended June 30,
(in thousands) 2021 % (1) 2020 % (1) 2021 % (1) 2020 % (1)
Revenue:
U.S. Services $ 436,338 $ 336,950 $ 1,269,487 $ 957,929
U.S. Federal Services 617,601 450,143 1,352,982 1,210,105
Outside the U.S. 189,581 114,244 525,885 369,667
Total $ 1,243,520 $ 901,337 $ 3,148,354 $ 2,537,701
Gross profit:
U.S. Services $ 104,814 24.0% $ 93,029 27.6% $ 323,256 25.5% $ 268,073 28.0%
U.S. Federal Services 155,776 25.2% 84,723 18.8% 312,405 23.1% 232,502 19.2%
Outside the U.S. 31,266 16.5% 7,851 6.9% 92,908 17.7% 13,576 3.7%
Total $ 291,856 23.5% $ 185,603 20.6% $ 728,569 23.1% $ 514,151 20.3%
Selling, general & administrative expense:
U.S. Services $ 42,606 9.8% $ 31,996 9.5% $ 116,655 9.2% $ 102,633 10.7%
U.S. Federal Services 69,647 11.3% 45,490 10.1% 172,877 12.8% 131,455 10.9%
Outside the U.S. 22,973 12.1% 13,668 12.0% 65,018 12.4% 47,125 12.7%
Gain on sale of business (3) 0 NM (1,706) NM 0 NM (1,706) NM
Other (2) 4,903 NM 134 NM 9,948 NM 4,155 NM
Total $ 140,129 11.3% $ 89,582 9.9% $ 364,498 11.6% $ 283,662 11.2%
Operating income:
U.S. Services $ 62,208 14.3% $ 61,033 18.1% $ 206,601 16.3% $ 165,440 17.3%
U.S. Federal Services 86,129 13.9% 39,233 8.7% 139,528 10.3% 101,047 8.4%
Outside the U.S. 8,293 4.4% (5,817) (5.1)% 27,890 5.3% (33,549) (9.1)%
Amortization of intangible assets (12,132) NM (8,712) NM (23,718) NM (26,734) NM
Gain on sale of business (3) 0 NM 1,706 NM $ 0 NM 1,706 NM
Other (2) (4,903) NM (134) NM (9,948) NM (4,155) NM
Total $ 139,595 11.2% $ 87,309 9.7% $ 340,353 10.8% $ 203,755 8.0%

(2)

~~(1)~~ Percentage of respective segment revenue. Percentages not considered meaningful are marked ~~“NM.”~~"NM."

~~(2)~~ (3)Other selling, general, and administrative expenses includes ~~credits and~~ costs that are not allocated to a particular segment. This includes expenses incurred as part of our acquisitions, as well as potential acquisitions which have not been or may not be completed. Our results for the three and nine months ended June 30, 2021, included $5.6 million and $8.8 million, respectively, of expenses relating to the acquisitions of Attain, LLC, and VES Group, Inc. For more information, see "Note 5. Business Combinations."

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~~(3) During fiscal year 2020, we sold Q2 Administrators LLC, a subsidiary within our U.S. Federal Services Segment, resulting in a gain.~~4. REVENUE RECOGNITION

Identifiable assets for the segments are shown below. Identifiable assets for U.S. Federal Services increased due to the acquisitions of Attain, LLC and VES Group, Inc. Refer to "Note 5. Business Combinations" for details.
(in thousands) June 30, 2021 September 30, 2020
U.S. Services $ 728,347 $ 702,728
U.S. Federal Services 3,149,694 937,477
Outside the U.S. 304,952 224,532
Corporate 187,600 159,965
Total $ 4,370,593 $ 2,024,702

~~3. Revenue Recognition~~

~~We recognize~~The Company recognizes revenue as, or when, we satisfy performance obligations under a contract. The majority of our contracts have performance obligations which 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~~Revenue

In addition to our segment reporting, we disaggregate our revenues by ~~service,~~ contract type, customer type, and geography. Our operating segments represent the manner in which our Chief Executive Officer reviews our financial results, which is further discussed in "Note ~~2. Segment Information.~~3. Business Segments."

~~By operating segment and service~~
Three Months Ended June 30, Nine Months Ended June 30,
(in thousands) 2021 2020 2021 2020
Program administration $ 325,755 $ 251,616 $ 964,981 $ 724,960
Assessments and appeals 33,529 40,875 101,561 104,621
Workforce and children services 64,240 32,531 167,106 90,651
Other 12,814 11,928 35,839 37,697
Total U.S. Services $ 436,338 $ 336,950 $ 1,269,487 $ 957,929
Program administration $ 451,594 $ 362,973 $ 1,005,706 $ 949,071
Technology solutions 89,559 42,101 187,006 130,172
Assessments and appeals 76,448 45,069 160,270 130,862
Total U.S. Federal Services $ 617,601 $ 450,143 $ 1,352,982 $ 1,210,105
Workforce and children services $ 94,310 $ 55,046 $ 269,743 $ 146,968
Assessments and appeals 58,664 42,468 169,753 167,397
Program administration 34,296 15,544 80,284 49,583
Other 2,311 1,186 6,105 5,719
Total Outside the U.S. $ 189,581 $ 114,244 $ 525,885 $ 369,667
Total revenue $ 1,243,520 $ 901,337 $ 3,148,354 $ 2,537,701


Table 4.1: Revenue by Contract Type
	For the Three Months Ended
	December 31, 2021		December 31, 2020
	(in thousands)
Performance-based	$	490,956	$	293,960
Cost-plus	340,081		384,483
Fixed price	151,505		120,777
Time and materials	168,334		146,334
Total revenue	$	1,150,876	$	945,554


Table 4.2: Revenue by Customer Type
	For the Three Months Ended
	December 31, 2021		December 31, 2020
	(in thousands)
U.S. state government agencies	$	371,547	$	388,114
United States Federal Government agencies	564,094		385,573
International government agencies	171,375		147,342
Other, including local municipalities and commercial customers	43,860		24,525
Total revenue	$	1,150,876	$	945,554

~~By contract type~~
Three Months Ended June 30, Nine Months Ended June 30,
(in thousands) 2021 2020 2021 2020
Performance-based $ 389,800 $ 295,650 $ 1,033,509 $ 864,077
Cost-plus 282,808 422,641 953,373 1,184,425
Fixed price 146,175 132,535 413,296 352,255
Time and materials 424,737 50,511 748,176 136,944
Total revenue $ 1,243,520 $ 901,337 $ 3,148,354 $ 2,537,701

~~By customer type~~
Three Months Ended June 30, Nine Months Ended June 30,
(in thousands) 2021 2020 2021 2020
New York State government agencies $ 102,195 $ 79,140 $ 289,462 $ 276,585
Other U.S. state government agencies 329,792 265,608 976,336 692,689
Total U.S. state government agencies 431,987 344,748 1,265,798 969,274
U.S. Federal Government agencies 594,771 429,031 1,288,213 1,155,773
International government agencies 180,049 107,353 499,091 345,629
Other, including local municipalities and commercial customers 36,713 20,205 95,252 67,025
Total revenue $ 1,243,520 $ 901,337 $ 3,148,354 $ 2,537,701

~~By geography~~
Three Months Ended June 30, Nine Months Ended June 30,
(in thousands) 2021 2020 2021 2020
United States $ 1,053,940 $ 787,092 $ 2,622,469 $ 2,168,033
United Kingdom 74,109 53,364 211,777 190,088
Australia 65,283 38,415 192,161 100,390
Rest of world 50,188 22,466 121,947 79,190
Total revenue $ 1,243,520 $ 901,337 $ 3,148,354 $ 2,537,701


Table 4.3: Revenue by Geography
	For the Three Months Ended
	December 31, 2021		December 31, 2020
	(in thousands)
United States	$	968,288	$	790,179
United Kingdom	85,807		64,786
Australia	52,814		55,932
Rest of world	43,967		34,657
Total revenue	$	1,150,876	$	945,554

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~~month. These balances are considered collectible and are included within accounts receivable — billed and billable.

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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~~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 December 31, 2021 and September 30, 2021, $12.5 million and $10.4 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”~~"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 which 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 desired outcomes, 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.

~~Of our revenue for~~During the three ~~and nine~~ months ended ~~June~~December 31, 2021, we recognized revenue of $41.2 million included in our deferred revenue balances as of September 30, ~~2021, approximately $7.5 million and $36.7 million, respectively, were from cash payments made to us prior to October 1, 2020. For~~2021. During the three ~~and nine~~ months ended ~~June 30,~~December 31, 2020, we recognized revenue of ~~$9.1~~$14.0 million ~~and $49.2 million, respectively, from payments made prior to October 1, 2019.~~included in our deferred revenue balances at September 30, 2020.

Contract estimates

We are required to use estimates in recognizing revenue from some of our contracts. As discussed in "Note ~~1. Organization and Basis of Presentation,~~2. Significant Accounting Policies," the calculation of these estimates has been complicated by the COVID-19 pandemic, which has reduced our ability to use past results to estimate future performance.

Some of our performance-based contract revenue is recognized based upon future outcomes defined in each contract. This is the case in many of our employment services contracts in the Outside the U.S. Segment, where we are paid as individuals attain employment goals, which may take many months to achieve. We recognize revenue on these contracts over the period of performance. Our estimates vary from contract to contract but may include estimates of the number of participants, the length of the contract, and the participants reaching employment milestones. We are required to estimate these outcome fees ahead of their ~~realization~~collection and recognize this estimated fee over the period of delivery. In almost all of the jurisdictions in which we operate, the employment markets have experienced significant changes due to the COVID-19 pandemic. As the pandemic commenced, many employment opportunities were terminated. Our volume of new program participants is beginning to increase as governments shift their focus to addressing the residual impacts of the pandemic, such as the economy and unemployment, particularly in those countries where the pandemic has stabilized, and economies are beginning to reopen.

Other performance-based contracts with future outcomes include those where we recognize an average effective rate per participant based upon the total volume of expected participants. In this instance, we are required to estimate the amount of discount applied to determine the average rate of revenue per participant. Our revised estimates of participant numbers are based upon our updated evaluation of probable future volumes.

~~Where we make changes~~Changes to our estimates ~~these~~ are recognized on a cumulative catch-up basis. InFor the three ~~and nine~~ months ended ~~June 30,~~December 31, 2021, we reported a ~~benefit to~~reduction in revenue ~~of $1.8 million~~ and ~~$17.8 million, respectively, and a benefit to~~ diluted earnings per share of ~~$0.03~~$4.7 million and ~~$0.20,~~$0.05, respectively, from changes in estimates. The corresponding change ~~in fiscal year~~for the three months ended December 31, 2020, was a ~~decline~~benefit to revenue and diluted earnings per share of ~~$1.4~~$10.2 million and ~~$9.1 million for the three and nine months ended June 30, 2020,~~$0.12, respectively.

Remaining performance obligations

~~At June 30,~~As of December 31, 2021, we had approximately ~~$635~~$570 million of remaining performance obligations. We anticipate that we will recognize revenue on approximately ~~42%~~50% 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 which is allocated entirely to future performance obligations, including variable transaction fees or fees tied directly to costs incurred.

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5. EARNINGS PER SHARE

~~4. Earnings Per Share~~


Table 5: Weighted Average Number of Shares - Earnings Per Share
	For the Three Months Ended
	December 31, 2021	December 31, 2020
	(in thousands)
Basic weighted average shares outstanding	62,262	62,038
Dilutive effect of unvested RSUs and PSUs	183	97
Denominator for diluted earnings per share	62,445	62,135

The ~~weighted average number of shares outstanding used to compute earnings per share was as follows:~~
Three Months Ended June 30, Nine Months Ended June 30,
(shares in thousands) 2021 2020 2021 2020
Basic weighted average shares outstanding 62,064 61,882 62,028 63,463
Dilutive effect of unvested RSUs 389 220 272 203
Denominator for diluted earnings per share 62,453 62,102 62,300 63,666

Our dilutive earnings per share for the three and nine months ended June 30, 2021 excludes the effect from approximately 0.1 million and 0.2 million unvested restricted stock units, respectively, as adding them to our calculation would be antidilutive. Our diluted earnings per share calculation for the three ~~and nine~~ months ~~ended June 30,~~December 31, 2021 and 2020, excludes ~~any effect from~~ approximately ~~0.3 million~~135,490 and ~~0.3 million~~595,000 unvested ~~restricted~~anti-dilutive stock units, ~~respectively, as adding them to our calculation would have been antidilutive~~.

respectively.

~~5. Business Combinations~~6. BUSINESS COMBINATIONS

VES Group, Inc. (VES)

On May 28, 2021, wethe Company acquired ~~all~~100% of VES for an estimated cash purchase price of ~~$1.37~~$1.36 billion (the ~~Acquisition)~~"VES Acquisition"). The final purchase price is subject to adjustment and is expected to be finalized during ~~our fourth fiscal quarter of 2021.~~2022. This business was integrated into our U.S. Federal Services Segment and is expected to increase revenue attributable to providing independent and conflict-free clinical business process ~~outsourcing (BPO)~~ services ~~at scale.~~("BPS"). The VES Acquisition also supports our ongoing strategic priority of expansion into the U.S. Federal market and ~~creates new opportunities~~accelerates our clinical evolution to ~~apply digital solutions to improve citizen services. We entered into~~meet long-term demand for BPS with a ~~new credit agreement to fund the Acquisition. See "Note 6 - Debt" for further details. The results~~clinical dimension. As of ~~operations for VES are included in the consolidated results of Maximus, Inc. starting May 28, 2021.~~

~~At this time,~~December 31, 2021, we ~~are in the process of finalizing the purchase price and the valuation~~have completed our assessment of all acquired assets and liabilities assumed, ~~liabilities. The balances below represent our best estimate~~except income taxes and ~~are subject to change:~~working capital true-up.

~~(in thousands)~~


Table 6.1: VES Valuation
	Allocation of Assets and Liabilities as of September 30, 2021		Adjustments		Estimated Allocation of Assets and Liabilities as of December 31, 2021
	(in thousands)
Consideration paid:
Cash consideration paid, net of cash acquired	$	1,360,231	$	—	$	1,360,231
Estimated additional cash payments	4,635		—		4,635
Estimated cash consideration, net of cash acquired	1,364,866		—		1,364,866
Assets acquired:
Accounts receivable - billed, billable and unbilled	$	44,078	$	—	$	44,078
Prepaid expenses and other current assets	7,955		—		7,955
Property and equipment, net	9,113		(1,092)		8,021
Operating lease right-of-use assets	18,898		—		18,898
Intangible assets	664,000		—		664,000
Other assets	7,166		—		7,166
Total identifiable assets acquired	751,210		(1,092)		750,118
Liabilities assumed:
Accounts payable and accrued compensation	42,182		—		42,182
Operating lease liabilities	18,898		—		18,898
Income taxes payable, current	5,673		—		5,673
Deferred income taxes	171,497		—		171,497
Other long-term liabilities	12,270		—		12,270
Total identifiable liabilities assumed	250,520		—		250,520
Net identifiable assets acquired	500,690		(1,092)		499,598
Goodwill	864,176		1,092		865,268
Net assets acquired	$	1,364,866	$	—	$	1,364,866

~~Estimated Fair Value of Assets and Liabilities~~

~~Cash consideration paid, net of cash acquired~~

~~1,360,231~~

~~Estimated additional cash payments~~

~~7,494~~

~~Estimated cash consideration, net of cash acquired~~

~~1,367,725~~

~~Accounts receivable - billed, billable and unbilled~~

~~44,078~~

~~Prepaid expenses and other current assets~~

~~13,911~~

~~Property and equipment, net~~

~~9,113~~

~~Operating lease right-of-use assets~~

~~18,898~~

~~Intangible assets~~

~~664,000~~

~~Other assets~~

~~12,816~~

~~Total identifiable assets acquired~~

~~762,816~~

~~Accounts payable and accrued compensation~~

~~42,978~~

~~Operating lease liabilities~~

~~18,898~~

~~Income taxes payable~~

~~6,196~~

~~Deferred income taxes~~

~~177,626~~

~~Other long-term liabilities~~

~~6,667~~

~~Net identifiable assets acquired~~

~~510,451~~

~~Goodwill~~

~~857,274~~

~~Net assets acquired~~

~~1,367,725~~

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Goodwill represents the value of the assembled workforce and the enhanced knowledge, capabilities, and qualifications held by the business. This goodwill balance is not ~~expected to be~~ deductible for tax purposes.

