REG - Public Policy Hldg - PPHC Announces Q1 2026 Financial Results
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RNS Number : 0623E Public Policy Holding Company, Inc. 13 May 2026
Public Policy Holding Company, Inc.
("PPHC", the "Group" or the "Company")
Public Policy Holding Company, Inc. Announces Q1 2026 Financial Results
Strong Revenue Growth Demonstrating Success of Company
Strategy
• Revenue growth of 27.5% with organic revenue growth of 5.1%
compared to Q1 2025
• Completed significant talent additions, and announced an
acquisition which closed in Q2 2026
• PPHC added to Russell 2000® and Russell 3000® Indices as of
March 23, 2026
• Net Debt reduced to $1.8 million following U.S. IPO
Washington, DC - May 12, 2026 - Public Policy Holding Company, Inc. ("PPHC,"
"Company," "Group") (Nasdaq: PPHC and AIM: PPHC.L), a leading global strategic
communications provider offering a comprehensive range of advisory services in
the areas of Government Relations, Corporate Communications, and Public
Affairs, yesterday at 4pm EST reported unaudited financial results for the
quarter ended March 31, 2026 ("Q1 2026").
Q1 2026 Financial Highlights
• Revenue increased 27.5% over Q1 2025 to $50.1 million.
• Organic Revenue growth 5.1%, driven by strong growth in each of
our three segments.
• GAAP Net Loss of $11.5 million compared to $10.6 million in Q1
2025.
• Adjusted EBITDA of $11.2 million, up 29.7% over Q1 2025,
achieved at a 22.3% margin.
• Adjusted Net Income of $7.4 million, up 100.5% over Q1 2025.
• GAAP Basic and diluted loss per share of $0.49 an improvement as
compared to $0.63 in Q1 2025.
• Adjusted EPS, fully diluted of $0.25 was up $0.11 or 74.5%.
Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA Incl. M&A
expense, Adjusted net income, Adjusted EPS, fully diluted, Organic Revenue
Growth and Adjusted Free Cash Flow, are non-GAAP financial measures, as
defined and reconciled to the nearest related GAAP measure below.
Stewart Hall, CEO of PPHC, commented:
"PPHC delivered its strongest quarter to date for both revenue and Adjusted
EBITDA, reflecting continued organic growth and the accelerating contribution
from recent acquisitions. Our strategy remains focused on building a
differentiated group of companies with complementary capabilities, expanded
geographic reach, and strong intercompany synergies, while maintaining the
financial flexibility to pursue additional M&A and strategic hires.
The U.S. listing has further increased PPHC's visibility and strengthened our
pipeline of opportunities, both for acquisitions and senior talent. In a
complex political, regulatory, and reputational environment, clients are
increasingly seeking integrated counsel across multiple spheres of influence,
and we believe PPHC is uniquely positioned to meet that need. I want to thank
our people across the Group for their continued commitment to our clients and
to the long-term growth of PPHC."
Roel Smits, CFO of PPHC, Commentary and Financial Guidance:
"With the completion of our January capital raise and U.S. IPO, PPHC has
entered the next phase of growth from a position of strength. Our balance
sheet flexibility allows us to pursue earnings-accretive acquisitions while
our strong cashflow allows us to continue investing in organic growth
initiatives. Momentum in Q4 and now also Q1 has set us up well for a
successful 2026.
In general, PPHC expects to continue growing revenue at an average organic
rate of approximately 5%, and that this will be supplemented by acquisitions.
For 2026, we anticipate reported revenue in the range between $205 million and
$209 million. While we continue to target Adjusted EBITDA at a margin around
25%, based on our current business mix and ambitions, in 2026 we will
experience the impact from assuming U.S. public company costs and certain
technology investments and therefore we anticipate Adjusted EBITDA in a range
between $46 million and $48 million, reflecting an adjusted margin between 22%
and 23%. The guidance above excludes the impact of any future acquisitions.
Our focus continues to be on driving client retention rates, new business
generation, and the continued cross-selling of services across the member
companies to support organic growth prospects, with each of these factors
impacting our organic growth result.
The market for Strategic Communications services in key geographies remains
fragmented. Management continues to view the Group as a natural consolidator,
and the pipeline of acquisition opportunities under development in the U.S.,
U.K., and mainland Europe remains robust. The Group is actively seeking to
expand its portfolio of member companies with strategically and financially
attractive opportunities while adding complementary specializations."
Conference Call Webcast Information
PPHC management will host a conference call to discuss the Company's financial
results today at 4:30 p.m. Eastern Time. The call will be led by Stewart Hall,
Chief Executive Officer, Roel Smits, Chief Financial Officer, and Thomas
Gensemer, Chief Strategy Officer.
Date: Tuesday, May 12, 2026
Time: 4:30 p.m. Eastern Time
Webcast: Participants may access the conference call via live webcast at
https://edge.media-server.com/mmc/p/gokedwqh.
Dial-in: To participate via telephone, please register in advance and receive
a unique PIN at
https://register-conf.media-server.com/register/BIf176e8d11b894d379f0e896523d8a879.
