# MAXIMUS, INC. (MMS)

Informational only - not investment advice.

CIK: 0001032220
SIC: 7389 Services-Business Services, NEC
SIC breadcrumb: [Services](/division/I/) > [Business Services](/major-group/73/) > [SIC 7389 Services-Business Services, NEC](/industry/7389/)
Latest 10-K filed: 2025-11-20
SEC page: https://www.sec.gov/edgar/browse/?CIK=1032220
Filing source: https://www.sec.gov/Archives/edgar/data/1032220/000103222025000053/mms-20250930.htm

## Selected Fundamentals
| Metric | Value | Unit | FY | Filed |
| --- | ---: | --- | ---: | --- |
| Revenue | 5431276000 | USD | 2025 | 2025-11-20 |
| Net income | 319034000 | USD | 2025 | 2025-11-20 |
| Assets | 4069639000 | USD | 2025 | 2025-11-20 |

## Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2025-11-20. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001032220.json. Derived margins are computed from the extracted annual SEC facts.

| Metric | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Revenue |  |  | 2,450,961,000 | 2,392,236,000 | 2,886,815,000 | 3,461,537,000 | 4,254,485,000 | 4,631,018,000 | 4,904,728,000 | 5,306,197,000 | 5,431,276,000 |
| Net income |  | 178,362,000 | 209,426,000 | 220,751,000 | 240,824,000 | 214,509,000 | 291,200,000 | 203,828,000 | 161,792,000 | 306,914,000 | 319,034,000 |
| Operating income |  | 286,603,000 | 313,512,000 | 295,483,000 | 317,107,000 | 288,278,000 | 408,530,000 | 325,898,000 | 294,794,000 | 488,499,000 | 528,289,000 |
| Gross profit |  | 562,191,000 | 611,905,000 | 594,385,000 | 671,184,000 | 711,002,000 | 946,975,000 | 939,810,000 | 1,028,608,000 | 1,251,652,000 | 1,333,443,000 |
| Diluted EPS |  | 2.69 | 3.17 | 3.35 | 3.72 | 3.39 | 4.67 | 3.29 | 2.63 | 4.99 | 5.51 |
| Assets |  | 1,348,819,000 | 1,350,662,000 | 1,462,000,000 | 1,745,732,000 | 2,024,702,000 | 4,118,965,000 | 3,992,714,000 | 3,985,797,000 | 4,131,508,000 | 4,069,639,000 |
| Liabilities |  | 595,679,000 | 404,894,000 | 375,581,000 | 497,531,000 | 782,883,000 | 2,638,636,000 | 2,443,343,000 | 2,317,962,000 | 2,288,693,000 | 2,395,604,000 |
| Stockholders' equity | 612,378,000 | 749,081,000 | 940,085,000 | 1,083,867,000 | 1,247,792,000 | 1,241,819,000 |  | 1,549,371,000 | 1,667,835,000 | 1,842,815,000 | 1,674,035,000 |
| Cash and cash equivalents |  | 66,199,000 | 166,252,000 | 349,245,000 | 105,565,000 | 71,737,000 | 135,061,000 | 40,658,000 | 65,405,000 | 183,123,000 | 222,351,000 |
| Net margin |  |  | 8.54% | 9.23% | 8.34% | 6.20% | 6.84% | 4.40% | 3.30% | 5.78% | 5.87% |
| Operating margin |  |  | 12.79% | 12.35% | 10.98% | 8.33% | 9.60% | 7.04% | 6.01% | 9.21% | 9.73% |

## Quarterly

Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-05-07. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001032220.json.

Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived.

