Faiza Alwy

Faiza Alwy with Deutsche Bank inquired about the factors impacting CBIZ's 2025 revenue growth, specifically soft market conditions and productivity losses, and sought clarification on the improving middle market sentiment. She also asked about potential disruption from AI in more formulaic parts of CBIZ's business and the enduring role of the trusted advisor.

Answer

Jerry Grisko, President and CEO of CBIZ, explained that soft market conditions in the first half of 2025, characterized by a lack of certainty and stability, impacted revenue. He noted an encouraging pickup in advisory work in the second half and expressed confidence in improving sentiment based on CBIZ's middle-market pulse survey and 'green shoots' in project-based work. Regarding AI, Mr. Grisko stated that AI would augment work, making some tasks more efficient, but emphasized the difficulty for clients to separate isolated efficient tasks from the holistic, trusted advisor relationship. Peter Scavuzzo, Chief Strategy Officer and Technology Leader, added that clients need more advisory services due to AI-driven complexity, making human judgment and trust more critical than ever.

Faiza Alwy asked about the factors impacting CBIZ's 2025 revenue growth, specifically soft market conditions and productivity losses, and sought clarification on the improving middle market sentiment mentioned by management.

Answer

Jerry Grisko (President and CEO, CBIZ) explained that soft market conditions in the first half of 2025 stemmed from clients' need for certainty and stability, which was absent. He noted an encouraging shift in sentiment and increased advisory activity in the second half, which is expected to continue into 2026, supported by CBIZ's proprietary middle-market pulse survey. Faiza Alwy also inquired about the potential for AI disruption in more formulaic business areas. Jerry Grisko clarified that while AI will augment work and improve efficiency in some tasks, it's difficult to separate this from the holistic, trusted advisor relationship middle-market clients seek. Peter Scavuzzo (Chief Strategy Officer and Technology Leader) added that AI increases business complexity, making human judgment and trust from firms like CBIZ even more critical.

Faiza Alwy asked about the expected quarterly cadence for 2026 revenue and margins, particularly the flat Q1 outlook and the drivers for improvement throughout the year. She also inquired about the political environment surrounding automated photo traffic enforcement, including any noise from D.C. and the Trump administration, and its impact on new RFPs.

Answer

Craig Conti, Chief Financial Officer, explained that Q1's flat revenue is due to Commercial Services' FMC churn (acute in Q1 2024), slower pacing of travel volumes (back-end weighted, impacted by inclement weather), and Government Solutions' price normalization (effective 1/1/2026) combined with weather-related delays in NYC installations. David Roberts, Chief Executive Officer, noted that political commentary on automated enforcement is normal and has occurred for 18 years. He highlighted the expansion of the addressable market through state legislatures and the industry's successful pivot to 'purpose-built use cases' like school zones and bus stop arms, which are more publicly accepted.

Faiza Alwy asked about the expected quarterly revenue cadence for 2026, specifically what factors are driving the anticipated flat revenue in Q1 and the subsequent improvement throughout the year. She also inquired about the political environment surrounding automated photo traffic enforcement, including any noise from D.C. and the Trump administration, and what Verra Mobility is observing on the ground regarding new RFPs.

Answer

Craig Conti, Chief Financial Officer, explained that the Q1 flat revenue is due to a combination of Commercial Services (FMC churn, particularly acute due to a strong Q1 2024, and slower travel pacing impacted by inclement weather) and Government Solutions (price normalization from the New York City contract and weather-related delays in installations). David Roberts, CEO, addressed the political environment, stating that discussions around automated enforcement are normal and have occurred for 18 years. He highlighted the expansion of the addressable market through state legislatures and the industry's successful pivot to 'purpose-built use cases' like school zones, which tend to draw less negative feedback.

Faiza Alwy from Deutsche Bank inquired about Verra Mobility's assumptions for travel trends in the second half of the year, the specific factors driving weakness in the Fleet Management (FMC) business, and the reasons behind the improved outlook for the Government Solutions segment.

Answer

CFO Craig Conti explained that the guidance assumes a travel throughput rate for the rest of the year consistent with the Q2 exit rate of 99-100% of the prior year. Regarding the FMC business, he confirmed a further decline is expected in Q3 due to macroeconomic factors and churn, after which the company expects to stabilize and grow from that new base. For Government Solutions, Mr. Conti attributed the strength to both higher-than-anticipated product sales and accelerated service revenue growth outside of New York City, which is now expected to be in the low double digits.

Faiza Alwy inquired about the volatile travel trends impacting the Commercial Services business at the start of 2025 and the expected quarterly revenue cadence. She also asked about win rates and the revenue conversion timeline for new Government Solutions contracts.

Answer

CFO Craig Conti confirmed that year-to-date travel trends align with their full-year forecast despite some daily volatility and detailed the expected quarterly revenue sequence for Commercial Services. CEO David Roberts noted strong win rates in Government Solutions, with a typical 12-to-18-month period for new annual recurring revenue (ARR) to convert to recognized revenue. Craig Conti added that Government Solutions revenue outside of New York City is expected to grow in the low double-digits, ramping sequentially through 2025.

Faiza Alwy requested more detail on the incremental costs expected in 2025, including portfolio mix, TAM execution, and infrastructure investments, and also asked about 2025 CapEx and the margin profile of new contracts.

Answer

Executive Craig Conti detailed the 2025 cost drivers: margin pressure from portfolio mix, pre-revenue costs for new government program installations, and a $5 million non-capitalized ERP expense in the first half. He guided for a 40-45% free cash flow conversion rate, implying slightly higher CapEx. Executive David Roberts added that new contract margins are broadly consistent with historical levels, though large installs can cause temporary pressure.

Faiza Alwy sought clarification on whether the projected second-half revenue inflection is already included in the 2026 guidance or if it's contingent on sustained current positive trends. She also asked for more details on data centers, including their percentage of the business, the RFP process, win rates, and competitive dynamics.

Answer

President and CEO Tim Boswell clarified that the potential second-half revenue inflection is not included in the current guidance and would represent performance above the outlook if positive commercial indicators are sustained. Regarding data centers, Mr. Boswell stated that activity is picking up, with new contractual revenue from this subvertical expected to increase by about 50% in 2026, though it still represents less than 5% of overall revenue. He noted projects are widespread across the U.S. and compared the current demand surge to the significant increase in oil and gas activity that led the non-residential market's re-inflection post-GFC.

Faiza Alwy sought clarification on whether the projected second-half revenue inflection was already factored into the 2026 guidance or if it was contingent on current positive trends being sustained.

Answer

President and CEO Tim Boswell clarified that the second-half inflection is conditional; if current positive commercial indicators are sustained, the results would be above the current conservative guidance. For her follow-up, Faiza Alwy asked for more details on the data center vertical, including its current percentage of the business, the RFP process, win rates, and competitive dynamics. President and CEO Tim Boswell stated that data center activity is picking up, with new contractual revenue in this subvertical expected to increase by about 50% in 2026, though it represents less than 5% of overall revenue. He highlighted widespread project locations and compared the demand surge to the oil and gas boom post-GFC.

Faiza Alwy asked for more detail on the contraction in delivery and installation margins, specifically the 'lower-margin seasonal transportation activity.' She also questioned how the company might perform in a more inflationary environment compared to the post-COVID period.

Answer

President and COO Timothy Boswell attributed the margin pressure to return activity from a strong Q4 and the in-sourcing of trucking resources ahead of volume, which should provide leverage later. Regarding inflation, he stated that it is generally supportive as their largest cost, the fleet, is already owned, providing a relative advantage. He noted that demand remains the key variable.

Faiza Alwy of Deutsche Bank asked for more detail on the enterprise accounts initiative, including the size of these accounts and the scale of the opportunity. She also requested a more specific range for the expected Q1 EBITDA margin decline.

Answer

President & COO Timothy Boswell detailed that the top 200 customers generate about $500 million in revenue, or 20% of the total, and include major GCs and retailers. He explained the opportunity lies in creating a vertically aligned business development layer to sell across geographies, improving wallet share with existing accounts, and adding new ones. CFO Matt Jacobsen specified that the Q1 EBITDA margin is expected to be down by about 100 basis points year-over-year at the midpoint, driven by headwinds and investments in sales headcount.

Faiza Alwy asked for the current pricing gap between spot rates and the portfolio average, the company's pricing strategy for 2025, and the expected timeline for a volume recovery given macroeconomic lags.

