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What changed in MAXIMUS, INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of MAXIMUS, INC.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+314 added−286 removedSource: 10-K (2024-11-21) vs 10-K (2023-11-16)

Top changes in MAXIMUS, INC.'s 2024 10-K

314 paragraphs added · 286 removed · 208 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

78 edited+46 added−31 removed16 unchanged
Biggest changeIn addition to competitive base wages, additional programs include incentive bonus opportunities, restricted stock units, performance stock units, company-matched 401(k) Plan, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, family care resources, flexible work schedules, employee assistance programs, and supplemental programs to support our employees’ physical, mental, and financial well-being. 11 Table of Contents During fiscal year 2023, we made significant improvements to the employee value proposition in the U.S., introducing a preferred provider organization plan with lower deductibles for all employees, and further lowering the deductible for our most populated service contract medical plan to make healthcare more accessible for our mission-critical employees.
Biggest changeIn addition to competitive base wages, additional programs include incentive bonus opportunities, restricted stock units, performance stock units, global retirement programs including a company-matched 401(k) Plan in the U.S., healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, family care resources, flexible work schedules, employee assistance programs, and supplemental programs to support our employees’ physical, mental, and financial well-being.
We are driven to strengthen communities and improve the lives of those we serve. We create value to our customers through our ability to translate health and human services public policy into operating models that achieve outcomes for governments at scale.
We are driven to strengthen communities and improve the lives of those we serve. We create value for our customers through our ability to translate health and human services public policy into operating models that achieve outcomes for governments at scale.
Economic and Market Environments In all the markets and locations in which we operate, we are seeing consistent themes that drive our long-term strategy. Investment in Technology. Many federal agencies must address the maintenance of legacy IT systems, and the pressing need for IT infrastructure modernization continues to grow.
Economic and Market Environments In all the markets and locations in which we operate, we are seeing consistent themes that drive our long-term strategy. Investment in Technology Modernization. Many federal agencies must address the maintenance of legacy IT systems, and the pressing need for IT infrastructure modernization continues to grow.
Our recruiting programs focus on identifying and evaluating talent through practices that welcome a diverse workforce, including people with disabilities, language barriers, and those from varying socioeconomic backgrounds. We continue to invest in our employees through a variety of benefits and overall program enhancements.
Our recruiting programs focus on identifying and evaluating talent through practices that welcome a diverse workforce, including veterans and people with disabilities, language barriers, and those from varying socioeconomic backgrounds. We continue to invest in our employees through a variety of benefits and overall program enhancements.
Our strength lies within our people – connectors, innovators, and problem solvers – united by a shared purpose and championing our customers’ mission to deliver results. Cultivating a culture that thrives on individual contributions and embracing diversity, we attract and retain a future-ready, diverse workforce through opportunities for career advancement and ensuring that each employee can unlock their true potential.
Our strength lies within our people – connectors, innovators, and problem solvers – united by a shared purpose and championing our customers’ mission to deliver results. Cultivating a culture that thrives on individual contributions and embracing inclusivity, we attract and retain a future-ready, diverse workforce through opportunities for career advancement and ensuring that each employee can unlock their true potential.
For more information on our segment presentation and geographic distribution of our business, including comparative revenue, gross profit, operating income, identifiable assets, and related financial information for the 2023, 2022, and 2021 fiscal years, see "Note 3. Business Segments" within Item 8 of this Annual Report on Form 10-K. 5 Table of Contents U.S. Federal Services Segment Our U.S.
For more information on our segment presentation and geographic distribution of our business, including comparative revenue, gross profit, operating income, identifiable assets, and related financial information for the 2024, 2023, and 2022 fiscal years, see "Note 3. Business Segments" within Item 8 of this Annual Report on Form 10-K. 5 Table of Contents U.S. Federal Services Segment Our U.S.
In the event that we have significant cash outlays at the commencement of projects or where delays in payments result in short-term working capital needs, we may borrow up to $600 million through a credit agreement with JPMorgan Chase Bank N.A. (the "Credit Agreement"), subject to standard covenants.
In the event that we have significant cash outlays at the commencement of projects or where delays in payments result in short-term working capital needs, we may borrow up to $750 million through a credit agreement with JPMorgan Chase Bank N.A. (the "Credit Agreement"), subject to standard covenants.
Many of our customers are requesting that their providers adopt and disclose their climate policies and principles and are using these in procurement decisions. These requirements vary between customers and are constantly evolving, often with limited notice. Such policies and principles may be subjective, and the manner of scoring our performance against our competitors may vary between bids.
Some of our customers are requesting that their providers adopt and disclose their climate policies and principles and are using these in procurement decisions. These requirements vary between customers and are constantly evolving, often with limited notice. Such policies and principles may be subjective, and the manner of scoring our performance against our competitors may vary between bids.
In addition, even though the majority of our direct clients are state governments, a significant amount of our revenue is ultimately funded via the U.S. federal government in the form of cost-sharing arrangements with the states, as is the case with Medicaid. Our primary competitors are government in-sourced operations.
In addition, even though the majority of our direct clients are state governments, a significant amount of our revenue is ultimately funded via the U.S. federal government in the form of cost-sharing arrangements with the states, as is the case with Medicaid. Our primary competitors are government insourced operations.
Although the basis for competition varies from contract to contract, we believe that typical contracts are awarded based upon a mix of comprehensive solutions and prices. In some cases, clients award points for past performance tied to program outcomes.
Although the basis for competition varies from contract to contract, we believe that typical contracts are awarded based on a mix of comprehensive solutions and prices. In some cases, clients award points for past performance tied to program outcomes.
Engaged employees stay longer, provide a better consumer experience, and influence other employees. To better understand employee morale, satisfaction, and engagement, we administer an annual Global Employee Engagement survey. We utilize the anonymous feedback to provide an exceptional employee experience and engaging culture where our values of Respect, Compassion, Innovation, Accountability, Collaboration, and Customer Focus are lived out.
Engaged employees stay longer, provide a better consumer experience, and influence other employees. To better understand employee morale, satisfaction, and engagement, we administer an annual Global Employee Engagement survey. We utilize anonymous feedback to shape the employee experience and culture where our values of Respect, Compassion, Innovation, Accountability, Collaboration, and Customer Focus are lived out.
This makes our hiring efforts significant and extensive, and as a result, our talent acquisition team focuses on finding top, diverse talent quickly. We believe our culture values individual skills, experiences, and differences that allow Maximus to deliver robust and innovative approaches to solving some of our communities' most challenging needs.
This makes our hiring efforts significant and extensive, and as a result, our talent acquisition team focuses on finding top talent quickly. We believe our culture values individual skills, experiences, and differences that allow us to deliver robust and innovative approaches to solving some of our communities' most challenging needs.
Item 1. Business General Maximus, under its mission of Moving People Forward, helps millions of people access the vital government services they need. With over 45 years of experience working with local, state, federal, and international government clients, we proudly design, develop, and deliver innovative and impactful programs that change lives.
Item 1. Business General Maximus, under its mission of Moving People Forward, helps millions of people access the vital government services they need. With nearly 50 years of experience working with local, state, federal, and international government clients, we proudly design, develop, and deliver innovative and impactful programs that change lives.
Our work covers a broad array of services, including the operation of large health insurance eligibility and enrollment programs; clinical services, including assessments, appeals, and independent medical reviews; and technology services. These services benefit from a market with increasing demographic demand, constrained government budgets, and an increased focus on technology.
Our work covers a broad array of services, including the operation of large health insurance eligibility and enrollment programs; clinical services, including assessments, appeals, and independent medical reviews; and technology services. These services benefit from a market with increasing demographic demand, constrained government budgets, and an increased focus on technology as governments prioritize modernization.
Legacy processes and systems are fundamental to government operations, yet they are expensive to operate in an environment that requires online agility and rapid response to new demands, requirements, and global challenges. We are delivering and supporting the priorities set by the Federal Chief Information Officer: cybersecurity, IT modernization, and customer service and customer experience.
Legacy processes and systems are fundamental to government operations, yet they are expensive to operate in an environment that requires online agility and rapid response to new demands, requirements, and global challenges. We are delivering and supporting the priorities set by our federal customers: cybersecurity, IT modernization, and customer service and customer experience.
With more than 40 years of experience in responding to RFPs, we believe we have the necessary experience to navigate government procurement processes and to assess and allocate the appropriate resources necessary for successful project completion in accordance with contractual terms. Barriers to entry. The market for providing our services to government agencies is competitive and subject to rapid change.
With nearly 50 years of experience in responding to RFPs, we believe we have the necessary experience to navigate government procurement processes and to assess and allocate the appropriate resources necessary for successful project completion in accordance with contractual terms. Barriers to entry. The market for providing our services to government agencies is competitive and subject to rapid change.
TCS's core capabilities build further upon our cloud-based solutions and include: • Application development & modernization: Modernize, develop, and deliver solutions utilizing automation, agile, and development, security, and operations (DevSecOps) practices. • Enterprise Business Solutions: Integrate and manage disparate business processes and systems. • Advanced Analytics & Emerging Technologies: Provide technology services to leverage and integrate the latest technologies for AI/ML, automation, and high-performance computing. 6 Table of Contents • Cybersecurity: Deliver full spectrum cybersecurity services, including cyber engineering and operations, digital forensics, and incident response. • Infrastructure and Engineering: Deploy solutions that leverage cloud-hosted and on-premise designs to optimize costs.
Our core capabilities include: • Application development & modernization: Modernize, develop, and deliver solutions utilizing automation and agile development, security, and operations (DevSecOps) practices. • Enterprise Business Solutions: Integrate and manage disparate business processes and systems. • Advanced Analytics & Emerging Technologies: Provide technology services to leverage and integrate the latest technologies for AI/ML, automation, and high-performance computing. • Cybersecurity: Deliver full spectrum cybersecurity services, including cyber engineering and operations, digital forensics, and incident response. • Infrastructure and Engineering: Deploy solutions that leverage cloud-hosted and on-premise designs to optimize costs. 6 Table of Contents We also build digital qualifications in the market.
As a leading supplier in many of the health program administration markets that we serve, we are the largest provider of Medicaid eligibility support and enrollment services and state-based health insurance exchange operations. 7 Table of Contents Clinical Services. Clinical services include our independent appeals and person-centered assessment services, primarily under Medicaid Long-Term Care.
As a leading supplier in many of the health program administration markets that we serve, we are the largest provider of Medicaid eligibility support and enrollment services and state-based health insurance exchange operations. 7 Table of Contents Clinical Services. Clinical services include our person-centered assessment services, primarily to determine consumers' eligibility for Medicaid Long-Term Care services.
Maximus supports enterprise-wide professional development by offering a variety of instructor-led and self-paced learning programs for diverse audiences ranging from individual contributors to frontline supervisors and executive leadership. Additionally, our project training teams manage customized programs supporting contract requirements, customer service, local leadership development, and employee engagement.
We support enterprise-wide professional development by offering a variety of instructor-led and self-paced learning programs for diverse audiences ranging from individual contributors to frontline supervisors and executive leadership. Our project training teams are positioned to manage customized programs supporting contract requirements, customer service, local leadership development, and employee engagement.
Our primary competitors in this segment include Atos, Capita, Serco, Staffline, Shaw Trust, Ingeus, Sarina Russo, Advanced Personnel Management, IBM, Telus-Health, NTT Data, Pacific Blue Cross, Sawaeed, Takamol, and other specialized private companies and nonprofit organizations.
Our primary competitors in this segment include Atos, Capita, Serco, Staffline, Shaw Trust, Reed in Partnership, Ingeus, Advanced Personnel Management, IBM, Telus-Health, NTT Data, Pacific Blue Cross, Sawaeed, Elm, and other specialized private companies and nonprofit organizations.
Services Segment, 7,600 employees in the Outside the U.S. Services Segment, and 1,500 corporate administrative employees. Talent Acquisition Our success depends in large part on our ability to attract talent globally to meet the needs of our customers and comply with our contracts.
Services Segment, 8,300 employees in the Outside the U.S. Services Segment, and 1,800 corporate administrative employees. Talent Acquisition Our success depends in large part on our ability to attract talent globally to meet the needs of our customers and comply with our contracts.
Our culture, values, and unwavering commitment to our people define who we are, and they guide us in making a meaningful impact on the lives of those we serve . As of September 30, 2023, we had approximately 39,600 employees and 12,400 contingent workers, consisting of 15,800 employees in our U.S. Federal Services Segment, 14,700 employees in the U.S.
Our culture, values, and unwavering commitment to our people define who we are, and they guide us in making a meaningful impact on the lives of those we serve. As of September 30, 2024, we had approximately 41,100 employees and 11,800 contingent workers, consisting of 15,400 employees in our U.S. Federal Services Segment, 15,600 employees in the U.S.
Services Segment provides a variety of BPS, such as program administration, assessments, and related consulting work for U.S. state and local government programs. These services support a variety of programs, including the ACA, Medicaid, the Children's Health Insurance Program ("CHIP"), Temporary Assistance to Needy Families ("TANF"), and child support programs.
Services Segment provides a variety of services, such as program operations, clinical services, employment services and technology solutions and related consulting work for U.S. state and local government programs. These services support a variety of programs, including the programs under ACA, Medicaid, the Children's Health Insurance Program (CHIP), Temporary Assistance to Needy Families (TANF), and child support programs.
The inclusion of these additional criteria, in addition to price and quality of service, may provide opportunities for us, but may also count against us in competitive bids if our real or perceived performance against climate and environmental requirements is deemed unsatisfactory. In addition, our operations are subject to various local, state, federal, and international environmental laws and regulations.
The inclusion of these additional criteria, in addition to price and quality of service, may provide opportunities for us but may also count against us in competitive bids if our real or perceived performance against climate and environmental requirements is deemed unsatisfactory.
The services we provide vary from program to program but may include: • Program eligibility support and enrollment services to help beneficiaries make the best choice for their health insurance coverage to improve their access to healthcare; • Centralized multilingual customer contact centers and multichannel, digital self-service options for simplified enrollment to better serve citizens' needs; • Application assistance and independent health plan choice counseling to beneficiaries; and • Beneficiary outreach, education, eligibility assistance, enrollment, and redeterminations services.
The services we provide vary from program to program but may include: • Centralized multilingual customer contact centers and multichannel, digital self-service options to better serve citizens' needs; • Application assistance and independent health plan choice counseling to beneficiaries to help them access benefits and make informed choices; • Beneficiary outreach, education, eligibility assistance, enrollment, and redeterminations services.
Our government program expertise and proven ability to deliver defined, measurable outcomes differentiate us from other firms and nonprofit organizations, including large consulting firms that serve multiple industries and lack the focus necessary to manage the complexities of serving government efficiently. Established presence outside the United States .
Our government program expertise and proven ability to deliver defined, measurable outcomes differentiate us from other firms and nonprofit organizations, including large consulting firms that serve multiple industries and lack the focus necessary to manage the complexities of serving government efficiently. 10 Table of Contents Expertise in competitive bidding .
Such contractual language generally allows the government to terminate a contract at any time and enables us to recover only our costs incurred or committed and settlement expenses and profit, if any, on the work completed prior to termination. Our primary competitors in the U.S. Federal Services Segment are Serco, General Dynamics Information Technology, Amentum, Cognosante, and Conduent.
Such contractual language generally allows the government to terminate a contract at any time and enables us to recover only our costs incurred or committed and settlement expenses and profit, if any, on the work completed prior to termination. Our primary competitors in the U.S.
It should not be relied upon for investment purposes, nor is it incorporated by reference into this Annual Report on Form 10-K.
We make our website available for informational purposes only. It should not be relied upon for investment purposes, nor is it incorporated by reference into this Annual Report on Form 10-K.
The growth of our clinical services demonstrates successful execution of our continued strategy and focus on clinical services. These services help governments engage with program recipients while at the same time helping them improve the efficiency, cost-effectiveness, quality, and accountability of their health and disability benefits programs.
