Ladies and gentlemen, thank you for joining us for the Q2 Fiscal Year ’20 MAXIMUS Earnings Conference Call. All participants are currently in listen-only mode. After the presentations, there will be a question-and-answer session. I will now turn the conference over to Lisa Miles, Senior Vice President of Investor Relations. Thank you, and please proceed.

Good morning and thank you for joining us today. With me is Bruce Caswell, President and Chief Executive Officer; and Rick Nadeau, Chief Financial Officer. I would like to highlight that a presentation is available on the Investor Relations page of MAXIMUS.com if you would like to follow along with today’s prepared remarks. I would like to remind everyone that a number of statements being made today will be forward-looking in nature. Please remember that such statements are only predictions. Actual events and results may differ materially as a result of the risks we face, including those discussed in Exhibit 99.1 of our SEC filings. We encourage you to review the information contained in our earnings release today and our most recent Forms 10-Q and 10-K filed with the SEC. The company does not assume any obligation to revise or update these forward-looking statements to reflect subsequent events or circumstances, except as required by law. Today’s presentation may contain non-GAAP financial information. Management uses this information in its internal analysis of results and we believe this information may be informative to investors, engaging the quality of our financial performance, identifying trends in our results, and providing meaningful period-to-period comparisons. For a reconciliation of the non-GAAP measures presented in this document, please see the company’s most recent quarterly earnings press release. And with that, I’ll hand the call over to Rick.

