mms-20200630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2020

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number: 1-12997

Maximus, Inc.

(Exact name of registrant as specified in its charter)


Virginia						54-1000588
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

1891 Metro Center Drive, Reston, Virginia						20190
(Address of principal executive offices)						(Zip Code)

(703) 251-8500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, no par value

MMS

New York Stock Exchange

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 ☒ No ☐

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 ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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. (Check one):


Large accelerated filer ☒						Accelerated filer ☐

Non-accelerated filer ☐						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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 3, 2020, there were 61,312,619 shares of the registrant’s common stock (no par value) outstanding.

Maximus, Inc.

Quarterly Report on Form 10-Q

For the Quarter Ended June 30, 2020

INDEX

PART I. FINANCIAL INFORMATION

Item 1.

Consolidated Financial Statements

Consolidated Statements of Operations for the Three and Nine Months Ended June 30, 2020 and 2019 (unaudited)

Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended June 30, 2020 and 2019 (unaudited)

Consolidated Balance Sheets as of June 30, 2020 (unaudited) and September 30, 2019

Consolidated Statements of Cash Flows for the Nine Months Ended June 30, 2020 and 2019 (unaudited)

Consolidated Statements of Changes in Shareholders’ Equity for the Three and Nine Months Ended June 30, 2020 and 2019 (unaudited)

Notes to Unaudited Consolidated Financial Statements

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Item 4.

Controls and Procedures

PART II. OTHER INFORMATION

Item 1.

Item 1A.

Item 6.

Throughout this Quarterly Report on Form 10-Q, the terms “Company,” “we,” “us,” “our” and “Maximus” refer to Maximus, Inc. and its subsidiaries, unless the context requires otherwise.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Included in this Quarterly Report on Form 10-Q 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 COVID-19 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 continued spread of the COVID-19 virus, including the speed, depth, geographic reach and duration of the spread, and the actions taken or to be taken by us, our customers and the governments of jurisdictions in which we operate in response to COVID-19;

•the demand for our services and products, including based on any downturns in the economy;

•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 of this Quarterly Report on Form 10-Q and in Exhibit 99.1 of our Annual Report on Form 10-K for the year ended September 30, 2019, which was filed with the Securities and Exchange Commission on November 26, 2019, and as supplemented in our Form 10-Q for the quarter ended March 31, 2020, should be considered.

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.

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements.

Maximus, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except per share data)

(Unaudited)


	Three Months Ended June 30,						Nine Months Ended June 30,
	2020		2019		2020		2019
Revenue	$	901,337	$	730,710	$	2,537,701	$	2,131,849
Cost of revenue	715,734		556,463		2,023,550		1,628,915
Gross profit	185,603		174,247		514,151		502,934
Selling, general and administrative expenses	89,582		81,604		283,662		239,377
Amortization of intangible assets	8,712		9,049		26,734		24,026



Operating income	87,309		83,594		203,755		239,531
Interest expense	616		420		1,565		2,614
Other (expense)/income, net	(671)		556		621		3,048
Income before income taxes	86,022		83,730		202,811		239,965
Provision for income taxes	21,558		20,765		51,963		59,511
Net income	64,464		62,965		150,848		180,454
Income/(loss) attributable to noncontrolling interests	—		67		—		(281)
Net income attributable to Maximus	$	64,464	$	62,898	$	150,848	$	180,735
Basic earnings per share	$	1.04	$	0.98	$	2.38	$	2.80
Diluted earnings per share	$	1.04	$	0.97	$	2.37	$	2.79
Dividends paid per share	$	0.28	$	0.25	$	0.84	$	0.75
Weighted average shares outstanding:
Basic	61,882		64,405		63,463		64,534
Diluted	62,102		64,759		63,666		64,800

See notes to unaudited consolidated financial statements.

Maximus, Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in thousands)

(Unaudited)


	Three Months Ended June 30,						Nine Months Ended June 30,
	2020		2019		2020		2019
Net income	$	64,464	$	62,965	$	150,848	$	180,454
Foreign currency translation adjustments	3,432		(1,974)		(1,304)		(4,157)

Comprehensive income	67,896		60,991		149,544		176,297
Comprehensive income/(loss) attributable to noncontrolling interests	—		67		—		(281)
Comprehensive income attributable to Maximus	$	67,896	$	60,924	$	149,544	$	176,578

See notes to unaudited consolidated financial statements.

