Company Quick10K Filing
Price78.47 EPS4
Shares65 P/E21
MCap5,086 P/FCF14
Net Debt-116 EBIT338
TTM 2019-09-30, in MM, except price, ratios
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MMS 10K Annual Report

Part I
Item 1. Business.
Item 1A. Risk Factors.
Item 1B. Unresolved Staff Comments.
Item 2. Properties.
Item 3. Legal Proceedings.
Item 4. Mine Safety Disclosures
Part II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Item 6. Selected Financial Data.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Item 8. Financial Statements and Supplementary Data.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Item 9A. Controls and Procedures.
Part III
Item 10. Directors, Executive Officers and Corporate Governance.
Item 11. Executive Compensation.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Item 14. Principal Accounting Fees and Services.
Part IV
Item 15. Exhibits, Financial Statement Schedules.
Item 16. Form 10 - K Summary.
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Maximus Earnings 2020-09-30

Balance SheetIncome StatementCash Flow
Assets, Equity
Rev, G Profit, Net Income
Ops, Inv, Fin


Washington, D.C. 20549

(Mark one)
For the fiscal year ended September 30, 2020
For the transition period from to
Commission file number: 1-12997

Maximus, Inc.
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
1891 Metro Center Drive, Reston, Virginia
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code: (703251-8500
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, no par valueMMSNew York Stock Exchange
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes ý    No  o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o    No ý
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý    No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ý
Accelerated filer o
Non-accelerated filer o
Smaller reporting company 
Emerging growth company  
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes     No ý
The aggregate market value of outstanding voting stock held by non-affiliates of the registrant as of March 31, 2020 was $3,527,771,000 based on the last reported sale price of the registrant's Common Stock on The New York Stock Exchange as of the close of business on that day.
There were 61,452,520 shares of the registrant's Common Stock outstanding as of November 16, 2020.
Portions of the registrant's definitive Proxy Statement for its 2021 Annual Meeting of Shareholders to be held on March 16, 2021, which definitive Proxy Statement will be filed with the Securities and Exchange Commission not later than 120 days after the end of the registrant's fiscal year, are incorporated by reference into Part III of this Form 10-K.

Maximus, Inc.
Form 10-K
September 30, 2020
Table of Contents



Included in this Annual Report on Form 10-K are forward-looking statements within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: “anticipate,” “intend,” “plan,” “goal,” “seek,” “opportunity,” “could,” “potential,” “believe,” “project,” “estimate,” “expect,” “strategy,” “future,” “likely,” “may,” “should,” “will” and similar references to future periods.
Forward-looking statements that are not historical facts, including statements about our confidence, strategies and initiatives and our expectations about revenues, results of operations, profitability, liquidity, market demand or the impact of the Coronavirus (COVID-19) global pandemic are forward-looking statements that involve risks and uncertainties. These risks could cause our actual results to differ materially from those indicated by such forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following:
the extent and impact of the continuation of the COVID-19 global pandemic and the actions taken or to be taken by us, our customers, and the governments or jurisdictions in which we operate in response to COVID-19;
the impact of the recent U.S. general election and the transition to the Biden Administration on federal procurement, federal funding to states' safety-net programs, and the overall decision-making process related to our industry, including our business and customers;
the demand for our services and products, including the impacts of any economic downturns;
a failure to meet performance requirements in our contracts, which might lead to contract termination and actual or liquidated damages;
the effects of future legislative or government budgetary and spending changes;
our failure to successfully bid for and accurately price contracts to generate our desired profit;
our ability to maintain technology systems and otherwise protect confidential or protected information;
our ability to attract and retain executive officers, senior managers and other qualified personnel to execute our business;
our ability to manage capital investments and startup costs incurred before receiving related contract payments;
our ability to manage our growth, including acquired businesses;
the ability of government customers to terminate contracts on short notice, with or without cause;
our ability to maintain relationships with key government entities from whom a substantial portion of our revenue is derived;
the outcome of reviews or audits, which might result in financial penalties and impair our ability to respond to invitations for new work;
a failure to comply with laws governing our business, which might result in the Company being subject to fines, penalties, suspension, debarment and other sanctions;
the costs and outcome of litigation;
difficulties in integrating or achieving projected revenues, earnings and other benefits associated with acquired businesses;
the effects of changes in laws and regulations governing our business, including tax laws, and applicable interpretations and guidance thereunder, or changes in accounting policies, rules, methodologies and practices, and our ability to estimate the impact of such changes;
matters related to business we have disposed of or divested; and
other factors set forth in Item 1A, "Risk Factors."
Any forward-looking statement made by us in this report is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

ITEM 1.    Business.
Throughout this annual report, the terms "Maximus," "Company," "we," "our" and "us" refer to Maximus, Inc. and its subsidiaries.
We are a leading operator of government health and human services programs worldwide. We are a responsible and reliable contracting partner to governments under our mission of Helping Government Serve the People®. Governments rely on our financial stability and proven expertise in helping people connect and use critical government programs. We use our experience, business process management expertise, innovation and technology solutions to help government agencies run effective, efficient and accountable programs.
Our primary portfolio of work is tied to business process services (BPS) in the health services and human services markets. Our growth over the last decade was driven by new work, such as that from the Affordable Care Act (ACA) in the United States (U.S.) and a growing footprint in clinical services including assessments, appeals and independent medical reviews in multiple geographies. Our growth has been supplemented by strategic acquisitions.
Most recently, we experienced both favorable and unfavorable impacts as a result of the Coronavirus (COVID-19) global pandemic. Underscoring the importance of the services we provide, many of our U.S. contracts were designated as "essential" by government agencies in the midst of COVID-19. Keeping these programs open ensures vulnerable individuals and families can access vital healthcare and safety-net services during these uncertain times. While some of the programs we support have experienced reduced volumes due to the pandemic, we have also been successful in winning new contracts tied to public health initiatives such as contact tracing and unemployment insurance programs to help governments respond to the COVID-19 crisis. The individuals and families served under these programs are those considered some of the most vulnerable to COVID-19. As a result, we believe our operations support programs that are essential for their safety and wellbeing.
The Company has a long-term growth strategy with three key tenets:
an aim to increase its growing clinical services;
a digital transformation embedded in its service offerings; and
a desire to seek strategic acquisitions as a means to set the platform for organic growth.
We believe that demographic, economic, and legislative trends will provide our industry with further opportunities for growth and that our strong reputation within this industry, based upon our market leadership, strong financial position and experience, will allow us to benefit from future demand trends.
Demographic trends, including increased longevity and more complex health needs, place an increased burden on government social benefit and safety-net programs. At the same time, programs that address societal needs must be a good use of taxpayer dollars and achieve their intended outcomes. We believe the macro-economic trends of demographics and government needs, coupled with the need to achieve value for money, will continue to drive demand for our services.
We maintain a strong reputation within the government health and human services industry. Our deep client relationships and reputation for delivering outcomes and efficiencies create a strong barrier to entry in a risk-averse environment. Entering our markets typically requires expertise in complex procurement processes, operation of multi-faceted government programs and an ability to serve and engage with diverse populations.
Our contract portfolio offers us good revenue visibility. Our contracts are typically multi-year arrangements and we have customer relationships that have lasted decades. Because of this longevity, our contract portfolio at any point in time can typically be used to identify more than 90% of our anticipated revenue for the next twelve months.
We have a diversified company portfolio with consistent operating margins, high cash conversion, a healthy balance sheet, and access to a $400 million corporate credit facility. We seek a fair return for the risk that

we take. Our financial flexibility allows us to fund investments in the business, complete strategic acquisitions to further supplement our core capabilities and seek new adjacent platforms.
We believe that the election of Joe Biden bears further support for the expansion of the ACA. President-elect Biden's health platform includes renewed efforts to protect and build upon the ACA. Although the Supreme Court is currently considering the constitutionality of the ACA, our overall experience in Medicaid expansion and the state and federal exchange markets uniquely positions us to support the new administration's health and human services efforts, as well as the states' needs to adapt to a changing health care market environment.
To supplement our core business, we have an active program to identify potential strategic acquisitions. We temporarily paused the program in March 2020 in order to preserve cash during the early stages of the pandemic, but we have resumed mergers and acquisitions activity. Our past acquisitions have enabled us to expand our business processes, knowledge, and client relationships into adjacent markets and new geographies. In November 2018, we acquired the citizen engagement centers business previously operated by General Dynamics Information Technology. This acquisition, coupled with our 2015 acquisition of Acentia, LLC, provided increased scale, customer base and competitive advantages in our business with the U.S. Federal Government. Our primary clients are government agencies, with the majority at the national, state and provincial levels. In the year ended September 30, 2020, approximately 39% of our total revenue was derived from U.S. state government agencies, 45% from U.S. Federal Government agencies, 13% from foreign government agencies and the balance from other sources, including local municipalities and commercial customers.
Our business segments
We operate our business through three segments: U.S. Services (previously identified as U.S. Health and Human Services), U.S. Federal Services and Outside the United States. We operate in the U.S., Australia, United Kingdom (U.K.), Canada, Saudi Arabia, Singapore, Italy, Sweden, and South Korea.
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 2020, 2019 and 2018 fiscal years, see "Note 2. Business segments" within Item 8 of this Annual Report on Form 10-K.
U.S. Services Segment
Our U.S. Services Segment, previously identified as our U.S. Health and Human Services Segment, generated 38% of our total revenue in fiscal year 2020.
Our U.S. Services Segment provides a variety of business process services such as program administration, appeals and assessments work and related consulting work for U.S. state and local government programs. These services support a variety of programs, including the ACA, Medicaid and the Children’s Health Insurance Program (CHIP), Temporary Assistance to Needy Families (TANF), and child support programs. In fiscal year 2020, the segment further executed on its clinical evolution strategy by expanding its clinical offerings in public health with new work in contact tracing, disease investigation, and COVID-19 response efforts. We also successfully expanded into the unemployment insurance market. As of September 30, 2020, Maximus was supporting 14 states in their unemployment insurance programs, subsequent to fiscal year end the number of states supported increased to 17. We changed the name of our U.S. Health and Human Services to U.S. Services to recognize the evolution our service offerings into new markets and clients.
Approximately 76% of our revenue for this segment comes from our comprehensive program administration services for government health benefit programs. 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.
Beneficiary outreach, education, eligibility, enrollment and redeterminations services.

We are a leading player in many of the health program administration markets that we serve:
We are the largest provider of Medicaid enrollment services in the U.S., serving more than 65% of Medicaid beneficiaries enrolled in Medicaid managed care.
We are a leading provider of CHIP services and state-based health insurance exchange operations.
We have established a sizeable presence in the public health market with contact tracing work and other COVID-19 response work.
Approximately 11% of the segment’s revenue is from our independent appeals and person-centered assessments services primarily under Medicaid Long-Term Care. 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. These include person-centered independent disability, long-term sick and other health assessments, including those related to long-term services and supports such as Preadmission Screening and Resident Reviews (PASRR) and Independent Developmental Disability (IDD) assessments. We are a leading provider of such services in the United States.
Approximately 10% of the segment’s fiscal year revenue is from workforce and child services programs. Workforce services cover a number of attributes, including eligibility determination, case management, job-readiness preparation, job search and employer outreach, job retention and career advancement, and selected educational and training services. In fiscal year 2020, Maximus won 14 contracts to support state efforts with unemployment insurance as a result of COVID-19. As of November 18, 2020, Maximus supported 17 states. Child services include full and specialized child support case management services, customer contact center operations, and program and systems consulting services.
The rest of the segment’s fiscal year revenue is from specialized consulting services.
Payment for our services varies from contract to contract based upon factors such as the priorities of the customer and the willingness to share risks and rewards. Some contracts are performed on a cost-plus basis, where we receive revenue based upon the hours and costs incurred and typically operate at lower margins. Most contracts include a level of performance-based compensation or a fixed fee or a mixture of both, with fees being based upon call volumes, populations served or appeals processed. Our workforce services contracts typically have outcomes-based payments in an effort to incentivize providers to ensure that we help job seekers find long-term sustained employment and achieve economic independence.
The segment may experience seasonality due to transaction-based work, such as program open enrollment periods. Other fluctuations may arise from changes in programs directed by our clients and activity related to contract life cycles.
During fiscal year 2020, we earned 27% of our segment revenues from the State of New York. A small number of large states comprise a significant share of this segment's revenue. 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.
U.S. Services Market Environment
We believe that effectively managing healthcare costs, as well as improving quality and access to healthcare, is a major policy priority for governments. Further, President-elect Biden has indicated that his healthcare platform will use the foundation of the ACA to expand access, lower costs and simplify the process for individuals and families. Governments seek efficient and cost-effective solutions to manage their public health benefits programs. This includes programs meant to support individuals with disabilities and long-term medical conditions, as well as individuals with shorter-term health conditions.
For instance, the U.S. Department of Health and Human Services continues to implement and focus on its fiscal years 2018 through 2022 strategic plan, which prioritizes their goals around reforming, strengthening, and modernizing the Nation's healthcare system. As part of this strategic goal, they seek to:
Promote affordable healthcare, while balancing spending on premiums, deductibles, and out-of-pocket costs;
Expand safe, high-quality healthcare options, and encourage innovation and competition;