A replay of the webcast of the conference call will be available on the
Investor Relations section of the Company's website at
investors.pphcompany.com.
Operational Highlights
· Significant progress in line with the Group's stated growth
strategy, with earnings accretive acquisitions providing an enhanced
complementary range of services to the Group's international client base:
· Organically, the Group recorded 5.1% growth in revenue for Q1
2026 year-on-year which represents a step-up from the 4.7% growth in Q1 2025,
attributable to increases across our three segments.
· Announced the acquisition of WPI Strategy and made other
significant hires across the group, expanding group-wide capabilities in
Corporate Communications and providing cross-referral revenue opportunities.
· Revenue remained diversified with the top 10 Group clients
representing 8.0% of revenue in Q1 2026 versus 9.0% in Q1 2025; and revenue
mix by segment was further diversified with the Corporate Communications &
Public Affairs segment, our second largest reporting segment, growing to
represent 36.5% of total revenue in Q1 2026 (Q1 2025: 25.5%).
· The Group ended Q1 2026 with a client base of approximately
1,500, with representations of approximately a quarter of the Fortune 100 in
addition to many more via trade associations, underlining that our retention
rates remain high.
First Quarter 2026 Segment Results
· Government Relations Consulting grew at 8.4% for Q1 2026, as
compared to Q1 2025 as a consequence of continued organic growth of 5.2% in
tandem with the acquisition of Pine Cove Strategies, LLC ("Pine Cove") (2025
Q3). The margin of Segment Adjusted pre-bonus EBITDA remained relatively
stable at 45.5%, reflecting the stable pricing of retainer contracts both at
U.S. Federal and State level.
· Corporate Communications & Public Affairs Consulting
increased by 82.7% for Q1 2026, as compared to Q1 2025 as a consequence of
continued strong organic growth of 3.3%, in tandem with the acquisition of
TrailRunner International, LLC ("TrailRunner") (2025 Q2). The margin of
Segment Adjusted pre-bonus EBITDA increased significantly from 22.4% in Q1
2025 to 26.2% in Q1 2026, reflecting the operating leverage effects of
realizing higher revenues, although still operating at margins that are lower
than the Group's average.
· Compliance and Insights Services continued its strong growth at
10.8% for Q1 2026, as compared to Q1 2025 (reported and organic) as a result
of high renewal rates, price increases, and new client wins, all together
reflective of a unique and high value-added offering. The margin of Segment
Adjusted pre-bonus EBITDA further improved to 50.2%, reflecting the strong
pricing of subscription contracts in this area, in combination with the
increased use of technology in servicing our clients.
About PPHC
Incorporated in 2014, PPHC is a global strategic communications platform that
supports clients in enhancing and defending their reputations, advancing
policy objectives, managing regulatory risk, and engaging with federal and
state-level policymakers, stakeholders, media, and the public.
Engaged by approximately 1,500 clients, including companies, trade
associations and non-governmental organizations, PPHC is active in all major
sectors of the economy, including healthcare and pharmaceuticals, financial
services, energy, technology, telecoms and transportation.
With operations across 18 offices in the United States and internationally,
PPHC's services include government relations, public affairs and corporate
communications, research and analytics, digital advocacy campaigning, and
compliance support. The Company's shares are admitted to trading on the Nasdaq
Global Market and on AIM, a market operated by the London Stock Exchange,
under the ticker symbol "PPHC".
For more information, visit www.pphcompany.com.
Financial Review
Certain monetary amounts, percentages and other figures included elsewhere in
this earnings release have been subject to rounding adjustments. Accordingly,
figures shown as totals in certain tables or charts may not be the arithmetic
aggregation of the figures that precede them, and figures expressed as
percentages in the text may not total 100% or, as applicable, when aggregated
may not be the arithmetic aggregation of the percentages that precede them.