Clinical services is a growing portion of the segment and demonstrates successful focus and execution of our continued strategy. Our services help governments engage with program recipients while at the same time helping improve the efficiency, cost-effectiveness, quality, and accountability of state health and disability benefits programs.
Over the last three years, many programs in this segment have been operating with depressed margins resulting from the pause in Medicaid redeterminations. The depressed margins have resulted from reduced operating leverage in the segment as costs cannot scale down at the same rate to meet lower demand due to the requirements to fulfill other obligations on these contracts.
In fiscal years 2020 through 2023, many programs in this segment were operating with depressed margins resulting from the pause in Medicaid redeterminations. The depressed margins resulted from reduced operating leverage in the segment as costs could not scale down at the same rate to meet lower demand due to the requirements to fulfill other obligations on these contracts.
We believe that near-term growth should also be realized as a result of the Promise to Address Comprehensive Toxics Act of 2022 ("PACT") Act, which was passed by the U.S. Congress in August 2022. The PACT Act expands certain conditions under which veterans should presumptively qualify for benefits and would result in increases in MDE volumes.
Near-term growth has been realized as a result of the Promise to Address Comprehensive Toxics Act of 2022 (PACT) Act, which was passed by the U.S. Congress in August 2022. The PACT Act expanded certain conditions under which veterans qualify for benefits and resulted in increases in MDE volumes.
Aggregated results are dispersed throughout the organization to ensure all levels of management understand employee sentiment. Maximus empowers employee leaders alongside an organizational action committee to review the responses and create action plans to improve our culture and performance.
Aggregated results are dispersed throughout the organization to ensure all levels of management understand employee sentiment. Maximus empowers employee leaders alongside an organizational action committee to review the responses and create action plans to improve our culture and performance. Our employee engagement score had increased to +33 as of our last pulse survey in fiscal year 2024.
These services cover a number of attributes, including eligibility determination, case management, job-readiness preparation and work capability assessments, job search and employer outreach, job retention and career advancement, and selected educational and training services. Payment terms are typically focused on achieving employment outcomes. Clinical Services. Clinical services includes appeals and assessments work.
Comprehensive employment services help vulnerable individuals transition from government assistance programs to sustainable employment and economic independence. These services cover a number of attributes, including eligibility determination, case management, job-readiness preparation and work capability assessments, job search and employer outreach, job retention and career advancement, and selected educational and training services. Payment terms are typically focused on achieving employment outcomes.
The independent health and disability assessments and appeals portion of our business is a growing part of our overall portfolio, lending further credibility to our organic growth efforts with other Federal departments and in non-Federal markets. Technology Solutions.
We are operating at higher volumes amidst strong demand and expect this to continue for the foreseeable future. The independent health and disability assessments and appeals portion of our business is a growing part of our overall portfolio, lending further credibility to our organic growth efforts with other Federal departments and in non-Federal markets. Technology Solutions.
TCS has also built digital qualifications in the market. The division utilizes AI and machine learning to build bespoke data models, providing predictive analytics to maximize process efficiency, as well as identify systemic process issues that can be isolated and prioritized for troubleshooting.
We utilize AI and machine learning to build bespoke data models, providing predictive analytics to maximize process efficiency, as well as identify systemic process issues that can be isolated and prioritized for troubleshooting.
On these contracts, we are typically reimbursed for each transaction. The HAAS contract is a hybrid contract with cost-plus elements coupled with a number of incentives and penalties to achieve the programmatic outcomes defined by the government in order to ensure quality and timeliness of service.
The FAS contract supersedes our flagship HAAS contract and is a hybrid contract with cost-plus elements coupled with a number of incentives and penalties to achieve the programmatic outcomes defined by the government in order to ensure quality and timeliness of service.
Federal Services Segment generated 49% of our total revenue in fiscal year 2023. Our U.S. Federal Services Segment delivers end-to-end solutions that help various U.S. federal government agencies better deliver on their mission, including program operations and management, clinical services, and technology solutions.
Federal Services Segment generated 52% of our total revenue in fiscal year 2024. Our U.S. Federal Services Segment delivers solutions that help various U.S. federal government agencies better deliver on their mission, including program operations and management, clinical services, and technology solutions. The segment also includes system and application development, Information Technology (IT) modernization, and maintenance services.
Outside the U.S., we must also comply with local laws and regulations as determined by geography, as well as U.S. government laws. Adherence includes human rights protections, environmental regulation, and contract specifications. Our government clients have strict policies, procedures, and requirements in the procurement process, as well as regulations governing contract pricing and reimbursable costs.
Outside the U.S., we must also comply with local laws and regulations as determined by geography, as well as U.S. government laws. Adherence includes human rights protections, environmental regulation, and contract specifications.
Our SEC filings may be accessed through the Investor Relations page of our website. These materials, as well as similar materials for other SEC registrants, may be obtained directly from the SEC through its website at sec.gov . 13 Table of Contents
Our SEC filings may be accessed through the Investor Relations page of our website at investor.maximus.com . These materials, as well as similar materials for other SEC registrants, may be obtained directly from the SEC through its website at sec.gov . We also use our website as a channel of distribution for important company information.
Within the technology sector, our primary competitors are IBM, Oracle, Leidos, Accenture, Deloitte, Booz Allen Hamilton, and other federal contractors. U.S. Services Segment Our U.S. Services Segment generated 37% of our total revenue in fiscal year 2023. Our U.S.
Federal Services Segment are General Dynamics Information Technology, Deloitte, Leidos, IBM, Accenture, Booz Allen Hamilton, and other federal contractors. U.S. Services Segment Our U.S. Services Segment generated 36% of our total revenue in fiscal year 2024. Our U.S.
For the year ended September 30, 2023, approximately 48% of our revenue was derived from U.S. federal government agencies, 37% from U.S. state government agencies, 14% from foreign government agencies, and the balance from other sources, including local municipalities and commercial customers.
Services, and Outside the U.S. We operate in the United States and worldwide. For the year ended September 30, 2024, approximately 50% of our revenue was derived from U.S. federal government agencies, 36% from U.S. state government agencies, 12% from foreign government agencies, and the balance from other sources, including local municipalities and commercial customers.
We also continue to focus on our people - the foundation of our strategy. Our commitment, as an employer of choice, is to continue to prioritize attracting, retaining, developing, and empowering employees as a central part of our plan for achieving future growth. More information on our human resource priorities is included below.
We also continue to focus on our people - the foundation of our strategy. As an employer of choice, our goal is to continue to prioritize attracting, retaining, developing, and empowering employees as a central part of our plan for achieving future growth. Our Business Segments We operate our business through three segments: U.S. Federal Services, U.S.
Competitive Advantages Some of the competitive advantages that allow us to capitalize on various market opportunities are as follows: Subject matter, clinical, and digital expertise. Our workforce includes many individuals who possess substantial subject matter expertise in areas critical to the successful design, implementation, administration, and operation of government health and human services programs.
Our workforce includes many individuals who possess substantial subject matter expertise in areas critical to the successful design, implementation, administration, and operation of government health and human services programs.
The segment contains performance-based contracts where revenue is earned based upon participant numbers or other transaction-based measures, such as the number and type of assessments or appeals processed. Many contracts in this segment earn their revenue on a cost-plus or time-and-materials basis, which typically carry lower levels of risk and lower levels of profit margin as compared to performance-based contracts.
A group of other contracts in this segment earn their revenue on a cost-plus or time-and-materials basis, which typically carry lower levels of risk and lower levels of profit margin as compared to performance-based contracts.
Other Information Maximus, Inc. is a Virginia corporation founded in 1975. Our principal executive offices are located at 1600 Tysons Boulevard, McLean, Virginia, 22102. Our telephone number is 703-251-8500. Our website address is maximus.com . We make our website available for informational purposes only.
We provide financial support for nonprofit organizations and charities that share our commitment in helping disadvantaged populations and underserved communities. Other Information Maximus, Inc. is a Virginia corporation founded in 1975. Our principal executive offices are located at 1600 Tysons Boulevard, McLean, Virginia, 22102. Our telephone number is 703-251-8500. Our website address is maximus.com .
Our teams continue to adapt to the recruiting, hiring, and training needs of our customers in both remote and onsite settings to ensure continuity of vital services. Talent Development We value ongoing development and continuous learning, and we strive to support and provide learning opportunities to all Maximus employees.
Our teams continue to adapt to the recruiting, hiring, and training needs of our customers in both remote and onsite settings to ensure continuity of vital services. Talent Management and Talent Development We are committed to Moving Our Talent Forward.
These services include business process assessment and design, quality assurance processes, including independent verification and validation services as well as policy and procedure reviews, and audit preparation and compliance, including grant and proposal reviews. The segment also includes a tax credit service, which assists commercial customers in claiming workforce and location-based tax benefits.
The rest of the segment's revenue is from specialized consulting services. These services include financial consulting, including cost allocation plans, business process assessment and design, quality assurance processes, including policy and procedure reviews, and audit preparation and compliance, including grant and proposal reviews. The segment also assists commercial customers in claiming workforce and location-based tax benefits.
Also aligned with our strategic focus, and benefiting from the Attain platform, the TCS division 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.
Under this division, we execute on 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 may experience fluctuations as a result of volume variations or program maturity, with contracts recording lower revenue and profitability during program startup. Contracts with government clients often contain "termination without cause" provisions.
This segment may experience seasonality with increased revenue in the first quarter of the fiscal year from cost-plus work tied to CMS's annual open enrollment period. Other fluctuations may result from volume variations or program maturity, with contracts recording lower revenue and profitability during program startup. Contracts with government clients often contain "termination without cause" provisions.
We support programs and deliver services in the United Kingdom ("U.K."), including the Health Assessment Advisory Service ("HAAS") and the recently awarded replacement contract to start in 2024, Functional Assessment Services (“FAS”), and Restart; Australia, including Workforce Australia and employment support and job seeker services worldwide.
We support programs and deliver services in the United Kingdom, including the newly awarded Functional Assessment Services (FAS) contract, which replaced the Health Assessment Advisory Service (HAAS) contract, and the Restart employment program; and Australia, including Workforce Australia, and other employment support and job seeker services in a number of other countries.
We have also shown the ability to move quickly, most notably with the swift establishment of public health and safety initiatives during the recent COVID-19 pandemic, such as vaccine information hotlines and unemployment insurance services. Our organic growth through increased contract scope and entry into new markets has been supplemented by strategic acquisitions.
We also demonstrate the ability to move quickly, ranging from digitally enabled contact center support services for natural disaster response to swift establishments of public health and safety initiatives, examples of which occurred during the COVID-19 pandemic. Our organic growth through increased contract scope and entry into new markets has been supplemented by strategic acquisitions.
Elevate the customer experience to achieve higher levels of satisfaction, performance, and outcomes through intelligent automation and cognitive computing. • Future of Health. Help governments reach the rising demand for health services by growing our clinical capabilities to improve the health of people and their communities. • Advanced Technologies for Modernization .
Help governments reach the rising demand for health services by growing our clinical capabilities and increasing the level of sophistication of underlying tools to improve the health of people and their communities. • Advanced Technologies for Modernization .
We also employ a diverse set of experts, including a wide network of clinicians and an experienced team of digital technologists. Many of our employees worked for governments in management positions and can offer insights into how we can best provide valuable, practical, and effective services to our clients. Digital engagement, analytics, and automation solutions to enhance government programs.
Many of our employees worked for governments in management positions and can offer insights into how we can best provide valuable, practical, and effective services to our clients. Digital engagement, analytics, and automation solutions to enhance government programs. Participants in government programs expect the same types of digital engagement they rely upon when interacting with consumer-oriented businesses.
By aligning our priorities with the U.S. federal government, we believe that we are well-positioned to meet agency change and to provide enterprise-wide solutions and strategies, both in the U.S. and elsewhere. Helping Governments. We believe that effectively managing healthcare costs, as well as improving quality and access to healthcare, is a major policy priority for governments.
By aligning our priorities with the U.S. federal government, we believe that we are well-positioned to meet agency change and to provide enterprise-wide solutions and strategies. Complex Programs at Scale.
Further our credibility as a technology leader, enabling the transformation of government programs to be resilient, dynamic, integrated, and equitable. More information on how each of our business segments align with the execution of our strategy is provided below. Across all segments, there is a common focus on optimizing processes and simplifying our structure.
Further our credibility as a technology leader, enabling the transformation of government programs and legacy system environments to be resilient, dynamic, integrated, and equitable. Our strategic plan is aligned with specific opportunities within all three segments and include a common focus on optimizing processes and simplifying our structure under our Maximus Forward corporate initiative.
Payment for our services varies from contract to contract based upon factors such as the priorities of the customer and their willingness to share risks and rewards. Some contracts are performed on a cost-plus basis, where we receive revenue based on the hours and costs incurred and typically operate at lower margins.
Payment for our services varies from contract to contract based upon factors such as the priorities of the customer and their willingness to share risks and rewards.
This contract supports the federal marketplace under the Affordable Care Act ("ACA") and serves as the primary support engagement center for Medicare, also known as 1-800-MEDICARE. The contract serves the U.S. population through twelve customer contact centers handling general inquiries for the marketplace and general and claims-based Medicare inquiries.
In fiscal year 2022, our contract with the Centers for Medicare and Medicaid Service (CMS) to support the Contact Center Operations was renewed. This contract supports the federal marketplace under the Affordable Care Act (ACA) and serves as the primary support engagement center for Medicare, also known as 1-800-MEDICARE.
Under Technology Consulting Services ("TCS"), 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 through VES, which manages the clinical evaluation process for U.S. veterans and service members on behalf of the VA.
Under Technology Consulting Services (TCS), 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. Program Operations. Program operations include business process services (BPS), eligibility and enrollment, outreach, and other services for federal health and human services programs.
Segment provides BPS for international governments, 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.
Segment provides BPS and technology solutions for international governments. These services include health and disability assessments, program administration for employment services, wellbeing solutions and other job seeker-related services, digitally-enabled customer services, and advanced technologies for modernization.
The Foundation focuses our grant giving to carefully selected partners who have the expertise and capability to enhance our communities and the quality of life of the people we serve. We provide financial support for nonprofit organizations and charities that share our commitment in helping disadvantaged populations and underserved communities.
We offer employees the opportunity to give back through the Maximus Foundation. The Foundation focuses our grant giving to carefully selected partners who have the expertise and capability to enhance our communities and the quality of life of the people we serve.
We also made great strides in closing the gender and ethnicity pay gap, instituting an annual review to identify and close any new or persistent unsubstantiated differences in pay between our employees. We improved the hourly wage in fiscal year 2023 to at least $16.20 an hour for approximately 90% of our U.S. population.
We also continue to make great strides in our efforts to close the gender and ethnicity pay gap, continuing an annual review to identify and close any new or persistent unsubstantiated differences in pay between our employees.
Maximus has a confidential, third-party-operated, 24/7 reporting ethics hotline. Violations of our ethics standards and policies are taken seriously and include remediation processes and disciplinary action, as applicable. Any director, officer, or employee may anonymously report suspected violations of the Maximus Standards for Business Conduct and Ethics, Company policies, or applicable laws and regulations.
Violations of our ethics standards and policies are taken seriously. Any director, officer, or employee may anonymously report suspected violations of the Maximus Standards for Business Conduct and Ethics, Company policies, or applicable laws and regulations. Maximus is committed to an environment where open, honest communications are the expectation, not the exception.
Our focus is solely on supporting the student borrowers on behalf of FSA. Aidvantage is an extension of long-standing work supporting student loan management and is in line with our core business. The manner in which we provide these services varies from contract to contract but may include a mix of contact centers, mail-room operations, and mobile and website media.
We view student loan servicing as an opportunity to apply our insights, expertise, and quality-driven approach through support for Federal Student Aid (FSA) and student borrowers. The manner in which we provide these services varies from contract to contract but may include a mix of digitally enabled contact centers, mail-room operations, and mobile and website media. Clinical Services.
