Earnings Call Transcript - PPHC Q4 2025

Operator, Operator

Good day, and thank you for standing by. Welcome to the PPHC Fourth Quarter and Full Year 2025 Earnings Conference Call. 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 Mazzanti. Please go ahead.

Matthew Mazzanti, Speaker

Thank you, operator. I'm here today with Stewart Hall, CEO of PPHC; Roel Smits, CFO; and Thomas Gensemer, 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 may 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, Stewart Hall.

Stewart Hall, CEO

Thank you, Matthew. Good afternoon to everyone who's joined us. My name is Stewart Hall. I'm one of the Co-Founders and current CEO of PPHC, Public Policy Holding Company. I'm joined here today, as Matthew noted, by Roel Smits, our CFO; and Thomas Gensemer, 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 Roel 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, 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 have 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. On the state level and 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, accounting, et cetera, 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 of 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. The policy and strategic communications industry is highly fragmented, with a total addressable market of approximately $20 billion. Our recent expansion in 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 $186.5 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 in 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 8 offices globally and marked a massive leap forward into the complementary corporate communications 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 Cove 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 MultiState. 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. 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 PRWeek's Best Places to Work for the third consecutive year. Forbes Tate and Seven Letter were both named PRNEWS' Agency Elite Top 120, also for the third straight year. 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 with their 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. At the state level, the complexity is only compounding further. State legislatures introduced more than 135,000 bills last year. In just the first 6 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, health care, 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 governor 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. All of that will, in one way or another, filter into our corporate strategic communications practice through the natural interconnect activity 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. Roel will walk you 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 U.K.-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, with 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 the 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. The goal is straightforward, to 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 advisers sharper, 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 this is 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. 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 instruments. Employee ownership has led to the retention of culture, the 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 of brands to deepen both employee loyalty and, therefore, client loyalty. And we're continuing to broaden that base as we anticipate headcount growth via acquisitions, and we're committed to getting more equity in more employees' hands over that time. With that, I want to hand it over to Roel Smits, again, our CFO, who can dive deeper into the financial details for 2025. Roel?

