George Tong

George Tong inquired about the potential for revenue synergies and whether the combined company's mid-single-digit organic growth target could accelerate due to the strategic benefits of the acquisition.

Answer

CFO Kurt McMaken stated that while no revenue synergies are currently modeled, the combination broadens capabilities and offers significant opportunity to drive higher organic growth. CEO Mark Eubanks affirmed the mid-single-digit organic growth framework, noting potential upside from accelerated bank outsourcing, highlighting Brink's' AMS/DRS growing at 20% and NCR Atleos' ATM-as-a-service at 30-40%.

George Tong asked about the specific breakdown of the expected $200 million in annual run rate cost synergies from the NCR Atleos acquisition, inquiring about contributions from routing, fleet, and overhead.

Answer

Brink's CFO Kurt McMaken detailed that over $100 million is expected from SG&A, approximately $70 million from shared networks, and $25 million from procurement savings, with full realization anticipated within three years. CEO Mark Eubanks added that these synergies are within their control and do not include potential revenue synergies.

George Tong of Goldman Sachs inquired about the drivers behind Brink's increased full-year growth outlook for AMS/DRS, specifically asking for details on client traction in both AMS and DRS segments. He also asked about trends in the CVM business, including factors that could influence its organic performance.

Answer

CEO Mark Eubanks explained that strong Q3 sales and a robust pipeline for Q4 and early next year are driving the accelerated AMS/DRS growth, which is balanced across AMS and DRS and all regions. He highlighted increased conversions from traditional CIT customers to DRS (accelerating from 25% to 33% of global DRS signings in Q3) and significant opportunities in Latin America's cash-intensive economies. For CVM, Mr. Eubanks attributed the flat organic performance primarily to the 2-3 points of organic headwind from customer conversions to AMS/DRS, with Global Services performing consistently.

George Tong inquired about the drivers behind Brink's increased full-year growth outlook for AMS DRS, specifically asking for details on client traction in both AMS and DRS segments.

Answer

CEO Mark Eubanks highlighted strong pipeline visibility for Q4 and early next year, with balanced growth across AMS and DRS globally. He noted an acceleration in conversions from traditional CIT to DRS, now accounting for about a third of global DRS signings, and significant penetration opportunities in cash-intensive economies like Brazil and Mexico. Eubanks also addressed the CVM business, attributing its flat organic performance to the conversion of existing customers to AMS DRS, which created a 2-3 point organic headwind, while Global Services performed consistently with Q2.

George Tong of Goldman Sachs asked if the company could differentiate the expected growth acceleration between its DRS and AMS businesses for H2 and beyond, and whether the 1% organic growth in the traditional Cash and Valuables Management (CVM) business represents a steady-state rate.

Answer

CEO Mark Eubanks responded that growth between AMS and DRS is generally balanced, though large, lumpy customer rollouts make it difficult to differentiate their trajectories. He expects the mid-to-high teens growth framework to continue. Regarding CVM, Eubanks stated the 1% growth is not necessarily a steady state, as it can be influenced by volatility in the BGS business or accelerated by conversions to AMS/DRS, which is a positive mix shift. CFO Kurt McMaken added that the 1% CVM growth was also negatively impacted by fewer workdays.

George Tong asked about the expected M&A contributions for 2026 and the organic growth rates for both commercial and residential segments embedded in the full-year guidance, considering the strong performance from Domain and Matterport.

Answer

CoStar Group CFO Chris Lown clarified that the 2026 guidance primarily reflects the full-year impact of acquisitions made in 2025, rather than new M&A activity. He did not provide specific organic growth rates for the segments during the call but indicated that the company is not currently in the midst of any new M&A.

George Tong asked about the expected M&A contributions for 2026, given Domain's strong Q4 revenue and Matterport's inorganic contribution, and the organic growth rates for commercial and residential embedded in the full-year guidance.

Answer

CoStar Group CFO Chris Lown stated that the 2026 guidance primarily reflects the full-year impact of 2025 acquisitions (Domain and Matterport). He did not have specific organic growth rates immediately available but indicated no new M&A activity was currently in progress or expected to close.

George Tong from Goldman Sachs asked for more detail on the Homes.com pricing strategy, including how average prices for new members have changed and whether the model is based on tiers or agent performance.

Answer

Founder & CEO Andy Florance reiterated that the focus is on profitable penetration growth, not maximizing price at this early stage. He detailed that pricing is based on the listing side of an agent's business, asset value, team size, and now includes a factor for rental portfolios. He noted that 'depth advertising,' a key lever for mature portals, is a future opportunity for Homes.com.

George Tong followed up on the Homes.com pricing strategy, asking how the average price for new memberships has changed and if the model is tiered or based on agent metrics.

Answer

CEO Andy Florance reiterated that the primary focus is on market penetration rather than price maximization. He detailed that pricing is a dynamic mix based on the listing side of an agent's business, asset value, team size, and now includes a factor for rental portfolios. The strategy is to grow the user base profitably before focusing on depth advertising revenue in future years.

George Tong inquired about the key considerations behind Clarivate's decision to initiate a sale process for its Life Sciences & Healthcare business and why LS&H was deemed non-strategic compared to A&G and IP.

Answer

CEO Matti Shem Tov stated that the ultimate goal is shareholder value creation, and the LS&H sale is part of their strategic alternatives plan. He explained that selling LS&H allows for increased focus on the A&G and IP segments, strengthening the balance sheet. A&G and IP are kept together due to shared content assets, technology platforms, commercial channels, and innovation benefits.

George Tong inquired about the key considerations that led Clarivate to initiate a sale process for its Life Sciences & Healthcare business and why LS&H was deemed non-strategic compared to A&G and IP.

Answer

Matti Shem Tov (CEO) stated that the decision was part of the value creation plan to maximize shareholder value. Selling the LS&H segment allows for increased focus and operational execution across the A&G and IP segments, strengthening the balance sheet. He explained that A&G and IP are kept together due to shared content assets, technology platforms, commercial channel scales, and innovation benefits.

George Tong from Goldman Sachs asked for more details on the expected recovery of the IP market, including underlying trends in new patents and trademarks, and potential catalysts for a recovery in volumes.

Answer

Jonathan Collins, EVP and CFO, explained that patents in force in core markets are ticking up, with growth observed in 2023 and last year, which will eventually translate into the renewal book. He also highlighted internal competitive improvements and an anticipated innovation upswing driven by AI as future catalysts for lifting patents in force and boosting the renewal business. He noted the current flat performance in recurring renewal services (compared to a 3% decline last year) as a step in the right direction.

