Ladies and gentlemen, thank you for standing by, and welcome to the Q3 FY 2020 MAXIMUS earnings conference call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker for this morning, Ms.

Lisa Miles, Senior Vice President of Investor Relations. Thank you. You may go ahead, ma'am..

Good morning and thanks for joining us. With me today is Bruce Caswell, President and CEO and Rick Nadeau, Chief Financial Officer. I'd 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 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 analyses of results and believes 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..

the ultimate duration of the pandemic, the threat of future further negative pandemic-related impacts, the recovery pattern of our core programs, the potential impacts resulting from budget challenges with our government clients, the possibility of delayed or missed payments by customers, the potential for further supply chain disruptions impacting IT or safety equipment, the impact of further legislation or government policies on programs we operate and particularly in the US, the correlation between unemployment and volumes and core benefit programs such as Medicaid and the health benefit exchanges.

Additionally, we have noted in the past the portfolio experiences normal course erosion each year and we count on new work wins to backfill. The Census contract will wind down next year as expected, delivering less than $70 million of revenue in fiscal 2021 as compared to approximately $500 million of expected revenue for fiscal 2020.

We think it is useful to review the analyst consensus estimates for fiscal 2021. On the top line, we are cautiously optimistic that we can exceed the consensus revenue estimate of approximately $2.95 billion.

However, on the bottom line we acknowledge continued uncertainty tied to temporary program changes from the COVID-19 responses of various governments. Therefore, earnings consensus estimates of $3.71 per share is achievable, but a bit optimistic. At this time, we believe there is a wide range of possible outcomes as we look into next year.

As is our normal practice, we will provide formal guidance during our year end call in November. Bruce and I remain optimistic that MAXIMUS will emerge from this disruption as a stronger company.

We believe that our efforts since March have demonstrated our ability to quickly deploy a hybrid operational model, safeguard our employees, operate and execute under less than ideal conditions and be a dependable partner for the wide-ranging needs of our customers and the citizens we are proud to support.

And with that, I will turn the call over to Bruce Caswell..

Thank you, Rick, and good morning, everyone, and thank you for joining us.

Despite the great uncertainty and significant economic disruption in the global economy as a result of COVID-19, we are pleased today to be raising revenue and diluted earnings per share guidance as a result of our demonstrated ability to modify and scale operations, respond to the priorities of our government clients and ensure that individuals and families receive uninterrupted access to needed services.

At the same time, we are conscious of the fact, as Rick stated, that no one can predict the trajectory of the pandemic.

While some governments are experiencing fiscal challenges with more limited budgets and yet higher demand for services, this impact has primarily been felt at the state level, while federal funding continues to support the administration of many essential benefit programs and has been a critical lifeline to states to provide COVID-19 services such as expanded unemployment insurance, contact tracing and testing.

As a consequence, while we've experienced disruption in our US Health & Human Services and US Federal Services segments, these have related more to policy changes and the downstream economic consequences of the pandemic and less to fiscal challenges.

That said, I'm pleased that these headwinds have been tempered in the near term by our new COVID-19 work and the Census contract. From a procurement perspective, we've fortunately seen only isolated delays on a global basis.

As you can appreciate, many US state customers shifted priorities to COVID-19 emergency procurement undertaken at unprecedented speeds and from which we have benefited. For certain customers, this has meant delaying previously planned RFPs and awards.

In some cases, these delays have been a net positive for MAXIMUS, leading to extended contracts and additional option year periods. At the federal level, there's been no material change in the pipeline flow, as COVID-19-related emergency procurements have been absorbed into existing agency processes and capacity.

Finally, outside the US, where our delivery model is more direct and citizen facing, some procurements have been paused or even canceled as governments rethink policy, program design and procurement strategy.

Taken collectively, these dynamics cause us to be cautiously optimistic that the global pipeline for government services addressable by MAXIMUS will remain robust.

Although we're not immune to economic slowdowns, our services have historically been countercyclical in nature as the demand for income, health and employment support closed during times of economic decline.

The necessity of these health and human services programs is no more apparent than during a health crisis, resulting in increased unemployment and needed access to vital services.

The unpredictable nature of this pandemic and the disruption it continues to create for economies, governments and in the lives of individuals and families, underscores the importance of our business model.

On the one hand, we must continue to deliver critical programs at our core, such as Medicaid, Medicare and employment services through a highly modified hybrid model.

