Companies: 10,786     total market cap: $134.829 T
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Maximus
MMS
#3722
Rank
$3.49 B
Marketcap
๐Ÿ‡บ๐Ÿ‡ธ United States
Country
$64.05
Share price
-0.08%
Change (1 day)
-5.36%
Change (1 year)
  1. Maximus
  2. Quarterly Reports (10-Q)
  3. Financial Year FY2022 Q3

Maximus - 10-Q quarterly report FY2022 Q3


Text size:
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Table of Contents
As filed with the Securities and Exchange Commission on August 4, 2022
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
(Mark one)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________to__________.
Commission file number: 1-12997
mms-20220630_g1.jpg

Maximus, Inc.
(Exact name of registrant as specified in its charter)
Virginia54-1000588
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
1600 Tysons Boulevard, McLean, Virginia
22102
(Address of principal executive offices)
(Zip Code)
(703) 251-8500
(Registrant's telephone number, including the area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, no par valueMMSNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).        Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒
 
Accelerated filer ☐
 
Non-accelerated filer ☐
Smaller reporting company ☐
Emerging growth company  ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
There were 60,550,580 shares of the registrant's Common Stock outstanding as of August 1, 2022.

Table of Contents
Table of Contents to Third Quarter 2022 Form 10-Q
3
4
Item 1.
4
Consolidated Statements of Operations
4
Consolidated Statements of Comprehensive Income
5
Consolidated Balance Sheets
6
Consolidated Statements of Cash Flows
7
Consolidated Statements of Changes in Shareholders' Equity
8
Notes to the Consolidated Financial Statements
10
1. Organization
10
2. Significant Accounting Policies
10
3. Business Segments
11
4. Revenue Recognition
13
5. Earnings Per Share
15
6. Business Combinations
15
7. Debt
18
8. Fair Value Measurements
20
9. Equity
21
10. Cash and Cash Equivalents and Restricted Cash
22
11. Accounts Receivable, Net
22
12. Property and Equipment, Net
22
13. Commitments and Contingencies
22
14. Subsequent Event
23
Item 2.
24
24
25
25
31
32
32
Item 3.
34
Item 4.
34
35
Item 1.
35
Item 1A.
35
Item 2.
35
Item 3.
35
Item 4.
35
Item 5.
35
Item 6.
36
37
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Unless otherwise specified, references in this Quarterly Report on Form 10-Q to "our," "we," "us," "Maximus," the "Company," and "our business" refer to Maximus, Inc. and its subsidiaries.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Included in this Quarterly Report on Form 10-Q are forward-looking statements within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: "anticipate," "intend," "plan," "goal," "seek," "opportunity," "could," "potential," "believe," "project," "estimate," "expect," "forecast," "strategy," "future," "likely," "may," "should," "will," and similar references to future periods.
Forward-looking statements that are not historical facts, including statements about our confidence, strategies and initiatives, and our expectations about revenues, results of operations, profitability, liquidity, market demand, the impact of the coronavirus ("COVID-19") global pandemic and related policy implications, and our recent acquisitions are forward-looking statements that are subject to risks and uncertainties. These risks could cause our actual results to differ materially from those indicated by such forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following:
•a failure to meet performance requirements in our contracts, which might lead to contract termination and actual or liquidated damages;
•our failure to successfully bid for and accurately price contracts to generate our desired profit;
•the effects of future legislative or government budgetary and spending changes;
•the impact of the Biden Administration on federal procurement, federal funding to states' safety-net programs, and the overall decision-making process related to our industry, including our business and customers;
•our ability to manage our growth, including acquired businesses;
•difficulties in integrating or achieving projected revenues, earnings, and other benefits associated with acquired businesses;
•the outcome of reviews or audits, which might result in financial penalties and impair our ability to respond to invitations for new work;
•our ability to manage capital investments and startup costs incurred before receiving related contract payments;
•our ability to manage our debt;
•the extent and impact of the continuation of the global pandemic and the actions taken or to be taken by us, our customers, and the governments or jurisdictions in which we operate in response to COVID-19, including the U.S. federal government's ongoing Public Health Emergency declaration;
•our ability to maintain technology systems and otherwise protect confidential or protected information;
•our ability to attract and retain executive officers, senior managers, and other qualified personnel to execute our business;
•the ability of government customers to terminate contracts on short notice, with or without cause;
•our ability to maintain relationships with key government entities from whom a substantial portion of our revenue is derived;
•a failure to comply with laws governing our business, which might result in the Company being subject to fines, penalties, suspension, debarment, and other sanctions;
•the costs and outcome of litigation;
•the effects of changes in laws and regulations governing our business, including tax laws, and applicable interpretations and guidance thereunder, or changes in accounting policies, rules, methodologies, and practices, and our ability to estimate the impact of such changes;
•matters related to business we disposed of or divested; and
•other factors set forth in Item 1A, "Risk Factors" of our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on November 18, 2021.
Any forward-looking statement made by us in this report is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments, or otherwise.
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PART I - Financial Information
Item 1. Financial Statements
Maximus, Inc.
Consolidated Statements of Operations
(Unaudited)
For the Three Months EndedFor the Nine Months Ended
June 30, 2022June 30, 2021June 30, 2022June 30, 2021
(in thousands, except per share amounts)
Revenue$1,125,785 $1,243,520 $3,453,987 $3,148,354 
Cost of revenue915,564 951,664 2,787,160 2,419,785 
Gross profit210,221 291,856 666,827 728,569 
Selling, general, and administrative expenses132,974 140,129 387,502 364,498 
Amortization of intangible assets22,690 12,132 67,951 23,718 
Operating income54,557 139,595 211,374 340,353 
Interest expense(10,791)(3,087)(29,867)(4,049)
Other expense, net(2,497)(8,289)(2,093)(9,584)
Income before income taxes41,269 128,219 179,414 326,720 
Provision for income taxes9,934 33,724 44,653 87,534 
Net income$31,335 $94,495 $134,761 $239,186 
Earnings per share:
Basic$0.51 $1.52 $2.17 $3.86 
Diluted$0.51 $1.51 $2.17 $3.84 
Weighted average shares outstanding:
Basic61,607 62,064 62,038 62,028 
Diluted61,756 62,453 62,190 62,300 
Dividends declared per share$0.28 $0.28 $0.84 $0.84 
See accompanying notes to unaudited consolidated financial statements.
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Maximus, Inc.
Consolidated Statements of Comprehensive Income
(Unaudited)
For the Three Months EndedFor the Nine Months Ended
June 30, 2022June 30, 2021June 30, 2022June 30, 2021
(in thousands)
Net income$31,335 $94,495 $134,761 $239,186 
Other comprehensive income, net of tax:
Foreign currency translation adjustments(8,935)(24)(8,499)7,669 
Net gains/(losses) on cash flow hedge, net of tax effect of $1,085, $(379), $5,857 and $(379), respectively
3,042 (1,062)16,416 (1,062)
Other comprehensive income(5,893)(1,086)7,917 6,607 
Comprehensive income$25,442 $93,409 $142,678 $245,793 
See accompanying notes to unaudited consolidated financial statements.
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Maximus, Inc.
Consolidated Balance Sheets
June 30, 2022September 30, 2021
(unaudited)
(in thousands)
Assets:
Cash and cash equivalents$93,748 $135,061 
Accounts receivable, net868,010 834,819 
Income taxes receivable15,608 5,413 
Prepaid expenses and other current assets94,218 104,201 
Total current assets1,071,584 1,079,494 
Property and equipment, net55,908 62,627 
Capitalized software, net48,478 42,868 
Operating lease right-of-use assets143,545 179,349 
Goodwill1,783,870 1,774,406 
Intangible assets, net829,179 879,168 
Deferred contract costs, net43,723 36,486 
Deferred compensation plan assets38,729 46,738 
Deferred income taxes4,776 990 
Other assets38,131 16,839 
Total assets$4,057,923 $4,118,965 
Liabilities and Shareholders' Equity:
Liabilities:
Accounts payable and accrued liabilities$259,016 $305,565 
Accrued compensation and benefits182,434 186,809 
Deferred revenue, current portion106,797 98,588 
Income taxes payable4,071 6,782 
Long-term debt, current portion59,698 80,555 
Operating lease liabilities, current portion67,680 76,077 
Other current liabilities50,510 35,057 
Total current liabilities730,206 789,433 
Deferred revenue, non-current portion23,518 35,932 
Deferred income taxes196,691 194,638 
Long-term debt, non-current portion1,423,276 1,429,137 
Deferred compensation plan liabilities, non-current portion39,006 47,405 
Operating lease liabilities, non-current portion93,035 121,771 
Other liabilities30,629 20,320 
Total liabilities2,536,361 2,638,636 
Commitments and contingencies (Note 13)
Shareholders' equity:
Common stock, no par value; 100,000 shares authorized; 60,904 and 61,954 shares issued and outstanding as of June 30, 2022 and September 30, 2021, respectively (shares in thousands)
557,656 532,411 
Accumulated other comprehensive loss(31,991)(39,908)
Retained earnings995,897 987,826 
Total shareholders' equity1,521,562 1,480,329 
Total liabilities and shareholders' equity$4,057,923 $4,118,965 
See accompanying notes to unaudited consolidated financial statements.
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Maximus, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
For the Nine Months Ended
June 30, 2022June 30, 2021
(in thousands)
Cash flows from operating activities:
Net income$134,761 $239,186 
Adjustments to reconcile net income to cash flows from operating activities:
Depreciation and amortization of property, equipment and capitalized software29,875 33,664 
Amortization of intangible assets67,951 23,718 
Amortization of debt issuance costs and debt discount1,946 — 
Costs related to debt financing— 8,509 
Deferred income taxes(7,179)3,632 
Stock compensation expense22,080 20,823 
Change in assets and liabilities, net of effects of business combinations:
Accounts receivable(39,997)(254,304)
Prepaid expenses and other current assets9,454 7,542 
Deferred contract costs(7,702)(15,773)
Accounts payable and accrued liabilities(42,577)116,873 
Accrued compensation and benefits13,846 34,387 
Deferred revenue342 23,624 
Income taxes(12,822)15,165 
Operating lease right-of-use assets and liabilities(1,330)1,077 
Other assets and liabilities1,128 (11,464)
Net cash provided by operating activities169,776 246,659 
Cash flows from investing activities:
Purchases of property and equipment and capitalized software(35,936)(32,133)
Acquisitions of businesses, net of cash acquired(14,144)(1,779,473)
Other2,000 — 
Net cash used in investing activities(48,080)(1,811,606)
Cash flows from financing activities:
Cash dividends paid to Maximus shareholders(51,762)(51,625)
Purchases of Maximus common stock(73,864)(3,363)
Tax withholding related to RSU vesting(9,673)(9,818)
Payments for debt financing— (22,759)
Proceeds from borrowings415,000 2,285,000 
Principal payments for debt(442,973)(607,880)
Other— (2,763)
Net cash (used in)/provided by financing activities(163,272)1,586,792 
Effect of exchange rate changes on cash, cash equivalents, and restricted cash(4,369)2,830 
Net change in cash, cash equivalents, and restricted cash(45,945)24,675 
Cash, cash equivalents and restricted cash, beginning of period156,570 88,561 
Cash, cash equivalents and restricted cash, end of period$110,625 $113,236 
See accompanying notes to unaudited consolidated financial statements.
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Maximus, Inc.
Consolidated Statements of Changes in Shareholders' Equity
(Unaudited)
Common StockAccumulated
Other
Comprehensive
Loss		Retained
Earnings		Total
Equity
SharesAmount
(in thousands)
Balance at September 30, 202161,954$532,411 $(39,908)$987,826 $1,480,329 
Net income—— — 53,330 53,330 
Foreign currency translation—— 459 — 459 
Cash flow hedge, net of tax—— 2,685 — 2,685 
Cash dividends—— — (17,347)(17,347)
Dividends on RSUs—272 — (272)— 
Purchases of Maximus common stock(18)— — (1,379)(1,379)
Stock compensation expense—8,248 — — 8,248 
Tax withholding adjustment related to RSU vesting—2,101 — — 2,101 
Balance as of December 31, 202161,936$543,032 $(36,764)$1,022,158 $1,528,426 
Net income—— — 50,096 50,096 
Foreign currency translation—— (23)— (23)
Cash flow hedge, net of tax—— 10,689 — 10,689 
Cash dividends—— — (17,312)(17,312)
Dividends on RSUs—392 — (392)— 
Purchases of Maximus common stock(330)— — (24,464)(24,464)
Stock compensation expense—6,804 — — 6,804 
RSUs vested4— — — — 
Balance as of March 31, 202261,610$550,228 $(26,098)$1,030,086 $1,554,216 
Net income—— — 31,335 31,335 
Foreign currency translation—— (8,935)— (8,935)
Cash flow hedge, net of tax—— 3,042 — 3,042 
Cash dividends—— — (17,103)(17,103)
Dividends on RSUs—400 — (400)— 
Purchases of Maximus common stock(706)— — (48,021)(48,021)
Stock compensation expense—7,028 — — 7,028 
Balance as of June 30, 202260,904$557,656 $(31,991)$995,897 $1,521,562 