Maximus, Inc.

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands)


	June 30, 2020		September 30, 2019
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	81,548	$	105,565

Accounts receivable — billed and billable, net of reserves of $13,031 and $5,382	626,471		476,690
Accounts receivable — unbilled	203,267		123,884
Income taxes receivable	8,284		20,805
Prepaid expenses and other current assets	59,942		62,481
Total current assets	979,512		789,425
Property and equipment, net	73,319		99,589
Capitalized software, net	35,447		32,369
Operating lease right-of-use assets	171,041		—
Goodwill	586,757		584,469
Intangible assets, net	151,115		179,250
Deferred contract costs, net	20,267		18,921
Deferred compensation plan assets	33,834		32,908
Deferred income taxes	3,450		186
Other assets	8,244		8,615
Total assets	$	2,062,986	$	1,745,732
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	217,831	$	177,786
Accrued compensation and benefits	130,396		106,789
Deferred revenue	48,743		43,344
Income taxes payable	4,725		13,952
Current portion of long-term debt and other borrowings	7,000		9,658
Operating lease liabilities	74,878		—
Other liabilities	18,971		12,709
Total current liabilities	502,544		364,238
Deferred revenue, less current portion	30,090		32,341
Deferred income taxes	44,532		46,560
Long-term debt, less current portion	145,161		231
Deferred compensation plan liabilities, less current portion	34,302		34,079
Operating lease liabilities, less current portion	103,236		—
Other liabilities	8,174		20,082
Total liabilities	868,039		497,531
Shareholders’ equity:
Common stock, no par value; 100,000 shares authorized; 61,313 and 63,979 shares issued and outstanding at June 30, 2020, and September 30, 2019, at stated amount, respectively	517,200		498,433
Accumulated other comprehensive loss	(46,684)		(45,380)
Retained earnings	724,431		794,739
Total Maximus shareholders' equity	1,194,947		1,247,792
Noncontrolling interests	—		409
Total equity	1,194,947		1,248,201
Total liabilities and equity	$	2,062,986	$	1,745,732

See notes to unaudited consolidated financial statements.

Maximus, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)


	Nine Months Ended June 30,
	2020		2019
Cash flows from operations:
Net income	$	150,848	$	180,454
Adjustments to reconcile net income to cash flows from operations:
Depreciation and amortization of property and equipment and capitalized software	47,496		34,588
Amortization of intangible assets	26,734		24,026

Deferred income taxes	(5,210)		11,196
Stock compensation expense	17,558		15,323
Gain on sale of a business	(1,706)		—
Change in assets and liabilities net of effects of business combinations
Accounts receivable — billed and billable	(147,626)		(108,131)
Accounts receivable — unbilled	(80,267)		46,172
Prepaid expenses and other current assets	529		(2,933)
Deferred contract costs	(1,396)		(8,142)
Accounts payable and accrued liabilities	48,622		53,462
Accrued compensation and benefits	33,647		9,282
Deferred revenue	2,806		7,857
Income taxes	563		3,139
Operating lease right-of-use assets and liabilities	(1,071)		—
Other assets and liabilities	4,556		(2,582)
Cash flows from operations	96,083		263,711
Cash flows from investing activities:
Purchases of property and equipment and capitalized software costs	(28,436)		(39,033)
Acquisitions of businesses, net of cash acquired	(2,611)		(422,049)
Proceeds from the sale of a business	3,250		—
Maturities of short-term investments	—		19,996
Other	385		380
Cash used in investing activities	(27,412)		(440,706)
Cash flows from financing activities:
Cash dividends paid to Maximus shareholders	(52,988)		(47,936)
Purchases of Maximus common stock	(166,959)		(46,068)
Tax withholding related to RSU vesting	(10,614)		(8,915)

Borrowings under credit facility and other loan agreements	421,488		320,048
Repayment of credit facility and other long-term debt	(278,971)		(316,597)


Other	(957)		(133)
Cash used in financing activities	(89,001)		(99,601)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(174)		(994)
Net decrease in cash, cash equivalents and restricted cash	(20,504)		(277,590)
Cash, cash equivalents and restricted cash, beginning of period	116,492		356,559
Cash, cash equivalents and restricted cash, end of period	$	95,988	$	78,969

See notes to unaudited consolidated financial statements.