Thank you, Lisa. First, let me say that since the COVID-19 pandemic, Bruce and I have never been prouder to lead an organization with such heart, dedication, ingenuity and collaboration at all levels. Underscoring the critical nature of our work, many of our core program operations in the United States and abroad have been deemed essential to ensure that vital government programs continue to operate and citizens continue to receive critical assistance at a time when the need for healthcare and safety-net programs is rising. The entire MAXIMUS team has met this challenge and worked tirelessly to ensure that we continue to support citizens during this unprecedented health pandemic. Our employees are accomplishing extraordinary things during the COVID-19 pandemic. Bruce will discuss in greater detail, but I would like to highlight some important accomplishments. First and foremost, we implemented robust paid leave options to ensure the safety and wellbeing of those employees who experienced COVID-19 related absences. We mandated social distancing across all operations, significantly enhanced our sanitation measures, and most importantly, we continue to transition more employees to work from home. Outside the United States, we have partnered with government in the United Kingdom to redeploy some of our healthcare professionals directly into the National Health Service as well as case management and administrative staff into the Department for Work and Pensions to provide vital front-line support. Our priority has been the health and safety of our employees and ensuring that we can continue to support our government clients in whatever model that takes, as demand for government services surges. No one can predict with certainty the scale or length of disruption from the COVID-19 pandemic or how deep and severe the economic impacts will be. We completed our normal bottom-up quarterly review in April and are reinstating guidance for fiscal 2020. We think it is important to give our investors a sense of our current expectations for the fiscal year. Please note, however, that our actual results could vary from the guidance due to numerous factors including a worsening of the pandemic; erosion due to budgetary pressures; additional steps taken by federal, provincial, state or local governments to restrict business operations or limit office occupancy; delayed or missed payments by customers or supply chain disruptions affecting IT or safety equipment. The ranges we have used are wider than typical at the midpoint of the year and reflect the increased risk and variability we face. It is possible that actual results could vary materially from our current expectations. We anticipate that fiscal 2020 revenue will range between $3.15 billion and $3.25 billion and diluted earnings per share to range between $2.95 and $3.15 per share. Cash from operations is now expected to range between $250 million and $300 million and free cash flow between $200 million to $250 million. While we feel comfortable with this cash flow range, I will point out that delays in collections of receivables can cause significant variation at year end. For the remainder of the fiscal year, we anticipate continued disruption across all segments with some offsetting favorability from new work. This disruption is expected to be most pronounced in our Outside the US segment. We expect some positive impacts in the two US segments from opportunities that in some cases we have won and in other cases are pursuing. Bruce will provide more detail in his remarks. Let me touch on second quarter results. COVID-19 impacts as well as the challenges and opportunities that lie ahead. Revenue for the second quarter of fiscal 2020 totaled $818.1 million, which included the full ramp-up of the Census contract in the US Federal Services segment. Total company operating margin was 4.6% and diluted earnings per share were $0.43, reflecting two substantial impacts in the quarter. First, we had a pandemic-related write-down of approximately $24 million or $0.28 per share related to the decline in estimates for future period outcomes-based payments on welfare to work programs in the United Kingdom and Australia. Second, a change order for approximately $9 million or $0.11 per share was signed after quarter end in the US Health & Human Services segment. The related costs were incurred in the first two quarters of fiscal 2020, but the revenue will be recognized in the third quarter, which falls to the bottom line in that period. I will now review the segments. Second quarter revenue for the US Health & Human Services segment increased 6.2% over the prior year and all growth was organic, resulting from new contracts and the expansion of existing work. Both revenue and the 15.0% operating margin were tempered largely by the change order previously discussed. The COVID-19 pandemic impacted the last three weeks of March 2020. Disruption to our US Health & Human Services business has varied as local and state governments imposed different working requirements designed to ensure worker safety, leading us to, in some cases, managed through temporary site closures. To address social distancing requirements in our call centers, our work from home capabilities were scaled at a rapid pace to enable continued support of essential services and to meet deliverables on the predominantly performance-based contracts in this segment. Our current assumptions indicate economics for this segment will continue to experience minor disruption and we expect an operating margin between 17% and 18% for the full year. Looking ahead, not only have the MAXIMUS operational teams been able to manage core operations in an ever-evolving environment, they have also taken on new work associated with unemployment insurance and a variety of COVID-related work. Further, the business development teams have launched rapid action plans to help states address needs, resources and gaps with support services. Revenue for the second quarter of fiscal 2020 in the US Federal Services segment increased to $393.4 million. All growth in this segment was organic. Excluding the citizen engagement centers’ contracts, organic growth was 6.7%, driven by new work and growth on existing contracts. The operating margin for this segment in the second quarter of fiscal 2020 was 7.7% which was tempered by unfavorable impacts from the COVID-19 pandemic on performance-based work and ongoing investments in business development. The majority of revenue in this segment is generated by cost-plus contracts, which means that we can recover certain COVID-related costs such as increased facility cleaning incurred on these contracts. The Census contract is now approaching its peak level of operations and delivered approximately $140 million of revenue in the second quarter, yielding year-to-date revenue of approximately $210 million. The teams have continued to solve unique challenges for our clients in our Census contract is no exception. We implemented operational changes to ensure that our support is available to citizens so they can complete their Census questionnaires and we will continue providing assistance through the Census Bureau’s extended response period which now ends October 31. As a result, our contract has expanded to support the new deadline and we now estimate that the Census contract will deliver between $430 million and $450 million for the full year. This is an increase from our previously expected revenue of $360 million in fiscal 2020 from this contract. The economics of this segment are largely intact through fiscal 2020. The US Federal Services segment is estimated to deliver a full year operating margin between 8% and 9% resulting from a slightly greater mix of cost-plus work from previously anticipated as well as our continued investment in both business development and technical capability. The COVID-19 pandemic has had the most pronounced effect on our Outside the US segment. Second quarter revenue was $116.0 million and this segment had a loss of $26.7 million. As a reminder, this segment has several significant performance-based contracts, where payments are tied directly to job-seeker outcomes with the primary goal of placing individuals into long-term sustained employment to achieve economic independence. Revenue was recognized based on our estimate of the number of individuals who we anticipate reaching these milestones. As a result of the pandemic, we reduced our estimates of those job-seekers who are likely to achieve employment outcomes. The accounting rules require us to record our best estimate of the future outcomes and therefore the impact of those re-estimates immediately. This resulted in a pandemic-related write-down of approximately $24 million or $0.28 per share related to a decline in estimates for future period outcomes-based payments on welfare to work programs in the United Kingdom and Australia. Although we are continuing to service participants in these programs where we can, many participants have underlying health conditions which require them to self-isolate at home and the pool of available employment opportunities is currently significantly lower than before. The remainder of fiscal 2020 is expected to experience impacts from the COVID-19 pandemic related to our HAAS contract in the UK. While our face-to-face assessments work is currently suspended, we are working to introduce telephone assessments and continuing to process paper-based assessments. We are proud to partner with government to be a part of the solution to this worldwide health crisis. In the last few weeks, many of our healthcare professionals have volunteered to be seconded to the National Health Service. We will act in an agency capacity for those employees on secondment and will receive reimbursement of most of our costs, but we will not earn revenue or profit. This segment is expected to end the full year in an operating loss position. To give you more color, we expect the fourth quarter for this segment to come in a little below break-even. Our objective is for a progressive improvement in the third quarter with an aim to cut the second quarter loss in half. Looking ahead, we are starting to see new opportunities develop to address the significant impact of the pandemic on global labor markets. In fiscal 2021 and beyond, we anticipate we will see an expanded need for our services as we help our governments expand and adapt their employment programs to cope with widespread unemployment. In the UK, we are in the process of transitioning some of our outcomes-based employment services contracts that are currently in a loss position to cost recovery contracts, which should provide considerably more stability and flexibility. We expect these contract changes will be temporary, as we work with the Department on transitioning to a new model with rising unemployment. Turning to the balance sheet, we finished the second quarter with cash and cash equivalents of approximately $126 million. Cash provided by operations was $22 million. Free cash flow was $13.4 million in the quarter. Second quarter cash provided by operations was tempered by a combination of lower income and a higher proportion of income taxes paid in the quarter and accounts receivable grew in the first half of the fiscal year 2020 due to increased revenue levels. DSOs were 72 days. We are continuing to monitor collections closely and I would like to point out that one day of DSO is roughly $9 million receivables, which directly impacts estimated cash provided by operations and free cash flow. We entered the COVID-19 pandemic with a strong balance sheet and a resolve to manage liquidity and maintain flexibility. While we face uncertainties, including state budgetary pressures, payments to-date from our customers have continued without disruption. Our historical experience during economic downturns is that our designation as an essential service provider in the United States puts us in a favorable position in working with our clients on invoicing and payments. However, we recognize that our customers are experiencing significant disruption to their tax receipts, and we will continue to manage the company in a conservative manner. Going forward, the management team and the Board of Directors intend to take a prudent and constructive approach to cash deployment over the coming months. Currently, we do not anticipate a disruption to our future quarterly cash dividends. Our quarterly 10b5-1 Share Purchase Plan expired naturally in March when the cap embedded in the program was met. We have paused share purchases in significant M&A activity until we see an easing of the uncertainties resulting from the COVID-19 pandemic. We continue to work on smaller, tuck-in transactions that will support future organic growth in a meaningful way. Bruce and I are optimistic that MAXIMUS will emerge from this disruption as a stronger company. We have been able to demonstrate that we can navigate, innovate and showcase our operational effectiveness during challenging events while continuing to support the most vulnerable populations and protecting our workforce during this world crisis. We believe that our efforts over the past two months have further cemented our position as a trusted reliable partner that brings scale, talent and real business solutions to bear. And with that, I will hand the call over to Bruce.

