Q1 2026 Andersen Group Inc Earnings Call

May 12, 2026

Speaker #1: Assistance during the conference, press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Greg Vistica, Managing Director, Investor Relations.

Speaker #1: Thank you. You may begin.

Speaker #2: Okay. Thank you, Diego. good afternoon, everyone, and thank you for joining the Andersen call to discuss—discuss our first quarter earnings results with Andersen Global Chairman and Chief Executive Officer Mark Vorsatz, and CFO Neal Livingston.

Speaker #2: After their presentation, we will take questions from the analysts. Our call today is scheduled for approximately 45 minutes. But before we be begin, our Chief Legal Officer, Bill Deckelman, will discuss forward-looking statements.

Speaker #2: Bill?

Speaker #3: Okay. Thank you, Greg. please note that certain statements made on this call are forward-looking statements within the meaning of federal securities laws. These statements are subject to risk and uncertainties that could cause actual results to differ materially from those expressed or implied.

Speaker #3: These risk and uncertainties are described in our earnings release and our SEC filings, including our Form 10-K for the year ended December 31, 2025.

Speaker #3: Except as required by law, we undertake no obligation to update any forward-looking statements. We will also reference certain non-GAAP financial measures today, reconciliations to the most directly comparable GAAP measures are included in our earnings release, and will be available on our website.

Speaker #3: And with that, Mark, I will turn the call over to you.

Speaker #2: Thanks, Bill. good day, everybody. this is Mark Vorsatz. I'm gonna keep my comments real short. and then I'm gonna turn it over to Neal to talk about, our, our guidance for the balance of the year.

Speaker #2: we had a—I wanna first of all, I wanna thank the investors who have been in—who have been along with us on this ride, and, we definitely appreciate the support.

Speaker #2: I also wanna thank our partners and our people. We had a very solid first quarter. Greg had circulated a little bit ago the, the release on our earnings.

Speaker #2: our revenue came in at a little under 241 million. that was an increase of 15.7%. That does not include any inorganic growth on the acquisitions that we have completed.

Speaker #2: that was about 4.5% better than what we had included in the projections that we had provided to the analysts. the financial performance was broad-based.

Speaker #2: if you look at the—if you look at the 10-Q, you'll see that we were up across all four major areas of our tax service lines.

Speaker #2: all were up more than double digits, each at least 12% in growth. an important statistic I wanna highlight, and we'll talk about this more on future calls, is revenue per professional.

Speaker #1: Greetings, and welcome to the Andersen Group first quarter 2026 earnings conference call. At this time, I'll participants are in a listen-only mode. A question-and-answer session will follow the formal presentation.

Operator: Greetings, and welcome to The Andersen Group Q1 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, press star 0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Gregory Vistica, Managing Director, Investor Relations. Thank you. You may begin.

Speaker #2: For me, that's probably the number one metric that I focus on. We had excellent growth in that area in the first quarter. at 12.7%, a combination of, some moderate improvement in productivity and also moderate improvement in pricing, a little bit of that as we're edging forward, is on the technology side.

Speaker #1: If anyone should require operator assistance during the conference, press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Greg Vistica, managing director, investor relations.

Speaker #1: Thank you. You may begin.

Speaker #2: Thank you, Diego. Good afternoon, everyone, and thank you for joining the Andersen call to discuss our first quarter earnings results with Andersen Global Chairman and Chief Executive Officer Mark Forsetz and CFO Neil Livingston.

Gregory Vistica: Thank you, Diego. Good afternoon, everyone, and thank you for joining the Andersen call to discuss our Q1 earnings results with Andersen Global Chairman and Chief Executive Officer, Mark Vorsatz, and CFO, Neal Livingston.

Speaker #2: and we're making very good progress in that area. on the adjusted EBITDA numbers, we came in at around 72.3. that was an increase of 26.4% over first quarter last year.

Speaker #2: After their presentation, we will take questions from the analysts. Our call today is scheduled for approximately 45 minutes. But before we begin, our chief legal officer, Bill Deckelman, will discuss forward-looking statements.

Speaker #2: And the adjusted EBITDA number was, the margin was 30%. that includes about a 7.4 million dollar loss in global mobility and consulting. We are starting to get more traction in those areas.

Gregory Vistica: After their presentation, we will take questions from the analyst. Our call today is scheduled for approximately 45 minutes. Before we begin, our Chief Legal Officer, William Deckelman, will discuss forward-looking statements. Bill?

Speaker #2: Bill?

Speaker #3: Okay. Thank you, Greg. Please note that certain statements made on this call are forward-looking statements within the meaning of federal securities laws. These statements are subject to risk and uncertainties that could cause actual results to differ materially from those expressed or implied.

William Deckelman: Okay. Thank you, Greg. Please note that certain statements made on this call are forward-looking statements within the meaning of federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied. These risks and uncertainties are described in our earnings release and our SEC filings, including our Form 10-K for the year ended 31 December 2025. Except as required by law, we undertake no obligation to update any forward-looking statements. We will also reference certain non-GAAP financial measures today. Reconciliations to the most directly comparable GAAP measures are included in our earnings release and will be available on our website. With that, Mark, I will turn the call over to you.

Speaker #2: But as we had anticipated, we're gonna lose money in both of those practices this year. That's part of our continued investment in expansion. Without that loss, our adjusted EBITDA number would have been 33%.

Speaker #2: So I think very strong across the board. those are my comments on our financials for the first quarter, and I'm gonna turn it over to Neal.

Speaker #3: These risk and uncertainties are described in our earnings release and our SEC filings including our Form 10-K for the year ended December 31, 2025.

Speaker #2: He can fill in some additional detail. And he'll talk about guidance for the balance of the year.

Speaker #3: Except as required by law, we undertake no obligation to update any forward-looking statements. We will also reference certain non-GAAP financial measures today. Reconciliations to the most directly comparable GAAP measures are included in our earnings release, and will be available on our website.

Speaker #1: Mark, thanks very much. good afternoon, everyone, and thanks for joining us today. It's Neal Livingston here, Chief Financial Officer. this is our second earnings call as a public company, and, we very much appreciate the ongoing interest from the analysts and investors, alike.

Speaker #3: And with that, Mark, I will turn the call over to you.

Speaker #1: as Mark's noted, I will cover our financial performance for the most recent quarter in a—in some detail. And then provide updated guidance for the next quarter.

Speaker #2: Thanks, Bill. Good day, everybody. This is Mark Forsetz. I'm going to keep my comments real short, and then I'm going to turn it over to Neil to talk about our guidance for the balance of the year.

Mark Vorsatz: Thanks, Bill. Good day to everybody. This is Mark Vorsatz. I'm gonna keep my comments real short. I'm gonna turn it over to Neal to talk about our guidance for the balance of the year. First of all, I wanna thank the investors who have been along with us on this ride. We definitely appreciate the support. I also wanna thank our partners and our people. We had a very solid Q1. Greg had circulated a little bit ago the release on our earnings. Our revenue came in at a little under $241 million. That was an increase of 15.7%. That does not include any inorganic growth on the acquisitions that we have completed.

Speaker #1: And also for the full year 2026. so let me start with revenue. As Mark has noted, revenue for the first quarter '26 was 240.7 million.

Speaker #2: We had a I want to first of all, I want to thank the investors who have been along with us on this ride. And we definitely appreciate the support.

Speaker #1: That was an increase of 32.7 million, equating to 15.7% growth over the same quarter last year. also, as Mark noted, that exceeded the midpoint of the guidance that we had provided on our last earnings call, where you may recall we indicated first quarter revenue of between 230 and 235 million.

Speaker #2: I also want to thank our partners and our people. We had a very solid first quarter. Greg had circulated a little bit ago the release on our earnings.

Speaker #2: Our revenue came in at a little under $241 million. That was an increase of 15.7%. That does not include any inorganic growth on the acquisitions that we have completed.

Speaker #1: So we exceeded that by approximately 8.2 million. also, as Mark noted, revenue across all of our key service lines, private client services, business tax, alternative investment funds, and valuation services all increased for the quarter.

Mark Vorsatz: That was about 4.5% better than what we had included in the projections that we had provided to the analysts. The financial performance was broad-based. If you look at the 10-Q, you'll see that we were up across all 4 major areas of our tax service lines. All were up more than double digits, each at least 12% in growth. An important statistic I want to highlight, and we'll talk about this more on future calls, is revenue per professional. For me, that's probably the number 1 metric that I focus on. We had excellent growth in that area in Q1, at 12.7%. A combination of some moderate improvement in productivity and also moderate improvement in pricing.

