Public Policy Holding Co Q3 2026 Earnings Call Transcript

Public Policy Holding Co (NASDAQ:PPHC) reported third-quarter financial results on Monday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Public Policy Holding Co reported a 13.2% increase in third-quarter revenue to $55.2 million, with organic growth of 5.1%. Adjusted EBITDA rose by 11.1% to $12.8 million, with a 23.2% margin.

The company reaffirmed its full-year 2026 guidance, anticipating revenue between $213 and $216 million and adjusted EBITDA between $48.5 and $50.5 million.

Strategic initiatives included the integration of two M&A transactions and the addition of AI-enabled tools and advisory services to expand offerings.

Management emphasized the impact of recent elections, highlighting the potential for increased client demand amid political changes.

Operationally, the company maintained a strong cash position and reduced net debt, supporting its capacity for future acquisitions.

The company’s M&A strategy focuses on firms with $10 to $30 million in revenue, aiming for growth in geographic and service capabilities.

The addition of new government relations firms in key U.S. states has strengthened its market-leading position, enhancing state-level and federal expertise.

Full Transcript

OPERATOR

Good day and thank you for standing by. Welcome to the Public Policy Holding Co third quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. To ask a question during the session, you’ll need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again.

Please be advised today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Matthew Mazzanti. Please go ahead.

Matthew Ross Mazzanti (Chief Administrative Officer)

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

With that, I’ll now turn the call over to Stuart.

George Stewart Hall (Chief Executive Officer)

Thank you, Matthew. Thanks to everybody for joining us, as always, this afternoon. Third quarter was another period of steady execution against the backdrop of an unpredictable policymaking and communications environment, which, of course, led to increasing client demand. Third quarter revenue increased 13.2% to $55.2 million, including organic growth of 5.1%, which was up from 3.9% in the second quarter. Adjusted EBITDA increased 11.1% to $12.8 million, and that was achieved at a 23.2% margin.

For the first nine months, revenue is up 15.2% to $157.5 million, and adjusted EBITDA is up 9.9% to $36.2 million at a 23% margin—right in the middle of our guidance range that we raised in August. We’re on track for the full year today, and today we’re reaffirming that guidance that we raised last quarter. Roel’s going to take you through the quarterly results and the underlying drivers in more detail shortly. Beyond the numbers, there are a few highlights in the deck and recent news I want to point out. Some of the most exciting highlights of the period come directly from commercial momentum across our firms, including a few timely new offerings listed here and new AI-enabled tools and advisory offerings that expand the services we make available to our clients. Our two M&A transactions of the third quarter are already being integrated into their respective segments and are now making meaningful contributions.

With our new government relations firm in Tallahassee, Florida now on board, we have market-leading teams in California, Texas, and Florida—three of the four largest state economies in the U.S., arguably the most critical jurisdictions that our corporate clients need to navigate outside of Washington, D.C. This combination of federal and state expertise is as critical as always for our ongoing success, and it’s never more so than now. Collectively, through four acquisitions so far in 2026, we’ve added approximately $33 million in annualized net revenue based on figures disclosed at announcement time on each of those transactions and at pre-tax margins above our average, while adding important capabilities to our service offerings, specifically as it relates to our expanded offering in corporate communications. Thomas will talk a little bit about our approach here as well as our latest acquisition, Reedmark, which we closed just last week, and it significantly deepens our advisory expertise in crisis, litigation, and financial communications.

Finally, before handing it over to Roel for a complete financial report, I should take a couple of minutes to cover last week’s elections, and specifically to answer a question we often hear from investors new to our story: what do elections actually mean for Public Policy Holding Co? The short answer is that you’ve maybe heard me say—and others in our business since we started reporting results in London five years ago—that political change, institutional change of control, is good for our business regardless of the partisan outcome of that change.

Last week, voters made their voices heard, and now new agendas and some new political factors are already getting to work. This is our team’s time to shine, as always, and not only at the federal level. With three of our firms among the 25 largest in D.C. by revenue, last week’s elections put 21 new governors in office and decided more than 6,000 state legislative seats. So agendas in state capitals are being reset at the same time as Washington’s. With our firms in Texas, Florida, and California on the ground in those states—and those significant states backed by multi-state coverage across all 50 states—few, if any, of our peers can match the state-level reach that we can offer our clients.

Remember, we don’t do campaign and elections work. Our firms are bipartisan by design and built to stay. Clients pay us to understand a dynamic new political and reputational landscape quickly and position them to act within it. Every election brings new members and new priorities at the federal, state, and local levels, and this year’s elections have delivered that in some major and almost unprecedented ways. We help clients manage the risk and pursue the opportunities that emerge from environments like these.

