Andrew Nicholas

Andrew Nicholas asked about Paycor client receptivity to PEO offerings and whether the percentage of worksite employees migrating from the HRMS segment to PEO has evolved. He also sought to quantify the impact of AI on cost efficiency, specifically if agentic AI was already affecting headcount or enabling existing individuals to do more.

Answer

CEO John Gibson stated that Paycor client receptivity to PEO has been very pleasing, particularly with the size of deals, leveraging existing broker relationships. He noted that the percentage of worksite employees coming from existing clients versus outside-the-base for PEO has remained consistent, roughly 50/50. On AI's impact, Mr. Gibson explained that Paychex has used AI predecessors for decades to drive margins. The current AI advancements are making people more productive, enabling them to engage in more advisory conversations with customers. He expects to grow the business without adding as much headcount as historically, citing past success in increasing client count without proportional service staff increases, aiming to differentiate through expert-embedded technology and proactive advisory services.

Andrew Nicholas asked about the upsell motion to PEO, specifically Paycor client receptivity and whether the percentage of worksite employees entering PEO from the HRMS segment has evolved. He also inquired about quantifying the impact of AI on cost efficiency, asking if it's affecting headcount or increasing current employee productivity.

Answer

CEO John Gibson stated that the PEO's client source (inside vs. outside base) has remained consistent (around 50/50), and Paycor client receptivity to PEO has been very pleasing, especially with larger deals, leveraging existing broker relationships. Regarding AI, Gibson explained that Paychex has used AI predecessors for decades to drive margins. He clarified that AI makes existing employees more productive, enabling them to focus on advisory conversations, which improves customer lifetime value. While not directly reducing headcount, AI allows the business to grow without adding as much headcount as historically, a trend observed over the last decade.

Andrew Nicholas inquired about the expected second-half ramp for PEO, focusing on Florida's attach rate dynamics, stabilization, and any improvements in the plan. He also asked about the competitiveness of the broader PEO market, particularly regarding aggressive pricing on administration fees.

Answer

President and CEO John Gibson explained that PEO enrollment cycles are early, with initiatives underway to improve plan lineups, underwriting, and client support, including an AI partnership. He noted that while overall PEO health plan enrollment is expanding, the Florida plan faces challenges due to competitiveness, and Paychex will not take undue risk. CFO Bob Schrader added that the PEO's second-half acceleration is due to easier comparisons as prior year enrollment headwinds anniversary. Gibson described the competitive environment as consistent, emphasizing Paychex's holistic value proposition, comprehensive HCM platform, and HR advisory support.

Andrew Nicholas asked for quantification of the top-line synergies embedded in the fiscal 2026 outlook and for details on the expected cadence of cost synergy realization throughout the year.

Answer

CFO Bob Schrader specified that the outlook includes 30 to 50 basis points of growth from revenue synergies, which will build over several years. He added that while actions for cost synergies are largely complete, the P&L benefit will ramp up throughout fiscal 2026. President & CEO John Gibson provided context on the decision to accelerate integration activities into Q4.

Andrew Nicholas of William Blair inquired about the top-line synergy contribution embedded in the fiscal 2026 outlook and the expected cadence of cost synergy realization.

Answer

CFO Bob Schrader specified that the outlook includes 30 to 50 basis points of growth from revenue synergies in fiscal 2026, which is expected to build over several years. He added that actions for the $90 million in cost synergies have already been taken, though the P&L benefit will ramp throughout the year. President & CEO John Gibson emphasized the strategic decision to accelerate all integration activities into Q4 to ensure a clean start to the new fiscal year.

Andrew Nicholas asked about the source of HR outsourcing worksite employee growth (new vs. existing clients) and the specific enrollment dynamics in the Florida PEO business.

Answer

CEO John Gibson explained that growth is a healthy mix of new and existing clients, with a recent tilt toward upselling the base driven by AI-powered analytics. Regarding Florida, he and EVP Robert Schrader clarified that flat enrollment in the at-risk medical plan was a conscious underwriting decision to manage risk, which does not impact earnings, and that overall insurance attachment within the PEO still grew.

Andrew Nicholas asked about competitive dynamics and pricing specifically within the PEO business, and whether there were any signs of stabilization in the insurance agency business, which has faced workers' comp rate headwinds.

Answer

CEO John Gibson confirmed that his earlier comments about a stable competitive environment apply to the PEO business as well. Regarding the insurance agency, he acknowledged the continued headwind from workers' comp rates in Q1, noting that the PEO business was a double-digit grower while the broader Insurance Solutions category was dragged down by the agency. Executive Robert Schrader added that the company is innovating to expand the insurance business, citing the new Perks product as an example.

Andrew Nicholas asked for an update on tariff impacts, specifically if Q3 results and early October trends were consistent with June's snap-back or if choppiness continued. He also sought clarification on the restructuring plan, particularly the non-strategic business lines being exited, and where freed-up capital would be reinvested.

Answer

CEO Jennifer Scanlon stated Q3 saw a more typical, steady cadence, with customers gaining certainty on tariff responses, leading to shifts in manufacturing sites to regions like Vietnam, Thailand, and India, while some traditional countries saw slight contraction. She explained the restructuring is a continuous assessment to focus on high-quality growth and leadership, freeing resources from underperforming areas. CFO Ryan Robinson added that UL Solutions adapts its capabilities globally.

Andrew Nicholas followed up on the impact of tariffs, asking if Q3 results and early October trends were consistent with the 'snap back' seen in June or if choppiness continued. He also asked for more details on the restructuring plan, specifically the non-strategic business lines being exited and where freed-up capital/resources would be diverted.

Answer

CEO Jennifer Scanlon stated that Q3 was a strong quarter with a typical cadence, indicating customers are gaining certainty in their R&D and supply chain decisions. She noted shifts in manufacturing sites, with significant growth in Vietnam, Thailand, and India, and slight contraction in Germany, Japan, and Taiwan. Regarding restructuring, Ms. Scanlon explained it's part of an ongoing assessment to focus on leading businesses and high-quality growth, minimizing distractions from underperforming areas, and diverting resources to value-creating capabilities.