| Quarter | End date | Revenue | Net income | Diluted EPS | Method |
| --- | --- | ---: | ---: | ---: | --- |
| 2022-Q3 | 2022-06-30 |  |  | 0.51 | reported discrete quarter |
| 2023-Q1 | 2022-12-31 |  |  | 0.65 | reported discrete quarter |
| 2023-Q3 | 2023-03-31 |  | 31,788,000 |  | reported discrete quarter |
| 2023-Q2 | 2023-03-31 |  |  | 0.52 | reported discrete quarter |
| 2023-Q3 | 2023-06-30 | 1,188,677,000 |  | 0.50 | reported discrete quarter |
| 2023-Q4 | 2023-09-30 | 1,259,953,000 | 59,146,000 |  | derived Q4 = FY annual - nine-month YTD |
| 2024-Q1 | 2023-12-31 | 1,327,041,000 | 64,148,000 | 1.04 | reported discrete quarter |
| 2024-Q2 | 2023-12-31 |  | 64,148,000 |  | reported discrete quarter |
| 2024-Q3 | 2024-03-31 |  | 80,510,000 |  | reported discrete quarter |
| 2024-Q2 | 2024-03-31 | 1,348,357,000 |  | 1.31 | reported discrete quarter |
| 2024-Q3 | 2024-06-30 | 1,314,929,000 |  | 1.46 | reported discrete quarter |
| 2024-Q4 | 2024-09-30 | 1,315,870,000 | 72,504,000 |  | derived Q4 = FY annual - nine-month YTD |
| 2025-Q1 | 2024-12-31 | 1,402,675,000 | 41,196,000 | 0.69 | reported discrete quarter |
| 2025-Q2 | 2024-12-31 |  | 41,196,000 |  | reported discrete quarter |
| 2025-Q2 | 2025-03-31 | 1,361,786,000 |  | 1.69 | reported discrete quarter |
| 2025-Q3 | 2025-03-31 |  | 96,569,000 |  | reported discrete quarter |
| 2025-Q3 | 2025-06-30 | 1,348,400,000 |  | 1.86 | reported discrete quarter |
| 2025-Q4 | 2025-09-30 | 1,318,415,000 | 75,288,000 |  | derived Q4 = FY annual - nine-month YTD |
| 2026-Q2 | 2025-12-31 |  | 93,943,000 |  | reported discrete quarter |
| 2026-Q1 | 2025-12-31 | 1,345,046,000 | 93,943,000 | 1.70 | reported discrete quarter |
| 2026-Q2 | 2026-03-31 | 1,305,967,000 |  | 1.80 | reported discrete quarter |