Adjusted Profit & Loss Statement
(Amounts in millions, except per share data)
Three months ended March 31,
2026 2025 $ Change % Change
Revenue $ 50.1 $ 39.3 $ 10.8 27.5 %
GAAP Net loss (11.5) (10.6) (0.9) (8.3) %
Adjusted EBITDA 11.2 8.6 2.6 29.7 %
Adjusted EBITDA margin 22.3 % 21.9 % 0.4 pts
M&A expense (0.3) (0.2) (0.1) (29.3) %
Adjusted EBITDA incl M&A expense 10.9 8.4 2.5 29.7 %
Depreciation 0.0 0.0 (0.0) (5.2)%
Adjusted EBIT 10.9 8.4 2.5 29.8 %
Net interest (0.8) (0.6) (0.2) (31.2) %
Adjusted EBT 10.1 7.8 2.3 29.7 %
Taxes (2.7) (4.1) 1.4 33.4 %
Effective tax rate 27.1 % 52.9 % (25.7)pts
Adjusted Net Income $ 7.4 $ 3.7 $ 3.7 100.5 %
Adjusted Net Income margin 14.7 % 9.3 % 5.3 pts
GAAP basic and diluted loss per share (0.49) (0.63) 0.13 21.4 %
Adjusted EPS ($) (basic) 0.27 0.15 0.11 74.1 %
Adjusted EPS ($) (fully diluted) 0.25 0.14 0.11 74.5 %
Bridge from Adjusted to Reported Results
(Amounts in millions, except percentages)
Three months ended March 31,
2026 2025 $ Change % Change
Adjusted Net Income $ 7.4 $ 3.7 $ 3.7 100.5 %
Share-based accounting charge 7.3 7.4 (0.2) (2.2)%
M&A: Post-combination compensation 2.8 3.4 (0.6) (17.3)%
M&A: bargain purchase charge (0.1) - (0.1) -
M&A: change in contingent consideration 6.3 1.0 5.3 541.0 %
Long Term Incentive Program charges 1.0 1.1 (0.2) (14.3)%
Amortization intangibles 1.6 1.3 0.3 24.1 %
Other income, net (0.1) - (0.1) -
Net Income (Reported) $ (11.5) $ (10.6) $ (0.9) (8.3) %
Management reviews the progress and performance of its business on the basis
of the Adjusted Net Income shown above. The items excluded from the Adjusted
Net Income above, while included in our GAAP results, have been shown in the
Bridge above. These excluded items do not have a cash impact, nor do they
reflect ongoing performance of the underlying business. Please refer to the
section 'basis of preparation' for a discussion of each of the non-cash items
excluded from Adjusted Net Income.
Revenue
($ in millions, except percentages)
Three months ended March 31,
2026 2025
Revenue from acquisitions Organic revenue Total revenue Total revenue Organic Revenue Growth((1)) Total Growth
Government Relations Consulting $ 0.8 $ 27.5 $ 28.4 $ 26.2 5.2% 8.4%
Corporate Communications & Public Affairs Consulting 8.0 10.3 18.3 10.0 3.3% 82.7%
Compliance and Insights Services - 3.5 3.5 3.1 10.8% 10.8%
Total $ 8.8 $ 41.3 $ 50.1 $ 39.3 5.1% 27.5%
($ in millions, except percentages)
Three months ended March 31,
2026 2025 $ change % change
United States $ 47.4 $ 37.7 $ 9.6 25.6 %
International 2.8 1.6 1.2 72.4 %
Revenue by geographic market $ 50.1 $ 39.3 $ 10.8 27.5 %
During the three months ended March 31, 2026, 56.6% of the Group's revenues
stemmed from Government Relations as compared to the same period in 2025 of
66.6% , 36.5% came from Corporate Communications & Public Affairs as
compared to the same period in 2025 of 25.5%, and 6.9% from Compliance and
Insights Services as compared to the same period in 2025 of 8.0%.
The Group's revenue realized outside of the U.S. was $2.8 million, or 5.5%,
for the three months ended March 31, 2026, as compared to $1.6 million, or
4.1%, for the three months ended March 31, 2025.
Profit
Long-term Profit
(dollars in millions)
FY FY FY FY 3 months 3 months
2022 2023 2024 2025 Q1 2025 Q1 2026
GAAP Net loss $ (15.0) $ (14.2) $ (24.0) $ (39.0) $ (10.6) $ (11.5)
Adjusted EBITDA $ 31.5 $ 35.4 $ 38.6 $ 45.4 $ 8.6 $ 11.2
Adjusted EBITDA margin 29.0% 26.2% 25.8% 24.3% 21.9% 22.3%
GAAP Net losses increased from $(10.6) million in Q1 2025 to $(11.5) million
in the three months ended March 31, 2026, the loss primarily resulting from a
$7.3 million share-based accounting charge stemming from the 2021 London IPO
and the treatment of acquisitions in our accounts, related to the change in
fair value of contingent consideration and post combination compensation
charges.
The increase in loss in 2026 was driven by an increase of $5.3 million in the
change in fair value of contingent consideration. This increase was offset by
a $1.4 million decrease in income tax expense and a $0.6 million decrease in
post combination compensation expense (which represents a $2.8 million
decrease before adding the new acquisitions of TrailRunner and Pine Cove),
along with revenue growth outpacing expenses.
Adjusted EBITDA for the three months ended March 31, 2026 was $11.2 million,
up 29.7% from the same period in 2025, achieved at a margin of 22.3%, close to
the Group's historic performance, while reflecting the change in businesses
mix with highly profitable Government Relations activities reducing in
relative weight, incorporation of new U.S. public company costs, and certain
technology investments.