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Maximus, Inc.
Consolidated Statements of Changes in Shareholders' Equity
(Unaudited)
Common StockAccumulated
Other
Comprehensive
Loss		Retained
Earnings		Total
Equity
SharesAmount
(in thousands)
Balance at September 30, 202061,504$513,959 $(42,638)$770,498 $1,241,819 
Net income—— — 64,077 64,077 
Foreign currency translation—— 6,923 — 6,923 
Cash dividends—— — (17,207)(17,207)
Dividends on RSUs—336 — (336)— 
Purchases of Maximus common stock(52)— — (3,363)(3,363)
Stock compensation expense—6,062 — — 6,062 
Balance as of December 31, 202061,452$520,357 $(35,715)$813,669 $1,298,311 
Net income—— — 80,614 80,614 
Foreign currency translation—— 770 — 770 
Cash dividends—— — (17,207)(17,207)
Dividends on RSUs—431 — (431)— 
Stock compensation expense—7,417 — — 7,417 
RSUs vested20— — — — 
Balance as of March 31, 202161,472$528,205 $(34,945)$876,645 $1,369,905 
Net income—— — 94,495 94,495 
Foreign currency translation—— (24)— (24)
Cash flow hedge, net of income tax—— (1,062)— (1,062)
Cash dividends—— — (17,211)(17,211)
Dividends on RSUs—441 — (441)— 
Stock compensation expense—7,344 — — 7,344 
Balance as of June 30, 202161,472$535,990 $(36,031)$953,488 $1,453,447 
See accompanying notes to unaudited consolidated financial statements.
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Maximus, Inc.
Notes to the Unaudited Consolidated Financial Statements
1. ORGANIZATION
Maximus, a Virginia corporation established in 1975, is a leading provider of government services worldwide. Under our mission of moving people forward, we offer industry-leading expertise, including citizen engagement, eligibility and program integrity and case management to enable citizens around the globe to successfully engage with their governments at all levels. We assist governments to support families, strengthen workforces and streamline their services. We are a proud partner to government agencies in the United States, Australia, Canada, Italy, Saudi Arabia, Singapore, South Korea, Sweden, and the United Kingdom.

2. SIGNIFICANT ACCOUNTING POLICIES
(a)Basis of Presentation
The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries over which the Company has a controlling financial interest, and have been prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP, and the rules and regulations of the U.S. Securities and Exchange Commission, or SEC. All intercompany balances and transactions have been eliminated in consolidation.
(b)Basis of Presentation for Interim Periods
Certain information and footnote disclosures normally included for the annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted for the interim periods presented. We believe that the unaudited interim financial statements include all adjustments (which are normal and recurring in nature) necessary to present fairly our financial position and the results of operations and cash flows for the periods presented.
The results of operations for the interim periods presented are not necessarily indicative of results that may be expected for the year or future periods. The financial statements should be read in conjunction with our audited consolidated financial statements and the notes thereto for the year ended September 30, 2021 included in our Annual Report on Form 10-K for the fiscal year then ended (the "2021 10-K"). We have continued to follow the accounting policies set forth in those financial statements.
(c)Estimates
The preparation of these financial statements, in conformity with U.S. GAAP, requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities, and the reported amounts of revenue and expenses. At each reporting period end, we make estimates, including those related to revenue recognition and cost estimation on certain contracts, the realizability of goodwill, and amounts related to income taxes, certain accrued liabilities, and contingencies and litigation.
We base our estimates on historical experience and expectations of the future that we believe to be reasonable. The continued uncertainty related to the economic and political effects of the COVID-19 global pandemic reduce our ability to use past results to estimate future performance. Accordingly, our estimates may be subject to greater volatility than has been the case in the past.
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3. BUSINESS SEGMENTS
We conduct our operations through three business segments: U.S. Services, U.S. Federal Services, and Outside the U.S.
U.S. Services
Our U.S. Services Segment provides a variety of business process services ("BPS") such as program administration, appeals and assessments, and related consulting work for U.S. state and local government programs. These services support a variety of programs, including the Affordable Care Act ("ACA"), Medicaid, the Children's Health Insurance Program ("CHIP"), Temporary Assistance to Needy Families ("TANF"), and child support programs. Addressing societal macro trends such as aging populations and rising costs, the segment continues to execute on its clinical evolution strategy by expanding its clinical offerings. This includes assessments to determine whether personal care services are medically necessary and public health offerings such as contact tracing, disease investigation, and vaccine distribution support services as part of the governments' COVID-19 response efforts.
U.S. Federal Services
From technology solutions to program administration and operations, our U.S. Federal Services Segment delivers end-to-end solutions that help various U.S. federal government agencies better deliver on their mission. This also includes appeals and assessments services, system and application development, IT modernization, and maintenance services. The segment also contains certain state-based assessments and appeals work that is part of the segment's heritage within the Medicare Appeals portfolio which continues to be managed within this segment. Benefiting from the Maximus Federal Consulting (formerly Attain Federal) platform, the segment executes on its digital strategy to deliver technology solutions that advance agency missions, including the challenge to modernize, provide better customer experience, and drive process efficiencies. The segment continues to expand its clinical solutions with the acquisition of VES Group, Inc., which manages the clinical evaluation process for U.S. veterans and service members on behalf of the U.S. Department of Veterans Affairs. The segment further supports clinical offerings in public health with new work supporting the U.S. federal government's COVID-19 response efforts. This included expanded work with the Centers for Disease Control and Prevention ("CDC") for their helpline and increased support for the IRS Wage and Investment Division's response efforts to general inquiries regarding the Coronavirus Aid Relief & Economic Security ("CARES") Act and Economic Impact Payment Service Plan.
Outside the U.S.
Our Outside the U.S. Segment provides BPS for international governments and commercial clients, transforming the lives of people around the world. Helping people find employment, access vital support, and remain healthy, these services include health and disability assessments, program administration for employment services, wellbeing solutions, and other job seeker related services. We support programs and deliver services in the U.K., including the Health Assessment Advisory Service ("HAAS") and Restart; Australia, including Workforce Australia and the Disability Employment Service; Canada, including Health Insurance British Columbia and the Employment Program of British Columbia; in addition to Italy, Saudi Arabia, Singapore, South Korea, and Sweden, where we predominantly provide employment support and job seeker services.
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Table 3: Results of Operation by Business Segment
For the Three Months EndedFor the Nine Months Ended
June 30, 2022June 30, 2021June 30, 2022June 30, 2021
Amount% (1)Amount% (1)Amount% (1)Amount% (1)
(dollars in thousands)
Revenue:
U.S. Services$399,320 $436,338 $1,183,814 $1,269,487 
U.S. Federal Services525,519 617,601 1,680,678 1,352,982 
Outside the U.S.200,946 189,581 589,495 525,885 
Revenue$1,125,785 $1,243,520 $3,453,987 $3,148,354 
Gross profit:
U.S. Services$74,135 18.6 %$104,814 24.0 %$248,805 21.0 %$323,256 25.5 %
U.S. Federal Services124,203 23.6 %155,776 25.2 %365,932 21.8 %312,405 23.1 %
Outside the U.S.11,883 5.9 %31,266 16.5 %52,090 8.8 %92,908 17.7 %
Gross profit$210,221 18.7 %$291,856 23.5 %$666,827 19.3 %$728,569 23.1 %
Selling, general, and administrative expenses:
U.S. Services$42,351 10.6 %$42,606 9.8 %$115,726 9.8 %$116,655 9.2 %
U.S. Federal Services69,466 13.2 %69,647 11.3 %203,340 12.1 %172,877 12.8 %
Outside the U.S.23,101 11.5 %22,973 12.1 %68,452 11.6 %65,018 12.4 %
Other (2) (1,944)NM4,903 NM(16)NM9,948 NM
Selling, general, and administrative expenses$132,974 11.8 %$140,129 11.3 %$387,502 11.2 %$364,498 11.6 %
Operating income/(loss):
U.S. Services$31,784 8.0 %$62,208 14.3 %$133,079 11.2 %$206,601 16.3 %
U.S. Federal Services54,737 10.4 %86,129 13.9 %162,592 9.7 %139,528 10.3 %
Outside the U.S.(11,218)(5.6) %8,293 4.4 %(16,362)(2.8) %27,890 5.3 %
Amortization of intangible assets(22,690)NM(12,132)NM(67,951)NM(23,718)NM
Other (2)1,944 NM(4,903)NM16 NM(9,948)NM
Operating income$54,557 4.8 %$139,595 11.2 %$211,374 6.1 %$340,353 10.8 %
(1)Percentage of respective segment revenue. Percentages not considered meaningful are marked "NM."
(2)Other selling, general, and administrative expenses includes costs that are not allocated to a particular segment. This includes legal expenses and settlements and expenses incurred as part of our acquisitions, as well as potential acquisitions which have not been or may not be completed. Our results for the three and nine months ended June 30, 2022 included a $2.3 million credit related to changes in acquisition related contingent consideration. See "Note 6. Business Combinations" for more information.
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4. REVENUE RECOGNITION
The Company recognizes revenue as, or when, we satisfy performance obligations under a contract. The majority of our contracts have performance obligations which are satisfied over time. In most cases, we view our performance obligations as promises to transfer a series of distinct services to our customers that are substantially the same and which have the same pattern of service.
Disaggregation of Revenue
In addition to our segment reporting, we disaggregate our revenues by contract type, customer type, and geography. Our operating segments represent the manner in which our Chief Executive Officer reviews our financial results, which is further discussed in "Note 3. Business Segments."
Table 4.1: Revenue by Contract Type
For the Three Months EndedFor the Nine Months Ended
June 30, 2022June 30, 2021June 30, 2022June 30, 2021
Amount%Amount%Amount%Amount%
(dollars in thousands)
Performance-based$520,202 46.2 %$389,800 31.3 %$1,527,368 44.2 %$1,033,509 32.8 %
Cost-plus282,578 25.1 %282,808 22.7 %945,482 27.4 %953,373 30.3 %
Fixed price160,219 14.2 %146,175 11.8 %470,591 13.6 %413,296 13.1 %
Time and materials162,786 14.5 %424,737 34.2 %510,546 14.8 %748,176 23.8 %
Total revenue$1,125,785 $1,243,520 $3,453,987 $3,148,354 
Table 4.2: Revenue by Customer Type
For the Three Months EndedFor the Nine Months Ended
June 30, 2022June 30, 2021June 30, 2022June 30, 2021
Amount%Amount%Amount%Amount%
(dollars in thousands)
U.S. state government agencies$401,042 35.7 %$431,987 34.7 %$1,183,876 34.3 %$1,265,798 40.2 %
U.S. federal government agencies507,047 45.0 %594,771 47.8 %1,624,848 47.0 %1,288,213 40.9 %
International government agencies191,753 17.0 %180,049 14.5 %557,928 16.2 %499,091 15.9 %
Other, including local municipalities and commercial customers25,943 2.3 %36,713 3.0 %87,335 2.5 %95,252 3.0 %
Total revenue$1,125,785 $1,243,520 $3,453,987 $3,148,354 
Table 4.3: Revenue by Geography
For the Three Months EndedFor the Nine Months Ended
June 30, 2022June 30, 2021June 30, 2022June 30, 2021
Amount%Amount%Amount%Amount%
(dollars in thousands)
United States$924,839 82.2 %$1,053,940 84.8 %$2,864,492 83.0 %$2,622,469 83.3 %
United Kingdom109,776 9.7 %74,109 6.0 %303,481 8.8 %211,777 6.7 %
Australia43,594 3.9 %65,283 5.2 %143,078 4.1 %192,161 6.1 %
Rest of world47,576 4.2 %50,188 4.0 %142,936 4.1 %121,947 3.9 %
Total revenue$1,125,785 $1,243,520 $3,453,987 $3,148,354 