Maximus, Inc.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Amounts in thousands)

(Unaudited)


	Common Shares Outstanding	Common Stock		Accumulated Other Comprehensive Loss		Retained Earnings		Noncontrolling Interest		Total
Balance at March 31, 2020	61,313	$	511,023	$	(50,116)	$	677,561	$	—	$	1,138,468
Net income	—	—		—		64,464		—		64,464
Foreign currency translation	—	—		3,432		—		—		3,432
Cash dividends	—	—		—		(17,175)		—		(17,175)
Dividends on RSUs	—	419		—		(419)		—		—


Stock compensation expense	—	5,758		—		—		—		5,758


Balance at June 30, 2020	61,313	$	517,200	$	(46,684)	$	724,431	$	—	$	1,194,947


	Common Shares Outstanding	Common Stock		Accumulated Other Comprehensive Loss		Retained Earnings		Noncontrolling interest		Total
Balance at September 30, 2019	63,979	$	498,433	$	(45,380)	$	794,739	$	409	$	1,248,201
Net income	—	—		—		150,848		—		150,848
Foreign currency translation	—	—		(1,304)		—		—		(1,304)
Cash dividends	—	—		—		(52,988)		(409)		(53,397)
Dividends on RSUs	—	1,209		—		(1,209)		—		—
Purchases of Maximus common stock	(2,767)	—		—		(166,959)		—		(166,959)
Stock compensation expense	—	17,558		—		—		—		17,558


RSUs vested	101	—		—		—				—

Balance at June 30, 2020	61,313	$	517,200	$	(46,684)	$	724,431	$	—	$	1,194,947

Maximus, Inc.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Amounts in thousands)

(Unaudited)


	Common Shares Outstanding	Common Stock		Accumulated Other Comprehensive Loss		Retained Earnings		Noncontrolling Interest		Total
Balance at March 31, 2019	63,811	$	498,269	$	(39,136)	$	705,824	$	2,624	$	1,167,581

Net income	—	—		—		62,898		67		62,965
Foreign currency translation	—	—		(1,974)		—		—		(1,974)

Cash dividends	—	—		—		(15,953)		(2,452)		(18,405)
Dividends on RSUs	—	399		—		(399)		—		—


Stock compensation expense	—	5,419		—		—		—		5,419



Acquisition of part of noncontrolling interest	—	(903)		—		—		216		(687)
Balance at June 30, 2019	63,811	$	503,184	$	(41,110)	$	752,370	$	455	$	1,214,899


	Common Shares Outstanding	Common Stock		Accumulated Other Comprehensive Loss		Retained Earnings		Noncontrolling Interest		Total
Balance at September 30, 2018	64,371	$	487,539	$	(36,953)	$	633,281	$	2,552	$	1,086,419
Cumulative impact from adopting ASC Topic 606 on October 1, 2018	—	—		—		32,929		553		33,482
Net income	—	—		—		180,735		(281)		180,454
Foreign currency translation	—	—		(4,157)		—		—		(4,157)

Cash dividends	—	—		—		(47,936)		(2,585)		(50,521)
Dividends on RSUs	—	1,225		—		(1,225)		—		—

Purchases of Maximus common stock	(716)	—		—		(45,414)		—		(45,414)
Stock compensation expense	—	15,323		—		—		—		15,323


RSUs vested	156	—		—		—		—		—
Acquisition of part of noncontrolling interest	—	(903)		—		—		216		(687)
Balance at June 30, 2019	63,811	$	503,184	$	(41,110)	$	752,370	$	455	$	1,214,899

See notes to unaudited consolidated financial statements.

Maximus, Inc.

Notes to Unaudited Consolidated Financial Statements

For the Three and Nine Months Ended June 30, 2020 and 2019

1. Organization and Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. As permitted by these instructions, they do not include all of the information and notes required by generally accepted accounting principles (GAAP) for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. All intercompany balances and transactions have been eliminated in consolidation. The results of operations for the three and nine months ended June 30, 2020, are not necessarily indicative of the results that may be expected for the full fiscal year. The balance sheet at September 30, 2019, has been derived from the audited financial statements at that date, but does not include all of the information and notes required by GAAP for complete financial statements.

These financial statements should be read in conjunction with the consolidated audited financial statements and the notes thereto at September 30, 2019 and 2018, and for each of the three years ended September 30, 2019, included in our Annual Report on Form 10-K which was filed with the Securities and Exchange Commission on November 26, 2019.