Andrew Nicholas of William Blair asked for more detail on growth by geography and whether the Advisory business is inherently lumpy and could benefit from the current complex environment.

Answer

CEO Jennifer Scanlon highlighted strength in North America for Industrial and Consumer, as well as across Asia for Consumer. She confirmed the Advisory business is lumpy and currently faces headwinds from shifts in U.S. sustainability regulations and a challenging commercial real estate market.

Andrew Nicholas inquired about the drivers of the Consumer segment's strong growth, including customer sentiment and a specific surge in technology product testing. He also asked for a ranking of the factors contributing to the company's overall margin expansion.

Answer

EVP and CFO Ryan Robinson attributed the Consumer segment's performance to broad-based demand and a Q3 surge in new product testing, which may moderate. President and CEO Jennifer Scanlon highlighted sustainability testing as a key tailwind. For margins, Robinson ranked the drivers as: 1) organic growth leverage, 2) favorable mix from the Industrial segment, 3) internal productivity initiatives, and 4) post-IPO stock compensation accounting.

Andrew Nicholas inquired about the CV growth of tariff-impacted industries relative to non-tariff-affected industries, and whether the current trends give pause to the expectation for improvement in 2026.

Answer

Gene Hall (Chairman and CEO, Gartner) noted that non-tariff-affected industries continue to perform about 200 basis points faster in CV growth than tariff-affected ones, similar to Q2. He added that the selling environment with tariff-impacted companies is starting to improve due to more certainty, allowing clients to make purchasing decisions they previously deferred.

Andrew Nicholas inquired about the current CV growth trends in tariff-impacted industries relative to non-tariff-impacted industries and how this might affect expectations for improvement in 2026.

Answer

Chairman and CEO Gene Hall reported that non-tariff-affected industries continued to perform approximately 200 basis points faster in CV growth than tariff-affected industries, a gap similar to Q2. CFO Craig Safian added that the selling environment for tariff-impacted companies is beginning to improve due to increased certainty regarding tariffs, enabling clients to make previously deferred purchasing decisions. He anticipates better performance from these industries next year as clients adapt to the tariff landscape.

Andrew Nicholas inquired about the specific industries Gartner considers 'tariff-affected,' which are expected to contribute to growth normalization, and asked for quantification of operational efficiencies from internal AI applications.

Answer

EVP & CFO Craig Safian explained that tariff-affected industries, defined as those heavily reliant on importing and exporting, represent 35-40% of Gartner's contract value (CV). CEO & Chairman Eugene Hall added that while the company has over 50 internal AI applications with promising results, it is too early to quantify their long-term impact on the cost structure.

Andrew Nicholas asked for the timing of U.S. federal contract renewals for the rest of the year and whether the Q1 renewal rate of roughly 50% is expected to persist. He also asked about the conservatism of the OpEx guidance.

Answer

CFO Craig Safian outlined the renewal cadence, with Q3 being the next largest renewal quarter. He confirmed the guidance models the ~50% retention rate going forward, noting any win-backs would be upside. He described the OpEx guidance as their 'normal approach,' balancing prudence with long-term investment.

Andrew Nicholas followed up on the government business, asking if the cautious tone is based on tangible feedback about a choppy renewal cycle or just a reaction to news flow. He also asked for an update on how Gartner is leveraging generative AI internally for efficiency.

Answer

Executive Eugene Hall stated that there has been no change in trends for the U.S. public sector compared to Q4. Regarding AI, he described it as 'fantastic' for Gartner, with the primary benefit being helping clients navigate uncertainty. Internally, he mentioned 'tens of different kinds of initiatives' using AI for things like training and translation, framing it as part of a continuous improvement strategy rather than a single transformative project.

Speaking on behalf of Andrew Nicholas, Tom Rush asked about the underlying drivers for new business growth across GTS and GBS, and how client spending trended relative to expectations during the quarter.

Answer

CFO Craig Safian attributed the solid new business growth (10% in GBS, 8% in GTS) to the strength of Gartner's value proposition and consistent sales execution, rather than a specific external demand driver. He added that there was no significant change in client spending trends, as the environment remains complex and clients continue to need help with priorities like AI, cybersecurity, and cost optimization.

Andrew Nicholas asked for qualitative or quantitative insights into the magnitude of difference in rate increases TriNet is applying compared to its competition. He also posed a higher-level question on client decision-making, asking about SMB optimism, hiring plans, and willingness to make HR decisions in the current environment, and if there's any change from prior quarters.

Answer

Mike Simonds (CEO) explained that TriNet moved quicker and more conservatively on health fee increases, which proved fortuitous, and evidence suggests the pricing gap with competitors is tightening. He noted a 'settling in' among SMBs, with healthcare costs being central to PEO buying decisions, sometimes pushing decisions to January 1st. Kelly Tuminelli (CFO) added that year-to-date CIE is slightly better due to fewer layoffs, with growth mainly in tech and financial services.

Andrew Nicholas asked about the competitive environment, specifically if competitors are behaving differently on pricing compared to last year. He also requested more detail on underlying healthcare cost trends observed during the quarter.

Answer

President & CEO Mike Simonds stated that while the market is competitive, he has not observed abnormal pricing behavior from competitors. He noted TriNet's disciplined, quarterly pricing adjustments may position it ahead of the market, which he sees as now catching up. EVP & CFO Kelly Tuminelli added that underlying health trends remain consistent, with the quarter's higher insurance cost ratio driven by a one-time anomaly of older claims from a single carrier, not a change in overall cost inflation.

Andrew Nicholas requested more granularity on healthcare utilization trends, particularly in light of comments from managed care providers, and asked about the significant year-over-year decrease in the cost of providing service (COGS) line.

Answer

President and CEO Michael Simonds clarified that TriNet's insured base is working-age and that low-double-digit healthcare cost trends have stabilized, providing confidence in pricing. CFO Kelly Tuminelli added that while both medical and prescription costs are up, the rate of acceleration on prescription costs is slowing. Regarding COGS, Ms. Tuminelli attributed the decrease to tight expense management, automation efforts, and a strategic focus on high-value services, while still reinvesting in key initiatives.