On the other hand, our significant technology investments, coupled with core capabilities in citizen engagement and complex program [ph] administration, have enabled us to pivot to new areas and support new government priorities.

As we look to the future, as Rick noted, we see opportunities to provide greater value and to remain more than ever the trusted partner of governments as they administer essential citizen services.

Last quarter, I provided updates on some of our new work as a result of COVID-19 as well as highlighted our ongoing efforts to prioritize employee safety and well-being. I want to provide a bit more color in these areas as more understanding and transparency has developed over the past few months of this pandemic.

I want to reinforce that our commitment to the safety and well-being of our employees remains our top priority.

We continue to rapidly evolve in line with CDC and EPA guidelines with new policies and procedures, continued paid leave opportunities and expanded work from home policy, mandated social distancing and face coverings and ongoing enhanced cleaning regimens.

As we've mentioned, we've responded to increased demand for services by quickly standing up and operating turnkey citizen engagement centers, with both on site, but predominantly home-based service agents.

Our ability to recruit, hire, train and manage service agents enabled us to scale and augment program staff quickly and effectively in response to unprecedented demand.

We compared notes with others in related industries and believe that we have accomplished one of the most significant pivots to work from home with more than 18,000 agents on Amazon workspaces and another nearly 10,000 individuals connecting through virtual desktop or virtual private network connections.

Our efforts to design a highly secure remote model that supports both corporate provided and bring your own device assets began prior to COVID-19. In addition to the contact tracing award in Indiana, we announced last quarter, we added new contracts in Pima County, Arizona, Florida, Kentucky and North Carolina.

In Florida, we are providing search capacity for the state's contact tracing efforts. The total contract value is $73 million over six months, which covers two separate statements of work managed by Florida Department of Health.

In Pima County, Arizona, we provide a team of case investigators to augment the county's disease investigation activities related to COVID-19 and contact tracers to follow-up on contacts identified as part of the disease investigation process. The total contract value is $10 million, with a six-month base term and three six-month option period.

Contact tracing is important work as we continue to evolve our clinical BPO strategy and demonstrate our ability to deliver clinical services at scale. As part of this effort, we've made several key hires of national experts in public health monitoring, data science and epidemiology.

These resources are available to our state and local clients to augment the efforts of health department officials and staff.

We're now also helping 12 states manage the surgeon unemployment insurance and pandemic unemployment assistance claims having expanded into Delaware, Idaho, Louisiana, New Hampshire, Pennsylvania, South Carolina and Virginia, most recently.

Within the Federal segment, we're supporting the IRS Wage and Investment division to respond to general inquiries regarding the Coronavirus Aid Relief and Economic Security or CARES Act and economic impact payment or EIP Service Plan. EIP program provides stimulus payments to households based on a number of factors.

We were initially tasked with providing up to 500 call agents and have since expanded to approximately 1,600. This is the first time the IRS has used contracted agents on this large of a scale and we are pleased to have been entrusted with this effort. This contract is valued at $26 million over six months.

As Rick noted, we've experienced lower than normal volume levels on certain performance-based contracts domestically, particularly those where government has loosened program participation requirements as a result of COVID-19.

As a result of these puts and takes, we've experienced less disruption and meaningful near-term organic growth in both of our US segments. Meanwhile, as Rick noted, our outside the US segment has experienced a negative impact from the pandemic within our HAAS and workforce services contracts.

We believe that the pandemic driven pause in employment placement efforts is creating a backlog of demand for governments to support more job seekers down the road, creating opportunities for our role as we emerge out of this health crisis.

As you're likely personally experiencing during the time of social distancing, flexible and scalable technology and digital capabilities are more important than ever before.

Before the pandemic, we were already transitioning operational infrastructure to the cloud to help government agencies benefit from the security, scalability and flexibility through a singular platform solution.

This encompassed both our core application environments, such as the micro services effort that I mentioned on prior calls and a major investment in enterprise-wide cloud-based telephony. This gives us the ability to not only dynamically scale and allocate capacity in response to demand, but also to provide a true omnichannel customer experience.

This means being able to integrate calls, e-mails, chats, messages and social comments into one uninterrupted conversation, including leveraging more than one channel at a time for multi-modal communications and customer convenience, all without losing critical context.

In light of COVID-19, this platform also enables agencies to handle surges and inquiry volumes, as seen in the recent unemployment insurance state programs.