## Macro Cross-References
- [CPIAUCSL](/indicator/CPIAUCSL/): Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
- [UNRATE](/indicator/UNRATE/): Unemployment Rate
- [FEDFUNDS](/indicator/FEDFUNDS/): Federal Funds Effective Rate
- [CES0500000003](/indicator/CES0500000003/): Average Hourly Earnings of All Employees, Total Private
- [DFEDTARU](/indicator/DFEDTARU/): Federal Funds Target Range - Upper Limit
- [DFEDTARL](/indicator/DFEDTARL/): Federal Funds Target Range - Lower Limit
- [DGS3MO](/indicator/DGS3MO/): Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
- [DGS2](/indicator/DGS2/): Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
- [DGS10](/indicator/DGS10/): Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
- [DGS30](/indicator/DGS30/): Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
- [T10Y2Y](/indicator/T10Y2Y/): 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
- [CPILFESL](/indicator/CPILFESL/): Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
- [CPIUFDSL](/indicator/CPIUFDSL/): Consumer Price Index for All Urban Consumers: Food
- [CPIENGSL](/indicator/CPIENGSL/): Consumer Price Index for All Urban Consumers: Energy
- [CUSR0000SAH1](/indicator/CUSR0000SAH1/): Consumer Price Index for All Urban Consumers: Shelter
- [PCEPI](/indicator/PCEPI/): Personal Consumption Expenditures: Chain-type Price Index
- [PCEPILFE](/indicator/PCEPILFE/): Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
- [PPIACO](/indicator/PPIACO/): Producer Price Index by Commodity: All Commodities
- [T10YIE](/indicator/T10YIE/): 10-Year Breakeven Inflation Rate
- [U6RATE](/indicator/U6RATE/): Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
- [PAYEMS](/indicator/PAYEMS/): All Employees, Total Nonfarm
- [CIVPART](/indicator/CIVPART/): Labor Force Participation Rate
- [EMRATIO](/indicator/EMRATIO/): Employment-Population Ratio
- [UNEMPLOY](/indicator/UNEMPLOY/): Unemployed
- [CE16OV](/indicator/CE16OV/): Employment Level
- [ICSA](/indicator/ICSA/): Initial Claims
- [JTSJOL](/indicator/JTSJOL/): Job Openings: Total Nonfarm
- [JTSQUR](/indicator/JTSQUR/): Quits: Total Nonfarm
- [GDPC1](/indicator/GDPC1/): Real Gross Domestic Product
- [A191RL1Q225SBEA](/indicator/A191RL1Q225SBEA/): Real Gross Domestic Product: Percent Change from Preceding Period
- [INDPRO](/indicator/INDPRO/): Industrial Production: Total Index
- [TCU](/indicator/TCU/): Capacity Utilization: Total Index
- [HOUST](/indicator/HOUST/): New Privately-Owned Housing Units Started: Total Units
- [PERMIT](/indicator/PERMIT/): New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
- [RSAFS](/indicator/RSAFS/): Advance Retail Sales: Retail Trade
- [PCE](/indicator/PCE/): Personal Consumption Expenditures
- [DSPIC96](/indicator/DSPIC96/): Real Disposable Personal Income
- [PSAVERT](/indicator/PSAVERT/): Personal Saving Rate
- [M2SL](/indicator/M2SL/): M2
- [BOPGSTB](/indicator/BOPGSTB/): U.S. International Trade in Goods and Services: Balance
- [MSPUS](/indicator/MSPUS/): Median Sales Price of Houses Sold for the United States
- [HSN1F](/indicator/HSN1F/): New One Family Houses Sold: United States
- [RHORUSQ156N](/indicator/RHORUSQ156N/): Homeownership Rate in the United States
- [TTLCONS](/indicator/TTLCONS/): Total Construction Spending: Total Construction in the United States
- [RRVRUSQ156N](/indicator/RRVRUSQ156N/): Rental Vacancy Rate in the United States
- [TOTALSL](/indicator/TOTALSL/): Total Consumer Credit Owned and Securitized
- [REVOLSL](/indicator/REVOLSL/): Revolving Consumer Credit Owned and Securitized
- [DRCCLACBS](/indicator/DRCCLACBS/): Delinquency Rate on Credit Card Loans, All Commercial Banks
- [GDP](/indicator/GDP/): Gross Domestic Product
- [GPDI](/indicator/GPDI/): Gross Private Domestic Investment
- [GCE](/indicator/GCE/): Government Consumption Expenditures and Gross Investment
- [PCEC](/indicator/PCEC/): Personal Consumption Expenditures
- [NETEXP](/indicator/NETEXP/): Net Exports of Goods and Services
- [GFDEBTN](/indicator/GFDEBTN/): Federal Debt: Total Public Debt
- [GFDEGDQ188S](/indicator/GFDEGDQ188S/): Federal Debt: Total Public Debt as Percent of Gross Domestic Product
- [FYFSD](/indicator/FYFSD/): Federal Surplus or Deficit
- [FGRECPT](/indicator/FGRECPT/): Federal Government Current Receipts
- [FGEXPND](/indicator/FGEXPND/): Federal Government: Current Expenditures
- [MANEMP](/indicator/MANEMP/): All Employees, Manufacturing
- [USCONS](/indicator/USCONS/): All Employees, Construction
- [USTRADE](/indicator/USTRADE/): All Employees, Retail Trade
- [USFIRE](/indicator/USFIRE/): All Employees, Financial Activities
- [USGOVT](/indicator/USGOVT/): All Employees, Government
- [AWHAETP](/indicator/AWHAETP/): Average Weekly Hours of All Employees, Total Private
- [DGORDER](/indicator/DGORDER/): Manufacturers' New Orders: Durable Goods
- [NEWORDER](/indicator/NEWORDER/): Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
- [BUSINV](/indicator/BUSINV/): Total Business Inventories
- [EXPGS](/indicator/EXPGS/): Exports of Goods and Services
- [IMPGS](/indicator/IMPGS/): Imports of Goods and Services
- [IR](/indicator/IR/): Import Price Index (End Use): All Commodities
- [PPIFIS](/indicator/PPIFIS/): Producer Price Index by Commodity: Final Demand

## Latest quarter (10-Q)

Latest 10-Q source: https://www.sec.gov/Archives/edgar/data/1032220/000103222026000027/mms-20260331.htm

Extracted between Part I Item 2 and the next Item 3/4 or Part II heading after HTML sanitization.
Confidence: high
Filing date: 2026-05-07
Report date: 2026-03-31

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

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

Business Overview

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

We create value for our customers 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.

24

Table of Contents

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 

 %

25

Table of Contents

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%.

26

Table of Contents

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%.

27

Table of Contents

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, 20

[Excerpt truncated for page length; source filing is linked above.]

## Latest 10-K MD&A

Extracted between Item 7 and the next Item 7A/8 heading after HTML sanitization.
Confidence: high

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

This Management's Discussion and Analysis of Financial Condition and Results of Operations should be read together with our audited consolidated financial statements and the related notes thereto for the fiscal years ended September 30, 2025, 2024, and 2023, included in Item 8. Financial Statements and Supplementary Data.