Roeland Jozef Smits, CFO

Well, thank you, Stewart. My name is Roel Smits, and let me start with the key highlights for the year, and then I'll also take you through the numbers in a bit more detail. As Stewart already indicated, we're really pleased with the way that 2025 turned out financially. For the full year 2025, revenue increased 25% to $187 million. Of that 25%, organic growth contributed 6%, which was a really strong result. Adjusted EBITDA was a record $45 million, up 18% year-over-year at a margin of 24.3%. Then adjusted net income increased 32% to $37 million. This adjusted net income number provides the foundation for our adjusted EPS calculation and our dividend decisions. To the left bottom corner of the chart, we had a very strong free cash flow year, delivering $37 million of free cash flow. Moving to the EPS results, while our GAAP EPS was still negative, and I'll talk about that on the next chart, our adjusted fully diluted EPS was $1.39, up 25% versus the prior year. Finally, we proposed a final dividend of $0.24 per share, which brings the total dividend for the book year 2025 to $0.355 per share, reflecting a payout ratio of approximately 30%. Looking at the balance sheet, we ended the year with a net debt of $27 million. Following the completion of our U.S. IPO and Nasdaq dual-listing in January 2026, debt has now reverted into a net cash position. Now let's take a step back. What I think this new chart shows is clearly that we continue to combine strong top line growth with a consistently good level of profitability. As we mentioned earlier, the revenue in 2025 was up 25%, of which 6% was organic, which extended a 12-year long record of always reporting positive organic growth, especially in recent years supplemented by contributions from M&A. Below, you see the profit trend. The adjusted EBITDA increased to $45 million, up from $39 million last year, with a margin of 24%. This margin is slightly below the 26% that we reported in 2024 but still very close to the level of 25% that we've historically targeted. Key items explaining the difference between the adjusted EBITDA and the adjusted free cash flow are three things: it's interest, it's taxes, and a little bit of working capital investments. CapEx, on the other hand, is effectively zero in our business. So therefore, the conversion from EBITDA to free cash flow has traditionally been consistently strong. We've seen an average of 63% in prior years, but in 2025, it was as high as 82%. This strong result was driven by very attentive working capital management, lower tax payments, and the timing of our accretive acquisitions. Now let's look at the organic growth by segment because I think organic growth is one of the encouraging parts of our 2025 story and, of course, a key way how we add value. On the left, first in red, you find our overall organic growth picture. To the right, you can see how this is broken down into three segments that we're active in. First, in Government Relations, which by the way, is our largest segment, representing 58% of our business. Organic growth in 2025 was 4% for the year. That is very steady performance in this anchor segment and really in line with prior years, as you can see there. Then in Corporate Communications and Public Affairs, that segment has grown to 35%, while organic growth was 9%, which is really a good outcome. It reflected a significant rebound and a much stronger performance after a somewhat softer 2024, which was directly tied to the typical cycle that we see around the U.S. Presidential election. And finally, in Compliance and Insights Services, net organic growth was 22%, which is truly a spectacular performance again. That segment represents 7% of our portfolio and continues its multiyear double-digit growth streak and has really attractive recurring characteristics, continuing to exceed our expectations. When we put that all together, what you see is that all three segments delivered organic growth in 2025, underpinning the group's overall organic growth rate of 6% per year. Now let me go on this side to segment profitability in a bit more detail. Government Relations generated $108 million of revenue in 2025, up 6% from the 2024 results. The segment profit levels depicted in this table are at a level that is pre-bonus and pre-corporate overhead. In Government Relations, the margin remained very stable at approximately 45%. That's a very strong and stable segment for us with high margins and high client retention. Then in Corporate Communications and Public Affairs, revenues increased to $65 million, which represents a very strong growth of 79%. Obviously, a large part of that is M&A, most prominently the addition of TrailRunner. The margin of this segment increased significantly in 2025, going from 21% to 29%, supported by a recovery in volume that we saw already in the organic growth measure. Compliance and Insight Services had a truly spectacular performance again. Not only did it grow its top line by 22%, but it also increased its margin from 48% to 55%, aided by the technology that supports this line of business. So tying this segment performance now to the adjusted EBITDA we looked at before, at the bottom of the table, we report two remaining expense items. Both cost items increased in size in 2025. First, we restored our bonus pool to regular levels as a percentage of profit after we had a similar bonus pool in 2024. Secondly, we increased our corporate cost by 13%, reflecting the investments we've made in our platform and wanting to be ready to be a U.S. public company in 2026. At the group level, when you take the segment profit and deduct the bonus and corporate costs, we arrived at $45.4 million of adjusted EBITDA that I mentioned earlier. So now let's turn to cash flow because how does all this EBITDA convert to cash? Well, that's an area where we are particularly pleased with the outcome. Adjusted free cash flow increased to $37 million in 2025, up from $22 million in 2024. Three things explain the difference between adjusted EBITDA and adjusted free cash flow: interest, taxes, and a little bit of working capital investments. CapEx, on the other