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Contract balances
Differences in timing between revenue recognition and cash collection result in contract assets and contract liabilities. We classify these assets as accounts receivable — billed and billable and unbilled receivables; the liabilities are classified as deferred revenue.
In many contracts, we bill our customers on a monthly basis shortly after the month end for work performed in that month. These balances are considered collectible and are included within accounts receivable — billed and billable.
Exceptions to this pattern will arise for various reasons, including those listed below.
•Under cost-plus contracts, we are typically required to estimate a contract's share of our general and administrative expenses. This share is based upon estimates of total costs which may vary over time. We typically invoice our customers at an agreed provisional billing rate which may differ from actual rates incurred. If our actual rates are higher than the provisional billing rates, an asset is recorded for this variance; if the provisional billing rates are higher than our actual rates, we record a liability.
•Certain contracts include retainage balances, whereby revenue is earned but some portion of cash payments are held back by the customer for a period of time, typically to allow the customer to confirm the objective criteria laid out by the contract have been met. This balance is classified as accounts receivable — unbilled until restrictions on billing are lifted. As of June 30, 2022, and September 30, 2021, $12.2 million and $10.4 million, respectively, of our unbilled receivables related to amounts pursuant to contractual retainage provisions.
•In certain contracts, we may receive funds from our customers prior to performing operations. These funds are typically referred to as "set-up costs" and reflect the need for us to make investments in infrastructure prior to providing a service. This investment in infrastructure is not a performance obligation which is distinct from the service that is subsequently provided and, as a result, revenue is not recognized based upon the establishment of this infrastructure, but rather over the course of the contractual relationship. The funds are initially recorded as deferred revenue and recognized over the term of the contract. Other contracts may not include set-up fees but will provide higher fees in earlier periods of the contract. The premium on these fees is deferred.
•Some of our contracts, notably our employment services contracts in the Outside the U.S. Segment, include payments for desired outcomes, such as job placement and job retention, and these outcome payments occur over several months. We are required to estimate these outcome fees ahead of their realization and recognize this estimated fee over the period of delivery.
During the three and nine months ended June 30, 2022, we recognized revenue of $23.7 million and $85.5 million, respectively, that was included in our deferred revenue balances as of September 30, 2021. During the three and nine months ended June 30, 2021, we recognized revenue of $7.5 million and $36.7 million, respectively, that was included in our deferred revenue balances at September 30, 2020.
Contract estimates
We are required to use estimates in recognizing revenue from some of our contracts. As discussed in "Note 2. Significant Accounting Policies," the calculation of these estimates has been complicated by the COVID-19 pandemic, which has reduced our ability to use past results to estimate future performance.
Some of our performance-based contract revenue is recognized based upon future outcomes defined in each contract. This is the case in many of our employment services contracts in the Outside the U.S. Segment, where we are paid as individuals attain employment goals, which may take many months to achieve. We recognize revenue on these contracts over the period of performance. Our estimates vary from contract to contract but may include estimates of the number of participants, the length of the contract, and the participants reaching employment milestones. We are required to estimate these outcome fees ahead of their collection and recognize this estimated fee over the period of delivery. Changes to our estimates are recognized on a cumulative catch-up basis.
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Table 4.4: Effect of Changes in Contract Estimates
For the Three Months EndedFor the Nine Months Ended
June 30, 2022June 30, 2021June 30, 2022June 30, 2021
(in thousands, except per share data)
Benefit to/(reduction of) revenue recognized due to changes in contract estimates$(959)$1,800 $(5,174)$17,800 
Benefit to/(reduction of) diluted earnings per share recognized due to changes in contract estimates$(0.01)$0.03 $(0.06)$0.20 
Remaining performance obligations
As of June 30, 2022, we had approximately $550 million of remaining performance obligations. We anticipate that we will recognize revenue on approximately 45% of this balance within the next 12 months. This balance excludes contracts with an original duration of 12 months or less, including contracts with a penalty-free termination for convenience clause, and any variable consideration which is allocated entirely to future performance obligations, including variable transaction fees or fees tied directly to costs incurred.

5. EARNINGS PER SHARE
Table 5: Weighted Average Number of Shares - Earnings Per Share
For the Three Months EndedFor the Nine Months Ended
June 30, 2022June 30, 2021June 30, 2022June 30, 2021
(in thousands)
Basic weighted average shares outstanding61,607 62,064 62,038 62,028 
Dilutive effect of unvested RSUs and PSUs149 389 152 272 
Denominator for diluted earnings per share61,756 62,453 62,190 62,300 
Unvested anti-dilutive stock units excluded from the dilutive effect41873178171