And equip a remote workforce, accommodating not only more flexible, diverse and inclusive workforce structure, but also ensuring additional health and safety protections during the pandemic, all while providing essential services without disruption.

In fact, the IRS contract I mentioned earlier, supporting the CARES Act and EIP service plan, was migrated to our cloud-based infrastructure, enabling us to provide a work from home workforce and to seamlessly route specific calls to higher level agents at IRS contact centers.

Of course, vital government work continues amidst the global health crisis. Government of Alberta recently awarded MAXIMUS Canada Services the Enabling New Models of CARE or NMOC program to replace our old mainframe with a new flexible and configurable solution to better support new models of healthcare.

This has an estimated total contract value of $75 million over an 81-month base and five one-year option periods. This is an important new client for MAXIMUS and the first large-sized Canadian jurisdiction to undertake this type of modernization of its provincial health insurance technical platform.

This program will help reinforce MAXIMUS as a leader in digital transformation throughout Canada and a primary option for other large jurisdictions. Turning stateside.

The California Department of Healthcare Services re-awarded MAXIMUS their Optional Targeted Low Income Children Program, the state's Children's Health Insurance Program or CHIP funded Medicaid program for children from birth to age 19, who would have been eligible for the California Healthy Families program before it was merged into Medicaid.

An important rebid for MAXIMUS; this is a five-year base contract with three one-year options to renew for a total contract value of $136 million, if all options are exercised. Moving on to new awards and pipeline as of June 30. For the third quarter of fiscal year 2020, signed awards were $1.466 billion of total contract value at June 30.

Further, at June 30, there were another $672 million worth of contracts that have been awarded, but not yet signed. Let's turn our attention to our pipeline of addressable sales opportunity. Our total contract value pipeline at June 30 was $28.9 billion compared to $29.2 billion reported in the second quarter of FY '20.

Of our total pipeline of sales opportunities 67.7% represents new work. As I mentioned in my opening remarks, regarding pipeline dynamics amid this global health pandemic, we are cautiously optimistic.

However, I want to reiterate the difficulty in predicting the impact these events may have on erosion, timing on new work and simply getting some of our operations back to more of abnormal [ph] cadence. As Rick mentioned, the new COVID-related work is temporary in nature and it's difficult to predict how long some of this work will continue.

It's also important to point out that some of this new work is backfilling the unfavorable impacts we are experiencing on some programs where volumes are lower due to COVID relief efforts. Our earned reputation as an effective and cost-efficient partner to government lends credence to our strength and success despite a challenging environment.

Lastly, I want to take a moment to discuss current events and our responsibility to be a leader through employee engagement and direct action. Our people are our business. They provide essential services, serving the front lines of support and working hand-in-hand with government customers.

Their diverse backgrounds, experience and insight, enable us to represent the citizens and communities we serve, provide compassionate and empathetic service in a time of great uncertainty and continue to be transformational and impactful for clients and customers.

At the same time, many of our employees come from communities that have been disproportionately affected by the pandemic. Our commitment to the safety and well-being of all employees remains paramount. Diversity, equity and inclusion are central to our company identity.

Empathy is a mainstay of our relationships and positively impacting and contributing to our communities is embedded in our mission. In light of recent events, I'm reminded that we have an opportunity to further lead by example. MAXIMUS can and will do more. To start, we're looking inward and listening to our people.

For instance, we recently held our first US Diversity, Equity and Inclusion Town Hall, where I was joined by our new Chief Human Resources Officer, Michelle Link, as part of our developing strategy to listen to employees and continue crucial discussions that will inform and guide our ongoing efforts.

Additionally, I was moved by our employees record breaking rates of participation and acts of solidarity, making it possible for us to donate more than $150,000 to the NAACP Legal Defense and Educational Fund. I look forward to sharing more about our ongoing efforts in the coming months.

Our government clients are facing hard choices in an increasingly challenging environment due to the global and uncontained health pandemic. And at the same time, people are looking to government to lead the way to recovery as we emerge from this crisis. As a result, MAXIMUS is well positioned during these unprecedented times.

Our reputation for quality and accountable service earned over decades, combined with the investments we have made in transforming our delivery capabilities, underscores the resilience of our business model and positions us as a continued trusted partner to government and the people we serve.