The discussion below contains management's comments on our business strategy and outlook, and such discussions contain forward-looking statements. These forward-looking statements reflect the expectations, beliefs, plans, and objectives of management about future financial performance and assumptions underlying management's judgment concerning the matters discussed, and accordingly involve estimates, assumptions, judgments, and uncertainties. Our actual results could differ materially from those discussed in the forward-looking statements, and the discussion below is not necessarily indicative of future results. Factors that could cause or contribute to any differences include, but are not limited to, those discussed below and elsewhere in this Annual Report on Form 10-K, particularly in "Item 1A. Risk Factors" and in "Special Note Regarding Forward-Looking Statements."

A discussion of our results of operations, backlog, and liquidity and capital resources for fiscal year September 30, 2024, including comparisons to fiscal year 2023, can be found in last year's Annual Report on Form 10-K.

Business Overview

For an overview of our business, including our business segments and discussion of the services we provide, see Item 1. Business of this Annual Report on Form 10-K.

Financial Overview

A number of factors have affected our fiscal year 2025 results, the most significant of which we have listed below. More detail on these changes is presented below within our "Results of Operations" section.

•Our business has grown organically, mostly from the expansion of our U.S. Federal Services Segment.

•During the first quarter of fiscal year 2025, we sold our businesses in Australia and Korea. This sale resulted in a loss and increased our full-year tax rate. However, this sale, and similar sales made in fiscal year 2024, have streamlined our international businesses and resulted in improved results in our Outside the U.S. Segment.

•Our operating cash flows remain strong and our overall leverage is relatively low, allowing us to make significant purchases of our own common stock.

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Results of Operations

The following table sets forth, for the fiscal years indicated, information derived from our statements of operations. In preparing our discussion and analysis of these results, we focused on the comparison between fiscal years 2025 and 2024.

Table MD&A 1: Consolidated Results of Operations

For the Year Ended September 30,

2025

2024

(dollars in thousands, except per share data)

Revenue

$

5,431,276 

$

5,306,197 

Cost of revenue

4,097,833 

4,054,545 

Gross profit

1,333,443 

1,251,652 

Gross profit percentage

24.6 %

23.6 %

Selling, general, and administrative expenses

713,107 

671,583 

Selling, general, and administrative expenses as a percentage of revenue

13.1 %

12.7 %

Amortization of intangible assets

92,047 

91,570 

Operating income

528,289 

488,499 

Operating margin

9.7 %

9.2 %

Interest expense

84,080 

82,440 

Other (income)/expense, net

(640)

(450)

Income before income taxes

444,849 

406,509 

Provision for income taxes

125,815 

99,595 

Effective tax rate

28.3 %

24.5 %

Net income

$

319,034 

$

306,914 

Earnings per share:

Basic

$

5.56 

$

5.03 

Diluted

$

5.51 

$

4.99 

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 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 Year Ended September 30, 2025

Revenue

Cost of Revenue

Gross Profit

Dollars

% Change

Dollars

% Change

Dollars

% Change

(dollars in thousands)

Fiscal year 2024

$

5,306,197 

$

4,054,545 

$

1,251,652 

Organic growth

208,961 

3.9 

 %

119,480 

2.9 

 %

89,481 

7.1 

 %

Disposal of businesses

(95,186)

(1.8)

 %

(86,059)

(2.1)

 %

(9,127)

(0.7)

 %

Currency effect compared to the prior period

11,304 

0.2 

 %

9,867 

0.2 

 %

1,437 

0.1 

 %

Fiscal year 2025

$

5,431,276 

2.4 

 %

$

4,097,833 

1.1 

 %

$

1,333,443 

6.5 

 %

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Selling, general, and administrative (SG&A) expenses

Our 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. 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 expenses for fiscal year 2025 include a charge of $39.5 million related to the sale of certain of our businesses in our 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. Absent this charge, SG&A was broadly consistent with fiscal year 2024.

Interest expense

Our interest expense is principally driven by our debt facility in the United States. During fiscal year 2025, delays in payments from customers resulted in additional borrowings under our revolving credit facility, resulting in higher borrowings than in the prior year. This additional cost was partially offset by lower interest rates.

Our effective interest rate was 5.37% at September 30, 2025, compared to 5.52% at September 30, 2024. We have mitigated our risk by fixing interest rates on approximately half of our debt and our near-term capital allocation plan continues to prioritize reducing our debt using our free cash flow. At our current debt balances, a 100 basis point increase in the Secured Overnight Financing Rate (SOFR) would result in an increased annual interest expense of $7.0 million.