hand, is effectively zero in our business. Therefore, the conversion from EBITDA to free cash flow has traditionally been strong, with an average seen at 63% in prior years. But in 2025, it was as high as 82%. This strong result was driven by very attentive working capital management, lower tax payments, and the timing of our accretive acquisitions. As noted in the release, the cash generation by PPHC is typically weighted towards the second half of the year because annual bonuses are paid in the first half. The 2025 cash flow result is strong and consistent with the profile that we've seen in prior years. Now with all this cash generated, let's look at the impact on our balance sheet. On December 31, 2025, total debt stood at $47 million, whilst cash and cash equivalents were $20 million. That resulted in a net debt position of $27 million. If you compare that against our EBITDA, it's just a bit more than 0.5 turns EBITDA. We're not really leveraged by any standards. Not reflected here because it's not part of our 2025 results, but also noteworthy, is that we raised approximately $46 million in gross proceeds during our IPO early in 2026. Therefore, the net debt position that I just talked about has now turned into a net cash position. On dividends, as I mentioned earlier, we proposed a final dividend of $0.24 per share, together with the interim dividend that we already paid in the fall of 2025 of $0.115. Consequently, the total dividend for 2025 stands at $0.355 per share. The absolute dividends paid in 2025 will be $9.7 million, down from the $11.4 million that we paid in 2024, reflecting the dividend policy change we announced early in 2025. I think a combination of good cash flow generation, moderate leverage, and the capital raise completed in January gives us a very solid financial base to support our next phase of growth. Now I want to go into more detail regarding the historical M&A because I think that remains a very important differentiator in how we've built PPHC. Let’s look at this chart that depicts our track record since the London IPO in 2021. This slide shows six major acquisitions we've done in the period 2022 through 2025. We've been disciplined, adding approximately one to two companies each year, very much in line with our growth strategy of geographic and functional strengthening that Thomas will discuss further. Overall, we generally see that companies that join us enjoy an increase in revenue growth in year one and two, really benefiting from the network effect of being part of PPHC. Also, we observe an improvement in their margins stemming from three sources: benefiting from top-line boosting through network effects; stronger financial planning capability; and savings in back-office costs because, as a holding company, we take over some of the back opportunities. Now let me explain how we structure our acquisitions in a very intentional way, having learned from decades of experience between the three of us. There are similarities to the large holding companies' traditional transaction structures, but also some clear differences. Typically, we use an earn-out structure, which is an upfront payment today in combination with one or two earn-out payments staggered after a period. In our structures, that's typically a five-year earn-out deal. The way we structure our earn-outs means that payments will only materialize if the company grows its profit after the point of acquisition. If the company were to remain flat after acquisition, then no earn-out payment will be due. But here's where we're really different: First, we not only pay in cash but also in a mix of cash and shares. Secondly, we want sellers on the cap table to share some of those earn-out payments with next-generation management. This is important because, at the time those payments are made, the next-generation management will also become a significant shareholder in PPHC. Third, we make each earn-out payment conditional upon continued employment. Yes, this creates significant accounting complexity, but we believe it's the right thing to do from a commercial point of view. Adding it all up, a typical transaction has a duration of 7 to 9 years, which includes a 5-year earn-out structure plus a 4-year vesting tail on the final payment. This long-length deal is not for everybody. Some sellers may opt for a quick exit, for example, by accepting private equity offers. But there are certain entrepreneurs for whom this type of deal structure works really well because they can crystallize the value from the company while continuing to grow it as part of a larger platform. Across our acquired businesses, we've typically observed an increase of around 30% in our EBITDA post-acquisition as a result. Now, one question we often get is, with all these acquisitions and earn-outs, what's your total expected earn-out obligation? Well, that's a good question. Obviously, it's reflected in our balance sheet, but we also present the table you see here at the right bottom. At year-end, based on the latest forecasts of the companies under earn-out, we anticipate making approximately $78 million in future earn-out payments, with $45 million in cash and the remainder in stock. Please note that the stock portion will be priced at share price at the time of payment. Looking ahead, the way we think about our business remains consistent with what we have reported in our life as a public company in London since 2021. In general, we expect to continue growing revenue at an average organic rate of approximately 5%, supplemented by acquisitions. On the profit side, we generally anticipate our adjusted EBITDA margin to be around 25%. In 2026, we will experience the impact of U.S. public company costs and certain technology investments we've made. Our focus remains on client retention, new business generation, and continued cross-selling among the group's member companies. With the recent capital raise and Nasdaq uplisting now complete, we believe we enter this next phase of growth from a position of strength, with the balance sheet flexibility for earnings-accretive acquisitions and strong cash flow to continue investing in the business.