Thank you, Rick and good morning, everyone. Like Rick, I could not be more proud of our employees’ efforts during these unprecedented times. COVID-19 is a global pandemic that impacts all of us. We are working around the clock to ensure we protect our employees, while still serving government and the vulnerable populations who rely on the Health & Human Services programs we operate; a demand, which is only increasing under the impacts of this pandemic. In mid-March, we rapidly developed a response to fast-moving COVID-19 challenges and implemented new policies emphasizing paid sick leave, social distancing and significantly enhanced cleaning regimens to keep our employees safe and healthy. The slide in my presentation illustrates many of the protections and resources we have provided. And I’ll touch on some of the most salient actions taken in my remarks. If you hover over each box, additional details will be highlighted for each initiative. As part of our efforts, we are following the more restrictive recommendations outlined in the Federal Families First Coronavirus Response Act and in some cases, we are exceeding the Act. While the Act does not apply to MAXIMUS, because we have more than 500 employees, we felt it provided a good benchmark for supporting and safeguarding our employees. Our income continuity plans are fully funded by MAXIMUS and cover a variety of scenarios, including quarantine, childcare, government mandated restrictions, office closure and employees who are in high-risk categories. Under these leave options, an employee’s health insurance is also protected and we are not requiring them to take their accrued paid time off or PTO in order to access these leave options. We also realize that employees' stress and anxiety is heightened during this time. Balancing the strains of normal life during the crisis has been difficult for us all. Consistent, frequent and transparent communications to our staff remain vital. To further support our team members, we’ve launched topical videos from our Chief Medical Officer, mental health seminars, virtual development training classes as well as wellness apps such as Headspace and Wellbeats. Moving on to the next slide. One of the most impressive things we’ve done is the systematic and ongoing transition of employees to work from home. This has been a heroic effort in procuring new equipment, increasing network capacity and deploying new services, all while keeping operations running to meet program needs. There are significant IT challenges in transitioning to a work from home model, ranging from information security and privacy requirements to ensuring continuity of services. Many government programs were never designed to be carried out in a remote environment, presenting high hurdles to immediately enable a remote workforce. This transition is also taking place during a pandemic-driven global IT equipment supply chain shortage. Equipment such as laptops and headsets are imperative for our customer service representatives to effectively serve citizens. But we’ve been working diligently with suppliers and have made great progress. MAXIMUS has also been able to overcome these challenges by capitalizing on the strategic investments we’ve made in our IT infrastructure, including emerging technologies such as secure remote network platforms and cloud-based omnichannel telephony environments. For example, we leveraged our planned migration to Amazon Web Services or AWS to provision nearly 9,000 secure agent desktops through the Amazon WorkSpaces as-a-service model thus far, in addition to approximately 7,500 VPN connection users. Our ability to deploy HIPAA-compliant work from home capabilities enables us to maintain operational continuity and assist program participants remotely for more complex services, including clinical and social assessments required to access important government benefits and services. Most importantly, we believe we are forging a path forward for government services longer-term. The pandemic offers us a unique opportunity to test and learn new models with full support from our clients. It gives us the opportunity to trial new ways of serving and engaging citizens who, now more than ever, need access to vital services. We also gain an entirely new data set related to citizen engagement, channel preferences and agent performance, which enables us to optimize this model. This also allows us long-term to evaluate the optimal environment for each individual employee. While not every employee is best matched to a remote work environment, the results of early pilots indicate no statistically significant reduction in agent performance on the contracts being measured. This type of robust data will be meaningful in solutioning new delivery methods. As we move into the next phase of this pandemic, we believe one of the most important ways to safeguard employees, keep operations running and ensure citizens can access the services they need is to implement an Employee Wellness check before and during their workday. Our digital team developed the health assessment mobile application called Clear2Work. An employee will use the app before coming to work each day. The app takes them through a series of questions, including a self-administered temperature check. The app either clears the employee to come to work or instructs them to stay at home that day. If the employee is cleared, they are given a time-limited digital credential to show when they arrive at work, and then complete a second temperature check during their day. The app was developed and implemented in roughly two weeks and is being systematically deployed across operational sites in the United States. We will review other geographic rollouts based on local health guidance and requirements. In concert with this, we’ve also implemented a mandatory face covering policy across our US operations, while ensuring our sourcing approach protects supplies to front-line health professionals. And while we’ve talked about the operational disruptions and how we’re tackling those, I’ve been pleased at how our teams have responded to the calls for support from our clients as they rapidly design and procure solutions to address the pandemic. Our ability to quickly pivot has underscored the resilience of our business model and our position as a trusted partner to governments worldwide. Over the last four weeks we’ve been helping our clients solve real challenges of rising caseloads and reduced resources. To this end, we’ve won a number of COVID-related contracts as well as new work associated with rising unemployment. Let’s start with our Federal team. As you may recall, MAXIMUS was already supporting the CDC’s information line. At the beginning of the pandemic, the CDC requested that MAXIMUS provide bilingual support for COVID-19 phone lines and emails. This 24/7 coverage began with 50 agents and has grown 250, plus more than 40 nurses. Our most recent statistics show that we are responding to more than 16,000 and 2,000 emails per day. We were also selected to deliver the Federal Health and Human Services community-based testing centers or result center. Under this contract, MAXIMUS provides COVID-19 test results to patients that are tested at various Federal testing centers across the nation. Our team did an astounding job in solutioning a turnkey contact center in less than six days which has since seen enormous growth. The contract launched with 260 call center agents, making outbound calls to patients to deliver test results from 47 emergency facilities across the US. Today, a team of more than 2,000 agents now contacts 10,000 individuals per day and provides real-time geo-mapping of COVID-19 test results to the US Department of