It’s maybe worth me being quite specific about how our business segments respond to an election, because they are all a bit different—but that’s by design. Government relations is steady through transitions like this. It’s roughly 58% of our total revenue at the moment, and our lobbying firms typically go into the year with about 90% of that revenue already identified. The work doesn’t pause for an election. There’s a lame-duck session ahead, and the agenda before the new Congress and the new state sessions is being written and articulated right now as we speak.

Bottom line: Government Relations has grown 7.5% organically in the third quarter and is up 6.7% through the first nine months, and we expect that steady base to continue to grow. As for our Corporate Comms and Public Affairs firms, in our experience over the past decade or more, once the political players and their mandates are established, our clients’ need for policy influence, campaign and coalition management, and expert public affairs all grow as new agendas take shape. We saw this play out clearly the last cycle. The Comms segment was softer through ’24 and then grew 9% organically in ’25, including 22% in the second quarter alone last year, as clients mobilized around the new agenda.

You’ve seen this chart before, and the consistency in our growth over the past decade is something we’re proud of. At the same time, we believe our positioning for future growth is stronger than at any time in the past. So with that, I’m going to hand it over to Roel for a closer look at the numbers.

Roeland Jozef Bernard Smits (Chief Financial Officer)

Thank you, Stuart. First, to set things up, here’s a quick overview. I’d like to emphasize that we’re really pleased with how this year has been progressing so far. We’ve grown our revenues by 15%, including a healthy dose of organic growth. And alongside, our profit has gone up and we’ve controlled our margin in a way that aligns with the guidance that we’ve been providing throughout this year. So let’s look at the financial highlights. Here’s a chart that captures our primary KPIs both for the three months and for the nine months. As Stuart already mentioned, revenue in the third quarter was $55 million, up 13% year over year, which includes the contributions from the acquisitions that joined the year. Organic growth in the quarter was 5%, up from 3.9% in the second quarter. Now for the first nine months, revenue was $157 million, up 15%.

This organic growth of 4.7% is consistent with the approximately 5% average annual organic growth that underpins our outlook. So then let’s look at EBITDA. Adjusted EBITDA for Q3 was $12.8 million, up 11% versus prior year, and we delivered that at a 23.2% margin, which compares to a 23.6% margin a year ago. Then for the first nine months, adjusted EBITDA was $36.2 million, up 9.9% and delivered at a 23% margin compared to 24.1% a year ago, firmly within our guidance range for 2026. Now, as we already alluded to in the announcement of our six-month figures three months ago, the year-over-year margin difference is not driven by our member companies, but really by an increase in expense at the holding company level.

In the first nine months, our non-allocated corporate costs increased by $3.9 million to $13 million, primarily driven by our first year as a U.S. public company and the associated continued build-out of our central platform. Then moving to adjusted net income. Adjusted net income of $28.6 million for the first nine months was up 12.8%. Now, this was helped by the fact that in this period our effective tax rate on adjusted profits was 11% only for the first nine months compared to 15.5% last year. As I’ve explained also on previous calls, the phasing of our tax provision across the quarters is heavily impacted by our GAAP results, so quarterly rates are not indicative of where the full year will end for our tax rate.

Looking at the per-share results on a GAAP basis: for the quarter, we reported a net loss per share of $0.01 compared to a net loss of $0.45 per share a year ago, and we see the same type of steep improvement for the nine months GAAP EPS. Now, that improvement is mostly due to the non-cash bargain purchase gain that we realized on this quarter’s acquisitions. And this bargain purchase gain is an accounting outcome; it’s not an economic one. In the past I’ve explained how we sometimes realize bargain gain income because of the way that we structure our M&A transactions, and therefore we have to account for those M&A transactions in a certain way that impacts our P&L. At the same time, for the same restructuring reasons, we also have to take some of our M&A payments through our P&L in the form of post-combination compensation charges. Finally, in Q3 our GAAP results still included the share-based accounting charge that stems from our 2021 London listing and which is anticipated to fully roll off at the end of this fiscal year.

So for all these reasons, we continue to believe that looking at adjusted net income and adjusted EPS alongside the stated GAAP results makes it easier to interpret our results. So let’s look at the adjusted EPS. On a fully diluted basis they were $0.33 for the quarter compared to $0.36 last year, and for the nine months they were $0.92 compared to $0.97 last year. The step down in this adjusted EPS is not driven by the earnings. On the contrary, as we’ve just seen, adjusted net income went up decisively, but it’s driven by the share count. Our average fully diluted share count increased by about 18% year over year, and that’s primarily a result of the Nasdaq IPO in January 2026.