Participants in government programs expect the same types of digital engagement they rely upon when interacting with consumer-oriented businesses. We believe our clients value our ability to infuse digital, such as mobile applications, omnichannel solutions, and digital media, into our BPS solutions to make it easier for beneficiaries to engage with government programs.
We believe our clients value our ability to infuse digital, such as mobile applications, omnichannel solutions, and digital media, into our solutions to make it easier for beneficiaries to engage with government programs. Analytics enable us to optimize our operations and provide our clients with improved outcomes through greater insight into the populations we serve.
During the first quarter of fiscal year 2024, we divested our businesses in Italy and Singapore, as well as our Canadian employment services business. Employment Services. Comprehensive employment services help vulnerable individuals transition from government assistance programs to sustainable employment and economic independence.
As a result, we divested a small commercial practice in the U.K. and our business in Sweden during fiscal year 2023. We also divested our businesses in Italy and Singapore, as well as our Canadian employment services business during the first quarter of fiscal year 2024. Employment Services.
Community Involvement We aim to give back to the communities where we live and work and believe that this commitment helps in our efforts to attract and retain employees. We offer employees the opportunity to give back through the Maximus Foundation.
Our government clients have strict policies, procedures, and requirements in the procurement process, as well as regulations governing contract pricing and reimbursable costs. 13 Table of Contents Community Involvement We aim to give back to the communities where we live and work and believe that this commitment helps in our efforts to attract and retain employees.
We have documented Information Security and Privacy policies to address data protection. We regularly provide information security and privacy awareness training to our employees. Environment The Board of Directors' Nominating and Governance Committee has oversight responsibility for Environmental, Social, and Governance ("ESG") matters, which includes climate-related risks and opportunities.
Employees understand our efforts to act with integrity, which is summarized in our Standards for Business Conduct and Ethics, which includes the confidential ethics hotline contact information and is available at maximus.com . Environment The Board of Directors' Nominating and Governance Committee has oversight responsibility for Environmental, Social, and Governance (ESG) matters, which includes climate-related risks and opportunities.
In programs such as Medicaid, Maximus does not make the final determination of eligibility. We also provide some specialized services, including substance abuse, diversion program support, and administration of subsidized telephony services. During the COVID-19 pandemic, we provided support in contact tracing.
In programs such as Medicaid, Maximus does not make the final determination of eligibility; and • Administration of programs that provide subsidized telephone services for eligible consumers.
Employment services cover a number of attributes, including eligibility support, case management, job-readiness preparation, job search and employer outreach, job retention and career advancement, and selected educational and training services, including vocational training. Maximus also supports unemployment insurance programs, a market which largely began in response to the COVID-19 pandemic.
Employment services cover a number of attributes, including eligibility support, case management, job-readiness preparation, job search and employer outreach, job retention and career advancement, and selected educational and training services, including vocational training. Children services include full and specialized child support case management services through customer contact center operations and program and systems consulting services. Technology Solutions.
We offer clients the flexibility and scalability to deliver the people, processes, and technology to complete short- and long-term contractual assignments in an efficient and cost-effective manner. Financial strength. Our business provides us with robust cash flows from operations as a result of our profitability and our management of customer receivables.
We are experienced in launching large-scale complex operations under compressed time frames. We offer clients the flexibility and scalability to deliver the people, processes, and technology to complete short- and long-term contractual assignments in an efficient and cost-effective manner, including the ability to modernize customer solutions, infrastructure, and equipment to maintain operational resilience. Financial strength.
Children services include full and specialized child support case management services, including collection of child-support funds, through customer contact center operations and program and systems consulting services. Technology Solutions. Technology solutions offer assistance with system planning, implementation oversight, and the construction and maintenance of client systems to allow processing of transactions.
Technology solutions offer state and local governments assistance with system planning, implementation oversight, and the construction and maintenance of client systems to allow processing of transactions. We also provide system implementation project management and independent verification and validation services to state and local clients.
Recent financial performance of the segment has not met expectations due, in part, to increased volatility from employment services programs dependent on fluctuating macroeconomic conditions. During fiscal year 2023, we divested a small commercial practice in the U.K. and our business in Sweden.
We are currently reshaping this segment in a thoughtful manner to align with the broader Maximus strategy. The segment has not met profitability expectations in recent periods due, in part, to increased volatility from employment services programs that are dependent on fluctuating macroeconomic conditions.
We also provide system implementation project management services to state and local clients. Consistent with our overall corporate strategy, technology solutions in our U.S. Services Segment is an area of focus for growth. The rest of the segment's revenue is from specialized consulting services.
Our Independent Verification and Validation (IV&V) services provide comprehensive objective testing to confirm that requirements in client systems are correct, and validate that the system correctly implements the functionality and security requirements. Consistent with our overall corporate strategy, technology solutions in our U.S. Services Segment is an area of focus for growth.
Clinical Services. In line with our strategic focus for the future, the segment continues to expand its clinical solutions, most notably through VES, which manages the clinical evaluation process for U.S. veterans and service members on behalf of the VA.
In line with our strategic focus for the future, this division continues to expand its clinical programs, most notably through the VA medical disability examinations (MDE) contracts.
Having moved past the impacts of the COVID-19 pandemic, we believe we are in a strong position to capitalize on organic growth opportunities in our core business, as reflected in the following three pillars of our refreshed strategy. • Customer Services, Digitally Enabled.
We believe in further expansion of our business and remain in a strong position to capitalize on organic growth opportunities in our core business. Our strategic plan consists of three central pillars: • Customer Services, Digitally Enabled. Elevate the customer experience to achieve higher levels of satisfaction, performance, and outcomes through intelligent automation and cognitive computing.
We also provide online role-based and skill-based learning tools to many of our employees. Total Rewards As part of our compensation philosophy, we offer and maintain market-competitive total rewards programs for our employees to attract and retain superior talent.
Total Rewards In support of Moving Our Talent Forward, a Maximus-wide initiative focused on planning for our organization's current and future needs and equipping our talent to meet those needs, we offer and maintain market-competitive total rewards programs for our employees to attract and retain superior talent.
Most contracts include a level of performance-based compensation, a fixed fee, or a mixture of both, with fees being based upon call volumes, populations served, or appeals processed. Our employment services contracts typically have outcome-based payments in an effort to incentivize providers to ensure that we help job seekers find long-term, sustained employment and achieve economic independence.
Some contracts are performed on a cost-plus basis, where we receive revenue based on the hours and costs incurred and typically operate at lower margins. Our employment services contracts typically have outcome-based payments to ensure that we help job seekers find long-term, sustained employment and achieve economic independence.
With the resumption of redeterminations, we expect a full period of volumes in 2024 coming back into these programs, enabling our operating leverage to recover. Program Operations. Program operations include our comprehensive program administration services for government health benefit programs.
Fiscal year 2024 reflected a full period of volumes. The middle two quarters of the fiscal year experienced slightly elevated volumes from excess temporary work. This work was concluded by the last fiscal quarter with the segment’s margin appropriately aligned. Program Operations. Program operations include our comprehensive program administration services for government health benefit programs.
Removed
Most notably, our recent acquisitions of VES Group, Inc. ("VES"), a leading provider of medical disability examinations ("MDE") to the United States ("U.S.") Department of Veterans Affairs ("VA"); the Federal business of Attain, LLC ("Attain"), a provider of technology consulting and systems integration services; and a service contract with the U.S.
Added
In recent years, three acquisitions enhanced our qualifications for servicing the U.S. Federal Government in areas of clinical assessments, leading technology consulting solutions, and digitally-enabled contact center services. We are progressing through our strategic plan introduced in fiscal year 2022.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

54 edited+21 added−9 removed72 unchanged
Biggest changeHigher interest rates have a detrimental effect on our profits and cash flows, as well as reducing the amount of cash we have available for servicing of debt or other transactions. In fiscal year 2023, we amended our credit facilities to switch the benchmark rate from the London Interbank Offering Rate (“LIBOR”) to the Secured Overnight Financing Rate (“SOFR”).
Biggest changeApproximately half of our long-term debt is held at variable interest rates. Interest rates in the United States are currently close to their highest levels for over a decade. Higher interest rates have a detrimental effect on our profits and cash flows, as well as reducing the amount of cash we have available for servicing of debt or other transactions.
As a result, in these situations, we are required to expend significant sums of money before receiving related contract payments. In addition, payments due to us from government agencies may be delayed due to billing cycles or as a result of failures by the government to approve governmental budgets in a timely manner.
In these situations, we are required to expend significant sums of money before receiving related contract payments. In addition, payments due to us from government agencies may be delayed due to billing cycles or as a result of failures by the government to approve governmental budgets in a timely manner.
We have experienced cybersecurity incidents in the past that were immaterial, and in the third quarter of fiscal year 2023, we experienced a material cybersecurity incident as the personal information of a significant number of individuals was accessed by an unauthorized third party by exploiting a zero-day vulnerability in a file transfer application used by many organizations, including us.
We have experienced cybersecurity incidents in the past that were immaterial, and in the third quarter of fiscal year 2023, we experienced a material cybersecurity incident as the personal information of a significant number of individuals was accessed by an unauthorized third party by exploiting a zero-day vulnerability in a third-party vendor's file transfer application used by many organizations, including us.
Our indebtedness contains financial or other covenants that limit our operational flexibility in a number of other ways, including: 21 Table of Contents • causing us to be less able to take advantage of business opportunities, such as other acquisition opportunities, and to react to changes in market or industry conditions; • increasing our vulnerability to adverse economic, industry, or competitive developments; • affecting our ability to pay or refinance debts as they become due during adverse economic, financial market, and industry conditions; • requiring us to use a larger portion of cash flow for debt service, reducing funds available for other purposes; • decreasing our profitability and/or cash flow; • causing us to be disadvantaged compared to competitors with less leverage; and • limiting our ability to borrow additional funds in the future to fund working capital, capital expenditures, and other general corporate purposes.
Our indebtedness contains financial or other covenants that limit our operational flexibility in a number of other ways, including: • causing us to be less able to take advantage of business opportunities, such as other acquisition opportunities, and to react to changes in market or industry conditions; • increasing our vulnerability to adverse economic, industry, or competitive developments; • affecting our ability to pay or refinance debts as they become due during adverse economic, financial market, and industry conditions; • requiring us to use a larger portion of cash flow for debt service, reducing funds available for other purposes; • decreasing our profitability and/or cash flow; • causing us to be disadvantaged compared to competitors with less leverage; and 23 Table of Contents • limiting our ability to borrow additional funds in the future to fund working capital, capital expenditures, and other general corporate purposes.
Factors that may cause our cash flows and results of operations to vary from quarter to quarter include: • the commencement of new contracts; • caseloads and other factors where revenue is derived on transactional volume on contracts; • the levels of revenue earned and profitability of fixed-price and performance-based contracts; • expenses related to certain contracts which may be incurred in periods prior to revenue being recognized; • increasing rates of inflation, which may increase our costs of labor and other goods and services; • the commencement, completion, or termination of contracts during any particular quarter; • the schedules of government agencies for awarding contracts; • government budgetary delays or shortfalls; • the timing of change orders being signed; • the terms of awarded contracts; and • potential acquisitions.
Factors that may cause our cash flows and results of operations to vary from quarter to quarter include: • the commencement of new contracts; 22 Table of Contents • caseloads and other factors where revenue is derived on transactional volume on contracts; • the levels of revenue earned and profitability of fixed-price and performance-based contracts; • expenses related to certain contracts which may be incurred in periods prior to revenue being recognized; • increasing rates of inflation, which may increase our costs of labor and other goods and services; • the commencement, completion, or termination of contracts during any particular quarter; • the schedules of government agencies for awarding contracts; • government budgetary delays or shortfalls; • the timing of change orders being signed; • the terms of awarded contracts; and • potential acquisitions.
Those services might include operating a Medicaid enrollment center pursuant to specified standards, designing and implementing information systems or applications, or delivering a planning document under a consulting arrangement.
Those services include operating a Medicaid enrollment center pursuant to specified standards, designing and implementing information systems or applications, or delivering a planning document under a consulting arrangement.
Although it is difficult to track all the reasons for changes in our contracts, we believe that this contract erosion has typically affected approximately 7% to 10% of our business annually, with the erosion largely being replaced by new or expanded work elsewhere. 16 Table of Contents Our business could be adversely affected by future legislative or government budgetary and spending changes.
Although it is difficult to track all the reasons for changes in our contracts, we believe that this contract erosion has typically affected approximately 7% to 10% of our business annually, with the erosion largely being replaced by new or expanded work elsewhere. 17 Table of Contents Our business could be adversely affected by future legislative or government budgetary and spending changes.
We are required to identify the fair value of assets acquired, such as customer relationships and technology, using estimates that are based upon factors such as expected future operations and the manner in which we will utilize these assets, which may be inaccurate or may change post-acquisition. In addition, we have recorded $1.78 billion of goodwill at September 30, 2023.
We are required to identify the fair value of assets acquired, such as customer relationships and technology, using estimates that are based upon factors such as expected future operations and the manner in which we will utilize these assets, which may be inaccurate or may change post-acquisition. In addition, we have recorded $1.78 billion of goodwill at September 30, 2024.
The COVID-19 pandemic negatively impacted worldwide economic activity and resulted in travel and work restrictions, commercial disruptions, and affected companies' operations around the world. We were affected by the COVID-19 pandemic, including operational disruptions and changes in working practices.
For example, the COVID-19 pandemic negatively impacted worldwide economic activity and resulted in travel and work restrictions, commercial disruptions, and affected companies' operations around the world. We were affected by the COVID-19 pandemic, including operational disruptions and changes in working practices.
Our portfolio includes fixed-price, performance-based, and cost-plus contracts for which employment requirements are contract-specific, and have varying impacts to financial results. In cost-plus contracts, we work with our customer to come to agreement for wage increases to meet the current demand and hiring needs, which generally does not impact profitability of these contracts.
Our portfolio includes fixed-price, performance-based, and cost-plus contracts for which employment requirements are contract-specific and have varying impacts to financial results. In cost-plus contracts, we work with our customers to come to an agreement for wage increases to meet the current demand and hiring needs, which generally does not impact profitability of these contracts.
A successful union organizing effort at one or more of our locations could substantially increase our 20 Table of Contents costs and result in our inability to successfully recompete for existing business. Outside the United States, we currently operate outsourced programs with unionized employees in the U.K, and in the past we have operated programs with unionized employees in Canada.
A successful union organizing effort at one or more of our locations could substantially increase our costs and result in our inability to successfully recompete for existing business. Outside the United States, we currently operate outsourced programs with unionized employees in the U.K., and in the past we have operated programs with unionized employees in Canada.
Although we have errors and omissions insurance, the policy coverage and limits may not be adequate to provide protection against all potential liabilities. Further, for certain contracts, we may post significant performance bonds or issue letters of credit to secure our performance, indemnification, and other obligations.
The policy coverage and limits in our errors and omissions insurance may not be adequate to provide protection against all potential liabilities. Further, for certain contracts, we may post significant performance bonds or issue letters of credit to secure our performance, indemnification, and other obligations.
As contracts reach re-procurement milestones, we may have the ability to adjust our pricing to current and/or future expected market conditions. Our indebtedness could adversely affect our business and our ability to meet our obligations. At September 30, 2023, we owed $1.3 billion under our credit facilities.
As contracts reach re-procurement milestones, we may have the ability to adjust our pricing to current and/or future expected market conditions. Our indebtedness could adversely affect our business and our ability to meet our obligations. At September 30, 2024, we owed $1.1 billion under our credit facilities.
This prohibition could impede or discourage an attempt to obtain control of us by requiring that any corporate actions initiated by shareholders be adopted only at properly called shareholder meetings. Item 1B. Unresolved Staff Comments None.
This prohibition could impede or discourage an attempt to obtain control of us by requiring that any corporate actions initiated by shareholders be adopted only at properly called shareholder meetings. Item 1B. Unresolved Staff Comments None. 25 Table of Contents
If our systems or networks are compromised, we could be adversely affected by losing confidential or protected information of program participants and clients or by facing a demand for ransom to prevent disclosure of or to restore access to such information.