Health & Human Services. MAXIMUS has played a critical role in supporting Federal agencies following the CARES Act implementation. Firstly, MAXIMUS supported the IRS to ensure that the Economic Impact Payments were paid in a timely manner, while continuing our normal tax season support. Secondly, as you may be aware, MAXIMUS operates the debt management project at Federal Student Aid. The act temporarily waived payment on student loans during the pandemic. Within 10 days of this waiver, MAXIMUS sent more than 2 million letters to student loan holders and made system changes to support the waivers. On the state level, we’ve partnered with the California Department of Public Health to answer phone calls from state residents and provide basic, general, non-medical information about COVID-19. We are in the process of working to potentially expand our offerings to include digital channels such as web chat to further engage and support California residents. Importantly, this project is using an entirely work from home model, protecting our staff and helping employ residents who may have experienced job loss during the crisis. Since mid-April, MAXIMUS has been providing New York State with dedicated COVID-19 support, including ramping up the state’s COVID-19 hotline to screen and schedule tests for New Yorkers as well as helping the state manage outbound calls to reach healthcare workers to volunteer to help with the COVID-19 crisis. Our call center representatives have managed to successfully connect more than 30,000 New Yorkers to critical COVID-19 testing resources and obtain more than 14,500 responses from healthcare workers through surveys. And just last week, we won our first state contract in Indiana to centralize contact tracing for Hoosiers who test positive for COVID-19. We’ll hire and train an estimated 500 people under the supervision of Indiana State Department of Health epidemiologists. The remote call center is anticipated to be operational by May 11th, and we’ll support individuals at least through the end of the year, if not longer, dependent upon the pandemic needs of the state and its citizens. Our Canadian team also quickly adapted and in only two days launched a COVID-19 information line for our British Columbia provincial government client. Those team members answer important questions about testing locations, employment concerns, quarantine non-compliance reports and the like. Across the globe, unemployment benefit claims have skyrocketed. As of May 1st, more than 30 million people in the United States filed claims triggered by the COVID-19 pandemic. This forewarns of more downstream implications to governments at all levels. Safety-net programs like Medicaid, SNAP and others are expected to face similar surges in applications. Government programs face staffing, process and system challenges in meeting the demand. Governments also face the daunting task of governing under a new normal, enabling citizens to return safely to normal life under the continuing threat of new outbreaks and the consequences of a damaged economy. MAXIMUS has rapidly responded to meet the immediate demand for information and application assistance, while positioning to provide longer-term services as the economy recovers. Let me give you a few examples of new work with compressed time scales that we have met with our response. In only eight days, we launched the contact center to support the District of Columbia Office of Unemployment Compensation. In North Carolina, we launched a new project to support questions pertaining to the unemployment insurance program. This was done in less than a week to support the division of economic security and has rapidly scaled to 1,800 agents. We are also doing similar work in Arkansas, Rhode Island and Vermont, responding to frequently asked questions and assisting residents with their unemployment applications. Across the country, other team members continue to support our Health & Human Services clients, ensuring vitally important services are delivered to the public. Moving on new awards and pipeline. Our reported numbers reflect the status as of March 31st and much has changed since then. Before I address some of these dynamics, I’ll briefly cover the awards in the pipeline at March 31st. For the second quarter of fiscal year 2020, signed awards were $729.8 million of total contract value at March 31st. Further, at March 31st, there were another $215.8 million worth of contracts that have been awarded, not yet signed. Let’s turn our attention to our pipeline of addressable sales opportunities. Our total contract value pipeline at March 31st was $29.2 billion, compared to $30.6 billion reported in the first quarter of FY ‘20. Of our total pipeline of sales opportunities, 65.7% represents new work. In regard to pipeline dynamics, we cannot accurately predict the pattern this pandemic may follow, nor the timing and form of the recovery. Certain clients impacted by COVID-19 are making awards in record time and relying heavily on existing contract relationships and trusted partners like MAXIMUS. This comes in some cases at the cost of delaying other prior procurements that were in process. In other instances, particularly in Federal, agencies not impacted significantly by the pandemic have stuck closely to procurement schedules. Therefore, it’s important to put all of this in context. While we are excited about the new work, many of the new COVID-related programs are expected to be temporary, but provide flexibility to scale and extend services as circumstances warrant. We also must be mindful that many of our government clients will likely face budgetary pressures as a result of a pandemic-driven economic recession. While we’re cautiously optimistic, it’s difficult to predict what impact these events may have on erosion, timing on new work and simply getting some of our operations back to somewhat of a normal cadence. The updated guidance, of course, incorporates all of these dynamics, based on what we know today. We actively manage a portfolio of work and have earned a reputation as a trusted long-term partner, all of which enables us to adapt to changing economic times. I’ve been inspired by the dedication, selflessness and resilience seen across our business in recent weeks. The resilience of our business model has also been impressive and of our employees, even more so. As Rick mentioned, one of the most inspiring stories comes from our colleagues in the United Kingdom, where we’re in the process of deploying nearly a 1,000 volunteer doctors, nurses and other clinicians to the NHS to provide vital support on the front line. Dr. Paul Williams, Division President of MAXIMUS UK volunteered to serve along with our team members. In addition, non-clinical colleagues are preparing for redeployment in support of the national effort. This represents the true heart of MAXIMUS and our more than 35,000 employees around the world. It has been remarkable to witness how our colleagues are coming together to support the global effort against this pandemic, and the safety and wellbeing of our employees will continue to remain our top priority. Governments are also planning for the time when, as we emerge from this crisis, our core capabilities in finding jobs for the unemployed, ensuring access to healthcare and administering critical safety-net programs will be needed more than ever. The world will be a different place for sure, but so will the landscape for services and how they are delivered. The work we’ve done in helping clients innovate, scale and still meet citizens’ needs will be a game changer. New opportunities will also emerge and we are well positioned to respond. And with that, we’ll open up the line for Q&A.