Speaker #2: That was about 4.5% better than what we had included in the projections that we had provided to the analysts. The financial performance was broad-based.

Speaker #2: If you look at if you look at the 10-Q, you'll see that we were up across all four major areas of our tax service lines.

Speaker #1: our largest service line private client services reported strong revenue growth of 18.2% for the quarter. Resulting in that service line representing approximately 51.2% of revenues, up from 50.1%, in the same quarter of 2025.

Speaker #2: All were up more than double digits each at least 12% in growth. An important statistic I want to highlight, and we'll talk about this more on future calls, is revenue per professional.

Speaker #1: Also, pleasingly, and linking to Mark's comments about investment, revenue increased in both Andersen Consulting and global mobility. Being our newer practice areas where we continue to invest in alignment with our expansion strategy.

Speaker #2: For me, that's probably the number one metric that I focus on. We had excellent growth in that area. In the first quarter, at 12.7%, a combination of some moderate improvement in productivity and also moderate improvement in pricing, a little bit of that as we're edging forward, is on the technology side.

Speaker #1: at a regional level, all of the three regions, recorded, increases in revenue with the east region in particular reporting strong revenue growth of 22.4% for the quarter.

Mark Vorsatz: A little bit of that as we're edging forward is on the technology side. We're making very good progress in that area. On the adjusted EBITDA numbers, we came in at around $72.3. That was an increase of 26.4% over Q1 last year. The adjusted EBITDA number was, the margin was 30%. That includes about a $7.4 million loss in Global Mobility and consulting. We are starting to get more traction in those areas. As we had anticipated, we're gonna lose money in both of those practices this year. That's part of our continued investment and expansion. Without that loss, our adjusted EBITDA number would have been 33%. I think very strong across the board.

Speaker #2: And we're making very good progress in that area. On the adjusted EBITDA numbers, we came in at around 72.3. That was an increase of 26.4% over first quarter last year.

Speaker #1: the growth was driven by a balanced mix of drivers with no large one-time or project-related items for the quarter. and just to reconfirm, there were no inorganic or M&A re-revenue—there was no inorganic or M&A revenue recorded in the first quarter of 2026.

Speaker #2: And the adjusted EBITDA number was the margin was 30%. That includes about a 7.4 million loss in global mobility and consulting. We are starting to get more traction in those areas.

Speaker #1: In terms of the underlying business drivers, the strong top-line performance is driven by a number of factors at a macro level. Obviously, this very much links to our business model and client selection.

Speaker #2: But as we had anticipated, we're going to lose money in both of those practices this year. That's part of our continued investment in expansion.

Speaker #1: Criteria. At an operational level, I would note a couple of points. Firstly, that we continue to maintain favorable operating leverage. Whereby annual revenue growth has consistently outpaced the growth in our core operating costs.

Speaker #2: Without that loss, our adjusted EBITDA number would have been 33%. So I think very strong across the board. Those are my comments on our financials for the first quarter.

Mark Vorsatz: Those are my comments on our financials for the Q1, and I'm gonna turn it over to Neal. He can fill in some additional detail, and he'll talk about guidance for the balance of the year.

Speaker #1: Highlighting platform scalability and opportunities for margin expansion. we have continually demonstrated good pricing power. illustrated by revenue per hour, which increased 8%. And as Mark noted, revenue per professional, which increased 13% for the first quarter of '26, compared to the same quarter in '25.

Speaker #2: And I'm going to turn it over to Neil. He can fill in some additional detail, and he'll talk about guidance for the balance of the year.

Speaker #4: Mark, thanks very much. Good afternoon, everyone. And thanks for joining us today. It's Neil Livingston here, chief financial officer. This is our second earnings call as a public company.

Neal Livingston: Mark, thanks very much. Good afternoon, everyone, and thanks for joining us today. It's Neal Livingston here, Chief Financial Officer. This is our second earnings call as a public company, and we very much appreciate the ongoing interest from the analysts and investors alike. As Mark's noted, I will cover our financial performance for the most recent quarter in some detail and then provide updated guidance for the next quarter and also for the full year 2026. Let me start with revenue. As Mark has noted, revenue for Q1 2026 was $240.7 million. That was an increase of $32.7 million, equating to 15.7% growth over the same quarter last year.

Speaker #4: And we very much appreciate the ongoing interest from the analysts and investors alike. As Mark's noted, I will cover our financial performance for the most recent quarter in some detail.

Speaker #1: Also, while we're on pricing, the 3% tech charge that we shared previously, that was introduced for—for client contracts signed in the first quarter of 2026.

Speaker #4: And then provide updated guidance for the next quarter and also for the full year 2026. So let me start with revenue. As Mark has noted, revenue for the first quarter 2026 was $240.7 million.

Speaker #1: I'd say that has met, if not exceeded, our internal expectations. And it will provide, a meaningful source of incremental revenue for 2026, which will be reflected in the revised full-year guidance, I'll provide later on the call.

Speaker #1: In terms of headcount, our capacity to—to support clients increased by 2.8% in the quarter or 62 additional colleagues. That's in line with expectations for single-digit growth.

Speaker #4: That was an increase of 32.7 million equating to 15.7% growth over the same quarter last year. Also, as Mark noted, that exceeded the midpoint of the guidance that we had provided on our last earnings call, where you may recall we indicated first quarter revenue of between $230 and $235 million.

Neal Livingston: As Mark noted, that exceeded the midpoint of the guidance that we had provided on our last earnings call, where you may recall we indicated Q1 revenue of between $230 million and $235 million. We exceeded that by approximately $8.2 million. As Mark noted, revenue across all of our key service lines, Private Client Services, Business Tax, Alternative Investment Funds, and Valuation Services all increased for the quarter. Our largest service line, Private Client Services, reported strong revenue growth of 18.2% for the quarter, resulting in that service line representing approximately 51.2% of revenues, up from 50.1% in the same quarter of 2025.

Speaker #1: and enabling ongoing tight control of staffing costs. Within that, the ratio of managing directors to non-managing directors remained stable, during the quarter. in terms of client groups, our active client groups increased 3.5%, for the quarter.

Speaker #4: So we exceeded that by approximately 8.2 million. Also, as Mark noted, revenue across all of our key service lines, private client services, business tax, alternative investment funds, and valuation services all increased for the quarter.

Speaker #1: And the number of client engagements that we undertook for those client groups increased 2%, confirming the ongoing growth in demand for—for the firm's, s, services.

Speaker #4: Our largest service line private client services reported strong revenue growth of 18.2% for the quarter. Resulting in that service line representing approximately 51.2% of revenue is up from 50.1% in the same quarter of 2025.

Speaker #1: Turning now to net income, so on a gap basis, our net income for the quarter was 17.7 million, with a net income margin of 7.4%.

Speaker #1: That compares to net income—net income of 50.6 million, and a net income margin of 24.3% for the same quarter of 2025. the reduction in net income and net income margin was primarily attributable to 41.2 million of non-cash equity-based compensation expense, associated with the equity granted in connection with the IPO, and the reorganization.

Speaker #4: Also, pleasingly, and linking to Mark's comments about investment, revenue increased in both Andersen Consulting and Global Mobility. Being our newer practice areas where we continue to invest in alignment with our expansion strategy.

Neal Livingston: Also pleasingly, and linking to Mark's comments about investment, revenue increased in both Andersen Consulting and Global Mobility, being our newer practice areas where we continue to invest in alignment with our expansion strategy. At a regional level, all of the 3 regions recorded increases in revenue, with the East region in particular reporting strong revenue growth of 22.4% for the Q1. The growth was driven by a balanced mix of drivers with no large one-time or project-related items for the Q1. Just to reconfirm, there were no inorganic or M&A revenue. There was no inorganic or M&A revenue recorded in the Q1 of 2026. In terms of the underlying business drivers, the strong top-line performance is driven by a number of factors.

Speaker #4: At a regional level, all of the three regions recorded increases in revenue with the east region in particular reporting strong revenue growth of 22.4% for the quarter.

Speaker #1: These expenses did not exist in the first quarter of 2025, when the firm was still privately held. In addition, interest expense increased 6 million for the quarter.

Speaker #4: The growth was driven by balanced mix of drivers with no large one-time or project-related items for the quarter. And just to reconfirm, there were no inorganic or M&A revenue.