George Tong of Goldman Sachs requested more color on the positive organic revenue inflection in the Life Sciences and Healthcare business, asking about end-market dynamics and the evolution of conversations with pharma and biotech clients.

Answer

EVP & CFO Jonathan Collins clarified that the subscription business within Life Sciences & Healthcare returned to positive organic ACV growth, a leading indicator for future revenue. He attributed the improvement to investments in the Cortellis product suite, which serves a stable R&D market. Collins also noted that the commercialization part of the market remains relatively soft.

George Tong from Goldman Sachs requested more color on the positive organic revenue inflection in the Life Sciences & Healthcare business, particularly regarding end-market dynamics.

Answer

EVP & CFO Jonathan Collins clarified that the subscription business within LS&H returned to positive organic ACV growth, a strong leading indicator. He attributed this improvement to a stable R&D market and successful product investments in the Cortellis suite, which have enhanced retention. He noted the commercialization part of the market remains relatively soft.

George Tong asked about the outlook for transactional revenue and the cyclicality of patent renewals, inquiring when transactional revenue might grow and if a macro slowdown could hurt patent volumes.

Answer

CFO Jonathan Collins explained that the company is de-emphasizing transactional revenue, expecting it to remain soft while focusing on recurring growth. Regarding patent renewals, he acknowledged that while durable long-term, volumes can fluctuate with macro factors, which is why the company remains cautious despite recent strength.

George Tong questioned the decline in recurring revenue during the quarter, which was attributed to lower IP patent renewals, and asked what initiatives under the Value Creation Plan (VCP) are aimed at improving these trends.

Answer

CFO Jonathan Collins clarified that the Q4 decline was primarily due to the timing of patent renewals compared to the prior year, with some activity shifting into the first quarter. He noted that as part of the VCP, sales incentives are now more geared toward recurring revenue types, which is expected to help build the book of business for both subscriptions and patent renewals.

George Tong asked about the end-market trends in each of the three segments and what external improvements are needed to support the company's transformation.

Answer

CEO Matti Shem Tov characterized the segments as attractive markets with 4-5% growth potential. He identified specific headwinds: lower university capital spending impacting A&G, industry-wide softness in IP annuities, and budget pressures on the commercial side of Life Sciences, even as R&D remains strong.

George Tong asked about the normalization of organic revenue growth in the industrial segment, from double digits in 2024 to mid-single digits exiting 2025. He questioned if this segment would reaccelerate, what the key drivers are, or if mid-single-digit growth is the new steady state. He also asked about the expected growth spread between the industrial and consumer segments for the year.

Answer

CEO Jennifer Scanlon clarified that the Q4 2024 industrial growth included a pull-forward due to anticipated tariffs, suggesting normalized levels are at the higher end of single digits. She noted strong demand in industrial, fueled by megatrends, particularly in the U.S., China, and broader Asia. CFO Ryan Robinson stated that specific segment growth guidance was not provided, but the comment about industrial growing faster than consumer was to clarify that the strong Q4 consumer performance was a surge, not a fundamental shift in relative growth rates.

George Tong asked about the normalization of industrial segment organic revenue growth from double digits in 2024 to mid-single digits, inquiring if this is a new steady state or if reacceleration is expected. He also asked about the anticipated growth spread between the industrial and consumer segments for the year.

Answer

CEO Jennifer Scanlon clarified that Q4 2024 industrial growth included pull-forward due to tariff anticipation, suggesting a normalized level in the higher single digits. She noted strong demand for industrial services, fueled by megatrends, particularly in the U.S., China, and broader Asia. CFO Ryan Robinson stated that specific segment growth guidance was not provided, but the comment about industrial growing faster than consumer aimed to clarify that the Q4 consumer surge was not a fundamental shift in relative growth rates.

George Tong from Goldman Sachs asked for quantification of the tariff-related demand pull-forward in the Industrial and Consumer segments and inquired about the potential for further margin expansion in all segments.

Answer

President & CEO Jennifer Scanlon clarified that the Industrial pull-forward occurred in Q4 2024, while the Consumer pull-forward was in Q1 2025. EVP & CFO Ryan Robinson noted Consumer's organic growth moderated from 7.7% in Q1 to 4.7% in Q2 as a result. He also stated that margin expansion opportunities exist across all three segments, with Industrial's Q2 results benefiting from strong operating leverage.

George Tong of Goldman Sachs asked if the Industrial segment could sustain its double-digit growth, given the long-standing nature of its megatrend drivers. He also questioned how potential higher tariffs might impact the business.

Answer

CFO Ryan Robinson acknowledged the strong tailwinds for the Industrial segment but noted that comparisons are getting steeper, leading to realistic expectations. CEO Jennifer Scanlon explained that historically, tariffs have not had a material impact and can lead to increased retesting activities as manufacturers shift supply chains, change materials, or value-engineer products.

George Tong asked about Verisk's 2026 EBITDA margin guidance, which suggests modest expansion. He requested a discussion of the puts and takes embedded in the outlook, specifically how Verisk balances investments with cost efficiencies.

Answer

Elizabeth Mann, CFO of Verisk Analytics, clarified that the normalized operational baseline for 2025 adjusted EBITDA margin was 55.8% (after adjusting for a 40 basis point foreign currency translation benefit). The 2026 guidance of 56%-56.5% represents modest but meaningful margin expansion from this baseline. Mann attributed this to balancing efficiencies and expected operating leverage with significant funding for exciting AI product investments.

George Tong asked about the factors influencing Verisk's 2026 EBITDA margin guidance, which suggests modest expansion, specifically how investments are balanced with cost efficiencies.

Answer

CFO Elizabeth Mann clarified that the normalized operational baseline for 2025 was 55.8% (after adjusting for a 40 basis point foreign currency benefit). The 2026 guidance of 56%-56.5% reflects modest but meaningful margin expansion, achieved by balancing business efficiencies and expected operating leverage with significant funding for exciting AI product investments.

George Tong sought clarification on the full-year guidance reduction, asking how much was attributable to the removal of the AccuLynx deal versus other factors like lighter extreme weather.

Answer

CFO Elizabeth Mann stated that Verisk does not break down the pieces of its full-year guidance, providing only the aggregate level.

George Tong asked for clarification on Verisk's full-year guidance reduction, specifically how much was due to the removal of the AccuLynx deal versus other factors like lighter-than-expected extreme weather.

Answer

Elizabeth Mann, Verisk's Chief Financial Officer, stated that Verisk does not break down the pieces of its full-year guidance, but analysts can map the sequential changes.

