Public Policy Holding Company, Inc.

Ladies and gentlemen, thank you for standing by. Welcome to PPHC's second quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. And to withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would like now to turn the conference over to Matthew Mazzanti, Chief Administrator Officer. Please go ahead.

Matthew Mazzanti, Chief Administrator Officer Thank you, operator, and good afternoon. With me today are Stewart Hall, our Chief Executive Officer, Roel Smits, our Chief Financial Officer, and Thomas Gensemer, our Chief Strategy Officer. Before we begin, please note that the following remarks and presentation include forward-looking statements and non-GAAP financial data. Forward-looking statements about the company, including those related to earnings guidance, are subject to uncertainties and risks, factors addressed in the company's SEC filings. For further details of the non-GAAP financial figures discussed in this presentation, including reconciliations to the nearest GAAP figures, please refer to the financial appendix in the investor presentation available on our website, investors.pphcompany.com. With that, I'll now turn the call over to Stewart.

Thanks, Matthew. Thanks to everyone who's joining us this afternoon. The first half of the year developed broadly as we expected, and we're pleased with both the performance of the business and the progress we've made against our overall strategy. At the highest level, revenue in the first half increased 16.3% year over year to $102.3 million. That was organic growth included in that of 4.4%. Adjusted EBITDA increased to $23.4 million, up 9.3%, representing a margin toward the top end of the range that we previously had communicated. Just as importantly, the business strengthened as it has progressed, as it usually does. In the second quarter, we delivered revenue of $52.1 million, continued organic growth, and an adjusted EBITDA margin of 23.5%. An improvement from the first quarter and consistent with the seasonally adjusted numbers that we discussed on our last call. Following this performance in our recent acquisitions, we're raising our full year revenue and adjusted EBITDA guidance. Roland will take you through that more thoroughly in our quarterly results and revised outlook and the underlying drivers in greater detail shortly. Halfway through the year, We're delivering how we said we would. The outlook for the business has strengthened and we retain the balance sheet capacity to continue executing our strategy. Additionally, on results, we reported a gap loss of $3.7 million in the quarter, a nearly 35% improvement year over year. But I want to take a moment and really discuss that number because the direction of travel is significant here, and especially as we enter the second half of 2026 and the beginning of 2027. The story behind it hasn't changed, but it's worth repeating plainly. The largest difference between our GAAP and our management P&L is the approximately $30 million a year non-cash share-based comp charge that resulted from our 2021 London listing, subjecting shares issued at that time to employee owners to a five-year vesting schedule. This charge will fully amortize at the end of this year, and we are looking forward to it dropping off and the positive effect we believe it will have on our GAAP financials. Roll again, we'll jump into this in a bit more detail. On M&A, we continue to execute a discipline strategy. We closed on three deals this year, including our long-desired presence in Florida with the addition of the advocacy partners on August 1st. All three transactions followed the same principles we stick to in M&A. We added a differentiated capability with each acquisition. They were margin accretive. They extended our reach where clients need us, and they link future purchase consideration to future performance. Thomas will go into these in more detail as well toward the end of the call. Before we go into the financials, a word on AI. It's a question that we hear from investors often and it deserves a very direct answer from us. We believe PPHC is very well positioned for the continued adoption of AI across industries for three main reasons. One is our business structure. Two is the demand that AI clients and AI issues are generating for our services. And three, the operating leverage that AI itself provides for our senior heavy workforce. First, let's talk about structure. We don't do hourly billing, but in a very, very small percentage of our engagements. By default, firms that bill by the hour are built on a pyramid of junior staff that sell output that any capable model can reproduce now in seconds, and they are in an existential period and they need reinvention. That's not our model. Roughly 90% of our revenue is retainer-based and our annual client retention of that revenue is 80 to 85 percent. That remaining revenue that we do take in on top of that is project based. And but what that just means is that it's a short term engagement by design tied to deliverables, but it's not billed against hours. Our clients by senior counsel that drives outcomes and on issues that are vital to their businesses, not billable time, not consumer oriented campaigns and not markup on entry level hours. There's no pyramid at PPHC for AI to compress. Unlike sectors where the fear is shrinking the fee pool, our core market's expanding. Federal lobbying spending set a record last year, roughly $5 billion, and grew at its fastest pace since 2008. Second, demand. When we look at AI, we don't see a threat to defend against. We actually see a tailwind driving our growth. AI is now one of the most active policy issues in the country at every level of government. At state level, we've tracked over 1,800 AI-related bills in 47 states, and that's a 12-fold increase over three years. Since 2025, our firms have been engaged by roughly 60 new clients whose core business itself is AI. That's everyone from model developers and AI-native companies to the chip designers, hyperscalers, and data center builders behind them. Companies that need some subset of our services often very early in their journey. And also, it's important to know clients across energy, technology, healthcare, and financial services are retaining us to work on the same issues because AI now touches their regulatory agenda whether they build the technology or simply deploy it. And third is operating leverage. We're deploying AI workflows inside our own business so our senior advisors spend less time assembling research and more time on judgment, strategy, and the advocacy services clients hire us for. Virtually none of our revenue depends on reselling the hours that AI eliminates for other firms. Commodity work gets automated. The work we do, senior-led, built on client trust, is worth more as AI proliferates.