Meanwhile, we will continue to execute upon our three strategic goals of digital transformation, clinical evolution and market expansion, the importance and value of which has been underscored in the face of this global pandemic.

As Rick mentioned, our employees have worked tirelessly to help consumers navigate challenging circumstances and to continue to drive the business forward. The Board of Directors and I are extremely impressed by and deeply appreciative of our MAXIMUS team. Together, we will emerge more resilient cohesive and capable organization.

And with that, we'll open up the line for Q&A.

Operator?.

Please hold while the operator queues up the questions..

[Operator Instructions] The first question comes from Dave Styblo..

Thanks for all the color today. Very comprehensive and I appreciate all that. And I certainly appreciate how challenging it is to give us an update forward-looking for all the uncertainty.

That said, I'm wondering if you can help us understand how much of the revenue increase this year, the $200 million was perhaps more temporary in nature or maybe even an aggregate for the full year, how much of the revenue is temporary in nature versus something that has more durability? Obviously, COVID has some positive impacts for higher unemployment for your job services, but then there's other things where as you guys talked about, there's a few contracts that are short of term in nature, so any way to quantify that as we're thinking about the bridge from this year to next year?.

Yes. Dave, Rick will take that..

Yes. Dave, it's a good question. And I talked and used a term COVID response type of work. It's coming in every day and our estimates change. But I think it will be something in the $150 million to $200 million of revenue for this year.

The awards number that Bruce gave you was comprehensive in that it goes past FY '21 year end and into FY '20 year end, goes into FY '21. So we will have some of this in both years. But that really is basically the level that we're talking about. This work is coming in, RFPs are coming in every day and we're bidding them every day.

So I mean this is part of when I talk about the uncertainty and the variability that we face, this is a very dynamic situation.

Does that help you?.

It does. Sure.

And I'm just trying to think, I think investors often times are trying to understand when things do hopefully return to normal sooner than later, what does the earnings power look like? And what are some of the contracts that are under the most pressure right now? What's the rebound on those? And I guess from my outside view, I think the HAAS contract might be the one that, that could be the biggest move or maybe you guys have a different view and could share that.

But maybe at least on that one, what is embedded in guidance this year for the earnings drag on that contract? And is there any early view on how that might progress to improving some face-to-face meetings in the UK? Or are we still in its whole standstill on that contract for now?.

Well, Dave, that's a very complex question. So let me make sure I get them all and Bruce will help me with some of that. So look, in my prepared remarks I noted that there are positive and negative dynamics that we're facing as we go into FY '21.

And as I said more than once, compared to our prior year experiences, we are facing a wider range of possible scenarios and much of this is COVID related. Look, the ultimate duration of the pandemic, let me give you an example. We're providing unemployment insurance assistance and contact tracing.

We're sitting here asking ourselves how long is this going to last. And we're asking ourselves how much more work are we actually going to win in this area. There's a threat of worsening unfavorable pandemic-related impacts. In my prepared remarks, I mentioned a significant drop in workers' compensation claims.

I think also in my prepared remarks, I talked about states that are pausing renewals and allowing citizens to stay on the health benefit programs without being challenged as to their eligibility. So those are some of the core programs that we have that we would expect to return to normal volumes at some point.

But we really can't predict when they will. You can talk about student loans. I mean those things, there are people who are in default of their student loans, but they're not being challenged at this point, another example. So we really don't know what kind of budget challenges we're going to face from our customers.

Our customers' tax receipts are under great pressure and that sometimes can impact us with respect to how much work they can give us. I mean there is some discretionary work that makes sense for them to do. But if the budget isn't there, then they can't do that.

There are risks of supply chain disruptions, including IT and personal protective equipment and obviously, legislation and government policies. The HAAS is a great question. We've wrestled with that. We gave you guidance for FY '20. And I think we've got a pretty good sense of what this next quarter is going to be, so through September 30.

After that, it's more of a question mark in our mind.

But Bruce, do you want to talk about HAAS a little bit?.

Yes. To add a little more color. So obviously, for all these programs, it's going to be a function of the pace at which these economies can reopen, obviously and the progression of the pandemic. And there's so much uncertainty around what the fall and winter might bring, it's difficult to speculate.

But when you think about HAAS, it's a program that's historically been delivered kind of three-fourth face-to-face, one-fourth paper-based, and 0% basically telephonic or video based, right? And it's a program that's delivered through about 150 clinical locations, many of which could have narrow corridors and adjacent assessment rooms.