George Tong from Goldman Sachs Group, Inc. asked about the sustainability of the drivers behind the recent transactional revenue growth, particularly from international markets and securitization, into the second half of the year.

Answer

CFO Elizabeth Mann explained that the strong securitization revenue is highly seasonal to the second quarter and will not repeat in the second half, creating a headwind. She noted that international transactional activity is less predictable and that H2 will also face tough comparisons to prior-year storm activity.

George Tong asked for quantification of the revenue benefit from elevated storm activity in the quarter and the expected benefit from storms in 2025.

Answer

CFO Elizabeth Mann stated that the storm impact did not meet the 1% of revenue growth threshold for specific quantification but was similar in dollar terms to Hurricane Ian's impact in Q4 2022. She noted that for 2025, the company does not expect a lingering impact from the 2024 storms and assumes a normalized level of storm activity in its guidance.

George Tong asked if the Presort business is expected to return to positive growth by the second half of 2026, given easing comparisons, and how SendTech's revenue performance is envisioned over the year, particularly if the second half will be stronger.

Answer

EVP, CFO, and Treasurer Paul Evans indicated that while second-half comparisons for Presort would be easier, Q1 and Q2 2026 would be tougher. He noted traction from aggressive pricing and stopping the decline mid-2025. For SendTech, CFO Paul Evans expects a top-line decline for the full year but anticipates a stronger second half. CEO Kurt Wolf added that the sequential year-over-year improvement trend seen in 2025 due to the IMI migration is expected to continue through 2026.

George Tong asked if the Presort business is expected to return to positive growth by the second half of the year, given easier comparisons and competitive pricing. He also inquired about the envisioned revenue performance for the SendTech business over the course of the year, specifically if the second half would be stronger than the first.

Answer

CFO Paul Evans indicated that while second-half comparisons for Presort would be easier, Q1 and Q2 would be tougher, and returning to positive growth depends on the sales cycle traction. For SendTech, CFO Paul Evans projected a top-line decline for the full year but expected the second half to be stronger than the first. CEO Kurt Wolf added that the year-over-year comparison trend for SendTech should continue to improve through 2026 due to the easing impact of the IMI migration.

George Tong asked for a quarterly breakdown of the expected occupancy trend for the full service segment throughout 2026, following the mid-sixties average reported in Q4 2025. He followed up by asking if the Q4 2026 occupancy rate is expected to surpass the mid-sixties reported for Q4 2025, or if the mid-sixties represents a steady state for year-end.

Answer

CFO Elizabeth Boland outlined a consistent seasonal pattern, with a lift in Q1 and Q2 peaking in the high 60s, then returning to the mid-60s in the second half. She reiterated that Q4 2026 occupancy would likely remain in the mid-sixties, as the 100 basis points of annual growth makes gradual headway, but expressed optimism for continued growth beyond mid-sixties over time, driven by improvements in middle and lower occupancy cohorts.

George Tong inquired about the expected quarterly occupancy trends for Full Service centers throughout 2026, given the mid-sixties average occupancy in Q4 2025. He also asked if occupancy by Q4 2026 would surpass the mid-sixties or if it was expected to remain at a steady state.

Answer

Elizabeth Boland (CFO) projected a consistent seasonal pattern for occupancy in 2026, with a lift in Q1 and Q2 peaking in the high 60s, then returning to the mid-60s in the second half. She clarified that while progress is being made, with 100 basis points of annual enrollment growth, occupancy is expected to remain in the mid-sixties by the end of 2026, with further growth opportunities beyond that year, particularly in the middle and lower occupancy cohorts.

George Tong of Goldman Sachs asked about the progress in streamlining the inquiry-to-enrollment process and inquired about current sales cycle trends. He also asked for visibility on when overall center occupancy might return to the 70%+ level.

Answer

Chief Executive Officer Stephen Kramer detailed actions to support the enrollment funnel, including web experience investments and personalized support. Chief Financial Officer Elizabeth Boland stated that while over 50% of centers are above 70% occupancy, the overall average is dragged down by underperformers. She noted the company expects to end the year in the mid-60s occupancy range, with the timeline to 70%+ dependent on improving or exiting the lowest-performing centers.

George Tong inquired about the slower velocity in new family commitments, asking if the trend was cyclical or structural, and questioned if the strategy for addressing the lowest-occupancy centers had changed.

Answer

CEO Stephen Kramer characterized the slowdown as cyclical, driven by macroeconomic uncertainty affecting new families, while noting strong retention among existing ones. He confirmed the playbook for underperforming centers remains consistent: a disciplined approach of evaluating leases and operations, which has shown success in return-to-office dependent locations.

George Tong (speaking as Keen Fai Tong) asked for the company's outlook on how full-service center occupancy rates, currently in the low 60s, are expected to trend throughout 2025, including any expected seasonality.

Answer

CFO Elizabeth Boland projected that with expected enrollment growth of 2.5% to 3.5%, overall occupancy should reach the mid-60s range by the end of 2025. She confirmed the typical seasonal pattern would continue, with occupancy rates rising in the first half of the year before tapering back in the second half.

George Tong asked about Rollins' expectations for one-time revenues for the remainder of 2026 and how this segment will contribute to the overall 7%-8% organic revenue growth outlook.

Answer

EVP and CFO Ken Krause stated that one-time business typically grows 1%-2% annually, with fluctuations, and that 7%+ growth from recurring/ancillary combined with 1%-2% from one-time is acceptable for the overall organic growth target. President and CEO Jerry Gahlhoff added that one-time demand is hard to predict due to specific pest resurgences and weather patterns.

George Tong inquired about any specific indicators or KPIs Rollins uses to track one-time revenue performance and gain visibility into future quarters.

Answer

Ken Krause, EVP and CFO, Rollins, Inc., explained that one-time business is small, doesn't correlate with macro factors, and is primarily influenced by weather patterns. Jerry Gahlhoff, President and CEO, Rollins, Inc., added that it's driven by various pest issues (e.g., bedbugs, seasonal pests) which are hard to predict. Both emphasized that recurring contracts and ancillary business are the true measures of business health.

George Tong asked about opportunities for organic growth acceleration in Q4, considering exit rates and prior year comps, and the primary drivers. He also inquired if any parts of the business surprised to the downside compared to expectations in the quarter.

Answer

Ken Krause (EVP and CFO) expressed confidence in the Q3 exit rate, citing strong backlog, especially in termite and ancillary, and robust recurring residential revenue. He was reluctant to give specific Q4 guidance but noted overall positive momentum. Jerry Gahlhoff (President and CEO) and Ken Krause confirmed no significant downside surprises, highlighting exceptional Q3 performance across organic growth, total revenue, earnings, and cash flow, with fleet vehicle gains being a transitory tailwind.

