Public Policy Holding Company, Inc.

Good day, and thank you for standing by. Welcome to the PPHC fourth quarter and full year 2025 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker for today, Matthew Manzantini. Please go ahead.

Thank you, operator. I'm here today with Stuart Hall, CEO of PPHC, Ruel Smith, CFO, and Thomas Ginsmer, Chief Strategy Officer. A press release detailing our full year 2025 results was released recently and is available on the investor relations section of our website. Before we begin, I'd like to remind you that during this call, management will make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties are detailed in the company's filings with the Securities and Exchange Commission. The company undertakes no obligation to update any forward-looking statements whether as a result of new information, future events, or otherwise. In addition, during this call, we were made to refer to certain non-GAAP financial measures. A reconciliation of these measures to the most directly comparable GAAP measures is available in our earnings press release, which can be found on the investors section of our website. I will now turn the call over to our CEO, Stuart Hall.

Thank you, Matthew. Good afternoon to everyone who's joined us. My name is Stuart Hall. I'm one of the co-founders and current CEO of PPHC, a public policy holding company. I'm joined here today, as Matthew noted, by Roel Smits, our CFO, and Thomas Gensmer, our Chief Strategy Officer. I'd like to start off by saying this is an important milestone for PPHC. This is our first earnings call as a NASDAQ-listed company, and I want to welcome all of our audience who's joining us and many of you who are joining us for the first time. We are pleased with the response from the U.S. investment community, Being public on NASDAQ gives us access to the capital markets that match our scale and our growth ambitions, particularly on the M&A side, which Thomas and Raul will cover shortly. But it's also worth stepping back to explain why we built the company in the first place, because the context is important for investors hearing from us for the first time. So why did we build PPHC? Well, from day one, our mission has been largely unchanged. That was to be the preeminent global strategic communications provider that uniting a diverse group of specialists around the world for the collective success of our clients, employees, and shareholders. We started with a foundation in government relations and public affairs. That was our common experience amongst the founders. But we recognized early on that the marketplace was changing in ways that demanded a different kind of platform. A few dynamics in particular stood out, but I will run through three that we found and still find are the most significant factors that affect the marketplace that we're addressing. First, policy complexity and its impact on business has been intensifying for a number of years. For over 40 years, government has come into every aspect of the economy. When public companies identify key risk factors today, regulatory and legislative risk, is consistently among the top concerns of public and private companies. And that complexity is no longer just federal. In the state level, in the international level, it's a multi-jurisdictional challenge. Our clients are often dealing with the same issues in Washington, Sacramento, Brussels, and London simultaneously. Second, reputation and policy have been converging. In a digital world driven by social media, political problems become instant reputational problems, and reputation problems become instant political problems. Companies can no longer separate government relations from corporate communications. They need both, and they have to work together in tandem. Third, clients need integrated specialist advice, not generalists, but the deep specialists who can work across jurisdictions and discipline as one team. The large marketing holding companies tried to build this. but their attempts often faltered, whether for wrong cultural fit, fragmented acquisitions, or lack of real integration. That opened the door to a different kind of model, the PPHC model, and that's what we've built and continue to build. These dynamics are exactly why we have constructed PPHC the way we have, and they continue to drive our growth and our differentiation in the market today. So where do we stand today? We operate a complementary portfolio of strategic communications advisory firms across government relations, corporate communications, and public affairs, compliance, and insights. Our firms operate in the high-end, high-margin segment of the market. These aren't commoditized, consumer-oriented marketing services. They're trusted advisory relationships driven by C-suite adjacent budgets, existential corporate budgets, so to speak, just like legal, accountancy, etc., professional services that companies have to have in their budgets year in and year out. As such, we service over 1,400 clients, including nearly half the Fortune 100. Approximately 90% of our revenues come from retainers or subscriptions. Client revenue retention runs around 80% to 85% on a dollar basis, and we're not politically cyclically dependent. We don't do campaigns and elections work. We relish policy opportunity, regardless of which side of the spectrum it comes from, because that's what drives our clients' needs and drives our profitability. The opportunity for scale is enormous in our market. Policy and strategic communications industry is highly fragmented with a total addressable market of approximately $20 billion. Our recent expansion into corporate communications has significantly broadened that TAM, and so we're just getting started. Just a few highlights in 2025. 