Improve American's access to healthcare and expand choices of care and service options; and
Strengthen and expand the healthcare workforce to meet America's diverse needs.
As a result of Medicaid expansion and the ACA within the U.S., more individuals are now eligible for health insurance coverage and there have been significant decreases in uninsured rates subsequent to the passage of the ACA. Over the last decade, many state Medicaid programs also expanded managed care to new populations and new geographies that were historically served through fee-for-service Medicaid. More recently, some states are also seeking increased flexibility in the operations of their Medicaid programs via waivers requested through the Centers for Medicare & Medicaid Services. The issuance of waivers is contingent upon federal approval.
Many governments are also looking for innovative solutions to support disabled and elderly populations who require long-term services and supports (LTSS). A general trend in the LTSS market has been to ensure that individuals are in the right setting and receiving the right level of support and care. In many cases, this means allowing individuals to receive care at home or in a community-based setting, rather than institutional facilities. With no financial ties to health insurance plans or providers, our conflict-free assessment services assist governments in determining the most appropriate placement and related services for program beneficiaries.
In response to the global COVID-19 pandemic, Maximus established itself in the public health market through our contact tracing, disease investigation and pandemic response work. We believe there will be continued demand for a variety of services as states grapple with improving their long-term public health infrastructure in the wake of the global pandemic.
We believe the current market environment for our services positions us to benefit from continued demand across all of our geographies from service areas such as operations program management and independent health and benefit assessments. Overall, we still expect the underlying demand for our services to increase over the next several years, particularly as economies emerge from this global health crisis.
Our primary competitors are government in-sourced operations, Conduent, Automated Health Systems, Faneuil, KePro, MTX Group, and Deloitte. In some services, we compete against specialized private companies and nonprofit organizations such as The Salvation Army and Goodwill Industries. We consider ourselves to be a significant competitor in the markets in which we operate as we are the largest provider of Medicaid and CHIP administrative programs and operate more state-based health insurance exchanges than any other commercial provider.
U.S. Federal Services Segment
Our U.S. Federal Services Segment generated 47% of our total revenue in fiscal year 2020. The segment is expected to experience a decrease in revenue in fiscal year 2021 as a result of the expected wind-down of the Census Questionnaire Assistance 2020 (CQA) contract.
Our U.S. Federal Services Segment provides program administration, appeals and assessments services and technology solutions, including system and software development and maintenance services, for various U.S. federal civilian programs. The segment also contains certain state-based assessments and appeals work that is part of the segment's heritage within the Medicare Appeals portfolio and continues to be managed within this segment. In fiscal year 2020, the segment expanded its clinical offerings in public health with new work supporting the Federal Government's COVID-19 response efforts. This included:
Expanded work with the Centers for Disease Control and Prevention (CDC) for their helpline;
An outbound customer support center for the Office of the Assistant Secretary for Health to notify individuals throughout the U.S. of their COVID-19 test result; and
IRS Wage and Investment Division response efforts to general inquiries regarding the Coronavirus Aid Relief & Economic Security (CARES) Act and Economic Impact Payment Service Plan.
Much of the recent growth in this segment came from our acquisition of the citizen engagement centers business at the beginning of fiscal year 2019. Within the portfolio, three significant contracts were acquired.
The contract to support the Centers for Medicare and Medicaid (CMS) Contact Center Operations (CCO) was the largest contract acquired. We had served as a subcontractor on this contract since 2014. This contract supports the federal exchange under the 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 11 customer contact centers handling general inquiries for the federal exchange and general and claims-based Medicare inquiries.
The CQA contract provides operations support and citizen engagement services to provide questionnaire assistance on the 2020 United States Census form. This contract is scheduled to end in June 2021 following the completion of the Census.
The CDC Information contact center provides assistance to individuals seeking the latest, reliable, and science-based health information on more than 750 health topics.
The acquired contracts make up part of the segment’s program administration business, which provides the majority of the segment’s revenue. Our legacy contract base includes:
Centralized citizen engagement centers and support services;
Document and record management; and
Case management, citizen support and consumer education.
Approximately 11% of the segment’s fiscal year 2020 revenue is from our independent assessments and appeals services. These include:
Independent medical reviews and workers' compensation benefit appeals;
Medicare and Medicaid appeals; and
Federal Marketplace eligibility appeals.
Approximately 10% of the segment’s fiscal year 2020 revenue is from our technology solutions. These include:
Modernization of systems and information technology (IT) infrastructure;
Infrastructure operations and support;
Software development, operations and management; and
Data analytics.
Many contracts in this segment, including the acquired contracts, earn most of 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. The segment also 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. The segment may experience fluctuations as a result of volume variations or program maturity, with contracts recording lower revenue and profitability during program startup.
We have the scale, capability, and experience to offer our customer services in a wide range of areas. We have access to a number of significant contract vehicles across several agencies of the U.S. Federal Government.
The U.S. Federal Services Segment may experience some seasonality largely tied to our CCO contract that operates open enrollment for the Federal Marketplace and Medicare, which begins in November and ends in January. In addition, the CQA contract is expected to provide between $50 million and $60 million of revenue in fiscal year 2021 but with revenue concentrated in the critical months of the service during our first fiscal quarter. The CQA contract provided $515 million of revenue in fiscal year 2020.
U.S. Federal Services Market Environment
Following the 2020 Presidential election, the executive branch of the federal government is expected to be under transition until and following President-elect Biden's inauguration in January 2021. However, we do not expect

to see a slowdown similar to the 2016 transition as the Biden Administration is already taking steps to prepare their transition teams and establish key appointments.
Some uncertainty regarding the federal legislative environment remains at the time of this filing as the Senate majority will not be decided until January 2021 and the House of Representatives lost several Democratic members.
While federal agency budgets still face fiscal pressures and the administration is looking for improved efficiencies, we continue to see opportunities to apply our cost-effective and efficient solutions to serve citizens in the federal market. Federal agencies are tasked with cost-effectively managing programs at a time when changing demographics are leading to rising caseloads in many federal programs.
Many federal agencies must also address the maintenance of legacy IT systems and the pressing need for IT infrastructure modernization continues to grow. 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 believe we are well-positioned to help agencies modernize and operate their mission-critical systems.
Key factors that will likely impact the U.S. federal services market include a variety of political, economic, social and technological issues:
The outcome of the 2020 U.S. general election including the balance of power between the Senate and House of Representatives, the transition to a new administration and President-elect Biden's ability to implement his stated health platform that will leverage the ACA;
A focus on the citizen experience, citizen services, omnichannel engagement and digital services;
Agencies moving from transformation initiatives to operations and maintenance;
Agencies seeking consolidation and shared services to achieve cost efficiencies; and
Changes in the acquisition and contracting environment, including consolidation of contract vehicles, such as Alliant 2 Government-wide Acquisition Contract.
Our primary competitors in the U.S. Federal Services Segment are Serco, General Dynamics Information Technology, PAE, Cognosante, and Conduent. Within the technology sector, our primary competitors are IBM, Oracle, Leidos, Accenture, Deloitte, Booz Allen Hamilton, and other federal contractors.
Outside the United States Segment
Our Outside the U.S. Segment generated 15% of our total revenue in fiscal year 2020. We expect an improved outlook for the segment in fiscal year 2021 with forecasted revenue growth of $175 million, compared to fiscal year 2020. The predominant driver of this growth is rising unemployment and increasing volumes on employment services contracts that support individuals back into long-term, sustained employment. We are already experiencing a rise in volumes in markets where economies have started to emerge from the global pandemic, such as Australia. The segment will also benefit from new work wins that will generate revenue and profit in fiscal year 2021.
Our Outside the U.S. Segment is forecasted to be profitable in fiscal year 2021, remaining in a loss position for the first half of the year and returning to profit in the second half of the year. The outlook may continue to be adversely impacted by the global pandemic. Ultimately, we believe that we remain poised to help governments navigate significant challenges as the markets we serve begin to emerge from the global pandemic.
Our Outside the U.S. Segment provides business process services (BPS) solutions for governments and commercial clients in geographies beyond the U.S., including health and disability assessments, program administration for employment services and other job seeker-related services. We support programs and deliver services in the United Kingdom (U.K.), including the Health Assessment Advisory Service (HAAS), the Work & Health Programme and Fair Start; Australia, including jobactive and the Disability Employment Service; Canada, including Health Insurance British Columbia and the Employment Program of British Columbia; Italy, Saudi Arabia, Singapore, South Korea and Sweden.
Approximately 41% of the segment’s fiscal year 2020 revenue is from comprehensive employment services that 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, 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.
Appeals and assessments work constitutes 44% of this segment’s revenue. 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 to the customers we serve. Maximus carries out these assessments on behalf of the Department for Work and Pensions (DWP), and the DWP makes the final decision on the level of benefit. In fiscal year 2020, face-to-face assessments under the HAAS program were paused due to the global pandemic. We have resumed limited telephone assessment and paper-based assessment, but we do not know for certain when face-to-face assessments will resume. The HAAS program serves some of the country's most vulnerable citizens, and ensuring a safe return to face-to-face assessments is a top priority for DWP and Maximus.
The balance of the segment provides program administration and some specialized services.
Our competitive position within each national market is different. Within the United Kingdom and Australia, we consider ourselves to be leading providers of services in those markets.
Seasonality is not significant to this segment.
Outside the United States Market Environment
We believe our established presence, healthy financial condition, strong brand recognition, and ability to achieve the requisite performance requirements and outcomes make us well-positioned to compete for opportunities outside the U.S.
We offer clients demonstrated results and decades of proven experience in administering workforce services programs in the U.K., Australia, Canada, Italy, Saudi Arabia, Singapore, South Korea, and Sweden. In Australia, we are one of the largest workforce services providers, and in the U.K., we have an established presence and exceptional reputation in the workforce services market. This segment's significant employment services contracts continue to operate at reduced levels as these economies wrestle to emerge from the global pandemic.
During 2020, governments recognized the emerging need for more robust employment support programs as a result of the economic downturn and soaring unemployment due to COVID-19. We are cautiously optimistic that new procurements for expanded employment services programs in markets like the U.K. will materialize in fiscal year 2021 as different geographies emerge from the pandemic at different paces. Given our deep experience, strong financial condition, and trusted brand reputation, we believe we are well-positioned with unique competitive advantages to meet an anticipated expanded need for our services and pent-up demand to help governments provide their citizens employment opportunities. Furthermore, this segment has historically benefited from increased caseloads in employment services programs during past economic downturns.
Over the last five years, many governments shifted their focus to employment programs that serve individuals with disabilities or health conditions. We increased our presence in the U.K. disability employment services market, where we help people with disabilities and health conditions obtain employment. We do similar work in Australia under the Disability Employment Services program that aims to provide individuals with disabilities a supported path towards long-term employment. We are a recognized leader in the U.K. and Australia for providing disability employment support services, having achieved accreditation in the U.K. as a Disability Confident Leader and in Australia as a Disability Confident Recruiter. We believe these services are transferable to our other geographies and position us well for emerging trends in the disability services market.
We believe ongoing initiatives and our ability to achieve the outcomes that matter, reduce costs and improve efficiencies, combined with our outstanding performance, expertise and proven solutions, will continue to drive demand for our core human services offerings across multiple geographies. Our ability to provide value-for-money is important in a market that is price competitive.
Our primary competitors in this segment include Atos, Capita, Interserve, Virgin Care, Optum, Serco, Staffline, Shaw Trust, Ingeus, Sarina Russo, Advanced Personnel Management, IBM, Telus-Health, NTT Data, Pacific Blue Cross, and other specialized private companies and nonprofit organizations. Although the basis for competition varies from contract to contract, we believe that typical contracts are awarded based upon a mix of comprehensive solution and price. In some cases, clients award points for past performance tied to program outcomes.

Our relationships with clients and our individual contracts, including option years, typically cover many years. At September 30, 2020, we estimate that we had approximately $7.8 billion in backlog. Backlog represents an estimate of the remaining future revenue from existing signed contracts, revenue from contracts that are formally awarded but not yet signed and revenue expected from unexercised contract options.
Government agencies do not have to exercise options, and they may elect not to exercise them for budgetary, performance or any other reason. Although the exercise of options is uncertain, in our experience, if the incumbent contractor is performing as expected, these options are exercised nearly 100% of the time.
Increases in backlog result from the award of new contracts and the extension or renewal of existing contracts. Reductions in backlog come from fulfilling contracts or the early termination of contracts. The backlog associated with our performance-based contracts is an estimate based upon management's experience of caseloads and similar transaction volume from which actual results may vary. We may modify our estimates related to performance-based contracts, and, as a result, backlog from these contracts may increase or decrease based upon the information that management has at that time. Additionally, backlog estimates may be affected by foreign currency fluctuations.
Government contracts typically contain provisions permitting government clients to terminate contracts without cause with limited notice or compensation. See “Risk Factors — Government entities have in the past terminated, and may in the future terminate, their contracts with us earlier than we expect, which may result in revenue shortfalls and unrecovered costs” below in Item 1A of this Annual Report on Form 10-K. Although we have experienced such terminations, they have been a rare occurrence. We also risk losing revenue in the event of a shutdown by the U.S. Federal Government ,which may impact our U.S. Federal Services Segment and, to the extent that programs are federally funded, our U.S. Services Segment. Many of our federally funded health and human services programs are typically deemed essential, which means that a short-term shutdown would not be expected to cause significant disruption to these operations.
We believe that period-to-period backlog comparisons are difficult and may not necessarily accurately reflect future revenue we may receive. The actual timing of revenue receipts, if any, on projects included in backlog could change for any of the aforementioned reasons. We also may experience periods in which there is a greater concentration of rebids, resulting in a comparatively reduced backlog balance until subsequent award or extension on those contracts. The dollar amount by segment of our backlog as of September 30, 2020 and 2019, was as follows:
(in millions)Backlog as of
September 30,
U.S. Services$4,388 $3,955 
U.S. Federal Services2,150 3,612 
Outside the U.S.1,236 1,408 
Backlog$7,774 $8,975 
Our businesses typically involve contracts covering a number of years, including option periods. Contracts may include a period between contract signature and operations beginning for startup and transition activities where we are precluded from recognizing revenue. At September 30, 2020, the average weighted remaining life of the contracts in our backlog was approximately 3.2 years, including option periods. The longevity of these contracts assists management in predicting revenue, operating income and cash flows. We expect approximately 40% of the backlog balance to be realized as revenue in fiscal year 2021. We adjust backlog annually for currency fluctuations and for estimated amounts associated with our performance-based contracts based upon the latest information that management has at that time.
Backlog represents more than 90% of current estimated fiscal year 2021 revenue.
Our growth strategy and competitive advantages
In all the markets and locations in which we operate, we are seeing consistent themes that drive our long-term strategy.

