Maximus Inc.

05/07/2026 | Press release | Distributed by Public on 05/07/2026 09:36

Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion is intended to help the reader understand our business, financial condition, results of operations, liquidity and capital resources. You should read this discussion in conjunction with "Risk Factors," "Special Note Regarding Forward-Looking Statements," and our financial statements and related notes included in our Annual Report on Form 10-K for fiscal year 2025 filed with the SEC on November 20, 2025 and elsewhere in this Quarterly Report on Form 10-Q, as applicable.
Business Overview
Maximus is a leading provider of tech-enabled services to government agencies. By moving people, technology, and government forward, Maximus helps improve the delivery of public services for more than 100 million American citizens, as well as citizens in the United Kingdom (U.K.), Canada, and the Middle East, amid complex technological, health, economic, and social challenges. As a trusted and accountable partner to primarily U.S. federal and state customers, we proudly design, develop, and deliver innovative and efficient programs that are designed to improve government's effectiveness in serving its citizens.
We create value for our customers through our ability to translate public policy into operating models that achieve outcomes for governments at scale. Our work covers a broad array of services, including the operation of large health insurance eligibility and enrollment programs; clinical services, including assessments, appeals, and independent medical reviews; and technology services. These services benefit from an industry with increasing demand, constrained government budgets, and an increased focus on technology as governments prioritize modernization. We also demonstrate the ability to move quickly, ranging from digitally enabled contact center support services for natural disaster response to swift establishments of public health and safety initiatives.
Financial Overview
A number of factors have affected our results for the second quarter of fiscal year 2026. More detail on these changes is presented below within our "Results of Operations" section.
Results of Operations
The following table sets forth items from our consolidated statements of operations for the three and six months ended March 31, 2026, and March 31, 2025.
Table MD&A 1: Consolidated Results of Operations
For the Three Months Ended For the Six Months Ended
March 31, 2026 March 31, 2025 March 31, 2026 March 31, 2025
(dollars in thousands, except per share data)
Revenue $ 1,305,967 $ 1,361,786 $ 2,651,013 $ 2,764,461
Cost of revenue 963,703 1,022,965 1,990,079 2,124,083
Gross profit 342,264 338,821 660,934 640,378
Gross profit percentage 26.2 % 24.9 % 24.9 % 23.2 %
Selling, general, and administrative expenses 173,479 162,857 325,639 354,592
Selling, general, and administrative expenses as a percentage of revenue 13.3 % 12.0 % 12.3 % 12.8 %
Amortization of intangible assets 20,298 22,996 40,598 46,031
Operating income 148,487 152,968 294,697 239,755
Operating margin 11.4 % 11.2 % 11.1 % 8.7 %
Interest expense 22,111 21,469 42,927 38,991
Other (income)/expense, net (158) (963) (1,031) (651)
Income before income taxes 126,534 132,462 252,801 201,415
Provision for income taxes 28,471 35,893 60,795 63,650
Effective tax rate 22.5 % 27.1 % 24.0 % 31.6 %
Net income $ 98,063 $ 96,569 $ 192,006 $ 137,765
Earnings per share:
Basic $ 1.81 $ 1.70 $ 3.52 $ 2.36
Diluted $ 1.80 $ 1.69 $ 3.50 $ 2.35
Our business segments have different factors driving revenue fluctuations and profitability. The sections that follow cover these segments in greater detail. Our revenue reflects fees earned for services provided. Cost of revenue consists of direct costs related to labor and its associated overhead, subcontractor labor, outside vendors, rent, and other direct costs. The largest component of cost of revenue, approximately two-thirds, is labor, including subcontracted labor.