George Tong from Goldman Sachs asked for more details on the legacy auto claims that impacted margins, questioning their predictability and the potential for future margin effects.

Answer

President & CEO Jerry Gahlhoff acknowledged the difficulty in predicting these claims, which can be several years old and mature unexpectedly. He explained that the company works with outside actuaries to establish its best reserve estimate each quarter but must respond to changing fact patterns. While safety technology is reducing new claim frequency, he noted the long-tail nature of this liability means the company will likely continue to face this issue from time to time.

George Tong of Goldman Sachs asked for the specific impact of auto claims activity on EBITDA margins during the quarter. He also questioned the reasons for the deceleration in the commercial business, despite facing easier year-over-year comparisons.

Answer

CFO Ken Krause quantified the auto claims impact as a 40 basis point headwind to leverage across the P&L, split evenly between gross margin and SG&A, noting these are legacy claims. CEO Jerry Gahlhoff addressed the commercial business, stating the Q4 softness was not indicative of a trend and was primarily due to the non-recurrence of large, lumpy projects like commodity fumigations from the prior year. He affirmed the business started 2025 strongly.

George Tong inquired about the operational impact of Hurricane Helene, which business areas were most affected, and the potential for spillover into Q4. He also asked what prompted the Q3 investment increase.

Answer

President and CEO Jerry Gahlhoff explained the hurricane caused branch closures in the Southeast U.S. but does not expect a significant impact on Q4 results. EVP and CFO Kenneth Krause noted that without the storm, organic growth would have been closer to 8%. Regarding investments, Krause cited strong leads and robust organic growth trends as the catalyst for increased spending. Gahlhoff added that Q3 is a critical period to acquire recurring customers to build the base for the slower winter months.

George Tong asked for a breakdown of the 56% organic growth in the ALM business during Q4 2025, specifically how much was driven by volumes versus pricing, and the assumptions for pricing contributions in the 2026 ALM outlook.

Answer

Executive Vice President and CFO Barry Hytinen explained that memory pricing contributed $15 million to $20 million more than anticipated to Q4 2025 revenue. He noted that hyperscaler business accounts for about 40% of ALM revenue, with memory representing 40-50% of that. Hytinen stated that pricing remains strong in early 2026, and the company's forecast assumes current market conditions for both pricing and volume. He also highlighted that the outperformance in Q4 was equally split between hyperscale and enterprise segments.

George Tong inquired about the 56% organic growth in the ALM business during Q4 2025, asking how much of that growth was driven by volumes versus pricing, and what pricing contributions are assumed in the 2026 ALM outlook.

Answer

Barry Hytinen explained that memory pricing, particularly in the hyperscale segment (which is about 40% of ALM revenue), contributed $15-$20 million more than originally guided for Q4 2025. He noted that pricing has remained strong in early 2026, and the forecast assumes current market conditions for pricing and volume. The outperformance in Q4 was equally split between hyperscale and enterprise.

George Tong asked about the planned phasing of revenues for the new $714 million five-year contract with the U.S. Department of the Treasury, specifically whether it would ramp linearly or be front-end loaded into 2026, given expectations of high seasonal volumes.

Answer

President and CEO Bill Meaney explained that the contract is expected to be linear with slight growth over time, not front-end loaded, but will have seasonality related to tax season. He also highlighted the DXP platform's success as a key factor in securing the contract.

George Tong asked about the planned phasing of revenues for the new $714 million five-year contract with the U.S. Department of the Treasury, specifically whether it will ramp linearly or be front-end loaded into 2026, given expectations of high seasonal volumes.

Answer

President and CEO Bill Meaney explained that the contract will be linear with slight growth over time, with a seasonal aspect tied to tax season in the spring. He noted that capacity building has already begun and expressed excitement about the DXP platform's validation through this contract.

George Tong from Goldman Sachs asked for an explanation regarding the lighter-than-expected data center signings and the downward revision of the full-year guidance for new leases.

Answer

President & CEO William Meaney explained that while the market remains strong, hyperscale customers prioritized building large AI training campuses in the first half of the year, a market Iron Mountain does not serve. He noted that customer focus is now intensifying on AI inference and cloud infrastructure, which aligns with Iron Mountain's key markets and available capacity.

George Tong asked for a broad perspective on data center demand, questioning if there have been any noticeable changes in demand from any part of Iron Mountain's customer base.

Answer

CEO William Meaney stated that there has been no change in demand appetite from their largest hyperscale customers across North America, Europe, and India. He highlighted that hyperscalers' own announced increases in CapEx spending reinforce the strong demand environment, which is further supported by the scarcity of power in key locations.

George Tong inquired about the drivers of organic growth in Iron Mountain's Asset Life Cycle Management (ALM) business in Q4, specifically asking for the breakdown between volumes and component prices.

Answer

Barry Hytinen, Executive Vice President and CFO, explained that the ALM organic growth was almost entirely volume-driven, especially within the enterprise segment. He noted that component prices were generally flat, with some minor fluctuations. Hytinen added that for 2025, the company's plan is based on continued strong volume growth from its pipeline rather than anticipating significant changes in component pricing.

George Tong inquired about current trends in the Asset Life Cycle Management (ALM) business, focusing on the data center and enterprise segments and the respective contributions from volume and pricing.

Answer

CEO William Meaney confirmed strong volumetric growth from data center decommissioning, driven by hyperscalers refreshing equipment for AI, alongside robust enterprise trends. CFO Barry Hytinen added that while component pricing is variable, significant volume increases and synergies from the Regency acquisition are driving substantial growth in ALM's organic revenue and profitability.

George Tong inquired about the key growth drivers in higher education, the outlook for fiscal 4Q, and how the Evergreen platform serves as a differentiator for McGraw Hill.

Answer

Chair of the Board of Directors, Simon Allen, highlighted Evergreen's unique innovation providing continuous updates to faculty, improved go-to-market execution, and McGraw Hill's effective use of AI as recognized by Morning Consult. EVP and CFO, Bob Sallmann, quantified higher education growth, noting contributions from enrollment, pricing, and a sales return release, while also addressing the more difficult Q4 comparison.

George Tong inquired about the key growth drivers in higher education, the outlook for fiscal Q4, and how the Evergreen platform serves as a differentiator for McGraw Hill.

Answer

Simon Allen, Chair of the Board of Directors, highlighted Evergreen's continuous updates, improved sales efficiency, and McGraw Hill's recognition for effective AI use. Bob Sallmann, EVP and CFO, quantified higher education growth drivers, including enrollment and pricing, and discussed the impact of sales return releases and Inclusive Access on Q4 outlook.