If our systems or networks are compromised, we could be adversely affected by losing confidential or protected information of program participants 16 Table of Contents and clients or by facing a demand for ransom to prevent disclosure of or to restore access to such information.
Although we conduct due diligence on our acquisitions, this diligence may not reveal all material issues that may be present, nor does it preclude factors outside of our control from arising later.
The due diligence we conduct on our acquisitions may not reveal all material issues that may be present, nor does it preclude factors outside of our control from arising later.
As a result, a significant portion of our business operations are subject to foreign financial, tax, and business risks which could arise in the event of: • foreign currency exchange fluctuations; • unexpected increases in tax rates or changes in U.S. or foreign tax laws; • non-compliance with international laws and regulations, such as data privacy, employment regulations, and trade barriers; • non-compliance with U.S. laws affecting the activities of U.S. companies in international locations, including the Foreign Corrupt Practices Act; • the absence in some jurisdictions of effective laws to protect our intellectual property rights; • new regulatory requirements or changes in local laws that materially affect the demand for our services or directly affect our foreign operations; • local economic and political conditions, including severe or protracted recessions in foreign economies and inflation risk; • the length of payment cycles and potential difficulties in collecting accounts receivable; • difficulty managing and communicating with teams outside the U.S.; • unusual or unexpected monetary exchange controls, price controls, or restrictions on transfers of cash; or • civil disturbance, terrorism, or other catastrophic events that reduce business activity in other parts of the world.
As a result, a significant portion of our business operations are subject to foreign financial, tax, and business risks which could arise in the event of: • foreign currency exchange fluctuations, including unrealized foreign exchange gains and losses which may become realized in the event of a disposal or abandonment; • unexpected increases in tax rates or changes in U.S. or foreign tax laws; • non-compliance with international laws and regulations, such as data privacy, employment regulations, and trade barriers; • non-compliance with U.S. laws affecting the activities of U.S. companies in international locations, including the Foreign Corrupt Practices Act; • the absence in some jurisdictions of effective laws to protect our intellectual property rights; • new regulatory requirements or changes in local laws that materially affect the demand for our services or directly affect our foreign operations; • local economic and political conditions, including severe or protracted recessions in foreign economies and inflation risk; • the length of payment cycles and potential difficulties in collecting accounts receivable; • difficulty managing and communicating with teams outside the U.S.; • difficulty in maintaining our control environment, including controls over financial reporting; • unusual or unexpected monetary exchange controls, price controls, or restrictions on transfers of cash; or • civil disturbance, terrorism, or other geopolitical or catastrophic events that reduce business activity in other parts of the world.
At September 30, 2023, our effective interest rate was 5.97%, compared to 4.69% at September 30, 2022. Our credit facilities are subject to variable rates that expose us to interest rate risk. When interest rates increase, our debt service obligations on the variable rate indebtedness increase even though the amount borrowed remains the same.
At September 30, 2024, our effective interest rate was 5.52%, compared to 5.97% at September 30, 2023. Our credit facilities are subject to variable rates that expose us to interest rate risk. When interest rates increase, our debt service obligations on the variable rate indebtedness increase even though the amount borrowed remains the same.
Integration of acquired businesses may result in material challenges, including, without limitation: • Our management might have its attention diverted from ongoing business concerns while trying to integrate these operations, and we could experience performance shortfalls within our existing or acquired businesses as a result of the devotion of management's attention to integration efforts. • The integration process could take longer than anticipated and could result in the loss of key employees, the disruption of each company's ongoing businesses, tax costs or inefficiencies, or inconsistencies in standards, controls, information technology systems, compliance requirements, procedures, and policies, any of which could materially adversely affect our ability to maintain relationships with customers, employees, or other third parties, or our ability to achieve the anticipated benefits of the transactions, and could harm our financial performance. • We could encounter unanticipated issues in integrating information technology, communications, and other systems that could harm our financial performance. • If we are unable to successfully or timely integrate our operations with those of our acquisitions, we may incur unanticipated liabilities and be unable to realize the revenue growth, synergies, and other anticipated benefits, and our business, results of operations, and financial condition could be materially adversely affected. 18 Table of Contents In connection with our acquisitions, we may be required to take write-downs, write-offs, restructuring, impairment, or other charges that could negatively affect our business, assets, liabilities, prospects, outlook, financial condition, and results of operations.
Integration of acquired businesses may result in material challenges, including, without limitation: • Our management might have its attention diverted from ongoing business concerns while trying to integrate these operations, and we could experience performance shortfalls within our existing or acquired businesses as a result of the devotion of management's attention to integration efforts. • The integration process could take longer than anticipated and could result in the loss of key employees, the disruption of each company's ongoing businesses, tax costs or inefficiencies, or inconsistencies in standards, controls, information technology systems, compliance requirements, procedures, and policies, any of which could materially adversely affect our ability to maintain relationships with customers, employees, or other third parties, or our ability to achieve the anticipated benefits of the transactions, and could harm our financial performance. • We could encounter unanticipated issues in integrating information technology, communications, and other systems that could harm our financial performance. • If we are unable to successfully or timely integrate our operations with those of our acquisitions, we may incur unanticipated liabilities and be unable to realize the revenue growth, synergies, and other anticipated benefits, and our business, results of operations, and financial condition could be materially adversely affected.
Even if unsuccessful, such organizing efforts could be disruptive to our business operations and can result in adverse publicity. The potential for adverse media coverage as the unions seek to discredit Maximus through their network may have a negative effect on the willingness of government agencies to outsource or cause them to seek contract terms that could impact us adversely.
Even if unsuccessful, such organizing efforts could be disruptive to our business operations and can result in adverse publicity. The potential for adverse media coverage may have a negative effect on the willingness of government agencies to outsource or cause them to seek contract terms that could impact us adversely.
In fiscal year 2023, approximately 48% of our total revenue was derived from the U.S. federal government, and approximately 37% of our total revenue was derived from contracts with state and local government agencies.
In fiscal year 2024, approximately 50% of our total revenue was derived from the U.S. federal government, and approximately 37% of our total revenue was derived from contracts with state and local government agencies.
From time to time, we engage subcontractors, teaming partners, or other third parties to provide our customers with a single-source solution. While we believe that we perform appropriate due diligence on our subcontractors and teaming partners, we cannot guarantee that those parties will comply with the terms set forth in their agreements or remain financially sound.
From time to time, we engage subcontractors, teaming partners, or other third parties to provide our customers with a single-source solution. We cannot guarantee that those parties will comply with the terms set forth in their agreements or remain financially sound.
For performance-based contracts, we receive our fee on a per-transaction basis or upon meeting specified milestones. These contracts include workforce services contracts in which we receive a payment based on a participant maintaining employment for a specified time period. For fixed-price contracts, we receive our fee based on services provided.
For performance-based contracts, we receive our fee on a per-transaction basis or upon meeting specified milestones. These contracts include workforce services contracts in which we receive a payment for performing an independent medical examination or placing a participant in sustained employment for a specified time period. For fixed-price contracts, we receive our fee based on services provided.
We cannot anticipate if, when, or to what extent a customer might terminate their contracts with us. If we fail to establish and maintain important relationships with government entities and agencies, our ability to successfully bid under RFPs may be adversely affected.
We cannot anticipate if, when, or to what extent a customer might terminate their contracts with us. If we fail to establish and maintain important relationships with government officials, entities and agencies, our ability to successfully bid under RFPs and retain existing work and secure new work on future procurements may be adversely affected.
If we fail to accurately estimate the factors upon which we base our contract pricing, we may generate less profit than expected or incur losses on those contracts. During fiscal year 2023, we derived approximately 49% of our revenue from performance-based contracts and 15% from fixed-price contracts.
We may also incur impairment costs on assets related to these contracts. If we fail to accurately estimate the factors upon which we base our contract pricing, we may generate less profit than expected or incur losses on those contracts. During fiscal year 2024, we derived approximately 55% of our revenue from performance-based contracts and 13% from fixed-price contracts.
If the U.S. federal government does not grant a necessary consent or waiver, the state or local agency will be unable to outsource that function to a private entity, such as us. This situation could eliminate or reduce the value of an existing contract.
If the U.S. federal government does not grant a necessary consent or waiver, the state or local agency will be unable to outsource that function to a private entity, such as us.
We also engage marketing consultants, including lobbyists, to establish and maintain relationships with elected officials and appointed members of government agencies. The effectiveness of these consultants may be reduced or eliminated if a significant political change occurs. In that circumstance, we may be unable to successfully manage our relationships with government entities and agencies and with elected officials and appointees.
The effectiveness of these consultants may be reduced or eliminated if a significant political change occurs. In that circumstance, we may be unable to successfully manage our relationships with government entities and agencies and with elected officials and appointees. Any failure to maintain positive relationships with government entities and agencies may adversely affect our business.
We have also purchased representations and warranties insurance policies in connection with certain acquisitions, but there is no assurance that those policies will cover any losses we might experience from breaches of the sellers' representations and warranties or otherwise arising from the acquisitions.
There is no assurance that our representations and warranties insurance policies that we purchase for certain acquisitions will cover any losses we might experience from breaches of the sellers' representations and warranties or otherwise arising from the acquisitions.
If the carrying value of our assets, including goodwill, exceeds their fair value, we may be required to take write-offs, write-downs, restructuring, impairment, or other charges that could negatively affect business, assets, liabilities, prospects, outlook, financial condition, and results of operations.
In connection with our acquisitions, we may be required to take write-downs, write-offs, restructuring, impairment, or other charges that could negatively affect our business, assets, liabilities, prospects, outlook, financial condition, and results of operations.
Various laws and regulations prohibit companies from performing work for government agencies that might be viewed as an actual or apparent conflict of interest. These laws limit our ability to pursue and perform certain types of work. For example, some of our businesses assist government agencies in developing RFPs for various government programs.
We may be precluded from bidding and performing certain work due to other work we currently perform. Various laws and regulations prohibit companies from performing work for government agencies that might be viewed as an actual or apparent conflict of interest. These laws limit our ability to pursue and perform certain types of work.
In addition, we may be unable to compete for the limited number of large contracts because we may not be able to meet a Request For Proposal's ("RFP") requirement to obtain and post a large performance bond. Also, in some geographic areas, we face competition from smaller firms with established reputations and political relationships.
In addition, we may be unable to compete for the limited number of large contracts because we may not be able to meet a Request For Proposal's (RFP) requirement to obtain and post a large performance bond.
We rely on key contracts with state, local, and federal governments for a significant portion of our revenue. A substantial reduction in those contracts would materially adversely affect our operating results.
This situation could eliminate or reduce the value of an existing contract. 18 Table of Contents We rely on key contracts with state, local, and federal governments for a significant portion of our revenue. A substantial reduction in those contracts would materially adversely affect our operating results.
In addition, we are subject to various reviews, audits, and investigations to verify our compliance with the terms of our contracts, as well as compliance with applicable laws and regulations.
If our reputation is negatively affected, our clients may decrease or cease business with us. In addition, we are subject to various reviews, audits, and investigations to verify our compliance with the terms of our contracts, as well as compliance with applicable laws and regulations.
Moreover, under current law, in order to privatize certain functions of government programs, the U.S. federal government must grant consent and/or waiver to the petitioning state or local agency.
Within the U.S., state or local governments could be required to operate such programs with government employees as a condition of receiving federal funding. Moreover, under current law, in order to privatize certain functions of government programs, the U.S. federal government must grant consent and/or waiver to the petitioning state or local agency.
Many of our projects handle protected health information or other forms of confidential personal information, the loss or disclosure of which has adversely affected, and in the future, could further adversely affect, our business, results of operations, and reputation.
For more information regarding our cybersecurity risk management, see "Item 1C. Cybersecurity" of this Annual Report on Form 10-K. Many of our projects handle protected health information or other forms of confidential personal information, the loss or disclosure of which has adversely affected, and in the future, could further adversely affect, our business, results of operations, and reputation.
Risks Pertaining to our Human Resources We may lose executive officers and senior managers on whom we rely to generate business and execute projects successfully. The ability of our executive officers and our senior managers to generate business and execute projects effectively is important to our success.
The ability of our executive officers and our senior managers to generate business and execute projects effectively is important to our success.
Risks Pertaining to Legal Compliance We are subject to review and audit by governments at their sole discretion and, if any improprieties are found, we may be required to refund revenue we have received or forego anticipated revenue, which could have a material adverse impact on our revenue and our ability to bid in response to RFPs.
If the carrying value of our assets, including goodwill, exceeds their fair value, we may be required to take write-offs, write-downs, restructuring, impairment, or other charges that could negatively affect business, assets, liabilities, prospects, outlook, financial condition, and results of operations. 20 Table of Contents Risks Pertaining to Legal Compliance We are subject to review and audit by governments at their sole discretion and, if any improprieties are found, we may be required to refund revenue we have received or forego anticipated revenue, which could have a material adverse impact on our revenue and our ability to bid in response to RFPs.
As a result, the amount of interest we may pay on our credit facilities is difficult to predict. We are subject to the risks of doing business internationally. For the year ended September 30, 2023, 14% of our revenue was driven from jurisdictions outside the U.S.
We are subject to the risks of doing business internationally. For the year ended September 30, 2024, 12% of our revenue was driven from jurisdictions outside the U.S.
Those uncertainties include, but are not limited to, costs of litigation, unpredictable court or jury decisions, and the differing laws and attitudes regarding damage awards among the states and countries in which we operate. 19 Table of Contents We may be precluded from bidding and performing certain work due to other work we currently perform.
In addition, litigation and other legal claims are subject to inherent uncertainties, and management's view of these matters may change in the future. Those uncertainties include, but are not limited to, costs of litigation, unpredictable court or jury decisions, and the differing laws and attitudes regarding damage awards among the states and countries in which we operate.
These cost increases may not be fully recoverable or adequately covered by insurance. We face competition from a variety of organizations, many of which have substantially greater financial resources than we do; we may be unable to compete successfully with these organizations.
These investments may not be recovered if we are unsuccessful in our entrance into these markets. We face competition from a variety of organizations, many of which have substantially greater financial resources than we do; we may be unable to compete successfully with these organizations.
We may be exposed to liability, and we and our clients may be adversely affected if a subcontractor or teaming partner fails to meet its contractual obligations. Risks Pertaining to Data and Data Security Our development and use of emerging artificial intelligence (“AI”) and machine learning (“ML”) technologies creates unique risks requiring use case-specific governance.
We may be exposed to liability, and we and our clients may be adversely affected if a subcontractor or teaming partner fails to meet its contractual obligations. Risks Pertaining to Data and Data Security Our use of artificial intelligence (AI) involves risks such as potential liability, regulatory issues, competition, and reputational damage.
In those situations, the divisions involved in operating such programs would likely be precluded from bidding on those RFPs. Similarly, regulations governing the independence of Medicaid enrollment brokers and Medicare appeal providers prevent us from providing services to other organizations such as health plans and providers. We may face liabilities arising from divested or discontinued businesses.
Similarly, regulations governing the independence of Medicaid enrollment brokers and Medicare appeal providers prevent us from providing services to other organizations such as health plans and providers. We may face liabilities arising from divested or discontinued businesses. We have divested a number of businesses. The transaction documents for those divestitures typically contain a variety of representations, warranties, and indemnification obligations.
Consequently, as a result of the above matters, we may incur significant costs or liabilities, including penalties, which could adversely impact our operating results, cash flows, financial condition, and our ability to compete for future contracts. We may also incur impairment costs on assets related to these contracts.
If a claim is made against a performance bond or letter of credit, we may be required to reimburse the issuer for the amount of the claim. Consequently, we may incur significant costs or liabilities, including penalties, which could adversely impact our operating results, cash flows, financial condition, and our ability to compete for future contracts.
To facilitate our ability to prepare bids in response to RFPs, we rely in part on establishing and maintaining relationships with officials of various government entities and agencies. These relationships enable us to provide informal input and advice to government entities and agencies prior to the development of an RFP.