Table MD&A 2: Changes in Revenue, Cost of Revenue, and Gross Profit for the Three Months Ended March 31, 2026
Revenue Cost of Revenue Gross Profit
Dollars % Change Dollars % Change Dollars % Change
(dollars in thousands)
Three Months Ended March 31, 2025 $ 1,361,786 $ 1,022,965 $ 338,821
Organic effect (56,482) (4.1) % (60,572) (5.9) % 4,090 1.2 %
Disposal of businesses (7,062) (0.5) % (5,700) (0.6) % (1,362) (0.4) %
Currency effect compared to the prior period 7,725 0.6 % 7,010 0.7 % 715 0.2 %
Three Months Ended March 31, 2026 $ 1,305,967 (4.1) % $ 963,703 (5.8) % $ 342,264 1.0 %
Table MD&A 3: Changes in Revenue, Cost of Revenue, and Gross Profit for the Six Months Ended March 31, 2026
Revenue Cost of Revenue Gross Profit
Dollars % Change Dollars % Change Dollars % Change
(dollars in thousands)
Six Months Ended March 31, 2025 $ 2,764,461 $ 2,124,083 $ 640,378
Organic effect (97,806) (3.5) % (121,835) (5.7) % 24,029 3.8 %
Disposal of businesses (27,624) (1.0) % (23,042) (1.1) % (4,582) (0.7) %
Currency effect compared to the prior period 11,982 0.4 % 10,873 0.5 % 1,109 0.2 %
Six Months Ended March 31, 2026 $ 2,651,013 (4.1) % $ 1,990,079 (6.3) % $ 660,934 3.2 %
Selling, general, and administrative expenses
Selling, general, and administrative (SG&A) expenses consist of indirect costs related to general management, marketing, and administration. It is primarily composed of labor costs. These costs may be incurred at a segment level, for dedicated resources that are not client-facing, or at a corporate level. We allocate corporate costs to segments on a consistent and rational basis. Fluctuations in our SG&A are primarily driven by changes in our administrative cost base, which are not directly driven by changes in our revenue. As part of our work for the U.S. federal government and many states, we allocate these costs using a methodology driven by the U.S. Federal Cost Accounting Standards.
Our SG&A expense for the six months ended March 31, 2026, includes $9.0 million of divestiture-related gain from the sale of our child support business within the United States, which we divested in December 2025. Our SG&A expense for the six months ended March 31, 2025, includes divestiture-related charges of $39.3 million from our sale of businesses in the Outside the U.S. Segment. These charges included accumulated foreign currency losses incurred over two decades of operations, as well as indemnifications provided to the buyer.
Amortization of intangible assets
Amortization of intangible assets has declined for the three and six months ended March 31, 2026, as compared to the same periods in fiscal year 2025, since the amortization of technology-based assets acquired in fiscal year 2021 was completed prior to fiscal year 2026.
Our balance sheet includes $380.4 million of intangible assets from a 2021 acquisition. These assets, comprised of customer relationships and a medical provider network, continue to support medical disability examinations (MDE) contracts with the U.S. Department of Veterans Affairs. These assets are being amortized over their remaining useful life of approximately seven years. In the event that our expectations change with respect to these acquired contracts, the value of these assets and the estimated remaining lives of these assets may need to be adjusted.
Interest Expense
During fiscal year 2025, we expanded our Term Loan A Credit Facility, which has resulted in an increase to our interest expense in the current year. We continue to mitigate a portion of our interest rate risk through hedging transactions on a portion of our outstanding debt.
Provision for Income Taxes
Our effective income tax rate for the three and six months ended March 31, 2026, was 22.5% and 24.0%, respectively, compared to 27.1% and 31.6% for the three and six months ended March 31, 2025, respectively. Our effective tax rate for the first half of fiscal year 2026 includes approximately $4.2 million of benefit from research and development tax credits identified and claimed in the period. Our tax rate in fiscal year 2025 was affected by the disposal of our businesses in Australia and Korea and other non recurring items. For fiscal year 2026, we expect an overall effective tax rate between 24% and 25%.
U.S. Federal Services Segment
Our U.S. Federal Services Segment delivers solutions that help various U.S. federal government agencies better execute on their mission, including program operations and management, clinical services, and advanced technology solutions.