At the same time, that dilution provided us the capital this year to do most of the 2026 acquisitions without adding any extra debt. So, looking at free cash flow: adjusted free cash flow for the nine-month period totaled $14.6 million compared to $21 million last year. That was helped by a $10 million contribution to our free cash flow in the third quarter. Now, as we discussed already after Q2, the year-to-date shortfall in free cash flow is primarily due to cash deployments for working capital purposes, primarily on the receivable side, which increased $11.6 million over these nine months.

Now, that increase in receivables was not only driven by the various acquisitions we’ve been doing, but also to some extent by organic factors. Now fortunately, we’ve been working hard on addressing the organic factors and we’ve seen a material improvement in our receivables balances at the end of Q3 and now also in the beginning of Q4. And therefore we’re counting on our last quarter to be a very traditionally strong cash-generating quarter. And that brings me to the balance sheet. We ended the quarter with $18 million of cash against a total debt of approximately $40 million for a net debt position of $21 million. And that is equivalent to approximately 0.4 times our trailing adjusted EBITDA. Now, that compares to $5 million of net debt at the end of June—that’s not shown on this chart. And this increase in quarter three reflects the closing payments that we’ve made for 10 Credit and Advocacy Partners, both acquisitions being funded from cash on our balance sheet.

But comparing our net debt position to the same time last year, which was $38 million, we can say that we’re really still in a position of real balance sheet strength with ample flexibility for continued earnings-accretive M&A. Now let’s go to this next chart and look at the organic growth by segment a bit deeper. In this chart, at the top you see the organic growth for the past four years, and at the bottom you see a quarterly breakout for the past two years. So just going from left to right, one can see that Government Relations—here depicted in dark blue and, as Stuart mentioned, our anchor activity at approximately 58% of our total revenue—accelerated its growth: 7% organic growth for the nine months.

And the 7% was recorded both for Q2 and Q3. At the same time, Corporate Communications and Public Affairs, abbreviated to CCPA, has shown relatively muted growth these nine months at -1% year to date and with the quarter so far being plus 3%, minus 3%, and minus 1%. As Stuart already alluded to, this soft performance is partially the effect of strong comparables in ’25 as well as a traditionally slower pace in the lead-up to a new election. Finally, Compliance and Insight Services, which represents approximately 7% of our business, keeps growing at double digits so far this year—in the mid-teens.

Really outstanding results. So then we go to the next chart, and last quarter we introduced this new chart as it does a very clear job of showing the reasons for our margin movement, in this case depicted for the nine months. When looking at the margin changes in our segments, we can see that Government Relations expanded its margin further, which really reflects the stable pricing of our retainer contracts as well as some scale economies. Conversely, in CCPA we see a margin reduction driven by the lower project volume that I already talked about in an election year against a strong prior-year comparable.

And finally, the CIS margin appears to be coming down, but I will admit that in this specific case this is also driven by our cost allocation structure for this segment, and it does not really represent a fundamental weakening of the profitability of this segment. But when taking together the three segments in aggregate, we see a blended segment margin of 39.5%, which is very much aligned with last year. In fact, it’s two ticks up. So overall, not a big change in the margins delivered by our member companies.

But below that blended segment margin, one can see the impact of our holding company costs. Those holding company costs went from 7% of revenue last year to 8.5% of revenue this year. And as previously mentioned, this was primarily the result of the IPO costs and all the associated investments we had to make in staff and tech stack and our advisors. Finally, at the bottom of this chart, the bonus pool remains relatively steady around 8% of revenue.

Taken together, these factors lead us to the adjusted EBITDA margin that we’re presenting to you today of 23%. Now, we believe that this overview very clearly demonstrates that the margin pressure we’re currently experiencing is not so much a function of our business results, but is really a result of our Holdco investments. And the impact of those Holdco investments will become less as we continue on the growth. Now, as I did last quarter, I’m going to skip the charts covering the management P&L, the cash flow statement, and the net debt position. They’re in this deck and together with all the appendices for your future reference later. After reviewing these financials, I also would like to quickly re-emphasize an observation we already made in previous quarters on our future GAAP results. So in this chart, for illustration, we outlined our multi-year GAAP results and they traditionally include a lot of non-cash charges.

Then at the bottom we also show what those GAAP results would have looked like had it not been for the share-based accounting charge. And as I’ve explained already earlier, these have been in our filings since the end of 2021 because the share-based accounting charge is a remnant of our 2021 London listing. It has no cash impact, it has no share-dilutive impact, and at the end of ’26, after five years, this amortization charge is scheduled to roll off.