Andrew Nicholas sought to confirm if the medium-term financial plan uses 2024 or 2025 as its baseline. He also inquired about the health of TriNet's customer base, recent trends in client conversations, and the factors that would drive performance to the high or low end of the Insurance Cost Ratio (ICR) guidance.

Answer

CEO Michael Simonds confirmed that 2024 is the baseline for the medium-term plan. Regarding customer health, Simonds described the tone of client conversations as 'markedly improved' but noted this optimism has not yet translated into higher hiring rates, which remain at historic lows. CFO Kelly Tuminelli added that financial services was a bright spot. Simonds explained the ICR guidance reflects improved forecasting; the high end of the range would be triggered by accelerating healthcare cost inflation, which is not the current trend.

Andrew Nicholas of William Blair & Company asked why the 2025 ICR is not expected to improve more significantly given successful price increases and strong retention, and also questioned the conservatism of the Q4 ICR outlook.

Answer

CEO Mike Simonds stated that the full benefit of repricing won't be realized until all cohorts are repriced, as about one-third of the book will renew during 2025. He also noted a headwind from favorable workers' comp adjustments in 2024 that won't recur. CFO Kelly Tuminelli added that the Q4 ICR forecast reflects increased pressure from annual pooling limit resets on October 1, which exposes TriNet to high-cost claims.

Andrew Nicholas asked for more details on the inflection point in commercial segment demand, particularly for strategy and financial advisory offerings, and what is driving the improved sales conversion.

Answer

Mark Hussey, CEO and President, explained that the uptick in financial advisory demand aligns with broader market trends in restructuring and turnaround, leading to short sales conversion cycles. He also noted positive momentum from the integration of Wilson Perumal & Company in strategy.

Andrew Nicholas asked about the strong performance in the healthcare segment's performance improvement and consulting offerings, inquiring about the underlying drivers, pipeline strength, hiring trends, and the sustainability of larger engagement sizes. He also asked about the 2026 outlook and the inflection point in commercial segment demand.

Answer

CEO Mark Hussey attributed the strong healthcare performance to persistent margin pressures, the integrated go-to-market strategy, and Huron's demonstrable ROI. CFO John Kelly added that the healthcare pipeline is at record highs, sales conversions are strong, and headcount additions are being made to meet demand, including in managed services. For 2026, John Kelly referred back to the multi-year model from Investor Day, noting increased demand as a favorable factor. Mark Hussey explained the commercial segment's improved conversion in financial advisory is due to broader market upticks in restructuring, and strategy momentum is boosted by the Wilson Perumal integration.

Andrew Nicholas of William Blair asked about the impact of the 'One Big Beautiful Bill Act' on Huron's business visibility and guidance, and sought clarity on the confidence behind the described 'temporary pause' in healthcare digital sales conversions.

Answer

CEO Mark Hussey explained that the bill provided clarity by confirming expected pressures on federal reimbursements, aligning with Huron's existing outlook. CFO John Kelly added that visibility is stronger due to regulatory clarity and robust sales conversions in H1. Kelly also stated that the full-year guidance is not contingent on a recovery in digital healthcare sales, as strength in consulting services is driving confidence, and the digital projects are viewed as delayed, not canceled.

Andrew Nicholas inquired about the outlook for the Commercial segment, specifically its pipeline, any client indecision on discretionary projects, and the company's strategy for headcount growth.

Answer

Chief Financial Officer John Kelly stated there are no changes to the segment's guidance, citing record sales conversion in Q1 driven by the digital business, which grew 12% organically. He acknowledged some softness in strategy consulting due to the macro environment but noted the financial advisory team remains busy. Regarding personnel, Kelly explained that while Q1 saw high utilization, full-year headcount growth is expected to align with revenue growth, with a particular hiring focus in the high-demand Healthcare business. Executive C. Hussey added that the segment's mix of pro and countercyclical offerings provides confidence in the yearly outlook.

Andrew Nicholas of William Blair & Company inquired about the impact of the dynamic regulatory environment on Huron's sales pipeline and sought details on headcount growth trends and plans for 2025.

Answer

CEO C. Hussey stated that while the company is monitoring the situation, they have not seen significant clients reprioritize spending and believe their guidance captures potential downside. He emphasized that Huron's broad offerings position them well to help clients navigate these changes. CFO John D. Kelly added that backlog and pipeline data remain strong and that recent acquisitions address increasing client needs. Regarding headcount, Kelly attributed the recent increase partly to the AXIA acquisition and strong sales conversion, with hiring focused on Healthcare performance improvement, managed services, and certain digital areas.

Andrew Nicholas inquired about the confidence behind the implied Q4 guidance acceleration, its implications for 2025 growth targets, and whether Huron is adequately staffed to meet demand from its strong sales conversion.

Answer

Chief Financial Officer John Kelly stated that confidence in Q4 guidance stems from a record sales conversion quarter in Q3. He noted that while some project starts were delayed, the overall win rate was stronger than anticipated, creating a solid foundation for 2025. Kelly also affirmed that the company is well-staffed, with some excess capacity indicated by a utilization rate in the upper 75% range, and feels confident in its ability to hire more talent as needed. Executive C. Hussey added that the demand backdrop remains very favorable.

Andrew Nicholas from William Blair inquired about the factors influencing economic consulting's top-line performance, the outlook for EBITDA, and the impact of a potential U.S. government shutdown. He also asked about the drivers of strength in the transactions practice and the sustainability of FLC's price realization.

Answer

Steven Gunby, CEO and Chairman, estimated that two-thirds of the economic consulting decline was due to talent transition and one-third to market conditions, noting that the government shutdown's impact was unclear but leads were still coming in. He expressed caution about an immediate EBITDA turnaround but long-term positivity. For transactions, Gunby attributed the strength primarily to the team's leadership and expanded service offerings. Regarding FLC's price realization, he stated that while rate potential exists across the business, the significant catch-up seen this year might not be repeatable annually, suggesting a more modest continuation.

Andrew Nicholas inquired about the economic consulting segment's Q3 performance, specifically differentiating between market-driven revenue decline and talent transition impacts, and asked about the conviction for EBITDA bottoming in the second half of the year, as well as any expected impact from a U.S. government shutdown. He also sought further details on the strength of the transactions practice, distinguishing between market influence and operational momentum, and questioned whether FLC's price realization and rate increases could continue into the next year.