Table MD&A 4: U.S. Federal Services Segment - Financial Results
For the Three Months Ended For the Six Months Ended
March 31, 2026 March 31, 2025 March 31, 2026 March 31, 2025
(dollars in thousands)
Revenue $ 753,143 $ 777,927 $ 1,539,744 $ 1,558,582
Cost of revenue 527,698 575,869 1,099,364 1,183,209
Gross profit 225,445 202,058 440,380 375,373
Selling, general, and administrative expenses 92,741 83,076 177,943 157,291
Operating income 132,704 118,982 262,437 218,082
Gross profit percentage 29.9 % 26.0 % 28.6 % 24.1 %
Operating margin percentage 17.6 % 15.3 % 17.0 % 14.0 %
Our revenue and cost of revenue for the three months ended March 31, 2026 and 2025 decreased 3.2% and 8.4%, respectively. Our revenue and cost of revenue for the six months ended March 31, 2026 and 2025 decreased 1.2% and 7.1%, respectively.
Our prior year revenue included the benefit of short-term disaster recovery work, which did not recur in fiscal year 2026. Absent this work, revenue would have grown approximately 1.5% for the three months ended March 31, 2026 compared to March 31, 2025, and 3.0% for the six months ended March 31, 2026 compared to six months ended March 31, 2025, principally driven by volume growth. Our margins have improved through a combination of efficiency savings through the use of technology and the absence of short-term disaster recovery work, which operated at lower margins than the core of our business.
Below is a reconciliation of revenue for the three and six months ended March 31, 2026 compared to the prior year period, including the impact of short-term disaster recovery work and our organic revenue growth excluding this work.
Table MD&A 5: Change in Revenue, Excluding Natural Disaster Recovery Work
Three Months Ended
March 31, 2026 		Six Months Ended
March 31, 2026
Dollars % Change Dollars % Change
(dollars in thousands)
Revenue for 2025 fiscal period $ 777,927 $ 1,558,582
Decline in short-term disaster recovery work (36,118) (4.6) % (64,927) (4.2) %
Organic revenue growth excluding short-term disaster recovery work 11,334 1.5 % 46,089 3.0 %
Revenue for 2026 fiscal period $ 753,143 (3.2) % $ 1,539,744 (1.2) %
We anticipate operating margin for the U.S. Federal Services Segment in fiscal year 2026 to be approximately 17.5%.
U.S. Services Segment
Our U.S. Services Segment provides a variety of services, such as program operations, clinical services, employment services and advanced technology solutions and related professional services work for U.S. state and local government programs. These services support a variety of programs, including the programs under Medicaid and Children's Health Insurance Program (CHIP), the Affordable Care Act (ACA) marketplaces, and Temporary Assistance to Needy Families (TANF).
Table MD&A 6: U.S. Services Segment - Financial Results
For the Three Months Ended For the Six Months Ended
March 31, 2026 March 31, 2025 March 31, 2026 March 31, 2025
(dollars in thousands)
Revenue $ 415,754 $ 442,350 $ 831,002 $ 894,600
Cost of revenue 315,245 330,580 646,099 687,826
Gross profit 100,509 111,770 184,903 206,774
Selling, general, and administrative expenses 61,919 57,963 117,027 112,121
Operating income 38,590 53,807 67,876 94,653
Gross profit percentage 24.2 % 25.3 % 22.3 % 23.1 %
Operating margin percentage 9.3 % 12.2 % 8.2 % 10.6 %
Our revenue and cost of revenue for the three months ended March 31, 2026 and 2025, decreased 6.0% and 4.6%, respectively. For the six months ended March 31, 2026 and 2025, our revenue and cost of revenue decreased 7.1% and 6.1%, respectively.