Our evaluation of the intangible assets acquired with VES ~~has~~ identified ~~three~~3 assets. The assets were valued using methods which required a number of estimates and, accordingly, they are considered Level 3 measurements within the Accounting Standard Codification No. 820 (ASC 820) fair value methodology.

•Customer relationships represent the value of the existing contractual relationships with the United States Federal Government. These were valued using the excess earnings method, which required us to utilize estimated future revenues and earnings from ~~contracts.~~contracts and an appropriate rate of return.

•VES maintains a provider network of third-party providers that assist in the performance of their clinical services. This network was valued using the cost method and income approach, which included both the cost of recreating such a network and the profits foregone during the time which would be required to recreate the ~~network.~~network and an appropriate rate of return.

•VES maintained proprietary technology which interacted with U.S. Federal Government systems, facilitated the transmission of examination data, and supported the performance of the contracts. We valued the technology using a relief-from-royalty method, which required us to estimate future revenues and an ~~arms'~~arm's length royalty rate that a third-party provider might use to supply this ~~service.~~

~~A summary~~service and an appropriate rate of ~~the asset values and asset lives is as follows:~~return.

~~(in thousands)~~Table 6.2: VES Intangible Asset Values and Useful Lives

Estimated Straight-Line Useful Life

Estimated Fair Value

(in thousands)

Customer contracts and relationships

12 years

580,000

Provider network

12 years

57,000

Technology-based intangible assets

1412 years

27,000

Total intangible assets

664,000

In connection with certain liabilities acquired in the VES acquisition, we ~~have~~ established a liability of $12.0 million for a billing dispute between VES and its customer relating to prior year billings. Our exposure is partially offset by an indemnification asset of $6.0 million. InDuring the ~~event that this dispute is settled for less than $6.0 million, we will return~~first quarter of fiscal year 2022, the liability has been agreed as $12.0 million. We expect to settle the liability in the second quarter of fiscal year 2022 and recover the indemnification ~~asset to~~balance from the sellers (as well as any difference between the settlement amount and $6.0 million). In the event that the settlement exceeds $6.0 million, we are entitled to utilize the indemnification asset, and if the settlement exceeds $12.0 million, pursue other recourse permitted under the purchase agreement. At this time $12.0 million remains our best estimate of this liability.escrow fund. In addition, we have established a tax liability of ~~$11.8~~$12.3 million for uncertain tax positions within VES, partially offset by another indemnification asset of ~~$6.7 million. Both indemnification assets are secured in third party escrow accounts and we have recourse to other funds in the event these contingencies exceed the escrow balances.~~

From the acquisition date of May 28, 2021 through June 30, 2021, the acquired business contributed revenue of $45.8 million and gross profit of $19.5 million. Amortization of intangible assets for the period through June 30, 2021 was $4.6$7.2 million.

~~The Federal division of Attain, LLC (Attain)~~Connect Assist Holdings Limited ("Connect Assist")

On ~~March 1,~~September 14, 2021, we acquired all of Attain for a cash purchase price of $419.1 million. This business was integrated into our U.S. Federal Services Segment and is expected to strengthen our position to further design, develop, and deliver more innovative, impactful solutions and drive automation of processes to improve citizen engagement and the delivery of critical federal programs, as well as expand our presence in the U.S. Federal market. We utilized borrowings on the credit facility we had in place at the time, as well as cash on our balance sheet to fund the acquisition. The results of operations for Attain are included in our results from March 1, 2021.

We are in the process of finalizing the valuation as of March 1, 2021, of all acquired assets and assumed liabilities and, accordingly, the balances below represent our best estimate and are subject to change:
(in thousands) Estimated fair value of assets and liabilities at acquisition date as of March 31, 2021 Adjustments Estimated fair value of assets and liabilities at acquisition date as of June 30, 2021
Cash consideration, net of cash acquired $ 419,864 $ (767) $ 419,097
Accounts receivable - billed, billable and unbilled $ 39,274 $ 101 $ 39,375
Prepaid expenses and other current assets 1,336 (410) 926
Property and equipment, net 703 (703) 0
Operating lease right-of-use assets 25,089 (129) 24,960
Other assets 84 (10) 74
Intangible assets 105,000 0 105,000
Total identifiable assets acquired 171,486 (1,151) 170,335
Accounts payable and other liabilities 28,301 562 28,863
Operating lease liabilities, less current portion 26,786 (385) 26,401
Net identifiable assets acquired 116,399 (1,328) 115,071
Goodwill 303,465 561 304,026
Net assets acquired $ 419,864 $ (767) $ 419,097

Goodwill represents the value of the assembled workforce and the enhanced knowledge, capabilities, and qualifications held by the business. This goodwill balance is expected to be deductible for tax purposes.

The intangible assets acquired represent customer relationships. We estimated this balance using the excess earnings method (which is a Level 3 measurement within the ASC 820 fair value hierarchy) and used a number of estimates, including expected future earnings from the acquired business and an appropriate expected rate of return. We have assumed a useful economic life of ten years, representing our expectation of the period over which we will receive the benefit.

During the three and nine months ended June 30, 2021, the acquired business contributed revenue of $56.4 million and $74.8 million, respectively, and gross profit of $13.2 million and $17.1 million, respectively.

~~VES and Attain~~

The following table presents certain pro forma results for the three and nine months ended June 30, 2021 and 2020 and the twelve months ended June 30, 2021, as though the acquisitions of both VES and Attain had occurred on October 1, 2019. The twelve month information is consistent with that utilized in our debt covenant calculations. This pro forma information is presented for information purposes only and is not necessarily indicative of the results if the acquisition had taken place on that date. The pro forma results below eliminate intercompany transactions, include amortization charges for acquired intangible assets, and estimates of interest expense based upon our total estimated borrowings, eliminate pre-acquisition transaction costs and reflect corresponding changes in our provision for income taxes. Acquisition related costs incurred by Maximus, VES and Attain have been excluded in the following pro forma results. These costs were $8.8 million, $52.2 million and $0.3 million, respectively.

Unaudited pro forma results
Three Months
Ended June 30, Nine Months
Ended June 30, Trailing Twelve Months Ended June 30,
(in thousands, except per share amounts) 2021 2020 2021 2020 2021
Revenue $ 1,335,780 $ 996,462 $ 3,566,466 $ 2,934,920 $ 4,645,540
Cost of revenue 1,004,523 787,189 2,679,170 2,283,589 3,503,074
Gross profit 331,257 209,273 887,296 651,331 1,142,466
Selling, general, and administrative expenses 151,321 110,754 425,062 360,370 551,143
Amortization of intangible assets 21,301 25,090 63,856 75,868 88,586
Operating income 158,635 73,429 398,378 215,093 502,737
Interest expense 8,701 9,423 26,715 28,528 36,426
Other (expense)/income, net (7,320) (2,126) (10,401) (11,755) (11,437)
Income before income taxes 142,614 61,880 361,262 174,810 454,874
Provision for income taxes 37,123 15,549 94,735 38,897 120,248
Net income $ 105,491 $ 46,331 $ 266,527 $ 135,913 $ 334,626
Basic earnings per share $ 1.70 $ 0.75 $ 4.30 $ 2.14 $ 5.40
Diluted earnings per share $ 1.69 $ 0.75 $ 4.28 $ 2.13 $ 5.37
Dividends declared per share $ 0.28 $ 0.28 $ 0.84 $ 0.84 $ 1.12
Weighted average shares outstanding:
Basic 62,064 61,882 62,028 63,463 62,001
Diluted 62,453 62,102 62,300 63,666 62,285

~~Other acquisitions~~

~~On February 28, 2020,~~ we acquired 100% of the share capital of ~~InjuryNet Australia Pty Limited (InjuryNet)~~Connect Assist for aan estimated purchase price of ~~$4.4~~$21.1 million ~~($6.7~~(£15.5 million ~~Australian Dollars), which included acquisition-related contingent consideration of $2.1 million ($3.1 million Australian Dollars) based upon future earnings. InjuryNet provides workplace medical~~British Pounds). We acquired this business to improve our contact center services ~~in Australia.~~and qualifications within the United Kingdom. The business was integrated into our Outside the U.S. Segment. We have completed ~~our~~a preliminary assessment of all acquired assets and liabilities assumed. We recorded estimated goodwill and intangible assets of ~~$2.6~~$11.3 million and ~~$0.9 million, respectively, related to the acquisition.~~

On August 21, 2020, we acquired 100% of the share capital of Index Root Korea Co. Ltd (Index Root) for an estimated purchase price of $5.4 million (6.3 billion South Korean Won), which includes acquisition-related contingent consideration estimated at $0.9 million (1.1 billion South Korean Won) based upon future earnings. We acquired Index Root to expand our geographic presence to South Korea. The business was integrated into our Outside the U.S. Segment. We have completed our assessment of all acquired assets and liabilities assumed. We recorded estimated goodwill and intangible assets of $4.6 million and $1.4$7.7 million, respectively, related to the acquisition. During the ~~second quarter of fiscal year~~three months ended December 31, 2021, we ~~concluded that~~reported $5.8 million and $2.2 million of revenue and gross profit, respectively, from Connect Assist.

Aidvantage

On October 6, 2021, we completed the acquisition of the student loan servicing business from Navient, rebranded as Aidvantage. The purchase price consideration is contingent upon future operating performance, up to a maximum payment of $65.0 million. At this time, we estimate that total payments will total approximately $15.3 million; this will increase if the ~~contingent consideration was unlikely and, accordingly,~~number of student loans we are servicing increases or if the contractual relationship we have acquired is extended beyond its current anticipated end date of December 31, 2023. In the event that our anticipated future expense exceeds $15.3 million, we will record any difference as a ~~benefit of $1.0 million was recorded within our acquisition expenses.~~

~~Changes in goodwill for the nine months ended June 30, 2021, were as follows:~~
(in thousands) U.S. Services U.S. Federal Services Outside the U.S Total
Balance as of September 30, 2020 $ 164,472 $ 381,719 $ 46,938 $ 593,129
Estimated effects of acquisitions 0 1,161,300 623 1,161,923
Foreign currency translation 0 0 2,743 2,743
Balance as of June 30, 2021 $ 164,472 $ 1,543,019 $ 50,304 $ 1,757,795

~~There have been no impairment charges~~charge to our ~~goodwill.~~

statement of operating income. ~~The following table sets forth the components of~~We recorded intangible assets ~~(in thousands):~~
As of June 30, 2021 As of September 30, 2020
(in thousands) Cost Accumulated
Amortization Intangible
Assets, net Cost Accumulated
Amortization Intangible
Assets, net
Customer contracts and relationships $ 921,023 $ 112,546 $ 808,477 $ 235,287 $ 90,302 $ 144,985
VES Provider network 57,000 396 56,604 0 0 0
Technology-based intangible assets 32,400 4,994 27,406 5,631 4,723 908
Trademarks and trade names 4,516 4,516 0 4,479 4,479 0
Total $ 1,014,939 $ 122,452 $ 892,487 $ 245,397 $ 99,504 $ 145,893

Asrelated to the customer relationship of ~~June 30, 2021,~~$14.9 million, which we are amortizing over 27 months. This business is a part of our ~~intangible assets have a weighted average remaining life~~U.S. Federal Services Segment and supplements our existing portfolio of ~~11.2 years, comprising 11.2 years for customer contracts and relationships, 11.9 years for~~services to the ~~provider network and 13.7 years for technology-based intangible assets. The estimated future amortization expense for~~U.S. Department of Education. We are still in the ~~next five years for the intangible assets held by the Company as~~process of ~~June 30, 2021 is shown below. As noted above, we have not yet completed~~completing our ~~assessment of the~~ valuation of the ~~intangible~~ assets acquired ~~with VES~~ and ~~Attain. These future amortization expenses represent our best estimate of future costs.~~


~~(In thousands)~~	~~Estimated Future Amortization Expense~~
~~Year ended September 30, 2021, Remainder of year~~	$	~~20,518~~
~~Year ended September 30, 2022~~	~~82,025~~
~~Year ended September 30, 2023~~	~~82,009~~
~~Year ended September 30, 2024~~	~~81,885~~
~~Year ended September 30, 2025~~	~~81,678~~
~~Year ended September 30, 2026~~	~~81,551~~

the contingent consideration.

During the three months ended December 31, 2021, we reported $34.7 million and $2.0 million of revenue and gross profit, respectively, from Aidvantage.

~~6. Debt~~

~~Concurrent with the acquisition~~

Table of ~~VES,~~Contents

7. DEBT


Table 7.1: Details of Debt
	December 31, 2021		September 30, 2021
	(in thousands)
Term Loan A, due 2026	$	1,072,500	$	1,086,250
Term Loan B, due 2028	398,000		399,000
Subsidiary loan agreements	36,564		38,281
Revolver	100,000		—
Total debt principal	1,607,064		1,523,531
Less: Unamortized debt-issuance costs and discounts	(13,272)		(13,839)
Total debt	1,593,792		1,509,692
Less: Current portion of long-term debt	(78,703)		(80,555)
Long-term debt	$	1,515,089	$	1,429,137

On May 28, 2021, we entered into a ~~new~~ credit agreement ~~(the "Credit~~with JPMorgan Chase Bank, N.A., as Administrative Agent ("Credit Agreement"), which replaced our existing revolving credit facility.

The Credit Agreement ~~has~~provided for the following three components.

•A ~~five~~ ~~year $1.10~~$1.10 billion term loan ~~with~~facility ("Term Loan A") which matures on May 28, 2026;

•$400.0 million term loan facility ("Term Loan B") which matures May 28, 2028; and

•$600.0 million revolving credit facility ("Revolver") which matures May 28, 2026.

The interest ~~payable at a rate~~rates applicable to loans under the Credit Agreement are floating rates based upon the London Interbank Offered Rate ~~(LIBOR)~~("LIBOR") plus a ~~margin~~margin. Term Loan A and the Revolver margins are dependent upon our leverage ratio. ~~From the inception~~Term Loan B is set to LIBOR plus 2.00% subject to a floor of 0.50%. At execution of the ~~loan through June 30, 2021,~~Credit Agreement, the interest ~~rate~~rates for Term Loan A and the Revolver was LIBOR plus 1.75%.