Speaker #1: This is due to the related party notes issued as part of the IPO reorganization. And transaction costs increased by 2.6 million in the first quarter as compared to the previous year, in support of the firm's ongoing inorganic expansion plans.

Speaker #4: There was no inorganic or M&A revenue recorded in the first quarter of 2026. In terms of the underlying business drivers, the strong top-line performance is driven by a number of factors.

Speaker #1: This equated to net income per share, EPS, of 4 cents on a basic and 3 cents on a diluted basis. Let me pivot now to the non-gap measures.

Speaker #4: At a macro level, obviously, this very much links to our business model and client selection, criteria. At an operational level, I would note a couple of points.

Neal Livingston: At a macro level, obviously, this very much links to our business model and client selection criteria. At an operational level, I would note a couple of points. Firstly, that we continue to maintain favorable operating leverage, whereby annual revenue growth has consistently outpaced the growth in our core operating costs, highlighting platform scalability, and opportunities for margin expansion. We have continually demonstrated good pricing power, illustrated by revenue per hour, which increased 8%. As Mark noted, revenue per professional, which increased 13% for Q1 2026 compared to the same quarter in 2025. Also, while we're on pricing, the 3% tech charge that we shared previously, that was introduced for client contracts signed in Q1 2026.

Speaker #4: Firstly, that we continue to maintain favorable operating leverage. Whereby annual revenue growth has consistently outpaced the growth in our core operating costs. Highlighting platform scalability and opportunities for margin expansion.

Speaker #1: And again, comparing to the first quarter of 2025, our adjusted net income was 62.9 million, compared to 55.2 million for 2025, an increase of approximately 14%.

Speaker #1: The adjusted net income margin was 26.1%, compared to 26.5%, in 2025. Looking at adjusted EBITDA, the adjusted EBITDA for the first quarter of 2026 was 72.3 million as Mark noted.

Speaker #4: We have continually demonstrated good pricing power. Illustrated by revenue per hour, which increased 8%. And as Mark noted, revenue per professional, which increased 13% for the first quarter of 2026 compared to the same quarter in 2025.

Speaker #1: That compares to 57.2 million for 2025, an increase of 26%. This again exceeded the midpoint last earnings call, where we indicated adjusted EBITDA between 55 and 60 million.

Speaker #4: Also, while we're on pricing, the 3% tech charge that we shared previously, that was introduced for client contracts signed in the first quarter of 2026.

Speaker #4: I'd say that has met, if not exceeded, our internal expectations. And it will provide a meaningful source of incremental revenue for 2026, which will be reflected in the revised full-year guidance.

Neal Livingston: I'd say that has met, if not exceeded, our internal expectations, and it will provide a meaningful source of incremental revenue for 2026, which will be reflected in the revised full-year guidance I'll provide later on the call. In terms of headcount, our capacity to support clients increased by 2.8% in the quarter or 62 additional colleagues. That's in line with expectations for single-digit growth and enabling ongoing tight control of staffing costs. Within that, the ratio of Managing Directors to non-Managing Directors remained stable during the quarter. In terms of client groups, our active client groups increased 3.5% for the quarter, and the number of client engagements that we undertook for those client groups increased 2%, confirming the ongoing growth in demand for the firm's services. Turning now to net income.

Speaker #1: So we exceeded, that by approximately 15 million or 26%. The adjusted EBITDA margin for Q1 was 30%. That compares to 27.5% in the prior year.

Speaker #4: I'll provide later on the call. In terms of headcount, our capacity to support clients increased by 2.8% in the quarter or 62 additional colleagues.

Speaker #1: Again, that exceeded the midpoint of the guidance provided, where we had indicated an EBITDA margin between 25 to 26%. So a healthy 4.5% or 450 basis point, excess.

Speaker #4: That's in line with expectations for single-digit growth. And enabling ongoing tight control of staffing costs. Within that, the ratio of managing directors to non-managing directors remained stable during the quarter.

Speaker #1: I'll briefly cover, costs, balance sheets, and cash flow. cost of services increased by approximately 41% for the first quarter. SG&A increased approximately 36% in the first quarter.

Speaker #4: In terms of client groups, our active client groups increased 3.5% for the quarter. And the number of client engagements that we undertook for those client groups increased 2%, confirming the ongoing growth in demand for the firm's services.

Speaker #1: The majority of these increases was again attributable to the 41 million of non-cash equity-based compensation expense, that I mentioned previously, which did not incur—occur in the first quarter of 2025.

Speaker #4: Turning now to net income. So on a gap basis, our net income for the quarter was 17.7 million, with a net income margin of 7.4%.

Neal Livingston: On a GAAP basis, our net income for the quarter was $17.7 million, with a net income margin 7.4%. That compares to net income of $50.6 million and a net income margin 24.3% for the same quarter of 2025. The reduction in net income and net income margin was primarily attributable to $41.2 million of non-cash equity-based compensation expense associated with the equity granted in connection with the IPO and the reorganization. These expenses did not exist in Q1 of 2025 when the firm was still privately held. In addition, interest expense increased $6 million for the quarter.

Speaker #1: As a reminder, these equity-based compensation charges are non-cash and non-dilutive, as no incremental equity was issued as part of these—these—these awards. In terms of the firm's balance sheet, the balance sheet remains liquid and provides significant flexibility to support growth.

Speaker #4: That compares to net income of 50.6 million. And a net income margin of 24.3% for the same quarter of 2025. The reduction in net income and net income margin was primarily attributable to 41.2 million of non-cash equity-based compensation expense, associated with the equity granted in connection with the IPO and the reorganization.

Speaker #1: As of March 31st, 2026, our current assets comprised cash and cash equivalents of approximately 207 million, and accounts receivable, including both billed and unbilled services, net of allowances for credit losses, of approximately 214 million.

Speaker #4: These expenses did not exist in the first quarter of 2025 when the firm was still privately held. In addition, interest expense increased 6 million for the quarter.

Speaker #1: On the short-term liability side of the balance sheet, we had accrued payroll and benefits of approximately 50 million, and distributions and short-term notes payable of approximately 85 million.

Speaker #4: This is due to the related party notes issued as part of the IPO reorganization. And transaction costs increased by 2.6 million. In the first quarter, as compared to the previous year, in support of the firm's ongoing inorganic expansion plans.

Neal Livingston: This is due to the related party notes issued as part of the IPO reorganization, and transaction costs increased by $2.6 million in Q1 as compared to the previous year in support of the firm's ongoing inorganic expansion plans. This equated to net income per share, EPS, of $0.04 on a basic and $0.03 on a diluted basis. Let me pivot now to the non-GAAP measures, and again, comparing to Q1 2025. 14%. The adjusted net income margin was 26.1% compared to 26.5% in 2025. Looking at adjusted EBITDA. The adjusted EBITDA for Q1 2026 was $72.3 million, as Mark noted. That compares to $57.2 million for 2025, an increase of 26%.

Speaker #1: At the end of the quarter, the firm had no third-party debt, and we continue to maintain a conservative stance towards the use of financial leverage.

Speaker #1: We believe that our existing cash and cash equivalents, the cash flow from operations and the net proceeds from the IPO, remain sufficient to meet our working capital investment and other general corporate funding requirements for the foreseeable future.

Speaker #4: This equated to net income per share, EPS, of 4 cents on a basic and 3 cents on a diluted basis. Let me pivot now to the non-gap measures.

Speaker #4: And again, comparing to the first quarter of 2025. 14%. The adjusted net income margin was 26.1% compared to 26.5% in 2025. Looking at adjusted EBITDA, the adjusted EBITDA for the first quarter of 2026 was 72.3 million, as Mark noted.

Speaker #1: I'll pivot now towards the outlook and forward guidance. we are going at some pace here. hopefully leaving time for questions. The looking ahead, we are providing updated guidance on today's call, which obviously reflects our current best judgment.

Speaker #1: for the second quarter of 2026, we are expecting revenue in the range of 190 to 205 million, equating to a growth of approximately 13%, 13%.

Speaker #4: That compares to 57.2 million for 2025, an increase of 26%. This, again, exceeded the midpoint of the guidance provided on our last earnings call, where we indicated adjusted EBITDA between 55 and 60 million so we exceeded that by approximately 15 million or 26%.

Speaker #1: We are anticipating a net loss for the quarter and negative EPS. That is due to seasonality and principally the aforementioned non-cash equity-based compensation expenses.