Thomas Gensemer, Chief Strategy Officer

Thanks, Roel. You've seen the numbers. Let me briefly take you inside on how we produce them. We operate a complementary portfolio of advisory firms, and we've focused our M&A agenda from the start on deepening specialization and broadening our geographic reach. Here on the next slide, we explain in simple terms how these specializations work together to address our clients' most urgent and complicated issues. As mentioned earlier in Stewart's comments, successful lobbying deployment increasingly requires careful coordination in communications and stakeholder engagement across the spectrum, across geographies, and jurisdictions. Versus our competitors, which include names you may be more familiar with like FGS, FTI, Teneo, and Brunswick, we've been very deliberate in our multi-branded strategy. There are several reasons for this, and it ties back to our shared experiences, particularly Stewart and I both sold businesses into big holding companies in previous chapters of our respective careers. The first reason here is about client conflict. Uniquely in the government relations and lobbying segment, every quarter we file activity reports on behalf of our clients, detailing every person making contact with government authorities and agencies and every dollar charged. Maintaining separate brands with appropriate divisions allows us to manage different sides of issues, handle competitive brands, and ultimately serve a broader set of clients than a single entity could. Second, and this is the keystone of our founding thesis over a decade ago, we retain our key leaders and employees. That sounds obvious, but client retention goes hand-in-hand with account retention. If we don't retain our teams, that 85% annual retention of clients wouldn't be possible. Ownership runs deep and broad with nearly one-third of our employees being active shareholders, and more than another third having been introduced to equity instruments through LTIP, options grants, and other means over the years we've been public in London. To our knowledge, we're unique in the sector for having this depth of employee ownership which is core to the model. Essentially, our model offers the best of both worlds: global scale and sophistication with the workplace culture and client connectivity of a more boutique advisory. As we broke out in the financials minutes ago, we report three clear segments here. Government Relations is our anchor. We like to call it our moat. This includes federal and state lobbying with issue advocacy across jurisdictions. If you spoke with us at the time of our London IPO late 2021, this was nearly 75% of the business. This is our bread and butter, our core, where many of our founders began. It's now 58% of the business. That's not due to shrinkage; it continues to grow healthily year-on-year, but we've built capabilities around it to make lobbying successful. Government Relations remains our most profitable division and enjoys the highest degree of client longevity and corporate connectivity. None of our other competitors are nearly as deep in this sector regarding bipartisan issue depth, etc. Next is Corporate Communications and Public Affairs. This includes everything from earned media, digital, social campaigning, crisis, and financial communications to internal communications, all that are non-marketing communications. We're not advertisers. Integration of these specializations is critical to the success of the policy work that was our foundation. Finally, we have Compliance and Insight Services, our third segment, which includes regulatory tracking and lobbying compliance services at the state and federal levels. These are largely subscription-based contracts and highly technology-supported independent products. It's our highest growth segment, and it's the place where AI is showing an immediate positive impact. Here, the client roster speaks for itself. We have more than 1,400 clients across the portfolio. The strong upward trajectory of our clients spending over $100,000 and $250,000 a year shows healthy gains. This has been a concerted effort as both geography and capabilities expand. Importantly, no single client in the portfolio represents more than 2% of the business. This lack of industry and client concentration is unique to what we're building at PPHC. Lastly and perhaps most enviably to our competitors, 90% of our work is retainer-based. Our clients renew at nearly 85%, giving us visibility into a large portion of next year's revenue. This is a significant advantage over other sectors that deal more with procurement, marketing time budgets, project-based work, and far lower renewal rates. Stewart mentioned our large total addressable market in his opening remarks. We've seen estimates far higher, up to 5x higher recently, but we prefer to be conservative. Moving from left to right on estimates, U.S. federal and state lobbying figures are reported due to disclosure laws we've described. The $6.5 billion to $7 billion is quite exact but highly fragmented, with thousands of individual firms registering and disclosing their clients. Last year, 2,400 firms filed each quarter in the federal space. Now looking at the revenue history, we are proud that we've always driven organic growth, even in periods when the market has not been up or our competitors have not been as fortunate. You can see at the bottom the ways we've added capabilities and geographies via M&A at a deliberate pace, always focusing on integration on both the client and talent side. California was the first move outside of Washington, D.C. years ago. Finally, I want to touch on our 2026 growth strategy. Our growth strategy is based on the commitment to our people, investing in the platform, and working with entrepreneurs and founders on succession planning, refreshing, and building their organizations for the long term. From the start, we maintained a referral bonus of 10% for the life of the contract on all internal referrals. You'd be surprised at how unique and powerful this simple program is. More recently, we created the role of Chief Client Officer to better coordinate referrals and facilitate joint pitches as an integrated group and deepen industry expertise globally. We launched cross-company practice groups to pursue business in energy, AI, health care, media, and transportation. You'll see more about that in our communications in the coming months. On M&A, we've never bought revenue for the sake of revenue. We buy for strategic fit, leadership quality, and geographic reach. Our recent Nasdaq listing has increased our profile and created more inbound opportunities. Beyond platform-level acquisitions, we also invest in our existing firms, adding capabilities and deepening specializations. The recent addition of WPI Strategy deepens our London team and adds a new specialization. We have seen significant average uplift in EBITDA across our acquired businesses over the years, but that's just table stakes. More importantly, we've successfully integrated new teams into the expanding PPHC growth story for the years to come.