Revenue and Profit by Segment ($ in millions)
Three months ended March 31,
2026 2025 % variance
Government Relations
Revenue $ 28.4 $ 26.2 8.4%
Segment Adjusted pre-bonus EBITDA $ 12.9 $ 11.5 12.2%
Segment Adjusted pre-bonus EBITDA margin 45.5 % 43.9 % 1.5pts
Corporate Communications and Public Affairs
Revenue $ 18.3 $ 10.0 82.7%
Segment Adjusted pre-bonus EBITDA $ 4.8 $ 2.2 114.1%
Segment Adjusted pre-bonus EBITDA margin 26.2 % 22.4 % 3.8pts
Compliance and Insights Services
Revenue $ 3.5 $ 3.1 10.8%
Segment Adjusted pre-bonus EBITDA $ 1.7 $ 1.7 4.3%
Segment Adjusted pre-bonus EBITDA margin 50.2 % 53.4 % (3.1)pts
Total
Revenue $ 50.1 $ 39.3 27.5%
Segment Adjusted pre-bonus EBITDA $ 19.4 $ 15.4 26.1%
Segment Adjusted pre-bonus EBITDA margin 38.8 % 39.2 % (0.4)pts
Non-allocated Bonus (3.9) (3.1) 23.9%
Non-allocated Corporate costs (4.4) (3.7) 19.4%
Adjusted EBITDA 11.2 8.6 29.7%
Adjusted EBITDA Margin 22.3% 21.9 % 0.4pts
GAAP Net loss (11.5) (10.6) 8.3%
Non-allocated bonus went up from $3.1 million to $3.9 million in the three
months ended March 31, 2026, as a result of the growth in pre-bonus EBITDA.
Non-allocated corporate costs went up from $3.7 million to $4.4 million in the
three months ended March 31, 2026, as a result of the building of a robust
central platform for supporting our clients, the incremental U.S. public
company costs stemming from the second listing, and our further growing group
of member companies. Also, external advisory costs increased as a consequence
of these same factors.
Other
The Group's net finance costs for the three months ended March 31, 2026 were
$0.8 million as compared to 2025 of $0.6 million, reflecting the inclusion of
additional debt on the Group's balance sheet for the acquisition of
TrailRunner in Q2 2025.
The income tax expense accrual for the three months ended March 31, 2026 was
$2.7 million on a net loss before income taxes of $8.8 million as compared to
$4.1 million on a net loss before income taxes of $6.5 million in Q1 2025,
which represents a blended effective tax charge relative to Adjusted Profit
before Tax of 27.1% for the three months ended March 31, 2026. This rate
represents a substantial improvement over the 52.9% blended effective rate in
Q1 2025. The reduction was driven by structural and temporary differences
between tax accounting and GAAP accounting, as well as temporary differences
due to phasing of the tax charge across the year (Q1 tax rate tends to be
higher than the full year rate).
After interest and taxes, the Group's Adjusted Net Income for the three months
ended March 31, 2026 amounted to $7.4 million, up 100.5% from $3.7 million in
Q1 2025.
The Group ended Q1 2025 with 358 employees and on March 31, 2026, this had
increased to 451, primarily as a result of the acquisition of TrailRunner. The
Group's average employee count during the three months ended March 31, 2026
was 451 (2025: 361).
Cash Flow
PPHC's GAAP Cash Flow statement has certain acquisition-related payments
included in the Cash provided by (used in) Operating Activities and in the
Cash provided by Financing Activities, as a consequence of certain acquisition
payments being made subject to continued employment.
Consequently, in addition to our GAAP statement of cash flows, we use a
non‑GAAP liquidity measure, Adjusted Free Cash Flow, to evaluate our cash
generation. Adjusted Free Cash Flow should be viewed as supplemental to, and
not a substitute for, GAAP net cash provided by (used in) operating activities
and total changes in cash and cash equivalents.
In general, the generation of Adjusted Free Cash Flow tends to be weighted
towards the second half of the year, as a consequence of the payment of annual
bonuses in the first half year.
The Group recorded Adjusted Free Cash Flow of $(10.3) million for the three
months ended March 31, 2026 as compared to $3.2 million in 2025. The decrease
is due to a $13.1 million increase in Accounts Receivable resulting from the
inclusion of the 2025 acquisitions as well as slower collections, along with
the payout of higher bonuses during this quarter, resulting in a reduction of
the Company's Accounts Payable balances. Management believes that most of this
decrease is driven by temporary effects which will get offset in the remainder
of the year.
Conversion Cash flow from Operations to Adjusted Free Cash Flow and Summary of
Cash Uses and Sources
(Amount in millions, except percentages)
Three months ended March 31,
2026 2025 $ Change % Change
Net cash used in operating activities - as reported $ (11.7) $ (8.6) $ (3.0) (35.2)%
Prepaid post-combination expense 1.9 10.1 (8.2) (81.1)%
Change in other liability - 1.7 (1.7) (100.0)%
Capex (0.5) - (0.5) -
Adjusted Free Cash Flow (10.3) 3.2 (13.5) (422.4)%
Prepayment on business acquisition (1.9) (18.5) 16.6 89.7%
Acquisition Payments included in Cash flow from Operations (1.9) (11.8) 9.9 83.8%
Cash Flow related to acquisitions (3.8) (30.3) 26.5 87.4%
Proceeds from notes payable - 24.0 (24.0) (100.0)%
Payment of debt issuance costs - (0.1) 0.1 100.0%
Principal payment of note payable (2.4) (1.8) (0.6) (32.9)%
Cash Flow related to debt financing (2.4) 22.1 (24.5) (110.9)%
Payment of deferred equity offering costs (3.9) - (3.9) -
Proceeds from U.S. initial public offering, net of underwriting fees of $3.0 42.9 - 42.9 -
million
Cash Flow related to equity financing 39.0 - 39.0 -
Effect of foreign exchange rate changes on cash and cash equivalents (0.1) 0.1 (0.1) (200.0)%
Net Cash Movement $ 22.4 $ (5.0) $ 27.4 548.6%
Typically, the Group's primary uses of cash are acquisition payments and
dividends. In 2026 Q1 only the acquisition payments were material at $3.8
million.