George Tong asked about K-12 capture rates for the current adoption cycle compared to the previous year. He also inquired about the projected K-12 TAM growth in 2027 based on current visibility.

Answer

Bob Sallmann, EVP and CFO, stated that K-12 capture rates are not publicly disclosed but highlighted that the market is 200 basis points higher than the prior year, which is in line with expectations. Regarding the K-12 TAM for 2027, Bob Sallmann and Simon Allen, Chairman, President, and CEO, indicated an overall market growth of $300 million, driven by large opportunities in California Math, Florida ELA, and Texas Math, expressing excitement for the potential.

George Tong inquired about the anticipated growth of the K-12 Total Addressable Market (TAM) in 2027, based on current visibility.

Answer

Bob Sallmann, EVP and CFO, reiterated that the overall K-12 market is expected to grow by $300 million in 2027, with California Math representing the largest opportunity. Simon Allen, Chairman, President, and CEO, added that while fiscal year 2026 is a low year, the higher TAM in 2027 and 2028 presents significant opportunities for growth and performance.

George Tong asked about the expected impact of Anthropic's recent announcement of open-source plugins for Claude Copilot on S&P Global's business.

Answer

Martina Cheung, President and CEO, stated that S&P Global views AI as a net tailwind, actively participating in the ecosystem. She highlighted S&P Global's role as a leading financial data provider for Cloud for Financial Services and its partnerships with Google (Gemini Enterprise) and OpenAI (MCP connector). The strategy involves embedding AI in S&P Global products, offering flexible data distribution to third-party platforms (treating LLM providers as distribution partners), maintaining commercial control, and prohibiting LLM training on S&P Global data. Internally, AI accelerates product innovation, productivity, and benchmark quality. Customers consistently demand more data, AI functionality, and integrations.

George Tong inquired about the expected impact of Anthropic's recently announced suite of open-source plugins for Claude Copilot on S&P Global's business.

Answer

Martina Cheung, President and Chief Executive Officer, stated that S&P Global views such AI announcements as exciting and a net tailwind. She highlighted S&P Global's partnerships with major AI players like Anthropic, Google (Gemini Enterprise), and OpenAI, emphasizing their strategy to embed AI in products and offer flexible data distribution while maintaining commercial control and preventing LLM providers from training on S&P Global data.

George Tong inquired about the future trend of S&P Global's pricing increases, historically in the 3-4% range, as AI functionalities are increasingly integrated into products and drive upgrade cycles.

Answer

Martina Cheung, President and CEO, stated that pricing conversations are always based on the value generated for clients, with positive feedback on AI enhancements and content additions. This value manifests in retention, new sales, and price increases, though not separately broken out. Eric Aboaf, CFO and EVP, added that the focus is on rolling out new offerings, monitoring usage, and demonstrating value to clients, which will drive revenue benefits over time. Martina Cheung also noted that new products leveraging generative AI, such as agents and the Pronto NLP filings product, will create additional commercial value.

George Tong inquired about S&P Global's pricing increases, historically in the 3-4% range, and how they will trend going forward as AI functionalities are increasingly included in products and drive upgrade cycles.

Answer

Martina Cheung, President and CEO, stated pricing conversations are based on value generated, noting positive client feedback on AI enhancements, content, and features. This value manifests in retention, new sales, and price increases, but wouldn't be broken out separately. Eric Aboaf, CFO and EVP, added that benefits will come through revenues in multiple ways, with a focus on rolling out offerings and monitoring usage to ensure clients get value, which naturally leads to positive financial results. Martina also mentioned new products using GenAI (agents, Pronto NLP filings) as other ways to drive commercial value.

George Tong asked for quantification of the benefit from lapping prior-year cancellations on second-half growth in the Market Intelligence segment and how much the outlook depends on an improving customer environment.

Answer

CFO Eric Abouaf stated that the customer environment has been relatively good and consistent, so the outlook does not depend on further improvement. He noted that lapping cancellations provides only a 'small benefit' and that the primary driver of accelerating revenue growth is the strong underlying performance in new sales and net renewals.

George Tong asked for quantification of the benefit from lapping prior-year cancellations on Market Intelligence growth in the second half, and how much the outlook depends on an improving customer environment.

Answer

CFO Eric Abouaf stated that the customer environment has been relatively good and consistent, with strong underlying demand for data and analytics. He noted that lapping cancellations provides a 'small benefit' but emphasized that the real driver of revenue growth is the upswing in sales and net renewals, with cancellations remaining well-contained. The focus is on the positive trajectory of new sales and retention.

George Tong requested a deeper dive into the Market Intelligence segment, asking what external market conditions are needed for improvement and what the potential low watermark for growth might be.

Answer

Incoming President and CEO Martina Cheung declined to call a specific trough for the segment's growth. However, she expressed strong conviction that as the cycle turns, the company's ongoing product innovation and deep customer engagement will drive a recovery. She noted seeing some 'green shoots' in areas like banking, though pressure remains elsewhere.

George Tong (via Sammy) asked if the margin guidance for 2026, which suggests a step down from 2025, represents a new baseline for the business or if the decline is temporary, with margins expected to return to the 25% level quickly.

Answer

CFO Craig Safian confirmed that the 23.5% margin for 2026 is viewed as the new baseline. He explained that the plan for 2026 reflects cost base alignment with CV and revenue growth (actions taken in 2025 for 2026 benefit), an assumed operating expense growth of about 5% (4% FX neutral) for merit increases and selected investments, and the lag between accelerating CV growth and revenue recognition impacting margins in the short term. He expects margins to expand going forward from this new baseline.

George Tong asked for more color on the expected trajectory and pacing of CV improvement, specifically if a bottoming in Q4 is expected, followed by re-acceleration across 2026 into high single digits. He also inquired about the performance of tech vendors.

Answer

Craig Safian (CFO, Gartner) confirmed expectations for re-acceleration over 2026 into high single-digit growth rates, with favorable compares in the first half. He detailed that within tech vendors, non-tariff-affected subsectors like software and services showed high single to low double-digit CV growth, improving over the last 12 months, particularly small tech software. This growth is somewhat muted by tariff-affected pieces like hardware and semiconductors.

George Tong asked for more details on the expected trajectory and pacing of CV improvement, specifically if a bottoming is anticipated in Q4 2025 followed by re-acceleration throughout 2026 into high single digits. He also requested details on how tech vendors performed.