Answer

President and CFO Timothy Boswell stated the modular pricing spread is a favorable 12%, while storage is flat. He outlined a 2025 strategy focused on new AI-informed pricing and quoting technology to improve bundling. CEO Brad Soultz added that a seasonal recovery would typically begin in March, coinciding with expected rate relief and political clarity.

Faiza Alwy asked how the rollout of new technologies is expected to impact Verisk's pricing power and margins, considering the balance between innovation costs and generated efficiencies.

Answer

CEO Lee Shavel explained that Verisk's businesses are value-driven, aiming to monetize investments by delivering functionality at a lower cost than clients could achieve themselves, and by finding new data uses that create value through AI. He anticipates these factors will drive incremental revenues. From a margin perspective, he noted inherent operating leverage from data usage and improved productivity from AI implementation in functions like coding and data normalization, supporting operating leverage and funding AI investments.

Faiza Alwy asked about the potential for Verisk to achieve better pricing for the value provided by new technologies, particularly AI, and if there's differentiation by customer type. She also questioned the implications for margins, considering the cost of innovation versus generated efficiencies.

Answer

Lee Shavel, President and CEO of Verisk Analytics, stated that all Verisk businesses are fundamentally value-driven from a pricing standpoint. He highlighted two key elements: Verisk's ability to monetize investments and deliver functionality at a lower cost than clients could achieve themselves, and finding new uses of data that create value through clients' AI utilization. Both factors are expected to drive incremental revenues by creating value for clients. From a margin perspective, Shavel noted inherent operating leverage from data usage and improved productivity from AI implementation in functions like coding and data ingestion, which supports operating leverage and funds AI investments.

Faiza Alwy questioned Verisk's future pricing opportunities, considering increased client usage, more contributory data, and the decelerating net written premiums in the insurance industry.

Answer

President and CEO Lee Shavel highlighted direct upsell revenue from AI enhancements like Exact Expert and Exact AI. He also noted that integrating Verisk's data sets adds incremental value, allowing for pricing adjustments in subscription contracts, and that improved product quality from AI (e.g., CAT modeling) creates further pricing opportunities.

Faiza Alwy asked about Verisk's future pricing opportunities, considering the ongoing strategic dialogue with clients, increasing usage, and more contributory data, especially in light of decelerating net written premiums in the insurance industry.

Answer

Lee Shavel, Verisk's President and Chief Executive Officer, highlighted direct upsell revenue from AI enhancements like XactXpert and Xact AI. He noted that integrating Verisk's data sets into client AI strategies or functional objectives creates incremental value, leading to pricing opportunities within subscription contracts. He also mentioned that AI improves product quality, such as in CAT modeling, strengthening competitive positioning and pricing.

Faiza Alwy from Deutsche Bank inquired about the new AI-powered products, particularly the automated underwriting assistant, asking about industry adoption readiness and the potential impact on Verisk's pricing power.

Answer

CEO Lee Shavel noted that Verisk is well-positioned to introduce new technologies to the industry. Co-President of Underwriting Solutions, Saurabh Khemka, provided specific adoption metrics, stating that the POS AI tool is used by nearly a quarter of users and the Mozart AI tool by almost half of its customers, both delivering significant efficiency gains and enhancing the value of the core products.

Faiza Alwy from Deutsche Bank questioned the sustainability of Verisk's strong margin performance, asking about the progress of global talent optimization efforts and the future outlook for efficiencies.

Answer

CFO Elizabeth Mann stated that while margin efficiency is an embedded discipline, the pace of expansion might taper, as reflected in guidance. She noted Q1's strength was partly due to expense timing and high-margin storm-related revenue. CEO Lee Shavel added that investment intensity acts as a counterbalance to immediate margin gains, serving the company's long-term interests.

Faiza Alwy followed up on transactional revenues, asking about the outlook for 2025 given difficult comparisons and whether the recent storm impact was entirely transactional.

Answer

CFO Elizabeth Mann confirmed the storm impact was primarily transactional. For 2025, she outlined several headwinds for transactional revenue, including tough comps from contract conversions and high auto activity in early 2024, the divestiture of the transactional AER business, and typical first-quarter seasonality.

Faiza Alwy requested an update on the 'Core Lines Reimagine' initiative, asking about its progress, client adoption metrics, and whether the new 'Future of Forms' initiative will be a similar value driver.

Answer

President and CEO Lee Shavel and executive Saurabh Khemka provided details. Khemka stated the program is over halfway through its investment phase and that KPIs include new insights like the 'Executive Insights' reports, now available for five of six major lines. He described 'Future of Forms' as a continuous innovation. Khemka also highlighted a new digital platform, core.verisk.com, which is seeing engagement levels multiple times higher than previous platforms, driving value for customers and Verisk.

Faiza Alwy asked about the accelerating growth in consumer lending, seeking insights into underlying market performance, fintech activity, and how these trends are embedded in the company's guidance and confidence levels.

Answer

CEO Chris Cartwright highlighted solid and stable macro conditions, including good GDP growth, low unemployment, and acceptable consumer leverage ratios, supporting optimism for loan growth. EVP and CFO Todd Cello added that FactorTrust grew nearly 20% in 2025, and TrueIQ analytics also contributed significantly to consumer lending success.

Faiza Alwy asked about the acceleration in Consumer Lending growth, seeking insights into underlying market trends, fintech activity, and the confidence embedded in the 2026 guidance for this segment.

Answer

Christopher Cartwright, President and CEO of TransUnion, and Todd Cello, Executive Vice President and Chief Financial Officer, highlighted solid macro conditions, strong performance from FactorTrust (growing nearly 20% in 2025) and TruIQ analytics, and expected continued strength in Consumer Lending due to favorable market dynamics.

Faiza Alwy of Deutsche Bank inquired about the key drivers behind TransUnion's outperformance relative to the broader lending market, questioning whether it was attributable to customer mix, technological innovation, or other strategic factors.

Answer

President and CEO Chris Cartwright explained that the outperformance is a combination of factors, including strong momentum from consumer lending and FinTech clients where TransUnion holds significant market share. He also emphasized the success of selling a broad suite of solutions—including credit, analytics, Trusted Call Solutions, and marketing—across all financial services verticals, which drives growth beyond just market volume.

Faiza Alwy asked for more detail on the resiliency of the Emerging Verticals segment in a slowing economy, referencing a 70% subscription-based figure.

Answer

EVP and CFO Todd Cello clarified that the 70% subscription figure applies only to the Marketing business. He then detailed the resiliency of the broader segment: Insurance and Tenant/Employment tend to perform well in downturns, Communications and Tech are generally neutral, Media is more negative but insulated by subscriptions, Public Sector is neutral-to-positive, and Collections is counter-cyclical and would see increased demand.

Faiza Alwy asked about the mortgage business outlook, specifically the drivers behind the guided inquiry decline and whether the market shift towards single-bureau soft pulls for prequalification was a major factor, as well as TransUnion's pricing strategy.

Answer

CFO Todd Cello confirmed the guidance reflects current trends without assuming rate-cut benefits and includes prequalification volumes. He noted that while some shift to fewer credit pulls for prequalification has occurred, they continue to win share. CEO Christopher Cartwright added that a complete shift to single-pulls is unlikely as lenders balance cost savings with the need to maximize qualification rates.

Faiza Alwy of Deutsche Bank inquired about the revenue potential from TransUnion's OneTru transformation, specifically asking if the cited $50 million pipeline represents incremental revenue and what the outlook is for 2025 and beyond.

Answer

President and CEO Christopher Cartwright explained that the $50 million in bookings from OneTru-powered products de-risks the company's goal of returning to high single-digit revenue growth. He highlighted that the elevated pace of innovation in analytics, marketing, and fraud solutions is improving sales, even in a tepid market, and positions TransUnion well for when customer acquisition spending increases.

Faiza Alwi asked about the limitations to integrating the '1,000 different tools' that reportedly sit inside the average K-12 district into McGraw Hill's offering. She also sought to reconcile the optimism for higher education growth with comments about tougher comps in Q4.

Answer

Chair of the Board of Directors, Simon Allen, acknowledged the 'outrageous statistic' of numerous tools, emphasizing McGraw Hill's role in simplifying this chaos for teachers by providing genuinely helpful, efficacious materials. EVP and CFO, Bob Sallmann, clarified that higher education optimism is unwavering regarding market share gains, with Q4's tougher comps being a nuance related to billings versus revenue, and full-year double-digit growth expected to reflect a more normalized basis.