Neal Livingston: This again exceeded the midpoint of the guidance provided on our last earnings call, where we indicated adjusted EBITDA between $55 to $60 million. We exceeded that by approximately $15 million or 26%. The adjusted EBITDA margin for Q1 was 30%. That compares to 27.5% in the prior year. That exceeded the midpoint of the guidance provided, where we had indicated an EBITDA margin between 25% to 26%. A healthy 4.5% or 450 basis points excess. I'll briefly cover costs, balance sheets, and cash flow. Cost of services increased by approximately 41% for Q1. SG&A increased approximately 36% in Q1.

Speaker #1: Looking to the full year, we currently expect revenue in the range of 980 million to 1 billion, equating to a growth rate of approximately 18%, 18%.

Speaker #4: The adjusted EBITDA margin for Q1 was 30%. That compares to 27.5% in the prior year. Again, that exceeded the midpoint of the guidance provided, where we had indicated an EBITDA margin between 25 to 26 percent.

Speaker #1: We are anticipating positive net income and EPS for the full year. We expect adjusted EBITDA in the range of 225 to 250 million, with an adjusted EBITDA margin in the range of 23 to 25%.

Speaker #4: So, a healthy 4.5%, or 450 basis point, excess. I'll briefly cover costs, balance sheets, and cash flow. Cost of services increased by approximately 41% for the first quarter.

Speaker #1: As we've announced separately, the firm has closed several acquisitions in the second quarter, approximately one quarter ahead of schedule. Based on this and the additional acquisition, the business combinations in the pipeline, we are raising our full year inorganic revenue guidance from 33 million to 55 million.

Speaker #4: SG&A increased approximately 36% in the first quarter. The majority of these increases was, again, attributable to the 41 million of non-cash equity-based compensation expense.

Neal Livingston: The majority of these increases was again attributable to the $41 million of non-cash equity-based compensation expense that I mentioned previously, which did not occur in Q1 2025. As a reminder, these equity-based compensation charges are non-cash and non-dilutive, as no incremental equity was issued as part of these awards. In terms of the firm's balance sheet, the balance sheet remains liquid and provides significant flexibility to support growth. As of 31 March 2026, our current assets comprised cash and cash equivalents of approximately $207 million, and accounts receivable, including both billed and unbilled services, net of allowances for credit losses of approximately $214 million. On the short-term liability side of the balance sheet, we had accrued payroll and benefits of approximately $50 million and distributions and short-term notes payable of approximately $85 million.

Speaker #4: That I mentioned previously, which did not incur in the first quarter of 2025. As a reminder, these equity-based compensation charges are non-cash and non-dilutive, as no incremental equity was issued as part of these awards.

Speaker #1: This is included in the full year numbers, which I mentioned previously. We'll be updating the impact of closed acquisitions and business combinations on both our gap and non-gap financial metrics in conjunction with our second quarter financial results.

Speaker #4: In terms of the firm's balance sheet, the balance sheet remains liquid and provides significant flexibility to support growth. As of March 31, 2026, our current assets comprised cash and cash equivalents of approximately $207 million.

Speaker #1: A final point, which is on seasonality, just as a reminder to everybody, our business is seasonal with a significant share of full year revenue and net income historically generated in the third quarter.

Speaker #4: And accounts receivable, including both billed and unbilled services, net of allowances for credit losses, of approximately 214 million. On the short-term liability side of the balance sheet, we had accrued payroll and benefits of approximately 50 million.

Speaker #1: This creates some uncertainty in projecting full year results, which is reflected in our updated guidance. As before, our guidance is based on multiple assumptions, including macroeconomic conditions, levels of client demand, staffing, investment, the impact of AI, integration of acquired firms, and so forth.

Speaker #4: And distributions and short-term notes payable of approximately $85 million. At the end of the quarter, the firm had no third-party debt. And we continue to maintain a conservative stance towards the use of financial leverage.

Neal Livingston: At the end of the quarter, the firm had no third-party debt, and we continue to maintain a conservative stance towards the use of financial leverage. We believe that our existing cash and cash equivalents, the cash flow from operations, and the net proceeds from the IPO remain sufficient to meet our working capital investment and other general corporate funding requirements for the foreseeable future. I'll pivot now towards the outlook and forward guidance. We are going at some pace here, hopefully leaving time for questions. Looking ahead, we are providing updated guidance on today's call, which obviously reflects our current best judgment. For Q2 of 2026, we are expecting revenue in the range of $190 to 205 million, equating to a growth of approximately 13%, 13%.

Speaker #1: These assumptions are, of course, dynamic and subject to change. In closing, I'd say on behalf of the team, we are extremely proud to announce a back-to-back set of quarterly financial results that exceeds our previously issued guidance and the base case projections published by most of the analysts who cover our stock.

Speaker #4: We believe that our existing cash and cash equivalents, the cash flow from operations, and the net proceeds from the IPO remain sufficient to meet our working capital investment and other general corporate funding requirements for the foreseeable future.

Speaker #1: Moreover, these financial results provide a solid foundation for ongoing value creation over the medium term. So thank you very much for listening, and with that, we'd be happy to take any questions or mark, if you'd like to make any summary comments.

Speaker #4: I'll pivot now towards the outlook and forward guidance. We are going at some pace here. Hopefully, leaving time for questions. We're looking ahead; we are providing updated guidance on today's call, which obviously reflects our current best judgment.

Speaker #1: No, that's fine. We'll go to questions. Thank you. At this time, we'll conduct our Q&A session. To get through as many questions as we can in the time remaining, please limit yourselves to one question and one follow-up question.

Speaker #4: For the second quarter of 2026, we are expecting revenue in the range of 190 to 205 million, equating to a growth of approximately 13%, 13%.

Speaker #1: To ask a question, press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue.

Speaker #4: We are anticipating a net loss for the quarter and negative EPS. That is due to seasonality and principally the aforementioned non-cash equity-based compensation expenses.

Neal Livingston: We are anticipating a net loss for the quarter and -EPS. That is due to seasonality and principally the aforementioned non-cash equity-based compensation expenses. Looking to the full year, we currently expect revenue in the range of $980 million to $1 billion, equating to a growth rate of approximately 18%, 18%. We are anticipating +net income and +EPS for the full year. We expect adjusted EBITDA in the range of $225 to 250 million, with an adjusted EBITDA margin in the range of 23% to 25%. As we've announced separately, the firm has closed several acquisitions in Q2, approximately 1 quarter ahead of schedule. Based on this and the additional acquisition, the business included in the full year numbers, which I mentioned previously.

Speaker #1: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. And your first question comes from Mark Marcon with Baird.

Speaker #4: Looking to the full year, we currently expect revenue in the range of 980 million to 1 billion. Equating to a growth rate of approximately 18%, 18%.

Speaker #1: Please state your question. good afternoon and congratulations on the strong results. it's Mark and, the whole team. I was wondering, can you talk a little bit about, you know, you had very strong growth in private client services.

Speaker #4: We are anticipating positive net income and EPS for the full year. We expect adjusted EBITDA in the range of 225 to 250 million, with an adjusted EBITDA margin in the range of 23 to 25 percent.

Speaker #1: to what extent are you already starting to feel the impact of, you know, all of the various initiatives? you know, that we're reading about, whether it's in California with the potential, you know, billionaire tax, New York in terms of various proposals to raise taxes.

Speaker #4: As we've announced separately, the firm has closed several acquisitions in the second quarter, approximately one quarter ahead of schedule. Based on this and the additional acquisition, the business.

Speaker #1: Even more moderate states like Virginia or Washington that are now proposing, you know, increased taxes. What are you seeing a-at this point, where do you think we are in terms of, you know, potentially leveraging, some of those dynamics?

Speaker #4: Included in the full year numbers, which I mentioned previously. We'll be updating the impact of closed acquisitions and business combinations on both our GAAP and non-GAAP financial metrics in conjunction with our second quarter financial results.

Speaker #1: Yeah. I, I don't think, Mark, those are baked into the numbers for the first quarter at all. I would say a lot of people are evaluating alternatives.

Neal Livingston: We'll be updating the impact of closed acquisitions and business combinations on both our GAAP and non-GAAP financial metrics in conjunction with our Q2 financial results. A final point, which is on seasonality. Just as a reminder to everybody, our business is seasonal, with a significant share of full-year revenue and net income historically generated in the Q3. This creates some uncertainty in projecting full-year results, which is reflected in our updated guidance. As before, our guidance is based on multiple assumptions, including macroeconomic conditions, levels of client demand, staffing, investment, the impact of AI, integration of acquired firms, and so forth. These assumptions are, of course, dynamic and subject to change.

