Conference Transcript - PPHC 2026-08-12

Jason Tilchin, Analyst — Canaccord Genuity

All right. Good morning, everyone. I am Jason Tilchin, Senior Research Analyst at Canaccord Genuity. It's my pleasure to welcome Stuart Hall, the co-founder and CEO of Public Policy Holding Company. Stuart's led the business for more than a decade, prior to which he co-founded the lobbying firm The Federalist Group, which was eventually acquired by Ogilvy. Stuart, always a pleasure to be with you.

George Stewart Hall, CEO

Great. Great to be with you, Jason. You know the company well, and we appreciate your coverage.

Jason Tilchin, Analyst — Canaccord Genuity

Absolutely. And there's a lot to get into. You just reported future results, which we'll touch on in a bit. But I think actually more so than the background of the company, I think a little bit of background on your personal experience, your history in the lobbying industry is a really helpful perspective to then sort of get to how you decided to come up with the idea to form this business.

George Stewart Hall, CEO

Yeah. So my background is I started in the U.S. Senate in 1992. And I went out like most people who decide they're going to make a career in Washington ultimately decided that I'd go out into the lobbying community. Some of that was obviously driven by my personal impetus. My wife was getting ready to want to have a child, and we couldn't afford it on two congressional salaries. So in any event, 1996, I left Capitol Hill, went out as a solo lobbyist, and then eventually got with three other fantastic partners and built up a very significant firm, the Federalist Group, that during a period of really aggressive acquisitions by marketing communications and public relations companies in the city, we got caught up in that wave and sold, had a very successful ride. It was actually Ogilvy Public Relations owned by WPP that was our immediate purchaser and parent company. But during that kind of period of really the time I started in business tonight from 96 to really about the point of our sale in 2005, I noticed that the business had changed substantially. And, you know, lobbying slash government relations, however you want to define it throughout the world, especially inside of Washington, was really based upon personal relationships. And it really was. You had to know the policymakers. They had to have your trust. And at the time, you know, corporations primarily who were there and had been on the ground in D.C. for many years with their own offices. They hired lobbyists as force extenders. And with the right team and the right collection of people with the right institutional knowledge and relationships, they could do amazing things. And then as the internet really came into its own as an information tool for the public and, you know, bandwidth got bigger and information really started filling up the system, what began to change was is that what we found is people that were on-the-ground practitioners is that we couldn't move policymakers as easily to do things as we could when really the coverage of what we were doing every day was limited to one page of the Washington Post, the federal page. And they never really talked about who was representing who, even though it was disclosed, etc. It was really about the policies that were coming out of committees and Congress and what the White House was doing. And so it really operated very much under the radar screen. But what happened was, is the public began to get more knowledge about what was going on inside the institutions of Congress, inside administrations, in state government capitals. Otherwise, what was being considered? Who was for what? What was your congressman or your local representative on these things? And as a result, the public began to form its own opinions about, with knowledge, about whether they liked something or they didn't. And so as a result, if you couldn't really align public opinion, which really started with originally earned media coverage, you could not get a policymaker to act on a significant issue anymore. And that was a real seminal moment. And we started seeing where our clients were not transitioning away from contract lobbyists, but that they were spending more and more and more money on all of the ancillary things to make the lobbyists successful. So a room that was one time dominated for a weekly meeting by a bunch of lobbyists now had a media consultant in there, had a pollster in there, had a number of other types of consultants, all of which were trying to create an orchestra, so to speak, to make the client successful. And so really realizing that the spend was exploding exponentially, take that at the same time with the growth of government, which really, whether it's a spending metric, regulatory metric, whatever, has grown unchecked worldwide for 30-something years. And realizing our clients had a deep, deep need for scale and simplicity. Things started drifting out into the states around 2009, 10, et cetera. State capitals like Sacramento became much more important because if you couldn't get what you wanted in Washington, you'd just go to the fifth largest economy in the world, largest U.S. economic engine. California, if you captured it, you would succeed. So that really was what led to the genesis of PPHC, which was the idea that our clients needed scale, they needed geographic reach, they needed a bucket of tools that could make them successful that you could bring together, and you had to simplify their lives and try to capture more and more of that spend in one place rather than the kind of fragmented one-off acquisition and use of those services that they had previously engaged in. So really that was the genesis of it.