Faiza Alwi asked about the limitations to integrating the estimated 1,000 different learning tools found in an average district into McGraw Hill's offering. She also sought to reconcile the optimism for higher education share gains with comments about tougher Q4 comps.

Answer

Simon Allen, Chair of the Board of Directors, acknowledged the 'outrageous' number of tools, emphasizing McGraw Hill's role in simplifying this chaos by providing genuinely helpful, efficacious products that offer teacher relief. Bob Sallmann, EVP and CFO, and Simon Allen clarified that while Q4 faces a difficult comp, the full-year higher education performance will reflect double-digit growth in billings and revenue, driven by unwavering market share gains, which is the primary focus.

Faiza Alwi sought further clarity on S&P Global's workflow products and their competitive moat, particularly how the company addresses potential shifts in data consumption channels, including pricing strategies.

Answer

Martina Cheung, President and CEO, reiterated that the vast majority of S&P Global's revenue comes from unique data, insights, and critical workflows. She described workflow tools like iLevel, ClearPar, Capital IQ Pro, and Platts Connect as enterprise-grade systems of record, essential for capital flows, trading, and reporting in regulated environments. These tools embed S&P Global's world-class datasets and offer sophisticated integrations, compliance, and risk management functionalities. Customers prefer fewer vendors and strategic partnerships, wanting S&P Global to embed leading-edge technology directly into its products. Martina expressed confidence in S&P Global's unique position, AI expertise, differentiated data, and enterprise-grade workflow tools.

Faiza Alwy sought further clarity on S&P Global's workflow products and their competitive moat in the context of AI, including how the company would overcome potential shifts in data consumption channels, possibly through higher pricing.

Answer

Martina Cheung, President and Chief Executive Officer, emphasized that S&P Global's workflow tools like iLEVEL, ClearPar, Cap IQ Pro, and Platts Connect are critical, enterprise-grade systems of record, not simple apps. She highlighted their sophisticated integration, connectivity across industry networks, embedded S&P Global data, and compliance with complex regulations, asserting that customers prefer integrated solutions from strategic partners.

Faiza Alwy inquired about the Ratings business, specifically the 2026 maturity wall (high yield pull-forward, lower investment grade), record RES revenue, the normalization of issuance, and the growth outlook for the next few years.

Answer

Martina Cheung, President and CEO, noted growth beyond expectations driven by strong high yield, bank loans, opportunistic issuance, and M&A. She projected Q4 issuance similar to Q3 (mid-to-high teens) due to opportunistic issuance and 2026 refinancing pull-forward, with maturity walls through 2026 being 8% higher than last year. Eric Aboaf, CFO and EVP, emphasized the balanced growth from transactional and non-transactional revenue, with RES and ICRs up over 20% this quarter, providing continuity.

Faiza Alwy asked about the Ratings business, specifically regarding the 2026 maturity wall, the pull-forward in high yield, and lower investment grade maturity wall, alongside record RES revenue, seeking characterization of issuance normalization and future growth outlook.

Answer

Martina Cheung, President and CEO, noted that 2025 growth exceeded expectations, driven by strong high yield and bank loan issuance, and opportunistic M&A. She highlighted that Q4 issuance is expected to be similar to Q3, with maturity walls through 2026 about 8% higher than last year. Eric Aboaf, CFO and EVP, emphasized the strength of non-transactional revenue, including RES and ICRs, which were up over 20% this quarter, providing a consistent growth engine for the franchise.

Faiza Alwy inquired about the drivers behind the strong margin performance and expense management in Market Intelligence, asking if any one-time items contributed to the results.

Answer

CFO Eric Abouaf explained that the margin strength was driven by two main factors: ongoing productivity initiatives across the division and the specific patterning of investment spending, which is more back-end loaded this year for new product and sales launches. He indicated there were no significant one-time benefits.

Faiza Alwy inquired about the drivers of the strong margin performance and expense management in Q2, particularly within Market Intelligence, and whether any one-time items contributed to the results.

Answer

CFO Eric Abouaf explained that the margin strength was driven by two main factors: ongoing productivity initiatives across divisions like MI and Commodity Insights, and the specific patterning of investment spending, which is more back-end loaded this year. He clarified that these investments are crucial for driving future growth.

Faiza Alwy asked for color on management's confidence in accelerating revenue growth in the Market Intelligence division, including feedback from customers and trends in bookings and end markets.

Answer

CEO Martina Cheung expressed high confidence, citing stable retention rates, strong sales pipelines, and Annual Contract Value (ACV) growing faster than revenue. She noted that lapping cancellations from early 2024 will support acceleration in the second half of the year and highlighted positive customer feedback on sales realignments and recent large deal wins.

Faiza Alwy from Deutsche Bank asked for details on the 2025 Ratings outlook, including visibility, expected M&A contribution, and the likely revenue growth cadence throughout the year.

Answer

President and CEO Martina Cheung explained that while they don't guide quarterly, the outlook assumes modest expectations, including just one more rate cut and no major economic shocks. The low single-digit billed issuance growth forecast accounts for a strong Q4 2024 pull-forward, full drawdown of 2025 maturities, modest pull-forward from 2026, and a balanced view on M&A recovery.

Faiza Alwy asked for early thoughts on the 2025 outlook for the Ratings business, considering the strong 2024 performance and debt issuance pull-forward, and whether the long-term 6-9% growth target remains achievable.

Answer

Incoming President and CEO Martina Cheung explained that while some issuance was pulled forward, the forward maturity wall remains healthy at $2.0-$2.8 trillion annually for the next five years. She emphasized that GDP growth is the strongest correlate to issuance. She also confirmed that the 6-9% growth target was a multi-year enterprise-level goal, and the company remains on track to achieve it.

Faiza Alwy asked about the government vertical's growth embedded within the low double-digit verifier diversified markets growth, and the factors states prioritize, such as pricing and funding issues. She also sought clarification on the difference between mortgage guidance for Q1 (low double digits ex-FICO) and the full year 2026 (mid-single digits).

Answer

Mark Begor, Chief Executive Officer, noted the government vertical's historical 20%+ CAGR and large $5 billion TAM, with Equifax currently under 20% penetration. States prioritize speed, caseworker productivity, and program integrity, with OB3 legislation acting as a catalyst for increased commercial activity and new product adoption. Pricing is modest, with penetration, new products, and record additions being key growth drivers. Government is expected to be Equifax's fastest-growing business. Regarding mortgage guidance, Mr. Begor explained that the Q1 strength reflects improving sequential trends in the mortgage market throughout 2025, leading to better year-over-year comparisons in Q1, with growth rates expected to normalize as the year progresses due to tougher comps.

Faiza Alwy inquired about the expected growth for the government vertical within the low double-digit verifier diversified markets, the factors states prioritize (pricing, funding), and the momentum observed. She also asked about the discrepancy between Q1 2026 mortgage guidance (low double digits ex-FICO) and full-year 2026 (mid-single digits).

Answer

CEO Mark Begor highlighted government's historical 20%+ CAGR and sub-20% TAM penetration, emphasizing value props like speed, productivity, and integrity. He noted OB3 is driving increased state engagement and expects government to be the fastest-growing business, with penetration and new products as key levers, not pricing. Regarding mortgage guidance, Begor explained the Q1 2026 growth appears higher due to weaker Q1 2025 comparables, with growth rates naturally declining later in the year against stronger prior-year quarters.

Faiza Alwy asked about the MBA's increasing push to shift away from the tri-merge report in mortgages, how Equifax views this, its potential impact, and the company's strategy to counter it. She also inquired about the traction of Equifax's recently launched 'Complete Income Solution' product within the government vertical, comparing it to instant verification, and the competitive landscape for consumer-permissioned data in government.

Answer

Mark Begor, Chief Executive Officer, stated that while there's some voice, it's not a 'real drumbeat,' with more focus on score pricing. He emphasized the value of tri-merge due to differences between bureaus (e.g., 10 million consumers on only one file, 40+ million with significant score differences), and the integrity it provides. He believes MBA's focus is primarily on FICO's cost increases. Mark Begor explained that the Complete Income Solution is integrated with the Twin instant solution, allowing caseworkers to seamlessly access W-2 and consumer-permissioned gig/self-employed income. He noted one state has already signed up, with a strong pipeline, highlighting its importance for caseworker productivity and speed of social service delivery.