• During the first quarter of fiscal quarter 2022, we were able to lower our interest rates on both Term Loan A ~~seven~~ ~~year $400.0 million term loan with interest payable at~~and the ~~higher~~Revolver to LIBOR plus 1.50% based on the attainment of ~~LIBOR~~a total leverage ratio of 2.50 or ~~0.5%, plus 2.0%. From the inception~~better. As of ~~the loan through June 30,~~December 31, 2021 the net total leverage ratio was 2.47. If the Company is able to achieve a net total leverage ratio of 2.00, the interest ~~rate was 2.5%.~~

•rates for Term Loan A ~~$600.0 million revolving credit facility, which is repayable in full in May 2026. Interest on~~and the ~~revolving credit facility is based upon~~Revolver could be further lowered to LIBOR plus ~~a margin dependent upon our~~1.375%, conversely if the net leverage ~~ratio. From~~ratio increases to 2.50 or greater, the ~~inception of the loan through June 30, 2021, the interest~~ rate ~~was~~would revert back to LIBOR plus 1.75%.

LIBOR is anticipated to be phased out over the next 18 months, and alternative benchmark rates have been identified in this agreement. This is the only significant arrangement within the Company that utilizes LIBOR.

As of December 31, 2021, the annual effective interest rate, including original issue discount and amortization of debt issuance costs, was 2.3%.

The Credit Agreement is available for general corporate purposes, including the funding of working capital, capital expenditures, and possible future acquisitions. In addition to borrowings, it allows us to continue to issue letters of credit when necessary. ~~The~~As of December 31, 2021, the Company had $100.0 million outstanding balance on the corporate Revolver.

Under the terms of the Credit Agreement, ~~includes a number of~~the Company is required to comply with certain covenants, the terms of which are customary and include a net total leverage ratio and a net interest coverage ratio. The net total leverage ratio is calculated as total outstanding debt and contingent consideration liabilities less the lower of (a) unrestricted cash ~~not to exceed~~or (b) $75.0 million. With certain exceptions, the covenant requires the net total leverage ratio, ~~does not permit our total indebtedness to exceed four times our EBITDA,~~ as defined by the Credit Agreement to be less than 4.0, calculated over the previous twelve months. ~~We are in compliance with those covenants at this time, with~~The net interest coverage ratio is calculated as earnings before interest, depreciation, and amortization ("EBITDA") divided by interest expense, over the previous twelve months, all defined by the Credit Agreement. The covenant requires a net interest coverage ratio of 3.0 or greater. As of December 31, 2021, as defined by the Credit Agreement, the Company calculated a net total leverage ratio of ~~2.4:1.~~2.47 and net interest coverage ratio of 16.4. The Company was in compliance with all applicable covenants under the Credit Agreement as of December 31, 2021 and September 30, 2021. We do not believe that the covenants represent a significant restriction to our ability to successfully operate the business or to pay our dividends.

Costs incurred in establishing the Credit Agreement have been reported as a reduction to the gross debt balance and will be amortized over the respective lives of the arrangements. Prior to the completion of the acquisition of VES, we entered into a bridging loan facility to ensure that funds were available in the event that our new credit facility would not be available in time. We did not use this interim facility. The $8.5 million cost of this facility was included within "other (expense)/income, net" on our consolidated statements of operations for the three and nine months ended June 30, 2021.

We estimate the fair value of its debt by discounting the future cash flows of each instrument using estimated market rates of debt instruments with similar maturities and credit profiles. These inputs are classified as Level 3 within the fair value hierarchy. At June 30, 2021, the carrying value reported in the consolidated balance sheet for our long-term debt approximated its fair value.

In addition to the corporate Credit Agreement, we hold smaller credit facilities in Australia and the United Kingdom. These allow our businesses to borrow to meet any short-term working capital needs.

~~Our debt balances at June 30, 2021 and September 30, 2020 were as follows:~~

(in thousands) June 30, 2021 September 30, 2020
Five year, $1.1 billion loan $ 1,100,000 $ 0
Seven year, $400 million loan 400,000 0
New $600 million revolving credit facility 200,000 0
Old $400 million revolving credit facility 0 0
Subsidiary loan agreements 7,754 28,895
Total debt principal 1,707,754 28,895
Less unamortized debt-issuance costs and discounts (14,033) 0
Total debt 1,693,721 28,895
Less current portion (60,586) (10,878)
Long-term debt $ 1,633,135 $ 18,017

~~The scheduled repayments~~Table of ~~our debt balance is as follows:~~Contents


				Table 7.2: Details of Future Minimum Principal Payments Due
	~~(In thousands)~~Amount Due
	~~Scheduled Debt Repayments~~(in thousands)
~~Year ended~~January 1, 2022 through September 30, ~~2021, Remainder of year~~2022			$	~~15,724~~
~~Year ended September 30, 2022~~			~~62,895~~65,035
Year ended September 30, 2023		~~68,761~~72,927
Year ended September 30, 2024		~~86,500~~93,482
Year ended September 30, 2025	95,120
Year ended September 30, 2026	~~91,656~~901,500
Thereafter		~~1,382,218~~379,000
Total ~~debt principal~~payments			$	~~1,707,754~~1,607,064

8. DERIVATIVES

Interest Rate Derivative ~~- Interest rate swap~~Instrument

In June 2021, wethe Company entered into an interest rate swap agreement for a notional amount of $300.0 million, effective June 28, 2021, with an expiration date of May 28, 2026, which ~~hedged~~hedges the floating LIBOR on a portion of the term loan ~~(Tranche~~(Term Loan A, $1.10 billion balance) under the Credit Agreement to a fixed rate of 0.986%. WeThe Company elected to designate this interest rate swap as a cash flow hedge for accounting purposes. ~~At June 30, 2021, our derivative was in a $1.4 million net liability position and recorded in "other current liabilities" on our consolidated balance sheet.~~

As this cash flow hedge is considered effective, any future gains and losses ~~will be~~are reflected within

Accumulated Other Comprehensive Income in the Consolidated Statements of Comprehensive Income. Derivatives in a net asset position are recorded in "Prepaid expenses and other current assets" on our Consolidated Balance Sheets and derivatives in a net liability position are recorded in "Other current liabilities" on our Consolidated Balance Sheets. No ineffectiveness was recorded on this contract during the three ~~or nine~~ months ended ~~June 30,~~December 31, 2021.

~~We are~~


Table 8.1: Details of Derivatives Fair Value
	December 31, 2021		September 30, 2021
	(in thousands)
Assets:
Interest rate swap	$	3,233	$	—
Total assets	$	3,233	$	—
Liabilities:
Interest rate swap	$	—	$	410
Total liabilities	$	—	$	410


Table 8.2: Gains on Derivatives
	For the Three Months Ended
	December 31, 2021		December 31, 2020
	(in thousands)
Net gains recognized in AOCI on derivatives, net of tax (1)	$	2,177	$	—
Amounts reclassified to earnings from accumulated other comprehensive loss (2)	508		—
Net current period other comprehensive income	$	2,685	$	—

(1)Amount is net of tax expense of $0.8 million for the three months ended December 31, 2021.

(2)Amount is net of tax benefit for $0.2 million for the three months ended December 31, 2021.

Counterparty Risk

The Company is exposed to credit losses in the event of nonperformance by the counterparty to our derivative instrument. Our counterparty has investment grade credit ratings; accordingly, we anticipate that the counterparty will be able to fully satisfy its obligations under the contracts. Our agreements outline the conditions upon which it or the counterparty are required to post collateral. ~~At June 30,~~As of December 31, 2021,~~we had~~ there was no collateral posted with its counterparty related to the derivatives.

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9. FAIR VALUE

The ~~only~~Company had 2 assets ~~or liabilities we had at June 30, 2021 that are~~ recorded at fair value on a recurring basis isas of December 31, 2021, the deferred compensation asset, related to the portion invested in mutual funds and the interest rate ~~swaps. Generally,~~swap. For the deferred compensation asset, the mutual funds prices are quoted in active markets and therefore are classified as Level 1. For the interest rate swap, the Company obtains its Level 2 pricing inputs from its ~~counterparties.~~counterparty for the interest rate swap. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data, or are supported by observable levels at which transactions are executed in the marketplace. As of December 31, 2021, the Company had 1 liability recorded at fair value on a recurring basis for contingent consideration related to acquisitions. The contingent consideration liability is considered Level 3, as the inputs are not observable and based on internal assumptions about forecasted revenues, margins, volumes, and probability of contract extensions on businesses acquired.

The fair values of receivables, prepaids, 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 debt was $1.59 billion and $1.51 billion as of December 31, 2021 and September 30, 2021, respectively, approximates 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).


Table 9: Fair Value
	As of December 31, 2021
	Level 1		Level 2		Level 3		Balance
	(in thousands)
Assets:
Deferred compensation assets - Rabbi Trust	$	30,065	$	—	$	—	$	30,065
Interest rate swap	—		3,233		—		3,233
Total assets	$	30,065	$	3,233	$	—	$	33,298
Liabilities:
Contingent consideration	$	—	$	—	$	15,602	$	15,602
Total liabilities	$	—	$	—	$	15,602	$	15,602

~~7. Supplemental Disclosures~~10. EQUITY

Stock Compensation

The Company grants restricted stock units ("RSUs") and performance stock units ("PSUs") to eligible participants under its 2017 Stock Incentive Plan, which was approved by the Board of Directors and stockholders. The RSUs granted to employees vest ratably over three to five years and one year for members of the board of directors, in each case 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. 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 three months ended December 31, 2021, we issued approximately 287,000 RSUs, which will vest ratably over three or four years, and approximately 87,000 PSUs, which will vest ratably over three years.

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Accumulated Other Comprehensive Income


Table 10: Details of Changes in Accumulated Other Comprehensive Loss by Category
	Foreign currency translation adjustment		Net unrealized (loss)/gain on derivatives, net of tax		Total
	(in thousands)
Balance as of September 30, 2021	$	(39,605)	$	(303)	$	(39,908)
Other comprehensive income before reclassifications	459		2,177		2,636
Amounts reclassified from accumulated other comprehensive loss	—		508		508
Net current period other comprehensive income	459		2,685		3,144
Balance as of December 31, 2021	$	(39,146)	$	2,382	$	(36,764)

Stock Repurchase Programs

Under a resolution adopted in March 2020, the Board of Directors authorized the purchase, at management's discretion, of up to ~~$200~~$200.0 million of our common stock. This supplemented a similar resolution adopted in June 2018. During the ~~nine~~three months ended ~~June 30,~~December 31, 2021 weand 2020, the Company purchased ~~approximately 52,000~~18,403 and 51,735 common shares ~~of our common stock~~ at a cost of $1.4 million and $3.4 ~~million. During the nine months ended June 30, 2020, we purchased approximately 2,767,000 shares~~million, respectively. As of ~~our common stock at a cost of $167.0 million. At June 30,~~December 31, 2021, ~~$146.7~~$145.3 million remained available for future stock repurchases.

During the nine months ended June 30, 2021, we granted approximately 366,000 restricted stock units (RSUs) to our employees. Most of these awards will vest ratably over four years, as opposed to five years in previous years. In addition, we awarded approximately 85,000 performance stock units in the nine months ended June 30, 2021, to certain executives that will vest at the end of a three-year performance period with the actual number of vested units dependent upon the Company's achievement of certain performance targets.

Our deferred compensation plan uses both mutual fund and life insurance investments to fund its obligations. The mutual funds are recorded at fair value, based upon quoted prices in active markets (Level 1), and the life insurance investments at cash surrender value; changes in value are reported in our consolidated statements of operations. At June 30, 2021, the deferred compensation plan held $28.9 million of the mutual fund investments.11. CASH AND CASH EQUIVALENTS AND RESTRICTED CASH


Table 11.1: Details of Cash and Cash Equivalents and Restricted Cash
	December 31, 2021		September 30, 2021
	(in thousands)
Cash and cash equivalents	$	181,790	$	135,061
Restricted cash (1)	20,822		21,509
Cash, cash equivalents, and restricted cash	$	202,612	$	156,570

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, and other amounts included within current assets and liabilities that meet the definition of a financial instrument are shown at values equivalent to fair value due to the short-term nature of these items. Our accounts receivable billed and billable balance includes both amounts invoiced and amounts that are ready to be invoiced where the funds are collectible within standard invoice terms. Our accounts receivable unbilled balance includes balances where revenue has been earned but contractual terms preclude invoicing at June 30, 2021. Restricted cash represents funds which are held in our bank accounts but which we are precluded from using for general business needs through contractual requirements; these requirements include serving as collateral for lease, credit card, or letter of credit arrangements, or where we hold funds on behalf of clients. (1)Restricted cash is ~~included~~recorded within ~~"prepaid~~"Prepaid expenses and other current assets" on the Consolidated Balance Sheets.


Table 11.2: Supplemental Disclosures of Cash Flow Information
	For the Three Months Ended
	December 31, 2021		December 31, 2020
	(in thousands)
Interest payments	$	8,943	$	203
Income tax payments	8,009		4,093

12. ACCOUNTS RECEIVABLE, NET


Table 12: Details of Accounts Receivable, Net
	December 31, 2021		September 30, 2021
	(in thousands)
Billed and billable receivables	$	717,804	$	718,728
Unbilled receivables	139,348		124,135
Allowance for credit losses	(7,742)		(8,044)
Accounts receivable, net	$	849,410	$	834,819

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13. PROPERTY AND EQUIPMENT, NET


Table 13: Details of Property and Equipment, Net
	December 31, 2021		September 30, 2021
	(in thousands)
Land	$	—	$	1,738
Building and improvements	—		11,981
Office furniture and equipment	245,110		254,102
Leasehold improvements	79,613		79,938
Property and equipment, at cost	324,723		347,759
Accumulated depreciation	(271,096)		(285,132)
Property and equipment, net	$	53,627	$	62,627

As of December 31, 2021, we classified as held for sale 1 building and the associated land with a carrying value of $5.4 million within "Prepaid expenses and other current assets" on our ~~consolidated balance sheets and is included within "cash, cash equivalents, and restricted cash" in our consolidated statements~~Consolidated Balance Sheets. As of ~~cash flows. A reconciliation of these balances is shown below.~~
Balance as of
(in thousands) June 30,
2021 September 30,
2020 June 30,
2020
Cash and cash equivalents $ 96,110 $ 71,737 $ 81,548
Restricted cash (recorded within "prepaid expenses and other current assets") 17,126 16,824 14,440
Cash, cash equivalents, and restricted cash $ 113,236 $ 88,561 $ 95,988

~~As noted in "Note 6 - Debt",~~December 31, 2021, we ~~recently entered into new long term debt arrangements. Accordingly, we believe the balances disclosed approximates~~concluded the fair ~~value.~~

~~Supplementary Cash Flow Information~~
Nine Months Ended June 30,
(in thousands) 2021 2020
Interest payments $ 4,751 $ 1,200
Income tax payments 68,031 55,600
Cash payments included in the measurement of lease liabilities 75,172 83,700
Operating lease liabilities arising from new or remeasured right-of-use assets 18,537 39,900

value less the costs to sell exceeds the carrying value of this asset.