Cash outflows related to acquisitions decreased from $30.3 million in Q1 2025
to $3.8 million in 2026 Q1, with the 2026 outflow resulting from the
acquisition of WPI Strategy (completed April 1, 2026), while the cash used in
2025 Q1 primarily related to the acquisition of TrailRunner (completed April
1, 2025). In 2026 Q1, the cash inflow relating to equity financing of $39.0
million resulted from the U.S. IPO in January 2026.
Adjusted Free Cash Flow is a non‑GAAP liquidity measure. It adjusts GAAP net
cash provided by (used in) operating activities for acquisition‑related and
capital expenditure cash flows as described above. These are cash outflows
that occur in connection with our acquisition strategy and ongoing investment
needs, and Adjusted Free Cash Flow should not be construed as representing
additional cash available for use.
Net debt position
PPHC's debt position on March 31, 2026 of $44.6 million offset by cash of
$42.9 million, resulted in a Net Debt position of $1.8 million as compared to
a Net Debt position of $44.6 million on March 31, 2025. The decrease in Net
Debt related to cash received from our 2026 U.S. IPO, as well as the continued
repayment of debt balances.
(Amounts in millions, except percentages)
March 31,
2026 2025 % Change $ Change
Cash and cash equivalents as of end of period $ 42.9 $ 9.5 349.2% $ 33.3
Notes payable, long-term, net (34.1) (46.1) 26.0% 12.0
Notes payable, current portion, net (10.5) (8.1) (30.4)% (2.5)
Total Debt $ (44.6) $ (54.2) 17.7% $ 9.6
Net debt at period-end $ (1.8) $ (44.6) 96.0% $ 42.9
Earnout obligations
As part of the typical structure applied for the acquisitions completed
post-UK IPO, the Group committed to certain contingent earnout payments. These
earnout payments are based on a profit-driven formula and if the acquired
company realizes profit growth after the date of completion. Payments are
typically made in a mix of cash and shares. In turn, each of these components
of earnout payments may be subject to further vesting requirements and
employment conditions, which keeps the recipients financially committed to the
Group.
In relation to these earnout payments, the Group has liabilities recorded of
$31.9 million on its balance sheet, spread across the 'Contingent
Consideration' and 'Other Liabilities' line items. This number reflects not
only the estimated foreseen nominal payments, but also discount factors and
fair value estimates. The liabilities accrued under 'Contingent Consideration'
relate to regular M&A payments, while the liabilities accrued under "Other
Liabilities" relate to those M&A payments that have 'continued employment'
requirements and are therefore subject to 'clawback' provisions.
In nominal terms, over the period 2026-2030, based on expected performance of
each of the acquired companies, management anticipates having to make earnout
payments of $79.5 million, of which $45.2 million will be payable in cash and
the remainder in shares.
The maximum earnout liability over that same period, which would only be
reached if each acquisition meets very aggressive profit growth targets, would
be $142.5 million, of which $84.0 million will be payable in cash and the
remainder in shares. Generally, in order for an acquisition to reach maximum
earnout payments, it would need to grow its profit by 25-30% annually over the
entire earnout period.
Estimated Earnout Liabilities - in Nominal Terms
($ in millions)
Remainder of 2026 2027 2028 2029 2030 Total
Expected earnout payments in Cash $ 11.8 $ 4.9 $ 23.0 $ 1.4 $ 4.1 $ 45.2
Expected earnout payments in PPHC stock 4.6 1.7 23.0 0.8 4.1 34.3
Expected earnout payments - total $ 16.4 $ 6.6 $ 46.0 $ 2.2 $ 8.2 $ 79.5
Maximum earnout payments in Cash $ 17.3 $ 15.4 $ 23.1 $ 18.0 $ 10.0 $ 84.0
Maximum earnout payments in PPHC stock 7.5 6.9 23.1 11.0 10.0 58.6
Maximum earnout payments - total $ 24.9 $ 22.4 $ 46.3 $ 29.1 $ 20.0 $ 142.5
Information per Share
Share count in thousands
Three months ended March 31,
2026 2025 Share count % Change
/ $ Change
# of shares period end - GAAP - basic and fully diluted 24,706 16,969 7,738 45.6 %
# of shares period end - Legally outstanding - basic 28,929 23,954 4,975 20.8 %
# of shares period end - Legally outstanding - fully diluted 30,604 25,449 5,156 20.3 %
# weighted avg shares - GAAP - basic and fully diluted 23,301 16,904 6,397 37.8 %
# weighted avg shares - Legally outstanding - basic 27,610 23,978 3,632 15.1 %
# weighted avg shares - Legally outstanding - fully diluted 29,295 25,501 3,794 14.9 %
EPS - GAAP reported (basic and fully diluted) $ (0.49) $ (0.63) 0.13 21.4 %
Adjusted EPS - basic $ 0.27 $ 0.15 0.11 74.1 %
Adjusted EPS - fully diluted $ 0.25 $ 0.14 0.11 74.5 %
For the purpose of giving investors a useful view on Earnings Per Share
("EPS"), the Group computed EPS not only on a GAAP Reported Profit basis, but
also on an Adjusted Net Income basis. For the latter calculation the Group
includes in the denominator the legally outstanding number of shares. This
definition not only includes the common shares outstanding, but also (i)
unvested portion of the pre-UK IPO Retained Shares, (ii) unvested shares that
have been issued in relation to post-IPO acquisitions, and (iii) unvested
Restricted Stock Awards. While those shares are still subject to vesting
rules, and therefore not part of the Common Outstanding share count per GAAP
definition, they entitle the recipients to dividends and voting rights.