Faiza Alwy asked about the MBA's push to shift away from tri-merge reports and its potential impact on Equifax. She also inquired about the traction of Equifax's complete verification product within government and the competitive environment for consumer permission data.

Answer

CEO Mark Begor stated that the focus is more on score pricing than tri-merge, emphasizing the value of tri-merge due to data differences between bureaus and integrity. Regarding the complete verification product, he noted it's integrated with the Twin indicator, with one customer signed and an attractive pipeline, providing a comprehensive view of W-2 and gig income to enhance caseworker productivity and speed of social service delivery.

Faiza Alwy requested more details on the rising litigation costs and their potential continuation into 2026, and also asked about the specific trends contributing to the weaker talent market.

Answer

CFO John Gamble attributed the higher litigation costs to general outstanding lawsuits and a rising volume of small claims from individuals, which he expects to remain elevated. CEO Mark Begor explained the weaker talent market is due to corporate cautiousness around economic uncertainty, particularly regarding tariffs, which has dampened hiring activity over the last six months.

Faiza Alwy asked for clarification on the mix of hard versus soft pulls in mortgage, expected penetration of pre-qual products, and the 2025 outlook for TWN inquiry outperformance.

Answer

CFO John Gamble clarified that over 70% of USIS mortgage revenue comes from hard pulls. CEO Mark Begor noted a trend of lenders using fewer bureaus for initial shopping, a dynamic Equifax aims to win with differentiated data. Gamble expects TWN inquiries to slightly outperform mortgage inquiries in 2025.

Faiza Alwy inquired about the quarterly phasing of CV growth for 2026, specifically whether it would align with historical patterns or be more weighted towards the back half of the year due to internal initiatives.

Answer

CFO Craig Safian indicated that the CV expiration schedule for 2026 is consistent with historical patterns, with Q1 and Q4 slightly overweighted. He noted that NCVI generation typically occurs more in the second half, and internal transformations are expected to have a greater impact in the latter half of 2026.

Faiza Alwi asked about the quarterly phasing of CV growth in 2026, specifically if it would be similar to historical patterns or if internal initiatives would shift more impact to the back half of the year.

Answer

CFO Craig Safian explained that the CV expiration schedule for 2026 is consistent with historical patterns, with a slight overweighting in Q1 and Q4 for renewals. He confirmed that NCVI (Net Contract Value Increase) build is typically stronger in the second half, and the ongoing transformations are expected to have a greater impact on the second half of 2026.

Faiza Alwy asked for additional color on the drivers behind the improved renewal rates, specifically whether it's due to the macro environment or Gartner's strategic adaptations and new services. She also questioned the sustainability of expense management and the balance between investments and cost optimization.

Answer

CFO Craig Safian attributed the improved renewal rates primarily to Gartner's operational adaptations, such as accelerating research pace and quantity, and enhanced sales training, alongside reduced uncertainty in certain tariff-impacted geographies. Chairman and CEO Gene Hall discussed disciplined expense management throughout the year, emphasizing a balance between in-year OpEx and investments in core areas to catalyze future double-digit growth. He highlighted efforts to drive productivity, automate processes, and leverage lower-cost geographies to fund these strategic investments.

Faiza Alwy asked about the drivers behind the improvement in renewal rates, specifically whether it's due to the macro environment, changes in selling strategies, or new services like cost optimization. She also asked about the sustainability of expense management and the balance between investments and cost optimization.

Answer

Craig Safian (CFO, Gartner) attributed the improved renewal rates primarily to two factors: operational adaptations (accelerating research pace and quantity, improved sales training) and reduced uncertainty in tariff-impacted geographies. He also explained that expense management is disciplined, balancing OpEx and exit run rates while investing in core areas to catalyze future double-digit growth, aiming for 'permanent savings.'

Faiza Alwy inquired about the historical pattern of client behavior during periods of uncertainty and asked for perspective on the share buyback strategy, given the company's cash position and stock performance.

Answer

CEO Gene Hall described a historical pattern where clients initially pause during uncertainty before re-engaging as they need Gartner's help to navigate the new environment. CFO Craig Safian reiterated the company's disciplined, opportunistic, and price-sensitive approach to share repurchases, focused on optimizing long-term returns.

Faiza Alwy requested more detail on Gartner's tactical approach to the public sector, given comments about being 'thoughtful' on hiring. She also asked for clarification on Q1 being a higher renewal quarter and whether this applies across the entire business.

Answer

Executive Eugene Hall clarified that Gartner's public sector business is highly diversified across 74 countries and various government levels (federal, state, local), viewing it as a vibrant sector. CFO Craig Safian explained that while renewals are spread throughout the year, Q1 is slightly above the 25% average. The key dynamic, he noted, is that Q1 is also seasonally the lowest new business quarter, which drives their prudent planning.

Faiza Alwy asked if AI could become a more significant driver of new business growth in 2025 and beyond, and also requested an early read on 2025 revenues, particularly for non-subscription revenue.

Answer

CEO Gene Hall positioned AI as one of several critical issues Gartner helps clients with, alongside cybersecurity and data analytics, suggesting it's part of their ongoing value proposition rather than a new, distinct growth surge. CFO Craig Safian deferred specific 2025 guidance to the February call, emphasizing that the year-end 2024 CV figure is the most critical input for the 2025 revenue outlook.

Faiza Alwy, Managing Director at Deutsche Bank, asked about the Collection and Disposal business's Q4 2025 volumes, noting they appeared light, and sought additional factors beyond special waste and the macro environment. She also inquired about the 2026 margin guidance, considering moving pieces like wildfires and sustainability projects, and requested insight into the quarterly cadence of margins.

Answer

CEO Jim Fish and President John Morris attributed Q4 2025 volume softness in MSW and industrial to December weather, while residential volumes, though negative, are expected to improve in 2026. They also highlighted a 50 basis points volume headwind in 2026 from 2025 wildfire cleanup. CFO David Reed outlined a 30 basis points (50 adjusted) margin expansion for 2026, driven by Collection and Disposal, business mix, and sustainability benefits, with a typical quarterly cadence of 47% in the first half and 53% in the second half.

Faiza Alwy asked about the collection and disposal volumes in Q4, noting they seemed light relative to trend, and inquired about the industrial business and macro environment. She then asked for clarification on the 2026 margin guide, considering moving pieces like wildfires and sustainability projects, and the expected quarterly cadence of margins.

Answer

CEO Jim Fish attributed Q4 volume softness to December weather impacting MSW and industrial, though it didn't affect EBITDA. He also noted a 50 basis points volume headwind in 2026 from wildfire cleanup. EVP and CFO David Reed highlighted record 2025 margins and projected 30 basis points (50 adjusted) margin expansion in 2026, driven by collection and disposal, business mix, and sustainability, with a typical 47% H1 / 53% H2 cadence.

Faiza Alwy followed up on the cross-selling and churn dynamics within WM Healthcare Solutions, asking for more color on customer types, regions, and where strength in cross-selling versus higher churn was observed. She also inquired about the remaining runway for lower maintenance and risk management costs in the core business for 2026 and beyond.

Answer

Rafael Carrasco (EVP Enterprise Strategy and President) clarified that cross-selling success was across all channels. Churn was primarily among hospital customers who experienced the most frustration with ERP issues, but customer additions remained healthy, and overall churn was lower than the legacy business. Jim Fish (CEO) and John Morris (President and COO) emphasized that the core business was performing strongly. John Morris stated there is still room to run for reducing operating expenses, with aspirational targets beyond the current 59.4%. Jim Fish added that achieving these targets would require different approaches, including technology and AI.

Faiza Alwy asked for more color on the churn observed in the healthcare business, specifically if it's concentrated in certain customer types or regions, and how it balances against cross-selling success. She also inquired about the remaining runway for further reductions in maintenance and risk management costs within the core business for 2026 and beyond.

Answer

EVP Enterprise Strategy and President Rafael Carrasco explained that cross-sell success is across all channels, while churn on the hospital side relates to customers most frustrated with ERP issues, but it's not extraordinary. CEO Jim Fish reiterated the unsurpassed network of WM Healthcare Solutions and confidence in 5-6% revenue growth once ERP is stabilized. President and COO John Morris stated there is absolutely more runway for cost reductions, aiming for aspirational figures better than the current 59.4% operating expense to revenue ratio, which will require new approaches using technology and AI.