Estimates

The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities and the reported amounts of revenue and expenses. At each reporting period end, we make estimates including those related to revenue recognition and cost estimation on certain contracts, the realizability of goodwill and amounts related to income taxes, certain accrued liabilities and contingencies and litigation.

We base our estimates on historical experience and expectations of the future that we believe to be reasonable. The economic and political impacts of the COVID-19 pandemic increases uncertainty, which has reduced our ability to use past results to estimate future performance. Accordingly, our estimates may be subject to greater volatility than has been the case in the past.

•Our balance sheet includes goodwill valued at $586.8 million. This balance is allocated between reporting units, which are consistent with our three operating segments. Goodwill is not amortized but is tested for impairment when necessary and no less than once per year. We performed our last annual goodwill impairment test as of July 1, 2019. As of July 1, 2019, none of our reporting units showed any signs of impairment and all held a fair value estimated to be at least twice as high as their carrying value. We are in the process of performing our 2020 goodwill impairment test; at this time, we do not believe any goodwill impairment has occurred. This is based upon a number of factors, including the long-term viability of our business and the creditworthiness of our customer base.

•Our balance sheet includes a number of long-lived assets, including property and equipment, capitalized software, operating lease right-of-use assets, deferred contract costs and intangible assets. These assets are depreciated or amortized over their estimated useful economic lives but are subject to impairment if events indicate that the carrying amount may not be recoverable. At this time, there are no significant balances which we believe are not recoverable.

•Our balance sheet includes $829.7 million of billed, billable and unbilled accounts receivable, net of reserves. We regularly evaluate this balance for recoverability and reserve those balances where we no longer believe that collection is probable. Bad debt expense has not historically been significant to our business due to the nature of our customers. During the nine months ended June 30, 2020, we recorded bad debt expense of $8.8 million. We have reserved balances against customers who we believe are experiencing difficulties during the COVID-19 pandemic and may not be able to reimburse us for work performed.

•As disclosed in "Note 4. Revenue Recognition," revenue for some of our welfare-to-work contracts in the Outside the U.S. Segment is based upon achievement of future outcomes as defined in each contract. Specifically, we are paid as individuals attain employment goals, which may take many months to achieve.

Revenue is recognized on these contracts over the period of performance. Employment markets worldwide suffered a significant shock during the second quarter of the current fiscal year and many employment opportunities have been terminated or are no longer available. While we expect the volume of new program participants to increase as a result of disruption to employment markets, participants in programs prior to March 2020 have experienced reduced opportunities to reach sustained employment. This has resulted in revised estimates to our outcome fees and a reduction in our unbilled revenue balance.

•Many of our contracts in the United States are cost-plus contracts, where we are reimbursed for costs that are allowable, allocable and reasonable. Due to the COVID-19 pandemic, we are incurring incremental and unusual costs, including additional sick pay and idle labor for employees who are unable to perform services due to their health issues, child care issues or physical restrictions imposed on their workplace. Although the U.S. Federal Government, which provides the majority of our cost-plus contracts, has provided regular guidance, there is some uncertainty within other contracts as to recoverable costs.

Changes in financial reporting

Leases

Effective October 1, 2019, we adopted ASU No. 2016-02, Leases (Topic 842). The new standard requires that assets and liabilities arising under leases be recognized on the balance sheet, except for those with an initial term of less than twelve months. We adopted this standard using a modified retrospective approach. Accordingly, we did not recast prior period financial information. Certain elections were made in adopting the standard.

•We elected to use the package of practical expedients which, among other things, allows us to not reassess historical lease classification.

•We do not separate lease and non-lease components for all classes of leases, which allows us to account for a lease as a single component.

•We used the optional transition method, which did not require us to recast our comparative periods.

•We did not use the hindsight practical expedients, which would have allowed us to use hindsight in determining the reasonably certain lease term.

•We did not adjust our accounting for leases with an initial term of twelve months or less.

Upon adopting Topic 842, we recognized a lease liability of $214.5 million, reflecting the present value of the future remaining minimum lease payments. Changes to our opening balance sheet are summarized below. There was no cumulative impact to our retained earnings and the changes did not cause any material changes in our statements of operations or our statements of cash flows. The adoption of Topic 842 does not affect our compliance with our existing contracts, including our credit facility.