Stewart Hall, CEO

Thanks, Thomas. Let me bring it together with what we think makes PPHC such a compelling story. First, stability. We operate in a steadily growing market with low political dependency, low client concentration, high retention, and approximately 90% of our revenue remains retainer-based. We're advisers, and our clients pay us largely on retainer, which translates to a highly predictable and recurring business with great visibility into future performance. Second, profitability. We operate on the high margin end of the world that we live in, consistently delivering around 25% adjusted EBITDA. We're a capital-light organization with minimal CapEx. Our significant non-cash charge rolls off at the end of this year, putting us on a clear path towards GAAP profitability in 2027. Third, growth. We have a proven disciplined M&A engine, with more than 50 firms in our pipeline. Our balance sheet has significant capacity, along with consistent and mid-single-digit organic growth in a market where our clients face increasing complexity. Lastly, our people. More than 135 employee shareholders and over 200 with equity instruments create an engaged team committed to the long-term success of the company. Being a public company allows us to bring people into the equity story, encouraging retention and maintaining client relationships. We're excited about where PPHC is headed. We've built something differentiated in a fragmented market with the stability of a recurring advisory business and the growth potential of a robust M&A engine. We appreciate your time today and your interest in our company, and we'll now take your questions. Thank you.

Operator, Operator

And our first question today will be coming from Jason Tilchen of Canaccord.

Jason Tilchen, Analyst

I really appreciate all the helpful color in the prepared remarks. One thing I want to talk about was the commentary around growth expectations. I believe you said you expect mid-single-digit organic growth over the next few years. Wondering how we should be thinking about some of the various building blocks to achieving this in terms of new client growth, more spend at existing clients, increases in retainer values and some of the other factors? And then specifically, as it relates to 2026, can you talk about some of the key puts and takes that may drive upside or downside relative to those targets?

Stewart Hall, CEO

Thanks, Jason. Appreciate you joining us today. I think you started out with a point on organic growth and expectations going forward, too, on pricing. So I'm going to hand that to Roel and let him start off.

Roeland Jozef Smits, CFO

Yes. So thanks, Jason. Good question. From a growth expectation perspective, first of all, we have a bottom level, what we call market growth, which provides a nice bottom in overall growth. On top of that, we like to grow slightly faster than the market, as we believe our efforts on cross-collaboration between our companies allow us to grow 1 or 2 points faster than the market. When you look at it from a client perspective, I think, Jason, we've always worked on a mix of upselling and adding clients. There will be no change on that going forward. The actual mix between increase in revenue per client and new clients varies a bit, but roughly, you could generally say it's 50-50. However, this will fluctuate once we add a new acquisition because that will change the client profile. We typically stopped disclosing those numbers because it's hard to extrapolate with all this M&A going on. I hope that gives you some color on how we continue to target 5% organic growth in the midterm.

Jason Tilchen, Analyst

Absolutely. And just one quick follow-up from me. In terms of the acquisition you announced today, it seems like obviously more of a tuck-in acquisition of specific capabilities. Maybe you could talk us through the balance between a deal like that? And as you're looking at what's closest to execution within the pipeline that you're consistently managing through, how the balance is between those smaller types of deals where you're adding a specific capability in a certain area versus a larger deal, like a TrailRunner that is more across sectors and geographies.

Thomas Gensemer, Chief Strategy Officer

Great. It's Thomas here, Jason. Thanks for the question. They are a nice tuck-in from a geographic standpoint, wanting for scale in London. Interestingly, this economic consultancy cuts across horizontal fields as well. So we've already seen increasing demand for their work for some of the public relations we do in California. It was a specialization but also a play for better scale. As we look at the next few deals, it will be that careful mix. We have a couple of larger deals in the pipeline, keeping in mind that Pagefield is not that big of a business in the grand scheme. We have a healthy mix typically in that $4 million to $5 million up to $25 million range.

Operator, Operator

And our next question will be coming from Scott Schneeberger of Oppenheimer.