Faiza Alwy of Deutsche Bank sought clarification on the drivers of the 110 basis point year-over-year improvement in collection and disposal margins and requested an updated EBITDA contribution outlook for Stericycle and the sustainability business for 2025.

Answer

EVP & CFO Devina Rankin clarified that the C&D margin expansion was driven by efficiency, price-cost spread, and favorable mix from strong landfill volumes, though this will moderate in H2. She stated that the full-year EBITDA guidance of $7.55B is intact, with the only negative revision being a ~$25M reduction in recycling EBITDA due to commodity prices and costs, which is being offset by strength in C&D and higher-than-expected synergy capture.

Faiza Alwy of Deutsche Bank asked how much of the Collection and Disposal business's EBITDA growth is from sustainability projects, sought guidance on the quarterly cadence for synergies and commodity impacts, and questioned the stability of Investment Tax Credits (ITCs) under a new administration.

Answer

EVP and CFO Devina Rankin explained that of the $190 million in incremental sustainability EBITDA, about $40 million flows to the Collection and Disposal segment via royalties and fees. She guided for a back-half weighted synergy ramp for Stericycle and H1 pressure from recycling commodity comps. Both Devina Rankin and President and CEO Jim Fish expressed confidence that the ITCs are secure, noting the original investments were viable even without them and that other potential tax credits were excluded from guidance.

Faiza Alwy asked if an LLPA grid is necessary for FICO 10T in the conforming market and whether FICO expects 10T and VantageScore to be released simultaneously or in stages. She also inquired about the drivers behind the acceleration in mortgage revenue growth, specifically if it was due to higher volume, price, or refi activity.

Answer

CEO Will Lansing believes there will likely be an adjustment to the LLPA grid for FICO 10T when it's made available, noting its architectural similarity to FICO Classic. He mentioned the industry's preference for simultaneous release of 10T and VantageScore, but the FHFA's decision is unknown. Will Lansing attributed the mortgage revenue growth to a combination of price, volume, and refi activity.

Faiza Alwy from Deutsche Bank asked if an LLPA grid is necessary for FICO Score 10T or if the conforming market could accept it without one, and whether 10T and VantageScore would be implemented simultaneously or in stages. She also inquired about the drivers behind the acceleration in FICO's mortgage revenue growth this quarter.

Answer

Will Lansing, CEO, anticipated that there would likely be an adjustment to the LLPA grid for FICO Score 10T, noting its architectural similarity to FICO Classic. He mentioned the industry's preference for simultaneous release of 10T and VantageScore, but stated the FHFA's ultimate decision is unknown. Dave Singleton, VP of Investor Relations, emphasized FICO Score 10T's significantly greater predictability compared to FICO Classic. Regarding mortgage revenue, Mr. Lansing attributed the growth to a combination of price, volume, and refi activity.

Faiza Alwy of Deutsche Bank asked for feedback on the next-generation FICO Platform and the outlook for software bookings. She also inquired about the drivers behind the acceleration in auto B2B originations revenue.

Answer

CEO Will Lansing noted continued customer interest in the platform and a good bookings pipeline, though growth rates are not at the highs of past years. CFO Steve Weber attributed the strong auto revenue growth primarily to pricing, with a smaller contribution from volume increases.

Faiza Alwy of Deutsche Bank asked about the drivers behind the substantial increase in non-origination B2B Scores revenue. She also inquired about FICO's perspective on the evolving regulatory environment, particularly with new regulators in place.

Answer

CFO Steve Weber attributed the non-origination B2B Scores revenue increase to a combination of factors including license sales, international market activity, and prescreening, noting that this line item can fluctuate quarter-to-quarter. CEO Will Lansing described the current regulatory environment as 'a good one for FICO,' stating that the company is pleased with its position and that recent developments are 'basically good news.'

Faiza Alwy of Deutsche Bank questioned the drivers behind the significant increase in non-origination B2B Scores revenue and asked for an update on the current regulatory environment.

Answer

CFO Steve Weber attributed the non-origination revenue growth to a mix of factors, including license sales and international activity, noting this line item can fluctuate. CEO Will Lansing described the regulatory environment as favorable for FICO, stating, 'It's all basically good news for us.'

Asked for the source of confidence in re-accelerating software platform ARR back to 30% and about the volume assumptions for the Scores business that are embedded in the annual guidance.

Answer

Confidence in ARR re-acceleration stems from a strong pipeline of already-signed bookings that will convert to revenue in the coming quarters, as there is a lag between booking and revenue recognition. The guidance for the Scores business was built on a conservative assumption that interest rates would not decrease significantly in 2025.

Faiza Alwy of Deutsche Bank asked for elaboration on macroeconomic uncertainty, particularly regarding mortgage volume recovery, and inquired about the potential for monetizing the FICO Score's value for secondary market participants.

Answer

CEO William Lansing stated that FICO incorporates a level of conservatism in its guidance to account for macro uncertainty and leaves specific volume forecasts to analysts. On monetizing downstream score usage, Mr. Lansing acknowledged it's an interesting idea they have studied, but emphasized that FICO is extremely cautious about changing its business model due to the risk of unforeseen consequences and its responsibility to the stability of the financial ecosystem.

Faiza Alwy from Deutsche Bank asked about quantifying the benefits from AI efficiencies, the incremental reinvestment into the business, and the longer-term impact on profitability (whether it leads to better profitability or continued reinvestment/pricing giveback).

Answer

Henry Fernandez, Chairman and CEO of MSCI, explained that AI is a 'godsend' in two ways: lowering existing business expenses to free up savings for reinvestment in innovation, and accelerating product introduction. He stated that AI will help grow inorganic investments at a much higher pace, potentially double. AI also aids in gathering more granular data (e.g., private assets) and improving client consumption of MSCI's content, accelerating the ability of people to use their tools.

Faiza Alwy asked about the quantification of AI efficiencies, potential incremental reinvestment in 2026, and the longer-term impact on profitability, specifically whether it will lead to better profitability or continued reinvestment and potential pricing givebacks.

Answer

Henry Fernandez, Chairman and CEO of MSCI, described AI as a 'godsend' for two reasons: lowering existing business expenses to free up capital for 'change the business' investments, which will accelerate from 2026-2028, potentially doubling the pace of inorganic investments. Secondly, AI accelerates product introduction and improves client content consumption. He offered to follow up offline for specific quantification.

Faiza Alwy asked for additional color on the performance of net new sales in EMEA, noting a decline and inquiring if new product innovation is more Americas-centric or if specific factors like ESG are influencing the region.

Answer

Andy Wiechmann, Chief Financial Officer, MSCI, acknowledged continued sluggishness with asset managers in EMEA, noting they have been slower to rebound compared to the Americas. He clarified that MSCI's product development efforts are global, with significant opportunities in Europe, particularly in the growing ETF ecosystem around MSCI indices. He stated that while some client sluggishness and pressure persist in EMEA, MSCI's strong position and innovations across product lines, including PCS and private asset markets, are expected to drive future growth. He reiterated that the near term sees a continuation of past sluggishness.

Faiza Alwy questioned the slight slowdown in custom indexes subscription sales, wondering why growth wasn't accelerating given recent technology advancements and acquisitions like Foxberry.

Answer

President & COO Baer Pettit stated that there has been no fundamental change to the positive outlook for custom indexes. He attributed the quarterly fluctuation to the specific timing of deals and reaffirmed that it remains a very important and unequivocal growth opportunity for MSCI.

Faiza Alwy asked about the retention rates in the Index and Analytics segments, questioning if current levels are normalized and if impacts from client consolidation are still expected.

Answer

Chief Financial Officer Andrew Wiechmann reported healthy retention rates of 96.5% in Index and 95.5% in Analytics. He noted that Q1 benefited from lapping a large bank merger cancellation from the prior year. While the top cause of cancellations remains client events and some caution persists around Europe, the core business showed strong resilience. He suggested some lumpiness in cancels could occur if market uncertainty continues.

Faiza Alwy requested more detail on the geographic bifurcation in client trends between the U.S. and other regions, and also asked if the conversion of one-time data sales to subscriptions was outsized.

Answer

CFO Andrew Wiechmann explained that pressure on asset managers has lingered more in Europe, whereas the Americas are showing signs of improvement driven by sustained market momentum. Regarding the second question, he clarified that converting one-time data sales to subscriptions is a normal part of the business and was not a significant or outsized factor in the quarter's results.