(dollars in thousands)	Balance at September 30, 2019		Adjustments due to adoption of new standard		Opening balance at October 1, 2019
Assets
Prepaid expenses and other current assets	$	62,481	$	(6,131)	$	56,350
Operating lease right-of-use assets	—		206,314		206,314
Liabilities and shareholders' equity
Accounts payable and accrued expenses	177,786		(5,250)		172,536
Operating lease liabilities	—		88,276		88,276
Other current liabilities	12,709		(648)		12,061
Operating lease liabilities, net of current portion	—		126,197		126,197
Other long-term liabilities	20,082		(8,392)		11,690

At the adoption of Topic 842, the Company recognized deferred tax assets and liabilities corresponding to the operating lease liabilities and operating right-of-use assets, respectively. These balances offset each other and no net effect resulted from this change.

Additional information and disclosures relating to this change are included within "Note 3. Leases."

Forthcoming changes

In August 2018, the Financial Accounting Standards Board (FASB) issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40) - Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This accounting guidance requires customers in cloud-computing arrangements to identify and defer certain implementation costs in a manner broadly consistent with that of existing guidance on the costs to develop or obtain internal-use software. Costs capitalized under this guidance will be expensed over the term of the cloud computing arrangement. We will adopt this guidance on October 1, 2020 using a prospective approach. The effect on our financial statements will be dependent upon our adoption of future cloud-based computing initiatives.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This update introduces a new model for recognizing credit losses on financial instruments, including losses on accounts receivable. This update replaces the existing incurred loss impairment model with an expected loss model. We will adopt this guidance on October 1, 2020 and any changes will be recorded as a cumulative adjustment to retained earnings. We are currently assessing the future impact of this update on our consolidated financial statements and related disclosures.

In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment. This standard will not change the manner in which we would identify a goodwill impairment but would change any subsequent calculation of an impairment charge. We will adopt this guidance on October 1, 2020. The effect of this new standard will depend upon the outcome of future goodwill impairment tests.

Other recent accounting pronouncements are not expected to have a material effect on our financial statements.

2. Segment Information

The table below provides certain financial information for each of our business segments. We operate our business through three segments.

•Our U.S. Health and Human Services Segment provides a variety of business process services such as program administration, appeals and assessments services, 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). We also serve as administrators in state-based welfare-to-work and child support programs.

•Our U.S. Federal Services Segment provides business process solutions, including program administration, appeals and assessment services, as well as system and software development and maintenance services for various U.S. federal civilian programs. This 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.

•Our Outside the U.S. Segment provides business process solutions for governments and commercial clients outside the U.S., including health and disability assessments, program administration and case management for employment services and other work-support programs. We deliver services in the United Kingdom, 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 and Sweden.


	Three Months Ended June 30,											Nine Months Ended June 30,
(dollars in thousands)	2020		% (1)	2019		% (1)	2020		% (1)	2019		% (1)
Revenue:
U.S. Health & Human Services	$	336,950		$	291,132		$	957,929		$	876,082
U.S. Federal Services	450,143			292,295			1,210,105			799,018
Outside the U.S.	114,244			147,283			369,667			456,749
Total	$	901,337		$	730,710		$	2,537,701		$	2,131,849
Gross profit:
U.S. Health & Human Services	$	93,029	27.6%	$	86,664	29.8%	$	268,073	28.0%	$	260,955	29.8%
U.S. Federal Services	84,723		18.8%	66,803		22.9%	232,502		19.2%	175,484		22.0%
Outside the U.S.	7,851		6.9%	20,780		14.1%	13,576		3.7%	66,495		14.6%
Total	$	185,603	20.6%	$	174,247	23.8%	$	514,151	20.3%	$	502,934	23.6%
Selling, general & administrative expense:
U.S. Health & Human Services	$	31,996	9.5%	$	32,414	11.1%	$	102,633	10.7%	$	93,953	10.7%
U.S. Federal Services	45,490		10.1%	32,896		11.3%	131,455		10.9%	90,632		11.3%
Outside the U.S.	13,668		12.0%	15,791		10.7%	47,125		12.7%	52,591		11.5%
Gain on sale of a business (3)	(1,706)		NM	—		NM	(1,706)		NM	—		NM
Other (2)	134		NM	503		NM	4,155		NM	2,201		NM
Total	$