We are seeing increased longevity, driving more complex healthcare needs.
Individuals are experiencing financial hardships and other barriers that require a combination of social safety-net programs and support into work.
Governments are focusing on citizen responsibility and engagement as a condition of receiving benefits.
We believe that programs that focus on measurable outcomes can cost-effectively address this need.
Within the U.S., the U.S. Federal Government is exploring per capita funding and recently clarified federal regulations that now allow states the flexibility to use contractors for government support services that were previously managed by state-based employees. However, a shift to a new administration could result in a reversal of these clarifications. President-elect Biden has made healthcare a major priority and is expected to build upon the ACA.
Within the U.K., we are seeing devolution of programs to local authorities.
We believe that these changes to funding and government mechanics allows state and local authorities enhanced flexibility to shape their benefit programs.
Economic environment
As a result of the global health crisis, unemployment levels have drastically increased in markets around the globe. As a leading provider of employment services, we have historically experienced increased caseload volumes and an increased need for our services as we help governments tackle unemployment in order to support individuals back into sustained, meaningful employment.
We believe this will provide favorable tailwinds in our employment services portfolio as governments turn to companies like Maximus to help them manage the unemployment crisis as geographies emerge from the global pandemic.
Value for spend
Our partners are mandating that programs to address societal need be a good use of taxpayer dollars and achieve their intended outcomes.
Governments are increasing accountability by laying out performance expectations and rewarding partners who deliver while penalizing those who do not.
We believe that this environment favors companies like Maximus, a responsible contractor that is financially stable, has proven expertise and can deliver complex government programs in a transparent and independent fashion.
We are addressing these themes with a three-fold strategy.
Digital transformation. We are using digital technologies to transform the experience of our customers and our employees. These technologies can help our governments run their programs in a more streamlined manner and make it easier for individuals to interact with these programs.
Clinical evolution. We are expanding our clinical-related services and are experienced at delivering clinical BPO at scale. We established an extensive set of services that frequently requires a network of healthcare professionals who can complete clinical assessments, provide occupational health and independent medical review services and adjudicate complicated benefits appeals. With the formation of Maximus Public Health (MPH), we are able to serve as a resource to governments as they respond to public health threats. These efforts include providing health information and COVID-19 test results through our citizen engagement centers and supporting contact tracing efforts in key states and counties across the nation.
Market expansion. We continue with our existing strategy to expand our markets through bringing core capabilities to new programs and clients, by adding new capabilities to access adjacent markets and

through geographic expansion. In fiscal year 2020, we expanded into the unemployment insurance market and completed an acquisition in South Korea to deliver employment services.
Our competitors may be other private corporations or government in-sourced operators. We offer a private-sector alternative for the operation and management of critical government-funded health and human services programs. We believe our reputation and extensive experience give us a competitive advantage as governments value the level of expertise, proven delivery and brand recognition that we bring to our clients. Some of the competitive advantages that allow us to capitalize on various market opportunities are as follows.
Proven track record, ability to deliver outcomes and exceptional brand recognition. We assist governments in delivering cost-effective services to beneficiaries of government programs. We run large-scale, and often complex, program management operations on behalf of government agencies, improving the quality of services provided to their beneficiaries and achieving the necessary outcomes to help the government agencies cost-effectively meet their program goals. This has further enhanced our brand recognition as a proven partner with government agencies.
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. We also employ a diverse set of experts, including a wide network of clinicians and an experienced team of digital champions. 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.
Intellectual property that supports the administration of government programs. We have proprietary solutions to address client requirements in our markets that are configurable or provide a platform that can be utilized with other clients. We leverage commercial off-the-shelf platforms across multiple contracts in which we have considerable expertise to ensure we can deploy repeatable, proven solutions. We also leverage software development methodologies to shorten development cycles. Extensive use of shared infrastructure and standard solutions provides considerable price and quality advantages. We believe our extensive industry focus and expertise embedded in our systems and processes provide us with a competitive advantage.
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. 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. Analytics enable us to optimize our operations and provide our clients with improved outcomes through greater insight into the populations we serve. Process automation incorporated into our BPS solutions increases the efficiency and quality of the programs we operate.
Flexibility and scalability. We are experienced in launching large-scale 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.
Financial strength. Our business provides us with robust cash flows from operations as a result of our profitability and our management of customer receivables. 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 $400 million through our corporate credit facility, subject to standard covenants. We have the ability to borrow under our corporate credit facility in all of the principal currencies in which we operate. We believe we have strong, constructive relationships with the lenders on our corporate credit facility. We believe our financial strength provides reassurance to government agencies that we will be able to establish and maintain the services they need to operate high-profile public health and human services programs. 
Focused portfolio of services. We are one of the largest publicly traded companies that provide a portfolio of BPS almost exclusively to government customers. 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 agencies efficiently.
Established presence outside the United States. Governments outside the U.S. are seeking to improve government-sponsored health and human services programs, manage increasing caseloads and contain costs. We

have an established presence in the U.K., Australia, Canada, Saudi Arabia, Singapore, Italy, Sweden, and South Korea. Our international efforts are focused on delivering cost-effective welfare-to-work and health benefits services to program participants on behalf of governments.
Expertise in competitive bidding. Government agencies typically award contracts through a comprehensive, complex and competitive request for proposals (RFP) and bidding process. Although the bidding criteria vary from contract to contract, typical contracts are awarded based upon a mix of technical solution and price. In some cases, governments award points for past performance tied to program outcomes. With more than 40 years of experience in responding to RFPs, we believe we have the necessary experience and resources 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. However, given the specialized nature of our services and the programs we serve, market entry can be difficult for new or inexperienced firms. The complex nature of competitive bidding, qualifying criteria related to past performance, the required investment in subject-matter expertise, repeatable processes and support infrastructure, and the need to achieve specific program outcomes creates barriers to entry for potential new competitors unfamiliar with the nature of government procurement. In some areas of our business, notably contracts with the U.S. Federal Government, there are requirements for bidders seeking contracts to be pre-approved on registered contract vehicles, further limiting the pool of competitors.
Exceptional outcomes. Through our growth strategy and competitive advantage, our solutions deliver outcomes that matter for our clients, such as:
Helping more than 65% of all Medicaid Managed Care beneficiaries easily connect and enroll in managed care plans that meet their unique needs across the U.S.
Supporting nearly 240,000 individuals in finding employment through 379 employment and training centers and 335 outreach and field locations, across seven countries, including the U.S., Australia, Canada, Italy, Saudi Arabia, Singapore and the U.K. We consistently place job seekers with pay rates above the federal minimum wage in the U.S. and minimum wage requirements in each geography.
Helping more than 650,000 children receive child support in the U.S.
Legislative initiatives
We actively monitor legislative initiatives and respond to opportunities as they develop. Much of our work depends upon us reacting quickly to dynamic changes in the legislative landscape to assist with implementation of new legislation. Over the past several years, legislative initiatives created new growth opportunities and potential markets for us. Legislation passed in all the geographies in which we operate can have significant public policy implications for all levels of government and presents viable business opportunities in the health and human services arena.
Some legislative initiatives that created new growth opportunities for Maximus are as follows:
In 2020, four pandemic response bills and new Medicaid 1115 waiver flexibility were enacted to provide additional federal support to state Medicaid programs and prohibits states from tightening eligibility, thus helping to preserve Maximus’ existing Medicaid and CHIP business. Most notably, the CARES Act, for the first time, allowed states to hire contractors to support unemployment insurance call centers and eligibility determinations. Maximus has won business with many states as at least 37 states took advantage of the new flexibility to address the surge of unemployment insurance (UI) applications.
Coronavirus Aid, Relief, and Economic Security (CARES) Act. The CARES Act was signed into U.S. law on March 27, 2020, providing fast and direct economic assistance for American workers and families and small businesses. Maximus did not take any loan support through the CARES Act. Maximus plays a critical role in supporting Federal agencies following the CARES Act implementation. Support covered by the CARES Act includes the IRS deferral of student loans by the FSA. On the state level, contact tracing, disease investigation, COVID-19 information hotlines, and unemployment insurance were expanded under the CARES Act. It is expected that the incoming Biden Administration, House of Representatives, and Senate will work together towards an additional COVID-19 stimulus bill to provide additional relief to Americans who have been impacted by the global pandemic.

The Families First Coronavirus Response Act (FFCRA). The FFCRA was signed into law on March 18, 2020, to provide protection to American workers. While not required by law for Maximus as we have more than 500 employees, the Company met or, in some cases, exceeded the FFCRA in ensuring employee-safeguarding measures. The FFCRA also provided states with a temporary increase to federal matching funds for Medicaid in exchange for meeting certain requirements, including ensuring continuous care for current Medicaid enrollees. As a result, Medicaid redeterminations are paused on some of the largest Medicaid programs and the reduced activity caused a significant revenue and earnings headwind for this segment. In addition, state budgetary pressures have created the need to work closely with clients to provide needed relief through adjustments to the scope of work on certain contracts.
The Affordable Care Act (ACA). Enacted in 2010 and upheld through subsequent Supreme Court decisions, the ACA introduced comprehensive healthcare reform in the U.S. In our U.S. Services Segment, we helped states with the operation of their health insurance exchanges, the expansion of their Medicaid programs to include new populations and the integration of state eligibility processing across multiple entitlement programs. In our U.S. Federal Services Segment, we also assisted the federal government with the operations of customer engagement centers for the Federal Marketplace and independent eligibility appeals services for federal exchange plan members.
The Supreme Court is currently considering the constitutionality of the ACA in the matter of California v. Texas, and a decision is expected in the spring of 2021. We cannot know for certain when the Court will issue a decision or what their decision may be. The Supreme Court has several options. A decision by the Supreme Court finding the ACA unconstitutional, in part or in whole, or a legislative repeal or amendment of the ACA, could have a material adverse effect on our business and revenues and profits associated with those operations.
Regardless, a health care plan strategy is expected to continue to be a priority of the Biden Administration. We believe we remain well-positioned to assist the federal government and individual states with future modifications to the ACA, including those made through waivers, an entirely new health care plan, or a legislative stale-mate between the parties.
Section 1115 Waiver Programs. Section 1115 of the Affordable Care Act allows states to apply for waivers of certain requirements provided that the program changes are budget neutral and advance the goals of the Medicaid program. All fifty states currently operate at least part of their Medicaid programs under one or more section 1115 demonstrations. As CMS has approved community engagement requirements under Section 1115, we supported the implementation of those efforts by providing member contact services in several states. In addition, we supported states’ new long-term services and supports initiatives that introduced more flexibility for Medicaid to cover long-term care and home and community-based services. The COVID-19 pandemic legislation has extended new 1115 waiver flexibility to Medicaid programs and Maximus is helping states handle a surge in Medicaid and CHIP enrollment. President-elect Biden is expected to be supportive of the ACA’s Medicaid expansion and has proposed using a federal public option to cover low-income Americans in states that have not expanded. While Biden’s formal campaign proposals have been silent on Medicaid waivers, he has the authority to rescind existing CMS guidance and/or issue new guidance and could also withdraw already-approved waiver and/or expenditure authorities. It is likely that the Biden Administration will cancel all remaining Medicaid 1115 waivers that curb benefits or include work requirements, which would affect several states.
Children's Health Insurance Program Reauthorization Act (CHIPRA). CHIPRA was signed into law on February 2, 2009, extending the previous State Children's Health Insurance Program (SCHIP). As part of the Bipartisan Budget Act of 2018, CHIP has been extended and funded through 2027.
Medicaid and CHIP Managed Care Regulations. In 2016, the Centers for Medicare & Medicaid Services issued managed care regulations and federal standards for the Medicaid and CHIP programs. These include enhancing support for consumers, improving health care delivery and quality of care, providing greater access to healthcare, and ensuring a modern set of rules that better align with the marketplace and Medicare Advantage plans. They also reinforce ongoing efforts to modernize and streamline the enrollment process and the continued value of independent choice counseling. The Trump administration has not finalized, and may not finalize, revisions to these regulations and the proposed regulation for comment retains enhanced support for consumers provided by Maximus in many states. The new Biden Administration will likely pull back on any regulations that are not in effect.
   Work Innovation and Opportunity Act (WIOA). Signed into law in July 2014, WIOA replaced the Workforce Investment Act of 1998 and took effect on July 1, 2015. The law coordinates several core federal employment,

training, education and literacy programs. It also requires states to strategically align their workforce development programs, with the option to include TANF, to help job seekers access the necessary support services and to match employers with skilled workers they need to compete in the global economy. WIOA represents potential new opportunities for us to complement our existing TANF welfare-to-work operations in the U.S.
Office of Personnel Management (OPM) Notice. In April 2019, OPM published a notice in the federal register encouraging states to exercise new flexibility to choose private contractors to support states’ operation of federally funded, state-administered means-tested programs such as the Supplemental Nutrition Assistance Program (SNAP) and Medicaid. This additional flexibility allowed states to use companies like Maximus for rapid and scalable support of COVID-relief efforts such as unemployment insurance programs. The notice states that federal statutes and regulations “do not prescribe the use of a particular staffing method such as utilizing state employees or contract employees." We are currently exploring new businesses with several states and executed a contract vehicle with one. The shift to a new administration of the U.S. Federal Government could result in a reversal of this notice, although a Republican-majority Senate would indicate a challenge to do so.
The Welfare Reform Act of 2007 (United Kingdom). The Welfare Reform Act of 2007 replaced Incapacity Benefit with the Employment and Support Allowance and introduced the Work Capability Assessment (WCA). The WCA is designed to provide advice to the Government on those who can not work due to disability or health-related problems, those who are "fit for work" as defined by the legislation and those that, with additional support, could eventually return to work. In 2010, the U.K. Government decided to reassess the 1.5 million people who had previously been determined to be eligible to receive incapacity benefits. The U.K. Government also decided that an independent health assessment provided by a vendor partner is the best method for the government to determine the level of benefits for individuals with long-term sickness or disabilities. We have been providing assessments through the resulting HAAS contract on behalf of the DWP since March 2015.
The Cities and Local Government Reform Act of 2016 (United Kingdom). The Act enabled devolution deals to be agreed with cities and regions that devolved selected powers including adult skills budgets, employment support and health and social care. We provide employment support through the devolved Work and Health Programme in East London and deliver specialist employment and health initiatives in Greater Manchester and the West Midlands. We also provide further education services in London and Manchester through the devolved Adult Education Budget.
United Kingdom Cabinet Office Procurement Policy Changes. In response to COVID-19, the U.K. Government released a series of Procurement Policy Notes (PPN 02/20: Supplier Relief due to COVID-19) to amend payment terms for major suppliers to ensure service continuity and put in place appropriate measures to support supplier cash flow. This meant that several payment-by-results contracts delivered by Maximus, particularly in our employment services division, moved to alternative payment models, and contractual requirements were amended.
Human Resources
As of September 30, 2020, we had approximately 34,300 global employees and 12,600 contingent workers in the U.S. Employees consisted of 10,000 employees in the U.S. Services Segment, 17,200 employees in our U.S. Federal Services Segment, 6,200 employees in the Outside the U.S. Services Segment and 900 corporate administrative employees.
Our success depends in large part on our ability to attract talent globally in order to meet the needs of our customers and comply with our contracts. This makes our hiring efforts significant and extensive, and as a result, our talent acquisition team focuses on finding high-quality, diverse talent necessary to fill positions. We believe that 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. Our recruiting programs focus on identifying and evaluating talent through practices that promote a diverse workforce, including people with disabilities, language barriers and those from varying socioeconomic backgrounds.

In fiscal year 2020, we hired over 38,000 employees and more than 14,000 contingent workers across the globe. In the U.S. in fiscal year 2020, we have hired more than 2,100 persons with disabilities and over 71% of our total hires were female. We continue to refine our focus on recruiting people of color and military veterans at all levels of the organization to better reflect the populations we serve.


While Maximus firmly believes in the benefit of retaining our talent, the nature of our work is often cyclical and project-driven and therefore results in a significant amount of seasonal, project and short-term hiring. As a result, we do not view turnover as a key metric in managing our business or driving our business performance.

We value ongoing development and continuous learning and we strive to support and provide learning opportunities to all Maximus employees. Maximus supports enterprise-wide professional development by offering a variety of instructor-led and self-paced learning programs ranging in audience from individual contributors to frontline supervisors and executive leadership. Additionally, our project training teams manage customized programs in support of contract requirements, customer service, local leadership development and employee engagement. We also provide online learning tools containing over 13,000 learning resources to many of our employees.