To facilitate our ability to prepare bids in response to RFPs and retain existing work and secure new work on future procurements, we rely in part on establishing and maintaining relationships with officials of various government entities and agencies.
Risks Related to our Acquisitions We may experience difficulties in integrating our operations with those of acquired businesses and realizing the expected benefits of these acquisitions.
If we are unable to adapt to changing eligibility requirements for strategic GWAC competitions, we would risk losing access to related contracts and awards. 19 Table of Contents Risks Related to our Acquisitions We may experience difficulties in integrating our operations with those of acquired businesses and realizing the expected benefits of these acquisitions.
Any failure to maintain positive relationships with government entities and agencies may adversely affect our ability to successfully bid in response to RFPs. Our customers may limit or prohibit the outsourcing of certain programs or may refuse to grant consents and/or waivers necessary to permit contractors, such as us, to perform certain elements of government programs.
Our customers may limit or prohibit the outsourcing of certain programs or may refuse to grant consents and/or waivers necessary to permit contractors, such as us, to perform certain elements of government programs. Governments could limit or prohibit private contractors like us from operating or performing elements of certain programs.
If significant portions of our workforce are unable to work effectively, including because of illness, quarantines, government actions, facility closures, or other restrictions in connection with an outbreak, our operations will likely be adversely impacted. If our operations are materially restricted, we may be unable to perform fully on our contracts, and our costs may increase significantly.
If significant portions of our workforce are unable to work effectively, including because of illness, quarantines, government actions, facility closures resulting from a natural disaster or public health crisis, failures in key networks or communications systems resulting from a natural disaster, or other limitations or restrictions in connection with a natural disaster or public health crisis, our operations will likely be adversely impacted.
These factors may lead to decreased revenues and profits, which could adversely affect our business, financial condition, and results of operations. 22 Table of Contents Inaccurate, misleading, or negative media coverage could adversely affect our reputation and our ability to bid for government contracts.
These factors may lead to decreased revenues and profits, which could adversely affect our business, financial condition, and results of operations. 24 Table of Contents Our business could be materially and adversely impacted by natural or man-made factors outside of our control.
Our reputation and relationships with our clients are key factors in maintaining our business. Negative press reports or publicity, regardless of accuracy, could harm our reputation. If our reputation is negatively affected, our clients may decrease or cease business with us.
Our clients may elect to open bidding processes up earlier than anticipated, resulting in increased competition prior to the anticipated end of contracts. Our reputation and relationships with our clients are key factors in maintaining our business. Negative press reports or publicity, regardless of accuracy, could harm our reputation.
When these contracts expire, they may be opened for bidding by competing bidders, and there is no guarantee that the contracts will be renewed or extended. Our clients may elect to open bidding processes up earlier than anticipated, resulting in increased competition prior to the anticipated end of contracts.
Our contracts typically run for a fixed number of years and may be extended for an additional specified number of years if the contracting entity or its agent elects to do so. When these contracts expire, they may be opened for bidding by competing bidders, and there is no guarantee that the contracts will be renewed or extended.
Any significant disruption or deterioration in our relationship with federal, state, and local governments and a corresponding reduction in these contracts would significantly reduce our revenue and could substantially harm our business. 17 Table of Contents Our contracts typically run for a fixed number of years and may be extended for an additional specified number of years if the contracting entity or its agent elects to do so.
Any significant disruption or deterioration in our relationship with federal, state, and local governments and a corresponding reduction in these contracts would significantly reduce our revenue and could substantially harm our business. In fiscal year 2024, approximately 55% of our revenue came from our ten largest contracts.
We have recorded expenses in connection with the investigation and remediation activities related to this incident, but we are unable to predict other potential liabilities or consequences that may arise from this incident. Despite our preventative and remediation efforts, we may continue to experience cybersecurity incidents in the future.
We have recorded expenses in connection with our investigation and remediation activities related to this incident; further details are included in "Note 15. Commitments and Contingencies" in Item 8 of this Annual Report on Form 10-K. We may continue to experience cybersecurity incidents in the future.
Alliant 2 is an unrestricted, IDIQ, multi-vendor award with a contract ceiling of $50 billion. If we are unable to adapt to changing eligibility requirements for strategic GWAC competitions, we would risk losing access to related contracts and awards.
Alliant 2 is an unrestricted, IDIQ, multi-vendor award with a contract ceiling of $50 billion.
To the extent that a project does not perform as anticipated, these deferred costs may not be considered recoverable, resulting in an impairment charge. 14 Table of Contents Our business could be materially and adversely impacted by pandemics, similar to the recent COVID-19 outbreak. We face various risks related to health epidemics, pandemics, and similar outbreaks.
To the extent that a project does not perform as anticipated, these deferred costs may not be considered recoverable, resulting in an impairment charge. 15 Table of Contents We may also make broad investments in resources, such as technology or personnel, to address new or adjacent markets.
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If a claim is made against a performance bond or letter of credit, we may be required to reimburse the issuer for the amount of the claim.
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In some cases, competitors may choose to take greater risks or lower profit margins in order to enter a market or build market share. Also, in some geographic areas, we face competition from smaller firms with established reputations and political relationships.
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If we fail to establish and maintain sufficient oversight, we face increased risk of negative outcomes which could expose us to legal liability, financial loss, and reputational damage. Applicable laws and regulations, both existing and forthcoming, often focus on AI/ML use when that technology is used to influence outcomes or make inferences about individuals, groups, or communities.
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AI technologies create specific risks that require tailored governance and use case specific review. Insufficient oversight could lead to legal liability, financial loss, and reputational harm. We use artificial intelligence (AI) to sort, organize, analyze, and generate data for business purposes. AI encompasses machine learning, generative AI, and other standard techniques.
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These new and emerging technologies require use-case-specific governance, with oversight that adequately addresses AI/ML-specific areas of concern, such as transparency, explainability, fairness, harmful bias mitigation, and unique third-party privacy and security risks.
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The comprehensive lifecycle utilization of AI, whether implemented directly by us or in collaboration with third parties, will necessitate ongoing investment in governance and security resources to help ensure its responsible use of AI and to safeguard against potential risks and vulnerabilities. The use of AI carries considerable risks, and we cannot guarantee the achievement of intended outcomes.
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If we fail to establish and maintain sufficient oversight, which evolves at the rapid pace with which AI/ML technology is changing, we could be subject to sanctions under the relevant laws, breach of contract claims, contract termination, class action, or individual lawsuits from affected parties, negative press articles, reputational damage, and a loss of confidence from our government clients, all of which could adversely affect our existing business, future opportunities, and financial condition. 15 Table of Contents Our systems and networks are and have been subject to cybersecurity breaches.
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As an evolving technology, AI may occasionally produce incomplete or misleading results. Despite training and risk management efforts, there is a possibility that employees might misuse AI, either intentionally or unintentionally. Additionally, given the nature of our citizen-facing services, we are vulnerable to potential adversarial attacks.
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Governments could limit or prohibit private contractors like us from operating or performing elements of certain programs. Within the U.S., state or local governments could be required to operate such programs with government employees as a condition of receiving federal funding.
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Should our AI generate suboptimal or contentious outcomes, or if public perception of AI shifts negatively due to perceived risks, we may encounter operational challenges, competitive disadvantages, legal liabilities, reputational harm, or other business impacts. AI-related legal and regulatory frameworks are evolving due to concerns about bias, discrimination, transparency, and security.
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In addition, litigation and other legal claims are subject to inherent uncertainties, and management's view of these matters may change in the future.
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The use of AI technologies involves issues associated with intellectual property, data privacy, consumer protection, competition, and equal opportunity, with potential for new regulations. AI is under review by U.S. Federal and State and international agencies, and the recent elections may influence the regulatory landscape in the United States.
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We have divested a number of businesses. The transaction documents for those divestitures typically contain a variety of representations, warranties, and indemnification obligations. We could face indemnification claims and liabilities from alleged breaches of representations or warranties.
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New or expanded AI laws could raise compliance costs and pose unpredictable risks, potentially affecting our operations and results. Our systems and networks are and have been subject to cybersecurity breaches.
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Approximately half of our long-term debt is held at variable interest rates. During fiscal year 2023, interest rates have increased and may continue to increase or remain at levels higher than in the past.
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There can be no guarantee that our preventative and remediation efforts will be sufficient to protect the company's information systems, information, and other assets from significant harm and that future cybersecurity incidents will not have a material adverse effect on the company or its results of operations or financial condition or cause reputational or other harm to the company.
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SOFR is a relatively new reference rate, has a very limited history, and is based on short-term repurchase agreements backed by Treasury securities. Changes in SOFR can be volatile and difficult to predict, and there can be no assurance that SOFR will perform similarly to the way LIBOR would have performed at any time.
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These relationships enable us to provide informal input and advice to government entities and agencies prior to the development of an RFP and our capabilities to support government objectives. We also engage marketing consultants and other third-party consultants to establish and maintain relationships with elected officials and appointed members of government agencies.
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If any of our current significant contracts or significant contracts we enter into in the future were terminated or our work under those contracts was decreased, our revenues and net income could significantly decline. Additional potential impacts of the loss of a significant contract or contracts might include impairment charges over tangible assets and intangible assets, including our goodwill balance.
Added
Our success will depend on our continued ability to develop and manage relationships with significant customers and there is no assurance that we will be able to diversify our customer base in the near future, if at all.
Added
The markets in which we sell our products are served by a relatively small number of governmental agencies, which limits the number of potential customers.
Added
We cannot provide assurance that we will be able to retain our largest customers, that we will be able to attract additional customers, or that our customers will continue to buy our services in the same volume as in prior years.
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The loss of one or more of our largest customers, any reduction or delay in sales to these customers, our inability to successfully develop relationships with additional customers, or future price concessions could impact our business.
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For example, some of our businesses assist government agencies in developing RFPs for various government programs. In those situations, the divisions involved in operating such programs would likely be precluded from bidding on those RFPs.
Added
We have faced, and continue to face, indemnification claims and liabilities from alleged breaches of representations or warranties. 21 Table of Contents Risks Pertaining to our Human Resources We may lose executive officers and senior managers on whom we rely to generate business and execute projects successfully.
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We may not be able to realize the full value of our backlog. At September 30, 2024, our total backlog was $16.2 billion. This represents an estimate of potential revenue from our existing contract portfolio.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties As of September 30, 2023, we leased approximately 176 offices in the U.S., totaling approximately 3.8 million square feet. In nine countries outside the U.S., we leased approximately 333 offices, totaling approximately 0.8 million square feet. The lease terms vary from month-to-month to ten-year leases and are generally entered into at market rates.
Biggest changeItem 2. Properties As of September 30, 2024, we leased approximately 141 offices in the U.S., totaling approximately 3.0 million square feet. In seven countries outside the U.S., we leased approximately 321 offices, totaling approximately 0.6 million square feet. The lease terms vary from month-to-month to ten-year leases and are generally entered into at market rates.
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Item 3. Legal Proceedings Refer to our disclosures included in " Note 15. Commitments and Contingencies " included in Item 8 of this Annual Report on Form 10-K. Item 4. Mine Safety Disclosures Not applicable. 28 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeStock Performance Graph The following graph compares the cumulative total shareholder return on our common stock for the five-year period from September 30, 2018, to September 30, 2023, with the cumulative total returns for the S&P MidCap 400 Index and the S&P MidCap 400 Value Index. Both S&P indices are utilized in outstanding market-based equity awards issued by Maximus.
Biggest changeStock Performance Graph The following graph compares the cumulative total shareholder return on our common stock for the five-year period from September 30, 2019, to September 30, 2024, with the cumulative total returns for the S&P MidCap 400 Value Index, which is utilized in outstanding market-based equity awards issued by Maximus.
The number of holders of record is not representative of the number of beneficial owners due to the fact that many shares are held by depositories, brokers, or nominees. We estimate there are approximately 164,000 beneficial owners of our common stock.
The number of holders of record is not representative of the number of beneficial owners due to the fact that many shares are held by depositories, brokers, or nominees. We estimate there are approximately 170,000 beneficial owners of our common stock.
This graph assumes the investment of $100 on September 30, 2018, in our common stock, the S&P MidCap 400 Index, the S&P MidCap 400 Value Index, and our peer group, weighted by market capitalization, and assumes dividends are reinvested. 24 Table of Contents Notes: • The lines represent index levels derived from compounded daily returns that include all dividends. • The indexes are reweighted daily, using the market capitalization on the previous trading day. • If the monthly interval, based on the fiscal year-end, is not a trading day, the preceding trading day is used. • The index level for all series was set to $100.00 on September 30, 2018.
This graph assumes the investment of $100 on September 30, 2019, in our common stock, the S&P MidCap 400 Value Index, the S&P 400 Commercial and Professional Index, and our peer group, weighted by market capitalization, and assumes dividends are reinvested. 29 Table of Contents Notes: • The lines represent index levels derived from compounded daily returns that include all dividends. • The indexes are reweighted daily, using the market capitalization on the previous trading day. • If the monthly interval, based on the fiscal year-end, is not a trading day, the preceding trading day is used. • The index level for all series was set to $100.00 on September 30, 2019.
Dividend Policy During the first fiscal quarter of 2024, we declared a quarterly dividend of $0.30 per share of Maximus common stock. Our quarterly dividends during fiscal years 2023, 2022, and 2021 were $0.28 per share, respectively. We intend to continue paying regular cash dividends, although there is no assurance as to future dividends.
Dividend Policy During the first fiscal quarter of 2025, we declared a quarterly dividend of $0.30 per share of Maximus common stock. Our quarterly dividends during fiscal years 2024, 2023, and 2022 were $0.30, $0.28, and $0.28 per share, respectively. We intend to continue paying regular cash dividends, although there is no assurance of this.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is traded on the New York Stock Exchange, or NYSE, under the symbol "MMS." Holders of Record As of October 27, 2023, there were 32 holders of record of our outstanding common stock.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is traded on the New York Stock Exchange, or NYSE, under the symbol "MMS." Holders of Record As of October 22, 2024, there were 31 holders of record of our outstanding common stock.
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Issuer Purchases of Equity Securities In March 2020, the Board of Directors authorized the purchase, at management's discretion, of up to $200 million of our common stock. We made no purchases of common stock in fiscal year 2023, and $50.6 million remained available for stock purchases as of September 30, 2023.
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Issuer Purchases of Equity Securities The following table sets forth the information required regarding purchases of common stock that we made during the three months ended September 30, 2024.
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Common Stock Repurchase Activity During the Three Months Ended September 30, 2024 Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of the Publicly Announced Plans (1) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans (in thousands) July 1, 2024 - July 31, 2024 250,194 $ 84.78 250,194 $ 172,643 August 1, 2024 - August 31, 2024 — — — $ 172,643 September 1, 2024 - September 30, 2024 14,316 84.83 14,316 $ 171,429 264,510 $ 84.78 264,510 (1) In June 2024, the Board of Directors authorized an increase to our existing stock purchase program whereby we may purchase, at management's discretion, up to $200.0 million of our common stock.
Added
We have also included the S&P 400 Commercial & Professional Index. This index is used in evaluating certain components of senior employee compensation.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeItem 6. [ R eserve d ] 25 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 26 Business Overview 26 Financial Overview 26 Results of Operations 27 Backlog 32 Liquidity and Capital Resources 33 Critical Accounting Policies and Estimates 36 Non-GAAP and Other Measures 37 Item 7A.
Biggest changeItem 6. [Reserved] 30 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 31 Business Overview 31 Financial Overview 31 Results of Operations 32 Backlog 37 Liquidity and Capital Resources 37 Critical Accounting Policies and Estimates 42 Non-GAAP and Other Measures 43 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 45 Item 8.
Financial Statements and Supplementary Data 41 Report of Independent Registered Public Accounting Firm (PCAOB ID: 42) 41 Consolidated Statements of Operations 43 Consolidated Statements of Comprehensive Income 44 Consolidated Balance Sheets 45 Consolidated Statements of Cash Flows 46 Consolidated Statements of Changes in Shareholders' Equity 47 Notes to the Consolidated Financial Statements 48 1. Organization 48 2.