8. 14. 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, and otherwise in connection with performing services in countries outside of the U.S. 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. These include but are not limited to bid protests, employment matters, contractual disputes, and charges before administrative agencies. Although we can give no assurance, based upon our evaluation and taking into account the advice of legal counsel, we do not believe that the outcome of any existing matter would likely have a material adverse effect on our consolidated financial position, results of operations, or cash flows.

Medicaid claims

The Centers for Medicare and Medicaid Services (CMS) asserted ~~two~~2 disallowances against a state Medicaid agency. The state contested the first disallowance and ultimately settled that claim for approximately $7.3 million. The second disallowance of approximately $19.9 million is still being contested by the state. The state is seeking reimbursement from us for the first disallowance ~~($7.3 million)~~of $7.3 million and has indicated its intention to seek reimbursement of the second disallowance if its legal challenge is unsuccessful. From 2004 through 2009, we had a contract with the state agency in support of its school-based Medicaid claims. We entered into separate agreements with the school districts under which we assisted the districts with preparing and submitting claims to the state Medicaid agency which, in turn, submitted claims for reimbursement to CMS. The state has asserted that its agreement with us requires us to reimburse the state for the amounts owed to CMS. However, our agreements with the school districts require them to reimburse us for such amounts, and therefore we believe the school districts are responsible for any amounts that ultimately must be refunded to CMS. Although it is reasonably possible that a court could conclude we are responsible for the full balance of the disallowances, we believe our exposure in this matter is limited to our fees associated with this work and that the school districts will be responsible for the remainder. We have ~~reserved~~recorded a liability of our estimated fees earned from this engagement relating to the disallowances. We exited the federal healthcare-claiming business in 2009 and no longer provide the services at issue in this matter.

~~9. Subsequent Events~~15. SUBSEQUENT EVENT

On ~~July 9, 2021,~~January 7, 2022, our Board of Directors declared a quarterly cash dividend of $0.28 for each share of our common stock outstanding. The dividend is payable on ~~August 31, 2021,~~February 28, 2022, to shareholders of record on ~~August 13, 2021.~~February 15, 2022. Based upon the number of shares outstanding, we anticipate a cash payment of approximately ~~$17.2~~$17.3 million.

Table of Contents

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

The following discussion ~~and analysis of~~is intended to help the reader understand our business, financial condition, ~~and~~ results of operations, ~~is provided to enhance the understanding of,~~liquidity and capital resources. You should be read this discussion in conjunction with "Risk Factors," "Forward-Looking Statements," and our ~~Consolidated Financial Statements~~financial statements and related ~~Notes~~notes included ~~both herein and~~ in our Annual Report on Form 10-K for ~~the~~fiscal year ~~ended September 30, 2020, which was~~2021 filed with the Securities and Exchange Commission on November ~~19, 2020.~~18, 2021 (the "2021 Form 10-K") and elsewhere in this Quarterly Report on Form 10-Q, as applicable.

Business Overview

We are a ~~U.S.-based global company with approximately 34,000 employees dedicated to helping governments on four continents administer their~~leading operator of government health and human services programs worldwide. We are a responsible and reliable contracting partner to governments under our mission of Helping Government Serve the People®. Governments rely on our financial stability and proven expertise in helping people connect and use critical government programs. We use our experience, business process management expertise, innovation, and technology solutions to help ~~people connect~~government agencies run effective, efficient, and accountable programs.

Our primary portfolio of work is tied to business process services ("BPS") in the health services and ~~interact with vital government programs so that they receive~~human services markets. Our growth over the ~~necessary support they are eligible to receive. The demand for the provision of these services is~~last decade was driven by ~~numerous factors including aging populations with complex healthcare needs; rising living standards in emerging markets creating~~ new ~~demands for our services; growing complexity of programs,~~work, such as that from the Affordable Care Act ("ACA") in the United States ("U.S."), an evolving eligibility requirements; the creation of new programs and initiatives such as long-term services and support, and the urgent need to support a surge in demand to help governments respond to the public health emergency. The coronavirus (COVID-19) global pandemic has required governments to implement new operational models to ensure public safety and this has led to an increased appetite for public-private partnerships due to availability of increased flexibility, scalability, and accountability, particularly in a time when government customers are looking for ways to dramatically increase servicesdigital transformation to meet the ~~surging~~modernization needs of our clients, and growing demand for independent and ~~subsequent strain on their agencies.~~conflict-free clinical services including assessments, appeals, and independent medical reviews in multiple geographies. Our growth has been supplemented by strategic acquisitions.

Maximus operates in a sector with relatively few environmental and social-issue risks but many opportunities, particularly ones that enable us to improve the lives of individuals and families, and provide meaningful opportunities to our employees. We run programs that connect people with disabilities and long-term health conditions to sustainable, long-term employment and we help people, including many of society's most vulnerable populations, access, connect to, and use government benefit programs, such as Medicaid and Medicare.

~~The pandemic resulted in~~experienced both favorable and unfavorable impacts ~~to Maximus. Underscoring the importance~~as a result of the ~~services we provide, many of our U.S. contracts were designated as ‘‘essential’’ by government agencies in the midst of the~~Coronavirus ("COVID-19") global pandemic. ~~Continued operations of these programs ensure vulnerable individuals and families can access vital healthcare and safety-net services during these uncertain times. Due to the pandemic,~~While some of the programs we support have experienced ~~temporary changes at~~reduced volumes due to the ~~direction of our customers which reduced volume, revenue, and profit on certain large programs. However,~~pandemic, we have also been successful in winning new contracts ~~tied~~ to meet the ~~urgent need to support public health initiatives such as contact~~immediate needs of our customers, including contract tracing and disease investigation, vaccine information lines, and unemployment insurance ~~programs, and supporting efforts around vaccine administration, scheduling, and registration to help governments slow~~administration. Proving the ~~spread~~value of ~~COVID-19.~~our business model, we have converted a number of these relationships into longer-term contract opportunities. The individuals and families served under these programs are those considered some of the most vulnerable to ~~COVID-19, and~~COVID-19. As a result, we believe our operations support programs that are ~~essential~~vital for their safety and wellbeing.

~~Our primary objective amidst this pandemic is~~We continue to ~~protect~~execute upon our ~~employees while ensuring global business continuity~~three-fold strategy to accelerate our progress and drive the next phase of our ~~essential services~~growth through:

•Digital transformation.We are using digital technologies to ~~help vulnerable individuals and taking responsible action to stop~~transform the ~~virus from spreading further. The safety and wellbeing~~experience of our ~~employees~~customers and our employees. We believe that these technologies can help our government clients run their programs in a more streamlined manner and make it easier for individuals to interact with these programs.

•Clinical evolution.We are ~~paramount,~~expanding our clinical-related services and are experienced at delivering clinical BPS at scale. We have established an extensive set of services that frequently requires a network of healthcare professionals who can complete clinical assessments, provide occupational health and independent medical review services, and adjudicate complicated benefits appeals. With the formation of Maximus Public Health ("MPH"), we ~~made several sweeping changes~~are able to ~~better~~ serve as a resource to governments as they respond to public health threats. These efforts include providing health information and COVID-19 test results and vaccination information through our ~~employees.~~citizen engagement centers in key states and counties across the nation.

~~Acquisitions~~

~~To supplement~~•Market expansion.We continue with our existing strategy to expand our markets by bringing our core ~~business,~~capabilities to new programs and clients, adding new capabilities to access adjacent markets, and through geographic expansion. In fiscal year 2021, we ~~have an active program to identify potential strategic acquisitions. Our~~expanded our clinical assessments and public health work, and completed two acquisitions ~~have successfully enabled us~~in the United States to increase ~~future organic growth,~~our digital and clinical capabilities, as well as ~~expand~~create stronger relationships in key U.S. federal government agencies.

The macro-trends for our business ~~processes, knowledge,~~remain unchanged. As the pandemic has underscored, governments around the world need better solutions to deliver on policy priorities that can change rapidly. Social welfare programs that reflect long-term societal commitments and ~~client relationships into adjacent markets~~priorities increasingly face rising demand, shifting demographics, and ~~new geographies.~~unsustainable program costs. We believe that Maximus is well positioned to address these challenges and be a transformative partner through our scalable, cost-effective, and operationally efficient services for a wide range of government programs.

~~In March~~

Table of Contents

Financial Overview

A number of factors have affected our results for the first quarter of fiscal year 2022, the most significant of which we have listed below. More detail on these changes is presented below within our "Results of Operations" section.

•During fiscal year 2021, ~~Maximus closed our acquisition of~~we acquired VES Group, Inc. ("VES"), the Federal ~~division~~Division of Attain, LLC ~~(Attain)~~("Attain") and Connect Assist Holdings Limited ("Connect Assist"). ~~This~~At the start of fiscal year 2022, we acquired the student loan servicing business from Navient, rebranded as Aidvantage. From the date of each acquisition, ~~expanded Maximus’ technology capabilities in application development and modernization, enterprise business solutions, cybersecurity, and~~we have received the ~~data sciences including advanced analytics & machine learning. These capabilities address U.S. Federal IT spending imperatives while also being applicable~~benefit of additional revenue, as well as additional operating costs. In completing these acquisitions, we have allocated a portion of each purchase price to ~~our business process outsourcing (BPO) solutions. They add to our existing portfolio~~identifiable intangible assets, which we are amortizing over the estimated useful lives of technology solutions comprised of modernization of systems and information technology infrastructure; infrastructure operations and support; software development, operations and support; and data analytics. Attain’s reputation as an innovator and experience as a forward-thinking technology provider are valuable additions to the U.S. Federal Services Segment and Maximus as a whole.each asset.

~~On May 28, 2021, Maximus completed~~•To fund the acquisition of VES, we entered into a leading provider of medical disability examinations to determine Veterans’ eligibility for compensation and pension benefits. The acquisition broadens our independent and conflict free clinical BPO services at scale. The acquisition provides us with key qualifications that we believe will assist governments with challenges they face around shifting demographic and policy priorities. VES’s connection with the U.S. Department of Veterans Affairs allows Maximus to pursue new ~~opportunities with a~~

wider set of customers, both federally and state, that are seeking independent and clinically based services. VES complements the Attain combination by expanding our support of the VA and creating new opportunities to apply digital solutions to improve citizen services.

In fiscal year 2020, we acquired InjuryNet Australia Pty Limited (InjuryNet) in Australia and Index Root Korea Co. (Index Root) in South Korea, which we integrated into our Outside the U.S. Segment. The InjuryNet acquisition broadens our customer offerings to include health oriented contracts in Australia and the Index Root acquisition enabled entry into South Korea to provide employment services.

~~Financial Overview~~

~~The acquisitions of VES and Attain have affected our results as follows:~~

•Our year to date revenue and gross profit includes an additional $120.6 million and $36.6 million, respectively, attributable to these two acquisitions, which will be included in our U.S. Federal Services Segment. Given the integration of these businesses into our cost structure, it is impracticable to calculate the effect of the acquisitions on our operating income.

•~~We incurred acquisition expenses through June 2021, of $8.8 million relating to these transactions, principally for legal, advisory and insurance services.~~

•~~Our intangible assets increased by $769.0 million, which will be amortized over the next 14 years.~~

•These acquisitions have been funded by an increase in our debt. At the beginning of this fiscal year, we had no outstanding indebtedness within the United States and some international balances to cover acquisitions and general working capital matters. To fund the acquisitions, we took on $1.5 billioncredit facility comprised of fixed term debt and ~~entered into~~ a new revolving credit facility. ~~While we anticipate reducing~~The cost of servicing this debt, ~~over the next few quarters, the cost of this debt, including interest expenses and~~as well as the cost of the debt facilities, ~~have increased~~has resulted in an increase in our financing costs. To comply with the terms of the VES purchase agreement, we entered into a financing commitment arrangement (the interim financing). The cost of this interim facility was approximately $8.5 million, which has been recorded in "other (income)/expense, net" on our consolidated statement of operations.interest expense.

~~The COVID-19 pandemic, and the responses of our customers, has had an effect on our results for the three and nine months ended June 30, 2021.~~

•Our services in fiscal years 2022 and 2021 were affected by the COVID-19 pandemic. We have ~~continued~~received the benefit from new, short-term work, assisting governments with their responses to ~~experience significant revenue growth in new work to assist governments in their COVID-19 response efforts.~~the pandemic. This has mitigated the effect of declines in ~~some of our~~ established programs ~~particularly those which rely upon payments per transaction. The COVID-19 response work~~where our transaction volume has been reduced. We anticipate that our core programs will begin returning to capacity in the ~~three and nine months~~latter half of this year, as our COVID related work is expected to decline.

•As anticipated, the Census Questionnaire Assistance ("CQA") contract ended ~~June 30, 2021, resulted~~ in ~~approximately $460 million and $860 million~~the first quarter of ~~revenue, respectively. We anticipate COVID response work will contribute more than $1 billion for the full~~ fiscal year 2021.

•Our Outside the U.S. Segment has experienced the most significant negative impact of the COVID-19 pandemic. In the second quarter of fiscal year 2020, we revised our estimates of job seekers who are likely to achieve employment outcomes, resulting in a decline in our estimated outcomes and a consequent decline in revenue of approximately $24.0 million. During fiscal year 2021, this business has demonstrated significant recovery principally through the improvements in performance in Australia.

Our organic growth has been partially offset by the anticipated decline in revenues from our Census Questionnaire Assistance (CQA) contract, which has concluded during fiscal year 2021. We earned $170.4 million and $313.2 million less revenue in the three and nine months ended June 30, 2021, respectively, compared to the respective periods in fiscal year 2020. In addition, a number of contracts in the start-up phase within our Outside the U.S. Segment have reported expected losses as these projects commence. They are anticipated to reach profitability in fiscal year 2022.

Results of Operations

~~Consolidated~~


Table MD&A 1: Consolidated Results of Operations
	For the Three Months Ended
	December 31, 2021		December 31, 2020
	(dollars in thousands, except per share data)
Revenue	$	1,150,876	$	945,554
Cost of revenue	922,721		739,499
Gross profit	228,155		206,055
Gross profit percentage	19.8 %		21.8 %
Selling, general, and administrative expenses	124,221		111,967
Selling, general, and administrative expenses as a percentage of revenue	10.8 %		11.8 %
Amortization of intangible assets	22,405		6,516
Operating income	81,529		87,572
Operating income margin	7.1 %		9.3 %
Interest expense	(9,638)		(206)
Other expense, net	(311)		(775)
Income before income taxes	71,580		86,591
Provision for income taxes	18,250		22,514
Effective tax rate	25.5 %		26.0 %
Net income	$	53,330	$	64,077
Earnings per share:
Basic	$	0.86	$	1.03
Diluted	$	0.85	$	1.03

~~The following table sets forth, for the periods indicated, selected statements~~

Table of ~~operations data:~~Contents
Three Months Ended June 30, Nine Months Ended June 30,
(dollars in thousands, except per share data) 2021 2020 2021 2020
Revenue $ 1,243,520 $ 901,337 $ 3,148,354 $ 2,537,701
Cost of revenue 951,664 715,734 2,419,785 2,023,550
Gross profit 291,856 185,603 728,569 514,151
Gross profit percentage 23.5 % 20.6 % 23.1 % 20.3 %
Selling, general and administrative expenses 140,129 89,582 364,498 283,662
Selling, general and administrative expense as a percentage of revenue 11.3 % 9.9 % 11.6 % 11.2 %
Amortization of intangible assets 12,132 8,712 23,718 26,734
Operating income 139,595 87,309 340,353 203,755
Operating income percentage 11.2 % 9.7 % 10.8 % 8.0 %
Interest expense 3,087 616 4,049 1,565
Other (expense)/income, net (8,289) (671) (9,584) 621
Income before income taxes 128,219 86,022 326,720 202,811
Provision for income taxes 33,724 21,558 87,534 51,963
Effective income tax rate 26.3 % 25.1 % 26.8 % 25.6 %
Net income $ 94,495 $ 64,464 $ 239,186 $ 150,848
Basic earnings per share $ 1.52 $ 1.04 $ 3.86 $ 2.38
Diluted earnings per share $ 1.51 $ 1.04 $ 3.84 $ 2.37

Our business segments have different factors driving revenue fluctuations and profitability. The sections that follow cover these segments in greater detail.