As part of our ongoing human resource measures, the Company hired a leader for Diversity, Equity, and Inclusion (DE&I) to champion our strategy and build an ongoing framework to successfully employ a diverse and inclusive workforce and focus on making improvements across our organization, so all of our employees feel included and valued. We are proud to employ an organization within the U.S. that is very diverse. As of September 30, 2020, we were 71% female and 66% racially diverse.
COVID-19 essential services
At the outset of the COVID-19 pandemic, many of our contracts were deemed "essential" by U.S. and international governments, underscoring the critical nature of our services to ensure vulnerable individuals and families continue to receive assistance at a time when the need for healthcare and safety-net programs is high.
Protecting our people
Our primary objective amidst this pandemic is to protect our employees while ensuring global business continuity of our essential services to help vulnerable individuals and taking responsible action to stop the virus from spreading further. The safety and well-being of our employees are paramount, and we made several sweeping changes to best serve our employees.
We committed to several safe-guarding measures, income-continuity opportunities, and other relief efforts to help employees impacted by this outbreak.
Company-wide, we systematically moved the majority of employees to work from home, when possible, in partnership with government clients for whom this was a new model. While some of these programs were not envisioned to be done in a work from home environment, we worked alongside clients to effectively implement work from home capabilities.
Effective March 16, 2020, our U.S. COVID-19 paid leave plan was initiated. This met or exceeded the requirements mandated by the FFCRA that was not required by law for the Company, and wholly funded by Maximus. Benefits included:
Paid Administrative Leave
Met: Included paid days for employees who were self-quarantined, pending diagnoses or diagnosed with COVID-19
Emergency Paid Sick Leave
Exceeded: Included time off for childcare needs if schools or daycares closed; government-mandated restriction or office closure that prevented employees from working; care for a sick relative; employees in a high-risk category for COVID-19
Expanded Paid Medical and Family Leave
Exceeded: Offered the same pay amount and length of time as Families First Act; exceed the act by not requiring use of Paid Time Off prior to benefit usage; this is not required by law for Maximus and is wholly funded by the Company, unlike smaller businesses that are reimbursed through tax credits under the Act
Insurance CoverageMaximus employees did not lose their insurance coverage when taking emergency paid leave
Employee safe-guarding provisions were made in our international business partners in line with local laws and regulations, as needed by the geography's impact by the pandemic.

Work from home
Many government programs never envisioned remote work. Many programs use technology platforms that lack capacity or resources to support telework. Nevertheless, we initiated a systematic effort to enable Maximus employees to work from home to the greatest extent possible. This included procuring new equipment in the wake of a global IT shortage, increasing network capacity and deploying new services while keeping operations running. The company was able to capitalize on its strategic investments in IT infrastructure, including emerging technologies such as secure remote network platforms and cloud-based omnichannel telephone environments to accelerate the rapid work-from-home initiative. We also deployed HIPAA-compliant work-from-home capabilities to enable operational continuity and to continue to assist individuals and families access more complex services such as clinical and social assessments required to access vital government benefits and services. This allowed us to:
Transition 63% of our U.S. employees to work from home at the peak.
Transition 76% of outside the U.S. employees to a work from home at the peak.
Reimburse employees who have new or increased cell phone, internet, and office supply costs as a result of COVID-19 related transition to working from home.
Increased safety precautions for onsite work
For roles where essential work must be completed onsite due to IT security and contract restrictions, we continue to take reasonable precautions to ensure a safe work environment. We adhere to local government agency recommendations in each of our geographies, such as the CDC, Environmental Protection Agency (EPA), and Occupational Safety and Health Administration (OSHA) in the U.S., for social distancing measures and facility cleaning/sanitation. We developed Clear2Work, our proprietary health screening assessment app, completion of which is required daily prior to entering any Maximus location.
We actively monitor and update our procedures as new or updated guidelines are provided. Reminders and educational material are communicated regularly to all employees through email, signage, video, and dedicated resource webpages. We expanded our free Employee Assistance Program to all employees, temps, and contractors, regardless of whether they utilize the Maximus health insurance program. We also launched online education and development tools, mental and health applications such as Headspace and Wellbeats to help support our employees' mental health and well-being. Regular mental wellness workshops with Maximus staff clinicians were held to learn strategies to reduce stress and anxiety, simple self-care techniques, and ways to remain resilient during the unknown, as well as provided resources to support grief and loss due to the pandemic.
Freedom of Association
As of September 30, 2020, 421 of our employees in Canada were covered under two different collective bargaining agreements, the British Columbia Government and Services Employees' Union, each of which has different components and requirements. These collective bargaining agreements expire in 2020.
As of September 30, 2020, 1,468 of our employees in Australia were covered under a Collective Agreement, which is similar in form to a collective bargaining agreement. The Collective Agreement is renewed annually.
As of September 30, 2020, 315 of our employees in the U.K. were covered under a collective bargaining agreement with GMB Trade Union and Unite Amicus Trade Union. These collective bargaining agreements do not have expiration dates.
None of our other employees are covered under any similar agreement. We consider our relations with our employees to be good.
Running our business ethically and with integrity
Our commitment to conduct our business ethically and with integrity extends to our responsibility to respect human rights as guided by international human rights principles. It is our duty to conduct our business through responsible workplace practices as described in the Maximus Human Rights Principles, available at

We strive to be champions for an inclusive and collaborative culture that is free from discrimination and harassment, where everyone is treated with respect and dignity. Our expectation is that Maximus and its employees

always conduct business according to the highest standards of ethics and performance and in compliance with all applicable laws.

Maximus is committed to an environment where open, honest communications are the expectation, not the exception. We want employees to feel comfortable in approaching a supervisor or anyone in management in instances where they believe violations of policies or standards have occurred.

Maximus has a confidential, third-party operated, 24/7 reporting hotline. Violations of our ethics standards and policies are taken seriously and include remediation processes and disciplinary action, as applicable. Any director, officer, and employee may anonymously report suspected violations of the Maximus Standards of Business Conduct and Ethics, Company policies, or applicable laws and regulations.

We believe that our employees are our most important asset. The ethics hotline is a comprehensive and confidential reporting tool to assist management and employees in working together to address any type of misconduct in the workplace. By creating open channels of communication, we aim to promote a positive work environment.

All employees understand our commitment 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

Government regulations

Our business is heavily regulated. In the U.S., we must adhere to local, state, and federal laws and regulations. Within the U.S. Federal Services Segment, we must also comply with the Federal Acquisition Regulations (FAR), which regulates the procurement, award, administration, and performance of U.S. government contracts. 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.

Maximus predominately serves in the role of data custodian. The government clients maintain the role as data owners and regulate access to and use of this data through extensive federal, state, and international privacy and data security laws requiring certain privacy protections and security safeguards. The Company's Information Security Office is led by the Chief Information Security Officer to provide oversight over the Company’s security obligations, as well as a Privacy Office under the Privacy Official to provide oversight over the Company’s privacy obligations within these contracts. The Board of Directors Technology Committee provides oversight with respect to the Company’s global IT, including, but not limited to, IT infrastructure, product development, digital services portfolio, cybersecurity, IT aspects of mergers and acquisitions, and intellectual property protection.

Maximus uses various technological and procedural security measures in order to protect the personal information we collect from loss, misuse, alteration or destruction. We have documented Information Security & Privacy policies to address data protection. We regularly provide information security and privacy awareness training to our employees.
Our operations may be subject to various local, state, federal, and international environmental laws and regulations. Given the nature of our business, we do not currently anticipate that the costs of complying with, or the liabilities associated with, environmental laws will materially affect us. However, we cannot ensure that we will not incur material costs or liabilities in the future. The Board of Director's Nominating and Governance Committee has oversight responsibility for Environment, Social, Governance (ESG), which includes climate-related risks and opportunities.
Other information
Maximus, Inc. is a Virginia corporation founded in 1975.

Our principal executive offices are located at 1891 Metro Center Drive, Reston, Virginia, 20190. Our telephone number is 703-251-8500.
Our website address is 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.
We make our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and the proxy statement for our annual shareholders' meeting, as well as any amendments to those reports, available free of charge through our website as soon as reasonably practical after we file that material with, or furnish it to, the Securities and Exchange Commission (SEC). 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 their website at
ITEM 1A.    Risk Factors.
Our operations are subject to many risks that could adversely affect our future financial condition, results of operations and cash flows, and, therefore, the market value of our securities. The risks described below highlight some of the factors that have affected, and in the future, could affect our operations. Additional risks we do not yet know of or that we currently think are immaterial may also affect our business operations. If any of the events or circumstances described in the following risks actually occurs, our business, financial condition or results of operations could be materially adversely affected.
Risks Pertaining to the Performance of our Business
If we fail to satisfy our contractual obligations or meet performance standards, our contracts may be terminated, and we may incur significant costs or liabilities, including actual or liquidated damages and penalties, which could adversely impact our operating results, financial condition, cash flows and our ability to compete for future contracts.
Our contracts may be terminated for our failure to satisfy our contractual obligations or to meet performance standards and often require us to indemnify customers for their damages. In addition, some of our contracts contain substantial liquidated damages provisions and financial penalties related to performance failures. Although we have liability 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. If a claim is made against a performance bond or letter of credit, we would be required to reimburse the issuer for the amount of the claim. 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.
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.
We derived approximately 14% of our fiscal year 2020 revenue from fixed-price contracts and approximately 32% of our fiscal year 2020 revenue from performance-based contracts. For fixed-price contracts, we receive our fee based on services provided. 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. For performance-based contracts, we receive our fee on a per-transaction basis or upon meeting specified milestones. These contracts include, for example, child support enforcement contracts in which we often receive a fee based on the volume of transactions or workforce services contracts in which we receive a payment based on a participant maintaining employment for a specified time period. To earn a profit on these contracts, we must accurately estimate the likely volume of work that will occur, costs and resource requirements involved and assess the probability of completing individual transactions or milestones within the contracted time period. If our estimates prove to be inaccurate, we may not achieve the level of profit we expected or we may incur a net loss on a contract.

Our growth initiatives could adversely affect our profitability.
Our growth strategy includes pursuing opportunities in new and adjacent market areas. We may encounter start-up challenges, unforeseen costs and other risks as we enter these markets. If we are unable to manage the risks of operating in these new markets, our reputation and profitability could be adversely affected.
We may incur significant costs before receiving related contract payments, which could result in an increased use of cash and risk of impairment charges.
From time to time, when we are awarded a contract, we incur significant expenses before we receive any contract payments. These expenses include leasing office space, purchasing office equipment and hiring personnel. In other situations, contract terms provide for billing upon achievement of specified project milestones. 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 addition to these factors, poor execution on project startups could impact us by increasing our use of cash.
In certain circumstances, we may defer costs incurred at the inception of a contract. Such action assumes that we will be able to recover these costs over the life of the contract. To the extent that a project does not perform as anticipated, these deferred costs may not be considered recoverable resulting in an impairment charge.
Our business could be materially and adversely impacted by the recent COVID-19 outbreak or other similar outbreaks.
We face various risks related to health epidemics, pandemics and similar outbreaks, including the recent global outbreak of COVID-19. COVID-19 has negatively impacted worldwide economic activity and has resulted in travel and work restrictions, commercial disruptions and has affected companies' operations around the world. We have been and continue to be affected by the COVID-19 pandemic, including through office closures and changes in working practices. 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 the COVID-19 pandemic, 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 as a result of the COVID-19 outbreak. These cost increases may not be fully recoverable or adequately covered by insurance.
We have also experienced procurement delays, including delays in procuring laptops and personal protective equipment, increased labor and technology costs and reductions in outcome-based contract revenue. If these conditions are more protracted or severe than anticipated, it could have a material effect on our business, disrupt our ability to perform on contracts, cause delays or limit the ability of our customers to perform, including in making timely payments to us.
During 2020, the spread of COVID-19 has led to disruption and volatility in the global capital markets, which increases the cost of capital and could impede our ability to access capital if we need to do so in the future.
We continue to work with our customers, employees and suppliers to address responsibly this global pandemic. We will continue to monitor the situation and assess further possible implications to our business and our stakeholders and will take appropriate actions in an effort to mitigate adverse consequences. We cannot assure you that we will be successful in any such mitigation efforts.
Our customers, and therefore our business and revenues, are sensitive to negative changes in general economic conditions. In particular, many governments may face reduced income from taxes as a result of the COVID-19 pandemic. Any continued or further decline in government tax revenues or economic conditions, as a result of COVID-19 or otherwise, would negatively impact our business.
We cannot at this time predict the continued impact of the COVID-19 pandemic and any resulting economic effects, but it could have a material adverse effect on our business, financial position, results of operations and cash flows.

A number of factors may cause our cash flows and results of operations to vary from quarter to quarter.
Factors which may cause our cash flows and results of operations to vary from quarter to quarter include:
the terms and progress of 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;
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.
Changes in the volume of activity and the number of contracts commenced, completed or terminated during any quarter may cause significant variations in our cash flows and results of operations because a large amount of our expenses are fixed.
We may rely on subcontractors and partners to provide clients with a single-source solution.
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. We may have disputes with our subcontractors, teaming partners or other third parties arising from the quality and timeliness of their work, customer concerns about them, or other matters. Subcontractor or teaming partner performance deficiencies could result in a customer terminating our contract for default. 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.
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 face competition from a number of different organizations depending upon the market and geographic location in which we are competing. A summary of our most significant competitors is included in Item 1 of this Annual Report on Form 10-K.
Many of these companies are international in scope, are larger than us, and have greater financial resources, name recognition and larger technical staffs. Substantial resources could enable certain competitors to initiate severe price cuts or take other measures in an effort to gain market share. In addition, we may be unable to compete for the limited number of large contracts because we may not be able to meet an RFP's 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. There can be no assurance that we will be able to compete successfully against our existing or any new competitors.
Risks Pertaining to our Client Relationships
Our business could be adversely affected by future legislative or government budgetary and spending changes.
The market for our services depends largely on domestic and international legislative programs and the budgetary capability to support programs, including the continuance of existing programs. Many of our contracts are not fully-funded at inception and rely upon future appropriations of funds. Accordingly, a failure to receive additional

anticipated funding may result in an early termination of a contract. In addition, many of our contracts include clauses that allow clients to unilaterally modify or terminate contracts with little or no recompense.
Changes in state or federal government initiatives or in the level of government spending due to budgetary or deficit considerations may have a significant impact on our future financial performance. For example, President Trump campaigned on a promise to repeal or replace the ACA, which has been a contributor to our growth over the past several years. The Supreme Court is currently considering the constitutionality of the ACA in the matter of California v. Texas, and a decision is expected in the spring of 2021. We cannot know for certain when the Court will issue a decision or what their decision may be. The Supreme Court has several options. A decision by the Supreme Court finding the ACA unconstitutional, in part or in whole, or a legislative repeal or amendment of the ACA, could have a material adverse effect on our business and revenues and profits associated with those operations.
Similarly, increased or changed spending on defense, security or anti-terrorism threats may impact the level of demand or funding for the health and human services programs that we operate. Many state programs in the United States, such as Medicaid, are federally mandated and fully or partially funded by the U.S. Federal Government. Changes to those programs, such as program eligibility, benefits, or the level of federal funding, could reduce the level of demand for our services, which could materially adversely impact our future financial performance.
Government entities have in the past terminated, and may in the future terminate, their contracts with us earlier than we expect, which may result in revenue shortfalls and unrecovered costs.
Many of our government contracts contain base periods of one or more years, as well as option periods covering more than half of the contract’s potential duration. Government agencies do not have to exercise these option periods, and they may elect not to exercise them for budgetary, performance or any other reason. Our contracts also typically contain provisions permitting a government customer to terminate the contract on short notice, with or without cause. Termination without cause provisions generally allows the government to terminate a contract at any time and enable us to recover only our costs incurred or committed, and settlement expenses and profit, if any, on the work completed prior to termination. We may or may not be able to recover all the costs incurred during the startup phase of a terminated contract. The unexpected termination of significant contracts could result in significant revenue shortfalls. If revenue shortfalls occur and are not offset by corresponding reductions in expenses, our business could be adversely affected. We cannot anticipate if, when, or to what extent a customer might terminate its 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.
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 the government entities and agencies prior to the development of an RFP. 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. Any failure to maintain positive relationships with government entities and agencies may adversely affect our ability to bid successfully in response to RFPs.
Our clients may limit or prohibit the outsourcing of certain programs or may refuse to grant consents and/or waivers necessary to permit private entities, 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. 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 a consent and/or waiver to the petitioning state or local agency. 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.