Income taxes

Our effective income tax rate for the fiscal years ended September 30, 2025 and 2024, was 28.3% and 24.5%, respectively. Our fiscal year 2025 tax rate was negatively affected by the disposal of our businesses in Australia and Korea.

For fiscal year 2026, we expect the effective tax rate to be between 25.0% and 26.0%. On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed in the United States. We do not believe the OBBBA will have a significant effect on our fiscal year 2026 tax rate but we anticipate that it could have a favorable cash flow impact in fiscal year 2026.

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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 3: U.S. Federal Services Segment - Financial Results

For the Year Ended September 30,

2025

2024

(dollars in thousands)

Revenue

$

3,067,691 

$

2,737,244 

Cost of revenue

2,256,928 

2,071,482 

Gross profit

810,763 

665,762 

Selling, general, and administrative expenses

341,608 

332,140 

Operating income

469,155 

333,622 

Gross profit percentage

26.4 

 %

24.3 

 %

Operating margin percentage

15.3 

 %

12.2 

 %

Our revenue and cost of revenue for the fiscal year ended September 30, 2025, increased 12.1% and 9.0%, respectively, compared to the fiscal year ended September 30, 2024. All movement was organic.

Our revenue growth was driven by our clinical programs, including medical assessments, as well as from support provided to the Federal Emergency Management Agency (FEMA). We have long-standing arrangements with FEMA to provide short-term assistance for natural disasters, the extent and timing of which are difficult to predict.

Our medical assessment revenue benefitted from increased volumes, including those driven by the Honoring our Pact Act, which had necessitated a contract rebid to expand the scale of these arrangements, as well as volume increases from underlying assessment demands. Improvements in performance also reduced our share of penalties incurred, benefitting our profit margin.

Our margins received a benefit from the implementation of technology initiatives, which increased the productivity of our operations.

We anticipate operating margins for the U.S. Federal Services Segment in fiscal year 2026 to range between 15.5% and 16%.

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U.S. Services Segment

Our U.S. Services Segment provides a variety of services, such as program operations, clinical services, employment services and 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, Temporary Assistance to Needy Families (TANF), and child support programs.

Table MD&A 4: U.S. Services Segment - Financial Results

For the Year Ended September 30,

2025

2024

(dollars in thousands)

Revenue

$

1,763,691 

$

1,911,813 

Cost of revenue

1,352,709 

1,432,026 

Gross profit

410,982 

479,787 

Selling, general, and administrative expenses

239,718 

232,805 

Operating income

171,264 

246,982 

Gross profit percentage

23.3 

 %

25.1 

 %

Operating margin percentage

9.7 

 %

12.9 

 %

Our revenue and cost of revenue for the year ended September 30, 2025, decreased 7.7% and 5.5%, respectively. All movement was organic.

Our fiscal year 2024 results received the benefit of higher volumes as Medicaid redetermination activities continued, resulting in benefits to our revenue and profit margins. As anticipated, our results have returned to a steady state with the conclusion of this additional work.

The OBBBA, signed into law in 2025, requires changes to the manner and funding of some of our state-based programs. Although these changes are not anticipated in fiscal year 2026, states may make changes to programs in anticipation of these changes. The nature, extent and timing of these changes is still uncertain.

We anticipate operating margins for the U.S. Services Segment in fiscal year 2026 to range between 10% and 11%.

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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 United Kingdom, 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 5: Outside the U.S. Segment - Financial Results

For the Year Ended September 30,

2025

2024

(dollars in thousands)

Revenue

$

599,894 

$

657,140 

Cost of revenue

488,196 

551,037 

Gross profit

111,698 

106,103 

Selling, general, and administrative expenses

89,307 

98,398 

Operating income

22,391 

7,705 

Gross profit percentage

18.6 

 %

16.1 

 %

Operating margin percentage

3.7 

 %

1.2 

 %

Table MD&A 6: 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)

Balance for fiscal year 2024

$

657,140 

$

551,037 

$

106,103 

Organic effect

26,636 

4.1 

 %

13,351 

2.4 

 %

13,285 

12.5 

 %

Disposal of businesses

(95,186)

(14.5)

 %

(86,059)

(15.6)

 %

(9,127)

(8.6)

 %

Currency effect compared to the prior period

11,304 

1.7 

%

9,867 

1.8 

%

1,437 

1.4 

%

Balance for fiscal year 2025

$

599,894 

(8.7)

 %

$

488,196 

(11.4)

 %

$

111,698 

5.3 

 %

We have divested a number of businesses from this segment across fiscal years 2024 and 2025. In December 2024, we completed the sale of our operations in Australia and Korea. These divestitures resulted in reduced revenues and profits, but provided a significant benefit to our segment operating margin.