Answer

Steven Gunby, CEO and Chairman of FTI Consulting, estimated that two-thirds of the economic consulting revenue decline was due to talent transition and one-third to market conditions. He noted that while the bulk of costs are now reflected, he is cautious about committing to an immediate EBITDA turnaround, citing the 'war' between legacy work runoff and new work generation. Gunby stated that the U.S. government shutdown had not yet shown much effect. Regarding the transactions practice, he attributed the strength primarily to the team's leadership and ability to introduce additional services, expressing fundamental bullishness for the coming years. For FLC, Gunby acknowledged significant rate catch-up in 2025 but suggested future increases would likely be more modest.

Andrew Nicholas of William Blair & Company inquired about the performance divergence between the Economic Consulting and Technology segments, the timeline for assessing the commercial capabilities of new academic hires, and the key drivers behind the record-setting growth in the restructuring practice.

Answer

CFO Ajay Sabherwal clarified that the strength in Economic Consulting was driven by non-M&A related activity. CEO Steven Gunby explained that hiring top academics is fundamental to the Compass Lexicon business and that a clearer picture of their commercial impact would emerge over the next year. Regarding restructuring's 25% growth, Mr. Sabherwal attributed it to world-class talent, the impact of tariffs, a wave of secondary bankruptcies from prior liability management exercises (LMEs), and increased company-side work from specialized industry expertise.

Andrew Nicholas asked about the bifurcation in the restructuring market between liability management and traditional bankruptcies, whether M&A deal count declines are driven more by regulatory or macro factors, and if there are expected ripple effects from the Compass Lexecon revenue loss to other FTI business segments.

Answer

CFO Ajay Sabherwal noted that liability management often fails, creating future restructuring demand, and that current tariff-related working capital stress presents a challenge that may require more than liability management. He attributed the M&A slowdown primarily to macro uncertainty, particularly around tariffs. Sabherwal also confirmed that any potential second or third-order effects from the Economic Consulting situation are already factored into the company's existing guidance range.

Andrew Nicholas asked for clarification on the Economic Consulting outlook, questioning if the historical $35 million negative impact from a prior dislocation is embedded in the 2025 guidance. He also inquired about the potential for this issue to extend into 2026, overall headcount growth plans for 2025, and current M&A trends.

Answer

Steve Gunby, President and CEO, confirmed that a figure in the order of magnitude of $35 million is factored into the 2025 guidance for the Economic Consulting segment, while emphasizing the high degree of uncertainty. He noted the potential impact on 2026 is unclear as it depends on the timing of staff departures. Gunby also affirmed that despite headwinds, FTI expects overall headcount growth in 2025. CFO Ajay Sabherwal added that the company is seeing some pickup in M&A activity.

Andrew Nicholas inquired about the current environment and outlook for the restructuring business, trends in the M&A market, and the nature of the company's investments in AI capabilities.

Answer

Chief Financial Officer Ajay Sabherwal stated that the restructuring business remains strong and robust, driven by fundamental business pressures rather than just interest rates. He also noted that the M&A environment is robust, spurred by credit availability. President and CEO Steve Gunby addressed the AI investments, explaining that FTI is focused on being at the forefront of the technology by developing internal tools, helping clients manage AI-related risks, and training its senior professionals to engage clients on the topic.

Andrew Nicholas asked about the overall consumer credit trends and conditions, including recent headlines on bankruptcies in the auto space, and what Equifax is observing regarding scores and ability to pay across different markets. He also inquired about the strong 20% growth in EWS non-mortgage consumer lending, its drivers, and the sustainability of this growth rate.

Answer

Mark Begor, Chief Executive Officer, described the environment as 'fairly stable' with strong customers and working consumers. He clarified that recent auto bankruptcies appear to be fraud-related, not indicative of underlying consumer problems. John Gamble, Chief Financial Officer, added that auto, card, and FI sectors show slow but consistent growth, below long-term trends. Mark Begor stated that 20% is a high growth rate not indicative of a long-term trend for that segment. He attributed it to the powerful deployment of Twin's value in specific verticals, new customer success, and low penetration. John Gamble added that this business is smaller than USIS, leading to more volatile growth rates, and noted that debt management (student loans) has not yet been a significant contributor.

Andrew Nicholas asked for a comparison of the consumer economic backdrop in major international markets versus the U.S. and questioned the rationale for maintaining full-year guidance despite strong H1 performance.

Answer

CEO Mark Begor described the international consumer backdrop as broadly similar to the U.S., with Latin America showing stronger growth and Canada lagging due to economic weakness from tariff concerns. He and CFO John Gamble explained the decision to hold guidance was a balanced and prudent approach given heightened uncertainty and volatility around tariffs, interest rates, and the hiring market.

Andrew Nicholas asked about the margin implications within Equifax's recession scenario and whether The Work Number's value proposition strengthens relative to manual verifications in a choppy macro environment.

Answer

CEO Mark Begor asserted that even with 5-10% growth in a recession, high incremental margins would allow for income and margin expansion. CFO John Gamble tempered this by noting the 50bps expansion target is based on higher 7-10% growth. Begor confirmed that in any economic event, especially a downturn, the value of more data like TWIN's income and employment verification increases, as it helps lenders originate with more confidence.

Andrew Nicholas asked about the drivers of underlying margin expansion in 2025 and whether new products with TWN data flags are primarily for market share gains or also for price increases.

Answer

CEO Mark Begor and CFO John Gamble highlighted that significant cloud cost savings from 2024 are providing a year-over-year benefit in 2025. On new products, Begor stated the strategy is to achieve "both" market share and price, as the differentiated data provides more value for which they expect to be compensated.

Andrew Nicholas from William Blair asked about the drivers of the strong performance in Financial Marketing Services (FMS) and whether it indicated a broader macro trend. He also questioned the puts and takes of the EWS mortgage business's expected Q4 outperformance relative to inquiries.