Speaker #1: I'll, I'll use the Washington state tax as an example. For those that are not familiar with it, the governor had signed legislation on March 31st to, create an income tax for anyone who makes over a million dollars at a 9.9% tax rate.

Speaker #4: A final point, which is on seasonality. Just as a reminder to everybody, our business is seasonal, with a significant share of full-year revenue and net income historically generated in the third quarter.

Speaker #1: Literally, within two weeks of the signing of that legislation, litigation was filed on the basis that it's unconstitutional. this is going to play out for a while.

Speaker #4: This creates some uncertainty in projecting full-year results, which is reflected in our updated guidance. As before, our guidance is based on multiple assumptions, including macroeconomic conditions, levels of client demand, staffing, investment, the impact of AI, integration of acquired firms, and so forth.

Speaker #1: I think a lot of people are evaluating how to deal with these things. We certainly have had discussions with a number of clients about it.

Speaker #1: although we have had some clients, particularly in California, that ha decided last year to relocate, we're really expecting that, to the extent that this le these types of legislative acts pass, a lot of that work is going to be in the future.

Speaker #4: These assumptions are, of course, dynamic and subject to change. In closing, I'd say on behalf of the team, we are extremely proud to announce a back-to-back set of quarterly financial results that exceeds our previously issued guidance and the base case projections published by most of the analysts who cover our stock.

Neal Livingston: In closing, I'd say on behalf of the team, we are extremely proud to announce a back-to-back set of quarterly financial results that exceeds our previously issued guidance and the base case projections published by most of the analysts who cover our stock. Moreover, these financial results provide a solid foundation for ongoing value creation over the medium term. Thank you very much for listening, and with that, we'd be happy to take any questions. Mark, if you'd like to make any summary comments.

Speaker #1: So I wouldn't say that's a material amount of our revenue. I'd say the bigger issue on the PCS practice is we continue to add more clients.

Speaker #4: Moreover, these financial results provide a solid foundation for ongoing value creation over the medium term. So thank you very much for listening, and with that, we'd be happy to take any questions or mark if you'd like to make any summary comments.

Speaker #1: And a larger clients. So I think that's, I mean, just this morning, I had a I had a I had a discussion with a new pr client that is worth several billion dollars.

Speaker #1: I'm going to put a younger partner on the job with me to do most of the real work. but we're seeing more and more of those kind of opportunities.

Speaker #1: No, that's fine. We'll go to questions.

Mark Vorsatz: No, that's fine. We'll go to questions.

Speaker #2: Thank you. At this time, we'll conduct our Q&A session. To get through as many questions as we can in a time remaining, please limit yourselves to one question and one follow-up question.

Operator: Thank you. At this time, we will conduct our Q&A session. To get through as many questions as we can in the time remaining, please limit yourselves to 1 question and 1 follow-up question. To ask a question, press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Your first question comes from Mark Marcon with Baird. Please state your question.

Speaker #1: and I would say the second thing, and it's just really at a very early stage, is we're doing a little bit better on the integration side.

Speaker #2: To ask a question, press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue.

Speaker #1: So if you looked at our valuation performance in the first quarter, it was 70 17.3% growth rate, just behind PCS. Most of that work is internal feed.

Speaker #1: It's internal referrals. So I think on the integration side, we're making some moderate progress. We have a lot more to do. What's exciting to me about the financial results we announced today is that we have a lot of room for improvement.

Speaker #2: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. And your first question comes from Mark Marcum.

Speaker #2: With Baird, please state your question.

Mark Marcon: Good afternoon, and congratulations on the strong results to Mark and the whole team. I was wondering, can you talk a little bit about, you know, you had very strong growth in Private Client Services. To what extent are you already starting to feel the impact of, you know, all of the various initiatives, you know, that we're reading about, whether it's in California with the potential, you know, billionaire tax, New York in terms of various proposals to raise taxes. Even more moderate states like Virginia or Washington that are now proposing, you know, increased taxes. What are you seeing at this point? Where do you think we are in terms of, you know, potentially leveraging some of those dynamics?

Speaker #3: Good afternoon, and congratulations on the strong results. It's Mark and the whole team. I was wondering, can you talk a little bit about—you had very strong growth in Private Client Services.

Speaker #1: That's fantastic. And then you mentioned the pricing and the and the revenue per hour being up nicely. Did the January price increase go through, as you expected?

Speaker #1: Yeah. I think pretty much. I mean, on the pricing side, we're coming in about where we had anticipated. I would say where I think for the balance of the year we'll see, much greater lift will be on the productivity side.

Speaker #3: To what extent are you already starting to feel the impact of all of the various initiatives that we're reading about, whether it's in California with the potential billionaire tax, New York, in terms of various proposals to raise taxes?

Speaker #1: I can tell you that, we really have started getting some benefit of that, starting around the end of February. But it's ki it's carrying through.

Speaker #3: Even more moderate states like Virginia or Washington that are now proposing increased taxes, what are you seeing at this point? Where do you think we are in terms of potentially leveraging some of those dynamics?

Speaker #1: And so, as I commented on the last call, I'm very excited. You know, we're doing fine. these are solid numbers. but we have a lot of room for improvement.

Speaker #1: And keep in mind, these are just pure organic growth numbers. we, we will, continue to, to have a lot of conversations with groups, about joining us.

Speaker #4: Yeah, I don't think, Mark, those are baked into the numbers for the first quarter at all. I would say a lot of people are evaluating alternatives.

Mark Vorsatz: I don't think, Mark, those are baked into the numbers for Q1 at all. I would say a lot of people are evaluating alternatives. I'll use the Washington State tax as an example. For those that are not familiar with it, the governor had signed legislation on 31 March to create an income tax for anyone who makes over $1 million at a 9.9% tax rate. Literally within 2 weeks of the signing of that legislation, litigation was filed on the basis that it's unconstitutional. This is gonna play out for a while. I think a lot of people are evaluating how to deal with these things. We certainly have had discussions with a number of clients about it.

Speaker #4: I'll use the Washington state tax as an example. For those that are not familiar with it, the governor had signed legislation on March 31st to create an income tax for anyone who makes over a million dollars at a 9.9% tax rate.

Speaker #1: we did sign a deal yesterday with Switzerland. So we've now closed eight deals. In the last 10 weeks, I'm not going to suggest that that is an, a-an indicator of future activity.

Speaker #1: A lot of long time, to put, put to a conclusion. But I will say that we expect at a systematic fashion that we'll be continuing to add groups and key markets.

Speaker #4: Literally, within two weeks of the signing of that legislation, litigation was filed on the basis that it's unconstitutional. This is going to play out for a while.

Speaker #1: What's particularly important about that is the managing partner of that practice co-manages Europe. And as I indicated on the last call, similar with our practice in Nigeria, similar with our practice in Uruguay, we're focused on adding groups that are, have a significant role in the management of our Swiss vine.

Speaker #4: I think a lot of people are evaluating how to deal with these things. We certainly have had discussions with a number of clients about it.

Mark Vorsatz: Although we have had some clients, particularly in California, that had decided last year to relocate, we're really expecting that to the extent that these types of legislative acts pass, a lot of that work is gonna be in the future. I wouldn't say that's a material amount of our revenue. I'd say the bigger issue on the PCS practice is we continue to add more clients and larger clients. I think that's, I mean, just this morning I had a discussion with a new client that is worth $several billion. I'm gonna put a younger partner on the job with me to do most of the real work. We're seeing more and more of those kind of opportunities.

Speaker #4: Although we have had some clients, particularly in California, that decided last year to relocate, we're really expecting that, to the extent that these types of legislative acts pass, a lot of that work is going to be in the future.

Speaker #1: So as we add more practices, we've got the management already put in place. That's fantastic. And just with regards to the guidance, you know, the, the second quarter, I fully recognize is seasonally slower.

Speaker #4: So, I wouldn't say that's a material amount of our revenue. I'd say the bigger issue on the PCS practice is we continue to add more clients.

Speaker #1: do you have any of the acquisitions built in for the second quarter? And then, and then it, you know, the, the, the full year guidance, you know, basically anticipates a, a fairly significant acceleration.