We're obviously operating at any kind of volume and waiting rooms where people have to congregate where it's very difficult to operate at volume with respect to social distancing.

So I'm pleased that we've been able to work with our customers to think through alternate delivery models and actually move a number of investment types to telephonic based assessments. And we've been piloting that for the first time ever in the program.

Another historical constraint that we may have spoken to you about when we talk about video-based assessments was that historically, the networks into our assessment centers have not been sufficient to support a video assessment model.

And so there's a kind of a complicated mix, if you will, between operating procedures, IT infrastructure and then the third piece I'd make is policy that have to support a movement like this or a shift to more of a remote model.

Now it could be an excellent model for this program because some of those vulnerable populations that are served through the HAAS program are the long-term stick [ph], meaning it's difficult for them to often get into the location. So I think that we're on the cusp of reinventing the model a bit, but it's going to take some time.

The technology will be there first, but the policy has to catch up as well. The final point I'd make was in that regard is that historically, final determinations of an outcome of an assessment could not be made as my understanding based on just a telephonic assessment for certain categories of individuals.

So the policy has to be modified and then the operating model. And then obviously, the technology has to be in place. But I think that's the path towards resuming some level of volume in the program in combination with socially distance, face-to-face assessments at the appropriate time..

Got it. Thanks and Lisa well executed too, so I'll yield..

Thank you, Dave. Operator, next question please..

Okay, next question comes from Charlie Strauzer..

This is Brendan on for Charlie. Just looking at health and human services first, you see our model by probably $30 million, $40-ish million on top line.

Is there any way you could talk about breakdown, I guess, reading [ph] versus your own expectations, what you thought for the quarter? How much was new COVID work, for contract tracing or other things versus just an expansion within current Medicaid work just because of the spike in unemployment, etc.

more people looking for Medicaid?.

Yes. You're talking about US Health & Human Services. Yes, their COVID response work was about $35 million to $40 million in the quarter..

Okay. And then follow-up to that. What did you see with your Medicaid work? I know you did call out one customer who stopped doing renewals.

So was there some push and pull there with Medicaid?.

Let me just give you a little more color on that, Brendan, if I can. You may be aware that under the Federal Legislation, states were eligible for an increased match. We call it the Federal Matching Rate or FMAP rate of 6.2 points. And in order to do that, they had to suspend renewals.

There were a number of conditions that had been met, but the suspension of renewals was one of them. It's not uncommon to some of the things we've seen historically, where when in exchange for enhanced funding, there's like a maintenance and other requirements, so you can't degrade the program in any way.

So that was a string that was attached to the 6.2% increase in FMAP. And so the question then is, okay, how long will that last, was the 6.2%? I think the 6.2% increase is presently in place through December 31 this year. In some instances or scenarios, it could be extended.

So that was clearly linked to federal policy, and it's the right thing to do, right? You want to keep as many people on the program as you can.

It also means that as we go through a period where folks transition from unemployment and the loss of employer sponsored insurance into other types of health supports like Medicaid, we likely will see a period of relaxed eligibility rules, which could lead to backlogs in eligibility support requirements and ultimately, program integrity work down the road, way down the road as the economy recovers.

So that's the color on that and it was really just in one specific contract where that policy impacted the renewal volumes substantially.

The only other kind of Medicaid color I'd give you is, historically, our work in Medicaid is a very small component of total state Medicaid budgets often less than 10% is spent on administration, right? And so as you well know, the money is in the benefits.

And so states will pull a number of levers and we saw this during the global financial crisis in response to that. The first levers they'll turn to is the benefit packages. So maybe they'll look at prescription drug coverage, maybe they'll look at other benefit enhancements, like dental and vision and stuff like that, that they've added into programs.

Then they also look at expanded populations that they've offered benefits through higher income levels. So some of the states that have richer Medicaid programs might cut back on coverage models or create waiting lists.

And then, lastly of course states there's been some talk about this may want to negotiate provider reimbursement rates, whether it's directly in a fee-for-service model or through their capitated [ph] arrangements with their MCOs. So I feel like, generally, the work that we do is kind of one of the last things they turn to.

And as a consequence, like I said in my prepared remarks are affected more by policy effects than necessarily kind of client negotiations for extreme changes in programs..

Brendan, does that address your question?.