Answer

CFO John Gamble clarified that the FMS strength was not a macro read-through but was driven by the execution of large transactions with new customers in the payments industry, which he views as an ongoing revenue source. Regarding EWS mortgage, Gamble stated that the outperformance progression is consistent with their plan and is primarily driven by extremely strong record growth. He noted the business is returning to its long-term framework of outperforming the market by around 10%.

Andrew Nicholas asked for a characterization of FactSet's AI product suite and its execution relative to peers at this early stage. He also questioned the importance of being a first mover in AI versus a more deliberate approach, considering the stickiness of FactSet's products and its deep client embeddedness.

Answer

Sanoke Viswanathan, CEO & Director, FactSet, noted that the AI products are finely tuned to add value to existing solutions (e.g., portfolio commentary, pitch creator), showing high competitiveness and continued traction. He acknowledged the trade-off between being too early and too late in AI adoption, stating it's a fine balance to strike, and expressed confidence in FactSet's talent to achieve the right balance going forward.

Andrew Nicholas asked for a characterization of FactSet's AI product suite and execution relative to peers, and how important it is for FactSet to be a first mover in AI versus leveraging its product stickiness and client embeddedness for a more deliberate product development and rollout strategy.

Answer

Sanoke Viswanathan, CEO, reiterated that the industry is in the early stages of AI adoption. He described FactSet's current AI products as finely tuned and synergistic with existing offerings, citing examples like portfolio commentary and Pitch Creator, and believes their competitiveness is high. He acknowledged the delicate balance between being too early (and potentially getting things wrong) and being too late (and missing market opportunities), expressing confidence in FactSet's talent to navigate this balance effectively.

Andrew Nicholas from William Blair asked about progress on achieving internal efficiencies from GenAI and the potential for these savings to offset investments over time.

Answer

CEO Philip Snow explained the focus is shifting to internal use cases like developer productivity and automating administrative tasks. Chief Financial Officer Helen Shan added that while direct ROI is complex, benefits are visible in increased output and flat-to-down core headcount, demonstrating efficiency gains.

Andrew Nicholas asked for details on the 'land-and-expand' strategy within the wealth management segment, given FactSet's already strong market share among top-tier firms.

Answer

Chief Revenue Officer Goran Skoko outlined a multi-pronged strategy. He explained that growth will come from geographic expansion into Europe and Asia, increasing user penetration within existing clients (especially in the home office), and layering on additional services and workflow solutions, such as lead generation and portfolio management tools.

Andrew Nicholas asked about the company's current appetite for M&A and whether conviction in monetizing internal AI investments changes that appetite or informs the types of attractive assets.

Answer

CEO Frederick Snow stated that FactSet has a high appetite for M&A to fill a couple of product suite gaps, noting most targets are not AI-related as he believes internal AI investments are sufficient. Chief Financial Officer Helen Shan reaffirmed they have a strong balance sheet and ample capacity for inorganic growth alongside internal capital expenditures.

Andrew Nicholas from William Blair & Company inquired about FactSet's current appetite for M&A and whether the company's conviction in monetizing its internal AI investments influences its acquisition strategy or target profile.

Answer

CEO Frederick Snow confirmed a high appetite for M&A to fill specific product gaps, noting that most targets are not purely AI-related, though a modern tech stack is a key criterion. CFO Helen Shan reiterated that their strong balance sheet and deliberate capital allocation provide ample room for inorganic growth.

Andrew Nicholas asked about the allocation of investment dollars, the balance between spending and top-line growth, and whether the guidance includes flexibility to increase investment if revenue exceeds expectations.

Answer

CFO Helen Shan clarified that the margin decline is half due to the bonus pool reset and half for investments. She stated that roughly 150 basis points of additional, self-funded investment is planned for fiscal 2025. This is allocated to gen AI, content (real-time, fixed income), buy-side workflows (managed services, trading), and infrastructure. The spending is funded by productivity gains and discretionary cost reductions, balancing the need to invest for growth while maintaining strong margins.

Andrew Nicholas from William Blair & Company inquired about the drivers of international growth and any differences in the growth algorithm compared to the Americas. He also asked if the strong upsell/cross-sell performance included early revenue synergies from the Sterling acquisition.

Answer

CEO Scott Staples and CFO Steven Marks reported that international revenue grew 7.2% in Q2, outperforming the Americas across all growth algorithm components (base, new logos, upsell/cross-sell), with particular strength in EMEA. Regarding synergies, Marks and Staples clarified that it's too early for significant revenue synergy contribution, as the current focus is on platform integration to improve customer experience, with material revenue synergies expected in 2026.

Andrew Nicholas inquired about the post-Sterling market structure, asking if strong bookings were driven by more RFP volume or better win rates, and also asked for the typical onboarding time for large deals.

Answer

CEO Scott Staples stated that RFP volumes are about normal, and attributed the record bookings to industry trends like the growing need for digital identity solutions and the appeal of the combined company's advanced technology platform. He clarified that while average onboarding is 90 days, large, complex deals typically take about 6 months, with revenue from the three recently announced large deals expected in late Q2 or early Q3.

Speaking on behalf of Andrew Nicholas, Daniel Maxwell asked whether the low end of the 2025 revenue guidance includes a buffer for a potentially slower-than-expected recovery in base business growth.

Answer

CFO Steven Marks clarified that the entire guidance range assumes a slight to modest full-year base revenue decline, with improvement in the second half driven by easier year-over-year comparisons and market stabilization, not a significant macro recovery. CEO Scott Staples added that strong pipeline momentum and major new client wins provide confidence in the back-half forecast.

Andrew Nicholas asked for more detail on the impressive upsell and cross-sell metrics for both First Advantage and Sterling, and inquired about the potential for revenue synergies. He also asked about the perceived risk of sales force distraction during the integration.

Answer

CEO Scott Staples attributed the strong upsell/cross-sell performance to large deals from the prior quarter beginning to generate revenue and a continued customer focus on safety and compliance over cost-cutting. Regarding integration, he stated that while there is always a risk of distraction, close coordination of the go-to-market teams should lead to a period of stabilization in key metrics, rather than deterioration, with potential for long-term improvement.

Andrew Nicholas of William Blair & Company inquired about the potential financial impact of the Workday partnership in 2026, given the newly announced beta timing, and asked for an update on net client hiring trends.