Speaker #4: And larger clients. So I think that's—just this morning, I had a discussion with a new client that is worth several billion dollars. I'm going to put a younger partner on the job with me to do most of the real work.

Speaker #1: how, how should we think about that? What's being layered in? What are the, the key drivers for the acceleration for the full year? Thank you.

Speaker #4: But we're seeing more and more of those kinds of opportunities. And I would say the second thing, and it's just really at a very early stage, is we're doing a little bit better on the integration side.

Mark Vorsatz: I would say the second thing, and it's just really at a very early stage, is we're doing a little bit better on the integration side. If you looked at our Valuation Services performance in Q1 was 17.3% growth rate, just behind PCS. Most of that work is internal feed. It's internal referrals. I think on the integration side, we're making some moderate progress. We have a lot more to do. What's exciting to me about the financial results we announced today is that we have a lot of room for improvement.

Speaker #1: Well, I would say that the first of all, we have some very modest revenue included in these, these second quarter numbers. It's a little less than 7 million.

Speaker #4: So if you looked at our valuation performance in the first quarter, it was 77.3% growth rate, just behind PCS. Most of that work is internal feed.

Speaker #1: So when we've announced deals, most of the deals, any of the deals that we, announce, after May 1 will not close until July 1st.

Speaker #4: It's internal referrals. So I think on the integration side, we're making some moderate progress. We have a lot more to do. What's exciting to me about the financial results we announced today is that we have a lot of room for improvement.

Speaker #1: So that revenue won't be until the second half of the year. So as Neal indicated, what we had previously given the analysts was 33 million of actual revenue for 2026 from acquisitions.

Speaker #3: That's fantastic. And then you mentioned the pricing and the revenue per hour being up nicely. Did the January price increase go through as you expected?

Mark Marcon: That's fantastic. You mentioned the pricing and the revenue per hour being up nicely. Did the January price increase go through as you expected?

Speaker #1: We've now increased that to 55 million. That's not an annualized number. That's the revenue that we expect on those deals will hit our financials this year.

Speaker #4: Yeah, I think pretty much. I mean, on the pricing side, we're coming in about where we had anticipated. I would say where I think, for the balance of the year, we'll see much greater lift will be on the productivity side.

Mark Vorsatz: Yeah, I think pretty much. I mean, on the pricing side, we're coming in about where we had anticipated. I would say where I think for the balance of the year, we'll see much greater lift will be on the productivity side. I can tell you that, we really have started getting some benefit of that starting around the end of February, but it's.

Speaker #1: that is primarily, almost exclusively in the second half of the year. Ergo, we anticipate this will continue to go up. One other thing I would mention, because I expect we'll get a question on this, we just started the implementation of our artificial intelligence, I'll call it technology plan, on Friday.

Speaker #1: w as I mentioned on the prior call, we are still doing two more pilots with the University of San Francisco. One is in process in May.

Speaker #1: It started yesterday. The other is in June. But we actually started the rollout of our internal training. We're doing it in increments of 500 people.

Speaker #1: and that started on Friday, which I participated in. that is something that we expect over time is going to increase our efficiency. Some of that efficiency will go to our clients.

Speaker #1: Some of it will go to us. but we do anticipate, that, that number of revenue per professional, pay attention to that each quarter, because that's the number one factor I look at.

Speaker #1: We anticipate that's going to continue to increase at a healthy pace. That's fantastic. And if I could squeeze can we, Mark, do you mind if yeah, could you hold that till the great.

Speaker #1: Thank you. Next question, please. Your next question comes from Faiza Alwy, with Deutsche Bank. Please state your question. Yes. Hi. Thank you so much.

Speaker #1: I wanted to follow up on the M&A transactions that you've done so far. Could you comment on, you know, the structure of the deals?

Speaker #1: I know that you're not, you know, making upfront payments. on, on as, as you're completing these acquisitions. But it was interesting to me that your, your EBITDA margin guide is above where it was last quarter.

Speaker #1: And I'm so I'm curious to see if that's more related to, you know, underlying margin expansion or organically, or if these deals are actually margin accretive.

Speaker #1: So all the all the margin expansion for the first quarter is 100% organic because there is no revenue in the first quarter from any of the acquisitions.

Speaker #1: So what I've kind of agreed conceptually with any transaction that is done in a quarter will be closed on the first of the beginning of the following quarter.

Speaker #1: So most of the transactions that we closed, won't hit the numbers until the second quarter. And again, they're fairly modest. I will tell you from a conceptual standpoint, we are focusing on adding quality platforms where we have a relationship.

Speaker #1: So Palo Mande is the managing partner of Switzerland, co-manages Europe. Palo has been with us for 12 years. And they've used the brand during that period of time.

Speaker #1: This was an easy thing for us. A lot of legal work, a lot of paperwork. We've got separate law firms in each country working on us.

Speaker #1: We have quite a few conversations going. So it takes a lot of time. But none of that's in our numbers. In each deal, there'll be some level of transition cost.

Speaker #1: So we expect that margins on the acquisition component may slide a little bit in the short term. Simply because we've got to get groups integrated.

Speaker #1: That just takes time. This is no different than if we hire a lateral partner in the United States. We go through those issues. But all of the, the growth and the EBITDA, and the margin is purely organic.

Speaker #1: I think we're doing a little bit better in how we're running the firm. Great. That-that's very helpful. And then, Mark, could you comment a bit more on the pipeline?

Speaker #1: Sort of I, I know this is, you know, it's part of your strategic plan. And I-I'm curious as you've become a public company, sort of is the pipeline in line with your expectations?

Speaker #1: Kind of what, what has been the feedback with, you know, potential, companies that you might acquire outside the US? I-I'm not going to get into specifics.

Speaker #1: And I'm not going to speculate on how many or revenue or those factors. But I will say this. Our, our biggest challenge right now is execution.

Speaker #1: we are adding another full-time attorney in the transaction group that will give us three full-time attorneys in the transaction group. In addition to that, I've spoken with Bill Deckelman and Oscar Alcantara in the legal department, who both can spend time swinging in that area.

Speaker #1: Oscar has worked with me on the expansion for the last eight or nine years. we also just hired two more people in the financial group for the acquisition team.

Speaker #1: So that will give us now three full-time lawyers and four full-time people on the financial side. We do not lack opportunity. It's just a question of how fast can we manage the opportunities.

Speaker #1: And in each deal, there are some components of it that we have to negotiate economics and negotiate specific terms. It will be easier for us to, to replicate transactions in countries where we do a deal, for example, let's say we do a deal in South Africa.

Speaker #1: we have four or five other opportunities in South Africa of parties that are interested in moving forward. The time it takes is to build that prototype for that country.

Speaker #1: Once we have the prototype built, those subsequent transactions can be done in probably 90 to 120 days. So I would say, Faiza, as a practical matter, while we'll be a little slow out of the box this year on a relative basis for us, I do think that what we'll see is in 2027, as we have more resources and we've built this model that will have plenty of opportunity to continue to add groups, keep in mind many of these groups are groups that have been with us for a long time.

Speaker #1: And in total, we had over 400 groups between consulting in the United States and other practices consulting legal, tax, etc., outside the United States.

Speaker #1: Great. Thank you, Mark. Thank you. And your next question comes from Tony Kaplan with Morgan Stanley. Please state your question. Thanks so much. nice job on the quarter.

Speaker #1: Given AI increasing efficiency, I was hoping you could talk about if you're thinking about changing from a rate per hour to a different monetization model and what potential options you'd consider and if you are talking to clients about that, you know, their receptivity to that.

Speaker #1: Because I know you I think want to maybe move to a per value type of model. So maybe you could just talk about what's going on with that.

Speaker #1: So I would say, Tony, there are going to be components of both time and materials and components of an increasing amount on fixed fees.

Speaker #1: So I'll give you an example. we like to consider ourselves a relationship firm, not a commodity firm. most of the services that we provide, we believe are relationship-driven.

Speaker #1: So I had an example I had on a different client this morning is, we have a family group that is looking at diversifying their asset base.

Speaker #1: And that is an opportunity for them to sell a portfolio of real estate that has a gross value of about $2 billion. I have another client that has some substantial investors in Japan.

Speaker #1: And those substantial investors may be interested to acquire a portfolio of like that. So with the second group, I set up a call on, on Friday with the principal to explore discussion.

Speaker #1: Well, obviously, if we're able to bring that transaction to a conclusion, that lends itself to a value fee. There are some components of that where technology will be very helpful in making the delivery of our service more efficient.