Note that the growth in the weighted of average number of shares for the three
months ended March 31, 2026 (15.1% basic, 14.9% fully diluted) was primarily
driven by the Group's 2026 U.S. public offering, as well as the annual
long-term incentive program ("LTIP") issuance and M&A related issuances.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of
1995
Forward-Looking Statements
This earnings release contains "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995. Such forward looking
statements involve risks and uncertainties. Forward-looking statements are
often identified by words such as "anticipate," "believe," "could,"
"estimate," "expect," "intend," "may," "might," "plan," "potential,"
"predict," "project," "should," "target," "will," "would," and similar
expressions, or the negative of these terms or other comparable terminology.
These statements include, but are not limited to, statements regarding the
Company's future financial performance, business strategy, market
opportunities, anticipated financial position, liquidity and capital needs,
and other statements that are not historical facts. These statements are based
on various assumptions, whether or not identified in this earnings release,
and on the current expectations and assumptions of the Company's management,
which are inherently subject to uncertainties, risks and changes in
circumstances that are difficult to predict, including as detailed in our
filings with the Securities and Exchange Commission (the "SEC"). Moreover, we
operate in a very competitive and rapidly changing environment and new risks
emerge from time to time. It is not possible for our management to predict all
risks, many of which are outside the control of the Company, nor can we assess
the impact of all factors on our business or the extent to which any factor,
or combination of factors, may cause actual results to differ materially from
those discussed in the forward-looking statements. In light of these risks,
uncertainties and assumptions, the future events and trends discussed in this
earnings release may not occur and actual results could differ materially and
adversely from those anticipated or implied in the forward-looking statements
and we cannot guarantee any future performance, conditions or results. We
undertake no obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise, except as
required by law. Given these risks and uncertainties, readers are cautioned
not to place undue reliance on such forward-looking statements. Copies of our
filings with the SEC can be found on our investor relations website
(investors.pphcompany.com) or on the SEC website (www.sec.gov).
Industry Information
Market data and estimates used throughout this earnings release are based on
information from independent third parties and other publicly available
information in addition to management's internal estimates. Such data involves
a number of assumptions and limitations, and you are cautioned not to give
undue weight to such estimates. No representations or warranties are made by
the Company or any of its affiliates as to the accuracy of any such
information. Projections, assumptions and estimates of the future performance
of the industry in which the Company operates are necessarily subject to a
high degree of uncertainty and risk due to a variety of factors. These and
other factors could cause results to differ materially from those expressed in
management's estimates and beliefs and in the estimates prepared by
independent parties.
Basis of preparation
The financial statements have been prepared in accordance with Generally
Accepted Accounting Principles in the United States ("U.S. GAAP" or "GAAP").
When the Company purchases services or goods on behalf of its clients (for
example in the case of media purchases), the Group does not recognize the
purchased goods as net revenue, but only the net fees earned on the purchases.
Therefore, purchases on behalf of clients do not materially impact the
top-line or the margins.
Management believes that Adjusted EBITDA and Adjusted Net Income are more
useful performance indicators than the reported Net Income. The following
elements distinguish our Adjusted Net Income from our Reported Net Income:
(1) Share-based accounting charge: As mentioned in all
prior filings and annual reports, shares issued to employee shareholders at
the time of the 2021 London IPO are subject to a vesting schedule. In
addition, their employment agreements contain certain provisions which enable
cash derived from the sale of shares at the time of the 2021 London IPO to be
clawed back and forfeited on certain events of termination of employment.
These items create a non-cash share-based accounting charge in accordance with
guidance under U.S. GAAP, Accounting Standards Codification, 718- 10-S99-2,
"Compensation-Stock Compensation". Based on the value of the Company at the
time of admission ($197 million) and the pre-admission employee shares sold in
2021, for three months ended March 31, 2026, the non-cash charges are $7.3
million (2025: $7.4 million). This non-cash share-based charge has no impact
on tax, nor share count or Company operations.
(2) Post-combination compensation charge: In the
acquisitions that have been completed since the London IPO in 2021, the Group
makes payments in cash and shares. In order to protect the interests of the
Group, the shares issued as part of these transactions were made subject to
vesting schedules. To a similar degree, also the cash paid as part of these
transactions can be clawed back and forfeited on certain events of termination
of employment.