So as of 2027 this share-based accounting charge is no longer going to be there and that is going to greatly enhance our GAAP profitability. And that concludes my part and brings me to the guidance. With nine months behind us, we are reaffirming our full-year 2026 guidance after raising it last quarter. So we continue to anticipate that our reported revenue is going to end up in the range between $213 and $216 million and the adjusted EBITDA is going to end up in the range between $48.5 and $50.5 million at a margin of between 22.5% and 23.5%. We have not increased the guidance as a consequence of last week’s Reevemark acquisition.

We chose not to do so because the profit contribution of the Reevemark acquisition for the two months in 2026 is relatively small, and would not materially lift us above the guidance that we already provided to you. So, as always, our guidance does not take into account any future acquisitions. For us, the main variable for the fourth quarter in 2026 is how much project work is going to follow the election outcome across the rest of the business.

Our retainers are giving us good visibility on how that’s going to roll off. We continue to expect strong free cash flow conversion in the fourth quarter consistent with our normal second-half weighting of cash generation. And with that, I will hand it now over to Thomas Gensemer.

Thomas Edward Gensemer (Chief Strategy Officer)

Thank you, Roel, and thanks again to everyone joining us today. Stuart and Roel set up nicely just how our Core business segments are responding to changed political environments and the economic conditions more generally. I’ll say it here again, Public Policy Holding Co is and will remain anchored in policy and political communications. As many of you know, lobbying and public affairs is our origin story and it remains our distinct competitive advantage versus our closest competitors. Our addition of the Advocacy Partners, a leading Florida state lobbying firm, earlier in the third quarter is a clear statement of that commitment.

So let me use the bulk of my time today to explain just how and why we are working to deepen the complementary capabilities in corporate and crisis communications to expand our positioning and to be able to provide clients the best advice for their most critical challenges and in turn driving growth across the platform. As with the exciting deal announced just last week with Reevemark, which is really a premier firm here in New York, we have been busy growing our litigation, transaction support and crisis communications capabilities, all that fit closely with our core services.

Simply put, a company’s reputation, its legal positioning and its regulatory exposure all collide in times like these. TrailRunner International, headquartered in Dallas and with a network of offices from San Francisco to the Middle East, is now in its second financial year with us and that team continues to shine for clients when the stakes are the highest. Big corporates, universities, sports franchises, asset managers — that’s their bread and butter client. In July, Ken Creedy joined as the first member of what we now call the TrailRunner Group, adding deep corporate crisis and litigation communications capabilities in London and across Europe.

And now Reevemark deepens our footprint and connectivity in the world’s financial capital here in New York as a second member of that group. As Stuart has said many times before, there is no such thing as a reputation problem that isn’t political or a political problem that isn’t reputational. Clients want one team that can handle it all, and increasingly that team is ours. And finally, a word on our M&A pipeline. We remain active but are increasingly selective, focusing on integration and cross-selling of the current portfolio. We have dozens of quite specific opportunities at various stages of review and mostly to fit geographic gaps. Our criteria are unchanged — firms with 10 to 30 million dollars in revenue, margins that support our overall profile and clear cross-selling opportunities into the existing portfolio.

Our pace of two to four transactions a year is proven by our recent activity and appropriate for our state ambitions. With that, I’ll hand it back to Stuart.

George Stewart Hall (Chief Executive Officer)

Thanks, Thomas. And I’ll add that to support the pace of growth that we’re discussing here and Thomas was just talking about, last week we announced the new five-year $105 million senior secured credit facility with our longtime partners at Bank of America. We intend to increase it to $150 million through a syndication expected in January of 27 and it includes an uncommitted accordion of up to another $50 million. Together with our strong operating cash flow, that gives us the capacity to act on the right opportunities when they present themselves and it keeps leverage within our stated range of 1.5 to 2 times adjusted EBITDA.

To wrap up here today and to get to your questions, I want to highlight the four core elements of Public Policy Holding Co’s business profile, in summary, for those of you who may be new to the story. First, its stability: roughly 90% of our revenue is retainer based. Client retention is in the mid-80s and no single client is more than 2% of the entire book. Second, profitability: our EBITDA remains consistently high year over year along with the growth and the maintenance of our top line revenue as well.

As a result, we convert that at a very good rate to free cash flow which we’re able to reinvest in further M&A and other activities that grow and support the business. Third, it’s growth — organic growth. In each quarter of this year, four acquisitions completed, a robust pipeline remains under consideration and a new policy agenda that’s forming at every level of government heading in 2027. When clients need to navigate that, it’s Public Policy Holding Co companies that they’re going to call.

And fourth, most importantly, and I always end the calls this way, I’m making this point — it’s our people. Nearly half of our roughly 500 employees hold some form of equity in Public Policy Holding Co and more than 160 hold registered and active shares. They think like owners because they are owners. This model is built around keeping our best talent, bringing in the next generation into ownership and aligning the interest of our employees with the success of the business.