Speaker #1: But the reason we have that opportunity is the guy got relationships with two different groups that we do continuing work on. And those relationships are pretty extensive.

Speaker #1: And that's just an illustration of what we do in our practice. That's different. And I don't mean this in a disrespectful way to other types of firms.

Speaker #1: We're not we're not providing an audit because a client has a covenant with a lending institution and typically those clients don't necessarily assign a lot of value to that.

Speaker #1: So as I've said on a number of occasions, one of the advantages and what drives our pricing, they're really a multitude of things. But the two that stick out the most, one is our client selection.

Speaker #1: The second are the types of services that we focus on. And more and more, where we can use technology to increase the value that we can provide those types of engagements will lend themselves to fixed fees.

Speaker #1: But on some of the some work that client, we may be able time and material. Some will do fixed fee. This is part of a internal training that we're going to go through with all 2,000 of our line people.

Speaker #1: So we started on Friday with the first 500. We, we all have separate case studies to do. One is technical. One's not technical. We're going to build those skills.

Speaker #1: It isn't going to happen tomorrow. It isn't going to happen next week. It will happen over time. But we do see a much, much higher yield.

Speaker #1: And we also see a much better delivery system for our clients. And bringing them more cost-effective value services. That's terrific. And I guess my follow-up is exactly on that topic.

Speaker #1: are there any sort of targets or milestones that we should be thinking of in terms of what you're hoping to accomplish with that technology program?

Speaker #1: I know you talked about increased yield, etc. But anything we should be aware of and be able to sort of understand the timing and implication of how much of an impact you should get from it?

Speaker #1: Thanks. I would just say it's a little premature to be in a position to, to give you information on that. And even if I could, I probably wouldn't because that gets into projections on things that I don't think today we are prepared to do.

Speaker #1: What I will say is I anticipate our continued focus on areas of improvement. Sometimes people say to me, you know, they're a little surprised that our margins and they're probably more surprised that I think we have an ability to improve our business.

Speaker #1: It's all about execution. execution illis integration providing great client service in areas that they value. We think that's the secret to improving our profitability.

Speaker #1: Thank you. Your next question comes from Toby Somer with Truist Securities. Please state your question. Thank you. as you look at the opportunity for acquisitions o-over time, how big i-i-in opportunity do you see to reassemble and sort of assimilate these partner firms over the next two or three years?

Speaker #1: And, and has that changed since we were l-leading up to the IPO, you know, around six months or so ago? Toby, I would say that what we have stopped is we're not soliciting new groups although we're still adding you, you guys may get announcements from us on new collaborating relationships.

Speaker #1: That collaboration process is a great form of due diligence. We typically have at least two or three years of a collaborating relationship. We're not proactively seeking those because we have currently about 436 groups, okay?

Speaker #1: Now, not all of those are going to make sense to merge into the public company either because they're too small or they're in markets that aren't appropriate for us as a public company.

Speaker #1: We do need the footprint. So we want to maintain those relationships. But we see this as an, a, a we haven't existing pipeline that if I had 100% capacity, I could spend the next three years just working on deals with people that we already have a relationship with.

Speaker #1: So as I indicated, it's not a lack of opportunity. It's just a question of we have to manage this in a deliberative, thoughtful way that is profitable for us.

Speaker #1: I have some conversations going with a very large firm outside the United States. And what I basically suggested to them that I wouldn't consider a deal with them at this point because I don't think I think they, they need to improve their profitability too much.

Speaker #1: Before we would entertain that. and we have a plan with them that I'm working on. And I'm hoping to visit them in June. they would be a terrific addition and bring in an area of geography where we would have a major presence.

Speaker #1: But we're going to be very deliberative about this. we're going to be very responsible financially. you know, I think Toby, when we talked you know, with, with this group, I've explained to you that I'm pretty conservative.

Speaker #1: We drew on our operating line one time in the first quarter of 2008. When we paid off our MBO debt about 10 or 12 years ago, we've never borrowed any money.

Speaker #1: We're being very financially responsible. And we're going to do this with the acquisitions. Thank you. And, and I was wondering if you could comment a, a bit more on the, the growth in arc of profitability within Global Mobility and Consulting.

Speaker #1: As you see it now, sort of w-w-when does the profitability start to close its gap and, and start inching towards breakeven and eventual positive?

Speaker #1: I think second half of this year in both. we see a big pickup in revenue. We're still investing in headcount because we think we can grow the practice I would like to lose money on a more moderate basis.

Speaker #1: But I don't want to sacrifice growth for immediate profitability. Because we have to build out an infrastructure for those practices. I would say as between the two, it's more likely that consulting could be in the black second half of next year.

Speaker #1: Global Mobility, I would say probably 2028 is educated guesswork. We're still in Global Mobility. With respect to consulting, at this juncture, it's a question more of executing on implementing the integration of practices.

Speaker #1: And you will see that we will add practices in consulting in the third quarter. We have a number of conversations going with con-consulting groups.

Speaker #1: Primarily initially in the United States. because from a pure integration standpoint, those are going to be much easier for us to execute. Thank you very much.

Speaker #1: Thank you. And your next question comes from Kevin McVeigh with UBS. Please state your question. Great. Thanks so much. And congratulations on the results.

Speaker #1: Mark, I think you'd mentioned or that, you know, the rate per hour increased 8%. But, the growth of the professionals was 13. i-is can you help us understand the delta, the 8 to 13?

Speaker #1: And it sounds like you're relatively new in terms of the phasing of AI. So is there any way to think about what that 13 can become over time as y-y-you know, it's, it's, it's, it, it becomes more embedded i-i-in the organization?

Speaker #1: yeah. I would say, it's, it's pro Kevin, it's a little bit tough, tough to, to estimate specifics. I haven't taken out pen and paper and cranked through the numbers.

Speaker #1: And I, I haven't asked anybody else to do that. I will say this. We have a lot of room for improvement. And I discussed on the last call, Dan DePauli has taken on the responsibility you know, we run as a team.

Speaker #1: Nobody worries about titles or what position they play. Everybody just wants to make a contribution. Dan is a terrific partner. Dan has taken on the productivity responsibility.

Speaker #1: We think that will move productivity on a systematic basis this year. We are going to set aside each quarter, which is in our numbers.

Speaker #1: We set aside a $1 million bonus for our, our non-partners. we will continue to do that in responsible way. I want to see all the investors make a lot of money.

Speaker #1: But we're only going to make a lot of money is if our people have a, a, an opportunity both professionally and financially. So we're going to balance those things.

Speaker #1: Just as we're going to balance the growth in the Global Mobility and Consulting area with profitability. as I indicated on our last call, last year, we were up 48% in net income in a traditional price-earnings basis.

Speaker #1: ha-h on a pro forma basis, if we excluded consulting, and Global Mobility, that would have been 64%. To me, that is a very good way to balance growth with profitability.

Speaker #1: I don't think any business would mind growing their net income 48%. But we also have to expand. And we have to invest in our people.

Speaker #1: Ergo, we're going to see some, some modest volatility in productivity because of the artificial intelligence training. We have to invest in our people. And we have to g build their skill set so that we can continue to perform very strong in the future.

Speaker #1: No, that, that's helpful. And then Mark, I think you'd mentioned that, y-you know, if, if, if, if, if I interpret it right, that, you know, the, the source of the upside was greater client wins.

Speaker #1: I wonder, where are those clients coming from? And is it, you know, the constant rhetoric from the governments around, you know, taxes and things like that that's driving that?

Speaker #1: Or is it, you know, the public, you know, structure in now? Or just scale or, y-you know, because obviously the, the numbers are terrific.

Speaker #1: But when you think about, y-you know, where you're sourcing those clients from, maybe we can understand that a little bit more. Yeah. I would just say it's the quality of our services, okay?

Speaker #1: I don't think any of the noise around wealth taxes or anything else right now is, is really been much of a catalyst to our business.

Speaker #1: the call that myself and a younger partner had today was somebody it was referred to me by a law firm. And they have an inflated view of, of my capabilities.

Speaker #1: I'm not going to try to dissuade them from that. I'm going to try to demonstrate that they're making a good decision. I would say more often than not, our partners get work because we focus on trying to provide great service to clients.

Speaker #1: And we try to p-focus also on those opportunities that create the greatest value to clients. So I would say, you know, it's not really any one thing.