Thank you. Our first question is from Charles Strauzer with CJS Securities. Your line is open.

Good morning, guys. This is Brendan on for Charlie. I want to ask you had a lot of great color on what’s going on with COVID-19 not only affecting operations, but also opportunities as well. I was wondering if there’s any way you can quantify the benefit from it in this quarter you just reported, and then any way you can talk about how it affects your guidance that you reinstated and could you quantify that?

Hey, Brendan it’s Bruce. Good morning and thanks for the question. I’ll begin and then I’ll turn it over to Rick to answer the second part of your question. I can share with you that as of two days ago, we’ve added approximately $140 million of signed and unsigned awards for COVID-19-related work across all three of our business segments. And we gave a little bit of color on that in the call, talking about some of the work, for example, that we picked up in Canada and of course, in the Federal segment and in the US Health & Human Services segment. This particularly relates to the contact tracing work and unemployment insurance work. So that’s all subsequent to the March 31st reporting period. We view the work to be generally short-term in nature and at the same time, because it’s such a fluid environment, I literally need to say as of two days ago, because we are very active in terms of inbound proposal activity and procurement activities as states continue to work to put the programs in place that they need to return to normal and address these immediate needs. I’ll also say that in doing this, we established relationships with new customers. And those new customers can include state public health departments; they can include state departments of employment security, and while we intend to support them fully during this short-term need, it allows us to also be able to be a trusted vendor to turn to as those needs could develop into longer-term needs. And so it is very dynamic, potentially fluid, but the $140 million total contract value is the signed and unsigned awards since the close of the quarter. Rick, would you like to add anything further to that?

Sure. Brendan, you know our goal in reinstating the guidance today was to provide investors with a view of our current expectation based on assumptions that we made when we were completing our planning for the remainder of the year, you know what represents our best assessment at that time as of today. You know we could get further erosion due to COVID, which would drag us down toward the lower end of guidance. You know, conversely, you know increased COVID-19-related work would push us up toward the upper end of the guidance. Want to make sure I caution you though, there is more than a normal level of uncertainty at this time and that uncertainty could result in greater variability than we’ve experienced in the past few years, but you know we’re seeing positive signs in some of the COVID pipeline as Bruce indicated.

Great, thank you –

Thanks, Brendan.