Yes, it does..

Great, excellent. Thank you. Next question, please..

[Operator Instructions] We have a question from Richard Close..

Great. With respect to the Census and I appreciate you giving the expected contribution through the remaining of the year, does that include or the recent chatter this week in terms of possibly ending the Census count early? Just curious your thoughts there..

Yes. Richard, I'll take that. Well, there's been talk about as you've noted about having the Census complete one month earlier than was previously discussed. And we're in dialogue with our customer and we've not been instructed at this time to make any kind of programmatic changes. And we'll follow their lead as that develops.

It's important to note also though that two other dynamics. One is that we don't handle the boots on the ground work, the door knocking efforts, what they call the enumeration work.

So to that end, we could be asked actually to ramp up outbound calling and/or retain staff a little longer as they would push toward that revised deadline in order to ensure they get the participation rates that they're seeking to achieve. Also, the second point I'd note is that it's a cost reimbursement contract.

And so any modifications to our time lines that it could ultimately trigger through the WARN Act notices and severance for employees would be considered reimbursable costs. So at this point, it's too early to really say what the financial impact might be and we'll continue to take guidance from our customer..

Okay. That's helpful. And Rick just talking about the financial uncertainty with states that you just mentioned. With respect to continued work or new work. Thinking about cash flows and DSOs and whatnot, any thoughts there in terms of the financial uncertainty in the states? And potential impact to cash flows maybe longer term.

I know you adjusted your expectations for this fiscal year. But obviously, there's a logjam on the federal side in terms of whether to give support to states, so just thoughts in and around that would be helpful..

Sure. One thing I do feel good about is our liquidity. As of today, our draws on our credit facility are $105 million and that gives us a lot of liquidity. So if our states are struggling, I don't think that will impact ultimately our liquidity. Now you obviously saw our DSOs grow and so they're getting a little slower in some of the payments.

I think that the thing I look to and that makes me feel good is that most of what we do is deemed essential and so they're going to have to use us for a great variety of the work that they do. Now obviously, some of the work is discretionary, as I indicated during a prior answer. So that will impact us going the other way.

The Medicaid program is a program that is administered on a state-by-state basis. So I think it's going to get into some policy issues, as Bruce talked about. But in the long term, obviously it's early days, but I think the fact that these are essential programs gives us some degree of insulation. Will our DSO continue to be higher? Yes.

That's possible. But it's only $9 million to $10 million per day. If it grows and it's $100 million worse, that's obviously not a good answer. But the interest on that is not a devastating impact to us.

So I do expect some slowness, but I do think that it's not going to affect our liquidity, which is ultimately what I think people should be most mindful of..

Okay, thank you..

Is that all questions, Richard?.

Well, one last one. In terms of the 3.5% organic growth excluding I guess the Census contract, whatever the dynamics are there, was that compared to negative 0.5% in the immediately preceding quarter? Just I want to - apples-to-apples..

Richard, we're going to file our Form 10-Q shortly after this call. There is an excellent table that is in the MD&A section that shows you exactly how we do that calculation. And it starts with the revenue in the comparable period. It shows you what the acquisitions and we do it by segment.

It shows you what the acquired revenue is, it shows you what the currency impact is and the plug is obviously the organic. So I think that, that's something that we've done for several years now, but I think that will give you exactly how we calculated that number..

Okay, thank you..

Thank you, Richard. Next question, please..

Next question comes from Donald Hooker..

Great. And I'll go off a little bit off script here. I don't think you guys talked about the November election. I know you've been asked this question in the past, but it's always good to revisit it. It's an important question.

When you look at your portfolio of projects, I mean, what would you guess would be the percentage that are discretionary or administration specific if there were a change in President?.

Donald, it's Bruce. Thanks for the question. And yes, we've actually thought about that very question and not specifically offered percentages as much as maybe some guidance as the way to think about it. I mean, as Rick said, a very large percentage of the programs that we administer are entitlement programs.

There are essential programs that trace back to very large pieces of legislation going back 40, 50 years and some more recently with the Affordable Care Act. We can take great comfort in that.

There are other programs, I would say, probably more related to the IT services part of our business in the US Federal area, that might be seen as more discretionary or priorities of existing administration, cabinet secretaries or undersecretaries, but that's a much smaller portion of our total revenue as a business.