Jason Tilchin, Analyst — Canaccord Genuity

Okay, very helpful over here. We're going to dive into some of the background on that in a bit more detail. But just to fast forward, you founded the company in 2014 and then in 2021 you decided to list over in London and then fast forward again earlier this year, you decided to list here in the U.S. Maybe just talk to the rationale for going public in the first place and then shifting.

George Stewart Hall, CEO

And again, lessons learned, observations. You know, one of the things that, in a people-based business, we are a people business that faces very important clients every day. Generally, all of our budgets come from C-suite adjacent budgets. So we deal with existential issues and we deal with important corporate officer players and oftentimes CEOs in our client mix. So really, you know, when you look at that human capital as being your engine, you know, we don't make widgets. You have to understand maintaining your people with sector expertise, maintaining people with key relationships, maintaining people that clients come to trust year after year after year. And I don't think it's any surprise. Our business is a business that rolls over its retainers at 90% a year, and we're a retained business. We have less than 1% of our business is billable hours. So it is really built on experts and people. And so as a result, you have to maintain that talent. And I think during that period where we sold, the marketing communications firms, really, that was not their basic talent model. And so when periods of earn out, incentive-based earnouts ended after sales, we saw talent leave. My firm is probably one of the few that exists in that era anymore that was bought. It's about a third of its original size when we left. And most of them faded away because the talent left and went elsewhere after these earnouts. And there was no consideration made to talent retention and management over the long haul for these enterprises. And we took a different approach. And so as we grew from originally an equity-based partnership, as we added our first five companies, it was really eight companies combined into five operating verticals, what we realized was is that at some point, we really had to really put some more fuel in the car, so to speak, to take advantage of the opportunities we had to grow. And so we needed some capital for growth. And there were really two choices. The One was get a private equity partner and, you know, do it that way, which could have been a fine option. Many people take it. But our view was is that ownership and equity was really the key for long-term retention, whether you buy someone and you equitize them, you know, at this point of the deal or as the process moves forward over a number of years and they're key people and you plan for succession and you make them owners. So we were able to go public in London. It was a difficult time. it was the second COVID lockdown happened during the middle of our roadshow. We listed on the AIM segment of the LSE, which was less regulatory costs, less burden, but it was an important stepping stone. It allowed us to rationalize the company for future growth, to normalize, you know, everyone's salary and bonus structures across the firms, and then to actually put shares in people's hands. And so that was really, you know, the stepping stone. And then, you know, after, you know, three and a half years to four years, really three and a half, we realized that, you know, we're a 90% U.S. company trying to, you know, operate in a space that outside of our strategic communications efforts was not well known or well understood over there in that marketplace with those investors. And, you know, we evaluated what our options were. And we decided, you know what, we're going to go ahead and do it. We doubled in size since that listing, and we're going to go list on the NASDAQ. So that's what led to that. And we're well on that path. We've got over 150 registered shareholders of our 500 plus employees, and another 100 plus have some form of long-term equity instrument on top of it. So half of our people are invested in the public platform.

Jason Tilchin, Analyst — Canaccord Genuity

Great overview. And if you look at the slide behind you, there's a lot of logos on there. You've expanded this portfolio significantly over the past decade plus. So M&A obviously is a very big, important part of your growth strategy. And you just mentioned using equity as a retention tool. That's one of several sort of key parts of your M&A strategy. Maybe you just at a high level walk through some of the other things that...