We appreciate your time today and your continued interest in Public Policy Holding Co. Operator, we’ll open the call for questions and Thomas and Roel will be available to answer them. Thanks.

OPERATOR

Thank you. Ladies and gentlemen, if you have a question or a comment at this time, please press star 11 on your telephone. If your question has been answered, you wish to move yourself from the queue, please press star 11 again. We will pause for a moment while we compile our Q&A roster. Our first question comes from Eric Wold with Texas Capital. Your line is open.

Eric Wold (Analyst)

Thank you. Good afternoon. A couple of questions for me. I guess first off, with the four acquisitions completed this year so far, maybe give a little bit of color just on the kind of the progress of integrating those into the company and kind of what you’ve seen in terms of the speed at which those teams have been working, kind of cross-work with other partners as well.

Thomas Edward Gensemer (Chief Strategy Officer)

Sure thing, Eric, it’s Thomas here. I’ll start on the — there’s two aspects of this. One is sort of cultural and bringing teams together and the other is sort of operational and financial. Roel will report happily that the well-oiled machine on operations means that sort of financial aggregation begins at day one after deal. The cultural side is more interesting in that we don’t change the flags above people’s business cards. We don’t issue new mandates for office space. We keep the continuity of the business while introducing the specializations into the other disciplines. And there’s very little duplication despite the fact that the segmentation does cluster the firms. The example of Reevemark last week is one that they’re already on calls with some of their colleagues across the group on pending matters or shared clients that existed before the transaction.

And usually we even lay the groundwork for that during our diligence in that we want to get people ingratiated and we use the value of our network as part of the M&A story and getting people over the line or convincing them to go with us in cases of competitive bids. Roel, on operations and financial, go ahead.

Roeland Jozef Bernard Smits (Chief Financial Officer)

Yes. Hi, Eric. It’s Roel indeed. We have a principle that we would like our new acquisitions to be on our systems on day one, which, for finance, is basically always realized. So we have them on our system, accounting essentially the first day that they’re part of us. And payroll — that is also on day one if they’re based in the US, while if they’re based outside the US, like for instance 10 credit, then we leave them on their own payroll system for the first few months.

So that is basically our principle of getting in any case our hands around the back office, and that has worked well. Obviously these things can only happen in close collaboration both with the management team of the acquired company as well as the prior accountants, and that typically already happens pre-closing of the transaction.

Eric Wold (Analyst)

Perfect. And then a follow-up question. You talked about having a robust pipeline and looking at dozens of companies in various stages right now. How would you describe the valuation environment right now? And then when we get into a period like post the midterms and kind of this big change in mindset, does that tend to be an environment where sellers in the government relations consulting segment would want to sell or do they kind of go hunker down and just deal with the busy work?

Thomas Edward Gensemer (Chief Strategy Officer)

Yeah, on the first I’ll say we remain in an environment that most of our competition at scale and for these specialty assets are within private equity. And so the marks aren’t exactly on valuation. With that I’ll also say that versus 12 and 18 months ago, valuations out there have become more realistic. While there are still premium players, there’s less froth, shall we say. And what we look at — again, these are small specialty assets. That world is quite small.

On the second question when it comes to — well, Roel, I’ll hand it to you if you have anything to add on the two parts.

Roeland Jozef Bernard Smits (Chief Financial Officer)

Well, no, I think the way we structure our transactions is quite particular and it automatically always provides a de-risking hedge, if you want, on the valuation because we work not only with earnouts but also those earnouts are paid part in cash, part in shares, and they’re strictly dependent — the outcome of these future earnout payments — on growth in profit realized after the day of completion. And that way we’re able to, I think, still be very competitive because those sellers who believe that they need a lot of growth sitting in their company, they’ll be happy to sign up and they know that they can monetize the asset that they’re selling.

Thomas Edward Gensemer (Chief Strategy Officer)

On the lobbying side, just to circle back to the second half of your question, Eric, it’s a really fragmented market still. And so more than 2,500 individual firms report at the federal level at least, and they make up such a broad spectrum of both ideological and specialty. It’s hard to say whether the change — everyone doubles down again in times of change because, as we’ve always said, it’s now the time that we move from campaign operators to policy operators.

It will be another inflection point as we look towards ’28 where some of the bigger firms like us in the top, call it 30 or even 50, with the bipartisan stripes, are where we both get to that scale and that stability. Because we weather the storm, more exits will come and go. We’ve certainly seen more of our competition coming to our core lobbying space in recent months. But those conversations I think will happen regardless, as the steady state of the lobbying work is what makes it so interesting to build a top like we have.