Table MD&A 7: U.S. Services Segment - Changes in Revenue, Cost of Revenue, and Gross Profit for the Three Months Ended March 31, 2026
Revenue Cost of Revenue Gross Profit
Amount % Change Amount % Change Amount % Change
(dollars in thousands)
Three Months Ended March 31, 2025 $ 442,350 $ 330,580 $ 111,770
Organic effect (19,534) (4.4) % (9,635) (2.9) % (9,899) (8.9) %
Disposal of businesses (7,062) (1.6) % (5,700) (1.7) % (1,362) (1.2) %
Three Months Ended March 31, 2026 $ 415,754 (6.0) % $ 315,245 (4.6) % $ 100,509 (10.1) %
Table MD&A 8: U.S. Services Segment - Changes in Revenue, Cost of Revenue, and Gross Profit for the Six Months Ended March 31, 2026
Revenue Cost of Revenue Gross Profit
Amount % Change Amount % Change Amount % Change
(dollars in thousands)
Six Months Ended March 31, 2025 $ 894,600 $ 687,826 $ 206,774
Organic effect (55,350) (6.2) % (35,105) (5.1) % (20,245) (9.8) %
Disposal of businesses (8,248) (0.9) % (6,622) (1.0) % (1,626) (0.8) %
Six Months Ended March 31, 2026 $ 831,002 (7.1) % $ 646,099 (6.1) % $ 184,903 (10.6) %
Our U.S. Services Segment continues to experience lower volumes and demand across a broad range of contracts compared to prior years. We believe the contracts and relationships held by this segment provide it with strong opportunities to assist state customers who will require higher engagement across their federally-funded social programs. Accordingly, we anticipate that we will return to organic growth towards the end of the current fiscal year.
During the second quarter of the year, we recorded an impairment charge of $6.9 million related to a capitalized software asset following a client decision which resulted in its carrying value no longer being recoverable. We anticipate operating margins for the U.S. Services Segment in fiscal year 2026 to be approximately 10%.
Outside the U.S. Segment
Our Outside the U.S. Segment provides business process services and other solutions for international governments. These services include health and disability assessments, program administration for employment services, wellbeing solutions and other job seeker-related services, digitally-enabled customer services, and advanced technologies for modernization. We support programs and deliver services in the U.K., including the Functional Assessment Services (FAS) contract and the Restart employment program. We also provide services in Canada and the Middle East.
Table MD&A 9: Outside the U.S. Segment - Financial Results
For the Three Months Ended For the Six Months Ended
March 31, 2026 March 31, 2025 March 31, 2026 March 31, 2025
(dollars in thousands)
Revenue $ 137,070 $ 141,509 $ 280,267 $ 311,279
Cost of revenue 120,760 116,516 244,616 253,048
Gross profit 16,310 24,993 35,651 58,231
Selling, general, and administrative expenses 19,395 20,197 40,116 45,315
Operating (loss)/income (3,085) 4,796 (4,465) 12,916
Gross profit percentage 11.9 % 17.7 % 12.7 % 18.7 %
Operating margin percentage (2.3) % 3.4 % (1.6) % 4.1 %
Table MD&A 10: Outside the U.S. Segment - Changes in Revenue, Cost of Revenue, and Gross Profit for the Three Months Ended March 31, 2026
Revenue Cost of Revenue Gross Profit
Amount % Change Amount % Change Amount % Change
(dollars in thousands)
Three Months Ended March 31, 2025 $ 141,509 $ 116,516 $ 24,993
Organic effect (12,164) (8.6) % (2,766) (2.4) % (9,398) (37.6) %
Currency effect compared to the prior period 7,725 5.5 % 7,010 6.0 % 715 2.9 %
Three Months Ended March 31, 2026 $ 137,070 (3.1) % $ 120,760 3.6 % $ 16,310 (34.7) %
Table MD&A 11: Outside the U.S. Segment - Changes in Revenue, Cost of Revenue, and Gross Profit for the Six Months Ended March 31, 2026
Revenue Cost of Revenue Gross Profit
Amount % Change Amount % Change Amount % Change
(dollars in thousands)
Six Months Ended March 31, 2025 $ 311,279 $ 253,048 $ 58,231
Organic effect (23,618) (7.6) % (2,885) (1.1) % (20,733) (35.6) %
Disposal of businesses (19,376) (6.2) % (16,420) (6.5) % (2,956) (5.1) %
Currency effect compared to the prior period $ 11,982 3.8 % $ 10,873 4.3 % 1,109 1.9 %
Six Months Ended March 31, 2026 $ 280,267 (10.0) % $ 244,616 (3.3) % $ 35,651 (38.8) %
The organic decline in this segment relates to lower volumes on a number of our contracts.
The divestiture of our businesses in Australia and Korea occurred in December 2024.