2025 was a strong year for PPHC. Revenue grew 25% to 160 86.5 million. Organic growth was 6%. And just a side note that not a single year in PPHC's history have we ever not had positive organic growth. Our adjusted EBITDA margins came at around 25%. On the M&A side, we completed two acquisitions during the year. Trailrunner International joined in the second quarter. This brought 80 professionals across eight offices globally and marked a massive leap forward into the complementary corporate communication space, as I mentioned earlier. They are a perfect example of the convergence of some of the trends we've talked about. They serve major corporations at their most critical moments and at a premium price point. In August, we added Pine Coast Strategies in Austin, led by former Texas Land Commissioner George P. Bush, giving us a third state-level government relations operation alongside California and Massachusetts, in addition to our 50-state coverage we already provided through multi-states. On the people side, we brought in John Green as the Chief Client Officer, and he's already driving more referrals between our firms and a sharper focus on joint pitches for broader mandates. We strengthened our board, announcing two new independent directors, Kathleen Casey and Charles Brown, and we're very proud to have them with us. And our headcount has now crossed 450 employees through 2025. Our firms continue to be recognized. Seven Letter, a public affairs firm based in Washington, D.C., was named one of PR Week's best places to work for the third consecutive year. Forbes, Tate, and Seven Letter were both named to PR News' Agency Elite Top 120, also for the third straight year. And many of our people have been recognized for various impressive industry awards. And on a consolidated basis, our three government relations brands remain in the top 25 federal lobbying properties in the United States by disclosed revenue. Finally, of course, we completed the NASDAQ listing, raising approximately $46 million in gross proceeds. Looking at the year ahead, I think the operating environment for our business is extremely favorable. Starting with the macro picture, federal lobbying spending hit a record $5 billion in 2025. The number of organizations engaged in lobbying itself rose by 12%. That's the core market that we started in and we continue to serve, and it continues to grow. Congress has a full plate. There are major debates and pending policy developments in energy, transportation, health care, and, of course, artificial intelligence. From the executive branch, companies are navigating an extraordinary pace of change. Since January of last year, there have been more than 240 executive orders issued, touching everything from trade to housing to cybersecurity. And at the state level, the complexity is only compounding further. State legislatures introduced more than 135,000 bills last year. In just the first six weeks of 2026, over 300 data center bills were filed across 30 states. More than 250 AI-related bills are in play in the states. Healthcare, energy, financial services. States are filling the gap where federal policy remains uncertain or undefined. and our clients have to be engaged at both levels simultaneously. In November, 36 governors' races are up. Every one of those debates becomes amplified as a result. All in all, in our core business, we see a really positive environment for the coming year, and all of that will, in one way or another, filter into our corporate and strategic communications practice through the natural interconnectivity with our policy practices. We've been clear from the outset that we intend to deploy the capital we raised at IPO in a disciplined and accretive way. We take a long view of these transactions. We're all walking through the actual structure of our general deals, but the key point is that we're not looking for quick flips. We're building a platform for the long term, and our acquisition approach reflects that. Today, we announced the acquisition of WPI Strategy, adding to our London subsidiary, Pagefield. WPI is a UK-based public affairs and economics consultancy, research-driven advocacy and economic modeling being their core. It deepens our presence in London, and combined with our PageField platform, it now has over 60 client-facing professionals, and the transaction is immediately earnings accretive. It's exactly the kind of complementary deal that builds on our set of tools that we deploy for our clients. More broadly, our M&A pipeline remains very active. more than 50 firms under consideration by us at any given stage. It's a really interesting time in the market. We're looking at a mix of deepening specific states and specialty offerings here in the U.S. and broadening a set of European, Middle Eastern, and Asian targets, driven by where our clients are and where they need to be. Think data centers, AI, and financial services as downstream of these potential acquisitions that we're looking at. A few words on AI. Our business is fundamentally about relationships, both in client service execution and business development. Deep relationships, experience, and expertise. That's not something that technology is going to replace. That said, we also are investing meaningfully in AI across the platform to make our people more effective. We've begun deploying tools that automate legislative and regulatory monitoring across all 50 states, the federal government, and over 100 international jurisdictions. Surfacing changes in real time. Better tools for our practitioners. Not to replace the advisory relationships at the heart of what we do, but again, enabling our practitioners to be more efficient and serve clients better. Goals straightforward. Free our people from the mechanical parts of the work so they can spend more time on strategic counsel and relationships that our clients value and pay us for. We're not using AI to replace advisory. We don't think that's possible. We're using it to, again, make our advisors sharper and faster and better for our clients. As far as people, I think it's very important to note that employee ownership is a cornerstone of how we constructed PPHC from its inception 11 years ago. And it's something I and all of our people feel extremely strongly about. Our people are 100% the key to our success. They are our number one asset. We have to keep those people and attract new talent. and we have to approach that a bit differently than some of our peers. So we believe deeply in the equity story as a retention, recruitment, and M&A tool. We have more than 135 employee shareholders out of our employee base of 450 people. Beyond that, there are an additional 200 people across the group that have some form of equity instrument. Employee ownership has led to the retention of culture, creation of tangible ownership, and a stable means to the transition of leadership in these businesses over time which is so extremely critical. We use equity provision across our portfolio brands to deepen both employee loyalty and therefore client loyalty. And we're continuing to broaden that base as we anticipate headcount growth by acquisitions. And we're committed to getting more equity and more employees hands over that time. With that, I want to hand it over to role Smith's again, our CFO who can dive deeper into the financial details for 25. Well,