Organic growth within the segment came from across the portfolio, including the FAS contract and other volume-based arrangements.

We anticipate operating margins for the Outside the U.S. Segment in fiscal year 2026 to range between 3% to 5%.

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Backlog

Backlog represents estimated future revenue from:

•existing signed contracts;

•contracts that have been awarded but not yet signed; and

•unexercised priced contract options.

As of September 30, 2025, we estimate that we had approximately $15.3 billion in backlog.

Table MD&A 7: Backlog by Segment

As of September 30,

2025

2024

(in millions)

U.S. Federal Services

$

9,780 

$

10,286 

U.S. Services

3,916 

3,867 

Outside the U.S.

1,631 

2,014 

Backlog

$

15,327 

$

16,167 

At September 30, 2025, the average weighted remaining life of the contracts in our backlog was approximately 5.0 years, including option periods.

Increases in backlog result from the award of new contracts and the extension or renewal of existing contracts. Reductions in backlog come from fulfilling contracts or the early termination of contracts, which our experience shows to be a rare occurrence. The backlog associated with our performance-based contracts is an estimate based upon management's experience of caseloads and similar transaction volume, which is subject to revision based upon the latest information available. Additionally, backlog estimates may be affected by foreign currency fluctuations. For further discussion of the risks related to our backlog, see "Risk Factors" in Item 1A of this Annual Report on Form 10-K, notably "We may not be able to realize the full value of our backlog."

We believe that it is difficult to predict with certainty future revenue solely based on an analysis of backlog or period-to-period comparisons. The actual timing of revenue from projects included in backlog will vary. We also may experience periods in which there is a greater concentration of rebids, resulting in a comparatively reduced backlog balance until subsequent award or extension on those contracts.

The longevity of these contracts assists management in predicting revenue, operating income, and cash flows for the purposes of business planning. Our standard forecasting process includes analyzing new work pipelines and submitted responses to requests for proposals when predicting future revenue, operating income, and cash flows.

Liquidity and Capital Resources

Our primary sources of liquidity are cash on hand, cash from operations, and availability under our revolving credit facilities. As of September 30, 2025, we had $222.4 million in cash and cash equivalents. We believe that 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 required long-term debt repayments, dividends, and any share purchases we might choose to make. We believe we have access to sufficient funds to manage through another shutdown of the U.S. federal government. See "Note 6. Debt and Derivatives" to the Consolidated Financial Statements for a more detailed discussion of our debt financing arrangements.

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

Table MD&A 8: Net Change in Cash and Cash Equivalents and Restricted Cash

For the Year Ended September 30,

2025

2024

(in thousands)

Cash flows:

Net cash provided by operating activities

$

429,372 

$

515,258 

Net cash used in investing activities

(60,261)

(129,104)

Net cash used in financing activities

(343,877)

(275,646)

Effect of foreign exchange rates on cash and cash equivalents and restricted cash

(538)

3,164 

Net change in cash and cash equivalents and restricted cash

$

24,696 

$

113,672 

Net Cash Provided By Operating Activities

Net cash provided by operating activities decreased by $85.9 million in fiscal year 2025 compared to fiscal year 2024.

The decline has been driven by movements in cash collections and tax payments.

•Our Days Sales Outstanding (DSO) at September 30, 2025 was 62 days, up from 61 days at September 30, 2024. Although we have experienced payment delays during fiscal year 2025, these have been resolved as of September 30, 2025.

•In fiscal year 2024, we had received advanced payment on a single, large U.S.-based contract. These advanced payments did not recur in fiscal year 2025.

•Our U.S. income tax payments in fiscal year 2025 were approximately $50 million higher than in the prior fiscal year, reflecting increased profitability.

Net Cash Used In Investing Activities

Our investing cash outflows were $60.3 million in fiscal year 2025, declining from $129.1 million in the prior fiscal year.

•We have been making significant investments in our capital base in fiscal years 2024 and 2025, including upgrading technology in our federal medical disability examinations (MDE) contracts. This work was largely completed in the middle of fiscal year 2025.

•Fiscal year 2024 included an investment of $18.0 million to acquire one of our established vendors.