~~Changes in~~ Our revenue ~~cost~~reflects fees earned for services provided. Cost of revenue ~~and gross profit for the three months ended June 30, 2021, are summarized below.~~
Revenue Cost of Revenue Gross Profit
Dollars in thousands Percentage change Dollars in thousands Percentage change Dollars in thousands Percentage change
Three Months Ended June 30, 2020 $ 901,337 $ 715,734 $ 185,603
Effect of Census Questionnaire Assistance 2020 (CQA) contract (170,385) (18.9) % (138,431) (19.3) % (31,954) (17.2) %
Organic effect 387,163 43.0 % 284,616 39.8 % 102,547 55.3 %
Net acquired growth 102,750 11.4 % 71,730 10.0 % 31,020 16.7 %
Currency effect compared to the prior period 22,655 2.5 % 18,015 2.5 % 4,640 2.5 %
Three months ended June 30, 2021 $ 1,243,520 38.0 % $ 951,664 33.0 % $ 291,856 57.2 %

~~Changes in revenue, cost~~consists of ~~revenue, and gross profit for the nine months ended June 30, 2021, are summarized below.~~
Revenue Cost of Revenue Gross Profit
Dollars in thousands Percentage change Dollars in thousands Percentage change Dollars in thousands Percentage change
Nine Months Ended June 30, 2020 $ 2,537,701 $ 2,023,550 $ 514,151
Effect of Census Questionnaire Assistance 2020 (CQA) contract (313,155) (12.3) % (263,483) (13.0) % (49,672) (9.7) %
Organic effect 754,594 29.7 % 534,434 26.4 % 220,160 42.8 %
Net acquired growth 125,092 4.9 % 90,635 4.5 % 34,457 6.7 %
Currency effect compared to the prior period 44,122 1.7 % 34,649 1.7 % 9,473 1.8 %
Nine Months Ended June 30, 2021 $ 3,148,354 24.1 % $ 2,419,785 19.6 % $ 728,569 41.7 %

~~Our cost of revenue includes~~ direct costs related to labor and related 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.


Table MD&A 2: Changes in Revenue, Cost of Revenue, and Gross Profit for the Three Months Ended December 31, 2021
	Revenue				Cost of Revenue				Gross Profit
	Dollars		% Change		Dollars		% Change		Dollars		% Change
	(dollars in thousands)
Three Months Ended December 31, 2020	$	945,554			$	739,499			$	206,055
Organic effect	(32,764)		(3.5)	%	10,844		1.5	%	(43,608)		(21.2)	%
Acquired growth	235,766		24.9	%	170,187		23.0	%	65,579		31.8	%
Currency effect compared to the prior period	2,320		0.2	%	2,191		0.3	%	129		0.1	%
Three Months Ended December 31, 2021	$	1,150,876	21.7	%	$	922,721	24.8	%	$	228,155	10.7	%

Selling, general, and administrative ~~expense (SG&A)~~expenses ("SG&A") consists 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. Corporate costs are allocated to segments on a consistent and rational basis. Fluctuations in our SG&A are primarily driven by changes in our administrative cost base, which is 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 has increased year-over-year due primarily ~~to:~~

•~~acquisition expenses, primarily due~~ to ~~Attain and VES, as well as~~ the additional cost base from ~~these acquired businesses;~~

•~~severance expenses in the United States in the first quarter of fiscal year 2021, which are expected to provide a benefit for the remainder of the fiscal year;~~

•~~information technology initiatives, including migration of data systems to the cloud;~~

•~~additional costs to address the COVID-19 pandemic;~~

•~~increases in business development activity to both bolster~~ our ~~technical skills and plan for increased bidding activity; and~~

•~~increases in our scope of operations, which increases our administrative base.~~acquisitions.

Our amortization of intangible assets ~~declined after~~increased by $15.9 million from three months ended December 31, 2020 to three months ended December 31, 2021.

•The intangible assets associated with the ~~first~~VES acquisition increased our amortization expense by $13.8 million.

•The intangible assets associated with the Attain acquisition increased our amortization expense by $2.6 million.

•The intangible assets associated with the Aidvantage acquisition increased our amortization expense by $1.7 million.

•Our acquisition of the Citizen Engagement Centers business in fiscal ~~quarter~~year 2019 included an intangible asset with a value of ~~2021 as~~$37.0 million and an asset life concurrent with the CQA contract. This asset was fully amortized in November 2020, and this reduced our year-over-year charge by $2.3 million.

•The balance of the difference was derived from the Connect Assist acquisition and the effects of foreign currency translation.

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Table MD&A 3: Non-GAAP Adjusted Results Excluding Amortization of Intangible Assets
	For the Three Months Ended
	December 31, 2021			December 31, 2020
	(dollars in thousands, except per share data)
Operating income	$	81,529		$	87,572
Add back: Amortization of intangible assets	22,405			6,516
Adjusted operating income excluding amortization of intangible assets (Non-GAAP)	$	103,934		$	94,088
Adjusted operating income margin excluding amortization of intangible assets (Non-GAAP)	9.0		%	10.0		%

Net income	$	53,330		$	64,077
Add back: Amortization of intangible assets, net of tax	16,530			4,822
Adjusted net income excluding amortization of intangible assets (Non-GAAP)	$	69,860		$	68,899

Diluted earnings per share	$	0.85		$	1.03
Add back: Effect of amortization of intangible assets on diluted earnings per share	0.27			0.08
Adjusted diluted earnings per share excluding amortization of intangible assets (Non-GAAP)	$	1.12		$	1.11

Our intangible asset amortization is based upon our assumptions of the value and economic life, typically established at the acquisition date. If these assumptions change, the pattern of future expense may be accelerated. At this time, we have a ~~large~~significant asset related to a large contract relationship on a contract which is subject to a rebid in June 2022. If this rebid is unsuccessful, the ~~U.S. Census contract was fully amortized. The acquisitions~~asset life of ~~VES and Attain are expected~~this asset may need to ~~add an annual amortization charge of $65.5 million. To assist users of our financial statements going forward, we will present results excluding the effects of the amortization of intangible assets.~~

Three Months Ended June 30, Nine Months Ended June 30,
(dollars in thousands, except per share data) 2021 2020 2021 2020
Operating income $ 139,595 $ 87,309 $ 340,353 $ 203,755
Amortization of intangible assets 12,132 8,712 23,718 26,734
Operating income excluding amortization of intangible assets - non-GAAP $ 151,727 $ 96,021 $ 364,071 $ 230,489
Net income $ 94,495 $ 64,464 $ 239,186 $ 150,848
Amortization of intangible assets adjusted for income taxes 8,941 6,529 17,364 19,884
Net income excluding amortization of intangible assets - non-GAAP $ 103,436 $ 70,993 $ 256,550 $ 170,732
Diluted earnings per share $ 1.51 $ 1.04 $ 3.84 $ 2.37
Effect of amortization of intangible assets on diluted earnings per share 0.15 0.10 0.28 0.31
Diluted earnings per share excluding amortization of intangible assets - non-GAAP $ 1.66 $ 1.14 $ 4.12 $ 2.68
be reduced.

Our interest expense increased ~~as we borrowed funds~~from $0.2 million for the three months ended December 31, 2020 to $9.6 million for the same period in 2021. This increase is driven by the costs of our cash borrowings utilized to acquire ~~VES and Attain. We anticipate an additional $10~~VES. Interest expense is expected to be in the range of $33 million ~~of interest expense~~to $35 million for fiscal year 2022 due to the debt being outstanding for the ~~remainder of the~~entire fiscal year. ~~As part of the VES acquisition, we incurred additional charges related to the interim financing. The $8.5 million cost of this funding was recorded within "other (income)/expense, net"~~Our interest rate will vary based upon both prevailing interest rates and our leverage ratio. Additional details on our ~~consolidated statement of operations.~~borrowings are including within the "Liquidity and Capital Resources" section.

Our effective income tax rate for the three months ended ~~June 30,~~December 31, 2021 and 2020, was ~~26.3%~~25.5% and ~~25.1%~~26.0%, respectively. ~~Our~~For fiscal year 2022, we expect the effective ~~income~~ tax rate ~~for the nine months ended June 30, 2021 and 2020, was 26.8% and 25.6%, respectively. Our projected annual effective income tax rate for the full fiscal year 2021 is~~to be between 25% and ~~25.5%~~26%.

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U.S. Services Segment


Table MD&A 4: U.S. Services Segment - Financial Results															Table MD&A 4: U.S. Services Segment - Financial Results
																For the Three Months Ended
		Three Months Ended June 30,						Nine Months Ended June 30,						December 31, 2021		December 31, 2020
(dollars in thousands)		2021			2020			2021			2020
																(dollars in thousands)
Revenue	Revenue	$	436,338		$	336,950		$	1,269,487		$	957,929			Revenue	$	386,417		$	384,934
Cost of revenue	Cost of revenue	331,524			243,921			946,231			689,856				Cost of revenue	296,718			285,932
Gross profit	Gross profit	104,814			93,029			323,256			268,073				Gross profit	89,699			99,002
Selling, general, and administrative expenses															Selling, general, and administrative expenses	35,102			37,456
Operating income	Operating income	62,208			61,033			206,601			165,440				Operating income	54,597			61,546
Gross profit percentage	Gross profit percentage	24.0		%	27.6		%	25.5		%	28.0		%		Gross profit percentage	23.2		%	25.7		%
Operating income percentage		14.3		%	18.1		%	16.3		%	17.3		%
Operating margin percentage															Operating margin percentage	14.1		%	16.0		%

Our revenue and cost of revenue for the three ~~month period~~months ended ~~June 30,~~December 31, 2021, increased ~~29%~~0.4% and ~~36%~~3.8%, respectively, compared to the same period ~~in fiscal year 2020. Our revenue and cost of revenue for the nine month period ended June 30, 2021, increased 33% and 37%, respectively, compared to the same period in fiscal year 2020.~~2021. All growth was organic.

Our growth for the three and nine months ended June 30, 2021, is driven by approximately $164 million and $450 million of COVID-19 response work, respectively. This work is short-term and has offset revenue declines

~~resulting from constraints on many~~Many of our core ~~programs.~~programs continue to run at reduced capacity as a response to the COVID-19 pandemic. Among other factors, we are reporting lower volumes of transactions on redetermination ~~contracts~~activities as states have paused Medicaid redeterminations as a condition for receiving enhanced U.S. Federal matching funds. In certain cases, redeterminations provide a significant part of our activity within volume-based contracts. ~~The decline~~We are anticipating that redeterminations will commence in ~~profit margins is principally from these core programs operating at reduced capacity. As~~ the ~~pandemic restrictions ease, we anticipate that our short-term response work will decline and our core programs will recover,~~latter half of this fiscal year but the timing and the nature of the ~~recovery~~change is uncertain.

~~We anticipate operating income margins for the full~~In fiscal year 2021, ~~will be between 16% and 17%.~~we received a large volume of short term COVID-19 related work, typically at a higher margin. This work has declined in 2022, tempering those margins.

U.S. Federal Services Segment

From technology solutions to program administration and operations, our U.S. Federal Services Segment delivers end-to-end solutions that help various U.S. ~~federal agencies~~Federal Government Agencies better deliver on their mission. This also includes appeals and assessments services, system and application development, IT modernization, and maintenance services. The segment also contains certain state-based assessments and appeals work that is part of the segment's heritage within the Medicare Appeals portfolio which continues to be managed within this segment. ~~Propelled by~~Benefiting from the Maximus Federal Consulting (formerly Attain Federal) platform, the segment executes on its digital strategy to deliver technology solutions that advance agency missions, including the ~~charge~~challenge to modernize, provide better customer experience, and drive process efficiencies. The segment continues to expand its clinical solutions ~~and~~with the acquisition of VES which manages the clinical evaluation process for U.S. veterans and service members on behalf of the U.S. Department of Veterans Affairs. The segment further supports clinical offerings in public health with new work supporting the U.S. Federal Government's COVID-19 response efforts. This included expanded work with the Centers for Disease Control and Prevention ~~(CDC)~~("CDC") for their helpline and increased support for the IRS Wage and Investment Division's response efforts to general inquiries regarding the Coronavirus Aid Relief & Economic Security ~~(CARES)~~("CARES") Act and Economic Impact Payment Service Plan.

Three Months Ended June 30, Nine Months Ended June 30,
(dollars in thousands) 2021 2020 2021 2020
Revenue $ 617,601 $ 450,143 $ 1,352,982 $ 1,210,105
Cost of revenue 461,825 365,420 1,040,577 977,603
Gross profit 155,776 84,723 312,405 232,502
Operating income 86,129 39,233 139,528 101,047
Gross profit percentage 25.2 % 18.8 % 23.1 % 19.2 %
Operating income percentage 13.9 % 8.7 % 10.3 % 8.4 %

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Table MD&A 5: U.S. Federal Services Segment - Financial Results
	For the Three Months Ended
	December 31, 2021			December 31, 2020
	(dollars in thousands)
Revenue	$	581,871		$	405,245
Cost of revenue	455,295			322,749
Gross profit	126,576			82,496
Selling, general, and administrative expenses	64,925			52,252
Operating income	61,651			30,244
Gross profit percentage	21.8		%	20.4		%
Operating margin percentage	10.6		%	7.5		%

~~Changes in revenue, cost of revenue, and gross profit for the three months ended June 30, 2021, are summarized below.~~
Revenue Cost of Revenue Gross Profit
Dollars in thousands Percentage change Dollars in thousands Percentage change Dollars in thousands Percentage change
Three months ended June 30, 2020 $ 450,143 $ 365,420 $ 84,723
Effect of CQA contract (170,385) (37.9) % (138,431) (37.9) % (31,954) (37.7) %
Organic growth from other contracts 236,222 52.5 % 165,444 45.3 % 70,778 83.5 %
Net acquisitions and disposals 101,621 22.6 % 69,392 19.0 % 32,229 38.0 %
Three months ended June 30, 2021 $ 617,601 37.2 % $ 461,825 26.4 % $ 155,776 83.9 %


Table MD&A 6: U.S. Federal Services Segment - Changes in Revenue, Cost of Revenue, and Gross Profit
	Revenue				Cost of Revenue				Gross Profit
	Amount		% Change		Amount		% Change		Amount		% Change
	(dollars in thousands)
Three Months Ended December 31, 2020	$	405,245			$	322,749			$	82,496
Organic effect	(53,339)		(13.2)	%	(34,064)		(10.6)	%	(19,275)		(23.4)	%
Acquired growth	229,965		56.7	%	166,610		51.6	%	63,355		76.8	%
Three Months Ended December 31, 2021	$	581,871	43.6	%	$	455,295	41.1	%	$	126,576	53.4	%

~~Changes in revenue, cost of revenue, and gross profit for the nine months ended June 30, 2021, are summarized below.~~
Revenue Cost of Revenue Gross Profit
Dollars in thousands Percentage change Dollars in thousands Percentage change Dollars in thousands Percentage change
Nine months ended June 30, 2020 $ 1,210,105 $ 977,603 $ 232,502
Effect of CQA contract (313,155) (25.9) % (263,483) (27.0) % (49,672) (21.4) %
Organic growth from other contracts 338,310 28.0 % 244,401 25.0 % 93,909 40.4 %
Net acquisitions and disposals 117,722 9.7 % 82,056 8.4 % 35,666 15.3 %
Nine months ended June 30, 2021 $ 1,352,982 11.8 % $ 1,040,577 6.4 % $ 312,405 34.4 %

Our revenue and cost of revenue for the three month period ended June 30, 2021, increased 37% and 26%, respectively, compared to the same period in fiscal year 2020. Our revenue and cost of revenue for the nine month period ended June 30, 2021, increased 11.8% and 6.4%, respectively, compared to the same period in fiscal year 2020. The primary drivers were:We received significant acquired growth from:

•~~As anticipated, the CQA (U.S. Census) contract has ended.~~VES, which we acquired in May 2021,

•~~We estimated that our incremental revenue from assisting the U.S. Federal Government with its COVID-19 response for the three~~Attain, which we acquired in March 2021, and nine months ended June 30, 2021 was $280 million and $370 million, respectively. This short-term work has earned relatively high margins, which has offset the tempering of margins on performance-based contracts, such as independent medical reviews for worker's compensation programs that declined sharply since the onset of the pandemic.