The effects of the organic decline and the divestiture were partially offset by the strengthening of the British Pound against the U.S. Dollar.
Following the divestitures in both fiscal years 2024 and 2025, we have taken the opportunity to expand our business development initiatives. We are tracking a number of opportunities, with the aim of driving growth and margin improvement in this segment. For fiscal year 2026, we anticipate a breakeven operating margin.
Liquidity and Capital Resources
Our primary sources of liquidity are cash on hand, cash from operations, our $750 million revolving credit facility, and our $350 million Receivables Purchase Agreement (RPA). As of March 31, 2026, we had $157.5 million in cash and cash equivalents. We believe that our current cash position, access to our debt facilities, and cash flow generated from operations should be sufficient for our operating requirements and should enable us to fund required long-term debt repayments, dividends, and any share repurchases we might choose to make. See "Note 7. Debt and Derivatives" to the Consolidated Financial Statements for a more detailed discussion of our debt financing arrangements.
We have included the following table showing our debt balances as of March 31, 2026, and their effective interest rates.
Table MD&A 12: Debt Balances and Interest Rates as of March 31, 2026
March 31, 2026
Carrying value Effective cash interest rate Interest rate basis
(dollars in thousands)
Term Loan A - Hedged through May 2026 $ 500,000 3.68 % Fixed rate of 2.31% plus margin. (1)
Term Loan A - Unhedged 330,625 5.04 % Term SOFR reset monthly plus margin. (1)
Term Loan B - Hedged through September 2026 75,000 5.72 % Fixed Rate of 3.72% plus 2% margin.
Term Loan B - Hedged through September 2027 75,000 5.62 % Fixed Rate of 3.62% plus 2% margin.
Term Loan B - Unhedged 341,250 5.67 % Term SOFR reset monthly plus 2% margin.
Revolver 225,000 5.05 % Term SOFR reset monthly plus margin. (1)
Debt Principal $ 1,546,875
(1) The applicable margin for Term Loan A ranges from 1% to 2%, depending on our leverage ratio as determined based on our most recently filed financial statements. As of March 31, 2026, the applicable margin was 1.375%.
Our effective interest rate reflects the drivers of our cash interest payments as of March 31, 2026, which can change based upon the reset of the rates. Including the amortization of the upfront payments, our effective interest rate as of March 31, 2026, was 5.0%.
The table below summarizes our change in cash, cash equivalents, and restricted cash.
Table MD&A 13: Net Change in Cash and Cash Equivalents and Restricted Cash
For the Six Months Ended
March 31, 2026 March 31, 2025
(in thousands)
Operating activities:
Net cash used in operating activities $ (54,876) $ (37,282)
Net cash used in investing activities (3,877) (41,627)
Net cash provided by financing activities 43,623 677
Effect of foreign exchange rates on cash and cash equivalents and restricted cash (632) (1,593)
Net change in cash and cash equivalents and restricted cash $ (15,762) $ (79,825)
Net Cash Used in Operating Activities
We reported net cash used in operations of $54.9 million for the first six months of fiscal year 2026, compared to $37.3 million for the first six months of fiscal year 2025. We continue to experience administrative delays on payments from one of our large contracts with the U.S. federal government. We anticipate that our cash flows will improve in the second half of fiscal year 2026.
These short-term delays in collections are reflected in Days Sales Outstanding ("DSO") at March 31, 2026, which were 78 days, compared with 62 days at September 30, 2025. Excluding the effects of the RPA, DSO would have been 102 days and 73 days, respectively.
Net Cash Used in Investing Activities
We reported net cash used in investing activities of $3.9 million for the first six months of fiscal year 2026, compared to net cash used in investing activities of $41.6 million for the first six months of fiscal year 2025.
In fiscal year 2025, we made significant investments in our capital base, most notably in updating technology on our Federal MDE contracts. Much of this update was completed in the third quarter of that year.
Our cash flows in fiscal year 2026 include the cash received from the sale of our child support business within the United States. The final purchase price will be calculated based upon a working capital calculation, which should be concluded during the third fiscal quarter of this year.