Net Cash Used In Financing Activities

We have utilized $447.5 million in fiscal year 2025 to purchase 5.8 million shares of our common stock. These purchases were funded by our operating cash flows, as well as a $250 million expansion of our credit facility.

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.

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Free Cash Flow (Non-GAAP)

Table MD&A 9: Free Cash Flow (Non-GAAP)

For the Year Ended September 30,

2025

2024

(in thousands)

Net cash provided by operating activities

$

429,372 

$

515,258 

Purchases of property and equipment and capitalized software

(63,213)

(114,190)

Free cash flow (Non-GAAP)

$

366,159 

$

401,068 

Material Cash Requirements from Contractual Obligations

Credit Facilities

Our principal debt agreement is with JPMorgan Chase Bank N.A. (the "Credit Agreement"). At September 30, 2025, we owed $1.35 billion under the Credit Agreement, with access to an additional $750.0 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.

We have included the following table showing our debt balances as of September 30, 2025, and their effective interest rates.

Table MD&A 10: Debt Balances and Interest Rates as of September 30, 2025

September 30, 2025

Carrying value

Effective cash interest rate

Interest rate basis

(dollars in thousands)

Term Loan A - Hedged through May 2026

$

500,000 

3.81 

%

Fixed rate of 2.31% plus margin. (1)

Term Loan A - Unhedged

353,125 

5.66 

%

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

343,750 

6.16 

%

Term SOFR reset monthly plus 2% margin.

Debt Principal

$

1,346,875 

(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 September 30, 2025, the applicable margin was 1.5%.

Our effective cash interest rate reflects the drivers of our cash interest payments as of September 30, 2025, which can change based upon the reset of the rates. Including the amortization of the upfront payments, our effective interest rate as of September 30, 2025 was 5.37%.

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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 require us 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 September 30, 2025, 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.

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Table MD&A 11: Reconciliation of Net Income to Consolidated EBITDA as defined by our Credit Agreement

For the Year Ended September 30,

2025

2024

(in thousands)

Net income

$

319,034 

$

306,914 

Adjustments:

Interest expense

84,080 

82,440 

Other (income)/expense, net

(640)

(450)

Provision for income taxes

125,815 

99,595 

Amortization of intangibles

92,047 

91,570 

Stock compensation expense

41,182 

35,349 

Acquisition-related expenses

427 

3,218 

Loss on sale of businesses

39,549 

1,018 

Depreciation and amortization of property, equipment, and capitalized software

41,669 

33,957 

Pro forma and other adjustments permitted by our Credit Agreement

50,832 

72,172 

Consolidated EBITDA (as defined by our Credit Agreement)

$

793,995 

$

725,783 

Table MD&A 12: Consolidated Net Total Leverage Ratio

For the Year Ended September 30,

2025

2024

(in thousands, except ratio data)

Funded Debt (as defined by our Credit Agreement)

$

1,346,875 

$

1,145,819 

Cash and cash equivalents up to $150 million

150,000 

150,000 

Consolidated Net Total Leverage (as defined by our Credit Agreement)

$

1,196,875 

$

995,819 

Consolidated Net Total Leverage Ratio (as defined by our Credit Agreement)

1.51 

1.37 

Table MD&A 13: Consolidated Net Interest Coverage Ratio

For the Year Ended September 30,

2025

2024

(in thousands, except ratio data)

Consolidated EBITDA (as defined by our Credit Agreement)

$

793,995 

$

725,783 

Interest expense

84,080 

82,440 

Components of other income/expense, net allowed in ratio calculation

1,748 

2,533 

Consolidated Net Interest Expense (as defined by our Credit Agreement)

$

85,828 

$

84,973 

Consolidated Net Interest Coverage Ratio (as defined by our Credit Agreement)

9.25 

8.54 

Leases

As of September 30, 2025, we reported current and long-term operating lease liabilities of $38.6 million and $71.3 million, respectively. These balances represent our contractual obligation to make future payments on our leases, discounted to reflect our cost of borrowing. The majority of these leases are for real estate. In the event that we vacate a location, we may be obligated to continue making lease payments. Where possible, we mitigate this risk by including clauses allowing for the termination of lease agreements if the contract the location covers is terminated by our customer. See "Note 10. Leases" to the Consolidated Financial Statements for information regarding our leases, including obligations by fiscal year.