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 fiscal year 2020, approximately 39% of our total revenue was derived from contracts with state and local government agencies. Approximately 55% of our total revenue was derived from the U.S. Federal Government and the State of New York. Any significant disruption or deterioration in our relationship with state and local governments and a corresponding reduction in these contracts would significantly reduce our revenue and could substantially harm our business.
We obtain most of our business through competitive bidding in response to government RFPs. We may not be awarded contracts through this process at the same level in the future as in the past, and contracts we are awarded may not be profitable.
Substantially all of our customers are government agencies. To market our services to government customers, we are often required to respond to government RFPs, which may result in contract awards on a competitive basis. To do so effectively, we must estimate accurately our cost structure for providing the required services, the time required to establish operations and likely terms of the proposals submitted by competitors. We must also assemble and submit a large volume of information within an RFP’s rigid timetable. Our ability to respond successfully to RFPs will greatly impact our business. There is no assurance that we will continue to obtain contracts in response to government RFPs and our proposals may not result in profitable contracts. In addition, competitors may protest contracts awarded to us through the RFP process that may cause the award to be delayed or overturned or may require the customer to reinitiate the RFP process.
Even where we are an incumbent, our ability to secure continued work or work at similar margins may be affected by competitive rebids or contract changes and cancellations. If we do not win certain recompetes, this may cause goodwill and other intangible assets to become impaired. Although it is difficult to track all the reasons for changes in our contracts, we believe that this contract attrition has typically affected approximately 7% to 10% of our business annually, with the attrition largely being replaced by new or expanded work elsewhere. However, there can be no assurance that we will be able to replace the work lost to attrition with new work.
Within our U.S. Federal business, our ability to participate in many competitive bids in response to government RFPs may be managed through Government-Wide Acquisition Contracts (GWACs) or the process by which agencies of the federal government purchase goods and services. Eligibility to remain on a GWAC changes over time. We may not be invited to bid and therefore be unable to be awarded contracts through this process at the same level in the future as in the past if we do not maintain full eligibility requirements over time.
A GWAC is a pre-competed, multiple-award, indefinite-delivery, indefinite-quantity (IDIQ) contract that agencies can use to buy total IT solutions. All IDIQs, including GWACs, are regulated by the FAR, which sets forth rules and regulations that must be followed by federal agencies and providers of goods and services to the government in the procurement process. For instance, in 2018, Maximus Federal was named a recipient of the U.S. General Services Administration’s (GSA) Alliant 2 GWAC. 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 a specific GWAC, we would risk losing access to related contracts and awards.
Risks Pertaining to Legal Compliance and Data Security
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.
We are subject to audits, investigations and reviews relating to compliance with the laws and regulations that govern our role as a contractor to agencies and departments of the U.S. Federal Government, state, local, and foreign governments, and otherwise in connection with performing services in countries outside of the United States. Adverse findings could lead to criminal, civil or administrative proceedings, and we could be faced with penalties, fines, suspension or debarment. Adverse findings could also have a material adverse effect on us because of our reliance on government contracts. We are subject to periodic audits by U.S., federal, state, local and foreign governments for taxes. We are also involved in various claims, arbitrations and lawsuits arising in the normal conduct of our business, including but not limited to bid protests, employment matters, contractual disputes and charges before administrative agencies. Although we can give no assurance, based upon our evaluation and taking

into account the advice of legal counsel, we do not believe that the outcome of any existing matter would likely have a material adverse effect on our consolidated financial position, results of operations or cash flows.
We may be subject to fines, penalties and other sanctions if we fail to comply with laws governing our business.
Our business lines operate within a variety of complex regulatory schemes, including but not limited to the FAR, Federal Cost Accounting Standards, the Truth in Negotiations Act, the Fair Debt Collection Practices Act (and similar national, state and foreign laws), the Foreign Corrupt Practices Act, the United Kingdom Bribery Act, as well as the regulations governing Medicaid and Medicare and accounting standards. If a government audit finds improper or illegal activities by us or we otherwise determine that these activities have occurred, we may be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, suspension of payments, fines and suspension or disqualification from doing business with the government. Any adverse determination could adversely impact our ability to bid in response to RFPs in one or more jurisdictions. Further, as a government contractor subject to the types of regulatory schemes described above, we are subject to an increased risk of investigations, criminal prosecution, civil fraud, whistleblower lawsuits and other legal actions and liabilities to which private sector companies are not, the result of which could have a material adverse effect on our operating results, cash flows and financial condition.
Adverse judgments or settlements in legal disputes could harm our operating results, cash flows and financial condition.
From time to time, we are subject to a variety of lawsuits and other claims. These may include lawsuits and claims related to contracts, subcontracts, securities compliance, employment claims and compliance with Medicaid and Medicare regulations, as well as laws governing debt collections and child support enforcement. Adverse judgments or settlements in some or all of these legal disputes may result in significant monetary damages or injunctive relief against us. 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.
Our systems and networks may be subject to cybersecurity breaches.
We are a trusted provider to government and other clients of critical health and human services that rely heavily upon technology systems, software and networks to receive, input, maintain and communicate participant and client data. Although we have experienced occasionally attempted security breaches, to our knowledge, none of those attempts have been successful. The risk of a security breach, system disruption, ransom-ware attack or similar cyber-attack or intrusion, including by computer hackers, cyber terrorists or foreign governments, is persistent and substantial as the volume, intensity and sophistication of attempted attacks, intrusions and threats from around the world increase daily. If our systems or networks were 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 restore access to such information. The loss, theft or improper disclosure of that information could subject us 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.
Similarly, if our internal networks were compromised, we could suffer the loss of proprietary, trade secret or confidential technical and financial data. That could make us less competitive in the marketplace and adversely affect our existing business, future opportunities and financial condition.
Many of our projects handle protected health information or other forms of confidential personal information, the loss or disclosure of which could adversely affect our business, results of operations and reputation.
As a provider of services under government health and human services programs, we often receive, maintain and transmit protected health information or other types of confidential personal information. That information may be regulated by the Health Insurance Portability and Accountability Act (HIPAA), the Health Information Technology for Economic and Clinical Health Act of 2009 (HITECH), Internal Revenue Service regulations, the European Union General Data Protection Regulation (GDPR) or similar U.S. or foreign laws. The loss, theft or improper disclosure of that information could subject us to sanctions under the relevant laws, breach of contract claims, class action or

individual lawsuits from affected parties, negative press articles and a loss of confidence from our government clients, all of which could adversely affect our existing business, future opportunities and financial condition.
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. 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. 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. We could face indemnification claims and liabilities from alleged breaches of representations or warranties.
During 2009, we exited the revenue maximization business. Although we no longer provide those services, former projects that we performed for state clients remain subject to federal audits. Our contracts for that business generally provide that we will refund the portion of our fee associated with any federal disallowance. Accordingly, we may be obligated to refund amounts paid for such revenue maximization services depending on the outcome of federal audits. In March 2009, for example, a state Medicaid agency, asserted a claim against us in connection with a contract we had to provide Medicaid administrative claiming services to school districts in the state. We had entered into separate agreements with the school districts under which we helped the districts prepare and submit claims to the state Medicaid agency which, in turn, submitted claims for reimbursement to the U.S. Federal Government. The state asserted that its agreement with us requires us to reimburse the state for amounts owed to the U.S. Federal Government. No legal proceedings have been instituted against us in that matter. We could face similar claims arising from such projects for other state clients. If we become subject to such a claim, there is no assurance that we would prevail or that a court would limit our liability to the amount of our fees associated with a disallowance.
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 successfully is important to our success. The loss of an executive officer or senior manager could impair our ability to secure and manage engagements, which could harm our business, prospects, financial condition, results of operations and cash flows.
We may be unable to attract and retain sufficient qualified personnel to sustain our business.
Our delivery of services is labor-intensive. When we are awarded a government contract, we must quickly hire project leaders and operational staff. Some larger projects have required us to hire and train thousands of operational staff in a very short time period. That effort can be especially challenging in geographic areas with very low unemployment rates. The additional operational staff also creates a concurrent demand for increased administrative personnel. Our success requires that we attract, develop, motivate and retain:
experienced and innovative executive officers globally;
senior managers who have successfully managed or designed government services programs; and
information technology professionals who have designed or implemented complex information technology projects within and outside the U.S.
Innovative, experienced and technically proficient individuals are in great demand and are likely to remain a limited resource. There can be no assurance that we will be able to continue to attract and retain desirable executive officers, senior managers and management personnel. Our inability to hire sufficient personnel on a timely

basis or the loss of significant numbers of executive officers and senior managers could adversely affect our business.
Government unions may oppose outsourcing of government programs to outside vendors such as us, which could limit our market opportunities and could impact us adversely. In addition, our unionized workers outside the United States could disrupt our operations and our non-unionized workers could attempt to unionize which could disrupt our operations and impose higher costs on us.
Our success depends in part on our ability to win profitable contracts to administer and manage health and human services programs traditionally administered by government employees. Many government employees, however, belong to labor unions with considerable financial resources and lobbying networks. Unions have in the past applied, and are likely to continue to apply, political pressure on legislators and other officials seeking to outsource government programs. Union opposition to these programs may result in fewer opportunities for us to service government agencies, prolonged and more complex procurement cycles, and the potential for adverse media coverage as the unions seek to discredit Maximus through their network of NewsGuild journalists who belong to the Communications Workers of America (CWA) union.
We do operate outsourcing programs using unionized employees in Canada and the U.K. We have historically experienced opposition from the union in Canada, which does not favor the outsourcing of government programs. Adverse press coverage and union opposition may have a negative effect on the willingness of government agencies to outsource such projects as well as certain contracts that are operated within a unionized environment. Our unionized workers could also declare a strike that could adversely affect our performance and financial results.
Non-unionized workers could initiate organizing efforts to unionize at one or more of our locations. Such organizing efforts could be disruptive to our business operations and result in adverse publicity. A successful union organizing effort could substantially increase our personnel costs.
General Risk Factors
If we do not successfully integrate the businesses that we acquire, our results of operations could be adversely affected.
Business combinations involve a number of factors that affect operations, including:
diversion of management’s attention;
loss of key personnel;
entry into unfamiliar markets;
assumption of unanticipated legal or financial liabilities;
becoming significantly leveraged as a result of incurring debt to finance an acquisition;
unanticipated operating, accounting or management difficulties in connection with the acquired entities;
impairment of acquired intangible assets, including goodwill; and
dilution to our earnings per share.
Businesses we acquire may not achieve the revenue and earnings we anticipate. Customer dissatisfaction or performance problems with an acquired firm could materially and adversely affect our reputation as a whole. As a result, we may be unable to profitably manage businesses that we have acquired or that we may acquire or we may fail to integrate them successfully without incurring substantial expenses, delays or other problems that could materially negatively impact our business and results of operations.
We are subject to the risks of doing business internationally.
For the year ended September 30, 2020, 14% of our revenue was driven from jurisdictions outside the U.S. 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.
These factors may lead to decreased revenues and profits, which could adversely affect our business, financial condition and results of operations.
Inaccurate, misleading or negative media coverage could adversely affect our reputation and our ability to bid for government contracts.
Because of the public nature of many of our business lines, the media frequently focuses their attention on our contracts with government agencies. If the media coverage is negative, it could influence government officials to slow the pace of outsourcing government services, which could reduce the number of RFPs. The media also focus their attention on the activities of political consultants engaged by us, and we may be tainted by adverse media coverage about their activities, even when those activities are unrelated to our business. Moreover, inaccurate, misleading or negative media coverage about us could harm our reputation and, accordingly, our ability to bid for and win government contracts.
Our Articles of Incorporation and bylaws include provisions that may have anti-takeover effects.
Our Articles of Incorporation and bylaws include provisions that may delay, deter or prevent a takeover attempt that shareholders might consider desirable. For example, our Articles of Incorporation historically provided that our directors were divided into three classes and elected to serve staggered three-year terms. This structure could impede or discourage an attempt to obtain control of us by preventing stockholders from replacing the entire board in a single proxy contest, making it more difficult for a third party to take control of Maximus without the consent of our Board of Directors. In 2020, we proposed, and our shareholders approved, an amendment to our Articles of Incorporation providing for the annual election of directors following a phase-in period. The phase-in will be complete by the time of our annual meeting of shareholders in 2023. Our Articles of Incorporation further provide that our shareholders may not take any action in writing without a meeting. 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.


ITEM 2.    Properties.
We own a 60,000 square-foot office building in Reston, Virginia. We also lease offices for operations, management and administrative functions in connection with the performance of our services.
At September 30, 2020, we leased approximately 150 offices in the U.S. totaling approximately 4.5 million square feet. In eight countries outside the U.S., we leased approximately 300 offices totaling approximately 0.9 million square feet. The lease terms vary from month-to-month to ten-year leases and are generally at market rates. In the event that a property is used for our services in the U.S., we typically negotiate clauses to allow termination of the lease if the service contract is terminated by our customer. Such clauses are not standard in foreign leases.
We believe that our properties are maintained in good operating condition and are suitable and adequate for our purposes.
ITEM 3.    Legal Proceedings.
Refer to our disclosures included in "Note 10. Commitments and contingencies" included in Item 8 of this Annual Report on Form 10-K.
ITEM 4.    Mine Safety Disclosures
Not applicable.