Answer

CFO Craig Safian confirmed expectations for CV to re-accelerate over the course of 2026 into high single-digit growth rates, with favorable comparisons in the first half of the year. Regarding tech vendors, he noted two trends: software and services subsectors are experiencing high single to low double-digit CV growth, with small tech software showing the most improvement, while tariff-impacted subsectors like hardware and semiconductors are muting overall tech vendor performance.

George Tong inquired about the level of new business from U.S. federal government clients and requested a breakdown of the tariff-impacted contract value between the GTS and GBS segments.

Answer

EVP & CFO Craig Safian confirmed that while new business from federal clients is significantly down year-over-year, some new contracts are still being signed despite difficult procurement processes. He also clarified that while the tariff impact is spread across both segments, the GBS segment has a slightly higher proportion of affected clients due to its large supply chain practice.

George Tong asked about the top internal and external swing factors that could affect Q1 NCVI. He also inquired about the expected phasing of sales headcount hiring in 2025 for both GTS and GBS.

Answer

CFO Craig Safian identified normal business variables like the mix of large and small clients, tech vendors, and public sector renewals as the key swing factors for Q1 NCVI. He noted that unlike last year, there are no specific, large challenging renewals looming. Regarding hiring, he expects it to be more evenly spread throughout 2025 compared to the back-end loaded hiring of 2024, though Q1 net growth can be lighter due to promotions and turnover.

George Tong asked for an update on tech vendor contract value (CV) growth and when a more meaningful improvement is expected. He also inquired about the trends and variability in the contract optimization business.

Answer

CEO Gene Hall explained that new business with tech vendors has rebounded, but overall CV growth is being dragged down by small, financially challenged vendors renewing at lower rates. Regarding contract optimization, both he and CFO Craig Safian noted its inherent lumpiness due to large deal sizes, highlighting that the prior year's Q3 had exceptionally high growth of 98%, creating a very tough comparison.

George Tong asked for an overview of sales cycles and customer purchasing behaviors, noting any changes from prior quarters, and how much of the full-year revenue guide increase reflects Q2 upside versus a stronger outlook for the remainder of the year.

Answer

Todd Schneider, President and CEO, reported no specific changes in sales cycles or purchasing behaviors to call out, emphasizing that Cintas's value proposition resonates even in uncertain economic times, leading to attractive retention and steady growth from existing customers. He explained that the updated full-year guide reflects strong Q2 performance, but also accounts for tougher year-over-year growth comparisons in the second half of the fiscal year, with an expectation of continued leverage.

George Tong asked for a high-level overview of sales cycles and broader customer purchasing behaviors, noting any meaningful changes from prior quarters, and how much of the full-year revenue guide increase reflects Q2 upside versus a stronger outlook for the remainder of the year.

Answer

President and CEO Todd Schneider reported no specific changes to call out in sales cycles or purchasing behaviors, noting that Cintas's value proposition resonates well, especially in uncertain times, leading to stable and slightly improved growth from current customers and attractive retention rates. He added that the updated full-year revenue guide (7.8%-8.5% growth) reflects a good Q2 performance, but also acknowledges tougher year-over-year comps in the second half of the fiscal year.

George Tong requested an update on the overall selling environment, including client budget trends and sales cycles. He also asked for details on which parts of the business outperformed initial expectations, leading to the increased revenue and EPS guidance.

Answer

Todd Schneider, President and CEO, reported no specific changes in sales cycles or customer behavior, noting that Cintas' value proposition continues to resonate even in an uncertain environment, with attractive retention rates and a steady-to-slightly improved customer base. He highlighted strong momentum across all three route-based businesses as the driver for the increased guidance, implying higher growth in the remaining quarters.

George Tong asked for an update on the overall selling environment, including current client budget trends and any changes in sales cycles.

Answer

Todd Schneider, President and CEO, reported no specific changes in sales cycles or customer behavior, despite an 'uncertain environment.' He noted that Cintas' value proposition continues to resonate, potentially even improving during uncertain periods by steadying cash flow. New business sales are strong, retention rates are attractive, and the customer base showed slight improvement. For a follow-up on the raised guidance, Mr. Schneider highlighted strong momentum across all three route-based businesses (uniform rental, first aid, fire protection) as key drivers, noting that the implied growth for Q2-Q4 is higher than the initial outlook.

George Tong inquired about the current selling environment, including client budget trends and sales cycles, and asked for elaboration on which parts of the business outperformed initial expectations to drive the increased revenue and EPS guidance.

Answer

President and CEO Todd Schneider reported no specific changes in sales cycles or customer behavior, noting that Cintas's value proposition continues to resonate, even improving during uncertain periods by steadying cash flow. He highlighted strong performance and momentum across all three route-based businesses (uniform rental, first aid, fire protection) as key drivers for the raised guidance, with implied growth for Q2-Q4 being higher than the initial outlook.

George Tong from Goldman Sachs inquired about the current selling environment, including sales cycles and client sentiment, and asked about the factors contributing to a narrowing rate of operating margin expansion.

Answer

President & CEO Todd Schneider reported no significant changes in customer behavior, with strong new business and retention despite market uncertainty. EVP & COO James Rozakis added that uncertainty creates opportunities to add value. Regarding margins, Schneider noted that the prior year's Q4 was a tough comparison and that the company is investing for the future while keeping incremental margins within their 25-35% target range.

George Tong from Goldman Sachs inquired about the current selling environment, including sales cycles and client sentiment, and asked about the factors contributing to the rate of operating margin expansion.

Answer

President & CEO Todd Schneider reported a stable selling environment with strong new business and retention, despite broader market uncertainty. EVP & COO James Rozakis added that uncertainty creates opportunities to provide value. Regarding margins, Mr. Schneider noted that while Q4 faced a tough prior-year comparison, the company is investing for the future and remains within its target 25% to 35% incremental margin range.

George Tong asked for an update on customer sentiment and purchasing behaviors throughout the quarter. He also inquired about where Cintas stands in its journey to unlock further operational efficiencies, asking if they are in the early, middle, or late stages.

Answer

CEO Todd Schneider reported no significant changes in customer behavior, highlighting that two-thirds of new business comes from 'no programmers,' representing a vast market. On efficiencies, he described Cintas's culture as one of 'positive discontent,' implying a continuous, ongoing process with a long list of initiatives still to be executed, rather than a finite project.

George Tong (Goldman Sachs) asked about FactSet's strategy for balancing productivity initiatives and investments in sales and tech infrastructure, given the projected 150 basis point decline in operating margins for fiscal year 2026, and how this impacts future margin expansion.