Net Cash Provided by Financing Activities
We reported net cash provided by financing activities of $43.6 million for the first six months of fiscal year 2026, compared to $0.7 million for the first six months of fiscal year 2025.
We have utilized our credit facilities in both years to cover the short-term delays in collections noted above. In addition, we have utilized $155.0 million and $306.4 million, in fiscal years 2026 and 2025, respectively, to purchase our common shares. We have certain contracts where we hold cash on behalf of our customers. We show these funds as restricted cash and include their movement within financing cash flows. During the current fiscal year, the customer under a single large contract has increased their volume of work with us, resulting in significant growth in this balance. The restricted cash asset is offset by a current liability.
Credit Facilities
Our principal debt agreement is with JPMorgan Chase Bank N.A. (the "Credit Agreement"). At March 31, 2026, we owed $1.55 billion under the Credit Agreement, with access to approximately $525.0 million through a revolving credit facility. Mandatory repayments are required under this agreement through May 2031, when the agreement ends, and must be renegotiated or the funds repaid.
The Credit Agreement contains a number of covenants. Failure to meet these requirements would result in a need to renegotiate the agreement, seek a waiver, or a requirement to repay our outstanding debt in full. There are two financial covenants, both defined in the Credit Agreement:
•Our Consolidated Net Total Leverage Ratio means, for any twelve-month period, the ratio of our Funded Debt (as defined by the Credit Agreement), offset by up to $150 million of unrestricted cash (Consolidated Net Total Leverage), against our Consolidated EBITDA (as defined by the Credit Agreement). To comply with our Credit Agreement, this ratio cannot exceed 4.00:1.00 at the end of each quarter, with a step up to 4.50:1.00 under certain circumstances. This ratio also determines both our interest rate and the charge we pay on the unused component of our revolving credit facility, with the charge increasing as the Consolidated Net Total Leverage Ratio increases.
•Our Consolidated Net Interest Coverage Ratio means, for any twelve-month period, the ratio of our Consolidated EBITDA against our Consolidated Net Interest Expense, as defined by the Credit Agreement. To comply with our Credit Agreement, this ratio cannot be less than 3.00:1.00 at the end of each quarter.
Consolidated EBITDA also drives certain permissions within the Credit Agreement, such as the level of investment we are entitled to make without seeking additional approval from our lenders.
Our Credit Agreement defines Consolidated EBITDA, as well as other components of the calculations above. The definition of Consolidated EBITDA requires us to include adjustments not typically included within EBITDA, including unusual, non-recurring expenses, certain non-cash adjustments, the pro forma effects of acquisitions and disposals, and estimated synergies from acquisitions. As a result, Consolidated EBITDA as defined by the Credit Agreement may not be comparable to EBITDA or related or similarly titled measures presented by other companies.
We have summarized below the components of our two financial ratio calculations, including the components of Consolidated EBITDA as defined by the Credit Agreement which are included within our financial statements. At March 31, 2026, we were in compliance with all applicable covenants of our Credit Agreement. We do not believe that these covenants represent a significant restriction on our ability to operate our business or to pay our dividends.