ITEM 5.    Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Our common stock trades on the New York Stock Exchange (NYSE) under the symbol "MMS."
As of October 22, 2020, there were 40 holders of record of our outstanding 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 30,151 beneficial owners of our common stock.
During the first fiscal quarter of 2021, we declared a quarterly dividend of $0.28 per share of Maximus stock. Our quarterly dividends during fiscal years 2020, 2019 and 2018 were $0.28, $0.25 and $0.045 per share, respectively.
We intend to continue paying regular cash dividends, although there is no assurance as to future dividends. Future cash dividends, if any, will be paid at the discretion of our Board of Directors and will depend, among other things, upon our future operating results, capital requirements and surplus, general financial condition, contractual restrictions and other factors our Board of Directors may deem relevant.
The following table sets forth information regarding purchases of common stock that we made during the three months ended September 30, 2020:
Number of
Price Paid
per Share
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans(1)
Approximate Dollar
Value of Shares that
May Yet Be
Under the Plan
(in thousands)
July 1, 2020 - July 31, 2020— $— — $150,026 
August 1, 2020 - August 31, 2020— — — 150,026 
September 1, 2020 - September 30, 2020 (2)143,275 68.55 — 150,026 
Total143,275 —  
(1)Under a resolution adopted in March 2020, the Board of Directors authorized the purchase, at management's discretion, of up to an aggregate of $200 million of our common stock.
(2)The total number of shares purchased includes 143,275 restricted stock units which vested in September 2020 but which were utilized by the recipients to net-settle personal income tax obligations.

Stock Performance Graph
The following graph compares the cumulative total shareholder return on our common stock for the five-year period from September 30, 2015, to September 30, 2020, with the cumulative total returns for the NYSE Stock Market (U.S. Companies) Index and the S&P MidCap 400 Index. In addition, we compared the results of a peer group to our performance. This peer group is based upon the companies noted in our annual proxy statement as entities with whom we compete for executive talent. This peer group is comprised of Booz Allen Hamilton Holding Corp., CACI International Inc., Conduent, Inc., Gartner Inc., ICF International, Inc., Leidos, Inc., ManTech International Corp., Science Applications International Corporation (SAIC), Unisys Corp., Tetra Tech Inc., and KBR, Inc.
This graph assumes the investment of $100 on September 30, 2015, in our common stock, the NYSE Stock Market (U.S. Companies) Index, the S&P MidCap 400 Index, and our peer group, weighted by market capitalization and assumes dividends are reinvested.
A.    The lines represent index levels derived from compounded daily returns that include all dividends.
B.    The indexes are reweighted daily, using the market capitalization on the previous trading day.
C.    If the monthly interval, based on the fiscal year-end, is not a trading day, the preceding trading day is used.
D.    The index level for all series was set to $100.00 on September 30, 2015.


ITEM 6.    Selected Financial Data.
The selected consolidated financial data presented below is from our consolidated financial statements and the related notes. The revenue and operating results related to the acquisition of companies are included from the respective acquisition dates. The selected financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" included as Item 7 of this Annual Report on Form 10-K and with the Consolidated Financial Statements and related Notes included as Item 8 of this Annual Report on Form 10-K. The historical results set forth in this Item 6 are not necessarily indicative of the results of operations to be expected in the future.
 Year Ended September 30,
 (dollars in thousands, except per share data)20202019201820172016
Consolidated statements of operations data:     
Revenue$3,461,537 $2,886,815 $2,392,236 $2,450,961 $2,403,360 
Operating income288,278 317,107 295,483 313,512 286,603 
Net income attributable to Maximus214,509 240,824 220,751 209,426 178,362 
Basic earnings per share attributable to Maximus$3.40 $3.73 $3.37 $3.19 $2.71 
Diluted earnings per share attributable to Maximus$3.39 $3.72 $3.35 $3.17 $2.69 
Weighted average shares outstanding:   
Basic63,062 64,498 65,501 65,632 65,822 
Diluted63,322 64,820 65,932 66,065 66,229 
Cash dividends per share of common stock$1.12 $1.00 $0.18 $0.18 $0.18 
 At September 30,
 (in thousands)20202019201820172016
Consolidated balance sheet data:     
Cash and cash equivalents$71,737 $105,565 $349,245 $166,252 $66,199 
Total assets2,024,702 1,745,732 1,462,000 1,350,662 1,348,819 
Debt28,895 9,889 510 668 165,615 
Total Maximus shareholders' equity1,241,819 1,247,792 1,083,867 940,085 749,081 

Effective October 1, 2018, we adopted Accounting Standard Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606), using the modified retrospective method. Accordingly, the results shown reflect the adoption of Topic 606 for the years ended September 30, 2020 and 2019, but all other years are reported under our previous accounting policy.
Effective October 1, 2019, we adopted ASU No. 2016-02, Leases (Topic 842), using a modified retrospective approach and, as a result, comparative information for fiscal years 2019 and prior have not been retrospectively adjusted. See "Note 1. Business and summary of significant accounting policies" and "Note 4. Leases" in Item 8 of this Annual Report on Form 10-K for more details.

ITEM 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of financial condition and results of operations is provided to enhance the understanding of and should be read in conjunction with our Consolidated Financial Statements and the related Notes.

For an overview of our business, including our business segments and a discussion of the services we provide, see Item 1 of this Annual Report on Form 10-K.
Financial overview
Our results for fiscal year 2020 were significantly affected by the following factors:
The coronavirus (COVID-19) global pandemic had an unfavorable impact on our core U.S.-based programs where our customers instituted temporary changes to ensure that individuals and families retained access to vital services. This resulted in reduced volumes, leading to declines in revenue and profits within our core business.
We continued our work on the Census Questionnaire Assistance (CQA) contract in support of the U.S. decennial census. Our revenue on this contract was $515 million, compared to $185 million in fiscal year 2019. Our increased cost-plus revenue, including that on the CQA contract, lowered our operating margin.
We performed new services to assist government clients in the U.S. in their COVID-19 response efforts. Our revenue on these contracts, which excludes the extension of planned work related to the CQA contract, was approximately $200 million and was earned in the second half of the fiscal year.
Our Outside the U.S. Segment experienced a significant change in estimates for employment work and a pause in face-to-face assessments, resulting in reduced revenue and profits.
Under our share purchase program, we acquired 2.8 million shares of our own common stock. We continue to buy shares when appropriate opportunities arise.
We increased our quarterly dividend during fiscal year 2020, from $0.25 to $0.28 per share of Maximus common stock.
Our cash flows from operations and free cash flows declined due to additional investment in working capital required by increases to revenue and delayed payments.
We continue to hold minimal debt.
Looking forward into fiscal year 2021, it is difficult to predict when the COVID-19 response work will end, when our core programs may return to previous profitability levels, and whether these two opposite forces will coincide. Our operating income margins are expected to be impacted by the challenges we face in operating during the pandemic, including but not limited to the suspension of redeterminations of eligibility required by states accepting enhanced funding from the U.S. Federal Government.


Summary of consolidated results
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 2020 and 2019. A discussion comparing our results between fiscal years 2019 and 2018 can be found in our Annual Report on Form 10-K for the year ended September 30, 2019, which we filed with the Securities and Exchange Commission on November 26, 2019.
 Year ended September 30,
(dollars in thousands, except per share data)20202019
Revenue$3,461,537 $2,886,815 
Cost of revenue2,750,535 2,215,631 
Gross profit711,002 671,184 
Gross profit margin20.5 %23.2 %
Selling, general and administrative expense387,090 321,023 
Selling, general and administrative expense as a percentage of revenue11.2 %11.1 %
Amortization of intangible assets35,634 33,054 
Operating income288,278 317,107 
Operating income margin8.3 %11.0 %
Interest expense2,059 2,957 
Other income, net843 3,170 
Income before income taxes287,062 317,320 
Provision for income taxes72,553 76,825 
Effective tax rate25.3 %24.2 %
Net income214,509 240,495 
Loss attributable to noncontrolling interests— (329)
Net income attributable to Maximus$214,509 $240,824 
Basic earnings per share attributable to Maximus$3.40 $3.73 
Diluted earnings per share attributable to Maximus$3.39 $3.72 


Revenue, cost of revenue and gross profit

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 and subcontracted labor. Changes in revenue, cost of revenue and gross profit between fiscal years 2019 and 2020 are summarized below.

 RevenueCost of RevenueGross Profit
Dollars in thousandsPercentage changeDollars in thousandsPercentage changeDollars in thousandsPercentage change
Balance for fiscal year 2019$2,886,815 $2,215,631 $671,184 
Estimated pre-acquisition results from citizen engagement centers business98,429 85,341 13,088 
Pro forma results for fiscal year 20192,985,244 2,300,972 684,272 
Growth from CQA contract329,453 11.0 %265,808 11.6 %63,645 9.3 %
Organic growth from other contracts138,008 4.6 %179,073 7.8 %(41,065)(6.0)%
Net acquisitions and disposals13,275 0.4 %11,489 0.5 %1,786 0.3 %
Currency effect compared to the prior period(4,443)(0.1)%(6,807)(0.3)%2,364 0.3 %
Balance for fiscal year 2020$3,461,537 16.0 %$2,750,535 19.5 %$711,002 3.9 %

On November 16, 2018, we acquired the citizen engagement centers business that was integrated into our U.S. Federal Services Segment. Had we acquired this business at the beginning of fiscal year 2019, we estimate that revenue and gross profit for fiscal year 2019 would have been higher by $98.4 million and $13.1 million, respectively. During fiscal year 2020, we received additional growth from this business, most notably with the CQA contract.
Our other acquired growth in the year came from the full-year benefit of GT Hiring Solutions (2005) Inc., which we acquired in fiscal year 2019, and two fiscal year 2020 acquisitions, InjuryNet Australia Pty Limited and Index Root Korea Co. Ltd. These acquisitions were all integrated into our Outside the U.S. Segment. Our U.S. Federal Services Segment disposed of a small business in fiscal year 2020.
Our U.S. Services and U.S. Federal Services Segments reported organic growth year-over-year, offset by declines in our Outside the U.S. Segment. Our profit margins declined in all segments.
Our organic revenue growth or decline reflects changes in our contract portfolio from our existing business, supplemented with new work. Most of our contracts are multi-year arrangements, built upon long-term relationships that allow us to maintain a strong backlog of work to sustain our revenues. In any typical year, we anticipate 7% to 10% attrition of work as contracts come to a natural end or are lost; contracts are rebid with reduced volumes, scope, rates or a combination of all three; contracted work is in-sourced by our customer or we elect not to rebid. Attrition should exceed our normal range in fiscal year 2021 due to the expected wind-down of the CQA contract. We also maintain a small portfolio of non-recurring short-term projects. To achieve organic growth, we must obtain more work than is lost through attrition. The COVID-19 pandemic caused some short-term disruption to our business; some contracts expanded, some declined and the business has been subject to additional costs.
Although we were able to maintain services, and add some additional work to assist customers with pandemic-related assistance, we experienced reduced volumes on core U.S.-based programs. The effect on our Outside the U.S. Segment was more significant due to the nature of the work performed.

Our business is affected by fluctuations in foreign currencies in the jurisdictions where we operate. Although revenue and related costs are typically earned and incurred in the same currency, a significant change in foreign exchange rates may impact our overall profit margins. We show the impact of currency fluctuations by reporting the difference between our results using current year exchange rates and results reported if the average rates utilized in the prior year prevailed. Currency effects are exclusively within the Outside the U.S. Segment.
Other operating expenses and benefits
Selling, general and administrative (SG&A) expense consists of 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 resources that are not client-facing, or at a corporate level. Corporate costs are allocated to segments on a consistent and rational basis. SG&A expenses are not typically driven by changes in our revenue. We allocate SG&A expenses using a methodology driven by the Federal Cost Accounting Standards.
SG&A expenses increased year-over-year due primarily to:
additional costs to address the COVID-19 pandemic;
increases in business development activity to both bolster our technical skills and plan for increased bidding activity;
increases in our scope of operations;
acquisition-related expenses of $4.6 million, for both completed and unconsummated deals; and
higher than usual specific acquisition costs and IT transformation initiatives, including migrating our existing data centers to the cloud, which allowed the rapid acceleration of staff into a work-from-home environment.
This increase was partially offset by a gain of $1.7 million related to the sale of Q2 Administrators LLC, a wholly-owned subsidiary, in our U.S. Federal Services Segment.
Amortization of intangible assets received a full charge from our acquisition of the citizen engagement centers business during fiscal year 2020. Additional charges from our other acquisitions also added to this charge.
Interest expense and other income
Our interest expense principally results from our U.S.-based corporate credit facility, which was used to acquire the citizen engagement centers business as well as covering short-term working capital needs throughout fiscal years 2019 and 2020. Credit facilities are also in place in some of our jurisdictions outside the U.S.
We earn interest on some of our cash balances that are in excess of our working capital requirements. In addition, in fiscal year 2019, we received interest income on late invoices from a customer in our U.S. Services Segment.
Income taxes
Our effective tax rate for fiscal years 2020 and 2019 was 25.3% and 24.2%, respectively. We anticipate that our effective tax rate for fiscal year 2021 will be between 25.8% and 26.5%.
Our tax rate increased in fiscal year 2020 due to reduced benefits from the vesting of equity compensation. Our income tax expense in fiscal years 2020 and 2019 received benefits of $2.0 million and $4.8 million from the vesting of restricted stock units (RSUs). Our annual benefit or charge related to the vesting of RSUs is dependent upon the timing, amount and share price on the date that the awards become available to owners of RSUs. Although most of our RSUs vest in the fourth quarter, we have a significant population of RSUs whose issuance has been deferred that might result in unpredictable movements in our tax provision. As of September 30, 2020, we have no outstanding stock options.

U.S. Services Segment
Our U.S. Services Segment provides a variety of business process services such as program administration, appeals and assessments work and related consulting work for U.S. state and local government programs. These services support a variety of programs, including the Affordable Care Act (ACA), Medicaid and the Children’s Health Insurance Program (CHIP), Temporary Assistance to Needy Families (TANF), and child support programs. In fiscal year 2020, the segment further executed on its clinical evolution strategy by expanding its clinical offerings in public health with new work in contact tracing, disease investigation, and COVID-19 response efforts. We also successfully expanded into the unemployment insurance market as Maximus supported 14 states in their unemployment insurance programs. We changed the name of our U.S. Health and Human Services to U.S. Services to recognize the evolution of our service offerings into new markets and clients.
 Year ended September 30,
(dollars in thousands)20202019
Revenue$1,329,274 $1,176,488 
Cost of revenue969,002 832,379 
Gross profit360,272 344,109 
Selling, general and administrative expense132,489 123,275 
Operating income227,783 220,834 
Gross profit percentage27.1 %29.2 %
Operating margin percentage17.1 %18.8 %

Our U.S. Services Segment revenue and cost of revenue increased by 13% and 16%, respectively, in fiscal year 2020. All growth was organic. A number of positive and negative factors impacted this segment.