Answer

Paul Sarvadi, Chairman & CEO, stated that while it's too early to provide precise 2026 financial predictions for the Workday solution, recent pricing research has exceeded expectations. He outlined a rollout plan starting with a beta group early next year, followed by two additional waves of new and existing clients. Regarding hiring, Mr. Sarvadi confirmed an underlying improvement from the February low point, noting that while it remains below historical norms, he is optimistic about future growth catalyzed by recent legislative support for small businesses.

Andrew Nicholas asked for more detail on the client onboarding pauses cited in late Q1 and inquired about the spending cadence and long-term outlook for the Workday partnership costs.

Answer

Paul Sarvadi, an executive, explained that the onboarding pauses stemmed from a sudden reversal in small business optimism due to market uncertainty from government tariff policies, though he noted some moderation. Regarding the Workday partnership, Paul Sarvadi and James Allison, an executive, clarified that the approximate $150 million investment is front-loaded, with $62 million forecasted for 2025. They expect spending to be stable quarterly this year, diminish significantly in subsequent years as development concludes, and see revenue generation beginning in 2026.

Andrew Nicholas asked if the validation of premium pricing for the Workday solution was a new development or a continuation of prior feedback. He also inquired about the broader competitive pricing environment during the recent fall sales campaign.

Answer

CEO Paul Sarvadi confirmed that the premium pricing potential for the Workday solution was validated by early research and continues to be supported by client dialogue, expecting the value proposition to justify higher markups. He also noted that while the competitive environment was significant, Insperity successfully used unique, short-term incentives that protected its long-term premium pricing strategy, helping drive results.

Andrew Nicholas inquired about client retention and market competitiveness, specifically asking if the Workday partnership is impacting large client retention. He also asked about the sources of G&A expense savings and whether efficiencies from AI investments could offset their implementation costs in the near term.

Answer

CEO Paul Sarvadi explained that the company is using short-term incentives that don't affect long-term pricing to successfully navigate a competitive environment for both new sales and renewals. He noted the Workday partnership has created a positive perception among clients, especially in the mid-market. Former CFO Douglas Sharp added that G&A savings came from general efficiencies during a slower growth period, while still investing in the Workday initiative. Paul Sarvadi also commented that while AI is in early stages, it is expected to create future operating leverage by improving staff efficiency and effectiveness.

Andrew Nicholas of William Blair asked about any performance divergence between M&A-related and non-M&A-related work within the antitrust practice. He also requested an update on talent retention and recruiting conditions specifically within that business.

Answer

Paul Maleh, Chairman, President & CEO, responded that many antitrust projects are long-lived, providing a stable base of work, and the practice continues to win both new merger and new antitrust enforcement matters without a dramatic shift in the business mix. On talent, Maleh acknowledged that their high-caliber professionals are always targets for competitors, a situation he described as business as usual. He emphasized that CRA focuses on creating a rewarding environment to ensure retention and has not experienced any large-scale attrition issues.

Andrew Nicholas from William Blair & Company inquired about business activity in April and its influence on the reaffirmed full-year guidance. He also asked for details on the Life Sciences practice pipeline and the company's plans for headcount growth, considering recent utilization rates and talent retention costs.

Answer

CEO Paul Maleh noted that the positive momentum from March continued into April but cautioned it was too early to declare a definitive trend. He expressed satisfaction with the Life Sciences practice's recent performance across geographies and business areas. Regarding headcount, Maleh explained that the year-over-year decline is still affected by a Q2 2024 action, but headcount was flat sequentially. He reiterated the long-term goal of aligning headcount growth with revenue growth and stated that recent talent retention payments were in line with prior expectations.

Andrew Nicholas of William Blair questioned how recent competitive disruptions in the antitrust space are impacting CRA's talent retention and recruitment, how these factors are incorporated into the 2025 outlook, and whether increased compensation to retain talent is reflected in the margin guidance.

Answer

Executive Paul Maleh acknowledged the market disruption, stating that having top-tier talent inevitably attracts competitors. He emphasized that CRA's goal is to be a 'net positive' from the disruption by focusing on both retention and lateral recruitment. Maleh confirmed that the 2025 guidance incorporates their current best expectations regarding these dynamics. He also affirmed that the competitive environment for talent leads to higher wages, and these increased compensation expectations are fully factored into the provided margin guidance.

Andrew Nicholas inquired about CRA's talent and headcount trajectory, questioning if the current staffing levels are sufficient for demand given the high utilization rates. He also asked for details on the demand dynamics within the management consulting segment, particularly for strategy-focused work.

Answer

CEO Paul Maleh explained that Q2 headcount actions redirected resources to busier, high-growth areas, which has proven effective. He noted that the faster-growing legal and regulatory segment can operate at higher utilization, providing capacity for growth with the current staff. Regarding management consulting, Maleh described the Life Sciences practice as being in a 'stabilization phase' with a 'sawtooth pattern' performance, while the Energy practice is experiencing 'very strong growth' and has an optimistic outlook.

Andrew Nicholas inquired about the strategic and economic rationale behind data partnerships with hyperscalers like Microsoft Copilot and Anthropic, asking about the go-to-market impact and the potential for cannibalization.

Answer

President & CEO Martina Cheung explained these partnerships are channels to meet clients where they want to work, similar to providing data via Snowflake. She stressed that clients must license the data from S&P Global to access it, and the data is not used to train the partners' LLMs, protecting IP and the direct customer relationship. She sees it as a growth opportunity to serve sophisticated clients across multiple channels and potentially reach new ones, rather than a cannibalization risk.

Andrew Nicholas asked about the strategy behind data partnerships with hyperscalers like Microsoft Copilot and Anthropic, including the potential for cannibalization and the impact on the go-to-market motion.

Answer

President & CEO Martina Cheung framed these partnerships as essential distribution channels to meet clients where they want to work. She stressed two key points to prevent cannibalization and protect IP: clients must have a direct license with S&P Global to access the data, and the data is not used to train the partners' LLMs. She views it as a multi-channel growth opportunity, not a risk, highlighting Kensho's technology for ensuring data integrity.