Speaker #1: It's a combination of things. Where I think we can get a geometric multiplier is going to be on the integration of services. We're already starting to see traction with the groups that are affiliated with us in consulting in the United States.

Speaker #1: And we're building on that. And that brings another dimension of capabilities to the relationship. We think that's a huge factor in, in the opportunity for growth for our business.

Speaker #1: Thank you. Your next question comes from Jason Haas with Wells Fargo. Please state your question. Hi. This is Johnion for Jason Haas. relative to your own projections that you gave back in 4Q for 1Q, where did you outperform the most at a segment level?

Speaker #1: And then excluding the change in inorganic revenue, you only increased the full-year revenue guide by 5.5 million at the midpoint. So why not flow through more of the beat there?

Speaker #1: I would say, Jason, that is a question that Neal probably should comment on. I would say we tend to be conservative. I would say the area that probably surprised me the most in the first quarter, the two areas were both PCS and valuation.

Speaker #1: 18.2% growth rate in PCS is probably a little higher than I would have anticipated. And valuation, there are some projects that we're getting, that I think we're executing better on, integration.

Speaker #1: And so those two numbers surprised me. My surprise that we came in at 15.7, 14.6, 15, 15.7, 13.3, you know, 17. We're, you know, I'm I expect we're going to be somewhere in those ranges.

Speaker #1: Neal, do you want to comment? Yeah. I, I think that's right, Mark. Th-those are the areas where we've had, the sort of outperformance, if you will, or, or where, where, you know, we've kind of re-raised the profile at a at a service line level.

Speaker #1: but, but if you if you look across the business from an organic perspective, just putting aside, you know, inorganic for now, y-y-you'll see that pretty much, you know, our, our numbers have been taken up across the board.

Speaker #1: So I, I wouldn't say there's any one specific service line or region or, or area of the business. but we're, you know, we're, we're, we're taking the overall organic up, considerably.

Speaker #1: about 2.5% from where we were, in, in the original, original projection. So we, we think that's a meaningful a meaningful increase. Got it. And then your client group count growth was 3.5% in the first quarter.

Speaker #1: Seems a bit lower than historical growth rates. Curious if that was in line with your proje, ex-expectations? And then given the revenue outperformance, it sounds like maybe you guys are winning some larger clients.

Speaker #1: So curious if there's a shift in your strategic focus and your go-to-market. I would say the biggest issue. I would say the biggest issue is our I mean, we are doing more things for clients.

Speaker #1: And as we build more dimensions of the business, I think that will be a big factor. Neal, you want to comment? No, I agree with that, Mark.

Speaker #1: I, I, I would say, the previous numbers that we've shared, in terms of client group growth and engagement growth, you know, we're, we're very strong.

Speaker #1: and bear in mind what we are measuring here is active clients on the platform for the time period that that's under measurement. So if you're looking just for the quarter, we're comparing Q1 with Q1.

Speaker #1: and, and which, you know, clients that are actually active on the platform. When you look across the full financial year, you, you'll get a different readout.

Speaker #1: and the, the, the underlying point here, dimension, is, is that seasonality in the business. so we, we, we don't think those numbers are unusual.

Speaker #1: In fact, you know, we're, we're very pleased to see both the engagement and the and the client group numbers grow. because of, because that, you know, that gives us that, that tailwind.

Speaker #1: Thank from Andrew Nicholas with William Blair. Please state your question. Hi. Good afternoon. Mark, the, the first question I wanted to ask was just on, on the M&A strategy.

Speaker #1: You, you've mentioned both this quarter and, and last quarter about all the different things that you're kind of contemplating as you kind of line people up in, in the pipeline.

Speaker #1: Is there a way for us to think about kind of prioritization of, of targets here? Does is it about, you know, the leadership and involvement with the Swiss Verine?

Speaker #1: Is it, specific types of work, consulting versus tax versus legal? geography, profitability, I think, was another, metric that, that you're looking at. So just kind of curious how you stack them up because it doesn't sound like there's a shor-shortage of opportunities.

Speaker #1: So just trying to figure out, you know, how you prioritize within that group. Sure. So I, number one, I think you'll see us continue to add practices that have existing management for our group, okay?

Speaker #1: So we are in discussions with, several other firms who provide existing management to regions. I would say second of all, you'll probably see this year, a concentration in Europe.

Speaker #1: our practice in Asia is relatively immature because that's the last practice that last region that we started building out. And so, I'm hoping that as we get enough of a queue because I spend time with our acquisition team on every deal, I'm hoping that as we get enough, structure in place on this, I can move to some of those groups that are not part of the Swiss Verine who have an interest and also I'm, I've started some conversations with a couple of larger groups that are completely unaffiliated from the firm.

Speaker #1: In fact, I'm going to be in the East Coast in June, having a very preliminary conversation with one of those groups. For the most part, I'm not interested in pursuing practices that are fully mature.

Speaker #1: The ideal practice for me is one where we have an existing platform, but it's much more cost-effective for us to expand that platform than to buy a practice that's very mature.

Speaker #1: So sometimes people can look at deals and say, why would you be interested in a practice that has 20 people?" And I can say, "Because I know where the next 300 people are coming from." And it's going to be much easier for me to get to 400 people and much more cost-effective for me to do that than to go out and buy a practice that's got 400 people.

Speaker #1: And that practice that I'm describing has a lot more upside, and that's a real fact pattern that I'm working on right now that is one country in particular where we actually have a practice that has 22 people, and there are five other groups that we have a verbal agreement with to go forward.

Speaker #1: And it's not inconceivable we will get all six of those deals done in one country this year that will give us a very significant position in that market.

Speaker #1: So I would say I'm looking at where we can replicate opportunities by adding other complementary practices Earthquake is a good example. We added a tax practice.

Speaker #1: We also added a legal practice. That's a very those are both very strong businesses run by Cecilia and Federico, and they've been with us for over eight years.

Speaker #1: We are now a very significant presence in a gateway to Latin America. I could tell you that there are other countries where if we get one deal done, we'll get four deals done.

Speaker #1: So getting critical mass in the markets, Andrew, is something that's important to me. Because when you start looking at the efficiencies of economies of scale, cross-selling, integration, you're going to drive your profitability.

Speaker #1: Very helpful. Thank you. And then just for my follow-up, in the in the release, this afternoon, you mentioned accelerating momentum in Andersen Consulting. Can you just flesh that out a little bit more, where you're seeing success, how headcount growth looks, and, and your ambitions, near term there?

Speaker #1: Thanks, Mark. Yeah. I would say, the greatest penetration we're getting is in the United States because it's easier because we've got a significant presence in the United States.

Speaker #1: We actually have 22 affiliates in no, 24 affiliates in the United States in consulting. we have active conversations going with six of those groups.

Speaker #1: That would provide us a very good initial platform and would be the first steps in the process. And I would say those groups are already reasonably integrated into the firm, but we have a lot of improvement to do there.

Speaker #1: So I would say, on the consulting side, we're going to probably start with the United States. And from a revenue standpoint, it's by far the biggest market.

Speaker #1: it also is the most profitable market. That doesn't mean that we aren't focused on the other areas. There are three other countries in Europe where I have suggested to our consulting leadership.

Speaker #1: I have given them a list where we have eight or nine affiliates in each of those three countries. And those three countries in consulting will be high priorities probably around the fourth quarter of this year.

Speaker #1: So Andrew, I have literally my own back of the envelope plan that I don't share widely I have a plan with conversations that would go all the way through the third quarter of next year.

Speaker #1: That doesn't mean we're going to close all those deals. But w-we have a known pipeline of firms that would give us plenty to do for the next 18 months in terms of implementation.

Speaker #1: Great. Thank you. Thank you. Thanks. And that's all the questions we have today. I'll hand it back to Mark Vorsatz for closing remarks. I just want to thank everybody for taking the time.

Speaker #1: I know how busy people's schedules are. I am actually in Maui right now. And, we had an event in Hawaii on Thursday with our think tank, and we did a think tank board meeting on Wednesday.

Speaker #1: And we had a PubCo board meeting on Friday. And when I surveyed everybody about whether that was a good venue, I had unanimity that everybody would like to do an annual board meeting in Hawaii.

Speaker #1: I'm limited to one. But, I'm going home tomorrow, and, I always keep myself busy wherever I am. My wife is very, supportive, and she's part of the team.

Speaker #1: So thank you all for taking the time out of your busy schedules to share the time with us. Thanks, everybody. Thank you. And that concludes today's call.