We received approximately $129 million of work for assisting states within the U.S. with their response to the COVID-19 pandemic. Although this work is accretive, these contracts generally experience lower operating margins and, therefore, tempered the overall operating margins of the segment.
Lower volumes on some of our large outcome-based contracts contributed to lower revenue and lower operating margins. As part of the response from the U.S. Federal Government to the COVID-19 pandemic, states were allowed to access increases in matching funds if they provide continuous care to current Medicaid enrollees and, as a result, redeterminations of eligibility were suspended. This ensured individuals and families continuous access to vital health care services during the pandemic. These redeterminations are a significant factor in several of our contracts and we are paid by the volume of transactions on many arrangements. This negative impact was offset in other contracts where we are reimbursed based upon the number of eligible Medicaid participants.
The increase in revenue in the U.S. Federal Services Segment absorbed additional corporate SG&A expenses and provided a benefit to operating margins; this is likely to reverse in fiscal year 2021 as the CQA contract ends.
If and when the pandemic subsides, we would anticipate increases in our volume-based revenue as governments emerge and programs return to pre-pandemic levels. We also expect an end to our COVID-19-related contracts. The timing of each of these is uncertain and these opposing changes may not coincide. Our customers in this segment are typically U.S. state governments, who have seen increases in the demand for the social services that we administer while also experiencing a significant reduction in their tax revenues. Although this may provide additional opportunities for us, we face the risk that many of our customers may face cash shortfalls from reduced income tax receipts, resulting in potential budgetary pressures and delayed payments from the pandemic.

U.S. Federal Services Segment
Our U.S. Federal Services Segment provides program administration, appeals and assessments services and technology solutions, including system and software development and maintenance services, for various U.S. federal civilian programs. The segment also contains certain state-based assessments, independent medical reviews, and appeals work that is part of the segment's heritage within the Medicare Appeals portfolio and continues to be managed within this segment. In fiscal year 2020, the segment expanded its clinical offerings in public health with new work supporting the Federal Government's COVID-19 response efforts. This included:
Expanded work with the Centers for Disease Control and Prevention (CDC) for their helpline;
An outbound customer support center for the Office of the Assistant Secretary for Health to notify individuals throughout the U.S. of their COVID-19 test result; and
IRS Wage and Investment Division response efforts to general inquiries regarding the Coronavirus Aid Relief & Economic Security (CARES) Act and Economic Impact Payment Service Plan.
 Year ended September 30,
(dollars in thousands)20202019
Revenue$1,633,337 $1,111,197 
Cost of revenue1,314,412 869,127 
Gross profit318,925 242,070 
Selling, general and administrative expense186,023 126,128 
Operating income132,902 115,942 
Gross profit percentage19.5 %21.8 %
Operating margin percentage8.1 %10.4 %

RevenueCost of RevenueGross Profit
Dollars in thousandsPercentage changeDollars in thousandsPercentage changeDollars in thousandsPercentage change
Balance for fiscal year 2019$1,111,197 $869,127 $242,070 
Estimated pre-acquisition results from citizen engagement centers business98,429 85,341 13,088 
Pro forma results for fiscal year 20191,209,626 954,468 255,158 
Growth from CQA contract329,453 27.2 %265,808 27.8 %63,645 24.9 %
Organic growth from other contracts96,259 8.0 %95,625 10.0 %634 0.2 %
Disposal of business(2,001)(0.2)%(1,489)(0.2)%(512)(0.2)%
Balance for fiscal year 2020$1,633,337 35.0 %$1,314,412 37.7 %$318,925 25.0 %

Revenue and cost of revenue in our U.S. Federal Services Segment increased by 35.0% and 37.7%, respectively, based upon pro forma results for fiscal year 2019.
The CQA contract provided approximately $330 million of revenue growth compared to fiscal year 2019. The contract started to wind down operations in October 2020, and we anticipate revenue from this contract will be between $50 million and $60 million in fiscal year 2021.

Both the CQA contract and the contract to support the Centers for Medicare and Medicaid (CMS) Contact Center Operations (CCO) are cost-plus arrangements, which carry lower risk and therefore lower margins than fixed-price or performance-based arrangements. This has tempered our profit margins in fiscal year 2020.
We estimate that our incremental revenue from assisting the U.S. Federal Government with its COVID-19 response was $71 million, excluding the increases to the CQA contract tied to the pandemic-related extended response period.
Our business realized higher revenues from short-term work but also experienced lower margins due to reduced volumes on performance-based contracts, such as workers compensation claims reviews that declined sharply since the onset of the pandemic.
Our operating income margin also declined due to increased spending on business development and selling activities.
Outside the U.S. Segment
Our Outside the U.S. Segment provides business process services (BPS) solutions for governments and commercial clients in geographies beyond the U.S., including health and disability assessments, program administration for employment services and other job seeker-related services. We support programs and deliver services in the United Kingdom (U.K.), including the Health Assessment Advisory Service (HAAS), the Work & Health Programme and Fair Start; Australia, including jobactive and the Disability Employment Service; Canada, including Health Insurance British Columbia and the Employment Program of British Columbia; Italy, Saudi Arabia, Singapore, South Korea and Sweden.
 Year ended September 30,
(dollars in thousands)20202019
Revenue$498,926 $599,130 
Cost of revenue467,121 514,125 
Gross profit31,805 85,005 
Selling, general and administrative expense65,938 68,944 
Operating (loss)/income(34,133)16,061 
Gross profit percentage6.4 %14.2 %
Operating margin percentage(6.8)%2.7 %

Changes in revenue, cost of revenue and gross profit for fiscal year 2020 are summarized below.
 RevenueCost of RevenueGross Profit
Dollars in thousandsPercentage changeDollars in thousandsPercentage changeDollars in thousandsPercentage change
Balance for fiscal year 2019$599,130 $514,125 $85,005 
Organic decline(111,037)(18.5)%(53,175)(10.3)%(57,862)(68.1)%
Acquired growth15,276 2.5 %12,978 2.5 %2,298 2.7 %
Currency effect compared to the prior period(4,443)(0.7)%(6,807)(1.3)%2,364 2.8 %
Balance for fiscal year 2020$498,926 (16.7)%$467,121 (9.1)%$31,805 (62.6)%

The COVID-19 pandemic had an immediate and significant negative effect on the results of our Outside the U.S. Segment. This business has several contracts that are compensated based upon performance-based outcomes, which were significantly disrupted. Work related to employment services and face-to-face health

assessments suffered due to disruptions in the employment markets and the halting of face-to-face assessments at the direction of our client as the U.K. government navigates towards the optimal path to safely resume these services. Results in the first quarter of fiscal year 2020 were also affected by the Australian bushfires. The segment reported declining organic revenues and reduced profit margins in fiscal year 2020.
Our employment services contracts earn revenue based upon our ability to place individuals in long-term sustained employment. Revenue is recognized based on our estimate of the number of individuals who we anticipate reaching these milestones. As a result, changes in our estimates of our ability to place people in work and the time that this will take can have a significant impact on our revenue. As a result of the pandemic, we revised our estimates of those jobseekers who are likely to achieve employment outcomes, reducing our revenue in the second fiscal quarter of 2020 by approximately $24 million. Each quarter we refine our estimates as we gain a better understanding of the effects of COVID-19 and the related regulations on the employment markets we serve.
Many of our contracts were modified to more favorable terms as a response to the pandemic. In Australia, the balance between administrative revenue and outcome-based revenue was adjusted to reduce the risks within the contract. In the U.K., contracts were temporarily changed to cost-reimbursement arrangements.
Our estimates of the number of outcomes we anticipate to achieve declined and the time we expect to achieve those outcomes increased compared to prior years. This reduced our potential revenue and slowed our progress towards recognizing it. All estimates at this time are based upon our expectations as to how the effects of the pandemic, including regulations adopted by governments and employment practices adopted by employers, will progress. We have limited history upon which to base these estimates and, accordingly, our revenue may be more volatile than we previously experienced.
Although we anticipate that our business will continue to experience disruption in fiscal year 2021, we believe that we will see an improved outlook in our operations outside the U.S. We believe that as our customers emerge from the pandemic, there will be an increased need for our role to support more people into long-term, sustained employment, particularly in geographies like Australia where they are emerging from the pandemic and people are returning to work. As a result of these trends, we are anticipating estimated revenue growth of approximately $175 million in fiscal year 2021 compared to the prior year. We also anticipate that we will return to profitability in the second half of fiscal year 2021.
The continued strength of the U.S. Dollar against the currencies in which we do business outside the U.S. resulted in year-over-year declines in our revenue and costs. In general, these currencies weakened during the first three fiscal quarters of 2020 but strengthened against the U.S. Dollar in the fourth fiscal quarter.
The Outside the U.S. Segment performs a significant part of its operations in the U.K. We closely monitor developments following the departure of the U.K. from the European Union. We do not anticipate the withdrawal to have a material direct effect on our business due to the nature of our customer base and the absence of cross-border operations. However, the uncertainty over the process has affected us indirectly. We anticipate we will continue to be subject to political risks, as legislative priorities may change and economic risks from the post-withdrawal environment.
Liquidity and capital resources
The COVID-19 pandemic has negatively affected our cash flows since March 2020. We are experiencing some delays in payments from our customers in addition to the operational challenges we are facing on our contracts. At September 30, 2020, we had approximately $71.7 million in unrestricted cash, including $45.0 million held in foreign locations in foreign currencies. In addition, we had $400 million of liquidity available on our corporate credit facility and capacity on smaller credit facilities worldwide. At this time, we believe that our cash flows from operations, combined with our borrowing capacity, is sufficient to meet our day-to-day obligations.
Governments worldwide introduced a number of short-term policies to assist businesses with their liquidity. We utilized payroll credits and the deferral of tax payments in the United States and the United Kingdom. We also furloughed employees in the United Kingdom.
We have no requirement to remit funds from our foreign locations to the United States. The Tax Cuts and Jobs Act in the United States enabled us and continues to enable us to transfer cash from our foreign locations on a tax-free basis. We will continue to explore opportunities to bring back additional funds, taking into consideration the working capital requirements and relevant tax rules in each jurisdiction. When we are unable to remit funds back

without incurring a penalty, we will consider these funds indefinitely reinvested until such time as these restrictions are changed. As a result, we do not record U.S. deferred income taxes on any funds held in foreign jurisdictions. We have not attempted to calculate our potential liability from any transfer of these funds as any such transaction might include tax planning strategies that we have not fully explored. Accordingly, it is not possible to estimate the potential tax obligations if we were to remit all of our funds from foreign locations to the United States.
The following table provides a summary of our cash flow information for the two years ended September 30, 2020.
 Year ended September 30,
(in thousands)20202019
Net cash from/(used in):  
Operations$244,592 $356,727 
Investing activities(44,138)(483,883)
Financing activities(230,090)(110,859)
Effect of exchange rates on cash and cash equivalents1,705 (2,052)
Net decrease in cash, cash equivalents and restricted cash$(27,931)$(240,067)
The factors influencing cash flows from operations are:
Our operating results;
The increased revenue from the CQA contract;
Our cash collections;
Our cash payments; and
The timing of tax payments.
Net income declined from $240.5 million in fiscal year 2019 to $214.5 million in fiscal year 2020.
The CQA contract resulted in increased working capital requirements.
Our Days Sales Outstanding (DSO) at September 30, 2020, were 77 days compared to 72 days at September 30, 2019. We have a target range for DSO of 65 to 80 days and, in recent years, we have typically maintained the lower end of this range. The increase in DSO is a result of an increased level of working capital from the increased level of revenue we had in the fourth quarter this year. Each unit of DSO represents approximately $10 million of collections.
Our tax payments for the fiscal years ended September 30, 2020 and 2019, were $89.1 million and $69.2 million, respectively.
Cash used in investing activities for the year ended September 30, 2020, was $44.1 million, principally for capital expenditures to support operations. Our principal investing activity in fiscal year 2019 was the acquisition of the citizen engagement centers business, which required a cash outflow of $430.7 million, as well as a further investment in software licenses of $4.5 million to cover software license additions for newly-acquired employees. We also acquired businesses within our Outside the U.S. Segment in both fiscal years 2020 and 2019.
Our cash used in financing activities were borrowings under our revolving corporate credit facility, purchases of our common stock and our quarterly dividend.
We purchased 2.8 million and 0.7 million shares of our common stock during fiscal years 2020 and 2019, utilizing cash of $167.0 million and $47.4 million, respectively. At September 30, 2020, we had $150.0 million available for future purchases under a plan approved by our Board of Directors. Our share purchases are at the discretion of our Board of Directors and depend upon our future operations and earnings, capital requirements, general financial condition, contractual restrictions and other factors our Board of Directors may deem relevant.
Between October 1, 2020, and November 19, 2020, we made additional purchases of 0.1 million shares of common stock at a total cost of approximately $3.4 million.

In fiscal year 2020 and 2019, we paid a quarterly dividend of $0.28 and $0.25 per share, respectively. This resulted in cash outflows of $70.2 million and $63.9 million, respectively.
Where possible, we identify surplus funds in foreign locations and place them in entities with the U.S. Dollar as their functional currency, reducing our exposure to foreign currencies. We mitigate our foreign currency exchange risks within our operating divisions through incurring costs and cash outflows in the same currency as our revenue.
To supplement our statements of cash flows presented on a Generally Accepted Accounting Principles (GAAP) basis, we use the measure of free cash flow to analyze the funds generated from operations.
 Year ended September 30,
(in thousands)20202019
Cash from operations$244,592 $356,727 
Purchases of property and equipment and capitalized software costs(40,707)(66,846)
Capital expenditure as a result of acquisition (1)— 4,542 
Free cash flow$203,885 $294,423 

(1) Purchases of property and equipment and capitalized software costs included $4.5 million in one-time payments to cover software licenses required for employees joining us through the citizen engagement centers acquisition in November 2018.
International businesses
We operate in international locations. Accordingly, we transact business in currencies other than the U.S. Dollar, principally the Australian Dollar, the Canadian Dollar, the South Korean Won, the Saudi Arabian Riyal, the Singapore Dollar, the Swedish Krona and the British Pound. During the year ended September 30, 2020, we earned approximately 14% of our revenue from our foreign subsidiaries. International business exposes us to certain risks.
Tax regulations in some jurisdictions may penalize us if we transfer cash across international borders. The Tax Cuts and Jobs Act eliminated many of these incremental penalties in the United States and we remitted a significant amount of excess cash to the U.S. in fiscal year 2019. International transaction limitations still exist and there is no guarantee that the current U.S. tax regime will remain in place. We maintain sufficient cash or have sufficient capital available to us under our corporate credit facilities, both within and outside the U.S. We establish our legal entities to make efficient use of tax laws and holding companies to minimize this exposure. At September 30, 2020, we held $45 million of cash outside the United States in currencies other than the U.S. Dollar.
Our foreign subsidiaries typically incur costs in the same currency as they earn revenue, thus limiting our exposure to unexpected currency fluctuations. Further, the operations of the U.S. business do not depend upon cash flows from foreign subsidiaries. However, declines in the relevant strength of foreign currencies against the U.S. Dollar affects our revenue mix, profit margin and tax rate.
Obligations and commitments
The following table summarizes our contractual obligations at September 30, 2020, that require the Company to make future cash payments:
 Payments due by period
(in thousands)TotalLess than
1 year
1 - 3
3 - 5
More than
5 years
Operating leases$195,509 $86,110 $85,761 $22,051 $1,587 
Debt(1)29,721 11,349 18,372 — — 
Deferred compensation plan liabilities(2)42,176 3,522 4,930 2,056 31,668 
Total$267,406 $100,981 $109,063 $24,107 $33,255 