Faiza Alwy requested more color on competitive displacements, particularly within the Analytics business, asking about the sustainability of these wins and the products driving them.

Answer

President and COO Baer Pettit stated that MSCI is seeing significant competitive displacements in ESG & Climate and is executing well in Analytics, often in formal RFP situations. While not naming competitors, he expressed confidence in MSCI's competitive execution and solid positioning, noting the landscape is more fluid in private markets but strong elsewhere.

Faiza Alwi requested an update on Cintas's technology initiatives, including AI-related efforts, and the return on these investments.

Answer

Todd Schneider, President and CEO, highlighted Cintas's continuous investment in technology, yielding benefits in material, production, and delivery costs through initiatives like SmartTruck and improved garment utilization. He noted that AI is in its early stages for Cintas, similar to many companies, but they are optimistic about its future impact and are organizing and investing appropriately to leverage these opportunities.

Faiza Alwy requested an update on Cintas's technology initiatives, including any recent projects and the return on these investments, specifically mentioning AI-related developments.

Answer

President and CEO Todd Schneider confirmed ongoing technology investments yielding benefits in material, production, and delivery costs, citing SmartTrack for garment utilization. He acknowledged Cintas is in the early stages of AI integration, like many companies, but is optimistic about its future impact and is organizing and investing appropriately to leverage these opportunities.

Faiza Alwy inquired about the evolving outlook for top-line growth in the first aid and safety services business, particularly over the next three to five years, given Cintas' ongoing investments.

Answer

Todd Schneider, President and CEO, confirmed that Cintas continues to view the first aid and safety business as a 'low double-digit growth business' and expects it to perform well. He emphasized smart investments for long-term positioning, customer service, and employee partner success, all while increasing operating margins. For a follow-up on investment timing and incremental margins, Mr. Schneider explained that investments are periodic and tied to initiatives, which might affect product mix. He highlighted the attractive 56.8% gross margin for first aid and safety, noting significant increases over recent years, and expects continued leverage and attractive growth, providing more value to customers, rather than a sudden 'pop' in margins.

Faiza Alwy asked about Cintas' updated outlook for top-line growth in the first aid and safety services business, given ongoing investments, and how it might evolve over the next three to five years. She also sought more color on the timing of these investments and their impact on incremental margins going forward.

Answer

Todd Schneider, President and CEO, reiterated the expectation for the first aid and safety services business to be a 'low double-digit growth business,' encouraged by its performance and smart investments for long-term positioning. He explained that investments are periodic, not leading to a sudden 'pop' in margins, but Cintas expects continued leverage and value creation from the attractive 56.8% gross margin.

Faiza Alwy asked about Cintas's updated outlook for top-line growth in the first aid and safety services business, given ongoing investments, and sought more color on the timing of these investments and their expected impact on incremental margins going forward.

Answer

President and CEO Todd Schneider confirmed that Cintas views the first aid and safety services business as a low double-digit growth segment, expecting this trend to continue due to strong performance and attractive future prospects. He explained that investments are periodic and strategic for long-term positioning and customer service, emphasizing that the 56.8% gross margin is already attractive and they expect continued leverage and growth, rather than a sudden 'pop' in margins after a specific investment timing.

Faiza Alwy requested more detail on the pricing environment, asking if the challenges were broad-based or specific to certain categories and seeking to dimensionalize the deceleration. She also asked about the current M&A environment, including valuation expectations.

Answer

CEO Todd Schneider clarified that the pricing challenge is a general trend reflecting lower inflation, with price increases returning to historical levels across the board. On M&A, he described the environment as active, with Cintas focused on acquiring high-quality businesses within its existing segments to extract synergies and expand its customer base.

Faiza Alwy from Deutsche Bank asked about the drivers behind the accelerating organic growth in the First Aid and Safety business, its long-term potential, and the extent of revenue synergies with the core uniform business.

Answer

President and CEO Todd Schneider attributed the growth to strong customer buying motives around health and wellness, a favorable product mix shift towards recurring revenue items like AEDs and eye wash stations, and strategic investments. He noted that while the businesses operate with separate route structures, they actively share data and leverage the rental business's customer base for cross-selling.

Faiza Alwy (Deutsche Bank) requested more details on FactSet's commercial excellence initiatives, specifically the changes in sales incentives, pricing, and packaging, and the early results observed, such as faster sales motion and a richer pipeline.

Answer

Sanoke Viswanathan, CEO of FactSet, explained that incentives were aligned to focus on new business development, cross-selling, and upselling, leading to increased lead generation and a palpable energy in sales teams. He noted that AI product resonance and client urgency are aiding faster sales motions, with future upside expected from analytics-driven churn reduction.

Faiza Alwy asked for more details on FactSet's commercial excellence initiatives, specifically the changes in simplifying pricing, packaging, pricing to value, and sales incentives, and the early results observed, such as faster sales motion and a richer pipeline.

Answer

CEO Sanoke Viswanathan explained that FactSet actively worked on sales incentives in the last quarter, aligning them across the company to focus on new business development, cross-selling, and upselling. He noted a significant expansion in top-of-funnel lead generation and a palpable pickup in energy among sales teams, leading to faster sales motions, partly aided by resonating AI products. He also mentioned ongoing investments in systems and analytics to reduce churn.

Faiza Alwy inquired about FactSet's strategy to become the leading AI-powered financial intelligence platform, the significant work ahead, new competitive dynamics, and the company's focus and envisioned end state over the next couple of years.

Answer

Sanoke Viswanathan, CEO, identified AI as the biggest opportunity, noting current traction and the dynamic, accelerating nature of the space with new competitors. His immediate focus involves extensive client engagement to understand priorities, deep dives into the product roadmap, and assessing infrastructure and technology architecture for AI integration. He expressed excitement about ongoing projects and products in development.

Faiza Alwy asked Sanoke Viswanathan about FactSet's strategic vision to become the leading AI-powered financial intelligence platform, seeking elaboration on the significant work ahead, new competitive dynamics, the company's focus over the next couple of years, and the envisioned end state for this platform.

Answer

Sanoke Viswanathan, CEO & Director, FactSet, highlighted AI as the biggest opportunity, noting existing products and traction. He emphasized the dynamic nature of the AI space and his immediate focus on client priorities, internal product roadmaps, and technology architecture, expressing excitement about upcoming products and projects.

Faiza Alwy of Deutsche Bank inquired about early thoughts on fiscal 2026 and whether the growth acceleration expected in Q4 is sustainable.

Answer

Chief Financial Officer Helen Shan stated that the company is currently focused on executing in Q4 2025 and will provide formal guidance for fiscal 2026 during the September earnings call. She noted that the trends driving current performance are expected to continue.

Faiza Alwy asked for confirmation on whether the recent UBS wealth management deal was included in the quarter's ASV and also requested quantification of the impact from a proactively retired legacy solution.

Answer

Chief Revenue Officer Goran Skoko and CEO Phil Snow addressed the questions. Skoko confirmed the UBS contract was signed and its ASV booked in Q2, representing a key strategic win. Snow added that the user rollout will occur in subsequent quarters. Regarding the retired product, Skoko stated its impact was contained within Q2 and that no further significant product retirements are planned for the fiscal year.

Faiza Alwy requested more color on the 'exceptional feedback' for generative AI products, asking which specific offerings are gaining traction and how to dimensionalize the potential ASV contribution for the year.

Answer

CEO Frederick Snow reiterated the guidance of 30 to 50 basis points of growth from generative AI in fiscal 2025. He mentioned several monetized use cases, including a conversational API for wealth clients and the 'Pitch Creator' for banking productivity. He emphasized the value proposition is practical efficiency gains and that the demand pipeline is solid.

Faiza Alwy of Deutsche Bank AG requested more detail on the "exceptional feedback" for FactSet's generative AI products and asked for a dimensionalization of their potential ASV contribution for the fiscal year.

Answer

CEO Frederick Snow reiterated the expectation of 30-50 bps of growth from gen AI in FY25, which is included in guidance. He mentioned monetized use cases like the conversational API, the 'Pitch Creator' for banking, and data sales for AI model training. He emphasized that the value proposition is centered on practical productivity gains and efficiency.

Faiza Alwy asked about the fiscal 2025 ASV guidance, questioning if it reflects conservatism and seeking a preview of what a more normalized ASV growth rate for FactSet might look like.