And then, I have one follow-up just with the, I guess how it relates to Outside the US – you know obviously you had to write-down in UK and Australia, and then, which you know makes sense, kind of being triggered given the employment environment at the same time though there is clearly going to be an opportunity down the road for re-employment and you know welfare to work kind of stuff. So do you – I guess how do you feel about those businesses Outside the US and you know within the US as well and obviously that’s not something we might see this next quarter, but what are you thinking over the next couple of years, about how those are positioned? Thank you.

Great question, Brendan. And actually, I think you read the situation correctly. You know we’ve always said that we believe that these businesses, when you frame it you know, 50% of our business Outside the US is in employment services, and we view it to be a counter-cyclical business. And so as you’ve said, we’re kind of on the down cycle of that with you know folks losing their jobs and no longer able to sustain them in their employment and hence the impact on sustainment payments under existing contracts. But by definition, these contracts are volume-based in their nature and as the volumes come back into the system, they tend to perform well. And so I’d comment on a couple of things. First, I think we’re very well positioned in countries like the United Kingdom and Australia to capitalize as the volumes return into those systems. That does – it’s predicated of course on the economies turning around in this – in the pace of the recovery and, Rick, I think rightly cautioned in his remarks, that we can’t predict at this time what the shape and the timing of their recovery will look like. In addition to that, Rick also noted that some of our UK employment services contracts have been transitioned into a cost recovery type arrangement, so that we can continue to keep our staff on board. It’s important to government that we do that so that we’ve got the staff in place and the program ready as people come back into those programs. Another thing that’s probably worth noting is that, you know in the period immediately preceding COVID-19, we were at such a state of nearly full employment that many of these programs were designed really more to serve the hardest to serve population. So folks with you know chronic issues that have prevented their employment for years and we’ve spoken about that on prior calls. Governments now are saying, what are the – how do we need to modify the structure of these employment services programs to really address the newly unemployed, the more mainstream unemployed, and what resources need to be in place, whether they’re digital services or other types of services to support that population. So you can imagine, we are spending time not just with industry partners through trade associations and so forth, but also directly with our customers, the commissioners of these programs to work with them to figure out what the best model will be, how to deliver those new programs at scale to meet the needs of the newly unemployed in the aftermath of this current outbreak.

Thanks, Brendan. Next question please.

The next question is from Dave Styblo with Jefferies. Your line is open.

Hi there. Good morning and thanks for the questions. Wanted to inquire a little bit more about the bridge on the $1 EPS reduction to guidance. I don’t think I fully understand all the moving parts there, so hoping you can fill in a couple of the blanks there. I think you know the $0.28 is pretty clear for the welfare to work write-down. I think the prior guidance maybe sort of contemplated some of the wildfires in Australia. So to call that maybe $0.40 and then I know you’re picking up a little bit of revenue from the Census contract and some of the other new work. But what is the other large gap in there that the plug towards EPS being down $1? Is that really related to the UK HAAS contract or some other elements of business maybe perhaps shifting to a cost model instead of a performance model?

Hey, Dave, it’s Bruce. Thanks for the question. I’ll start and then I’ll ask Rick to add any further color. You know it almost goes without saying that it’s impossible to predict how the year would have developed and as we finished the first quarter, we thought we had more signs that were pointing toward the bottom end of the prior guidance range, but there are also opportunities in the hopper. So it’s difficult to sit here and speculate as to how the – what erosion we would have seen had things played out without COVID, how the new work awards that I mentioned would have looked like. And the reality is really at the midway point of our fiscal year. We have gone on to a completely different vector than what we anticipated. You and I’ll just, as for the color, I’ve been amazed at the resilience of our business model and at the ability to pivot to the work from home arrangement in many instances that we talked about in our prepared remarks and our ability to actually work with our customers to gain their you know permission to do that. So you could have seen certainly much more of a disruptive moment in terms of trying to meet demand that was – remained consistent and if anything, this has become a more demand stimulative environment in the near-term for us. So now we’re resetting and there the makeup of deals in our pipeline and the near-term kind of field division that we have has changed, some opportunities being pushed out, other opportunities as we’ve discussed developing literally overnight. The response time that we’ve seen as RFPs have come through the pipeline have been you know in many instances like 48 hours. So we’re seeing both of those dynamics. But I’ll turn it over to Rick to add any further color addressing that bridge as you’ve requested.

Sure, Dave. You know as I said in my prepared comments, the most impact that we’ve had is, in the OUS segment. So the welfare to work contracts that we talked about, that $24 million was a write-down of revenue that we had – that we have recorded based on our expectations of how much future outcomes payments we would actually collect. We do expect to continue to have you know revenue impact from COVID-19 in those welfare to work contracts in Q3 and then to a lesser extent in Q4. You’re right HAAS is also impacted. We are not doing face-to-face assessments on HAAS at this time. And I did talk about the secondment that will occur, but I think that the revenue and the profit level on HAAS will be negatively impacted.

Okay. And so that’s a big part of the $0.50 delta that’s unexplained for, I guess.

Yeah. Do you have a follow-up?

