MAXIMUS, INC.

Results of Operations

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

Our business segments have different factors driving revenue fluctuations and profitability. The sections that follow cover these segments in greater detail. Our revenue reflects fees earned for services provided. Cost of revenue consists of direct costs related to labor and related overhead, subcontractor labor, outside vendors, rent, and other direct costs. The largest component of cost of revenue, approximately two-thirds, is labor, including subcontracted labor.

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

Our SG&A expenses consist of indirect costs related to general management, marketing, and administration. It is primarily composed of labor costs. These costs may be incurred at a segment level, for dedicated resources that are not client-facing, or at a corporate level. Corporate costs are allocated to segments on a consistent and rational basis. Fluctuations in our SG&A are primarily driven by changes in our administrative cost base, which is not directly driven by changes in our revenue. As part of our work for the U.S. federal government and many states, we allocate these costs using a methodology driven by the U.S. Federal Cost Accounting Standards.

Our SG&A expenses for fiscal year 2025 include a charge of $39.5 million related to the sale of certain of our businesses in our Outside the U.S. Segment. These charges included accumulated foreign currency losses incurred over two decades of operations, as well as indemnifications provided to the buyer. Absent this charge, SG&A was broadly consistent with fiscal year 2024.

Interest expense

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

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

Income taxes

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

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

U.S. Federal Services Segment

Our U.S. Federal Services Segment delivers solutions that help various U.S. federal government agencies better execute on their mission, including program operations and management, clinical services, and advanced technology solutions.

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

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

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

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

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

U.S. Services Segment

Our U.S. Services Segment provides a variety of services, such as program operations, clinical services, employment services and technology solutions and related professional services work for U.S. state and local government programs. These services support a variety of programs, including the programs under Medicaid and Children's Health Insurance Program (CHIP), the Affordable Care Act (ACA) marketplaces, Temporary Assistance to Needy Families (TANF), and child support programs.

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

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

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

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

Outside the U.S. Segment

Our Outside the U.S. Segment provides business process services and other solutions for international governments. These services include health and disability assessments, program administration for employment services, wellbeing solutions and other job seeker-related services, digitally-enabled customer services, and advanced technologies for modernization. We support programs and deliver services in the United Kingdom, including the Functional Assessment Services (FAS) contract and the Restart employment program. We also provide services in Canada and the Middle East.

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

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

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