George Stewart Hall, CEO

Well, the first thing I'd point out, Jason, you see here, is outside of some duplication in federal lobbying, which we have three of the top 25 firms in town, they're all bipartisan, they work in every subject area, and again, you know, they're all very, very strong properties, but that's a five billion dollar a year market, if you believe the disclosure metrics in the federal lobbying register. So outside of that, everything you see up there has some level of complement to the rest of the network, meaning that while we're a holding company, we're not buying duplicative assets. We're buying either geographic reach or capability. So some of these we've added in the last couple of years, a lot of communications assets, again, including the acquisition of Trailrunner International last year, which is a pure play corporate communications crisis, corporate reputation firm, you know, which we believed had a natural crossover into these issues, which are now, I think, frankly, existential. There's no such thing as a corporate image problem that's not immediately political and nothing that's political that's not an immediate image problem. So you can't operate in those silos anymore. And we've found that to be highly validated, that theory that all of this could work together. But the fact is, is that, you know, if you look, it either has, again, a capability add. Just look at the three firms we've added this year. you know, TRI needed to expand its footprint in the litigation communications, which they were already doing for clients. They needed to beef up their London presence. So we bought Tancredi a little over a month ago, which was a really good margin firm and a really excellent group out of London that we associated with Trailrunner Group on that side of the house. We bought a group out of London also earlier this year called WPI, which actually does, you know, high-end economist-based research for policy advocacy and policy positions, economic studies, skill set that translates across the entire portfolio. So, you know, again, a great compliment. They're selling as much new business into our U.S. side companies and U.S. clients now with their skill set as they're selling over in the UK and Europe. And then, you know, last week, we announced the acquisition of advocacy partners in Tallahassee, Florida. You know, when we look at our state map, especially in lobbying, some capitals matter more than others. You know, we're a high margin company. We don't, you can't get the rates in these small little places and their management problems and things that would go with having a bunch of them. So, you know, when we look, where do we need to be. We made an initial investment in Boston here years ago. We are in a very significant way in both public affairs and lobbying in Sacramento. We now have a presence with George P. Bush in Austin and then obviously Tallahassee and in Florida because Florida is just like Texas is one of the fastest growing economies in the country and the companies locating there need everything from economics connectivity to political connectivity with the new people that are going to be regulating them or overseeing them in state government. So really, we look at places that are active where the rate card is not that different than D.C., but all of this stuff fits together at the end of the day. So when you see Holding Company and our formal name, the truth of the matter is we're multi-branded, and there's some cultural reasons why that actually works for, again, long-term retention and, you know, the durability of our companies beyond, you know, a four or five year earn out window. But I think more to the point is that, you know, these pieces actually do fit together. And one of the things we've driven is that, you know, really strong in our company, you know, referral incentives, the fact that you have a lot of shareholders at the top levels of each of these firms, you know, makes them think not just that I'm carrying a Pagefield card. It also means I'm carrying a PPHC card as an owner and an investor. So, you know, we work very, very hard to build more in our company business and mandate in spite of being a multi-branded company.

Jason Tilchin, Analyst — Canaccord Genuity

Perfect. You stole a few of my questions there, so I want to ask a few quick follow-ups to that. One, you mentioned earnouts. Can you just talk a little bit about how you structure the deals and when you're going and targeting a company, who are they choosing between? Why are they choosing you?

George Stewart Hall, CEO

And to go back to your original question, which I filibustered a little one.

Jason Tilchin, Analyst — Canaccord Genuity

Still sinned experience.