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6. BUSINESS COMBINATIONS
VES Group, Inc. (VES)
On May 28, 2021, the Company acquired 100% of VES for a purchase price of $1.37 billion (the "VES Acquisition"). VES was integrated into our U.S. Federal Services Segment. The VES Acquisition supports our ongoing strategic priority of expansion into the U.S. Federal market and accelerates our clinical evolution to meet long-term demand for BPS with a clinical dimension. We have completed our valuation of all acquired assets and liabilities assumed.
Table 6.1: VES Valuation
Allocation of Assets and Liabilities as of September 30, 2021AdjustmentsAllocation of Assets and Liabilities as of June 30, 2022
(in thousands)
Consideration paid:
Cash consideration, net of cash acquired$1,364,866 $5,765 $1,370,631 
Assets acquired:
Accounts receivable - billed, billable and unbilled$44,078 $— $44,078 
Prepaid expenses and other current assets7,955 — 7,955 
Property and equipment, net9,113 (1,092)8,021 
Operating lease right-of-use assets18,898 — 18,898 
Intangible assets664,000 — 664,000 
Other assets7,166 — 7,166 
Total identifiable assets acquired751,210 (1,092)750,118 
Liabilities assumed:
Accounts payable and accrued compensation42,182 1,804 43,986 
Operating lease liabilities18,898 — 18,898 
Income taxes payable, current5,673 — 5,673 
Deferred income taxes171,497 (474)171,023 
Other long-term liabilities12,270 — 12,270 
Total identifiable liabilities assumed250,520 1,330 251,850 
Net identifiable assets acquired500,690 (2,422)498,268 
Goodwill864,176 8,187 872,363 
Net assets acquired$1,364,866 $5,765 $1,370,631 
Goodwill represents the value of the assembled workforce and the enhanced knowledge, capabilities, and qualifications held by the business. This goodwill balance is not deductible for tax purposes.
Our evaluation of the intangible assets acquired with VES identified three assets. The assets were valued using methods which required a number of estimates and, accordingly, they are considered Level 3 measurements within the Accounting Standard Codification No. 820 (ASC 820) fair value methodology.
•Customer relationships represent the value of the existing contractual relationships with the U.S. federal government. These were valued using the excess earnings method, which required us to utilize estimated future revenues and earnings from contracts and an appropriate rate of return.
•VES maintains a provider network of third-party providers that assist in the performance of their clinical services. This network was valued using the cost method and income approach, which included both the cost of recreating such a network and the profits foregone during the time which would be required to recreate the network and an appropriate rate of return.
•VES maintained proprietary technology which interacted with U.S. federal government systems, facilitated the transmission of examination data, and supported the performance of the contracts. We valued the technology using a relief-from-royalty method, which required us to estimate future revenues and an arm's length royalty rate that a third-party provider might use to supply this service and an appropriate rate of return.
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Table 6.2: VES Intangible Asset Values and Useful Lives
Estimated Straight-Line Useful LifeEstimated Fair Value
(in thousands)
Customer contracts and relationships12 years$580,000 
Provider network12 years57,000 
Technology-based intangible assets12 years27,000 
Total intangible assets$664,000 
In connection with certain liabilities acquired in the VES acquisition, we established a liability of $12.0 million for a billing dispute between VES and its customer relating to prior year billings. Our exposure was partially offset by an indemnification asset of $6.0 million. During the first nine months of fiscal year 2022, we paid the liability and recovered the indemnification asset. At acquisition, we established a tax liability of $12.3 million for uncertain tax positions within VES, partially offset by another indemnification asset of $7.2 million.
Connect Assist Holdings Limited ("Connect Assist")
On September 14, 2021, we acquired 100% of the share capital of Connect Assist for an estimated purchase price of $19.4 million (£14.4 million British Pounds). We acquired this business to improve our contact center services and qualifications within the United Kingdom. The business was integrated into our Outside the U.S. Segment. We completed our assessment of all acquired assets and liabilities assumed, with the exception of tax balances. We recorded estimated goodwill and intangible assets of $11.3 million and $7.7 million, respectively, related to the acquisition.
Aidvantage
On October 6, 2021, we completed the acquisition of the student loan servicing business from Navient, rebranded as Aidvantage. The purchase price consideration is contingent upon future volumes, with a maximum payment of $65.0 million. The final payment is uncertain as there are a number of potential outcomes. We estimated the fair value of this liability, based upon a probability weighted assessment of the potential outcomes, of $18.5 million. We update this liability each quarter as changes are made to our estimate of fair value. These changes are recorded through our statement of operations. If our obligation is less than anticipated, this will result in a benefit to our earnings. The obligation may be higher, either because the number of student loans we are servicing increases or if the contractual relationship we have acquired is extended beyond its current anticipated end date of December 31, 2023. In that instance, we would record an expense to earnings which we would anticipate being offset by additional benefits from the contract. However, the timing of the adjustment to the obligation and the anticipated financial benefits would be unlikely to be consistent. We recorded a single intangible asset related to the customer contract and relationship of $16.7 million, which we are amortizing over 27 months. The goodwill balance, representing the difference between the assets acquired and the estimated obligation, represents the assembled workforce, as well as the knowledge base acquired. We completed our assessment of all acquired assets and liabilities assumed. This business is a part of our U.S. Federal Services Segment and supplements our existing portfolio of services to the U.S. Department of Education.
During the three months ended June 30, 2022, we reported $47.5 million and $8.8 million of revenue and gross profit, respectively, from Aidvantage. During the nine months ended June 30, 2022, we reported $129.2 million and $7.5 million of revenue and gross profit, respectively, from Aidvantage. Since acquisition, we have adjusted the fair value of the liability each quarter to reflect the passage of time. During the third quarter of fiscal year 2022, we recorded a benefit of $2.3 million related to the decline in our anticipated obligation to the sellers; this was recorded in our selling, general and administrative expenses. At June 30, 2022, our contingent consideration liability is $16.4 million.
BZ Bodies Limited ("BZB")
On January 31, 2022, we acquired 100% of the share capital of BZB for an estimated purchase price of $2.9 million (£2.2 million British Pounds), which includes an estimate of contingent consideration payable upon future performance. BZB provides weight management services for adults, children and vulnerable groups in the United Kingdom. We acquired this business to complement our services within the United Kingdom. The business was integrated into our Outside the U.S. Segment. We are still in the process of finalizing the allocation of assets acquired and liabilities assumed. We recorded estimated goodwill and intangible assets of $1.5 million and $1.3 million, respectively, related to the acquisition. During the three and nine months ended June 30, 2022, we reported revenue of $1.6 million and $2.7 million and gross profit of $0.7 million and $1.3 million, respectively, from BZB.

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Stirling Institute of Australia Pty Ltd ("Stirling")
On June 1, 2022, we acquired 100% of the share capital of Stirling for an estimated purchase price of $4.2 million (A$5.8 million Australian Dollars). Stirling provides vocational training to Australians seeking to improve their knowledge and qualifications. We acquired this business to complement our existing employment services. The business was integrated into our Outside the U.S. Segment. We are in the process of finalizing the allocation of assets acquired and liabilities assumed. We recorded estimated goodwill and intangible assets of $2.2 million and $1.9 million, respectively, related to the acquisition. During the three and nine months ended June 30, 2022, we reported revenue of $0.3 million and gross profit of $0.2 million, respectively, from Stirling.

7. DEBT
Table 7.1: Details of Debt
June 30, 2022September 30, 2021
(in thousands)
Term Loan A, due 2026$1,045,000 $1,086,250 
Term Loan B, due 2028396,000 399,000 
Subsidiary loan agreements3,645 38,281 
Revolver50,000 — 
Total debt principal1,494,645 1,523,531 
Less: Unamortized debt-issuance costs and discounts(11,671)(13,839)
Total debt1,482,974 1,509,692 
Less: Current portion of long-term debt(59,698)(80,555)
Long-term debt$1,423,276 $1,429,137 
On May 28, 2021, we entered into a credit agreement with JPMorgan Chase Bank, N.A., as Administrative Agent ("Credit Agreement"), which replaced our existing revolving credit facility. The Credit Agreement provided for the following three components.
•$1.10 billion term loan facility ("Term Loan A") which matures on May 28, 2026;
•$400.0 million term loan facility ("Term Loan B") which matures May 28, 2028; and
•$600.0 million revolving credit facility ("Revolver") which matures May 28, 2026. As of June 30, 2022, we had $50.0 million outstanding balance on the Revolver.
The interest rates applicable to loans under the Credit Agreement are floating rates based upon the London Interbank Offered Rate ("LIBOR") plus a margin. Term Loan A and the Revolver margins are dependent upon our leverage ratio. At the execution of the Credit Agreement, the interest rates were based upon LIBOR plus 1.75% during the first quarter of 2022, which was reduced to LIBOR plus 1.50% as our total leverage ratio declined to below 2.50:1.00. As of June 30, 2022, the net total leverage ratio was 2.90:1.00, which we anticipate will result in an interest rate of LIBOR plus 1.75%.
Term Loan B is set to LIBOR plus 2.00% subject to a LIBOR floor of 0.50%.
LIBOR is anticipated to be phased out over the next 18 months, and alternative benchmark rates have been identified in this agreement. This is our only significant arrangement that utilizes LIBOR. As of June 30, 2022, the annual effective interest rate, including original issue discount and amortization of debt issuance costs, was 3.4%.
The Credit Agreement is available for general corporate purposes, including the funding of working capital, capital expenditures, and possible future acquisitions. In addition to borrowings, it allows us to continue to issue letters of credit when necessary.
Under the terms of the Credit Agreement, we are required to comply with certain covenants, the terms of which are customary and include a net total leverage ratio and a net interest coverage ratio. The net total leverage ratio is calculated as total outstanding debt less the lower of (a) unrestricted cash or (b) $75.0 million divided by adjusted earnings before interest, taxes, depreciation, and amortization ("EBITDA"). With certain exceptions, the covenant requires the net total leverage ratio, as defined by the Credit Agreement to be less than 4.00:1.00, calculated over the previous twelve months. The net interest coverage ratio is calculated as EBITDA divided by interest expense, over the previous 12 months. The covenant requires a net interest coverage ratio of 3.00:1.00 or greater. As of June 30, 2022, as defined by the Credit Agreement, we calculated a net total leverage ratio of 2.90:1.00 and net interest coverage ratio of 12.0. We were in
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compliance with all applicable covenants under the Credit Agreement as of June 30, 2022, and September 30, 2021. We do not believe that the covenants represent a significant restriction to our ability to successfully operate the business or to pay our dividends.
Costs incurred in establishing the Credit Agreement have been reported as a reduction to the gross debt balance and will be amortized over the respective lives of the arrangements. In addition to the corporate Credit Agreement, we hold smaller credit facilities in Australia, Canada, and the United Kingdom. These allow our businesses to borrow to meet any short-term working capital needs.
Table 7.2: Details of Future Minimum Principal Payments Due
Amount Due
(in thousands)
July 1, 2022 through September 30, 2022$18,328 
Year ending September 30, 202365,942 
Year ending September 30, 202486,500 
Year ending September 30, 202593,375 
Year ending September 30, 2026851,500 
Thereafter379,000 
Total payments$1,494,645 
Interest Rate Derivative Instrument
In June 2021, the Company entered into an interest rate swap agreement for a notional amount of $300.0 million, effective June 28, 2021, with an expiration date of May 28, 2026, which hedges the floating LIBOR on a portion of the term loan (Term Loan A, $1.10 billion balance) under the Credit Agreement to a fixed rate of 0.986%. The Company elected to designate this interest rate swap as a cash flow hedge for accounting purposes.
As this cash flow hedge is considered effective, any future gains and losses are reflected within Accumulated Other Comprehensive Income in the Consolidated Statements of Comprehensive Income. Derivatives in a net asset position are recorded in "Other assets" on our Consolidated Balance Sheets and derivatives in a net liability position are recorded in "Other liabilities" on our Consolidated Balance Sheets. No ineffectiveness was recorded on this contract during the nine months ended June 30, 2022.
Table 7.3: Details of Derivatives Fair Value
June 30, 2022September 30, 2021
(in thousands)
Assets:
Interest rate swap$21,864 $— 
Total assets$21,864 $— 
Liabilities:
Interest rate swap$— $410 
Total liabilities$— $410 