•The Aidvantage business, which we acquired in October 2021.

Our ~~results include those of~~profit margins on VES ~~(from May 28, 2021)~~ and Attain ~~(from March 1, 2021).~~are higher than our organic work, resulting in improvements to our profit margins. Our organic work tempered our margins. This was driven by a large contract we agreed to accept a lower margin in return for increased funding and future revenue.

~~We anticipate~~In the ~~operating margin for this segment to be between 10% and 11% for the full~~first quarter of fiscal year 2021, ~~due to~~we completed our work on the ~~benefit~~U.S. Census Questionnaire (CQA) contract, which did not recur in the first quarter of ~~VES's higher margins.~~

fiscal year 2022.

Outside the U.S. Segment

~~Delivering support to people from different backgrounds, cultures, and communities, our~~Our Outside the U.S. Segment provides BPS for international governments and commercial clients, transforming the lives of people around the world. Helping people find employment, access vital support, and remain healthy, these services include health and disability assessments, program administration for employment services, wellbeing solutions, and other job seeker related services. We support programs and deliver services in the ~~United Kingdom (U.K.)~~U.K., including the Health Assessment Advisory Service ~~(HAAS)~~("HAAS"), the Work & Health Programme, Fair Start, and Restart; Australia, including jobactive and the Disability Employment Service; Canada, including Health Insurance British Columbia and the Employment Program of British Columbia; in addition to Italy, Saudi Arabia, Singapore, South Korea, and Sweden, where we predominantly provide employment support and job seeker services.

Three Months Ended June 30, Nine Months Ended June 30,
(dollars in thousands) 2021 2020 2021 2020
Revenue $ 189,581 $ 114,244 $ 525,885 $ 369,667
Cost of revenue 158,315 106,393 432,977 356,091
Gross profit 31,266 7,851 92,908 13,576
Operating income/(loss) 8,293 (5,817) 27,890 (33,549)
Gross profit percentage 16.5 % 6.9 % 17.7 % 3.7 %
Operating income/(loss) percentage 4.4 % (5.1) % 5.3 % (9.1) %

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~~Changes in revenue, cost of revenue, and gross profit for the three months ended June 30, 2021, are summarized below~~
Revenue Cost of Revenue Gross Profit
Dollars in thousands Percentage change Dollars in thousands Percentage change Dollars in thousands Percentage change
Three months ended June 30, 2021 $ 114,244 $ 106,393 $ 7,851
Organic growth 51,553 45.1 % 31,569 29.7 % 19,984 NM
Acquired growth 1,129 1.0 % 2,338 2.2 % (1,209) NM
Currency effect compared to the prior period 22,655 19.8 % 18,015 16.9 % 4,640 NM
Three months ended June 30, 2021 $ 189,581 65.9 % $ 158,315 48.8 % $ 31,266 NM
NM - Changes are not meaningful.


Table MD&A 7: Outside the U.S. Segment - Financial Results
	For the Three Months Ended
	December 31, 2021			December 31, 2020
	(dollars in thousands)
Revenue	$	182,588		$	155,375
Cost of revenue	170,708			130,818
Gross profit	11,880			24,557
Selling, general, and administrative expenses	21,340			20,032
Operating (loss)/income	(9,460)			4,525
Gross profit percentage	6.5		%	15.8		%
Operating margin percentage	(5.2)		%	2.9		%

~~Changes in revenue, cost of revenue, and gross profit for the nine months ended June 30, 2021, are summarized below.~~
Revenue Cost of Revenue Gross Profit
Dollars in thousands Percentage change Dollars in thousands Percentage change Dollars in thousands Percentage change
Nine months ended June 30, 2021 $ 369,667 $ 356,091 $ 13,576
Organic growth 104,726 28.3 % 33,658 9.5 % 71,068 NM
Acquired growth 7,370 2.0 % 8,579 2.4 % (1,209) NM
Currency effect compared to the prior period 44,122 11.9 % 34,649 9.7 % 9,473 NM
Nine months ended June 30, 2021 $ 525,885 42.3 % $ 432,977 21.6 % $ 92,908 NM
NM - Changes are not meaningful.


Table MD&A 8: Outside the U.S. Segment - Changes in Revenue, Cost of Revenue, and Gross Profit
	Revenue				Cost of Revenue				Gross Profit
	Amount		% Change		Amount		% Change		Amount		% Change
	(dollars in thousands)
Three Months Ended December 31, 2020	$	155,375			$	130,818			$	24,557
Organic effect	19,092		12.3	%	34,122		26.1	%	(15,030)		(61.2)	%
Acquired growth	5,801		3.7	%	3,577		2.7	%	2,224		9.1	%
Currency effect compared to the prior period	2,320		1.5	%	2,191		1.7	%	129		0.5	%
Three Months Ended December 31, 2021	$	182,588	17.5	%	$	170,708	30.5	%	$	11,880	(51.6)	%

This segment ~~has seen~~experienced organic growth in revenue and ~~profit,~~costs, as well as acquired growth and currency benefits during the three months ended December 31, 2021.

Revenue growth was principally from our United Kingdom business, where the Restart contract continued to ramp up. Margins on the Restart contract are tempered as we have not yet reached our full service capacity. Elsewhere, our margins have contracted as caseload has declined; in the first quarter of fiscal year ~~2021.~~2021, our margins were higher as we received the benefit from the recovery of our employment contracts in Australia.

Acquired growth is from the Connect Assist acquisition.

Much of our revenue, ~~growth~~including that on the Restart contract, stems from our employment services contracts. On many contracts, ~~where~~ we ~~are paid~~recognize revenue based upon our ability to place individuals in long-term sustained employment. Revenue is recognized based on our estimate of the number of individuals whom we anticipate reaching these milestones. As a result, changes in our estimates of ~~our ability~~future employment outcomes, which have become more volatile due to ~~place people in work and the time that this will take can have significant effects on our revenue. As~~ the effects of the COVID-19 pandemic, became clear during fiscal year 2020, our revenue was significantly tempered as unemployment rose and available employment opportunities declined. As fiscal year 2021 has progressed, market conditions, particularly within Australia, have provided us with more placements than we anticipated and increased our estimates of future outcomes, increasing our revenue.

~~These estimates are based upon our current expectations as to how the effects of the pandemic,~~ including ~~regulations~~those actions adopted by governments and ~~employment practices adopted by employers, will progress.~~employers. We ~~have typically based~~update our estimates ~~on historical performance. The effects of COVID-19 have limited the extent to which we can rely~~regularly based upon ~~historical~~actual performance and ~~accordingly, our revenue~~updated expectations, but a sudden change in employment markets may ~~be more volatile than we have previously experienced.~~

~~Our acquired growth is from the acquisition of InjuryNet~~result in ~~Australia in February 2020 and Index Root in South Korea in August 2020.~~

~~The weakening of the United States Dollar against the currencies in which we do business outside the U.S. has resulted in year-over-year growth~~significant fluctuations in our ~~revenue and costs.~~revenue.

As pandemic restrictions ease and economies emerge from the pandemic-related lockdowns, we anticipate robust markets for our employment services and a return to pre-pandemic levels for our health assessments services. In addition, we have recently been awarded significant contracts in the United Kingdom under the UK Restart program, in addition to smaller contracts in Italy, Saudi Arabia, South Korea, and Sweden. As is typical, we anticipate that these contracts will incur start-up losses that should impact our fourth fiscal quarter before moving to profitability in the second half of fiscal year 2022. Accordingly, we anticipate this segment will realize an operating loss during the fourth quarter of this fiscal year.

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Liquidity and Capital Resources

Our primary sources of liquidity are cash on hand, cash flows ~~for the nine months ended June 30, 2021, include payments of $1.36 billion~~from operating activities, and ~~$419.1 million to cover~~availability under our acquisitions of VES and Attain, respectively, supported by $1.68 billion of net financing from our new credit facility. Our new credit facility includes a five year $1.10 billion term loan, a seven year $400.0 million term loan and a $600.0 million revolving credit ~~facility, which is repayable~~facilities. As of December 31, 2021, we had $181.8 million in ~~full in May 2026. Interest on these loans are typically based upon the combination of a fixed margin~~cash and a variable rate, which is currently based upon the London Interbank Offering Rate (LIBOR). From July 2021, our fixed rate will be based upon a net total leverage ratio as defined in our credit agreement. At this time, our net total leverage ratio is 2.4:1.cash equivalents. We believe that ~~this loan facility,~~our current cash position, access to our revolvers, and cash flow generated from operations should be not only sufficient for our operating requirements but also to enable us to fund share repurchases and any required long-term debt payments through the next several fiscal years. See Note 7 to the Consolidated Financial Statements for a more detailed discussion of our debt financing arrangements.


Table MD&A 10: Net Change in Cash and Cash Equivalents and Restricted Cash
	For the Three Months Ended
	December 31, 2021		December 31, 2020
	(in thousands)
Operating activities:
Net income	$	53,330	$	64,077
Non-cash adjustments	42,438		25,693
Changes in working capital	(98,687)		8,345
Net cash (used in)/provided by operating activities	(2,919)		98,115
Net cash used in investing activities	(6,327)		(9,253)
Net cash provided by/(used in) financing activities	54,916		(31,487)
Effect of foreign exchange rates on cash and cash equivalents and restricted cash	372		3,882
Net change in cash and cash equivalents and restricted cash	$	46,042	$	61,257

Net Cash (Used In)/Provided By Operating Activities

Net cash provided by operating activities decreased by $101.0 million for the three months ended December 31, 2021 compared to three months ended December 31, 2020. This decrease was primarily driven from a decrease in net income, increased working capital requirements, the timing of cash payments, including payments previously deferred in the United States under the CARES Act, and increased interest payments on our borrowings. Our Days Sales Outstanding ("DSO") as ~~well as~~of both December 31, 2021 and September 30, 2021, were 67 days.

Net Cash Used In Investing Activities

The net cash used in investing activities were $6.3 million and $9.3 million for the three months ended December 31, 2021 and 2020, respectively. These cash outflows were primarily for capital expenditures to support our ~~existing~~operations.

Net Cash Provided By/(Used In) Financing Activities

The $54.9 million cash provided by financing activities during the three months ended December 31, 2021, is primarily the result of a $100.0 million draw on our revolving credit line to fund operations, partially offset by $16.7 million of required debt payments on our term loans. Additionally, offsetting the cash flows ~~from operations, will provide us with~~related to debt, the ~~ability to sustain our operations~~Company also made $17.3 million in dividend payments, $9.7 million in tax payments for stock compensation, and ~~meet~~$1.4 million for share repurchases. During the short-term debt repayment requirements. We do not anticipate additional significant acquisition activity in the near term while we integrate the Attain and VES acquisitions and we plan to use most of our free cash flow to pay down debt to reduce our leverage ratio.

~~At June 30, 2021,~~three months ended December 31, 2020, we had ~~approximately $96.1 million in unrestricted cash and $400.0~~$31.5 million of ~~liquidity available on our $600.0~~cash used by financing activities, primarily being driven by dividend payments of $17.2 million, ~~revolving corporate credit facility.~~tax payments made related to stock compensation, and shares repurchases of $3.4 million.

With the acquisition of Aidvantage, we have incurred a liability to the seller based upon future performance, which we have estimated at $15.3 million. We expect these payments to be made through fiscal year 2024.

Cash in Foreign Locations

We have no requirement to remit funds from our foreign locations to the United States. ~~Current U.S. law enables us to transfer cash from our foreign locations on a tax-free basis.~~ 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.

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Free Cash ~~Flows~~Flow (Non-GAAP)

~~The following table provides a summary of our cash flow information for the nine months ended June 30, 2021 and 2020.~~
Nine Months Ended June 30,
(in thousands) 2021 2020
Net cash from/(used in):
Operations $ 246,659 $ 96,083
Investing activities - VES (1,360,231) —
Investing activities - Attain (419,097) —
Investing activities - other (32,278) (27,412)
Financing activities 1,586,792 (89,001)
Effect of exchange rate changes on cash and cash equivalents 2,830 (174)
Net increase in cash, cash equivalents, and restricted cash $ 24,675 $ (20,504)

Our cash flows from operations in fiscal year 2020 were tempered by the initial effects of the COVID-19 pandemic, including reductions in our business, delays in collecting cash and additional costs required to continue our operations. Our cash flows from operations in fiscal year 2021 benefited from increased revenues from organic and acquired businesses. On a pro forma basis, our DSO at June 30, 2021 is consistent with that at September 30, 2020 and remains within our target range.


~~(in days)~~						~~Days Sales Outstanding~~

~~September 30, 2020~~						77
~~December 31, 2020~~						75
~~March 31, 2021 (pro forma to reflect Attain acquisition)~~						70
~~June 30, 2021 (pro forma to reflect VES acquisition)~~						77
~~Target Range~~						~~65 - 80~~

Cash used in investing activities for the nine months ended June 30, 2021, was $1.81 billion, principally for the acquisitions of VES and Attain. We have finalized the purchase price of Attain and paid the balance due to the sellers in the third quarter of fiscal year 2021. We are in the process of estimating our final payment to the sellers of VES.

Cash provided by financing activities in the nine months ended June 30, 2021, was $1.59 billion, compared to $89.0 million of cash used in the comparative period. In May 2021, we entered into a new credit facility comprising up to $2.1 billion in available funds; a five year $1.10 billion term loan, a seven year $400.0 million term loan and a $600.0 million revolving credit facility, which is repayable in full in May 2026. We utilized $200 million of the revolving credit facility at June 2021.