Answer

Sanoke Viswanathan, CEO of FactSet, explained that structural investments (e.g., consolidating legacy applications, common tech infrastructure) are key to driving operating leverage and faster product development. Growth investments (content, delivery, AI) are directly aligned with client demand, and FactSet is balancing both types of investments for short-term and medium-to-long-term value.

George Tong asked how FactSet balances its investments in productivity initiatives (data ingestion, tech platform modernization, service team efficiencies) and sales/tech infrastructure, which are projected to cause a 150 basis point decline in FY26 operating margins, with its goal of driving margin expansion.

Answer

CEO Sanoke Viswanathan explained that structural investments (e.g., consolidating legacy applications onto a modern platform) are designed to drive operating leverage by freeing up developer time for product development, creating a flywheel effect. Growth investments, aligned with client demand in content, delivery, workflows, and AI, are expected to resonate directly with clients. He emphasized balancing both types of investments for short-term and medium-to-long-term value.

George Tong asked about the drivers behind FactSet's fiscal 2026 guidance for organic ASV growth, which at the midpoint of 5%, points to a deceleration from fiscal 2025 growth, and inquired about any competitive factors contributing to this.

Answer

Sanoke Viswanathan, CEO & Director, FactSet, explained that the guidance reflects the current business view, market dynamics, and commitment to long-term growth, acknowledging continued opportunities in wealth and data solutions. Helen Shan, CFO, FactSet, clarified that the conservative guidance is not due to reduced confidence in market demand or competitive positioning, but rather longer sales cycles, client adoption timelines for AI, and policy headwinds in Europe. Goran Skoko, EVP & Chief Revenue Officer, FactSet, reinforced the conservative nature of the guidance, noting an improved pipeline year-over-year and significant acceleration in the pipeline over the last five weeks.

George Tong asked about the drivers behind FactSet's fiscal 2026 guidance for organic ASV growth, which at the midpoint, suggests a deceleration from fiscal 2025, and inquired about any competitive factors contributing to this outlook.

Answer

Sanoke Viswanathan, CEO, explained that the guidance reflects the current business view and market dynamics, balancing growth opportunities with a commitment to long-term growth and disciplined investments. Helen Shan, CFO, clarified that the guidance takes a conservative approach due to longer sales cycles and client adoption timelines for AI, not reduced confidence in market demand or competitive positioning, noting that many top wins were competitive displacements. Goran Skoko, CRO, reinforced confidence in the range, stating that the pipeline has improved year-over-year, with significant acceleration in the last five weeks.

George Tong asked about the drivers behind FactSet's fiscal 2026 organic ASV growth guidance, which at a 5% midpoint, suggests a deceleration from fiscal 2025, and inquired about any competitive factors contributing to this outlook.

Answer

Sanoke Viswanathan, CEO, stated that the guidance reflects the current business view, market dynamics, and a balance between long-term growth commitments and disciplined investments. Helen Shan, CFO, clarified that the guidance takes a conservative approach, not due to reduced confidence in market demand or competitive positioning, as many top wins were competitive displacements. She cited longer sales cycles, client adoption and compliance checks for AI, and European policy headwinds as contributing factors. Goran Skoko, Chief Revenue Officer, reinforced the conservative nature of the guidance, expressing high confidence in execution within the range and noting an improved pipeline year-over-year, with significant acceleration in the last five weeks.

George Tong of Goldman Sachs asked for more details on the pricing environment in international regions, particularly given the deceleration from lower CPI, and inquired about any competitive changes.

Answer

Chief Financial Officer Helen Shan explained that new business price realization, which had been under pressure, has now stabilized. She noted that while the contractual annual price increase was lower due to CPI, the company has selectively raised rate cards, seeing solid uptake in corporate and hedge fund segments. The overall pricing environment is viewed more by firm type than by geography.

George Tong asked about the impact of recent market volatility on buy-side budgets and sales cycles, particularly among large asset managers and asset owners.

Answer

CEO Phil Snow stated that they have not seen a significant change, as the buy-side has been operating under pressure for years due to trends like the shift from active to passive management. He views this pressure as a forcing function for clients to adopt FactSet's enterprise and GenAI solutions. Snow expressed confidence in the robust second-half pipeline, which has a large buy-side component.

George Tong from The Goldman Sachs Group, Inc. asked for a relative ranking of client segments, inquiring which are expected to demonstrate the most significant improvement in the second half of the fiscal year.

Answer

CEO Frederick Snow identified PE/VC and hedge funds as showing strong growth signs. He expressed continued optimism for the large wealth segment. He noted more uncertainty for the broader buy-side (leveraged to active management) and the banking business, though he is optimistic about the latter if M&A activity and hiring pick up as anticipated.

George Tong from Goldman Sachs asked about Vestis's new pricing strategy, how it will reflect service value and cost, and what targeted pricing increases are expected. He also inquired if the targeted reductions to the field sales team are largely complete or still in early stages, and if the team is expected to grow at a specific rate to support future sales targets.

Answer

Jim Barber, President and CEO, explained that the pricing strategy starts with optimizing the network's cost to serve, as it's unfair to pass suboptimal costs to customers. He noted that pricing will be both tactical and strategic, guided by new profitability tools, and underpinned by improved service quality to ensure fair deals. Regarding sales team reductions, Mr. Barber stated that the targeted cuts were made to rebalance investment towards existing customer penetration, which offers a larger opportunity than solely focusing on new business. He emphasized that the goal is to grow jobs, and future investments in the sales force will depend on execution and the ability to create operating leverage, with current decisions deemed correct for the initial phase of 2026.

George Tong inquired about Vestis Corporation's new pricing strategy, its expected impact on effective pricing, and targeted increases. He also asked about the completeness of field sales team reductions and future growth expectations for the sales force.

Answer

President and CEO Jim Barber stated that the new pricing strategy begins with optimizing the network's cost to serve, ensuring fair pricing based on improved service quality. He noted that pricing will address areas with negative direct margin contribution. Regarding sales team reductions, Jim Barber clarified they were targeted to reallocate investment towards market development representatives, focusing on growing the existing customer base. He emphasized that the goal is to grow jobs, with future sales force size dependent on execution and operating leverage creation.

George Tong requested more details on progress with on-time deliveries and shortages, and also asked about the pace of sales force hiring and strategies for retaining sales talent.

Answer

CEO Kimberly Scott highlighted the launch of a real-time automated delivery notification system for customers and new standard operating procedures for truck loading to reduce shortages. Regarding the sales team, she credited new leadership with professionalizing the recruiting, onboarding, and training processes, which is improving both productivity and retention as hiring now ramps up.