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Table 7.4: Gains on Derivatives
For the Three Months EndedFor the Nine Months Ended
June 30, 2022June 30, 2021June 30, 2022June 30, 2021
(in thousands)
Net gains/(losses) recognized in AOCI on derivatives, net of tax (1)$2,904 $(1,062)$15,306 $(1,062)
Amounts reclassified to earnings from accumulated other comprehensive loss (2)138 — 1,110 — 
Net current period other comprehensive income$3,042 $(1,062)$16,416 $(1,062)
(1)Amount is net of tax expense of $1.0 million and $5.5 million for the three and nine months ended June 30, 2022, respectively. For the three and nine months ended June 30, 2021, $0.4 million was recorded as a tax benefit.
(2)Amount is net of a tax expense of $0.0 million and $0.4 million for the three and nine months ended June 30, 2022, respectively. No tax credit or expense was recorded for the three and nine months ended June 30, 2021.
We are exposed to credit losses in the event of nonperformance by the counterparty to our derivative instrument. Our counterparty has investment grade credit ratings; accordingly, we anticipate that the counterparty will be able to fully satisfy its obligations under the contracts. Our agreements outline the conditions upon which it or the counterparty are required to post collateral. As of June 30, 2022, there was no collateral posted with its counterparty related to the derivatives.

8. FAIR VALUE MEASUREMENTS
The Company had two assets recorded at fair value on a recurring basis as of June 30, 2022, the deferred compensation asset, related to the portion invested in mutual funds and the interest rate swap. For the deferred compensation asset, the mutual funds prices are quoted in active markets and therefore are classified as Level 1. For the interest rate swap, the Company obtains its Level 2 pricing inputs from its counterparty for the interest rate swap. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data, or are supported by observable levels at which transactions are executed in the marketplace. As of June 30, 2022, the Company had liabilities recorded at fair value on a recurring basis for contingent consideration related to acquisitions. The contingent consideration liability is considered Level 3, as the inputs are not observable and based on internal assumptions about forecasted revenues, margins, volumes, and probability of contract extensions on businesses acquired.
The fair values of receivables, prepaids, other assets, accounts payable, accrued costs, and other current liabilities approximate the carrying values as a result of the short-term nature of these instruments. The carrying value of our debt is consistent with the fair value as the stated interest rates in the agreements are consistent with the current market rates used in notes with similar terms in the markets (Level 2 inputs).
Table 8.1: Fair Value Measurements
As of June 30, 2022
Level 1Level 2Level 3Balance
(in thousands)
Assets:
Deferred compensation assets - Rabbi Trust$23,970 $— $— $23,970 
Interest rate swap— 21,864 — 21,864 
Total assets$23,970 $21,864 $— $45,834 
Liabilities:
Contingent consideration$— $— $18,892 $18,892 
Total liabilities$— $— $18,892 $18,892 

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The following table presents a reconciliation of the contingent consideration which is measured and recorded at fair value on a recurring basis using Level 3 inputs:
Table 8.2: Fair Value Measurement Using Significant Unobservable Inputs (Level 3)
Contingent Consideration
(in thousands)
Balance as of September 30, 2021$270 
Contingent consideration from current year acquisitions
20,967 
Adjustments to fair value recorded in the current year
(2,095)
Foreign currency translations
(250)
Balance as of June 30, 2022$18,892 

9. EQUITY
Stock Compensation
The Company grants restricted stock units ("RSUs") and performance stock units ("PSUs") to eligible participants under its 2021 Stock Incentive Plan, which was approved by the Board of Directors and stockholders. The RSUs granted to employees vest ratably over three to five years and one year for members of the board of directors, in each case from the grant date. PSU vesting is subject to the achievement of certain performance and market conditions and the number of PSUs earned could vary from 0% to 200% of the number of PSUs awarded. The PSUs will vest at the end of a three year-performance period. We issue new shares to satisfy our obligations under these plans. The fair value of each RSU and PSU is calculated at the date of the grant.
During the nine months ended June 30, 2022, we issued approximately 333,000 RSUs, which will vest ratably over one to four years, and approximately 87,000 PSUs, which will vest after three years.
Stock Purchases
Under a resolution adopted in March 2020, the Board of Directors authorized the purchase, at management's discretion, of up to $200.0 million of our common stock. As of June 30, 2022, $72.8 million remained available for future stock purchases.
Table 9: Stock Purchase Activity
For the Three Months EndedFor the Nine Months Ended
June 30, 2022June 30, 2021June 30, 2022June 30, 2021
(in thousands, except per share data)
Amount paid for shares repurchased$48,021 $— $73,864 $3,363 
Number of shares repurchased706 — 1,054 52 
Average per share price paid$68.01 $— $70.07 $64.98 
Since June 30, 2022, we have acquired an additional 353,848 shares of our common stock for $22.3 million.
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10. CASH AND CASH EQUIVALENTS AND RESTRICTED CASH
Table 10.1: Details of Cash and Cash Equivalents and Restricted Cash
June 30, 2022September 30, 2021
(in thousands)
Cash and cash equivalents$93,748 $135,061 
Restricted cash (1)16,877 21,509 
Cash, cash equivalents, and restricted cash$110,625 $156,570 
(1)Restricted cash is recorded within "Prepaid expenses and other current assets" on the Consolidated Balance Sheets.
Table 10.2: Supplemental Disclosures of Cash Flow Information
For the Nine Months Ended
June 30, 2022June 30, 2021
(in thousands)
Interest payments$28,251 $4,751 
Income tax payments64,057 68,031 

11. ACCOUNTS RECEIVABLE, NET
Table 11: Details of Accounts Receivable, Net
June 30, 2022September 30, 2021
(in thousands)
Billed and billable receivables$762,456 $718,728 
Unbilled receivables112,588 124,135 
Allowance for credit losses(7,034)(8,044)
Accounts receivable, net$868,010 $834,819 

12. PROPERTY HELD FOR SALE
As of June 30, 2022, we classified as held for sale one building and the associated land with a carrying value of $5.4 million within "Prepaid expenses and other current assets" on our Consolidated Balance Sheets. The fair value of this property less the expected selling costs exceed the carrying value of these assets.

13. COMMITMENTS AND CONTINGENCIES
Litigation
We are subject to audits, investigations, and reviews relating to compliance with the laws and regulations that govern our role as a contractor to agencies and departments of federal, state, local, and foreign governments, and otherwise in connection with performing services in countries outside of the U.S. Adverse findings could lead to criminal, civil, or administrative proceedings, and we could be faced with penalties, fines, suspension, or debarment. Adverse findings could also have a material adverse effect on us because of our reliance on government contracts. We are subject to periodic audits by federal, state, local, and foreign governments for taxes. We are also involved in various claims, arbitrations, and lawsuits arising in the normal conduct of our business. These include but are not limited to bid protests, employment matters, contractual disputes, and charges before administrative agencies. Although we can give no assurance, based upon our evaluation and taking into account the advice of legal counsel, we do not believe that the outcome of any existing matter would likely have a material adverse effect on our consolidated financial position, results of operations, or cash flows.
Medicaid claims
The Centers for Medicare and Medicaid Services (CMS) asserted two disallowances against a state Medicaid agency. The state contested the first disallowance and ultimately settled that claim for approximately $7.3 million. The second disallowance of approximately $19.9 million is still being contested by the state. The state is seeking reimbursement from
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us for the first disallowance of $7.3 million and has indicated its intention to seek reimbursement of the second disallowance if its legal challenge is unsuccessful. From 2004 through 2009, we had a contract with the state agency in support of its school-based Medicaid claims. We entered into separate agreements with the school districts under which we assisted the districts with preparing and submitting claims to the state Medicaid agency which, in turn, submitted claims for reimbursement to CMS. The state has asserted that its agreement with us requires us to reimburse the state for the amounts owed to CMS. However, our agreements with the school districts require them to reimburse us for such amounts, and therefore we believe the school districts are responsible for any amounts that ultimately must be refunded to CMS. Although it is reasonably possible that a court could conclude we are responsible for the full balance of the disallowances, we believe our exposure in this matter is limited to our fees associated with this work and that the school districts will be responsible for the remainder. We have recorded a liability of our estimated fees earned from this engagement relating to the disallowances. We exited the federal healthcare-claiming business in 2009 and no longer provide the services at issue in this matter.

14. SUBSEQUENT EVENT
On July 8, 2022, our Board of Directors declared a quarterly cash dividend of $0.28 for each share of our common stock outstanding. The dividend is payable on August 31, 2022, to shareholders of record on August 15, 2022. Based upon the number of shares outstanding, we anticipate a cash payment of approximately $17.1 million.
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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," "Forward-Looking Statements," and our financial statements and related notes included in our Annual Report on Form 10-K for fiscal year 2021 filed with the Securities and Exchange Commission on November 18, 2021 (the "2021 Form 10-K") and elsewhere in this Quarterly Report on Form 10-Q, as applicable.
Business Overview
We are a leading operator of government health and human services programs worldwide. We use our experience, business process management expertise, innovation, and technology solutions to help government agencies run effective, efficient, and accountable programs. Our customers include civilian agencies of governments worldwide, including those at federal, national, state and local levels.