~~To supplement our statements of cash flows presented on a GAAP basis, we use the measure of free cash flow to analyze the funds generated from operations.~~

Nine Months Ended June 30,
(in thousands) 2021 2020
Cash flows from operations $ 246,659 $ 96,083
Purchases of property and equipment and capitalized software costs (32,133) (28,436)
Free cash flow - non-GAAP $ 214,526 $ 67,647


Table MD&A 11: Free Cash Flow (Non-GAAP)
	For the Three Months Ended
	December 31, 2021		December 31, 2020
	(in thousands)
Net cash (used in)/provided by operating activities	$	(2,919)	$	98,115
Purchases of property and equipment and capitalized software	(6,327)		(9,094)
Free cash flow (Non-GAAP)	$	(9,246)	$	89,021

Critical Accounting Policies and Estimates

AsThe preparation of ~~June 30, 2021, there have been no changes to our critical accounting policies and estimates from those disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2020.~~

~~Our discussion and analysis of our financial condition and results of operations are based on our consolidated~~ financial statements ~~which have been prepared~~ in ~~accordance~~conformity with accounting principles generally accepted in the ~~United States. The preparation of these financial statements~~U.S. requires us to make estimates, judgments, and assumptions that affect the ~~reported~~ amounts of assets and liabilities, the disclosure of contingent liabilities, and the reported amounts of revenue and expenses. On an ongoing basis we evaluate our estimates, including those related to revenue recognition and cost estimation on certain contracts, the realizability of goodwill and other long-lived assets, and amounts related to contingencies and income tax liabilities. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities.reported. Actual results could differ from those estimates.

The 2021 Form 10-K, as filed with the SEC on November 18, 2021, 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 three months ended December 31, 2021.

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, cash flows from ~~operations,~~operating activities, net income, or earnings per share as measures of performance. These non-GAAP measures, as determined and presented by us, may not be comparable to related or similarly titled measures presented by other companies.

In fiscal year ~~2020, 14%~~2021, 16% of our revenue was generated outside the U.S. We believe that users of our financial statements wish to understand the performance of our foreign operations using a methodology which excludes the effect of year-over-year exchange rate fluctuations. To calculate year-over-year currency movement, we determine the current fiscal ~~year’s~~year's results for all foreign businesses using the exchange rates in the prior fiscal year. We refer to this adjusted revenue on a "constant currency basis."

In recent years, we have made a number of acquisitions. We believe users of our financial statements wish to evaluate the performance of our operations, excluding changes that have arisen due to businesses acquired or disposed of. We ~~will~~ identify acquired revenue and cost of revenue by showing these results for periods for which no comparative results exist within our financial statements. We ~~will~~ identify revenue and cost of revenue that has 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 recent acquisitions have resulted in significant intangible assets which are amortized over their estimated useful lives. We believe users of our financial statements wish to understand the performance of the business by using a methodology that ~~excludes~~allows them to compare operating activities excluding the effects of the amortization of ~~our~~ intangible assets. Accordingly, we have calculated our operating profit, net income, and earnings per share excluding the effect of the amortization of intangible assets. We have included a table showing our reconciliation of these income measures to their corresponding GAAP measures.

Our results in fiscal year 2020 included a significant benefit from the CQA contract as the U.S. Federal Government completed its census. As the pattern of revenue from this contract is significant and non-recurring, we have identified the revenue and related costs and excluded them from the organic growth calculation above. We believe that it is helpful to our investors to understand the effect of this contract on our results.

In order to sustain our cash flows from operations, we ~~require regular refreshing of~~regularly refresh our fixed assets and technology. We believe that users of our financial statements wish to understand the cash flows that directly correspond with our operations and the investments we must make in those operations using a methodology which 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 the ~~Company’s~~Company's operations and replacement capital expenditures and excludes the cash flow effects of acquisitions, purchases of our ~~own~~ common stock, dividend payments, and other financing transactions. We have provided a reconciliation of cash flows from ~~operations~~operating activities to free cash ~~flow.~~flow in "Liquidity and Capital Resources."

Table of Contents

To sustain our operations, our principal source of financing comes from receiving payments from our customers. We believe that users of our financial statements wish 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 period. Revenue per day for a quarter is determined by dividing total revenue by 91 days. ~~Where our DSO is affected by acquisitions, such as the VES acquisition in May 2021, we will perform the DSO calculation on a pro forma basis, including the acquired revenue for the fiscal quarter.~~

As noted above, we have a ~~$2.1~~$2.10 billion corporate credit facility. Our credit agreement includes the defined term Consolidated EBITDA and our calculation of Adjusted EBITDA conforms to the credit agreement definition. We believe our investors appreciate the opportunity to understand the possible restrictions which arise from our credit agreement.

•Adjusted EBITDA is also a useful measure of performance which focuses on the cash generating capacity of the business as it excludes the non-cash expenses of depreciation and amortization, and makes for easier comparisons between the operating performance of companies with different capital structures by excluding interest expense and therefore the impacts of financing costs.

•The measure of Adjusted EBITA is a step in calculating Adjusted EBITDA and facilitates comparisons to similar businesses as it isolates the amortization effect of business combinations.

•Our corporate credit facility requires us to calculate Adjusted EBITDA on a pro forma basis, as though we had owned any significant acquired business for a full twelve months. Accordingly, we have included the effects of VES, Attain, Aidvantage, and ~~Attain~~Connect Assist in the table below.

We have provided a reconciliation from net income to Non-GAAP Adjusted EBITA, Non-GAAP Adjusted EBITDA, and Non-GAAP Pro Forma Adjusted EBITDA as shown below. Our current credit facilities utilized a different version of EBITDA from that of the credit facility used in prior years.
Nine Months Ended
June 30, Trailing Twelve Months Ended
June 30,
(in thousands) 2021 2021
Net income $ 239,186 $ 302,847
Interest expense 4,049 4,543
Other (expense)/income, net 9,584 9,362
Provision of income taxes 87,534 108,124
Amortization of intangible assets 23,718 32,618
Stock compensation expense 20,823 26,973
Acquisition-related expenses 9,597 10,056
Gain on sale of a business — (12)
Adjusted EBITA - non-GAAP $ 394,491 $ 494,511
Depreciation and amortization of property, plant, equipment and capitalized software 33,664 50,696
Adjusted EBITDA - non-GAAP $ 428,155 $ 545,207
Pro forma adjusted EBITDA related to acquisitions 92,398 129,364
Pro Forma Adjusted EBITDA - non-GAAP $ 520,553 $ 674,571


Table MD&A 12: Reconciliation of Net Income to Non-GAAP Adjusted EBITA, Non-GAAP Adjusted EBITDA, and Non-GAAP Pro Forma Adjusted EBITDA
	For the Three Months Ended		For the Trailing Twelve Months Ended
	December 31, 2021		December 31, 2021
	(in thousands)
Net income	$	53,330	$	280,453
Adjustments:
Interest expense	9,638		24,176
Other expense, net	311		9,641
Provision for income taxes	18,250		88,216
Amortization of intangibles	22,405		60,247
Stock compensation expense	8,248		30,741
Acquisition-related expenses	2,490		12,661
Adjusted EBITA - Non-GAAP measure	114,672		506,135
Depreciation and amortization of property, equipment, and capitalized software	11,365		45,909
Adjusted EBITDA - Non-GAAP measure	$	126,037	$	552,044
Pro forma adjusted EBITDA related to acquisitions - Non-GAAP measure			75,031
Pro forma adjusted EBITDA - Non-GAAP measure			$	627,075

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Item 3.Quantitative and Qualitative Disclosures ~~about~~About Market ~~Risk.~~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.

~~Foreign Currency Risk~~

~~At June 30,~~ The Company's market rate risk disclosures set forth in Part II, Item 7A, "Quantitative and Qualitative Disclosures About Market Risk" on the 2021 we held net assets denominated in currencies other than the U.S. Dollar of $188.7 million. Of this balance, we had net monetary assets of $101.0 million, including cash and cash equivalents $65.0 million. We consider monetary assets to be those which which hold a fair value close to their book value and which represent a recent cash outflow or which will become a cash inflow or outflow within a short period of time. These assets and liabilities are typically cash, billed, billable, and unbilled accounts receivable, current prepaid expenses, operating lease right-of-use assets, accounts payable, accrued compensation, deferred revenue, lease liabilities, and debt.

A hypothetical 10% favorable or unfavorable exchange rate movement across currencies would have a positive or negative effect on our annual comprehensive income of $18.9 million and would increase or decrease our cash and cash equivalents and our net monetary assets by $6.5 million and $10.1 million, respectively.

~~Interest Rate Risk~~

~~Our exposure to market risk for changes in interest rates relates to our outstanding debt. The interest expense associated~~Form 10-K, as filed with the ~~two term loans and revolver will vary with market rates. The Tranche A Term Loan (principal balance $1.10 billion) and~~SEC on November 18, 2021, have not changed materially during the revolver (principal balance of $200.0 million) both have a LIBOR floor of 0% and Tranche B Term Loan (principal balance of $400.0 million) has a LIBOR floor of 0.5%. We have an interest rate swap with a notional amount of $300.0 million related to the Tranche A Term Loan. A rise of interest rate levels would increase our interest expense and a reduction in interest rates to the floor would decrease our interest expense. A hypothetical 100 basis point increase in interest rates would have a negative effect on annual earnings in the amount of $12.3 million and a 100 basis point decrease in interest rates would have a positive impact on annual earnings of $0.9 million. We based this sensitivity calculation on the onethree month ~~LIBOR rate of 0.087% in accordance with the most recent measurement date specified in the Credit Agreement.~~

~~Counterparty Risk~~

We are exposed to credit losses in the event of nonperformance by the counterparties to our derivative instruments. All of our counterparties have investment grade credit ratings; accordingly, we anticipate that the counterparties will be able to fully satisfy their obligations under the contracts. Our agreements outline the conditions upon which it or the counterparties are required to post collateral. At June 30, 2021, we had no collateral posted with our counterparties related to the derivatives.

period ended December 31, 2021.

Item 4.Controls and ~~Procedures.~~Procedures

~~(a)~~Management's Evaluation of Disclosure Controls and ~~Procedures~~Procedures.

~~Our~~ The Company maintains disclosure controls and procedures designed to ensure that information required to be disclosed in its periodic filings under the Securities Exchange Act of 1934 ("Exchange Act"), including this Quarterly Report on Form 10-Q, is recorded, processed, summarized, and reported on a timely basis. These disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed under the Exchange Act is accumulated and communicated to the Company's management ~~with~~on a timely basis to allow decisions about required disclosure. Management, including the ~~participation of our principal executive officer~~Company's Chief Executive Officer and ~~principal financial officer,~~Chief Financial Officer, has evaluated the effectiveness of the design and operation of ~~our~~Maximus' disclosure controls and procedures (as defined inunder Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of December 31, 2021.

Maximus carried out the evaluation of the effectiveness of its disclosure controls and procedures, required by paragraph (b) of Exchange Act Rules 13a-15 and 15d-15, under the ~~Securities Exchange Act~~supervision and with the participation of ~~1934, as amended (the “Exchange Act”)) as of~~management, including the ~~end of the period covered by this Quarterly Report on Form 10-Q.~~Chief Executive Officer and Chief Financial Officer. Based onupon this evaluation, ~~our principal executive officer~~the Chief Executive Officer and ~~principal financial officer~~Chief Financial Officer concluded that ~~these~~the Company's disclosure controls and procedures were 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 Securities and Exchange Commission’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.~~of December 31, 2021.

~~(b)~~Changes in Internal Control ~~over~~Over Financial ~~Reporting~~Reporting.

~~With~~ There were no changes in the ~~exception of the matter noted below, there was no change in our~~Company's internal control over financial reporting (as defined in ~~Rules~~Rule 13a-15(f) ~~and 15d-15(f) under~~of the Exchange Act) ~~identified in connection with~~during the ~~evaluation of our internal control~~three months ended December 31, 2021, that ~~occurred during our last fiscal quarter that has~~have materially affected, or isare reasonably likely to materially affect, ~~our~~the Company's internal control over financial reporting.

~~In May 2021, we acquired VES Group, Inc. We are in the process of integrating this business into our existing control environment.~~

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PART ~~II.~~II - OTHER INFORMATION

Item 1.Legal ~~Proceedings.~~Proceedings

Refer to our disclosures included in "Note 8 ~~. Litigation~~"14. Commitments and Contingencies included in Part 1, Item 1 of this Quarterly Report on Form 10-Q.

Item 1A.Risk ~~Factors.~~Factors

In connection with information set forth in this Form 10-Q, the factors discussed below and under “Risk Factors” in our Form 10-K for fiscal year ended September 30, 2020, should be considered. The risks included below and in those filings could materially and adversely affect our business, financial condition, and results of operations.

~~Other than as set forth below, there have been~~There were no material changes during the three months ended December 31, 2021 to the risk factors ~~discussed~~previously disclosed in ~~our Annual Report on~~the 2021 Form 10-K, ~~for the fiscal year ended September 30, 2020, which was~~as filed with the SEC on November 18, 2021.

Item 2. Unregistered Sales of Equity Securities and ~~Exchange Commission on November 19, 2020.~~Use of Proceeds

~~Risks related to our acquisitions of the Federal business of Attain, LLC (“Attain”) and VES Group Inc. (“VES”).~~

~~Our indebtedness following the completion of the VES acquisition is significant and could adversely affect our business and our ability to meet our obligations.~~(a) In connection with the VES acquisition, we incurred significant additional indebtedness. Our new indebtedness contains financial or other covenants that limit our operational flexibility. In addition, the increased indebtedness of the Company following the VES acquisition could adversely affect us in a number of other ways, including:None.

•(b)~~causing us to be less able to take advantage of business opportunities, such as other acquisition opportunities, and to react to changes in market or industry conditions;~~None.

•(c)~~increasing our vulnerability~~Under a resolution adopted in March 2020, the Board of Directors authorized the purchase, at management's discretion, of up to ~~adverse economic, industry, or competitive developments;~~

•~~affecting our ability to pay or refinance debts as they become due during adverse economic, financial market, and industry conditions;~~

•~~requiring us to use a larger portion of cash flow for debt service, reducing funds available for other purposes;~~

•~~decreasing our profitability and/or cash flow;~~

•~~causing us to be disadvantaged compared to competitors with less leverage; and~~

•~~limiting our ability to borrow additional funds in the future to fund working capital, capital expenditures, and other general corporate purposes.~~

~~We may experience difficulties in integrating our operations with those of Attain and VES and realizing the expected benefits of these acquisitions.~~ Although we currently anticipate that both the Attain acquisition and the VES acquisition (the “Acquisitions”) will be accretive to earnings per share in fiscal 2022, this expectation is based on assumptions about Maximus', Attain’s and VES’s business and preliminary estimates, which may change materially. The benefits of the Acquisitions will depend, in part, on our ability to successfully combine the businesses of Attain, VES, and Maximus, which currently operate as independent companies and realize the anticipated benefits, including business opportunities and growth prospects from combining our businesses. We may not achieve these objectives within the anticipated time frame, or may never realize these benefits and the value$200.0 million of our common ~~stock may be harmed.~~stock. This supplemented a similar resolution adopted in June 2018.