Scott Schneeberger, Analyst

Congrats on your first quarter reporting after becoming publicly listed on the Nasdaq. I'll follow on Jason's question, specifically on WPI Strategy. Why this one now, and you guys did a nice job addressing the pipeline? Maybe a little discussion on the cross-sell potential here?

Thomas Gensemer, Chief Strategy Officer

Yes. I mean they have specific offerings that can work in any geography, and they have some highly credentialed economists. What was a public affairs business in London has sort of grown the specialization. As to why now, it was in conversations over recent months. It wasn't the big deal that could come from a Nasdaq listing, but we're just continuing with the game plan. We’ll have more to come on it, big, small, and otherwise. The essential thing is their profitability aligns well with Pagefield. They come from a similar partisan background, which makes it a nice add-on for Pagefield. Again, we'll be able to extend our European presence and cross-sell from California and beyond.

Stewart Hall, CEO

Scott, let me add just quickly. This is Stewart. As we look at why economic research is relevant, it goes back to the principle we discussed regarding the interplay between strategic corporate communications and public affairs communications, and even lobbying. Frequently, we've found that people with economic interests in those are actually companies that need to manage political risks and opportunities related to their investments. So, from private funds to public entities to banking institutions, many corporations are engaging in deeper due diligence on these matters, as these relationships can impact their economic prospects.

Scott Schneeberger, Analyst

Appreciate that both. I think Stewart probably next one for you. It's a two-parter. It's kind of two separate things along the same theme. I'm impressed with your mentioned 300 data center bills, 250 AI bills, and then in November, 36 governor races for grabs. That's just a lot at the state level. If you could just speak to what you all are doing to position around such opportunities, and then also just maybe a clarification for all: You highlight that you don't work on campaign elections. Maybe a little bit more elaboration on the work that you do regarding policy.

Stewart Hall, CEO

Sure, Scott. In short, we don't do campaign elections work for several reasons. It's financially lumpy and can introduce a certain level of animus that we prefer not to absorb as a company. More importantly, we pay close attention to election cycles since our view is that policy production creates both opportunities and challenges for our clients. We look at the landscape and see various drivers—such as AI, which is just one example—not to mention the infrastructure needed to support this transition. We closely monitor election cycles in states, which are critical for managing the challenges and opportunities facing our clients. Regardless of political outcomes, we maintain a focus on policy-level activities. This is why we maintain bipartisan lobbying assets. We're positioned to deal with the complexities our clients are facing.

Scott Schneeberger, Analyst

Great answer. Appreciate that. The last question I was alluding to, kind of AI-themed, I like that you all addressed gear that early on, Stewart, in your remarks. The investors are looking these days: Is AI a disruptor to a company or an enabler? I think clearly, it's an enabler. You did a nice job outlining that and adding that to the slide deck and it segues into you alluded to maybe, Roel, for you, technology investments in 2026, and then, of course, new U.S. public company costs. Can you talk about what the technology investments are and maybe what type of impact we should be considering regarding OpEx of the public company and the technology investments?

Thomas Gensemer, Chief Strategy Officer

I'll start with strategy. Most technology investments are related to data sets supporting our initial AI efforts from our internal development. We've entered a couple of contracts with data providers. We're also enhancing our offerings in investor services, which aligns with your question on states and the crowded policy environment at the state level. There are risks connected with capital investments against public policy. We have a unique asset in MultiState, with boots on the ground in every state, and many of these disruptions arise from technology, healthcare, energy, and AI at the state level. Our investment in data represents a couple of hundred thousand dollars.

Scott Schneeberger, Analyst

Great. Understood. Appreciate the thorough answers. They were very helpful.

Operator, Operator

Our next question will be from Raj Sharma of Texas Capital Bank.

Raj Sharma, Analyst

Again, congratulations on your first public call. I wanted to discuss the new capital. With the additional funding, what pace of acquisitions can we anticipate this year and into the future? I know you've covered this extensively. Is there a specific segment or geographic focus? Considering WPI is small, do you think it will be challenging to predict the size of the acquisitions? I assume you'll acquire opportunities that are appealing. Could you elaborate on the expected size?