The addition of these provisions to purchase price paid creates a
post-combination compensation charge in accordance with accounting guidance
under U.S. GAAP, Accounting Standards Codification, ASC 805-10-55-25,
"Business Combinations - Contingent Payments". For the three months ended
March 31, 2026 the non-cash charges were $2.8 million (2025: $3.4 million).
Again, this is a non-cash charge and has no impact on either tax or Company
operations.
(3) LTIP charges. In 2022 the Group issued the first
stock-based compensation units under the Public Policy Holding Company, Inc.
2021 Omnibus Incentive Plan. This plan was introduced at the time of the 2021
London IPO and allows the Group to issue up to a certain number of
stock-related units (e.g. options, restricted stock). The charges relating to
these issuances were $1.0 million in the three months ended March 31, 2026
(2025: $1.1 million), and those were computed using the Black Scholes method.
(4) Amortization of intangibles: The non-cash amortization
charge of $1.6 million for the three months ended March 31, 2026 (2025: $1.3
million) relates to the amortization of customer relationships, developed
technology, and non-compete agreements per ASC 805.
(5) Bargain purchase: As laid out in point 2, because a
significant part of the purchase price of our acquisitions is tied to
continued employment, this part has been accounted for as post-combination
compensation in the Group's Consolidated Statements of Operations. As a
consequence, for certain acquisitions, the remaining book purchase price is
lower than the tax purchase price. The reason for the bargain purchase gain is
tied directly to the tax purchase price significantly exceeding the book
purchase price and is not a reflection of a true bargain purchase of the
actual intangible and tangible assets of these acquisitions. The income
recorded relating to the bargain purchase was $0.1 million in the three months
ended March 31, 2026 (2025: zero).
(6) Change in Contingent Consideration: The contingent
consideration liability recorded as part of the acquisitions is adjusted at
each reporting period for the change in the estimated fair value of that
liability. The fair value changes over time based on management assumptions,
the passage of time, payments made, and other external inputs, such as
discount rates and volatility. The change in the estimated fair value of the
contingent consideration is recorded as a non-operating expense of $6.3
million in the three months ended March 31, 2026 (2025: $1.0 million).
(7) M&A expenses: since Q2 2025 reporting, the Group
has been excluding M&A expenses from the Adjusted EBITDA. Reflecting our
selective M&A strategy, M&A-related costs are highly variable across
periods and may not occur in any given period. Expenses typically consist of
M&A advisory fees, debt origination costs, and transaction related taxes.
The M&A expenses in the three months ended March 31, 2026 amounted to $0.3
million, an increase from $0.2 million in 2025.
For the calculation of EPS based on GAAP Profit, as a denominator, the Group
uses the weighted average number of common stock outstanding during the
period. For the calculation of EPS based on Adjusted Profit, as a denominator,
the Group uses the weighted average number of Legally Issued shares during the
period. This comprises all the common stock outstanding, as well as those
shares that were yet unvested but entitled the owner to dividends and voting
rights.
Definitions and Uses of Non-GAAP Financial Measures
Our management uses a variety of financial and operating metrics to analyze
our performance. These metrics are significant factors in assessing our
operating results and profitability. These financial and operating metrics
include Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA Incl. M&A
expense, Adjusted net income, Adjusted EPS, fully diluted, Organic Revenue
Growth, Adjusted Free Cash Flow, which are financial measures not recognized
under U.S. GAAP.
These non-GAAP financial measures are used by management to measure our
operating performance, but may not be directly comparable to similar measures,
such as EBITDA or Adjusted EBITDA, relied on or reported by other companies,
including other companies in our industry. We believe excluding items that
neither relate to the ordinary course of business nor reflect our underlying
business operating performance, such as equity-based compensation, the
amortization of acquired intangible assets, acquisition-related
post-combination compensation and contingent consideration, gains on bargain
purchase price, interest and tax, enables meaningful period-to-period
comparisons of our operating performance. We also use these non-GAAP financial
measures when publicly providing our business outlook, for internal management
purposes, and as a basis for evaluating potential acquisitions and
dispositions.
We believe that the exclusion of equity-based compensation expense such as
stock options, restricted stock awards, restricted stock units and
equity-based compensation related to retained pre-UK IPO shares granted in
relation to our listing on the London Stock Exchange, is appropriate because
it eliminates the impact of non-cash expenses for equity-based compensation
costs that are based upon valuation methodologies and assumptions that can
vary significantly over time due to factors that are (i) unrelated to our core
operating performance, and (ii) can be outside of our control. Although we
exclude equity-based compensation expenses from our non-GAAP measures, equity
compensation has been, and will continue to be, an important part of our
future compensation strategy and a significant component of our future
expenses that may increase in future periods. Additionally, we believe the
exclusion of compensation expense related to share appreciation rights, which
are cash settled, is unrelated to our core operating performance in addition
to the fact that share appreciation rights are no longer part of our
compensation plans going forward.