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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 and judgments that affect the amounts reported. We consider the accounting policies below to be the most important to our financial position and results of operations either because of the significance of the financial statement item or because of the need to use significant judgment in recording the balance. 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. Actual results could differ from those estimates. Our significant accounting policies are summarized in "Note 2. Significant Accounting Policies" of the Consolidated Financial Statements included in Item 8 in this Annual Report on Form 10-K.

Revenue Recognition

Although much of our revenue is recognized concurrently with billing or with the passage of time, some of our revenue requires us to make estimates. These estimates are reviewed quarterly, with any changes being recorded as a cumulative catch-up.

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

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

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

Business Combinations and Goodwill

Our balance sheet as of September 30, 2025, includes $1.78 billion of goodwill and $538.3 million of net intangible assets. These assets are typically obtained through business acquisitions, and their acquisition and maintenance requires certain critical estimates.

•During an acquisition, we are required to estimate the fair value of all acquired tangible and intangible assets, as well as liabilities assumed, in order to allocate the purchase price. For many assets acquired and liabilities assumed, the calculation of fair value requires little judgment as balances may be readily convertible to cash receipts or cash payments, or there may be an active market against which to measure value. For the valuation of intangible assets, significant judgment is necessary in identifying and valuing such assets. This valuation will also involve identifying the useful economic life of this asset. Our estimates of these fair values and useful economic lives are based upon assumptions we believe to be reasonable and, where appropriate, include assistance from third-party appraisal firms.

•The excess purchase price over the identified net assets is considered to be goodwill. Goodwill is recorded at the reporting unit level. The identification of our reporting units requires judgment based on the manner in which our business is operated and the services performed. Our reporting units are consistent with our segments. Where we have acquisitions that provide services to more than one segment or where the acquisition provides benefits across all of our segments, we use judgment to allocate the goodwill balance based on the relative value we anticipate that each segment will realize.

•Goodwill is not amortized but is subject to impairment testing on an annual basis, or more frequently if impairment indicators arise. Impairment testing is performed at the reporting unit level. This process requires judgment in assessing the fair value of these reporting units. We performed the annual impairment test using the qualitative assessment as of July 1, 2025, and concluded it was not more likely than not that the fair value of the reporting units was less than the carrying amounts.

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Contingencies

From time to time, we are involved in legal proceedings, including contract and employment claims, in the ordinary course of business. We assess the likelihood of any adverse judgments or outcomes to these contingencies, as well as potential ranges of probable losses, and establish reserves accordingly. The amount of reserves required may change in future periods due to new developments or changes in approach to a matter, such as a change in settlement strategy.

We are also subject to audits by our government clients on many of our contracts based upon measures such as costs incurred or transactions processed. These audits may take place several years after a contract has been completed. We maintain reserves where we believe a loss is probable and are able to estimate any potential liability that is updated as audits are completed.

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 provided by 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.

In fiscal year 2025, 11% 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 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.

In recent years, we have made a number of acquisitions and divestitures. 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 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 wish to understand the performance of the business by using a methodology that excludes the amortization of our intangible assets. During fiscal years 2025 and 2024, we also incurred 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 effect of the amortization of intangible assets and divestiture-related charges. 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, and divestiture-related charges. 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. 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.

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Table MD&A 14: Non-GAAP Adjusted Results - Operating Income, Adjusted EBITDA, Net Income, and Diluted Earnings per Share

For the Year Ended September 30,

2025

2024

(dollars in thousands, except per share data)

Operating income

$

528,289 

$

488,499 

Add back: Amortization of intangible assets

92,047 

91,570 

Add back: Divestiture-related charges

39,549 

1,018 

Add back: Depreciation and amortization of property, equipment, and capitalized software

41,669 

33,957 

Adjusted EBITDA (Non-GAAP)

$

701,554 

$

615,044 

Adjusted EBITDA margin (Non-GAAP)

12.9 

%

11.6 

%

Net income

$

319,034 

$

306,914 

Add back: Amortization of intangible assets, net of tax

67,839 

67,481 

Add back: Divestiture-related charges

39,549 

1,018 

Adjusted net income excluding amortization of intangible assets and divestiture-related charges (Non-GAAP)

$

426,422 

$

375,413 

Diluted earnings per share

$

5.51 

$

4.99 

Add back: Effect of amortization of intangible assets on diluted earnings per share

1.17 

1.10 

Add back: Effect of divestiture-related charges on diluted earnings per share

0.68 

0.02 

Adjusted diluted earnings per share excluding amortization of intangible assets and divestiture-related charges (Non-GAAP)

$

7.36 

$

6.11 

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.

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