(1)Debt obligations include interest expense on our Australian debt facility at the prevailing rate.
(2)Deferred compensation plan liabilities are typically payable at times elected by the employee at the time of deferral. The timing of these payments is based upon elections in place at September 30, 2020, but these may be subject to change. Payments falling due may be deferred again by the employee, delaying the obligation. Payments may also be accelerated if an employee ceases employment with us or applies for a hardship payment. At September 30, 2020, we held assets of $38.2 million in a Rabbi Trust that could be used to meet these obligations.
Off-balance sheet arrangements
We do not have material off-balance sheet risk or exposure to liabilities that are not recorded or disclosed in our financial statements. We utilize performance bond commitments and standby letters of credit on certain contracts, we have not had any defaults resulting in draws on performance bonds. We do not speculate in derivative transactions. In the past, we utilized interest rate derivatives to add stability to interest expense and to manage our exposure to interest rate movements.
Effects of inflation
As measured by revenue, approximately 46% of our business in fiscal year 2020 was conducted under cost-plus pricing arrangements that adjust revenue to cover costs increased by inflation. Approximately 9% of the business was time-and-material pricing arrangements where labor rates are often fixed for several years. We generally were able to price these contracts in a manner that accommodates the rates of inflation experienced in recent years. Our remaining contracts are fixed-price and performance-based and are affected by inflation.
Critical accounting policies and estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires us to make estimates and judgments that affect the amounts reported. We consider the accounting policies below to be the most important to our financial position and results of operations either because of the significance of the financial statement item or because of the need to use significant judgment in recording the balance. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from those estimates. Our significant accounting policies are summarized in "Note 1. Business and summary of significant accounting policies" of the Consolidated Financial Statements included in Item 8 in this Annual Report on Form 10-K.
Revenue Recognition. Although much of our revenue is recognized concurrently with billing or over time following billing, some of our revenue requires us to make estimates. These estimates are typically reviewed quarterly, with any changes being recorded as a cumulative catch-up in revenue. Our most significant estimates are listed below.
Some of our performance-based contract revenue is recognized based upon future outcomes defined in each contract. This is the case in many of our welfare-to-work contracts in the Outside the U.S. Segment, where we are paid as individuals attain employment goals, which may take many months to achieve. We recognize revenue on these contracts over the period of performance. Our estimates vary from contract to contract but may include estimates of the number of participants, the length of the contract or the participants reaching employment milestones. We are required to estimate these outcome fees ahead of their collection and recognize this estimated fee over the period of delivery. These estimates are updated on a quarterly basis, with changes in estimate being taken to our income statement. Our estimates have been subject to significant revision during fiscal year 2020 as sustained employment outcomes were affected by the COVID-19 pandemic. During the year ended September 30, 2020, we recognized revenue from these performance-based fees of $45.0 million. At September 30, 2020, we have recorded $24.8 million of these estimated outcome fees which will be collected only when we reach the targets we anticipate. This balance is included on our consolidated balance sheets within the related contract accounts.
Other performance-based contracts with future outcomes include those where we recognize an average effective rate per participant based upon the total volume of expected participants. In this instance, we are required to estimate the amount of discount applied to determine the average rate of revenue per

participant. This balance is estimated each quarter and changes to revenue recorded through a cumulative catch-up.
Business combinations and goodwill. Our balance sheet at September 30, 2020, includes $593.1 million of goodwill and $145.9 million of net intangible assets. 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. For many assets acquired and liabilities assumed, the calculation of fair value requires little judgment as balances may be readily convertible to cash receipts or cash payments or there may be an active market against which to measure value. For the valuation of intangible assets, significant judgment is necessary in identifying and valuing such assets. This valuation will also involve identifying the useful economic life of this asset. Our estimates of these fair values and useful economic lives are based upon assumptions we believe to be reasonable and, where appropriate, include assistance from third-party appraisal firms. During fiscal year 2019, we completed the acquisition of the citizen engagement centers business. Our accounting for this acquisition included determining the fair value of the customer relationships intangible assets acquired. In making our determination of the fair value of these assets, we estimated discount rates, projected revenue growth margins and profit margins. 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 assets are also subject to impairment if events indicate that the carrying value of the assets may not be recoverable.
The excess purchase price over the identified net assets is considered to be goodwill. Goodwill is recorded at the reporting unit level. The identification of our reporting units requires judgment based upon the manner in which our business is operated and the services performed. We believe our reporting units are consistent with our segments. Where we have acquisitions that provide services to more than one segment, or where the acquisition provides benefits across all of our segments, we use judgment to allocate the goodwill balance based 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. Impairment testing is performed at the reporting unit level. This process requires judgment in assessing the fair value of these reporting units. At July 1, 2020, the Company performed its annual impairment test and determined that there was no impairment of goodwill. In performing this assessment, we assessed qualitative factors to determine whether it was more likely than not that the fair value of a reporting unit was less than its carrying amount, including goodwill.
Contingencies. From time to time, we are involved in legal proceedings, including contract and employment claims, in the ordinary course of business. We assess the likelihood of any adverse judgments or outcomes to these contingencies, as well as potential ranges of probable losses and establish reserves accordingly. The amount of reserves required may change in future periods due to new developments or changes in approach to a matter such as a change in settlement strategy. We are also subject to audits by our government clients on many of our contracts based upon measures such as costs incurred or transactions processed. These audits may take place several years after a contract has been completed. We maintain reserves where we are able to estimate any potential liability that is updated as audits are completed.
Non-GAAP and other measures
We utilize non-GAAP measures where we believe it will assist the user of our financial statements in understanding our business. The presentation of these measures is meant to complement, but not replace, other financial measures in this document. The presentation of non-GAAP numbers is not meant to be considered in isolation, nor as an alternative to revenue growth, cash flows from operations or net income as measures of performance. These non-GAAP measures, as determined and presented by us, may not be comparable to related or similarly titled measures presented by other companies.
In fiscal year 2020, 14% of our revenue was generated outside the U.S. We believe that users of our financial statements wish to understand the performance of our foreign operations using a methodology that excludes the

effect of year-over-year exchange rate fluctuations. To calculate year-over-year currency movement, we determine the current fiscal year’s results for all foreign businesses using the exchange rates in the prior fiscal year. We refer to this adjusted revenue on a "constant currency basis."
In recent years, we made a number of acquisitions. We believe users of our financial statements wish to evaluate the performance of our operations, excluding changes that occurred due to businesses acquired. Where information is available, we will show pro forma revenue, cost of revenue and gross profit. Pro forma results represent an estimate of the results of the business as though we had owned the business for an entire comparative period, rather than just a portion of it. To provide pro forma financial information, we use the results of the acquired business as prepared by the former owners adjusted to reflect changes in accounting and eliminating transactions between ourselves and the Company. When this information has not been prepared by the sellers, we show the effect of the acquisition by presenting revenue and cost of revenue for acquired businesses for the periods through to the anniversary of their acquisition; we show this as 'acquired growth.' We provide pro forma comparative results and acquired growth as a way of allowing investors to see the growth in our business on a year-over-year basis. This information is supplemented by our calculations of organic revenue. To calculate organic revenue growth, we compare current fiscal year revenue, excluding revenue from these acquisitions, to our prior fiscal year revenue.
In order to sustain our cash flows from operations, we require regular refreshing of our fixed assets and technology. We believe that users of our financial statements wish to understand the cash flows that directly correspond with our operations and the investments we must make in those operations using a methodology that combines operating cash flows and capital expenditures. We disclose free cash flow to complement our statement of cash flows. Free cash flow shows the effects of the Company’s operations and replacement capital expenditures and excludes the cash flow effects of acquisitions, purchases of our own common stock, dividend payments and other financing transactions. We provide a reconciliation of free cash flow to cash provided from operations.
To sustain our operations, our principal source of financing comes from receiving payments from our customers. We believe that users of our financial statements wish to evaluate our efficiency in converting revenue into cash receipts. Accordingly, we disclose 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.
As noted above, we have a $400 million corporate credit facility. Our credit agreement includes the defined term Consolidated EBITDA and our calculation of Adjusted EBITDA conforms to the credit agreement definition. We believe our investors appreciate the opportunity to understand the possible restrictions which arise from our credit agreement.
Adjusted EBITDA is also a useful measure of performance which focuses on the cash-generating capacity of the business as it excludes the non-cash expenses of depreciation and amortization, and makes for easier comparisons between the operating performance of companies with different capital structures by excluding interest expense and therefore the impacts of financing costs.
The measure of Adjusted EBITA is a step in calculating Adjusted EBITDA and facilitates comparisons to similar businesses as it isolates the amortization effect of business combinations.
Our corporate facility requires us to calculate Adjusted EBITDA on a pro forma basis as though we had owned any significant acquired businesses for a full twelve months prior to the acquisition.
We provided a reconciliation from net income to Adjusted EBITA, Adjusted EBITDA and Pro Forma Adjusted EBITDA as follows:

 Year ended September 30,
(in thousands)20202019
Net income attributable to Maximus$214,509 $240,824 
Interest expense1,300 (2,591)
Provision for income taxes72,553 76,825 
Amortization of intangible assets35,634 33,054 
Stock compensation expense23,708 20,774 
Acquisition-related expenses4,621 2,691 
Gain on sale of a business(1,718)— 
Adjusted EBITA350,607 371,577 
Depreciation and amortization of property, plant, equipment and capitalized software64,527 52,404 
Adjusted EBITDA$415,134 $423,981 
Additional adjusted EBITDA related to the citizen engagement centers acquisition from the pre-acquisition period6,695 
Pro forma adjusted EBITDA$430,676 


ITEM 7A.    Quantitative and Qualitative Disclosures about Market Risk.
We are exposed to foreign currency exchange rates.
At September 30, 2020 and 2019, we held net assets denominated in currencies other than the U.S. Dollar of $164.6 million and $176.3 million, respectively. Of these balances, cash and cash equivalents comprised $45.0 million and $18.9 million, respectively. Accordingly, in the event of a 10% unfavorable exchange rate movement across these currencies, we would have reported the following incremental effects on our comprehensive income and our cash flow statement.
As of September 30,
(in thousands)20202019
Comprehensive income attributable to Maximus$(16,460)$(17,630)
Net decrease in cash and cash equivalents(4,500)(1,890)
Included within our net assets held in international currency are assets that we consider to be monetary assets — those which hold a fair value close to their book value and which represent a recent cash outflow or which will become a cash inflow or outflow within a short period of time. These assets and liabilities are typically cash, billed, billable and unbilled accounts receivable, current prepaid expenses, operating lease right-of-use assets, accounts payable, accrued compensation, deferred revenue, lease liabilities and debt. At September 30, 2020, the net value of these assets and liabilities was $40.7 million.
Where possible, we identify surplus funds in foreign locations and place them in entities with the U.S. Dollar as their functional currency, reducing our exposure to foreign currencies. We mitigate much of our foreign currency exchange risks by incurring costs and cash outflows in the same currency as our revenue.
We are exposed to interest rate risk through our revolving corporate credit facility and other borrowings. Our interest rate for the revolving corporate credit facility is based upon the one-month London Interbank Offering Rate (LIBOR) or equivalent plus a premium based upon our leverage; this premium is currently 1%. The one-month LIBOR at September 30, 2020, was 0.15%. We had no borrowings under the facility at September 30, 2020. The majority of our outstanding debt at September 30, 2020, was comprised of borrowings in foreign locations. The terms and rates under which we borrow in these jurisdictions varies from location to location. As these borrowings are relatively small and for brief periods, we do not anticipate significant interest rate exposure.


ITEM 8.    Financial Statements and Supplementary Data.
The following consolidated financial statements and supplementary data are included as part of this Annual Report on Form 10-K:


Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Maximus, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Maximus, Inc. (the Company) as of September 30, 2020 and 2019, the related consolidated statements of operations, comprehensive income, changes in shareholders' equity and cash flows for each of the three years in the period ended September 30, 2020, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at September 30, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2020, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of September 30, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated November 19, 2020 expressed an unqualified opinion thereon.

Adoption of New Accounting Standard

As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for leases in the year ended September 30, 2020.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue recognition – Measuring Variable Consideration in Certain Performance-based Revenue Contracts
Description of the Matter
As described in Note 1 and Note 3 to the consolidated financial statements, in certain performance-based contracts, the Company recognizes revenue based on outcomes defined in each contract. Revenue recognition for certain of these contracts involves estimation of variable consideration utilizing management’s judgments about performance related to future outcomes. Significant changes in these estimates could have a material effect on the Company’s results of operations. During the year ended September 30, 2020, approximately $45.0 million of revenue was recorded on contracts that included an estimate related to contract performance for future outcomes.
Auditing the Company's measurement of variable consideration for these performance-based contracts requires judgment because the calculation involves estimates of future outcomes. This estimate reflects management’s assumptions about the number of participants and the service delivery period for the participants reaching employment milestones.
How We Addressed the Matter in Our Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process to calculate variable consideration, including determining the underlying assumptions about the number of participants and the service delivery period.
To test the variable consideration, our audit procedures included, among others, evaluating the significant judgments and the completeness and accuracy of the underlying data used in management’s calculation of variable consideration. For example, we tested management’s estimate of the number of participants reaching employment milestones by comparing the amounts estimated to historical results, inclusive of changes to the current period environment, and performing sensitivity analyses to evaluate the changes in variable consideration that could result from changes in the Company’s significant assumptions.

/s/ Ernst & Young LLP
We have served as the Company's auditor since 1996.
Tysons, Virginia
November 19, 2020


Maximus, Inc.
(Amounts in thousands, except per share data)
 Year ended September 30,
Revenue$3,461,537 $2,886,815 $2,392,236 
Cost of revenue2,750,535 2,215,631 1,797,851 
Gross profit711,002 671,184 594,385 
Selling, general and administrative expenses387,090 321,023 285,241 
Amortization of intangible assets35,634 33,054 10,308 
Restructuring costs  3,353 
Operating income288,278 317,107 295,483 
Interest expense2,059 2,957 1,000 
Other income, net843 3,170 4,726 
Income before income taxes287,062 317,320 299,209 
Provision for income taxes72,553 76,825 78,393 
Net income214,509 240,495 220,816 
(Loss)/income attributable to noncontrolling interests (329)65 
Net income attributable to Maximus$214,509 $240,824 $220,751 
Basic earnings per share $3.40 $3.73 $3.37 
Diluted earnings per share$3.39 $3.72 $3.35 
Dividends per share$1.12 $1.00 $0.18