I do. Comments on M&A, I appreciate that and the capital position line to preserve capital. It sounds like you’re still open to some smaller assets that would either, I suspect, enhance capabilities or expand geographic coverage. Just wanted to get a sense of have some opportunities come up in light of COVID where perhaps some other smaller companies are having trouble weathering the storm and has presented some opportunities for you guys to take a closer look at those or is there anything new in the pipeline that we should be thinking about again in light of the COVID conditions?

Good question, Dave. So the short answer is yes in terms of opportunities. As Rick said, we continue to look at really tuck-in type acquisitions and I thought it might be helpful to maybe give you a better sense of the criteria that were used to value those. And so, as we think about a tuck-in, we generally say it needs to meet criteria, including number one, being closely aligned with our current business. So it’s really no more than adjacent – one adjacency away. Number two, it has to be available at a reasonable price and under agreeable terms and you’re right in saying that in this current environment, there certainly are smaller businesses that are having more of a struggle and that can create opportunities for us to add capabilities and not just here in the United States, but even overseas. And number three, the third criteria would be, we don’t want any kind of tuck-in to create significant transaction or integration risk or effort or expense for us. So we’ve historically executed these tuck-ins really in all kind of economic conditions, including now in a tactical manner, to position the company for anticipated growth in new business areas, to add capabilities, to position ourselves into new geography. Generally, our tuck-ins have been under about $50 million in purchase price; many of those have been in the $5 million to $15 million range. But I’ll turn it over to Rick and he can add a little more color on that.

Yeah. You know, Dave, so size does impact whether or not something is a tuck-in, but I didn’t want that – I think Bruce’s answer is good from a standpoint that we don’t want that to be the – give you the impression that’s the only item. I mean I could see a $75 million revenue company actually meeting the tuck-in criteria. I could also see a $40 million company or some that’s even smaller and not meeting that criteria. It really goes back to you know looking at all of the factors that Bruce looked at.

Great, thanks.

Thanks, Dave. Next question please.

The next question is from Donald Hooker with KeyBanc. Your line is open.

Great, thank you for the question. Good morning. So wanted to hop back on this Outside of the US thematic here. So obviously there was this write-down in the quarter as we go forward. Can you kind of maybe provide some visibility perhaps longer-term in terms of how these contracts might be structured and what the right operating margin for you guys is in those contracts going forward? So we can think about kind of a ramp back up over the next several years to a target operating margin in that segment?

Sure. I’ll start and then hand it over to Rick. These contracts are inherently performance-based, and I don’t expect a major change in contract structure in at least one of the regions as volume increases. One question we’ve raised with the commissioners in that area is whether they would consider reallocating the budget from the traditional model of 30% upfront and 70% performance-based to something closer to a 50:50 split, similar to what we saw after the last recession. This is particularly relevant when considering a potential W-shaped recovery, where we might receive our 30% on fixed payments initially, but could face a downturn again. In that scenario, individuals placed in positions may struggle to maintain them, leading back to initial challenges. We believe discussing a shift from 30:70 to a more balanced 50:50 allocation with contracting authorities will be essential moving forward. With that in mind, we feel positive about achieving operating income margins for our Outside US employment services business within the historical target range of 10% to 15%. Rick’s team has conducted a thorough review of historical performance over the past decade, revealing that these businesses have successfully operated within that range—and sometimes exceeded it—when adjusting for contract structures like I mentioned earlier. This topic is very relevant now, as program commissioners are soliciting feedback not only from us but also from other industry participants regarding the future shape of these contracts. In certain areas, like the United Kingdom, the focus has shifted significantly towards serving the most difficult-to-place populations, which is not our current objective. Rick, would you like to add anything?

Yeah, sure. You know I think that Bruce made most of the points that I wanted to make on this topic, but that’s fine. But it really is too early to make a complete determination, but revenue and margin should improve in this new environment created by the COVID-19 pandemic, given our tendency in this area to be counter-cyclical. But I did want to emphasize something that Bruce said before, we are already positioned well in the UK and Australia to capitalize as our contracts are volume-based and the volume of transaction should increase. So, yes, you’re right, I’ve been saying all along that we are not satisfied with our OUS margins or Outside the US margins, but this coronavirus changes our outlook with respect to those businesses and we do want those – all of our segments to deliver between 10% and 15%.

Okay. And then my follow-up question would be, when I look at the sales pipeline with all the ebbs and flows and all the disorientation around the current environment, what is – how much of that sales pipeline, what should we assume sort of a win rate would be against that sales pipeline at this point? So I know you guys have expanded into new areas and you know there’s new opportunities emerging out of COVID-19, what is the – that $29 billion plus of sales pipeline? What is the conversion rate of that?

Well, that’s - yeah, I’ll begin again and as we have, we’re going to tag team this one. So there’s really two components that you have to think about, and they’re not numbers that we have historically disclosed in any detail. One is the, what we call the adjudication rate. So of the pipeline that’s in front of you what percentage of it actually ultimately is adjudicated to some form of outcome, a win or a loss or what have you. And then the second component is, of course, the win rate. And I think it is fair to say that in an environment when you are expanding into new agencies with new customers. We’ve spoken about this before in terms of the efforts in the Federal business to expand our footprint with new agencies and customers, you’re not going to see what you would customarily see in industry win rates and you know having been in this business for 30 years, we’ve customarily said, well, you know, if your new work win rate is in the 30% range, you’re really doing well. But I think 20% to 25% is a great win rate, blended between new customers and existing customers and certainly may be a little lower depending on how far you’re reaching into new places. But Rick, how would you?