Financial Statements and Supplementary Data 46 Report of Independent Registered Public Accounting Firm (PCAOB ID: 42) 46 Consolidated Statements of Operations 48 Consolidated Statements of Comprehensive Income 49 Consolidated Balance Sheets 50 Consolidated Statements of Cash Flows 51 Consolidated Statements of Changes in Shareholders' Equity 52 Notes to the Consolidated Financial Statements 53 1. Organization 53 2.
Cash and Cash Equivalents and Restricted Cash 70 2 Table of Contents Table of Contents to 2023 Form 10-K (continued) 14. Other Balance Sheet Components 70 15. Commitments and Contingencies 72 16. Employee Benefit Plans and Deferred Compensation 74 17. Subsequent Even t s 74
Cash and Cash Equivalents and Restricted Cash 75 2 Table of Contents Table of Contents to 2024 Form 10-K (continued) 14. Other Balance Sheet Components 75 15. Commitments and Contingencies 77 16. Employee Benefit Plans and Deferred Compensation 79 17. Subsequent Events 79
Significant Accounting Policies 48 3. Business Segments 54 4. Revenue Recognition 56 5. Earnings Per Share 58 6. Business Combination s and Divestiture s 59 7. Goodwill and Intangible Assets 62 8. Debt and Derivatives 63 9. Fair Value Measurements 65 10. Leases 66 11. Income Taxes 66 12. Equity 69 13.
Significant Accounting Policies 53 3. Business Segments 59 4. Revenue Recognition 61 5. Earnings Per Share 63 6. Debt and Derivatives 64 7. Acquisitions and Divestitures 66 8. Goodwill and Intangibles 67 9. Fair Value Measurements 68 10. Leases 70 11. Income Taxes 71 12. Equity 74 13.
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Quantitative and Qualitative Disclosures About Market Risk 40 Item 8.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeTable MD&A 11: Reconciliation of Net Income to Consolidated EBITDA as defined by our Credit Agreement For the Year Ended September 30, 2023 2022 (in thousands) Net income $ 161,792 $ 203,828 Adjustments: Interest expense 84,138 45,965 Other expense, net 363 2,835 Provision for income taxes 48,501 73,270 Amortization of intangibles 94,591 90,465 Stock compensation expense 29,522 30,476 Acquisition-related expenses 575 332 Gain on sale of land and building — (11,046) Loss on sale of businesses 883 — Depreciation and amortization of property, equipment, and capitalized software 54,725 42,330 Pro forma and other adjustments permitted by our Credit Agreement 69,892 30,032 Consolidated EBITDA (as defined by our Credit Agreement) $ 544,982 $ 508,487 Table MD&A 12: Consolidated Net Total Leverage Ratio For the Year Ended September 30, 2023 2022 (in thousands, except ratio data) Funded Debt (as defined by our Credit Agreement) $ 1,257,529 $ 1,366,314 Cash and cash equivalents up to $75 million 65,405 40,658 Consolidated Net Total Leverage (as defined by our Credit Agreement) $ 1,192,124 $ 1,325,656 Consolidated Net Total Leverage Ratio (as defined by our Credit Agreement) 2.19 2.61 35 Table of Contents Table MD&A 13: Consolidated Net Interest Coverage Ratio For the Year Ended September 30, 2023 2022 (in thousands, except ratio data) Consolidated EBITDA (as defined by our Credit Agreement) $ 544,982 $ 508,487 Interest expense 84,138 45,965 Components of other income/expense, net allowed in ratio calculation 2,684 (118) Consolidated Net Interest Expense (as defined by our Credit Agreement) $ 86,822 $ 45,847 Consolidated Net Interest Coverage Ratio (as defined by our Credit Agreement) 6.28 11.09 Leases As of September 30, 2023, we reported current and long-term operating lease liabilities of $49.9 million and $129.4 million, respectively.
Biggest changeWe do not believe that these covenants represent a significant restriction in our ability to operate our business or to pay our dividends. 40 Table of Contents Table MD&A 11: Reconciliation of Net Income to Consolidated EBITDA as defined by our Credit Agreement For the Year Ended September 30, 2024 2023 (in thousands) Net income $ 306,914 $ 161,792 Adjustments: Interest expense 82,440 84,138 Other expense, net (450) 363 Provision for income taxes 99,595 48,501 Amortization of intangibles 91,570 94,591 Stock compensation expense 35,349 29,522 Acquisition-related expenses 3,218 575 Loss on sale of businesses 1,018 883 Depreciation and amortization of property, equipment, and capitalized software 33,957 54,725 Pro forma and other adjustments permitted by our Credit Agreement 72,172 69,892 Consolidated EBITDA (as defined by our Credit Agreement) $ 725,783 $ 544,982 Table MD&A 12: Consolidated Net Total Leverage Ratio For the Year Ended September 30, 2024 2023 (in thousands, except ratio data) Funded Debt (as defined by our Credit Agreement) $ 1,145,819 $ 1,257,529 Cash and cash equivalents up to $150 million 150,000 65,405 Consolidated Net Total Leverage (as defined by our Credit Agreement) $ 995,819 $ 1,192,124 Consolidated Net Total Leverage Ratio (as defined by our Credit Agreement) 1.37 2.19 Table MD&A 13: Consolidated Net Interest Coverage Ratio For the Year Ended September 30, 2024 2023 (in thousands, except ratio data) Consolidated EBITDA (as defined by our Credit Agreement) $ 725,783 $ 544,982 Interest expense 82,440 84,138 Components of other income/expense, net allowed in ratio calculation 2,533 2,684 Consolidated Net Interest Expense (as defined by our Credit Agreement) $ 84,973 $ 86,822 Consolidated Net Interest Coverage Ratio (as defined by our Credit Agreement) 8.54 6.28 Leases As of September 30, 2024, we reported current and long-term operating lease liabilities of $47.7 million and $97.2 million, respectively.
These assumptions relate to the future performance of the acquired business, are forward-looking, and could be affected by future economic and market conditions. The asset values and asset lives determined at acquisition may change based upon circumstances such as contract terminations or changes in strategy. When this occurs, we may need to accelerate our amortization charges.
These assumptions relate to the future performance of the acquired business, are forward-looking, and could be affected by future economic and market conditions. The asset values and asset lives determined at acquisition may change based on circumstances such as contract terminations or changes in strategy. When this occurs, we may need to accelerate our amortization charges.
Business Overview For an overview of our business, including our business segments and discussion of the services we provide, see Item 1. Business of this Annual Report on Form 10-K. Financial Overview A number of factors have affected our fiscal year 2023 results, the most significant of which we have listed below.
Business Overview For an overview of our business, including our business segments and discussion of the services we provide, see Item 1. Business of this Annual Report on Form 10-K. Financial Overview A number of factors have affected our fiscal year 2024 results, the most significant of which we have listed below.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This Management's Discussion and Analysis of Financial Condition and Results of Operations should be read together with the Company's audited consolidated financial statements and the related notes thereto for the fiscal years ended September 30, 2023, 2022, and 2021, included in Item 8.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This Management's Discussion and Analysis of Financial Condition and Results of Operations should be read together with the Company's audited consolidated financial statements and the related notes thereto for the fiscal years ended September 30, 2024, 2023, and 2022, included in Item 8.
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. 39 Table of Contents
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. 44 Table of Contents
The accounting for our acquisitions included determining the fair value of intangible assets representing customer relationships, the VES provider network, and technology. In making our determination of the fair value of these assets, we utilized estimates, the most significant of which were forecasts related to future revenues and profit margins.
The accounting for our acquisitions included determining the fair value of intangible assets representing customer relationships, the VES provider network, technology, and an assembled workforce. In making our determination of the fair value of these assets, we utilized estimates, the most significant of which were forecasts related to future revenues and profit margins.
Where we have acquisitions that provide services to more than one segment or where the acquisition provides benefits across all of our segments, we use judgment to allocate the goodwill balance based upon the relative value we anticipate that each segment will realize. • Goodwill is not amortized but is subject to impairment testing on an annual basis, or more frequently if impairment indicators arise.
Where we have acquisitions that provide services to more than one segment or where the acquisition provides benefits across all of our segments, we use judgment to allocate the goodwill balance based on the relative value we anticipate that each segment will realize. 42 Table of Contents • Goodwill is not amortized but is subject to impairment testing on an annual basis, or more frequently if impairment indicators arise.
We have mitigated our risk by fixing interest rates on $650 million of our debt and our near-term capital allocation plan continues to prioritize reducing our debt using our free cash flow. At our current debt balances, a 100 basis point change in SOFR would result in an increased annual interest expense of $6.1 million.
We have mitigated our risk by fixing interest rates on $650 million of our debt and our near-term capital allocation plan continues to prioritize reducing our debt using our free cash flow. At our current debt balances, a 100 basis point change in SOFR would result in an increased annual interest expense of $5.0 million.
The identification of our reporting units requires judgment based upon the manner in which our business is operated and the services performed. Our reporting units are consistent with our segments.
The identification of our reporting units requires judgment based on the manner in which our business is operated and the services performed. Our reporting units are consistent with our segments.
We have included the following table showing our debt balances as of September 30, 2023, and their effective interest rates.
We have included the following table showing our debt balances as of September 30, 2024, and their effective interest rates.
These assets are created through business acquisitions, and their creation and maintenance requires certain critical estimates. • During an acquisition, we are required to estimate the fair value of all acquired tangible and intangible assets, as well as liabilities assumed, in order to allocate the purchase price.
These assets are typically obtained through business acquisitions, and their acquisition and maintenance requires certain critical estimates. • During an acquisition, we are required to estimate the fair value of all acquired tangible and intangible assets, as well as liabilities assumed, in order to allocate the purchase price.
These non-GAAP measures, as determined and presented by us, may not be comparable to related or similarly titled measures presented by other companies. In fiscal year 2023, 14% of our revenue was generated outside the U.S.
These non-GAAP measures, as determined and presented by us, may not be comparable to related or similarly titled measures presented by other companies. In fiscal year 2024, 12% of our revenue was generated outside the U.S.
There are two financial covenants, both defined in the Credit Agreement. • Our Consolidated Net Total Leverage Ratio means, for any twelve-month period, the ratio of our Funded Debt, offset by up to $75 million of unrestricted cash (Consolidated Total Leverage), against our Consolidated EBITDA (as defined by the Credit Agreement).
There are two financial covenants, both defined in the Credit Agreement. • Our Consolidated Net Total Leverage Ratio means, for any twelve-month period, the ratio of our Funded Debt, offset by up to $150 million (which was $75 million under our previous agreement) of unrestricted cash (Consolidated Total Leverage), against our Consolidated EBITDA (as defined by the Credit Agreement).
The presentation of these measures is meant to complement, but not replace, other financial measures in this document. The presentation of non-GAAP numbers is not meant to be considered in isolation, nor as an alternative to revenue growth, net cash provided by operating activities, operating income, net income, or earnings per share as measures of performance or liquidity.
The presentation of non-GAAP numbers is not meant to be considered in isolation, nor as an alternative to revenue growth, net cash provided by operating activities, operating income, net income, or earnings per share as measures of performance or liquidity.
We believe we have access to sufficient funds to manage through a potential shutdown of the U.S. federal government. See "Note 8. Debt and Derivatives" to the Consolidated Financial Statements for a more detailed discussion of our debt financing arrangements.
We believe we have access to sufficient funds to manage through a potential shutdown of the U.S. federal government. See "Note 8. Debt and Derivatives" to the Consolidated Financial Statements for a more detailed discussion of our debt financing arrangements. 37 Table of Contents The below table summarizes our change in cash, cash equivalents, and restricted cash.
As of September 30, 2023, we estimate that we had approximately $20.7 billion in backlog. Table MD&A 7: Backlog by Segment As of September 30, 2023 2022 (in millions) U.S. Federal Services $ 13,800 $ 13,168 U.S.
As of September 30, 2024, we estimate that we had approximately $16.2 billion in backlog. Table MD&A 7: Backlog by Segment As of September 30, 2024 2023 (in millions) U.S. Federal Services $ 10,286 $ 13,800 U.S.
Impairment testing is performed at the reporting unit level. This process requires judgment in assessing the fair value of these reporting units. We performed the annual impairment test using the qualitative assessment as of July 1, 2023, and concluded that the fair value of each of the reporting units were greater than the carrying amounts.
Impairment testing is performed at the reporting unit level. This process requires judgment in assessing the fair value of these reporting units. We performed the annual impairment test using the qualitative assessment as of July 1, 2024, and concluded it was not more likely than not that the fair value of the reporting units was less than the carrying amounts.
Where possible, we mitigate this risk by including clauses allowing for the termination of lease agreements if the contract the location covers is terminated by our customer. See "Note 10. Leases" to the Consolidated Financial Statements for information regarding our leases, including obligations by fiscal year.
Where possible, we mitigate this risk by including clauses allowing for the termination of lease agreements if the contract the location covers is terminated by our customer. See "Note 10.
Services 4,851 5,205 Outside the U.S. 2,089 1,441 Backlog $ 20,740 $ 19,814 At September 30, 2023, the average weighted remaining life of the contracts in our backlog was approximately 5.92 years, including option periods. Increases in backlog result from the award of new contracts and the extension or renewal of existing contracts.
Services 3,867 4,851 Outside the U.S. 2,014 2,089 Backlog $ 16,167 $ 20,740 At September 30, 2024, the average weighted remaining life of the contracts in our backlog was approximately 6.33 years, including option periods. Increases in backlog result from the award of new contracts and the extension or renewal of existing contracts.
We support programs and deliver services in the United Kingdom, including the Health Assessment Advisory Service ("HAAS") and the recently awarded replacement contract to start in 2024, Functional Assessment Services (“FAS”), and Restart; Australia, including Workforce Australia and employment support and job seeker services worldwide. Table MD&A 5: Outside the U.S.
We support programs and deliver services in the United Kingdom, including the newly awarded Functional Assessment Services (FAS) contract, which replaced the Health Assessment Advisory Service (HAAS) contract, and the Restart employment program; and Australia, including Workforce Australia, and other employment support and job seeker services in a number of other countries. Table MD&A 5: Outside the U.S.
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.
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.
Segment - Financial Results For the Year Ended September 30, 2023 2022 (dollars in thousands) Revenue $ 689,053 $ 763,662 Cost of revenue 595,872 686,296 Gross profit 93,181 77,366 Selling, general, and administrative expenses 102,311 92,536 Operating loss (9,130) (15,170) Gross profit percentage 13.5 % 10.1 % Operating margin percentage (1.3) % (2.0) % 30 Table of Contents Table MD&A 6: Outside the U.S.
Segment - Financial Results For the Year Ended September 30, 2024 2023 (dollars in thousands) Revenue $ 657,140 $ 689,053 Cost of revenue 551,037 595,872 Gross profit 106,103 93,181 Selling, general, and administrative expenses 98,398 102,311 Operating income/(loss) 7,705 (9,130) Gross profit percentage 16.1 % 13.5 % Operating margin percentage 1.2 % (1.3) % Table MD&A 6: Outside the U.S.
Under Technology Consulting Services ("TCS"), 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 through VES, which manages the clinical evaluation process for U.S. veterans and service members on behalf of the VA.
Under Technology Consulting Services (TCS), 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. Table MD&A 3: U.S.
Table MD&A 1: Consolidated Results of Operations For the Year Ended September 30, 2023 2022 (dollars in thousands, except per share data) Revenue $ 4,904,728 $ 4,631,018 Cost of revenue 3,876,120 3,691,208 Gross profit 1,028,608 939,810 Gross profit percentage 21.0 % 20.3 % Selling, general, and administrative expenses 639,223 534,493 Selling, general, and administrative expenses as a percentage of revenue 13.0 % 11.5 % Amortization of intangible assets 94,591 90,465 Gain on sale of land and building — 11,046 Operating income 294,794 325,898 Operating margin 6.0 % 7.0 % Interest expense 84,138 45,965 Other expense, net 363 2,835 Income before income taxes 210,293 277,098 Provision for income taxes 48,501 73,270 Effective tax rate 23.1 % 26.4 % Net income $ 161,792 $ 203,828 Earnings per share: Basic $ 2.65 $ 3.30 Diluted $ 2.63 $ 3.29 Our business segments have different factors driving revenue fluctuations and profitability.