Table MD&A 14: Reconciliation of Net Income to Consolidated EBITDA as defined by our Credit Agreement
For the Three Months Ended For the Trailing Twelve
Months Ended
March 31, 2026 March 31, 2026
(in thousands)
Net income $ 98,063 $ 373,275
Adjustments:
Interest expense 22,111 88,016
Other (income)/expense, net (158) (1,019)
Provision for income taxes 28,471 122,960
Amortization of intangibles 20,298 86,614
Stock compensation expense 9,899 38,526
Capitalized software impairment charges 6,914 6,914
Divestiture-related (gains)/charges, net - (8,779)
Depreciation and amortization of property, equipment, and capitalized software 12,328 48,991
Pro forma and other adjustments permitted by our Credit Agreement 4,573 40,877
Consolidated EBITDA (as defined by our Credit Agreement) $ 202,499 $ 796,375
Table MD&A 15: Consolidated Net Total Leverage Ratio
For the Trailing Twelve
Months Ended
March 31, 2026
(in thousands, except ratio data)
Funded Debt (as defined by our Credit Agreement) $ 1,546,875
Cash and cash equivalents up to $150 million 150,000
Consolidated Net Total Leverage (as defined by our Credit Agreement) $ 1,396,875
Consolidated Net Total Leverage Ratio (as defined by our Credit Agreement) 1.75
Table MD&A 16: Consolidated Net Interest Coverage Ratio
For the Trailing Twelve
Months Ended
March 31, 2026
(in thousands, except ratio data)
Consolidated EBITDA (as defined by our Credit Agreement) $ 796,375
Interest expense 88,016
Components of other income/expense, net allowed in ratio calculation 2,091
Consolidated Net Interest Expense (as defined by our Credit Agreement) $ 90,107
Consolidated Net Interest Coverage Ratio (as defined by our Credit Agreement) 8.84
Cash in Foreign Locations
We have no requirement to remit funds from our foreign locations to the United States. We will continue to explore opportunities to remit additional funds, taking into consideration the working capital requirements and relevant tax rules in each jurisdiction. When we are unable to remit funds back without incurring a penalty, we will consider these funds indefinitely reinvested until such time as these restrictions are changed. As a result, we do not record U.S. deferred income taxes on any funds held in foreign jurisdictions. We have not attempted to calculate our potential liability from any transfer of these funds, as any such transaction might include tax planning strategies that we have not fully explored. Accordingly, it is not possible to estimate the potential tax obligations if we were to remit all of our funds from foreign locations to the United States.
Free Cash Flow (Non-GAAP)
Table MD&A 17: Free Cash Flow (Non-GAAP)
For the Six Months Ended
March 31, 2026 March 31, 2025
(in thousands)
Net cash used in operating activities $ (54,876) (37,282)
Purchases of property and equipment and capitalized software (16,772) (40,198)
Free cash flow (Non-GAAP) $ (71,648) $ (77,480)
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires us to make estimates, judgments, and assumptions that affect the amounts reported. Actual results could differ from those estimates. Our Annual Report on Form 10-K, filed with the SEC on November 20, 2025, includes a summary of critical accounting policies we believe are the most important to aid in understanding our financial results. There have been no changes to those critical accounting policies that have had a material impact on our reported amounts of assets, liabilities, revenues, or expenses during the six months ended March 31, 2026.
Non-GAAP and Other Measures
We utilize non-GAAP measures where we believe it will assist users of our financial statements in understanding our business. The presentation of these measures is meant to complement, but not replace, other financial measures in this document. The presentation of non-GAAP numbers is not meant to be considered in isolation, nor as an alternative to revenue growth, net cash used in operating activities, operating income, net income, or earnings per share as measures of performance or liquidity. These non-GAAP measures, as determined and presented by us, may not be comparable to related or similarly titled measures presented by other companies.
For the three months ended March 31, 2026, 10% of our revenue was generated outside the U.S. We believe that users of our financial statements want to understand the performance of our foreign operations using a methodology that excludes the effect of year-over-year exchange rate fluctuations. To calculate year-over-year currency movement, we determine the current fiscal year's results for all foreign businesses using the exchange rates in the prior fiscal year.
From time to time, we enter into acquisitions and divestitures. We believe users of our financial statements want to evaluate the performance of our operations, excluding changes that have arisen due to businesses acquired or disposed of. We identify acquired revenue and cost of revenue by showing these results for periods for which no comparative results exist within our financial statements. We identify revenue and cost of revenue that 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 previous acquisitions have resulted in significant intangible assets, which are amortized over their estimated useful lives. We believe users of our financial statements want to understand the performance of the business by using a methodology that excludes the amortization of our intangible assets. For the six months ended March 31, 2026 and 2025, we also incurred gains and losses on sales of businesses. We believe that providing supplemental measures that exclude the impact of the items detailed below is useful to investors in evaluating our core operations and results in relation to past periods. Accordingly, we have calculated our net income and diluted earnings per share, excluding the effects of the amortization of intangible assets and divestiture-related gains and charges. Although these measures exclude the amortization of intangible assets acquired as part of our acquisitions, they do include the post-acquisition revenue from
the acquired businesses. In addition, Adjusted EBITDA, as calculated by us, is also a useful measure of performance that focuses on the cash generating capacity of the business as it excludes the non-cash expenses of depreciation and amortization of property, equipment, and capitalized software, amortization of intangible assets, capitalized software impairment charges, and divestiture-related activity. We believe that these non-GAAP measures assist investors in making comparisons between the operating performance of companies with different capital structures by excluding interest expense and therefore, the impacts of financing costs. Although Adjusted EBITDA excludes the amortization of intangible assets acquired as part of our acquisitions, it does include the post-acquisition revenue from the acquired businesses. As disclosed above, Adjusted EBITDA is calculated in a different manner from Consolidated EBITDA, as defined by our Credit Agreement.