It’s just all retainer-heavy, steady workhorse in the portfolio.

Eric Wold (Analyst)

Perfect. Thank you both.

OPERATOR

Cheers. Thank you for your questions. One moment for our next question. Our next question comes from Jason Tilson with Goldman Sachs. Your line is open.

Jason Tilson (Analyst)

Thank you. Good afternoon, everyone. Thanks for taking my questions, and apologies if you’ve covered this off already as I’ve been jumping between a few calls. Also appreciate that you’ve talked a lot about the high-level impact of election cycles on some recent earnings calls, but just curious, given the magnitude of the shift in the political landscape we saw last week, curious if you have any additional thoughts on how that may impact the various parts of your business.

Thomas Edward Gensemer (Chief Strategy Officer)

Right now, as Stuart said in the call, we see it as the cycles of the past. The media environment makes it very dramatic. There have been other big majorities in ’92 and 2006 and otherwise. So when you look at the longer picture outside of the hysteria that is very much a Trump-era phenomenon on both sides, we look at change as good. All the new committees, all the new members, and the fact that even despite the headlines, you know, moderation won in this environment.

So we see that as both good for business broadly for us and for the business economy broadly, because you’re going to have maybe a slight quieting of the extremes that exist on both sides towards more places. You know, you look at Kansas, Texas, really close elections in Florida. Yeah, it stayed Republican. But it’s still a signal across the board the moderates will prevail. Maybe that will decrease some of the noise, so to speak. But it won’t change the need for our clients to engage proactively—and reactively in some cases where there’s a correction in order—with government at all levels. So we see it as a resounding sort of reminder of democracy in a way.

And the fact that, like it or not, the role of government with and for business is part of the equation.

Jason Tilson (Analyst)

Right. That’s very, very helpful. And I would like to do this every quarter because you guys are so active on the M&A front. If you could maybe just refresh where you stand today—the priority list, sort of your internal checklist that you’re willing to at least share with us—top priorities, whether it be from a capability or geographic standpoint on a go-forward basis here. Thank you.

Thomas Edward Gensemer (Chief Strategy Officer)

Sure. I mean we have now checked the state boxes, domestically speaking, with the Florida acquisition this quarter, which we’re very happy with, and it was a long-time pursuit. For those of you who’ve been with us for the London years, as we call, we will say that it’s deepening across those states, and we really think the state play—multistate and the individual actors—is a really important piece of the portfolio going forward. So that being said, on the GR side, there are still regions in the comms space, particularly broader Europe. We’re still not in Brussels in any full-time capacity, and we’ve identified that outstanding. We do have client interest and increased needs with depth in the Middle East and in parts of Asia. And so we’re certainly opportunistic to leads in that space, and we do some networking both with clients and otherwise to deepen our early bets, particularly in the Middle East.

But it’s really remained much the same, I’ll say with Reevemark in particular. That thesis that we laid out both with TrailRunner two years ago and then sharpening with Tancredi in recent months on the litigation and sort of special events or transaction comms is really sharp now. We’ve gotten, in addition to TrailRunner, two regionally specific, very sharp sets of specialties in that. And so we will—you know, we never check a box because the market evolves so quickly—but we can sort of both focus more back to the policy and lobbying moats that we have; we have to reassess. And then the continued comms role. You may have more to add on that, if you will, please.

Roeland Jozef Bernard Smits (Chief Financial Officer)

Yes, please. Now, actually one point, Jason, on the GR M&A appetite. I know Thomas alluded to the state activities that we’ve picked up over there. But actually one state that clearly we’d still be very interested in acquiring something in, and that is New York State. And, yeah, it is anywhere in the world where there’s a really well-formed, mature government relations market we would potentially be interested in. But first and foremost, as Tom has already mentioned, is Brussels, because the EU we see as our next big thing.

OPERATOR

Very helpful. Thank you very much. Have a great night. One moment for our next question. Our next question comes from Scott Schneeberger with Oppenheimer. Your line is open.

Scott Schneeberger (Analyst)

Thanks. Good afternoon, guys. I want to dig in a little bit on the strength of GR in the third quarter. The organic revenue grew 7.5% year over year—quite strong. It’s been covered a little bit in the overview, but I just want to dig in. How much is that potentially seasonal? Was there some unique activity ahead of the midterms—you know, maybe not direct, but indirect—and kind of where does it shake out? Was it federal, was it state? Just kind of curious where that was.

Mostly federal, but just a layer deeper, please, if we could, on the strong growth.