Over the past five years, we have executed a three-pronged growth strategy: we have evolved through our digital transformation to meet the modernization needs of our clients; we have expanded our clinical assessment capabilities to meet growing demand for independent and conflict-free clinical services; and we have expanded our markets, both organically and through acquisitions.
We experienced both favorable and unfavorable impacts as a result of the Coronavirus ("COVID-19") global pandemic. While some of the programs we support have experienced reduced volumes due to the pandemic, we have also been successful in winning new contracts to meet the immediate needs of our customers, including contact tracing and disease investigation, vaccine information lines, and unemployment insurance administration. Demonstrating the value of our business model, we have converted a number of these relationships into longer-term contract opportunities. The individuals and families served under these programs are those considered some of the most vulnerable to COVID-19. As a result, we believe our operations support programs that are vital for their safety and wellbeing.
In 2022, we underwent a strategy refresh which focused on leveraging our successful foundation and strong technology portfolio to create the strategic focus for the next three to five years.
•Customer Services, Digitally Enabled. We will elevate the customer experience to achieve higher levels of satisfaction, performance, and outcomes through intelligent automation and cognitive computing. This strategy builds on our success and focuses on those capabilities and technologies most relevant to the future of citizen interactions with government programs.
•Future of Health. We are continuing our focus of clinical evolution by helping governments meet rising demand for health services. We will do this by growing our clinical capabilities to improve the health of people and their communities.
•Advanced Technologies for Modernization. We will leverage our deep relationships and programmatic knowledge to further our credibility as a technology leader enabling the transformation of government programs to be resilient, dynamic, integrated, and equitable.
Governments around the world need help meeting the rising demand for health services and to be able to do so in a manner that provides higher levels of customer satisfaction, performance and outcomes through the use of technology. Through our focus on health, customer services and technology, we look to partner with governments to respond to complex challenges they face in delivering their largest and most critical programs.

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Financial Overview
A number of factors have affected our results for the third quarter of fiscal year 2022, the most significant of which we have listed below. More detail on these changes is presented below within our "Results of Operations" section.
•During fiscal year 2021, we acquired VES Group, Inc. ("VES"), the Federal Division of Attain, LLC ("Attain") and Connect Assist Holdings Limited ("Connect Assist"). During fiscal year 2022, we acquired the student loan servicing business from Navient, rebranded as Aidvantage, BZ Bodies Limited ("BZB"), and Stirling Institute of Australia Pty Ltd ("Stirling"). From the date of each acquisition, we have received the benefit of additional revenue, as well as additional operating costs. In completing these acquisitions, we have allocated a portion of each purchase price to identifiable intangible assets, which we are amortizing over the estimated useful lives of each asset.
•To fund the acquisition of VES, we entered into a new credit facility comprised of fixed term debt and a new revolving credit facility. The cost of servicing this debt, as well as the cost of the debt facilities, has resulted in an increase in our interest expense.
•Our services in fiscal years 2022 and 2021 were affected by the COVID-19 pandemic. We received the benefit from new, short-term work, assisting governments with their responses to the pandemic, which was often highly profitable. This mitigated the effect of declines in established programs where our transaction volume has been reduced. Many of our core Medicaid programs are anticipated to continue operating at reduced levels due to the ongoing Public Health Emergency. As a condition of receiving supplemental funding under the PHE, those programs are required to pause eligibility redetermination. This has resulted in a revenue decline, and an outsized profit impact, where our contracts are compensated based on volumes of transactions.
•In our OUS Segment, we recorded a charge of $11.7 million on a single project, anticipating a loss over the life of the contract. If our current forecast remains unchanged, this project should record a breakeven profit for the remainder of its life.
Results of Operations
Table MD&A 1: Consolidated Results of Operations
For the Three Months EndedFor the Nine Months Ended
June 30, 2022June 30, 2021June 30, 2022June 30, 2021
(dollars in thousands, except per share data)
Revenue$1,125,785 $1,243,520 $3,453,987 $3,148,354 
Cost of revenue915,564 951,664 2,787,160 2,419,785 
Gross profit210,221 291,856 666,827 728,569 
Gross profit percentage18.7 %23.5 %19.3 %23.1 %
Selling, general, and administrative expenses132,974 140,129 387,502 364,498 
Selling, general, and administrative expenses as a percentage of revenue11.8 %11.3 %11.2 %11.6 %
Amortization of intangible assets22,690 12,132 67,951 23,718 
Operating income54,557 139,595 211,374 340,353 
Operating income margin4.8 %11.2 %6.1 %10.8 %
Interest expense(10,791)(3,087)(29,867)(4,049)
Other expense, net(2,497)(8,289)(2,093)(9,584)
Income before income taxes41,269 128,219 179,414 326,720 
Provision for income taxes9,934 33,724 44,653 87,534 
Effective tax rate24.1 %26.3 %24.9 %26.8 %
Net income$31,335 $94,495 $134,761 $239,186 
Earnings per share:
Basic$0.51 $1.52 $2.17 $3.86 
Diluted$0.51 $1.51 $2.17 $3.84 

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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 Three Months Ended June 30, 2022
RevenueCost of RevenueGross Profit
Dollars% ChangeDollars% ChangeDollars% Change
(dollars in thousands)
Three Months Ended June 30, 2021$1,243,520 $951,664 $291,856 
Organic effect(251,277)(20.2) %(137,342)(14.4) %(113,935)(39.0) %
Acquired growth150,217 12.1  %116,490 12.2  %33,727 11.6  %
Currency effect compared to the prior period(16,675)(1.3) %(15,248)(1.6) %(1,427)(0.5) %
Three Months Ended June 30, 2022$1,125,785 (9.5) %$915,564 (3.8) %$210,221 (28.0) %
Table MD&A 3: Changes in Revenue, Cost of Revenue, and Gross Profit for the Nine Months Ended June 30, 2022
RevenueCost of RevenueGross Profit
Dollars% ChangeDollars% ChangeDollars% Change
(dollars in thousands)
Nine Months Ended June 30, 2021$3,148,354 $2,419,785 $728,569 
Organic effect(279,979)(8.9)%(67,612)(2.8)%(212,367)(29.1)%
Acquired growth606,410 19.3 %452,782 18.7 %153,628 21.1 %
Currency effect compared to the prior period(20,798)(0.7)%(17,795)(0.7)%(3,003)(0.4)%
Nine Months Ended June 30, 2022$3,453,987 9.7 %$2,787,160 15.2 %$666,827 (8.5)%
Selling, General and Administrative
Selling, general, and administrative expenses ("SG&A") consists of indirect costs related to general management, marketing, and administration. It is primarily composed of labor costs. These costs may be incurred at a segment level, for dedicated resources that are not client-facing, or at a corporate level. Corporate costs are allocated to segments on a consistent and rational basis. Fluctuations in our SG&A are primarily driven by changes in our administrative cost base, which is not directly driven by changes in our revenue. As part of our work for the U.S. federal government and many states, we allocate these costs using a methodology driven by the U.S. Federal Cost Accounting Standards. Our SG&A expense increased year-over-year primarily due to the additional cost base from our acquisitions.

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Amortization of Intangible Assets
Our amortization of intangible assets increased by $10.6 million and $44.2 million for the three and nine months ended June 30, 2022, compared to same periods ended June 30, 2021. The increase is a result of acquisitions during fiscal years 2021 and 2022. This increase is partially offset by the intangible asset amortization related to the Census Questionnaire Assistance (CQA) contract, which was fully amortized through November 2020.
Table MD&A 4: Changes in Amortization of Intangible Assets Expense for Three and Nine Months Ended June 30, 2022
For the Three Months Ended June 30, 2022For the Nine Months Ended June 30, 2022
DollarsDollars
(dollars in thousands)
Period Ending June 30, 2021$12,132 $23,718 
VES acquisition9,249 36,916 
Attain acquisition— 4,375 
Aidvantage acquisition1,858 5,574 
Other 2022 acquisitions296 609 
CQA contract— (2,313)
Other, including foreign exchange(845)(928)
Period Ending June 30, 2022$22,690 $67,951 
Table MD&A 5: Non-GAAP Adjusted Results Excluding Amortization of Intangible Assets
For the Three Months EndedFor the Nine Months Ended
June 30, 2022June 30, 2021June 30, 2022June 30, 2021
(dollars in thousands, except per share data)
Operating income$54,557 $139,595 $211,374 $340,353 
Add back: Amortization of intangible assets22,690 12,132 67,951 23,718 
Adjusted operating income excluding amortization of intangible assets (Non-GAAP)$77,247 $151,727 $279,325 $364,071 
Adjusted operating income margin excluding amortization of intangible assets (Non-GAAP)6.9 %12.2 %8.1 %11.6 %
Net income$31,335 $94,495 $134,761 $239,186 
Add back: Amortization of intangible assets, net of tax16,750 8,941 50,164 17,364 
Adjusted net income excluding amortization of intangible assets (Non-GAAP)$48,085 $103,436 $184,925 $256,550 
Diluted earnings per share$0.51 $1.51 $2.17 $3.84 
Add back: Effect of amortization of intangible assets on diluted earnings per share0.27 0.15 0.80 0.28 
Adjusted diluted earnings per share excluding amortization of intangible assets (Non-GAAP)$0.78 $1.66 $2.97 $4.12 
Our intangible asset amortization is based upon our assumptions of the value and economic life, typically established at the acquisition date. If these assumptions change, the pattern of future expense may be accelerated. At this time, we have a significant asset related to the Customer Center Operations (CCO) contract which is subject to a rebid anticipated towards the end of this fiscal year. If this rebid is unsuccessful, the asset life of this asset may need to be reduced.
Interest Expense
Interest expense for the three months ended June 30, 2022, increased by $7.7 million to $10.8 million, while interest expense for the nine months ended June 30, 2022, increased by $25.8 million to $29.9 million. This increase is driven by the costs of our cash borrowings utilized to acquire VES. Interest expense is expected to be about $42 million for fiscal year 2022 as the debt is expected to be outstanding for the entire fiscal year. Our interest rate will vary based upon both
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prevailing interest rates and our leverage ratio.
Provision for Income Taxes
Our effective income tax rate for the three and nine months ended June 30, 2022, was 24.1% and 24.9%, respectively, compared to 26.3% and 26.8% for the three and nine months ended June 30, 2021. For fiscal year 2022, we expect the effective tax rate to be between 25.0% and 25.5%.
U.S. Services Segment
Our U.S. Services Segment provides a variety of business process services ("BPS") such as program administration, appeals and assessments, and related consulting work for U.S. state and local government programs. These services support a variety of programs, including the Affordable Care Act ("ACA"), Medicaid, the Children's Health Insurance Program ("CHIP"), Temporary Assistance to Needy Families ("TANF"), and child support programs. Addressing societal macro trends such as aging populations and rising costs, the segment continues to execute on its clinical evolution strategy by expanding its clinical offerings. This includes assessments to determine whether personal care services are medically necessary and public health offerings such as contact tracing, disease investigation, and vaccine distribution support services as part of the governments' COVID-19 response efforts.
Table MD&A 6: U.S. Services Segment - Financial Results
For the Three Months EndedFor the Nine Months Ended
June 30, 2022June 30, 2021June 30, 2022June 30, 2021
(dollars in thousands)
Revenue$399,320 $436,338 $1,183,814 $1,269,487 
Cost of revenue325,185 331,524 935,009 946,231 
Gross profit74,135 104,814 248,805 323,256 
Selling, general, and administrative expenses42,351 42,606 115,726 116,655 
Operating income31,784 62,208 133,079 206,601 
Gross profit percentage18.6 %24.0 %21.0  %25.5  %
Operating margin percentage8.0 %14.3 %11.2  %16.3  %
Our revenue and cost of revenue for the three months ended June 30, 2022, decreased 8.5% and 1.9%, compared to three months ended June 30, 2021, respectively. For the nine months ended June 30, 2022, our revenue and cost of revenue decreased 6.7% and 1.2%, respectively. All movement was organic.