We have included a table showing our reconciliation of these income measures to their corresponding GAAP measures.
Table MD&A 18: Non-GAAP Adjusted Results - Adjusted EBITDA, Adjusted Net Income, and Adjusted Diluted Earnings per Share
For the Three Months Ended For the Six Months Ended
March 31, 2026 March 31, 2025 March 31, 2026 March 31, 2025
(dollars in thousands, except per share data)
Net income $ 98,063 $ 96,569 $ 192,006 $ 137,765
Provision for income taxes 28,471 35,893 60,795 63,650
Interest expense 22,111 21,469 42,927 38,991
Other (income)/expense, net (158) (963) (1,031) (651)
Amortization of intangible assets 20,298 22,996 40,598 46,031
Divestiture-related charges/(gains) - 1,002 (8,985) 39,343
Depreciation and amortization of property, equipment, and capitalized software 12,328 9,440 25,217 17,895
Capitalized software impairment charges 6,914 - 6,914 -
Adjusted EBITDA (Non-GAAP) $ 188,027 $ 186,406 $ 358,441 $ 343,024
Net income margin (GAAP)* 7.5 % 7.1 % 7.2 % 5.0 %
Adjusted EBITDA margin (Non-GAAP)* 14.4 % 13.7 % 13.5 % 12.4 %
* Margins are calculated as a percentage of revenue
Net income $ 98,063 $ 96,569 $ 192,006 $ 137,765
Add back: Amortization of intangible assets, net of tax 14,960 16,948 29,921 33,925
Add back: Divestiture-related charges/(gains), net of tax - 1,002 (6,622) 39,343
Adjusted net income excluding amortization of intangible assets and divestiture-related adjustments (Non-GAAP) $ 113,023 $ 114,519 $ 215,305 $ 211,033
Diluted earnings per share $ 1.80 $ 1.69 $ 3.50 $ 2.35
Add back: Effect of amortization of intangible assets on diluted earnings per share 0.27 0.30 0.54 0.58
Add back: Effect of divestiture-related charges/(gains) on diluted earnings per share - 0.02 (0.12) 0.67
Adjusted diluted earnings per share excluding amortization of intangible assets and divestiture-related adjustments (Non-GAAP) $ 2.07 $ 2.01 $ 3.92 $ 3.60
In order to sustain our cash flows from operations, we regularly refresh our fixed assets and technology. We believe that users of our financial statements want to understand the cash flows that directly correspond with our operations and the investments we must make in those operations using a methodology that combines operating cash flows and capital expenditures. We provide free cash flow to complement our statement of cash flows. Free cash flow shows the effects of our operations and replacement capital expenditures and excludes the cash flow effects of acquisitions, purchases of our common stock, dividend payments, and other financing transactions. We have provided a reconciliation of cash flows from operations to free cash flow in "Liquidity and Capital Resources."
To sustain our operations, our principal source of financing comes from receiving payments from our customers. We believe that users of our financial statements want to evaluate our efficiency in converting revenue into cash receipts. Accordingly, we provide DSO, which we calculate by dividing billed and unbilled receivable balances at the end of each quarter by revenue per day for the quarter. Revenue per day for a quarter is determined by dividing total revenue by 91 days.
Maximus Inc. published this content on May 07, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on May 07, 2026 at 15:36 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]