George Stewart Hall, CEO

But we have a few gating factors we look at. And our deal structure isn't for everyone. Because again, people, business. So what do you want? You want good people. I mean, you want really decent people with great reputations. You want people that have really, really trusted client, long-term client relationships like all of our firms do. And then more importantly, you want people on the right part of their growth curve. They're ready to do something more. Most of these businesses are just not scalable beyond 20 to 30 million dollars at the end of the day, whether it's for conflict reasons, just lack of capital, lack of ability to grow in a highly fragmented and competitive market. So they, you know, it's people that come to us oftentimes now that are looking to do something different. So we always look at the people factor first. Do you have shared client responsibilities? Do you have, is it just a collection of six people with their own practices that don't talk to each other, but their nameplate is on the door together. That doesn't work for us. We want to see shared client ownership. We want to see people that are already thinking about the future of their firms when they retire one day eventually. So that means who actually is in the ownership here? Do you have juniors that you're bringing up? You know, who's your future? So once we clear all those items, beyond the normal things is what are your margins, right? You still have to look at that and make sure that, you know, they're not going to be margin dilutive to us. And we think they can grow within our network. Do they complement us? But then the structure we offer them is very simple. Oftentimes our competitors are private equity firms. When we're in an auction sale process that we're interested in, and those firms will go in and they will provide a valuation of your firm, somewhere between 10, 12 times EBITDA these days. Some have gone up to 18 times in recent years. But that's just total valuation. At the end of the day, we'll give you a closing payment, usually between four and six times EBITDA, mostly cash, some shares. And then the PE firm will offer you the same closing payment. The difference is they subject you to rollover equity. They say you still own 49% of the company. That's great. But what we tell people is, look, you're stuck there. Until they decide to roll this company or find an exit, you're stuck here. And that money is meaningless because it's paper money and it's not real. It's not tradable unless you actually can generate another transaction. We give earnouts that are all based on growth. So the only guaranteed consideration is your original closing payment. Then you have to believe in yourself and you have to believe in the network you're joining and the network effect to uplift you. And then by growing profit, we pay you more over a defined period, four to five years. Generally, we try to get to five. And it's based on a series of multipliers based on average profit growth. So at the end of the day, you're sitting there and saying, well, I'm taking a contingent deal, but it also brings the people to us that believe they're going to grow. They're in the right place, they want to grow. So again, our CFO said this years ago, we have an amazingly self-selective system, but that's how we don't bust out on these things and we end up with the right people.

Jason Tilchin, Analyst — Canaccord Genuity

Very helpful overview. I want to make sure I get to one or two very important points about the business. One of them, you just reported very solid Q2 results. They were a little bit ahead of expectations, but very similar consistent performance, especially on the organic side. And that is reflective of this portfolio approach that you've taken. Maybe just talk to one thing we haven't mentioned yet is the bipartisan approach that you take. So that and also how you are exposed across different types of customers, across different industries.

George Stewart Hall, CEO

So if you look at the mix of the company itself, today we're about 60% lobbying slash government affairs. Again, it's defined differently in different jurisdictions. How they define it in London is not the same as Sacramento, is not the same as Washington. That being said, that is our highest margin business by far. And, you know, it is our differentiator. When you ask who's our peer set of competitors, really, I say it's high-end strategic communications firms, people like FGS, people like Brunswick, both private equity-backed. Maybe think of FTI's Strategic Consulting Division. Those are the people, maybe Teneo to some extent, those are the people that really are the high-end corporate strategic advisors, and lobbying services slash government relations is a huge part of that spend every year. So those are really our near-peer competitors. And, you know, I think that, you know, in terms of, you know, how we're putting the company together and where we're going, you know, again, it's all about getting C-suite adjacent existential budgets. You know, the results that we reported, I think, you know, show that, you know, there's continued growth both in government relations and corporate communication spend. It's not going to slow down, both probably separately or about $25 to $30 billion of addressable market. And again, when you think of our largest competitor in that space, might be scaled to $600, $700 million. You can see there's an awful lot of headroom from consolidation. So, you know, we think that, you know, the TAM is there. The numbers bear that out. You know, one of the things that's in particular kind of hiccup, you know, in our numbers is they report on a gap basis, not our management P&L, is that, you know, we show a gap loss every year that should be coming to an end this year. There's a $30 million share-based accounting charge that shows up in our books that Matthew just pulled the slide up that shows up in our gap numbers. That charge is a result of the fact that, believe it or not, when we converted the old partnership equity at a value of $150 million to publicly traded shares in London, that was considered, even though they were issued shares, non-dilutive in any way going forward, they were subject to a five-year vesting cycle, a fifth each year for five years after the one enlisting. That charge of $30 million a year drops off our gap at the end of this year when the last vesting cycle takes place. So that's going to be a seminal moment for us, I think, when the kind of uninitiated of the people just taking a cursory look or machines suddenly see that, you know, they say, well, Stuart found $30 million in his garage and his daughter's old softball equipment. but that is not true. But that being said, that is the difference really between our management and our gap P&L. So, you know, we've been emphasizing that. And I think, you know, organic is, you know, normal. I think in comms for right now, which is generally flattens in even numbered years in the second quarter, a really tough comp to beat for them from last year, a difficult print given what happened in the second quarter of last year with our comms units. But I think, you know, lobbying, the good news is lobbying highest margin is growing very strong, grew 5% first quarter, grew 7% second quarter, again, 60% of our business.