The Acquisitions involve the integration of Attain’s and VES’s businesses with our existing business, which is expected to be a costly and time-consuming process. The integration may result in material challenges, including, without limitation:


Common Stock Repurchase Activity During the Three Months Ended December 31, 2021
Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of the Publicly Announced Plans or Programs	Maximum Dollar Value that May Yet Be Purchased Under the Plans or Programs
	(dollars in thousands, except per share data)
October 1 - October 31, 2021	—	$	—	—	$	146,665
November 1 - November 30, 2021	—	—		—	$	146,665
December 1 - December 31, 2021	18,403	74.87		18,403	$	145,286
Total	18,403	$	74.87	18,403

Item 3. Defaults Upon Senior Securities

•(a)Our management might have its attention diverted from ongoing business concerns while trying to integrate these operations, and we could experience performance shortfalls at one or all three of the companies as a result of the devotion of management’s attention to the Attain and VES integration efforts.None.

•(b)The integration process could take longer than anticipated and could result in the loss of key employees, the disruption of each company’s ongoing businesses, tax costs or inefficiencies, or inconsistencies in standards, controls, information technology systems, procedures and policies, any of which could materially adversely affect our ability to maintain relationships with customers, employees or other third parties, or our ability to achieve the anticipated benefits of the transactions, and could harm our financial performance.None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

(a)None.

(b)None.

•~~We could encounter unanticipated issues in integrating information technology, communications and other systems that could harm our financial performance.~~

•If we are unable to successfully or timely integrate our operations with those of Attain and VES, we may incur unanticipated liabilities and be unable to realize the revenue growth, synergies, and other anticipated benefits resulting from the Acquisitions, and our business, results of operations, and financial condition could be materially adversely affected.

VES currently derives all of its revenue from contracts with the Department of Veterans Affairs (“VA”). If one or more of these contracts with the VA are terminated or are not renewed on favorable terms or at all, if the VA reduces the number of medical examinations allocated to VES under the contracts or if VES receives an adverse finding or review resulting from an audit or investigation, the benefits of the VES acquisition may be adversely affected. VES’s contracts with the VA are generally intended to run for a fixed number of years and may be extended for an additional specified number of years if the contracting entity or its agent elects to do so. When VES’s contracts with the VA expire, they may be opened for bidding by competing providers, and there is no guarantee that the contracts will be renewed or extended. The VA may also elect to open the bidding process earlier than anticipated, resulting in increased competition prior to the anticipated end of the current contracts. Competitors may buy their way into the market by submitting bids with lower pricing. Even if VES’s responsive bids are successful, the bids may be based upon assumptions or other factors which could result in the contracts being less profitable than we had anticipated.

VES’s reputation and relationship with the VA are key factors in maintaining and growing its revenues. Negative press reports or publicity, regardless of accuracy, which could pertain to employee or service provider misconduct, conflicts of interest, poor contract performance, deficiencies in services, information security breaches, or other aspects of its business, could harm its reputation, particularly with the VA. If VES’s reputation is negatively affected, the VA could decrease or cease its business with VES. VES is also subject to various reviews, audits, and investigations to verify its compliance with the terms of its contracts with various governmental agencies, as well as compliance with applicable laws and regulations. Any adverse review, audit, or investigation could result in, among other things: cancellation of VES’s contracts; refunding of amounts that have been paid pursuant to its contracts; imposition of fines, penalties and other sanctions on VES; loss of its right to participate in various programs; loss of one or more of its licenses; lowered quality ratings; or changes to the way it does its business. In addition, under government procurement regulations and practices, a negative determination resulting from a government audit of the business practices could result in a contractor being fined, debarred, and/or suspended from being able to bid on, or be awarded, new government contracts for a period of time.

If any of the foregoing occurs, the volume of VES’s business with the VA could decrease and its business, future revenues, financial condition, and growth prospects could be adversely affected, causing the benefits to Maximus of the VES acquisition to be adversely affected.

In connection with the Acquisitions, we may be required to take write-downs or write-offs, restructuring and impairment, or other charges that could negatively affect our business, assets, liabilities, prospects, outlook, financial condition, and results of operations. Although we have conducted extensive due diligence on Attain and VES in connection with the Acquisitions, we cannot assure that this diligence revealed all material issues that may be present, that it would be possible to uncover all material issues through customary due diligence, or that factors outside of our control will not later arise. We have also purchased representations and warranties insurance policies in connection with the Acquisitions, but there is no assurance that those policies will cover any losses we might experience from breaches of the sellers’ representations and warranties or otherwise arising from the Acquisitions. Even if our due diligence successfully identifies certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with our preliminary risk analysis. Further, as a result of the Acquisitions, purchase accounting, and the proposed operation of the combined company after closing, we may be required to take write-offs or write-downs, restructuring and impairment or other charges that could negatively affect business, assets, liabilities, prospects, outlook, financial condition and results of operations after closing of the Acquisitions.

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Item 6.~~Exhibits.~~ Exhibits

~~Exhibit No.~~

~~Description~~

~~2.1~~Exhibit
No.

Stock Purchase Agreement dated as of April 20, 2021 by and among VES Group, Inc., each of the parties identified as a “Shareholder” on the signature pages thereto, George C. Turek, in his capacity as Shareholder Representative as set forth in therein, Maximus Federal Services, Inc., and Maximus, Inc. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on April 26, 2021).*

1 ~~0.1~~

~~Credit Agreement, dated as~~Description of May 28, 2021 by and between the Company, JPMorgan Chase Bank, N.A., as administrative agent, the lenders party thereto and each of JPMorgan Chase Bank, N.A., BofA Securities, Inc., Truist Securities Inc. and Wells Fargo Securities, LLC, in their capacities as joint lead arrangers and joint bookrunners (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on June 3, 2021).**

31.1

Certification ~~Pursuant~~of Chief Executive Officer pursuant to Section 302 of ~~the~~ Sarbanes-Oxley Act of 2002.

31.2

Certification ~~Pursuant~~of Chief Financial Officer pursuant to Section 302 of ~~the~~ Sarbanes-Oxley Act of 2002.

32.1

vΦ

Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 ~~Principal Executive Officer Certification.~~

~~32.2~~of Sarbanes-Oxley Act of 2002.

~~Section 906 Principal Financial Officer Certification.~~

~~101~~101.INS

XBRL Instance Document.

The following materials from the Maximus, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2021 formatted in eXtensible Business Reporting Language (XBRL): (i) Consolidated Statements of Operations, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Cash Flows, (v) Consolidated Statements of Changes in Shareholders’ Equity and (vi) Notes to Unaudited Consolidated Financial Statements. Filed electronically herewith.

101.SCH

XBRL Taxonomy Extension Schema Document.

101.CAL

XBRL Taxonomy Calculation Linkbase Document.

101.DEF

XBRL Taxonomy Definition Linkbase Document.

101.LAB

XBRL Taxonomy Label Linkbase Document.

101.PRE

XBRL Taxonomy Presentation Linkbase Document.

104

Cover Page Interactive Data ~~File~~File. (formatted as Inline XBRL tags and contained in Exhibit 101)

* Schedules and similar attachments omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish a copy of any omitted schedule to the Securities and Exchange Commission upon request.

** Schedules omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company agrees to furnish a copy of any omitted schedule to the Securities and Exchange Commission upon request.

s ~~Filed herewith.~~



v ~~Furnished herewith.~~			Filed herewith.
Φ			Furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the ~~registrant~~Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Maximus, Inc.

~~Date: August 5, 2021~~/s/ Bruce L. Caswell

February 3, 2022

By:

~~/s/ Richard J. Nadeau~~Bruce L. Caswell

President and Chief Executive Officer

~~Richard J. Nadeau~~

(Principal Executive Officer)

/s/ David. W. Mutryn

February 3, 2022

By:

David W. Mutryn

Chief Financial Officer

(~~On behalf of the registrant and as~~ Principal Financial ~~and Accounting~~ Officer)

3734


	June 30, 2021		September 30, 2020
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	96,110	$	71,737

Accounts receivable — billed and billable, net of allowance of $6,607 and $6,051	794,653		622,871
Accounts receivable — unbilled	334,666		163,332
Income taxes receivable	454		2,075
Prepaid expenses and other current assets	81,479		72,543

Total current assets	1,307,362		932,558
Property and equipment, net	67,794		66,721
Capitalized software, net	45,739		38,033
Operating lease right-of-use assets	186,944		177,159
Goodwill	1,757,795		593,129
Intangible assets, net	892,487		145,893
Deferred contract costs, net	37,020		20,891
Deferred compensation plan assets	47,041		36,819
Deferred income taxes	506		1,915
Other assets	27,905		11,584

Total assets	$	4,370,593	$	2,024,702
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	420,510	$	253,338
Accrued compensation and benefits	181,559		137,101
Deferred revenue	68,846		51,655
Income taxes payable	19,763		5,377
Current portion of long-term debt and other borrowings	60,586		10,878
Operating lease liabilities	82,572		80,748
Other current liabilities	26,768		22,071

Total current liabilities	860,604		561,168
Deferred revenue, less current portion	36,051		27,311
Deferred income taxes	204,174		24,737
Long-term debt, less current portion	1,633,135		18,017
Deferred compensation plan liabilities, less current portion	44,076		38,654
Operating lease liabilities, less current portion	118,341		104,011
Other liabilities	20,765		8,985

Total liabilities	2,917,146		782,883
Shareholders’ equity:
Common stock, no par value; 100,000 shares authorized; 61,472 and 61,504 shares issued and outstanding at June 30, 2021, and September 30, 2020, respectively	535,990		513,959
Accumulated other comprehensive loss	(36,031)		(42,638)
Retained earnings	953,488		770,498
Total shareholders' equity	1,453,447		1,241,819


Total liabilities and shareholders' equity	$	4,370,593	$	2,024,702


	Common Shares Outstanding	Common Stock		Accumulated Other Comprehensive Loss		Retained Earnings		Total
Balance at March 31, 2021	61,472	$	528,205	$	(34,945)	$	876,645	$	1,369,905
Net income	—	—		—		94,495		94,495
Foreign currency translation	—	—		(24)		—		(24)
Cash flow hedge, net of income taxes	—	—		(1,062)		—		(1,062)
Cash dividends	—	—		—		(17,211)		(17,211)
Dividends on RSUs	—	441		—		(441)		—


Stock compensation expense	—	7,344		—		—		7,344


Balance at June 30, 2021	61,472	$	535,990	$	(36,031)	$	953,488	$	1,453,447


(in thousands)	June 30, 2021		September 30, 2020
U.S. Services	$	728,347	$	702,728
U.S. Federal Services	3,149,694		937,477
Outside the U.S.	304,952		224,532
Corporate	187,600		159,965
Total	$	4,370,593	$	2,024,702


	Three Months Ended June 30,		Nine Months Ended June 30,
(shares in thousands)	2021	2020	2021	2020
Basic weighted average shares outstanding	62,064	61,882	62,028	63,463
Dilutive effect of unvested RSUs	389	220	272	203
Denominator for diluted earnings per share	62,453	62,102	62,300	63,666


(in thousands)	Estimated fair value of assets and liabilities at acquisition date as of March 31, 2021		Adjustments		Estimated fair value of assets and liabilities at acquisition date as of June 30, 2021
Cash consideration, net of cash acquired	$	419,864	$	(767)	$	419,097

Accounts receivable - billed, billable and unbilled	$	39,274	$	101	$	39,375
Prepaid expenses and other current assets	1,336		(410)		926
Property and equipment, net	703		(703)		0
Operating lease right-of-use assets	25,089		(129)		24,960
Other assets	84		(10)		74
Intangible assets	105,000		0		105,000
Total identifiable assets acquired	171,486		(1,151)		170,335
Accounts payable and other liabilities	28,301		562		28,863
Operating lease liabilities, less current portion	26,786		(385)		26,401
Net identifiable assets acquired	116,399		(1,328)		115,071
Goodwill	303,465		561		304,026
Net assets acquired	$	419,864	$	(767)	$	419,097


	Unaudited pro forma results
	Three Months Ended June 30,				Nine Months Ended June 30,				Trailing Twelve Months Ended June 30,
(in thousands, except per share amounts)	2021		2020		2021		2020		2021
Revenue	$	1,335,780	$	996,462	$	3,566,466	$	2,934,920	$	4,645,540
Cost of revenue	1,004,523		787,189		2,679,170		2,283,589		3,503,074
Gross profit	331,257		209,273		887,296		651,331		1,142,466
Selling, general, and administrative expenses	151,321		110,754		425,062		360,370		551,143
Amortization of intangible assets	21,301		25,090		63,856		75,868		88,586



Operating income	158,635		73,429		398,378		215,093		502,737
Interest expense	8,701		9,423		26,715		28,528		36,426
Other (expense)/income, net	(7,320)		(2,126)		(10,401)		(11,755)		(11,437)
Income before income taxes	142,614		61,880		361,262		174,810		454,874
Provision for income taxes	37,123		15,549		94,735		38,897		120,248
Net income	$	105,491	$	46,331	$	266,527	$	135,913	$	334,626


Basic earnings per share	$	1.70	$	0.75	$	4.30	$	2.14	$	5.40
Diluted earnings per share	$	1.69	$	0.75	$	4.28	$	2.13	$	5.37
Dividends declared per share	$	0.28	$	0.28	$	0.84	$	0.84	$	1.12
Weighted average shares outstanding:
Basic	62,064		61,882		62,028		63,463		62,001
Diluted	62,453		62,102		62,300		63,666		62,285


	As of June 30, 2021						As of September 30, 2020
(in thousands)	Cost		Accumulated Amortization		Intangible Assets, net		Cost		Accumulated Amortization		Intangible Assets, net
Customer contracts and relationships	$	921,023	$	112,546	$	808,477	$	235,287	$	90,302	$	144,985
VES Provider network	57,000		396		56,604		0		0		0
Technology-based intangible assets	32,400		4,994		27,406		5,631		4,723		908
Trademarks and trade names	4,516		4,516		0		4,479		4,479		0
Total	$	1,014,939	$	122,452	$	892,487	$	245,397	$	99,504	$	145,893


	Balance as of
(in thousands)	June 30, 2021		September 30, 2020		June 30, 2020
Cash and cash equivalents	$	96,110	$	71,737	$	81,548
Restricted cash (recorded within "prepaid expenses and other current assets")	17,126		16,824		14,440
Cash, cash equivalents, and restricted cash	$	113,236	$	88,561	$	95,988


	Nine Months Ended June 30,		Trailing Twelve Months Ended June 30,
(in thousands)	2021		2021
Net income	$	239,186	$	302,847
Interest expense	4,049		4,543
Other (expense)/income, net	9,584		9,362
Provision of income taxes	87,534		108,124
Amortization of intangible assets	23,718		32,618
Stock compensation expense	20,823		26,973
Acquisition-related expenses	9,597		10,056
Gain on sale of a business	—		(12)
Adjusted EBITA - non-GAAP	$	394,491	$	494,511
Depreciation and amortization of property, plant, equipment and capitalized software	33,664		50,696
Adjusted EBITDA - non-GAAP	$	428,155	$	545,207
Pro forma adjusted EBITDA related to acquisitions	92,398		129,364
Pro Forma Adjusted EBITDA - non-GAAP	$	520,553	$	674,571