Table MD&A 1: Consolidated Results of Operations For the Year Ended September 30, 2024 2023 (dollars in thousands, except per share data) Revenue $ 5,306,197 $ 4,904,728 Cost of revenue 4,054,545 3,876,120 Gross profit 1,251,652 1,028,608 Gross profit percentage 23.6 % 21.0 % Selling, general, and administrative expenses 671,583 639,223 Selling, general, and administrative expenses as a percentage of revenue 12.7 % 13.0 % Amortization of intangible assets 91,570 94,591 Operating income 488,499 294,794 Operating margin 9.2 % 6.0 % Interest expense 82,440 84,138 Other (income)/expense, net (450) 363 Income before income taxes 406,509 210,293 Provision for income taxes 99,595 48,501 Effective tax rate 24.5 % 23.1 % Net income $ 306,914 $ 161,792 Earnings per share: Basic $ 5.03 $ 2.65 Diluted $ 4.99 $ 2.63 Our business segments have different factors driving revenue fluctuations and profitability.
Table MD&A 9: Net Change in Cash and Cash Equivalents and Restricted Cash For the Year Ended September 30, 2023 2022 (in thousands) Operating activities: Net cash provided by operating activities $ 314,340 $ 289,839 Net cash used in investing activities (80,963) (54,009) Net cash used in financing activities (250,798) (248,271) Effect of foreign exchange rates on cash and cash equivalents and restricted cash 2,717 (7,334) Net change in cash and cash equivalents and restricted cash $ (14,704) $ (19,775) 33 Table of Contents Net Cash Provided By Operating Activities Net cash provided by operating activities increased by $24.5 million in fiscal year 2023 compared to fiscal year 2022.
Table MD&A 8: Net Change in Cash and Cash Equivalents and Restricted Cash For the Year Ended September 30, 2024 2023 (in thousands) Cash flows: Net cash provided by operating activities $ 515,258 $ 314,340 Net cash used in investing activities (129,104) (80,963) Net cash used in financing activities (275,646) (250,798) Effect of foreign exchange rates on cash and cash equivalents and restricted cash 3,164 2,717 Net change in cash and cash equivalents and restricted cash $ 113,672 $ (14,704) Net Cash Provided By Operating Activities Net cash provided by operating activities increased by $200.9 million in fiscal year 2024 compared to fiscal year 2023.
Much of our revenue growth stems from our employment services contracts, where we are paid based upon our ability to place individuals in long-term sustained employment. We recognize revenue over our period of performance, using estimates of our ability to place people in work and the time that this will take.
We recognize revenue over our period of performance, using estimates of our ability to place people in work and the time that this will take. Our estimates are based upon historical performance, where appropriate and available, and are constantly updated.
We believe that providing supplemental measures that exclude the impact of the items detailed below is useful to investors in evaluating our core operations and results in relation to past periods. Accordingly, we have calculated our operating income, net income, and diluted earnings per share, excluding the effect of the amortization of intangible assets and divestiture-related charges.
We believe that providing supplemental measures that exclude the impact of the items detailed below is useful to investors in evaluating our core operations and results in relation to past periods.
Our SG&A expenses have expanded through our growth, as well as investments made in our workforce and infrastructure.
Our SG&A expenses have expanded through our growth, as well as investments made in our workforce and infrastructure. In addition, our SG&A includes charges which are not directly connected to our day-to-day operations.
Services Segment - Financial Results For the Year Ended September 30, 2023 2022 (dollars in thousands) Revenue $ 1,812,069 $ 1,607,612 Cost of revenue 1,434,528 1,264,608 Gross profit 377,541 343,004 Selling, general, and administrative expenses 194,991 160,902 Operating income 182,550 182,102 Gross profit percentage 20.8 % 21.3 % Operating margin percentage 10.1 % 11.3 % Our revenue and cost of revenue for the year ended September 30, 2023, increased 12.7% and 13.4%, respectively, compared to fiscal year 2022.
Services Segment - Financial Results For the Year Ended September 30, 2024 2023 (dollars in thousands) Revenue $ 1,911,813 $ 1,812,069 Cost of revenue 1,432,026 1,434,528 Gross profit 479,787 377,541 Selling, general, and administrative expenses 232,805 194,991 Operating income 246,982 182,550 Gross profit percentage 25.1 % 20.8 % Operating margin percentage 12.9 % 10.1 % Our revenue for the year ended September 30, 2024, increased 5.5% and cost of revenue slightly declined compared to fiscal year 2023.
Free Cash Flow (Non-GAAP) Table MD&A 10: Free Cash Flow (Non-GAAP) For the Year Ended September 30, 2023 2022 (in thousands) Net cash provided by operating activities $ 314,340 $ 289,839 Purchases of property and equipment and capitalized software (90,695) (56,145) Free cash flow (Non-GAAP) $ 223,645 $ 233,694 Material Cash Requirements from Contractual Obligations Credit Facilities Our principal debt agreement is with JPMorgan Chase Bank N.A.
Accordingly, it is not possible to estimate the potential tax obligations if we were to remit all of our funds from foreign locations to the United States. 38 Table of Contents Free Cash Flow (Non-GAAP) Table MD&A 9: Free Cash Flow (Non-GAAP) For the Year Ended September 30, 2024 2023 (in thousands) Net cash provided by operating activities $ 515,258 $ 314,340 Purchases of property and equipment and capitalized software (114,190) (90,695) Free cash flow (Non-GAAP) $ 401,068 $ 223,645 Material Cash Requirements from Contractual Obligations Credit Facilities Our principal debt agreement is with JPMorgan Chase Bank N.A.
At each reporting period, we update our estimates of the variable fees to represent the circumstances present at the end of the reporting period. We are required to constrain our estimates to the extent that it is probable that there will not be a significant reversal of cumulative revenue when the uncertainty is resolved.
We are required to constrain our estimates to the extent that it is probable that there will not be a significant reversal of cumulative revenue when the uncertainty is resolved. We do not have a history of significant constraints on these contracts.
Risk Factors and in "Special Note Regarding Forward-Looking Statements." A discussion comparing our results of operations, backlog, and liquidity and capital resources between fiscal years 2022 and 2021 can be found in our Annual Report on Form 10-K for the year ended September 30, 2022, which we filed with the Securities and Exchange Commission on November 22, 2022.
Risk Factors" and in "Special Note Regarding Forward-Looking Statements." A discussion of our results of operations, backlog, and liquidity and capital resources for fiscal year 2023, including comparisons to fiscal year 2022, can be found in last year's Annual Report on Form 10-K.
Table MD&A 14: Non-GAAP Adjusted Results - Operating Income, Net Income, and Diluted Earnings per Share For the Year Ended September 30, 2023 2022 (dollars in thousands, except per share data) Operating income $ 294,794 $ 325,898 Add back: Amortization of intangible assets 94,591 90,465 Add back: Divestiture-related charges 3,751 — Adjusted operating income excluding amortization of intangible assets and divestiture-related charges (Non-GAAP) $ 393,136 $ 416,363 Adjusted operating income margin excluding amortization of intangible assets and divestiture-related charges (Non-GAAP) 8.0 % 9.0 % Net income $ 161,792 $ 203,828 Add back: Amortization of intangible assets, net of tax 69,714 66,786 Add back: Divestiture-related charges 3,751 — Adjusted net income excluding amortization of intangible assets and divestiture-related charges (Non-GAAP) $ 235,257 $ 270,614 Diluted earnings per share $ 2.63 $ 3.29 Add back: Effect of amortization of intangible assets on diluted earnings per share 1.14 1.08 Add back: Effect of divestiture-related charges on diluted earnings per share 0.06 — Adjusted diluted earnings per share excluding amortization of intangible assets and divestiture-related charges (Non-GAAP) $ 3.83 $ 4.37 38 Table of Contents In order to sustain our net cash provided by operating activities, we regularly refresh our fixed assets and technology.
We have included a table showing our reconciliation of these income measures to their corresponding GAAP measures. 43 Table of Contents Table MD&A 14: Non-GAAP Adjusted Results - Operating Income, Adjusted EBITDA, Net Income, and Diluted Earnings per Share For the Year Ended September 30, 2024 2023 (dollars in thousands, except per share data) Operating income $ 488,499 $ 294,794 Add back: Amortization of intangible assets 91,570 94,591 Add back: Divestiture-related charges 1,018 3,751 Adjusted operating income excluding amortization of intangible assets and divestiture-related charges (Non-GAAP) $ 581,087 $ 393,136 Adjusted operating income margin excluding amortization of intangible assets and divestiture-related charges (Non-GAAP) 11.0 % 8.0 % Add back: Depreciation and amortization of property, equipment, and capitalized software 33,957 54,725 Adjusted EBITDA (Non-GAAP) $ 615,044 $ 447,861 Adjusted EBITDA margin (Non-GAAP) 11.6 % 9.1 % Net income $ 306,914 $ 161,792 Add back: Amortization of intangible assets, net of tax 67,481 69,714 Add back: Divestiture-related charges 1,018 3,751 Adjusted net income excluding amortization of intangible assets and divestiture-related charges (Non-GAAP) $ 375,413 $ 235,257 Diluted earnings per share $ 4.99 $ 2.63 Add back: Effect of amortization of intangible assets on diluted earnings per share 1.10 1.14 Add back: Effect of divestiture-related charges on diluted earnings per share 0.02 0.06 Adjusted diluted earnings per share excluding amortization of intangible assets and divestiture-related charges (Non-GAAP) $ 6.11 $ 3.83 In order to sustain our net cash provided by operating activities, we regularly refresh our fixed assets and technology.
Table MD&A 2: Changes in Revenue, Cost of Revenue, and Gross Profit for the Year Ended September 30, 2023 Revenue Cost of Revenue Gross Profit Dollars % Change Dollars % Change Dollars % Change (dollars in thousands) Fiscal year 2022 $ 4,631,018 $ 3,691,208 $ 939,810 Organic effect 326,745 7.1 % 235,859 6.4 % 90,886 9.7 % Disposal of businesses (22,050) (0.5) % (22,799) (0.6) % 749 0.1 % Acquired growth 4,179 0.1 % 2,297 0.1 % 1,882 0.2 % Currency effect compared to the prior period (35,164) (0.8) % (30,445) (0.8) % (4,719) (0.5) % Fiscal year 2023 $ 4,904,728 5.9 % $ 3,876,120 5.0 % $ 1,028,608 9.4 % 27 Table of Contents Selling, general, and administrative expenses Our SG&A expenses consist of indirect costs related to general management, marketing, and administration.
Table MD&A 2: Changes in Revenue, Cost of Revenue, and Gross Profit for the Year Ended September 30, 2024 Revenue Cost of Revenue Gross Profit Dollars % Change Dollars % Change Dollars % Change (dollars in thousands) Fiscal year 2023 $ 4,904,728 $ 3,876,120 $ 1,028,608 Organic growth 432,381 8.8 % 214,257 5.5 % 218,124 21.2 % Disposal of businesses (42,373) (0.9) % (45,539) (1.2) % 3,166 0.3 % Currency effect compared to the prior period 11,461 0.2 % 9,707 0.3 % 1,754 0.2 % Fiscal year 2024 $ 5,306,197 8.2 % $ 4,054,545 4.6 % $ 1,251,652 21.7 % 32 Table of Contents Selling, general, and administrative (SG&A) expenses Our SG&A expenses consist of indirect costs related to general management, marketing, and administration.
We maintain a rabbi trust to fund this liability. Critical Accounting Policies and Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires us to make estimates and judgments that affect the amounts reported.
Leases" to the Consolidated Financial Statements for information regarding our leases, including obligations by fiscal year. 41 Table of Contents Critical Accounting Policies and Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires us to make estimates and judgments that affect the amounts reported.
We have provided notices to individuals whose personal information, including social security numbers, protected health information, and/or other personal information, may have been included in the impacted files. • We include costs related to our acquisitions within SG&A.
We have provided notices to individuals whose personal information, including social security numbers, protected health information, and/or other personal information, may have been included in the impacted files. Interest expense Interest expense for fiscal year 2024 and 2023 decreased from $84.1 million to $82.4 million.
Segment. 26 Table of Contents Results of Operations The following table sets forth, for the fiscal years indicated, information derived from our statements of operations. In preparing our discussion and analysis of these results, we focused on the comparison between fiscal years 2023 and 2022.
In preparing our discussion and analysis of these results, we focused on the comparison between fiscal years 2024 and 2023.
Over the last three years, many programs in this segment have been operating with depressed margins resulting from the pause in Medicaid redeterminations. The depressed margins have resulted from reduced operating leverage in the segment as costs cannot scale down at the same rate to meet lower demand due to requirements to fulfill other obligations on these contracts.
The depressed margins resulted from reduced operating leverage in the segment as costs could not scale down at the same rate to meet lower demand due to the requirements to fulfill other obligations on these contracts. Fiscal year 2024 reflected a full period of volumes.
Table MD&A 8: Debt Balances and Interest Rates as of September 30, 2023 September 30, 2023 Carrying value Effective cash interest rate Interest rate basis (dollars in thousands) Term Loan A - Unhedged $ 259,375 6.92 % Term SOFR reset monthly plus margin.
Table MD&A 10: Debt Balances and Interest Rates as of September 30, 2024 September 30, 2024 Carrying value Effective cash interest rate Interest rate basis (dollars in thousands) Term Loan A - Hedged through May 2026 $ 500,000 3.81 % Fixed rate of 2.31% plus margin.
In addition, our SG&A includes charges which are not directly connected to our day-to-day operations. • Our costs for the year ended September 30, 2023, include a $29.3 million expense incurred in the second half of the year for our best estimate of the investigation and remediation costs of a previously disclosed cybersecurity incident.
Our costs for the year ended September 30, 2024 and 2023, include charges of $2.9 million and $29.3 million, respectively, for the investigation and remediation costs of a previously disclosed cybersecurity incident.
Federal Services Segment - Financial Results For the Year Ended September 30, 2023 2022 (dollars in thousands) Revenue $ 2,403,606 $ 2,259,744 Cost of revenue 1,845,720 1,740,304 Gross profit 557,886 519,440 Selling, general, and administrative expenses 308,197 284,509 Operating income 249,689 234,931 Gross profit percentage 23.2 % 23.0 % Operating margin percentage 10.4 % 10.4 % Our results for the year ended September 30, 2023, received revenue growth from Aidvantage and the increased volume on the VA medical disability examination ("MDE") contracts.
Federal Services Segment - Financial Results For the Year Ended September 30, 2024 2023 (dollars in thousands) Revenue $ 2,737,244 $ 2,403,606 Cost of revenue 2,071,482 1,845,720 Gross profit 665,762 557,886 Selling, general, and administrative expenses 332,140 308,197 Operating income 333,622 249,689 Gross profit percentage 24.3 % 23.2 % Operating margin percentage 12.2 % 10.4 % Our revenue and cost of revenue for the year ended September 30, 2024, increased 13.9% and 12.2%, respectively, compared to fiscal year 2023.
The backlog associated with our performance-based contracts is an estimate based upon management's experience of caseloads and similar transaction volume, which is subject to revision based upon the latest information available. Additionally, backlog estimates may be affected by foreign currency fluctuations. We believe that comparisons of backlog period-to-period are difficult.
Reductions in backlog come from fulfilling contracts or the early termination of contracts, which our experience shows to be a rare occurrence. The backlog associated with our performance-based contracts is an estimate based upon management's experience of caseloads and similar transaction volume, which is subject to revision based upon the latest information available.