For the three months ended June 30, 2021, we received $164 million of short-term COVID-19 related work, typically at higher margins. For the three months ended June 30, 2022, COVID-19 related work provided $24 million of revenue. As a result, both revenue and profit margins have decreased year-over-year. Conversely, we are still awaiting the return of many of our core programs to pre-pandemic levels of operation, in particular those where we are paid based upon the volume of redetermination activities. The Federal public health emergency declaration has been extended through mid-October which will further delay the commencement of redeterminations. Accordingly, we do not expect recoveries in these contracts until fiscal year 2023. For the full fiscal year, we anticipate an operating margin between 10% and 11%.
U.S. Federal Services Segment
From technology solutions to program administration and operations, our U.S. Federal Services Segment delivers end-to-end solutions that help various U.S. federal government agencies better deliver on their mission. This also includes appeals and assessments services, system and application development, IT modernization, and maintenance services. The segment also contains certain state-based assessments and appeals work that is part of the segment's heritage within the Medicare Appeals portfolio which continues to be managed within this segment. Benefiting from the Maximus Federal Consulting (formerly Attain Federal) platform, the segment executes on its digital strategy to deliver technology solutions that advance agency missions, including the challenge to modernize, provide better customer experience, and drive process efficiencies. The segment continues to expand its clinical solutions with the acquisition of VES which manages the clinical evaluation process for U.S. veterans and service members on behalf of the U.S. Department of Veterans Affairs. The segment further supports clinical offerings in public health with new work supporting the U.S. federal government's COVID-19 response efforts. This included expanded work with the Centers for Disease Control and Prevention ("CDC") for their helpline and increased support for the IRS Wage and Investment Division's response efforts to general inquiries regarding the Coronavirus Aid Relief & Economic Security ("CARES") Act and Economic Impact Payment Service Plan.