We define Adjusted EBITDA, which is a non-GAAP financial measure, as
consolidated net loss before depreciation, interest income, interest expense,
income tax expense, mergers and acquisitions ("M&A") expenses, long-term
incentive program charges, share-based accounting charges, post-combination
compensation charges, impairment, change in fair value of contingent
consideration, gain on bargain purchase price net of deferred taxes and
amortization of intangible assets. Adjusted EBITDA Incl. M&A expense we
define as net loss before depreciation, interest income, interest expense,
income tax expense, long-term incentive program charges, share-based
accounting charges, post-combination compensation charges, change in fair
value of contingent consideration, gain on bargain purchase price net of
deferred taxes and amortization of intangible assets. We define Adjusted
EBITDA Margin as Adjusted EBITDA divided by revenue. We believe that these
non-GAAP financial measures, when considered together with our GAAP financial
results and GAAP financial measures, provide management and investors with a
more complete understanding of our operating results, including underlying
trends. While our Adjusted EBITDA may not be directly comparable to the EBITDA
or other measures used by others, we believe it helps provide a clearer
picture of the underlying performance of the business by removing certain
expenses tied to specific historical acquisitions, including post-combination
compensation charges, as well as non-cash charges such as depreciation and
amortization of intangibles. Additionally, we believe that Adjusted EBITDA
provides investors and management with operating results that reflect our core
operating activity of serving clients by removing the highly variable M&A
costs expenditure.
We define Adjusted Net Income, which is a non-GAAP financial measure, as
consolidated net loss before long-term incentive program charges, share-based
accounting charges, post-combination compensation charges, change in fair
value of contingent consideration, impairment, gain on bargain purchase price
net of deferred taxes, other income, and amortization of intangible assets. We
use Adjusted Net Income for the purpose of calculating Adjusted Earnings per
Share ("Adjusted EPS", being referenced as either "Adjusted EPS, basic" or
"Adjusted EPS, fully diluted"). Management uses Adjusted EPS diluted to assess
total group operating performance on a consistent basis. We believe that these
non-GAAP financial measures, when considered together with our GAAP financial
results and GAAP financial measures, provide management and investors with a
clearer picture of our underlying business operating results.
We define Adjusted Free Cash Flow, which is a non-GAAP financial measure, as
net cash provided by (used in) operating activities less cash payments for
purchases of property and equipment and less acquisition related payouts
classified in operating cash flows specifically changes in prepaid post
combination payments, changes in other liability (liability classified earnout
obligations) and changes in contingent consideration. We believe this non-GAAP
financial measure, when considered together with our GAAP financial results,
provides management and investors with useful supplemental information on our
ability to generate cash for ongoing business operations and capital
deployment.
We define Net Cash (Debt) as total unrestricted cash and cash equivalents less
the total principal amount of debt outstanding. The total principal amount of
debt outstanding is comprised of the long-term debt and current maturities of
long-term debt as presented in our consolidated balance sheets adding back any
debt issuance costs. We believe that the presentation of Net Cash (Debt)
provides useful information to investors because our management reviews Net
Cash (Debt) as part of our oversight of overall liquidity, financial
flexibility and leverage.
We define Organic Revenue Growth as the year-over-year revenue growth
excluding revenues from acquired businesses for the first twelve months
following the date of acquisition. For purposes of this calculation, the
revenue of an acquired business is classified as acquired revenue and excluded
from Organic Revenue Growth until the thirteenth month following the
acquisition date. Beginning in the thirteenth month, the revenue from that
acquisition is included in the Organic Revenue Growth comparison against the
corresponding prior-year period. This approach ensures comparability by
aligning revenue bases year-over-year and isolating the performance of our
ongoing operations. We believe that Organic Revenue Growth is a useful
supplemental metric for investors and management, as it provides a clearer
view of underlying revenue trends excluding the impact of acquisition-related
growth.
Certain monetary amounts, percentages and other figures included elsewhere in
this earnings release have been subject to rounding adjustments. Accordingly,
figures shown as totals in certain tables or charts may not be the arithmetic
aggregation of the figures that precede them, and figures expressed as
percentages in the text may not total 100% or, as applicable, when aggregated
may not be the arithmetic aggregation of the percentages that precede them.
Enquiries
Public Policy Holding Company, Inc. +1 (202) 688 0020
Stewart Hall, CEO
Roel Smits, CFO
Stifel (Nominated Adviser & Joint Broker) +44 (0) 20 7710 7600
Fred Walsh, Brough Ransom, Ben Good, Daniel Dearden Williams
Canaccord Genuity (Joint Broker) +44 (0) 20 7523 8000
Simon Bridges, Andrew Potts
Burson Buchanan (Media Enquiries) +44 (0) 20 7466 5000
Helen Tarbet, Toto Berger, Jesse McNab pphc@buchanan.uk.com
The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulations
(EU) No. 596/2014 as it forms part of United Kingdom domestic law by virtue of
the European Union (Withdrawal) Act 2018 ("MAR"). Upon the publication of this
announcement via a Regulatory Information Service ("RIS"), this inside
information is now considered to be in the public domain.
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