Roeland Jozef Bernard Smits (Chief Financial Officer)

Let me take that one. It was very much spread between state and federal. And I should also highlight actually strength in London, where Pagefield has been growing its GR business quite substantially. So really we saw it on all fronts, and of course we’re pleased about that because that also gives us more confidence and basis for further growth in the future.

Thomas Edward Gensemer (Chief Strategy Officer)

And I’ll just add the robustness in federal is higher than what our—you know, if we’ve been doing that for five and six congressional cycles now in the long term. But D.C., the dynamic of D.C. is different now in Trump 2 than it’s been before. So just a higher engagement level by clients for a whole variety of reasons. And then particularly I was going to add on California—just getting down, it was an extended cycle. Newsom was coming to the end of his term, is now at the end of the term.

They had an extended cycle that dealt with a lot of tech issues, some of the child safety issues and other things that were up—a very robust into-August California legislative cycle. So it kept California firms very, very busy.

Scott Schneeberger (Analyst)

Great. Thanks, both of you. I’m going to follow that with just what are the main drivers that you’re seeing out there? Is it the AI evolution, tariffs, crypto? Just what are some of the drivers that you’ve seen at a high level? And how do you anticipate that changing with the political changes from last week on what may be at the forefront? More of the same, or do you see things rising up that haven’t been there before? Thanks.

Thomas Edward Gensemer (Chief Strategy Officer)

I mean, I think it’s usually more of the same because gridlock in Washington will remain. You know, our job is sort of managing through gridlock. And while we have a change of gridlock, there’s still—you know, no one has control of all three. Super busy has been on health care—broadly speaking, healthcare efforts or healthcare practice. There are a bunch of things at the state level in ’27 that were part of Trump’s big, beautiful bill that will sort of expire.

And so at both the state level and where it impacts the federal money, the health care practice has been very— Energy remains just front and center for obvious reasons—war plus just the fact of energy and all things in that sector. Tech I’d mentioned before, from California to Washington, has been a very active segment and no question will remain. And then broadly speaking, the AI tailwinds that we’re feeling—there are always new players in Washington. So you have some new hyperscalers that are becoming sort of institutional players in Washington that are net new to the overall economy.

And then just the tentacles of that issue down into state, local jurisdictions, and every other thing is unlike other past entrants to the federal market. So firing that on federal and state level simultaneously—or often starting at the township level, at the data center, and moving up very quickly—is a new sort of growth phenomenon. It is AI-specific given the energy ties to it.

Roeland Jozef Bernard Smits (Chief Financial Officer)

Yeah. Now, I mean, Scott, I know that in the past we’ve said that actually when you look at our revenue profile by industry, we almost look like the U.S. economy, and that’s still the case. And right now loads of attention to tech and AI, and yes, we see that as well in our revenues and where new clients are coming from.

Scott Schneeberger (Analyst)

Thank you both again. And just a last one to clean up. Congratulations, one, on the recent acquisition—they all look very good, very exciting—and the new credit facility. I’m just curious, I think, Thomas, you mentioned in prepared remarks that the sweet spot is, I think, revenue of 10 to 30. Please correct me if I’m wrong.

Thomas Edward Gensemer (Chief Strategy Officer)

I did—10 to 30, yeah. That’s where, you know, there are things that live below and above that line in what we’re chasing, but those are safe parameters that our model really works well for.

Scott Schneeberger (Analyst)

Yeah, I guess the question on that is just, are there a lot of things up at the high end, at the 30 end, and now with a credit facility it just makes it very easy and gives you added flexibility to go do that? Is that something we should be watching for in 2027, or is that just not an appropriate read?

Thomas Edward Gensemer (Chief Strategy Officer)

I will never say never in that we—you know, this industry is broad and very fragmented, and so we find things that we don’t know of today. But when we look at high-margin sort of specialty comms or policy expertise, they’re not getting to 30-plus scale that naturally. So TrailRunner was sort of the largest of its type in that, and it had a corporate wallet that was additive to our capabilities. As we look now at sort of deepening and then doing geography, I’m never going to say never again, but it’s our sweet spot.

And those that we build outbound relationships and networking with are in the things that we know we can digest and are sort of additive and not duplicative. We’re not really looking for conflict shops or other sort of scaled plays right now. We’re really looking to fill in gaps where we know we can have outsized— So, you know, it’s a soft answer because we are open, and because we’ve been doing this, capital markets and otherwise, we’re getting more and more inbound from folks that are helping along the way. Sorry for the fire truck—it’s New York City. But yes, that’s where we are from a targeting perspective, and the outbound sort of remains. We enjoy the sort of getting to know, and then we benefit from clients who introduce us to new capabilities and new geographies along the way too.

Scott Schneeberger (Analyst)

Excellent. Thanks, guys. I’ll turn it over.