So I thought I might just take a moment and talk about our thinking in the event of that Biden administration and walk through just a couple of points. Since you opened the topic, we've always said that Democratic administrations tend to spend more and outsource less, and Republic administrations is kind of the opposite.

So generally, our sense is that social welfare and importantly, public health programs would likely see an increase in funding under Biden administration. So these are far from normal times.

And there are a number of important macro issues to consider, such as what will the greatest priorities their government be at that time? How will demand for accountability and government execution, shape the decision making? How will budget constraints, particularly at the state level, like we've talked about effect procurement decisions? And what role could the private sector have therefore, as a partner in achieving those priorities in an accountable fashion? We know that access to affordable healthcare is and remains a priority of the former Vice President and he certainly advocated publicly to build on the Affordable Care Act and consider something like a public option as opposed to something like Medicare for all.

So I see the former Vice President is being very pragmatic in this area. And like President Obama, we expect that he would have a view of leveraging the private sector to meet to help insurance coverage goals but probably not emphasize that.

The Affordable Care Act created a number of opportunities for us at the federal level and the state level and we think that the course informed at a Biden health policy would take obviously, it depends on a number of factors, but probably the most important one, is the outcome of the Senate in November as well.

But if we think about what form that could take, some of the levers that might be pulled could include rolling back certain measures that were instituted during the current administration like winding down navigator programs, restricting funding for marketing and shortening open enrollment periods.

Secondly, providing maybe more certainty to governors considering Medicaid expansion funding and enhanced federal funding as well as maybe continuing the CARES Act enhancement of the FMAP that I mentioned earlier. And lastly, continuing the extraordinary investments in public health that we've seen over the past six months.

So I see Biden administration probably being focused on public health, like we said, coverage expansion and with all those factors taken together, we feel like we're in a solid position in the event that the election goes in favor of the former Vice President..

And maybe just hitting you back on that. Has there been any sense from you in anything that Biden had said publicly that he might roll back the OPM memo? I think there was some optimism over the long-term that the Trump administration sort of is giving states more flexibility to outsource, I think. We talked about this in prior calls, that memo.

Has there been any commentary from the other side around the state of that? Or not?.

No, no. The short answer is no.

And I think the point I would make there is look, in these kinds of tough budgets, it's obvious that kind of keeping as many of your costs variable as possible and not making long-term commitments to significantly enhance workforces to handle the kind of surge in demand that we're seeing across these programs is important.

So that type of flexibility is critical. And don't forget, the OPM memo talks about giving governors the option, the flexibility to either continue kind of current course and speed or use the private sector partners.

It's also worth noting that under the CARES Act, there was explicit language included to clarify that states could use private partners to help with unemployment, insurance, benefits administration.

And in fact, to-date I think the total number of states is upwards of 33 with I think a recent count, 19 democratic states and 14 Republican states that have implemented unemployment insurance expansion contracts using private partners.

So my view is that, our model is a model that really should enjoy bipartisan support because it's an effective model for the taxpayer and the citizens that are getting served..

Super. Thank you for the commentary..

Thanks Don. Next question, please..

Okay, next question comes from Brendan Popson..

Just a quick follow-up. Looking at - you gave some thoughts on FY '21.

Could you just speak to the organic growth ex-Census, kind of what your expectations are given the color you guys provided?.

Sure. It's Rick. Let me walk you through the baseline math that is in our thinking. I think if you take the midpoint of the FY '20 revenue guidance, that number would be $3.4 billion.

If you normalize for the Census contract, which is expected to deliver $500 million of revenue in fiscal year '20 and less than $70 million of revenue in FY '21, you really have a baseline of $2.97 billion. We are seeing some modest organic growth potential in FY '21.

I said that our expectations as compared to the consensus was that we could beat that revenue number that was in that consensus. But you have to bear in mind that the next fiscal year will be significantly influenced by volumes and the cadence of opportunities and possible erosion that we have. We do know that we will have COVID-19-related work.

We do note that, that is temporary. But I think we have expectations for modest growth next year..

Thanks, Brendan.

Did you have another follow-up?.

No. That's it. Thank you..

Great. Thanks. Before we wrap up the call, I just want to thank everyone for their patience this morning and dealing with some of the technical difficulties that we had early on in the call. So thanks again for the support. And with that, that wraps up our call for today, and have a great day..

Ladies and gentlemen, this concludes today's conference. Thank you for participating. You all may now disconnect..