We received payments for the sales of our Swedish business and for our sale of a small commercial practice in the United Kingdom. Net Cash Used In Financing Activities The principal drivers of financing cash flows are the Credit Agreement, our equity transactions, and restricted cash flows where we hold funds on behalf of customers or vendors.
Net Cash Used In Financing Activities The principal drivers of financing cash flows are the Credit Agreement, our equity transactions, and restricted cash flows where we hold funds on behalf of customers or vendors. During both fiscal years 2023 and 2022, we utilized our operating cash inflows to pay down debt and pay our dividends.
As we establish our plans for fiscal year 2024 and beyond, the actions we consider may result in additional charges, including impairment of assets. 31 Table of Contents Backlog Backlog represents estimated future revenue from: • existing signed contracts; • contracts that have been awarded but not yet signed; and • unexercised priced contract options.
This may result in volatility within revenue as changes in estimates of future performance impact the revenue recognized in any period. 36 Table of Contents Backlog Backlog represents estimated future revenue from: • existing signed contracts; • contracts that have been awarded but not yet signed; and • unexercised priced contract options.
(the "Credit Agreement"). At September 30, 2023, we owed $1.25 billion under the Credit Agreement, with access to an additional $600.0 million through a revolving credit facility.
(the "Credit Agreement"). At September 30, 2024, we owed $1.15 billion under the Credit Agreement, with access to an additional $750.0 million through a revolving credit facility. Mandatory repayments are required under this agreement through May 2031, when the agreement ends, and must be renegotiated or the funds repaid.
As a result, Consolidated EBITDA as defined by the Credit Agreement may not be comparable to EBITDA or related or similarly-titled measures presented by other companies. We have summarized below the components of our two financial ratio calculations, including the components of Consolidated EBITDA as defined by the Credit Agreement, which are included within our financial statements.
We have summarized below the components of our two financial ratio calculations, including the components of Consolidated EBITDA as defined by the Credit Agreement, which are included within our financial statements. At September 30, 2024, we were in compliance with all applicable covenants of our Credit Agreement.
Our standard forecasting process includes analyzing new work pipelines and submitted responses to requests for proposals ("RFPs") when predicting future revenue, operating income, and cash flows. 32 Table of Contents Liquidity and Capital Resources Our primary sources of liquidity are cash on hand, cash from operations, and availability under our revolving credit facilities.
The longevity of these contracts assists management in predicting revenue, operating income, and cash flows for the purposes of business planning. Our standard forecasting process includes analyzing new work pipelines and submitted responses to requests for proposals (RFPs) when predicting future revenue, operating income, and cash flows.
For fiscal year 2024, we expect the effective tax rate to be between 24.5% and 25.5%. 28 Table of Contents U.S. Federal Services Segment Our U.S. Federal Services Segment delivers end-to-end solutions that help various U.S. federal government agencies better deliver on their mission, including program operations and management, clinical services, and technology solutions.
Federal Services Segment Our U.S. Federal Services Segment delivers solutions that help various U.S. federal government agencies better deliver on their mission, including program operations and management, clinical services, and technology solutions. The segment also includes system and application development, Information Technology (IT) modernization, and maintenance services.
Services Segment provides a variety of BPS, such as program administration, assessments, and related consulting work for U.S. state and local government programs. These services support a variety of programs, including the ACA, Medicaid, the Children's Health Insurance Program ("CHIP"), Temporary Assistance to Needy Families ("TANF"), and child support programs.
Services Segment Our U.S. Services Segment provides a variety of BPS, such as program operations, clinical services, employment services, and technology solutions and related consulting work for U.S. state and local government programs.
(1) Term Loan A - Hedged through May 2026 500,000 3.81 % Fixed rate of 2.31% plus margin. (1) Term Loan A - Hedged through September 2024 150,000 5.98 % Fixed rate of 4.48% plus margin. (1) Term Loan B 344,934 7.42 % Term SOFR (variable reset) plus 2% margin.
(1) Term Loan A - Unhedged 141,875 6.10 % Term SOFR reset monthly plus margin. (1) Term Loan B - Hedged through September 2026 75,000 5.72 % Fixed rate of 3.72% plus margin. (1) Term Loan B - Hedged through September 2025 75,000 6.09 % Fixed rate of 4.09% plus margin.
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.
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.
Debt held by international subsidiaries 3,220 6.08 % Floating rate, reset quarterly. Debt Principal $ 1,257,529 (1) Applicable margin ranges between 1% and 2%, based on our leverage ratio. Our effective cash interest rate reflects the drivers of our cash interest payments as of September 30, 2023, which can change based upon the reset of the rates.
Our effective cash interest rate reflects the drivers of our cash interest payments as of September 30, 2024, which can change based upon the reset of the rates.
At September 30, 2023, we recorded $53.9 million of these estimated outcome fees as unbilled receivables, which will be billed and then collected when we reach the targets we anticipate. Business Combinations and Goodwill Our balance sheet as of September 30, 2023, includes $1.78 billion of goodwill and $703.6 million of net intangible assets.
Business Combinations and Goodwill Our balance sheet as of September 30, 2024, includes $1.78 billion of goodwill and $630.6 million of net intangible assets.
We maintain reserves where we believe a loss is probable and are able to estimate any potential liability that is updated as audits are completed. 37 Table of Contents 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.
These audits may take place several years after a contract has been completed. We maintain reserves where we believe a loss is probable and are able to estimate any potential liability that is updated as audits are completed.
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.
Segment Our Outside the U.S. Segment provides BPS and technology solutions for international governments. These services include health and disability assessments, program administration for employment services, wellbeing solutions and other job seeker-related services, digitally-enabled customer services, and advanced technologies for modernization.
Some of our performance-based contract revenue is recognized based upon future milestones 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 milestones, which may take many months to achieve. We recognize revenue over the period of performance.
Within our employment services business in our Outside the U.S. segment, some of our performance-based contract revenue is recognized based on future milestones defined in each contract. This requires us to make estimates about the attainment of the milestones. We estimate the total variable consideration we will receive using the expected value method.
Income taxes Our effective income tax rate for the year ended September 30, 2023 and September 30, 2022, was 23.1% and 26.4 %, respectively. The decrease in tax rate was primarily driven by higher tax credits and stock vesting benefits in the US, as well as a mix of jurisdictions where we recorded profit.
Income taxes Our effective income tax rate for the year ended September 30, 2024 and 2023, was 24.5% and 23.1%, respectively. Our tax rate in fiscal year 2023 received the benefit of higher tax credits. For fiscal year 2025, we expect the effective tax rate to be between 24.5% and 25.5%. 33 Table of Contents U.S.
More detail on these changes is presented below within our "Results of Operations" section. • Our operations within the United States received the benefit of contract growth, including a return to redetermination activity.
More detail on these changes is presented below within our "Results of Operations" section. • We experienced significant organic growth within our United States businesses. This growth was driven by volume growth on our core programs, a return to full volumes on programs tied to Medicaid-related activities, such as redeterminations, and incremental work on Medicaid-related activities that provided surplus volumes.
This resulted in a large financing cash inflow in fiscal year 2022, and a corresponding outflow in fiscal year 2023. Cash in Foreign Locations We have no requirement to remit funds from our foreign locations to the United States.
In fiscal year 2024, we also used funds to purchase Maximus common stock. Cash in Foreign Locations We have no requirement to remit funds from our foreign locations to the United States. We will continue to explore opportunities to remit additional funds, taking into consideration the working capital requirements and relevant tax rules in each jurisdiction.
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As redetermination activity resumed during the year, this provided a benefit to both revenue and profit as volumes increased to match our resources. • Our Selling, General and Administrative ("SG&A") cost base has expanded with the growth of the business, including investments in our workforce and business infrastructure.
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This growth is reflected in our improved profitability and operating cash flows. • Our results in fiscal year 2023 included significant costs related to the investigation and remediation of a cybersecurity incident. Although we continue to incur costs to resolve this matter, the level of costs in fiscal year 2024 was significantly lower. • Our Outside the U.S.
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In addition, we recorded $29.3 million as the estimated costs for the investigation and remediation of a cybersecurity incident, $0.9 million related to the disposal of two businesses in fiscal year 2023, and $2.9 million of charges relating to sales completed in October 2023. • The cost of our debt has increased year-over-year as interest rates have risen. • The strength of the United States Dollar over the other currencies in which we do business has tempered our results in our Outside the U.S.
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Segment has tempered losses through divestitures of businesses and a rebalancing of its portfolio.
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For the year ended September 30, 2023, we increased anticipated consideration for our Aidvantage business, which we acquired in fiscal year 2022, for consideration based upon future performance. • Our SG&A expense for the year ended September 30, 2023 also includes losses of $0.9 million relating to the sale of two small businesses and $2.9 million related to assets in businesses that were sold subsequent to year end.
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It has also received a benefit in fiscal year 2024 from the strength of the British Pound. • Our interest costs have declined slightly despite fluctuating interest rates through a combination of reduced principal and our use of interest rate swaps. 31 Table of Contents Results of Operations The following table sets forth, for the fiscal years indicated, information derived from our statements of operations.
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Interest expense Interest expense for fiscal year 2023 and 2022 increased from $46.0 million to $84.1 million. This increase is principally due to market rate increases. Our effective interest rate was 5.97% at September 30, 2023, compared to 4.69% at September 30, 2022, and 2.05% at September 30, 2021.
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Our exposure to increasing interest rates in the United States was mitigated by a reduction in our debt balance and by maintaining interest rate swap agreements on approximately 50% of our gross debt. Our effective interest rate was 5.52% at September 30, 2024, compared to 5.97% at September 30, 2023, and 4.69% at September 30, 2022.
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This segment also includes appeals and assessments services, system and application development, Information Technology ("IT") modernization, and maintenance services. Certain state-based assessments and appeals work that is part of the segment's heritage continues to be managed within this segment.
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Clinical services comprises appeals and assessments services, which includes managing the evaluation process for U.S. veterans and service members on behalf of the U.S. Department of Veterans Affairs (VA) and certain state-based assessments and appeals work that is part of the segment's heritage.
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Profitability improvements from the VA MDE contracts were partially offset by our need to ramp up staffing for these contracts during the early part of the year in anticipation of the current higher volumes.
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All movement was organic. Our revenue and margin growth has principally been driven by volume growth and strong performance on our contracts relating to clinical assessments. We anticipate that revenue and profit margins will remain consistent through fiscal year 2025.
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We anticipate that the growth in fiscal year 2023 will continue into fiscal year 2024, continuing to receive the benefit of new and expanded work on the VA MDE contracts.
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We continue to monitor the status of announced recompetes of two of our significant contracts. • The Centers for Medicare & Medicaid Services is currently recompeting the Contact Center Operations contract awarded to us in 2022, which is earlier-than-expected, and for the express purpose of including a labor harmony agreement requirement.
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Operating margins are expected to range between 11% and 12% as the volume of work in the VA MDE contracts and the Aidvantage student loan business rises to meet our staffing levels.
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In June 2024, we filed a pre-award protest which will be adjudicated by the Government Accountability Office. In September 2024, the Government Accountability Office partially sustained our pre-award protest thereby requiring redrafting of the labor harmony requirement. In November 2024, we filed a lawsuit in the U.S. Court of Federal Claims challenging the rebid of the contract awarded to us.
Removed
Although a shutdown by the U.S. federal government may create challenges for our business, particularly if payments are delayed, we believe that a significant majority of our work is considered "essential" by the government and would be expected to have minimal disruption. U.S. Services Segment Our U.S.
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The delayed procurement timeline now assumes an anticipated award in late second quarter of fiscal year 2025 and we remain engaged in the process to maintain leverage in advocating for our legal rights. Meanwhile, a subsequent contract option year has been executed by the customer which extends the current contract through September 2025.
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With the resumption of redeterminations, we expect a full period of volumes in 2024 coming back into these programs, enabling our operating leverage to recover. 29 Table of Contents Table MD&A 4: U.S.
Added
The $6.6 billion contract value over a base plus a nine-year period of performance, is equivalent to approximately 10% to 15% of total Company revenue on an annual basis. The contract type is cost-plus-award-fee which traditionally carries low single digit margins.
Removed
All movement was organic. This segment received the benefit of the return of Medicaid eligibility redetermination work towards the latter half of the year; this work had previously been suspended or reduced during the COVID-19 pandemic.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAt September 30, 2023, we owed a gross balance of $1.26 billion associated with debt in the United States and in foreign locations. Our principal debt agreement incurs interest based upon a fixed rate, applicable spread, and a market rate. The market rate is based upon the Secured Overseas Funding Rate ("SOFR").
Biggest changeAt September 30, 2024, we owed a gross balance of $1.15 billion associated with debt in the United States and in foreign locations. Our principal debt agreement incurs interest based upon a fixed rate, applicable spread, and a market rate. The market rate is based on SOFR.
A rise in interest rates would increase our interest expense, and a reduction in interest rates would decrease our interest expense. We mitigate this risk through interest rate swaps. At September 30, 2023, $650.0 million of our debt-carrying value was hedged with-fixed interest rate swaps.
A rise in interest rates would increase our interest expense, and a reduction in interest rates would decrease our interest expense. We mitigate this risk through interest rate swaps. At September 30, 2024, $650.0 million of our debt-carrying value was hedged with fixed interest rate swaps.
Our counterparty has investment-grade credit ratings; accordingly, we anticipate that the counterparty will be able to fully satisfy their obligations under the contracts. Our agreement outlines the conditions upon which we or the counterparty are required to post collateral. As of September 30, 2023, we had no collateral posted with our counterparty related to the derivatives. 40 Table of Contents
Our counterparty has investment-grade credit ratings; accordingly, we anticipate that the counterparty will be able to fully satisfy their obligations under the contracts. Our agreement outlines the conditions upon which we or the counterparty are required to post collateral. As of September 30, 2024, we had no collateral posted with our counterparty related to the derivatives. 45 Table of Contents
A 100 basis point change in interest rates would have the following impact of net income: Table 7A.2: Exposure to Interest Rate Risk As of September 30, 2023 2022 (in thousands) 100 basis point increase impact on net income $ (6,075) $ (10,633) 100 basis point decrease impact on net income $ 6,075 $ 10,633 Counterparty Risk We are exposed to credit losses in the event of nonperformance by the counterparties to our derivative instrument.
A 100 basis point change in interest rates would have the following impact of net income: Table 7A.2: Exposure to Interest Rate Risk As of September 30, 2024 2023 (in thousands) 100 basis point increase impact on net income $ (4,958) $ (6,075) 100 basis point decrease impact on net income $ 4,958 $ 6,075 Counterparty Risk We are exposed to credit losses in the event of nonperformance by the counterparties to our derivative instrument.
We based the following sensitivity calculation on the SOFR rate of 5.3% in accordance with the most recent measurement date specified in our Credit Agreement.
We based the following sensitivity calculation on the SOFR rate of 4.6% in accordance with the most recent measurement date specified in our Credit Agreement.
Table 7A.1: Exposure to Currency Risk As of September 30, 2023 2022 (in thousands) Change in comprehensive income attributable to Maximus $ 21,036 $ 15,657 Change in net monetary assets $ 9,171 $ 6,127 Change in cash and cash equivalents $ 3,113 $ 3,867 Where possible, we mitigate our foreign currency risks.
Table 7A.1: Exposure to Currency Risk As of September 30, 2024 2023 (in thousands) Change in comprehensive income attributable to Maximus $ 25,252 $ 21,036 Change in net monetary assets $ 9,922 $ 9,171 Change in cash and cash equivalents $ 5,610 $ 3,113 Where possible, we mitigate our foreign currency risks.
Foreign Currency Risk As of September 30, 2023, we held net assets denominated in currencies other than the U.S. Dollar of $210.4 million. Of this balance, we had net monetary assets of $91.7 million and cash and cash equivalents of $31.1 million.
Foreign Currency Risk As of September 30, 2024, we held net assets denominated in currencies other than the U.S. Dollar of $252.5 million. Of this balance, we had net monetary assets of $99.2 million and cash and cash equivalents of $56.1 million.

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