Andrew Nicholas of William Blair inquired how S&P Global's perspective on generative AI has evolved and asked if its primary impact in 2025 will be on operational efficiency rather than top-line growth.

Answer

President and CEO Martina Cheung affirmed that AI remains a transformational technology and that for 2025, its impact is certainly more of an efficiency driver, though a healthy pipeline exists for future revenue. She noted that AI investments have been funded out of the existing budget, highlighting the Kensho innovation flywheel.

Andrew Nicholas of William Blair asked about the performance of the advisory business, whether current guidance assumes any improvement, the nature of pricing pressure, and the source of cost savings, particularly regarding Markham acquisition synergies.

Answer

President & CEO Jerry Grisko confirmed that guidance assumes the second half will mirror the first, with clients delaying discretionary projects amid economic uncertainty. He characterized pricing pressure as market-driven rather than structural and expressed optimism for future improvements, especially within the legacy Markham business. SVP & CFO Brad Lakhia added that lower incentive compensation was a primary driver of margin improvement and that the company is realizing Markham-related synergies ahead of the original 2026 schedule.

Andrew Nicholas asked for clarification on the market conditions assumed at the low end of the revised revenue guidance, the operational levers being used to maintain the earnings outlook, and for an update on capital allocation priorities.

Answer

President and CEO Jerry Grisko explained the low end of the revenue guidance assumes a continuation of Q1's challenging economic climate, similar to the 10-15% decline in discretionary work seen during COVID. To protect profitability, Grisko highlighted levers such as variable compensation tied to growth, reduced hiring, and cuts to discretionary spending like T&E and advertising. CFO Brad Lakhia addressed capital allocation, stating the primary focus for the next 1-2 years is using free cash flow to reduce leverage to below 2.5x by the end of 2026, while remaining opportunistic for strategic M&A and share repurchases.

Andrew Nicholas of William Blair & Company inquired about the organic growth expectations for the legacy Marcum business in 2025, its performance in 2024, and the key practice areas driving growth for the combined firm. He also asked about the impact of the post-election environment on discretionary M&A activity and any potential effects of the new administration on the Government Health Care Consulting business.

Answer

CEO Jerry Grisko clarified that Marcum's core practice is expected to perform strongly in 2025, mirroring CBIZ's own core accounting growth, and not be muted. He expressed optimism for stronger overall organic growth in 2025 compared to 2024, anticipating a rebound in discretionary project work as clients gain clarity post-election. Grisko also stated they do not expect a pause in the Government Health Care Consulting business and noted it could potentially benefit from a reduction in the federal workforce, leading to more reliance on external partners.

Andrew Nicholas of William Blair inquired about the internal feedback from both CBIZ and Marcum employees regarding the pending acquisition, and asked about the post-integration leadership structure. He also asked for more detail on the stronger-than-expected performance in the advisory business during the third quarter.

Answer

President and CEO Jerry Grisko expressed that the reception to the Marcum deal has been overwhelmingly positive from both teams, highlighting a collaborative spirit in the integration workstreams. He noted the future leadership will be a combination of talent from CBIZ, Marcum, and recent external hires. Regarding advisory services, Grisko stated that strength was broad-based, with the private equity advisory side seeing a higher volume of smaller transactions, which drove the strong performance.

Andrew Nicholas of William Blair & Company asked which specific drivers of the company's long-term growth algorithm have been contributing most to the strong performance over the last three quarters.

Answer

CEO Lee Shavel attributed the momentum to successfully communicating the incremental value from investments, especially the Core Lines Reimagined program, and deeper senior-level client engagement. CFO Elizabeth Mann added that this has translated into high-end performance on pricing, cross-selling, and upselling, as well as lower client attrition.

Andrew Nicholas of William Blair requested more detail on Verisk's plan to extend its improved sales model to a broader set of business units and new growth vectors.

Answer

President and CEO Lee Shavel clarified that the successful go-to-market strategies initially applied to Verisk's largest businesses (Claims, Extreme Events, Underwriting) are now being extended to growth areas like Life Insurance, Specialty Business Solutions (SBS), and Marketing Solutions. He added that the elevated strategic dialogue with clients is a core philosophy being expanded across the organization.

Andrew Nicholas asked about the trend of extending contract durations, seeking to understand the drivers, potential quantification of the change, and the resulting benefits.

Answer

CFO Elizabeth Mann described the change as a gradual evolution, not a drastic shift, driven by large customers seeking price certainty. CEO Lee Shavel added that it serves as a 'barometer' of stronger strategic relationships and client confidence in Verisk's long-term value, which allows for deeper partnership.

Andrew Nicholas asked for more details on the 10 new customer wins in Extreme Event Solutions, inquiring about their origin, the drivers of interest, and whether they were competitive takeaways or new market penetration.

Answer

CFO Elizabeth Mann revealed that nine of the ten new clients were entirely new to the catastrophe modeling space, indicating broader market adoption driven by climate concerns. She highlighted success in high-growth segments like excess and surplus (E&S) lines and managing general agents (MGAs). An unnamed executive added that heightened catastrophe activity is compelling more market participants to seek solutions to quantify their risk.

Andrew Nicholas posed a two-part question on private credit, asking for Moody's perspective on potential regulatory risks, highlighted by a letter from Senator Warren, and inquiring about the level of investment and team structure supporting this growth area.

Answer

CEO Robert Fauber emphasized Moody's role in providing transparency to an opaque market. He clarified that there is no single 'private credit team'; instead, Moody's leverages its existing, experienced analysts across all relevant rating groups (FIG, Structured Finance, etc.) and applies the same rigorous, regulated methodologies used for public ratings. While headcount has been added to handle flow, the strategy relies on integrating private credit into the core franchise, coordinated by dedicated analytical and commercial leaders.

Andrew Nicholas questioned the lack of expected acceleration in Research & Insights ARR growth and asked for an update on the monetization progress of GenAI tools like Research Assistant.

Answer

CFO Noemie Heuland acknowledged that ARR growth was impacted by stress in the banking sector. While the pipeline for Research Assistant is strong, she noted that adoption by large financial institutions has been slower than anticipated due to their need to establish internal GenAI governance frameworks. CEO Robert Fauber added that they now expect Q4 ARR growth at the lower end of the high single-digit range.