Stewart Hall, CEO

Raj, I think we all huddled up shortly after the listing. We agreed that as Roel outlined and Thomas discussed, our M&A strategy has proved sound for building the company, both from a complementary portfolio standpoint and for its long-term stability. As for the pace of deployment, if it fits, we're interested. We continue to organically discover these opportunities ourselves, while others are brought to us from sell-side bankers, etc. The size will depend on the intake. If you look at WPI, it was a nice small investment that we could manage to grow our position in London. Conversely, the TrailRunner deal came through a sell-side opportunity that we felt was an excellent fit.

Roeland Jozef Smits, CFO

Yes, we'll continue to be disciplined strategically and financially. You wouldn't expect to hear anything else from me as a CFO. But we have a model laid out, and those parameters remain unchanged as we pursue acquisitions. We're targeting a pace similar to 1 to 2 deals a year as we've seen in the past.

Thomas Gensemer, Chief Strategy Officer

Exactly. We previously mentioned that a typical pace would be two to four acquisitions in that range. We will broaden our appetite geographies-wise but won't act rashly. Typically, we're looking at deals ranging from $5 million to $20 million in revenue, but the focus will always be on those that can profitably be integrated into our portfolio and share the regularity and consistency we cherish.

Raj Sharma, Analyst

That was super helpful. Just wanted to get a sense of, given your acquisition strategy, do you foresee needing extra capital again? Or do you plan on funding those with your yearly high internal cash flow?

Roeland Jozef Smits, CFO

We should be able to fund that primarily with internally generated cash plus what we have on the balance sheet. However, if future cash needs arise from a sequence of acquisitions, we might explore our debt instruments as we've successfully done in the past. We've found that debt is highly flexible, allowing us to acquire and then quickly work to repay it.

Raj Sharma, Analyst

Got it. Just lastly for me, with the first quarter is almost over. How have your government and public affairs and corporate business trends been holding up, given the recent heightened geopolitical volatility?

Stewart Hall, CEO

Q1 has started sort of in line with expectations. We'll discuss that more in the future release, but that's all we can say about it right now.

Operator, Operator

And our final question today will be coming from the line of Samuel Dindol of Stifel.

Samuel Dindol, Analyst

Congratulations on the results. I have two questions. First, there's been a notable increase in clients, specifically those spending over $100,000 and $250,000 annually. I'm curious about how cross-selling is progressing, especially with TrailRunner now that it has been available for about a year and has significantly enhanced our corporate communications capabilities. Second, looking at your experience as you grow the number of operating companies, do you believe there is an ideal number to maintain? At what point might they become too large, and how do you intend to manage that?

Roeland Jozef Smits, CFO

Okay. Let me take number one, Sam. The number of clients indeed spending more than $100,000 or even more than $250,000 has increased. There are two reasons for that. First, TrailRunner has been an excellent new business driving culture. They've been contagious, and John Green is using that to help foster collaboration. Second, TrailRunner serves generally larger clients. When they onboard a new client, many times they begin with a monthly retainer of $50,000, $75,000, or even $100,000. Those are substantial numbers, which have helped our increase in clients spending over $100,000 annually.

Thomas Gensemer, Chief Strategy Officer

On the second question, even as we see WPI move in to bolster the scale at Pagefield, we realize there's a limit to numbers. Part of the system will be done through succession planning of founders exiting the business. We're careful not to rush things, considering the health of existing businesses we're acquiring. The real challenge is in the development of specialty skills across our portfolio of 12 brands. Will there be a magic number like 20? It really depends and remains to be seen, but our model is performing far better than others.

Stewart Hall, CEO

Yes. And Sam, I'd add to that—this is Stewart—that we also have an ongoing commitment to invest in our existing brands, whether through key talent acquisition, especially those who can bring in clients or client goodwill, which we really value. So again, I don't know the right number, but there will be ongoing commitments to talented teams or tuck-in acquisitions that help us grow our service offerings.

Operator, Operator

Thank you. I would like to now turn the call back over to Stewart Hall, CEO, for closing remarks. Please go ahead.

Stewart Hall, CEO

Thanks. I think we've covered everything today. We appreciate your time. The setup was a bit long, probably longer than you will hear in the future. We felt it was important that we provided a complete background on the company for our first call. We appreciate everyone's time and attention today, and we look forward to connecting with you regularly as we move forward. Thank you.

Operator, Operator

Thank you all for attending today's conference. You may now disconnect.