MMS

• Medicaid Program Updates: New CMS interim final rules have created operational compliance uncertainty for states, leading to slower than expected progress on new contract discussions, especially related to medically frail beneficiary requirements and upcoming 2027 work requirement implementation. A recent court ruling allowed implementation of work requirements to proceed as scheduled for January 1, 2027, with 90% federal funding available for state compliance work. Core demand for Maximus' administrative support, compliance monitoring, and technology services for Medicaid remains intact. A 180-day temporary pause on performance incentives is in place for the VA health services contract, which is scheduled to terminate December 31, 2026. The VA has released a draft performance work statement for the next procurement cycle with a comment period closing August 12, 2026, covering all six service regions consistent with current scope of work. The draft does not yet include pricing or incentive structure details, and a potential 6-month extension of the current contract may be required to align with new procurement timelines.

• SNAP Program Growth & Demand: SNAP program development is progressing faster than Medicaid opportunities. Maximus has completed over 40 demonstrations of its Accuracy Assistant tool and held 150 customer meetings, with growing customer interest. National SNAP payment error rates remain high at 10.6% in FY2025, barely improved from 10.9% in FY2024, confirming payment accuracy remains a major challenge for states. Starting October 1, 2026, states face a 25% increase in SNAP administrative cost share, creating immediate incentives to reduce error rates. Maximus' combination of program expertise, analytics, and technology positions the company well to support state improvement efforts.

• AI Adoption & Strategic Investments: AI adoption is accelerating both internally at Maximus and with customer clients. 75%-80% of new bids and rebids in the pipeline now include explicit AI-related requirements, with customers increasingly prioritizing AI governance, security, transparency, responsible practices, and measurable outcomes rather than treating AI as an optional innovation. AI is being systematically integrated into existing Maximus operations: for example, AI process improvements for core operations across five contracts delivered a 3.5% operating margin improvement alongside better customer experience. Maximus Ventures has made a direct investment in SpectroCloud, an AI infrastructure management platform, to help government customers deploy secure AI at scale in regulated environments, strengthening Maximus' competitive position and value for customers.

• Defense & National Security Growth Strategy: Defense remains a core long-term growth priority for Maximus. The total addressable defense market for Maximus is nearly $47 billion, with only a small portion currently reflected in the company's reported pipeline. Procurement activity at the Department of Defense is more consistent than civilian agency procurement, which continues to face delays and budget uncertainty. Maximus has already secured notable wins with the Air Force and Transportation Security Administration, and the company's hackathon collaboration platform has created new pathways to formal programs. The company is expanding capabilities and market access to capture emerging opportunities over the next several years, supporting broader corporate diversification and reduced customer/concentration risk over time.

• Management reaffirms the near-term adjusted EBITDA margin guidance range of 12% to 15% originally provided in May, with Q4 FY2026 implied 13% EBITDA margin considered a reasonable run rate for the period of the VA incentive pause.
• The company expects DSO (days sales outstanding) to drop below 70 by the end of September FY2026, supported by strong collection momentum from a large federal customer that has collected $245 million since July 1st, with full confidence in collecting all outstanding invoices for funded contracts.
• Management expects mid-single-digit organic growth for the government health segment to continue into FY2027, with sequential improvements in book-to-bill ratios over subsequent quarters as awarded but unsigned contracts complete the final execution process.

The call does not disclose formal absolute or percentage-based financial performance data for Maximus' individual product/operational segments. High-level qualitative performance updates are provided for Medicaid, SNAP, AI solutions, and defense business segments.

• Medicaid-related new business opportunities are progressing slower than expected due to uncertainty created by the new CMS interim final rule, as states deliberate on compliance strategies.
• The 180-day temporary pause on performance incentives for the VA contract reduces near-term earnings compared to prior periods, with uncertainty around procurement timelines for the follow-on contract.
• The current procurement environment is uneven, with civilian agency budgets and procurement activity facing ongoing uncertainty and delays. The probability of bid protests after contract awards is high, which delays final contract execution.
• The pending appeal of the court ruling upholding Medicaid work requirement implementation creates some near-term policy uncertainty for related Medicaid opportunity.

Q: Can you provide more details on the temporary incentive pause on the VA contract, including the reasons for the pause and the likely timeline? / A: Management confirmed the pause is temporary, scheduled to end when the current contract terminates December 31, 2026, and is an administrative policy adjustment that is not unprecedented for long-term government contracts. The VA has released a draft performance work statement for the next procurement, which suggests the new base contract may not start until mid-2027, so a 6-month extension of the current contract is likely. Incentives had become a larger contribution to earnings in FY26 due to prior performance improvements.

Q: What is the status of the awarded but unsigned contracts, and when can we expect them to convert to signed revenue? / A: Most of these awarded but unsigned contracts are long-duration deals, and many have already completed the bid protest process successfully. They are now only pending final administrative execution steps, so management expects these to convert in sequential quarters, driving steady improvements in book-to-bill ratios.

Q: What is the latest update on Medicaid work requirement and SNAP policy and demand for Maximus services? / A: A recent court ruling rejected a challenge to the new Medicaid work requirement rules, allowing implementation to proceed as scheduled for January 1, 2027. States are now beginning to plan compliance, with activities ramping up over the next year, and Maximus has already received approval to ramp up outreach activities in Q4. For SNAP, upcoming administrative cost increases have driven growing state interest in Maximus' payment accuracy solutions.

Q: What is the current outlook for Q4 collections and free cash flow, and how does M&A factor into current capital allocation priorities? / A: A large federal customer that had delayed payments has now paid $245 million since July 1, and management expects to hit the target of DSO below 70 by end of September, with full confidence all outstanding invoices will be collected. M&A remains a long-term priority for capability and market expansion, focused on targets that deliver high-probability revenue synergies, consistent with prior capital allocation strategy alongside share repurchases.