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Table MD&A 7: U.S. Federal Services Segment - Financial Results
For the Three Months EndedFor the Nine Months Ended
June 30, 2022June 30, 2021June 30, 2022June 30, 2021
(dollars in thousands)
Revenue$525,519 $617,601 $1,680,678 $1,352,982 
Cost of revenue401,316 461,825 1,314,746 1,040,577 
Gross profit124,203 155,776 365,932 312,405 
Selling, general, and administrative expenses69,466 69,647 203,340 172,877 
Operating income54,737 86,129 162,592 139,528 
Gross profit percentage23.6  %25.2  %21.8  %23.1  %
Operating margin percentage10.4  %13.9  %9.7  %10.3  %
Table MD&A 8: U.S. Federal Services Segment - Changes in Revenue, Cost of Revenue, and Gross Profit for the Three Months Ended June 30, 2022
RevenueCost of RevenueGross Profit
Amount% ChangeAmount% ChangeAmount% Change
(dollars in thousands)
Three Months Ended June 30, 2021$617,601 $461,825 $155,776 
Organic effect(235,221)(38.1) %(172,738)(37.4) %(62,483)(40.1) %
Acquired growth143,139 23.2  %112,229 24.3  %30,910 19.8  %
Three Months Ended June 30, 2022$525,519 (14.9) %$401,316 (13.1) %$124,203 (20.3) %
Table MD&A 9: U.S. Federal Services Segment - Changes in Revenue, Cost of Revenue, and Gross Profit for the Nine Months Ended June 30, 2022
RevenueCost of RevenueGross Profit
Amount% ChangeAmount% ChangeAmount% Change
(dollars in thousands)
Nine Months Ended June 30, 2021$1,352,982 $1,040,577 $312,405 
Organic effect(259,527)(19.2) %(167,028)(16.1) %(92,499)(29.6) %
Acquired growth587,223 43.4  %441,197 42.4  %146,026 46.7  %
Nine Months Ended June 30, 2022$1,680,678 24.2  %$1,314,746 26.3  %$365,932 17.1  %
Our results for the three months ended June 30, 2022 received the benefit of growth from VES, which we acquired in May 2021, and Aidvantage, which we acquired in October 2021. Our year-to-date results also include the benefit of the Attain acquisition, which was completed in March 2021.
The decline in our organic business is driven by a small number of large, pandemic-related contracts which ended in late 2021 or early 2022. These contracts resulted in approximately $24 million and $280 million of revenue for the three months ended June 30, 2022 and 2021, respectively. This short-term work was typically at higher margins than our standard services. We have also accepted a lower return on an existing contract in return for increased funding and anticipated future revenue.
Following a loss in the second quarter, Aidvantage returned to profitability in the three months ended June 30, 2022. This has improved our quarterly margins but still acts as a detriment on our margins over the first nine months of the year.
We anticipate operating margins between 10% and 11% for the full fiscal year. These margins will be tempered by an expected $8 million to $10 million of additional costs as we staff up VES to address additional volumes in fiscal year 2023.
Outside the U.S. Segment
Our Outside the U.S. Segment provides BPS for international governments and commercial clients, transforming the lives of people around the world. Helping people find employment, access vital support, and remain healthy, these services include health and disability assessments, program administration for employment services, wellbeing solutions, and other job seeker related services. We support programs and deliver services in the U.K., including the Health Assessment Advisory Service ("HAAS") and Restart; Australia, including Workforce Australia and the Disability Employment Service; Canada, including Health Insurance British Columbia and the Employment Program of British Columbia; in addition to
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Italy, Saudi Arabia, Singapore, South Korea, and Sweden, where we predominantly provide employment support and job seeker services.
Table MD&A 10: Outside the U.S. Segment - Financial Results
For the Three Months EndedFor the Nine Months Ended
June 30, 2022June 30, 2021June 30, 2022June 30, 2021
(dollars in thousands)
Revenue$200,946 $189,581 $589,495 $525,885 
Cost of revenue189,063 158,315 537,405 432,977 
Gross profit11,883 31,266 52,090 92,908 
Selling, general, and administrative expenses23,101 22,973 68,452 65,018 
Operating income/(loss)(11,218)8,293 (16,362)27,890 
Gross profit percentage5.9  %16.5  %8.8  %17.7  %
Operating margin percentage(5.6) %4.4  %(2.8) %5.3  %
Table MD&A 11: Outside the U.S. Segment - Changes in Revenue, Cost of Revenue, and Gross Profit for the Three Months Ended June 30, 2022
RevenueCost of RevenueGross Profit
Amount% ChangeAmount% ChangeAmount% Change
(dollars in thousands)
Three Months Ended June 30, 2021$189,581 $158,315 $31,266 
Organic effect20,962 11.1  %41,735 26.4  %(20,773)(66.4) %
Acquired growth7,078 3.7  %4,261 2.7  %2,817 9.0  %
Currency effect compared to the prior period(16,675)(8.8)%(15,248)(9.6)%(1,427)(4.6)%
Three Months Ended June 30, 2022$200,946 6.0  %$189,063 19.4  %$11,883 (62.0) %
Table MD&A 12: Outside the U.S. Segment - Changes in Revenue, Cost of Revenue, and Gross Profit for the Nine Months Ended June 30, 2022
RevenueCost of RevenueGross Profit
Amount% ChangeAmount% ChangeAmount% Change
(dollars in thousands)
Nine Months Ended June 30, 2021$525,885 $432,977 $92,908 
Organic effect65,221 12.4 %110,638 25.6 %(45,417)(48.9)%
Acquired growth19,187 3.6 %11,585 2.7 %7,602 8.2 %
Currency effect compared to the prior period$(20,798)(4.0)%$(17,795)(4.1)%(3,003)(3.2)%
Nine Months Ended June 30, 2022$589,495 12.1 %$537,405 24.1 %$52,090 (43.9)%
This segment experienced organic growth in revenue and costs, as well as acquired growth, during the three and nine months ended June 30, 2022. These were mitigated by declines in the values of the currencies in which we operate against the U.S. Dollar.
Fiscal year 2022 has seen revenue and cost growth from our United Kingdom business, where the Restart contract continued to ramp up. Whereas results in fiscal year 2021 included a significant revenue benefit from the recovery of our welfare-to-work contracts in Australia, this contract ended in June 2022 and we were awarded a significantly lower caseload for the follow-on contract. This resulted in reduced revenues for the three months ended June 30, 2022, as well as costs related to the ramping down of our existing case load, including severance. Profit margins were also tempered by a charge of $11.7 million related to a single large modernization contract. We anticipate that we will record a loss for this segment in the current fiscal year.
Acquired growth is from the Stirling, Connect Assist and BZB acquisitions.
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Much of our revenue, including that on the Restart contract, stems from our employment services contracts. On many contracts, we recognize revenue based upon estimates of future employment outcomes, which have become more volatile due to the effects of the COVID-19 pandemic, including those actions adopted by governments and employers. We update our estimates regularly based upon actual performance and updated expectations, but a sudden change in employment markets may result in significant fluctuations in our revenue.
Liquidity and Capital Resources
Our primary sources of liquidity are cash on hand, cash flows from operating activities, and availability under our credit facilities, including our $600 million revolving credit facility. As of June 30, 2022, we had $93.7 million in cash and cash equivalents. We believe that our current cash position, access to our credit facility, and cash flows generated from operations should be not only sufficient for our operating requirements but also to enable us to fund share repurchases and any required long-term debt payments through the next several fiscal years. See Note 7 to the Consolidated Financial Statements for a more detailed discussion of our debt financing arrangements.
Table MD&A 13: Net Change in Cash and Cash Equivalents and Restricted Cash
For the Nine Months Ended
June 30, 2022June 30, 2021
(in thousands)
Net cash provided by operating activities169,776 246,659 
Net cash used in investing activities(48,080)(1,811,606)
Net cash (used in)/provided by financing activities(163,272)1,586,792 
Effect of foreign exchange rates on cash and cash equivalents and restricted cash(4,369)2,830 
Net change in cash and cash equivalents and restricted cash$(45,945)$24,675 
Net Cash Provided By Operating Activities
Net cash provided by operating activities decreased by $76.9 million for the nine months ended June 30, 2022, compared to nine months ended June 30, 2021. This decrease is primarily caused by the decline in operating income and increased interest payments related to our credit facility.
Our Days Sales Outstanding ("DSO") as of June 30, 2022, and September 30, 2021, were 70 days and 68 days, respectively. Approximately $80 million of outstanding receivables were collected in the first two business days of July.
Net Cash Used In Investing Activities
The net cash used in investing activities was $48.1 million for the nine months ended June 30, 2022. In addition to capital expenditures, we made payments to acquire BZB and Stirling, as well as a final payment for the acquisition of VES. The prior year comparative total includes payments for the acquisitions of VES and Attain.
Net Cash (Used In)/Provided By Financing Activities
The $163.3 million cash used in financing activities during the nine months ended June 30, 2022, includes $73.9 million for share repurchases, $51.8 million in dividend payments and $9.7 million in tax withholding payments for stock awards. We have made $28.0 million of net repayments of debt related to the mandatory repayments on our U.S. credit facility and a mix of mandatory and voluntary payments related to our subsidiary debt. The prior year cash inflows include the proceeds from our new Credit Facility.
With the acquisition of Aidvantage, we have incurred a liability to the seller based upon future performance, which we have estimated at $16.4 million. We expect these payments to be made through fiscal year 2024.
Cash in Foreign Locations
We have no requirement to remit funds from our foreign locations to the U.S. 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 U.S.
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Free Cash Flow (Non-GAAP)
Table MD&A 14: Free Cash Flow (Non-GAAP)
For the Nine Months Ended
June 30, 2022June 30, 2021
(in thousands)
Net cash provided by operating activities$169,776 $246,659 
Purchases of property and equipment and capitalized software(35,936)(32,133)
Free cash flow (Non-GAAP)$133,840 $214,526 
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. The 2021 Form 10-K, as filed with the SEC on November 18, 2021, includes a summary of critical accounting policies we believe are the most important to aid in understanding our financial results. There have been no changes to those critical accounting policies that have had a material impact on our reported amounts of assets, liabilities, revenues, or expenses during the nine months ended June 30, 2022.
Non-GAAP and Other Measures
We utilize non-GAAP measures where we believe it will assist users of our financial statements in understanding our business. The presentation of these measures is meant to complement, but not replace, other financial measures in this document. The presentation of non-GAAP numbers is not meant to be considered in isolation, nor as an alternative to revenue growth, cash flows from operating activities, net income, or earnings per share as measures of performance. These non-GAAP measures, as determined and presented by us, may not be comparable to related or similarly titled measures presented by other companies.
For the nine months ended June 30, 2022, 17% of our revenue was generated outside the U.S. We believe that users of our financial statements wish to understand the performance of our foreign operations using a methodology which excludes the effect of year-over-year exchange rate fluctuations. To calculate year-over-year currency movement, we determine the current fiscal year's results for all foreign businesses using the exchange rates in the prior fiscal year. We refer to this adjusted revenue on a "constant currency basis."
In recent years, we have made a number of acquisitions. We believe users of our financial statements wish to evaluate the performance of our operations, excluding changes that have arisen due to businesses acquired or disposed of. We 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 results from acquisitions or disposals, to our prior fiscal year results.
Our recent acquisitions have resulted in significant intangible assets which are amortized over their estimated useful lives. We believe users of our financial statements wish to understand the performance of the business by using a methodology that allows them to compare operating activities excluding the effects of the amortization of intangible assets. Accordingly, we have calculated our operating profit, net income, and earnings per share excluding the effect of the amortization of intangible assets. We have included a table showing our reconciliation of these income measures to their corresponding GAAP measures.
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 wish to understand the cash flows that directly correspond with our operations and the investments we must make in those operations using a methodology which combines operating cash flows and capital expenditures. We provide free cash flow to complement our statement of cash flows. Free cash flow shows the effects of the Company's 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 operating activities 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 wish to evaluate our efficiency in converting revenue into cash receipts. Accordingly, we provide DSO, which we calculate by dividing billed and unbilled receivable balances at the end of each quarter by revenue per day for the period. Revenue per day for a quarter is determined by dividing total revenue by 91 days.
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As noted above, we have a $2.10 billion corporate credit facility. Our credit agreement includes the defined term Consolidated EBITDA and our calculation of Adjusted EBITDA conforms to the credit agreement definition. We believe our investors appreciate the opportunity to understand the possible restrictions which arise from our credit agreement.
•Adjusted EBITDA is also a useful measure of performance which focuses on the cash generating capacity of the business as it excludes the non-cash expenses of depreciation and amortization, and makes for easier comparisons between the operating performance of companies with different capital structures by excluding interest expense and therefore the impacts of financing costs.
•The measure of Adjusted EBITA is a step in calculating Adjusted EBITDA and facilitates comparisons to similar businesses as it isolates the amortization effect of business combinations.
•Our corporate credit facility requires us to calculate Adjusted EBITDA on a pro forma basis, as though we had owned any significant acquired business for a full twelve months. Accordingly, we have included pro forma data for VES, Aidvantage, Connect Assist, BZB and Stirling in the table below. Our corporate credit facility also allows other adjustments to Adjusted EBITDA for the purposes of calculating our leverage ratio, including anticipated synergies from acquisitions and one-time costs.
We have provided a reconciliation from net income to Non-GAAP Adjusted EBITA, Non-GAAP Adjusted EBITDA, and Non-GAAP Pro Forma Adjusted EBITDA as shown below.
Table MD&A 15: Reconciliation of Net Income to Non-GAAP Adjusted EBITA, Non-GAAP Adjusted EBITDA, and Non-GAAP Pro Forma Adjusted EBITDA
For the Three
Months Ended		For the Trailing Twelve
Months Ended
June 30, 2022June 30, 2022
(in thousands)
Net income$31,335 $186,774 
Adjustments:
Interest expense10,791 40,562 
Other expense, net2,497 2,614 
Provision for income taxes9,934 49,601 
Amortization of intangibles22,690 88,590 
Stock compensation expense7,028 29,810 
Acquisition-related expenses(1,957)1,501 
Adjusted EBITA - Non-GAAP measure82,318 399,452 
Depreciation and amortization of property, equipment, and capitalized software8,676 42,572 
Adjusted EBITDA - Non-GAAP measure90,994 442,024 
Pro forma adjusted EBITDA related to acquisitions - Non-GAAP measure— 8,709 
Other pro forma adjustments permitted by our debt agreement$23,163 $38,272 
Pro forma adjusted EBITDA - Non-GAAP measure$114,157 $489,005 
33
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
In the normal course of business, we are exposed to financial risks such as changes in interest rates, foreign currency exchange rates, and counterparty risk. We use derivative instruments to manage selected interest rate exposures. The Company's market rate risk disclosures set forth in Part II, Item 7A, "Quantitative and Qualitative Disclosures About Market Risk" on the 2021 Form 10-K, as filed with the SEC on November 18, 2021, have not changed materially during the nine month period ended June 30, 2022.
Item 4. Controls and Procedures
Management's Evaluation of Disclosure Controls and Procedures. The Company maintains disclosure controls and procedures designed to ensure that information required to be disclosed in its periodic filings under the Securities Exchange Act of 1934 ("Exchange Act"), including this Quarterly Report on Form 10-Q, is recorded, processed, summarized, and reported on a timely basis. These disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed under the Exchange Act is accumulated and communicated to the Company's management on a timely basis to allow decisions about required disclosure. Management, including the Company's Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of Maximus' disclosure controls and procedures (as defined under Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of June 30, 2022.
Maximus carried out the evaluation of the effectiveness of its disclosure controls and procedures, required by paragraph (b) of Exchange Act Rules 13a-15 and 15d-15, under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer. Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of June 30, 2022.
Changes in Internal Control Over Financial Reporting. There were no changes in the Company's internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the three months ended June 30, 2022, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
34
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Refer to our disclosures included in Note 13. Commitments and Contingencies included in Part 1, Item 1 of this Quarterly Report on Form 10-Q.
Item 1A. Risk Factors
There were no material changes during the nine months ended June 30, 2022, to the risk factors previously disclosed in the 2021 Form 10-K, as filed with the SEC on November 18, 2021.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(a)None.
(b)None.
(c)Under a resolution adopted in March 2020, the Board of Directors authorized the purchase, at management's discretion, of up to $200.0 million of our common stock.
Common Stock Purchase Activity During the Three Months Ended June 30, 2022
PeriodTotal Number of Shares PurchasedAverage Price Paid Per ShareTotal Number of Shares Purchased as Part of the Publicly Announced Plans or ProgramsMaximum Dollar Value that May Yet Be Purchased Under the Plans or Programs
(in thousands, except per share data)
April 1 - April 30, 2022189,631 74.65 189,631 $106,705 
May 1 - May 30, 2022337,579 69.10 337,579 $83,388 
June 1 - June 30, 2022178,600 59.38 178,600 $72,833 
Total705,810 $68.01 705,810 
Item 3. Defaults Upon Senior Securities
(a)None.
(b)None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
(a)None.
(b)None.
35
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Item 6. Exhibits
Exhibit
No.		Description of Exhibit
31.1
v
31.2
v
32.1
Φ
101.INSvXBRL Instance Document.
101.SCHvXBRL Taxonomy Extension Schema Document.
101.CALvXBRL Taxonomy Calculation Linkbase Document.
101.DEFvXBRL Taxonomy Definition Linkbase Document.
101.LABvXBRL Taxonomy Label Linkbase Document.
101.PREvXBRL Taxonomy Presentation Linkbase Document.
104vCover Page Interactive Data File. (formatted as Inline XBRL tags and contained in Exhibit 101)
vFiled herewith.
ΦFurnished herewith.
36
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Maximus, Inc.
/s/ Bruce L. CaswellAugust 4, 2022
By:Bruce L. Caswell
 President and Chief Executive Officer
 (Principal Executive Officer)
/s/ David. W. MutrynAugust 4, 2022
By:David W. Mutryn
Chief Financial Officer
(Principal Financial Officer)
37

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