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President and CEO Bruce Caswell detailed the opportunities from the new legislation, projecting it could lift the U.S. Services segment to mid-to-high single-digit growth, primarily in FY2027. He emphasized MAXIMUS's competitive edge from its scale, existing infrastructure, and conflict-free status, which is crucial for work requirements. Caswell also confirmed an increased focus on the defense sector, leveraging core capabilities and recent certifications. CFO David Mutryn explained it was too early for specific FY2026 segment guidance but noted that lower interest expense could provide a significant tailwind to EPS.

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CFO David Mutryn explained that the updated guidance reflects Q2's overperformance while maintaining a cautious outlook for the second half due to the dynamic environment. He noted that Q3 and Q4 results could be similar. President and CEO Bruce L. Caswell attributed the exceptional margins to high volumes and successful technology investments in AI and automation under the Maximus Forward initiative, which boosted productivity. Caswell also confirmed the pipeline remains strong, with proposals up 25%, despite some slowdowns in civilian agencies that have led to beneficial contract extensions for incumbents. Finally, Mutryn stated that the organic growth in the Outside the U.S. segment was primarily driven by the new Functional Assessment Services contract in the United Kingdom following the successful reshaping of the international portfolio.

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CEO Bruce L. Caswell and CFO David Mutryn addressed the questions. Mutryn explained that Q1's outperformance, combined with share repurchases and divestiture accretion, drove the guidance increase, clarifying it wasn't a pull-forward. Caswell stated that the core business is resilient to administrative changes, with deal flow remaining normal, though the company maintains a cautious outlook. Mutryn then detailed the margin expectations for each segment, attributing Q1 variances to anticipated seasonality in U.S. Services and temporary high volumes in U.S. Federal, and explained the higher tax rate was primarily due to non-deductible divestiture charges.

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CEO Bruce L. Caswell stated the GAO is expected to respond to the CCO protest by September 30, but this does not halt the procurement process. He emphasized Maximus's focus on service delivery and pursuing a fair outcome. CFO David Mutryn added that while the CCO contract has a low single-digit margin, its loss would have a larger impact due to indirect cost absorption, though it's not expected to significantly alter the FY2025 view. Regarding guidance, Mutryn explained that FY2025 revenue is expected to be similar to the newly raised FY2024 forecast, with the moderation of high-margin, non-recurring Medicaid redetermination volumes from the U.S. Services segment being the primary factor.

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CEO Barry McCarthy explained that Data Solutions growth is fueled by successful campaigns helping financial institutions grow low-cost deposits and by expansion into new non-FI verticals. He highlighted the platform's ability to provide a trackable ROI as a key differentiator. Regarding CheckMatch, McCarthy clarified that it is a network similar to Deluxe's own Deluxe Payment Network (DPN) and will be bolted on to expand the digital lockbox network, thereby increasing scale, reducing paper-based payment costs, and creating a larger platform for future growth.

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President and CEO Barry McCarthy clarified the Q2 outlook, expecting continued strength in Data, softness in Print due to promo timing, and low single-digit growth in B2B and Merchant. Regarding the Data segment's success, he attributed it to a massive proprietary database combined with advanced AI, which allows Deluxe to effectively prove ROI and win campaigns in the financial institution channel and other high-value verticals.

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CEO Barry McCarthy attributed the Data segment's success to its cloud-native data platform, which allows it to quickly meet strong demand from both financial and non-financial institution clients. For Merchant Services, he cited the potential to win more banks and expand into new verticals, enabled by the Deluxe Payment platform, as key drivers toward the 2026 growth goals. CFO Chip Zint detailed the 2025 cadence, expecting B2B and Merchant revenue growth to start low and accelerate sequentially, while Data remains strong and Print continues its predictable decline. Margins are expected to remain stable across segments, with B2B showing expansion through the year.

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President and CEO Barry McCarthy attributed margin strength to broad operational efficiency, noting an 11% year-over-year reduction in corporate expenses. CFO Chip Zint added that these results stem from the North Star program's execution. For the Data segment, Zint cited a favorable campaign mix and internal efficiencies as key drivers. Regarding debt, Zint confirmed plans to address the 2026 maturities in the near term, likely in the current or next quarter, to avoid them becoming current on the balance sheet.

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CFO David Gardella and President of Global Capital Markets Craig Clay addressed the questions. Gardella explained the Q3 transactional guidance reflects sequential growth but maintains caution due to timing visibility. Clay provided detailed color on the improving, yet uncertain, IPO and M&A pipeline. Gardella outlined expectations for software products like ActiveDisclosure and ArcSuite, continued print declines, and reiterated long-term goals focused on a software-mix shift and margin expansion. He projected full-year free cash flow to be similar to the prior year. Both executives affirmed DFIN is maintaining strong market share in its target market of large, high-profile deals.

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CFO David Gardella attributed the margin beat to three main factors: better-than-expected results from permanent cost reduction actions, strong operating leverage on higher-than-guided revenue, and a larger-than-anticipated reduction in bad debt expense. For Q2 guidance, Gardella detailed expectations for continued growth in ActiveDisclosure, tough comparisons for Venue, a modest decline in Capital Markets Compliance revenue due to lower print volume, and continued benefits from the Tailored Shareholder Reports regulation in the Arc Suite.

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CFO David Gardella explained that Q3 EBITDA margins were negatively impacted by a year-over-year variance of approximately $6 million in compensation-related accruals. He noted that Q4 guidance reflects lower transactional sales and the lapping of a large project from the prior year. The SG&A increase was primarily driven by a one-time $2.8 million accelerated amortization charge for a discontinued software product, which he advised removing for future modeling.

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CFO Brian Miller explained the updated R&D guidance reflects several factors: a planned shift of personnel from cost of sales, the expensing of previously capitalized development costs, and a reclassification of stock-based compensation for R&D staff from the G&A line to the R&D line. This latter change impacts GAAP R&D but not the non-GAAP figure.

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CEO H. Moore explained the year-over-year EPS dilution impact is approximately $0.28-$0.30, resulting from the company's higher stock price, related option exercises, and the full-year effect of the convertible debt. He emphasized that the company's underlying share issuance is modest, at less than 0.4% of outstanding shares, and that Tyler stopped issuing stock options in 2022 in favor of share-based awards.

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CEO Lynn Moore identified a desire for local control as a historic reason for hesitation. She explained that this is being overcome by several factors: the growing risk from aging on-premise infrastructure, increased cybersecurity threats, and the powerful 'referenceability' of seeing neighboring jurisdictions successfully and efficiently migrate to Tyler's cloud solutions.

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Executive Brian Bonnell stated the company's target net leverage ratio is around 2x, which the JV proceeds will help achieve. Executive Vivek Jain added that while some debt is appropriate, it shouldn't be much above 2x. On asset sales, Vivek Jain confirmed they remain an option for value creation once assets are performing predictably. He also noted that the 2025 guidance incorporates progress toward the company's 40% gross margin goal, which is heavily dependent on plant and logistics consolidation.

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