Answer

Executive Frederick Snow acknowledged that while headwinds persist, there is an opportunity to perform better than the guidance suggests. He pointed to generative AI as a potential wildcard that could accelerate growth if monetization occurs faster than planned. He also noted that a faster-than-anticipated recovery in sell-side hiring could be a tailwind. Snow stressed that the team's main focus is on accelerating top-line growth above the current 5% level.

Faiza Alwy inquired about the reasons for the historically low outsourcing levels in the semiconductor sector and whether ABM anticipates a shift towards greater outsourcing, along with insights into the competitive landscape and future M&A opportunities in this space. She also requested more specific financial details regarding WGNSTAR's dilution in 2026 and accretion in 2027, including its margins, assumed interest expense, and amortization for 2026, and the drivers of 2027 accretion. Finally, she asked for an outlook on the Technical Solutions segment, including its underlying environment, pipeline, and historical lumpiness.

Answer

Scott Salmirs, President and CEO, ABM Industries, attributed low outsourcing in semiconductors to the highly technical nature of the work and the need for trust, expecting WGNSTAR's expertise to drive more outsourcing and revenue synergies, potentially extending to pharma clients. He noted the competitive environment consists of many small players, offering both organic and roll-up potential. David Orr, EVP and CFO, ABM Industries, stated WGNSTAR's EBITDA margins are in the mid-teens, with estimated annualized amortization of $13 million and interest of $12 million, impacting fiscal 2026 by approximately three-quarters. He reiterated that 2027 accretion is driven by double-digit growth and significant cross-selling synergies. Orr described the Technical Solutions pipeline and backlog as 'as healthy as it's ever been,' projecting high single-digit growth, while acknowledging its project-based nature and seasonality.

Faiza Alwy inquired about the low level of outsourcing in the semiconductor sector, asking why this is the case and if ABM Industries anticipates a shift towards greater outsourcing, along with insights into the competitive landscape and future M&A opportunities in this space. She also requested more specific financial details on the WGNSTAR acquisition, including its margins, assumed interest expense and amortization for 2026, and the drivers of accretion in 2027. Finally, she asked for additional perspective on the Technical Solutions business, its lumpiness, and the go-forward environment and pipeline.

Answer

Scott Salmirs, President and CEO, explained that the low outsourcing in semiconductors is due to the highly technical nature of the work, requiring high proficiency and trust. WGNSTAR's 20-plus-year client relationships demonstrate this trust, leading to more insourced work shifting to them over time. He sees significant revenue synergies by introducing WGNSTAR's capabilities to ABM's existing semiconductor and pharma clients, noting the competitive landscape is fragmented, offering both organic expansion and roll-up potential. David Orr, Executive Vice President and CFO, stated WGNSTAR's EBITDA margins are in the mid-teens. For 2026, he assumes roughly $13 million in amortization and $12 million in interest annually, with three-quarters of that impacting fiscal 2026. Accretion in 2027 is expected from WGNSTAR's double-digit growth and significant cross-selling synergies. Mr. Orr added that the Technical Solutions pipeline and backlog are robust, with expected high single-digit growth, acknowledging its project-based lumpiness and seasonality.

Faiza Alwy (Deutsche Bank) inquired about the competitive environment, asking if new entrants were impacting the market and how ABM's competitive advantages played a role. She also sought clarification on the margin implications of strategic pricing for B&I (defensive) versus M&D (opportunistic) and whether M&D growth acceleration would continue.

Answer

President and CEO Scott Salmirs stated that while competitors exist, the preference is to renegotiate rather than rebid contracts to avoid irresponsible bids. He clarified that recent margin pressure was episodic, stemming from a confluence of large clients seeking cost savings in slower-recovering markets. He confirmed B&I's strategic pricing was defensive, while M&D's was opportunistic for market entry, noting strong overall bookings growth of 15% ($1.5 billion in new business) as a healthy tailwind for 2026.

Faiza Alwy of Deutsche Bank inquired about the Technical Solutions (ATS) segment, asking about the drivers of the project delays, the expected timing for normalization, and the outlook for the segment's margins. She also requested color on the underlying market dynamics, renewal trends, and new business outlook for the Education segment.

Answer

EVP and CFO Earl Ellis stated that the ATS project delays were due to normal timing shifts and customer approvals, with activity expected to revert in the second half and margins to return to the historical 9-10% range. President and CEO Scott Salmirs described the Education segment as a stable, GDP-level grower with strong cash flow, noting positive renewal trends and increasing traction with its integrated, bundled service offerings.

Faiza Alwy asked for color on new business win rates compared to historical levels and sources of differentiation. She also questioned if the Technical Solutions (ATS) business has stabilized and how to view its future revenue growth.

Answer

President and CEO Scott Salmirs attributed higher win rates to investments in sales talent, training, and AI-powered RFP responses, while maintaining margin discipline. Regarding ATS, he confirmed the microgrid business is very strong with a record backlog, while the bundled energy solutions side remains soft due to interest rates but is showing incremental improvement.

Faiza Alwy of Deutsche Bank inquired about the drivers behind broad margin improvements, particularly labor efficiencies. She also asked for color on the potential revenue lumpiness in the Technical Solutions (ATS) segment and questioned the company's capital allocation strategy regarding M&A versus shareholder returns.

Answer

President and CEO Scott Salmirs attributed margin gains to moderating wage inflation, better labor availability, and a new workforce productivity optimization tool that is in its early stages. He confirmed ATS revenue can be lumpy due to project timing but noted the backlog is very strong. EVP and CFO Earl Ellis added that capital allocation remains balanced between accretive M&A, like the recent Quality Uptime acquisition, and share repurchases.

Faiza Alwy from Deutsche Bank requested more detail on the core business revenue shortfall, questioning why event-based volumes didn't offset macro weakness, and asked for a price versus volume breakdown in the Environmental Solutions (ES) segment.

Answer

CFO Brian Delghiaccio explained the revenue shortfall was due to a deeper-than-expected decline in construction activity and weakness in the manufacturing vertical, which their initial flat-economy guidance did not anticipate. CEO Jon Vander Ark confirmed the ES business saw positive pricing but negative volumes, acknowledging they prioritized price and may have lost some share. He remains optimistic about the long-term outlook for US manufacturing, which would benefit the ES segment.

Faiza Alwy of Deutsche Bank sought clarification on the core business revenue reduction, questioning why event-based volumes didn't offset macro weakness. She also asked for a breakdown of volume versus price performance in the Environmental Solutions (ES) business.

Answer

CFO Brian Delghiaccio explained that the company had initially expected the construction business to be flat year-over-year, but it continued to decline, which was not anticipated. He also highlighted weakness in the manufacturing vertical. CEO Jon Vander Ark confirmed that in the ES business, price was positive while volume was negative. He noted that maintaining flat margins in that environment demonstrates a disciplined trade-off of volume for price.

Faiza Alwy of Deutsche Bank sought clarification on the Q3 to Q4 margin trend, questioning the impact of commodity prices or prior year comps. She also asked for 2025 guidance on M&A rollover, interest expense, and tax rate.

Answer

CFO Brian DelGhiaccio noted that Q4 faces a tougher prior-year comp, as margins were flat from Q3 to Q4 last year versus a typical seasonal step-down. For 2025, he confirmed a 10-20 basis points M&A rollover from deals closed to date and anticipated a slight increase in interest expense due to refinancing at higher rates, but nothing overly significant.

Faiza Alwy from Deutsche Bank noted adjustments to the 2025 growth algorithm beyond occupancy and asked for clarification, particularly on the B2B side. She also questioned the confidence that enrollment issues are localized and not macro-driven, especially since expected competitor closures post-COVID funding haven't materialized as predicted.

Answer

CFO Tony Amandy explained the B2B growth forecast was slightly tightened to around 1% due to slower-than-expected growth in the Champions business in Q2, though the outlook remains positive. On the macro question, he reiterated that internal data from pricing studies and exit surveys do not point to affordability as the core issue. He highlighted that retention of existing families was actually higher in the first half of the year, suggesting the challenge lies in converting prospective families.

Faiza Alwy sought more precise details on the 2025 guidance, asking for the specific assumptions for occupancy, acquisitions, and new center openings (NCOs) that underpin the midpoint of the forecast.