Yeah, right that’s a great answer. I would want to emphasize to say the point that it is a pipeline of opportunities when we look at and we don’t – did everything that’s in that pipeline. You know we want to make sure that we chase things in a smart way and that we spend our B&P, our bid and proposal money you know wisely. So if we’re looking at a program that has a good formidable competitor – incumbent competitor, you know we might decide you know we look at and we might decide not to bid it, because that would be wasteful of our B&P dollars and we’ll save them for a situation where we have a better chance of a win. So I want to make sure it’s not just the win rate that you need to apply the factor against that pipeline.

Thank you.

Thank you. Next question, please.

Our next question is from Jamie Stockton with Wells Fargo. Your line is open.

Good morning, thanks for taking my questions. I guess maybe the first one is just about the IT shortage comments and in general, you know are you where you need to be today? You know and if you’re not, you know when do you think you’ll get there?

Hey, Jamie it’s Bruce. Thanks for the question. So it’s an interesting dynamic, because there was a couple of things. First of all, there is the supply that we need to continue to move a greater portion of our workforce to work from home. And then there is, let’s call it, business as usual supply, right that we need, because we’re coming into, for example, the open enrollment season. And so, you know let me give you just a little bit of color on where we stand currently. From a work from home perspective, currently we’ve got 45% of our US employees working from home, another 45% are working on-site – you know practicing social distancing, wearing face masks and so forth as we’ve discussed and the balance are on leave. And it’s important to note that there are some contracts in the US portfolio, where working from home is not possible and we’ve had to implement, as we, I think mentioned here, creative policies like shift schedules where individuals stay home for a period and then they come into the office and switch with colleagues who have been working during that period. We’ve been able to do that, while maintaining service levels on some pretty critical – mission critical contracts for our customers and earned accolades from our customers in the process. So you have 45% in the US working from home, 45% not that’s 90%, the balance then are on leave for COVID-19-related qualifying conditions which doesn’t mean that they are all sick, but the condition can include needing, for example, to provide childcare where they have no alternative, caring for a sick family member and so forth. Outside the US, there have been different regional responses as you can imagine, approximately 76% of our workforce is working from home outside the US, but there are examples as well where working from home is not possible. In Australia, for example, our Australian colleagues have to maintain a safe level of storefront operations to serve jobseekers and individuals who you know now come through the public assistance kind of phase of this and now are going to be coming into the employment schemes that we operate. And as long as we can continue to do that, you know you’re going to have a portion of that workforce that has to be in the offices. So the IT supply has mostly been machines. We have for a number of reasons, not adopted a significant BYOD policy. We prefer to have employees use a standard image and securely connect through – in any instances where possible to a remote workspace environment, we’ve been using Amazon WorkSpaces as I mentioned. In that way, we can protect critical PHI, PII and other information. Surprisingly also, there we – there has been a shortage of headsets and obviously when you’re in a contact center business, that’s one of the hardest things to solution, but we’re working through it. We’re not exactly where we need to be, but we’re making progress. And we’re also mindful of the fact that as we transition to open enrollment, we are equally focused on the production and delivery estimates that we’re getting from our suppliers to make sure that as we ramp up, we have adequate capacity. And in fact, I think that we may see a need for greater capacity during this upcoming open enrollment period due to the – you know the pandemic itself, driving greater volumes.

Okay, that’s great. And then maybe my follow-up, if I look at the OpEx for US Health & Human Services, it was up a decent amount sequentially. Should we think about that as a new normal or you know where there elevated costs there you know related to COVID you know or something else that could allow that to come down incrementally?

So, Jamie. I’m going to add one more thing to the prior answer and then ask Rick to answer this one you know you’ve just asked. I did want to note that we have an essential services designation from the federal government, which does help us you know get closer to the front of the line when it comes to meeting the IT demands that we have with our suppliers. Okay. And then I’ll turn it over to Rick.

Yes, two things in there. The US Health & Human Services segment had an increase in their receivable reserves. Some of that due to payment concerns with respect to the COVID-19 pandemic. We went through all of our receivables and looked at them very carefully and made some assessments based on what we were seeing at that particular point with respect to collectability. And we did have a billing dispute with one of our customers, and that receivable is reserved. And we are seeing some incremental costs with respect to the COVID-19 pandemic. Remember that the US Health & Human Services segment is primarily performance-based contracts. And so when we have those incremental costs, they will fall to the bottom line as opposed to the US Federal segment, which is much more of cost-plus type of environment. So when we have incremental cost, those costs as long as they are reasonable are collectible under our contract. So, yes, we did have an increase there, but it was primarily COVID-related plus that billing dispute, I described.

Thank you. Next question please.

I’m showing no further questions at this time. And with that, ladies and gentlemen, this will conclude today’s conference call. Thank you for participating and you may now disconnect.