Andrew Nicholas asked about the company's conviction in maintaining its full-year guidance given the Q1 performance miss and increased macroeconomic uncertainty, and whether the shortfall was driven by macro factors or government headwinds. He also inquired about early signs of progress from the sales force and the nature of sales headcount changes.

Answer

CFO Chris Finn stated that the initial guidance was conservative, and while they've seen about $2 million in government contract cancellations, they are managing costs closely and see opportunities. CSO Nate Swan added that sales force progress is evident in three areas: adoption of their sales methodology, a 33% year-over-year increase in pipeline per account executive, and improved retention lifecycle activities. He also noted that sales headcount is down due to attrition but the company plans to hire in the second half of the year.

Andrew Nicholas of William Blair inquired about the factors behind the Q4 bookings weakness, asking whether it was due to market conditions or execution. He also sought clarity on the 2025 guidance, specifically the drivers for the expected second-half acceleration in CV growth and any operational efficiencies gained from AI.

Answer

Chief Sales Officer Nate Swan attributed the Q4 bookings shortfall to execution challenges in the small high-tech, government, and India sectors. CEO George Colony noted that large tech companies were a bright spot. Regarding AI, Chief Product Officer Carrie Johnson detailed how the Izola tool is used internally to boost customer success and analyst efficiency, while George Colony highlighted an observed correlation between heavy Izola usage and a 20% higher renewal rate.

Andrew Nicholas asked about the health of end markets, questioning if the shortfall in contract value (CV) bookings was due to market weakness or internal execution. He also inquired about the 2025 client budget outlook and how Forrester measures the traction of its new go-to-market strategies in a challenging environment.

Answer

Chief Sales Officer Nate Swan attributed the bookings weakness to execution in a specific group that has since been addressed, expressing confidence in the Q4 forecast. Chief Product Officer Carrie Johnson noted that tech budgets are expected to increase in 2025, aligning with Forrester's strategy. CEO George Colony added that the tech vendor world is stabilizing. Nate Swan further explained that go-to-market traction is measured by pipeline growth, retention rates, and the rollout of the 'retention life cycle,' with George Colony highlighting a specific goal of $500k in rolling pipeline per salesperson.

Andrew Nicholas of William Blair asked for further details on the Q2 outlook, particularly the drivers of softer utilization guidance, and whether the minor delays seen in proactive work are expected to persist. He also questioned the potential timing for upside from supply chain reconfigurations.

Answer

Executive Richard Schlenker explained the Q2 utilization forecast includes a 150-200 basis point headwind from the July 4th holiday timing, with the remainder reflecting minor, temporary client delays in life sciences and consumer products. He confirmed the full-year guidance assumes these remain 'edge cases.' Executive Catherine Corrigan added that there is potential for upside from supply chain shifts and increased regulatory scrutiny to be realized within the 2025 fiscal year.

Andrew Nicholas inquired about the visibility of the near-term business pipeline, especially given the rebound in the chemicals sector, and asked for an assessment of the conservatism in the company's 2025 guidance.

Answer

Executive Catherine Corrigan acknowledged the positive momentum in chemicals and strong market drivers like power demand and digital health. However, she tempered expectations by highlighting a 5-6% headcount deficit entering 2025 and a difficult comparison to a strong Q1 2024. Corrigan noted that while some user research work may see a normal Q1 dip, the pipeline for Q2 is healthy. She affirmed confidence in the company's realistic growth plan, which is primarily paced by the rate of hiring specialized talent.

Andrew Nicholas of William Blair inquired about the chemical sector, asking if the headwinds represented a new downturn or if comparisons were simply getting easier. He also asked for an explanation for why Q3 headcount did not grow sequentially as previously anticipated, probing whether it was due to strategic pruning or recruiting delays.

Answer

Executive Richard Schlenker clarified that the year-over-year comparison for the chemical sector is lower in Q4 and that current pressures stem from broad economic challenges and client restructuring. Executive Catherine Corrigan addressed the headcount miss, attributing it to higher-than-expected employee turnover in Q3 rather than recruiting issues. She affirmed that recruiting efforts are increasing and expressed confidence in returning to headcount growth.

Andrew Nicholas asked for more detail on the changes to the sales force incentive models and how these adjustments are expected to improve sales execution and success.

Answer

CEO Matti Shem Tov explained that the compensation models have been fine-tuned across all three segments to more heavily reward the growth of subscription and recurring revenue. The changes are designed to shift sales focus toward retaining customers, growing retention rates, and prioritizing subscription sales over onetime transactional business.

Andrew Nicholas inquired about the expected timeline for the turnaround initiatives, particularly for revitalizing go-to-market motions, based on the CEO's past experience.

Answer

CEO Matti Shem Tov explained that after his initial 90-day review, he has clear ideas for the path forward. He noted that some changes will be implemented quickly, while others, like product innovation, will take more time to evolve. He committed to providing specific KPIs in February to allow for progress tracking.

Andrew Nicholas asked about the outlook for Neustar, particularly the advertising and marketing business, and whether there are signs of accelerating demand from clients beyond the successful Trusted Call solutions.

Answer

CEO Christopher Cartwright confirmed that Communications has been the outperformer but framed the overall Neustar story as positive, citing exceeded synergy targets and the successful reconstitution of the product portfolio on the OneTru platform. He expects growth to increase over the medium term as the integration is complete and innovation benefits are realized, positioning them to compete better in fraud and marketing.

Andrew Nicholas from William Blair asked about management's organic growth aspirations in a steady-state environment and whether acquisitions are being considered. He also requested more color on enhancements to the end-client website, particularly new cash management functionality for advisors' clients.

Answer

President and CEO Tim Hockey stated the goal is mid-to-high single-digit asset growth and that they will always evaluate strategic and financial acquisitions. Regarding the website, EVP and CFO Steve Boyle clarified they rolled out a new, simplified platform for RIAs' end clients. Hockey added features like virtual agent chat and the ability for clients to move money themselves, which simplifies the experience and reduces administrative work for advisors.