Jason Tilchin, Analyst — Canaccord Genuity

And tying this all together to the overall financial profile of the business, your CFO roles, giving out these midterm targets, the sort of building blocks there, 5% organic growth plus continued M&A on the revenue side, and then a 25% EBITDA margin target. We touched on the growth a second ago, maybe just on the margins. Where are they today and what's going to get you back?

George Stewart Hall, CEO

Margins have traditionally been around 25% on the management P&L. And really, with the exception of M&A charges, that is pretty much our tax base at the end of the day. I mean, as I always tell people, if I'm losing money, then you should go and see my tax bill. And so that being said, you know, when, you know, we look at, you know, the future and where we're headed in terms of, you know, financial performance, we warn people with the U.S. listing that we were going to take on, as I said, AIM was lowly regulated. It's not lowly regulated. It actually turned out to be far more than we thought, but expense was low. We took on $4 million that we knew and we anticipated a public company cost, SOX compliance, all of the other things that we had to do vis-a-vis the SEC, et cetera. And so in doing that, you know, we had warned people ahead of the IPO that there was going to be some margin decrease. Now, as we're deploying the IPO cash, we're getting margin back. And those costs are relatively fixed. They're going to go up a little over time. But on a one-to-one basis, they're going to stay roughly where they are. So at that point, you know, it's just a matter of growing the company, either through organic growth through acquisition that's margin accretive, et cetera. And as we deploy the IPO clash, we've already been able to up guidance this quarter that, you know, to a half margin point more within our range. So we're already in the process of getting that back. And, you know, anticipation is as we execute on M&A and we get good organic, that we're going to certainly get back to 25 pretty quickly. But it is almost entirely the result of those PubCo costs.

Jason Tilchin, Analyst — Canaccord Genuity

Okay, very helpful. We're low on time. One more topic I want to touch on. I think they may fire me if I don't mention it is AI. Challenge, threat, opportunity, how is it impacting your business now?

George Stewart Hall, CEO

Well, quickly, and I know we're running out of time. I mean, our company, as I think I mentioned earlier, has built almost all on retainer or fixed fee projects. And retainers are 90% of our business. Even our communications firms are not like marketing communications firms. They go into of the year with 80% of their revenue identified, our lobbying firms go in with 90%. On average, we have 85% of our revenue ID'd in October for the next fiscal year. So the good news is that's what allows us to get the organic. The bad news is people will say, oh, you're AI threatened, just like every consulting service. We're not. We don't do billable hours. I think less than 1% of our revenue is billable hours. Everything else is fixed price project or retainer. And so as and these are deep, again, abiding relationships with people with large budgets at the C-suite level. So that's where we live. And there's a lot of stability in that model. There's not the pricing pressure that people think is not going to be there. And so we feel really good about that, again, because the human nature of the services, I just don't think a machine is going to replace a Jim Wilkinson at a trail runner or Matt Lipinski at CRS, which is a lobbying firm. You know, these are people that sit with CEOs and counsel them and give them advice and strategy. And so I think at the end of the day, we're in a good place vis-a-vis just our basic corporate structure. More to the point, though, we've seen a lot of uptake on actual client work as a result of AI disruption. You know, we represent most of the largest, you know, AI production platforms. We represent the largest builder of data centers in the country. We represent a number of other stakeholders in that space. In fact, I think the number is that we were able to compile recently is we have 60 new clients that are AI driven in just the last year, spanning that range. So in the short run, and certainly I think for the long run, anything, you know, you think of our business, anything that is socially or economically disruptive will engender a political response. AI is no different. Whether it's the controversy about I don't want a data center in my backyard? Or it's what is AI doing to our kids? Are they going to learn in school? All of these things. And economic dislocation, disruption, all of that brings a political response. So it's actually naturally fed into, you know, really a new practice area and revenue stream for us.

Jason Tilchin, Analyst — Canaccord Genuity

Okay. Unfortunately, we're out of time, but a really great overview of what is a very unique story in the public markets. Appreciate your time and best of luck in the second half.

George Stewart Hall, CEO

Thanks, Jason.