Answer

CFO Tony Amandi clarified that the midpoint of the guidance assumes flat year-over-year occupancy. He also guided to 10-15 new center openings for the year and suggested that the prior year's acquisition count of 23 centers would be a reasonable proxy for the midpoint assumption in the 2025 plan.

Faiza Alwy asked for an update on the M&A environment, including valuations and pipeline, as pandemic stimulus expires. She also requested housekeeping details on post-IPO interest expense and share count.

Answer

CFO Anthony Amandi noted that tuck-in M&A valuations remain in the low to mid-single-digit EBITDA multiples and the deal flow is strong. He also provided post-IPO figures, stating the effective interest rate is now 7.8% and the pro forma share count is just under 118 million.

Faiza Alwy of Deutsche Bank inquired about the drivers of investment reductions in Branded Services, the expected benefits and timeline for the new workforce system, and the reasons behind the lower full-year CapEx guidance.

Answer

CEO Dave Peacock explained that investment reductions in Branded Services are client-specific rather than category-wide and that the second half will benefit from lapping a major client loss and securing new business wins. He also noted that transformation costs are declining, with early benefits from improved labor management seen in a significant net hiring swing from Q1 to Q2. CFO Chris Growe added that the improved cash flow outlook is driven more by better working capital management (DSO improvement) and lower restructuring costs than by the reduced CapEx, which he attributed to timing and project efficiencies.

Faiza Alwy of Deutsche Bank asked about the observed macro impacts, particularly channel shift and private label trends, and whether specific categories saw demand changes. She also inquired about the quarterly phasing of the revised guidance and how the company is managing execution risk during its significant technology transformation.

Answer

CEO David Peacock addressed the macro environment, noting that low consumer sentiment is driving retailer destocking. He explained that while private label is growing, Advantage's exposure is more to channels where that growth is less pronounced. On technology, Peacock assured that an experienced team and top-tier integrators are managing the ERP rollout, with the main impact being a short-term cash flow hiccup. CFO Christopher Growe explained the back-half weighted guidance is due to higher IT-related costs in H1 and cost-reduction programs taking effect in H2.

Faiza Alwy asked for quantification of the timing impact that benefited Q3 results, sought clarity on the potential significance of new business wins, and questioned the drivers of margin improvement in Branded Services despite a revenue decline.

Answer

CFO Christopher Growe explained that a shift of some project work from Q4 into Q3 benefited the Experiential and Retailer segments, and pointed to the Q4 growth outlook as a way to gauge the magnitude. CEO David Peacock characterized the new business wins as early-stage strategic initiatives to access new growth channels and noted strong overall business development activity. Regarding Branded Services margins, Peacock attributed the improvement to enhanced labor efficiency driven by technology, AI-powered tools for personnel deployment, and more consistent processes.

Faiza Alwy of Deutsche Bank requested a breakdown of the growth drivers in the Business & Industry segment and asked for a general rule on the margin ramp-up timeline for new business wins.

Answer

CFO Jim Tarangelo attributed the B&I segment's strong performance to record new business, high retention, and increased participation rates. He explained that new business margins are typically flat in year one and ramp to mature levels over three years, also noting that strong performance could lead to higher incentive compensation costs.

Faiza Alwy inquired about the trend in Aramark's new business win rate over the last few years. She also asked for the key assumptions behind the fiscal 2025 interest expense guidance.

Answer

CEO John Zillmer stated that the company's win rate has consistently improved, estimating a 10% to 15% year-over-year increase in closure rates. CFO Jim Tarangelo explained the interest expense guide incorporates several factors, including repriced term loans, upcoming 2025 debt maturities that need to be addressed, and the roll-off of some interest rate swaps.

Faiza Alwy of Deutsche Bank asked about the specific strategies being used to replicate the success of high-occupancy centers in the middle-performing cohort. She also questioned the backup care margin guidance of 25-30%, asking for more color on the service mix and the potential to exceed that range.

Answer

Chief Executive Officer Stephen Kramer detailed a multi-pronged strategy for the middle cohort, focusing on articulating the value proposition, nurturing families from inquiry to start with technology and 'white glove' service, and ensuring a flawless center visit experience. Chief Financial Officer Elizabeth Boland explained that the 25-30% backup care margin reflects conscious, ongoing investment in the network, technology, and marketing to sustain high growth, which tempers margin expansion beyond that range for now.

Faiza Alwy requested more detail on the 'One Bright Horizon' strategy, including the cross-selling opportunity, and asked if maintaining the EPS guide despite a Q1 beat and favorable FX was simply an abundance of caution.

Answer

CEO Stephen Kramer explained that only one-third of their 1,400+ clients use more than one service, representing a significant cross-selling opportunity. CFO Elizabeth Boland reiterated that favorable FX has a minimal earnings impact due to the U.K.'s current profitability. She stated the guidance reflects the seasonal nature of the backup business and a slight moderation in full-service enrollment, which is offset by Q1's outperformance.

Faiza Alwy asked for the company's target for the percentage of centers in the lowest utilization cohort (below 40%) by the end of 2025. She also requested an update on the operating margin profiles of the different utilization cohorts.

Answer

CFO Elizabeth Boland stated the goal is to reduce the bottom cohort from 16% of the portfolio toward the pre-COVID level of around 5% by the end of 2025 through enrollment gains and pruning. She detailed the margin profiles: the top cohort (>70% occupied) is back to pre-COVID profitability (~10%+ EBIT), the middle cohort is at mid-single-digit margins, and the bottom cohort is currently losing money on a unit basis.

Faiza Alwy sought confirmation on full-year margin expectations by segment and asked about the potential for additional pricing power given that the childcare category appears less elastic.

Answer

CFO Elizabeth Boland confirmed margin outlooks: backup care similar to 2023 for the full year and full-service improving but remaining low-single-digits. She also noted an overhead allocation shift impacting segment margins in H2. Regarding pricing, she said they remain mindful of balancing costs and affordability, and while they have pricing power, the strategy is to taper increases slightly next year as inflation eases.

Faiza Alwy asked for more detail on the revenue contribution from private credit, specifically where this fast-growing revenue is being recognized within the MIS segment's different lines of business and revenue types.

Answer

CEO Robert Fauber detailed that the 75% growth in private credit revenue is distributed across multiple areas. This includes asset-backed finance within Structured Finance, ratings for BDCs and fund finance activities within the FIG franchise, and even some deals in Project Finance. He also highlighted its impact on new business, noting that private credit-related deals accounted for nearly 25% of first-time mandates in the quarter.

Faiza Alwy from Deutsche Bank inquired about the flexibility of MIS margins and expenses, asking how much room Moody's has to pull back on investments or accelerate efficiencies if the issuance environment worsens beyond current expectations.

Answer

CEO Robert Fauber explained that Moody's has 'traditional levers' to manage costs in cyclical downturns, such as effectively managing headcount. He also emphasized the long-term strategy of becoming more 'volume agnostic' by investing in modern applications and AI tools for analysts. He noted that AI deployment in the rating agency is deliberate to ensure a proper control environment.

Faiza Alwy requested an update on Moody's Analytics' medium-term targets in light of recent deceleration, asking about the most promising growth areas and the outlook for acceleration into 2025.

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CEO Robert Fauber stated that formal updates to the medium-term targets would come in February but outlined the current strategy. He described a dual approach: an 'expand' strategy of cross-selling more solutions to the existing financial services customer base and a 'land' strategy of acquiring new corporate logos for use cases like trade credit and supplier risk.

Faiza Alwy requested more details on the recently exited partnerships, including the types of products involved and the reasons for the termination. She also asked for more information on the company's new vertical-specific go-to-market strategy.

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CFO Bryan Hipsher clarified that the exited partnerships did not meet expectations regarding the relationship and cost of service, and a renewal on favorable terms was not possible. CEO Anthony Jabbour described the new vertical strategy as the final phase of the transformation, enabling D&B to engage clients with deeper industry expertise and tailored solutions, citing a new healthcare vertical initiative as an example.

Faiza Alwy asked for more details on the ongoing strategic discussions, particularly regarding the Credibility business, and inquired about the potential financial impact and structure of the new partnerships with LSEG and ICE.

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CEO Anthony Jabbour stated that the primary focus is on the strategic process for the entire company, rather than a smaller divestiture of the Credibility business at this time. CFO Bryan Hipsher added that the partnerships with LSEG and ICE are structured as revenue-sharing agreements on combined solutions, designed to monetize joint capabilities and expand market reach, particularly in private capital markets.