OPERATOR

One moment for our next question. Our next question comes from Samuel Dundal with Stifel. Your line is open.

Samuel Dundal (Analyst)

Thank you. Good afternoon, guys. Two questions for me, please. Firstly, on the AI tools which you mentioned bring new services to clients—any color on what you’re seeing there and how that’s driving new revenue? And then secondly, on cross-selling—appreciate with TrailRunner you’ve added to that with Tancredi and Reevemark this year. Just how are you going to ensure you sort of capture those growth opportunities and make sure everyone knows the services you now have, given that sort of material step change in that business?

Thank you.

Thomas Edward Gensemer (Chief Strategy Officer)

I’ll take the first and give the second to my colleague on the AI tools. You know, we’re happy that we didn’t sort of build group-wide capabilities in this at the start of the year or last year because the sand is shifting under all of our feet very quickly. And so we’ve used our federated model to really test different things, both bespoke for client needs and then, broadly speaking, where we see time opportunities. So I’ve used before the example of congressional hearings used to take time to reach transcriptions that would then turn into client deliverables.

Now we have sort of agents that are working for that across the sort of federal portfolio where we have the transcriptions up. That’s just a very sort of small but meaningful use of time and client execution. We’ve seen in the comms businesses, both on routine things like media monitoring and up to the research side, we’re doing synthetic sampling and synthetic message testing against things that used to just be focus groups. We’re political practitioners at heart, so we still do human contacts and human samples. But how you can bring insights to clients in cheaper, faster ways using AI tools is profound, and it’s changing the research industry. So where those live predominantly in our comms businesses, we’re seeing dramatic test-and-learn, but also a huge client appetite for bringing new product and new screens.

Finally, I’ll just add we’ve done something that is patent-pending in one of the London operations around a reputation score called GPS, which is allowing people to sort of manage reputational risks across the different LLMs. And we’ve now sold it across, I think, six or seven of the firms, ranging from London to Sacramento and D.C. It’s something that can incubate within one aspect of the group but then be sort of cross-sold through the work we do bringing the colleagues together as sort of trusted references.

So that’s called Pagefield GPS, and it’s now being sort of rolled out across some of the other companies. Over to you, Rol. Sorry.

Roeland Jozef Bernard Smits (Chief Financial Officer)

No, that’s all good. So your second question, Sam, was how do we capture the growth between our acquisitions in general and between Trailrunner 10 credit and Reedmark in particular?

Samuel Dundal (Analyst)

Yeah, exactly.

Roeland Jozef Bernard Smits (Chief Financial Officer)

Yes. And the answer to that is, listen, we’ve got our sort of collection of tools that we continue to further build out to encourage this collaboration between our companies because obviously that’s where we create a lot of our value. We do that through very regular business development calls between various business development teams. We have twice a year a summit. We actually had this quarter our first also Next Gen Summit, basically bringing a lot of people together in Texas, one of the meetings that Thomas hosted.

And in our business it’s very important that people get to know each other and trust each other because when they want to share their clients with, let’s say, a sister company, they have to trust and know that that company will treat their clients in the right way. So from that perspective, we’re still small enough that we can have a lot of actual connections between our people, and that will drive collaboration. And John Green, our chief client officer, is relentless in terms of pursuing multi-company client prospects, so private prospects that are being pursued by two or more companies. And then us on the finance side, we try to measure that collaboration constantly, and we’ve talked in the past about how we measure the percentage of business referred, the percentage of business that comes from clients that are being serviced by more than two of our companies.

And we have trend lines in our monthly management reports. And as long as that trend line goes up, we know we’re doing better than yesterday, but we also know that tomorrow we’ll still be doing better than today. Now, with respect to that new group, the Trailrunner group in particular, we can leave it to Jim Wilkinson to be very energetic when it comes to bringing these companies together for jointly developing client opportunities. Trailrunner is a very specific new-business culture, which I’m sure he will try to also infect the other companies with. And actually, we’ve already seen that. They’ve been on joint roadshows to meet with a lot of law firms to basically solicit litigation communications business.

I know that there’s been roadshows in London, in Italy. So there’s a lot going on already on this front. And we’ll keep doing it, because this is, frankly, where we add a lot of value. Sam,

Samuel Dundal (Analyst)

Brilliant. Thank you.

Roeland Jozef Bernard Smits (Chief Financial Officer)

Thanks for the question, Sam.

OPERATOR

I’m not showing any further questions at this time. As such, this does conclude today’s presentation. We thank you for your participation. We hope you have a nice day. You may now disconnect and have a wonderful day.

Roeland Jozef Bernard Smits (Chief Financial Officer)

Thank you, Sam.

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