George Tong inquired about the amount of pricing embedded in the fiscal 2025 guidance and the timeline for pricing to outpace input cost inflation. He also asked what proportion of branches are meeting service goals.

Answer

CFO Rick Dillon confirmed pricing will be a positive contributor for the year but did not quantify the amount. CEO Kim Scott added that the company is focused on a balance of earning price increases through better service and executing on cost take-outs. She described service levels as having 'pockets of outstanding performance' with the entire system's performance rising due to new accountability measures.

George Tong (Goldman Sachs) asked for additional color on the performance of contract revenue versus ancillary services, specifically the per-occurrence side, within the landscape maintenance business.

Answer

CEO Dale Asplund expressed confidence in the predictability and performance of contract revenue, expecting it to be a tailwind for 2026. He noted that the 'noise' from discretionary per-occurrence work, such as snow in certain regions, is largely behind them. Ancillary services are showing strong progress, with branches actively securing new deals and investments in assets like tree trucks further driving this growth. He affirmed that both contract and ancillary revenues are positioned for growth in 2026.

George Tong asked about the potential for mortgage resellers to raise their fees under the direct licensing program, given their increased responsibilities, and the feedback from conversations with these resellers.

Answer

CEO Will Lansing stated that reseller pricing is TBD and not influenced by FICO, as they run their own businesses. He noted that FICO's goal is to provide choice and optionality to customers, allowing them to optimize their score consumption, and FICO is comfortable with how the mix between per-score and performance models will shake out.

George Tong asked for FICO's thoughts on whether mortgage resellers might raise their fees to match credit bureaus under the direct licensing program, given their increased responsibilities, and what conversations with resellers suggest.

Answer

CEO Will Lansing stated that reseller pricing is up to the resellers and is still to be determined, as their pricing from bureaus on the data side is not fully understood. He clarified that FICO does not influence reseller pricing, as they run their own businesses.

George Tong from Goldman Sachs asked about the strategic priority of migrating the industry to FICO 10T versus maintaining Classic FICO. He also asked about the drivers of the FICO Platform's ARR growth.

Answer

CEO Will Lansing responded that the industry will ultimately decide, noting 10T's superior predictability is attractive for risk-bearers, while Classic FICO will likely remain for a long time due to its deep integration. He also explained that Platform ARR growth is shifting more toward 'expand' as FICO penetrates more of its target financial institutions.

George Tong asked about the achievability of the 9%-11% organic growth target for corporates next year without further sales organization changes, and the company's pricing strategy for AI products.

Answer

CFO Mike Eastwood expressed confidence in achieving 9%-11% organic growth for corporates in 2026, citing encouraging Q4 net sales and bookings, strong pipeline coverage, and solidified organizational changes. CEO Steve Hasker explained that the pricing strategy is based on 'price to value,' benefiting from efficiencies driven by AI products without per-seat pricing, and noted optimism for additional pricing opportunities in 2026.

George Tong questioned the achievability of the 9%-11% organic growth target for corporates next year without additional sales organization changes or cross-selling pace, and inquired about the pricing strategy, specifically plans for accelerated pricing increases in multi-year contracts given the increasing value from AI products.

Answer

CFO Mike Eastwood expressed confidence in the corporate segment's 9%-11% growth target for 2026, citing encouraging October net sales and bookings, strong pipeline coverage for Q4 and Q1 2026, and solidified organizational changes. CEO Steve Hasker explained the pricing principle is 'price to value,' ensuring alignment with efficiencies driven by AI products, and noted that they do not price on a per-seat basis, making them beneficiaries of efficiency. He stated that pricing has been competitive and profitable, with continuous market signal monitoring. Mike Eastwood added optimism for additional pricing opportunities in 2026.

George Tong of Goldman Sachs asked if the company is seeing different AI adoption curves between large enterprise clients and smaller firms, and how it's tailoring its go-to-market strategy. He also inquired about the internal KPIs used to measure the ROI on AI investments.

Answer

CEO Steve Hasker noted that, unlike past product cycles, AI is seeing a surprisingly even demand curve across all client segments, from sole proprietors to the largest firms. CFO Michael Eastwood explained that ROI is measured by a convergence of metrics, including gross margin, customer retention, and product adoption and usage rates, rather than a single KPI.

George Tong asked about the contribution of pricing to net new bookings growth in the current quarter and MSCI's overall pricing strategy.

Answer

Andy Wiechmann, Chief Financial Officer, MSCI, stated that pricing's contribution to new recurring sales was roughly in line with recent quarters, with no major shift in approach. He explained that MSCI aligns price increases with the value delivered, monetizing product enhancements and innovations. The strategy also considers the overall pricing environment, client health, and varies across product lines and client segments. He emphasized being a strong, long-term partner and constructive on price increases while delivering value.

George Tong asked about the contribution of pricing to net new bookings growth in the quarter and MSCI's overall pricing strategy.

Answer

Andy Wiechmann (CFO, MSCI) stated that pricing contribution to net new recurring sales is in line with recent quarters, with no major shift in strategy. He explained that price increases align with delivered value, product enhancements, and the overall pricing environment, while also considering client health and maintaining strong long-term partnerships.

George Tong asked about the timeline for achieving meaningful acceleration in non-active subscription growth beyond its current 11.5% rate and the potential peak growth for this segment.

Answer

Chairman & CEO Henry Fernandez stated it was hard to predict the exact timing but detailed the enormous demand and significant opportunities across various segments. These include the 'fast money' community, wealth management (via MSCI Wealth Manager), private asset GPs, and climate solutions for banks and insurers. He conveyed that it is only a matter of time before these initiatives translate into accelerated growth.

George Tong asked why net new recurring subscription sales declined in Q3 after showing growth in Q2, and what external conditions would be needed for an improvement.

Answer

CFO Andrew Wiechmann explained that while sales in Index and Analytics remained strong, the decline was driven by an uptick in cancellations in Q3, which can be lumpy quarter-to-quarter. He noted that the company is still working through the impact of client events from the past year. He believes a combination of improved client dialogues and working through these lingering cancels should lead to better results.

George Tong asked for specific details on the weekly sequential growth rate for contract talent revenues in September and October, and whether the trends were linear. He also questioned the extent of risk Robert Half faces from large enterprises automating finance departments with AI, potentially realizing significant labor cost savings.

Answer

CEO Keith Waddell specified a 1.5% to 2% sequential growth rate for contract talent revenues in September and early October, noting this provides a cushion relative to Q4 guidance. Regarding AI risk, Mr. Waddell expressed skepticism about short-term 50%+ productivity gains, citing studies indicating modest ROI, longer adoption times, and AI's impact primarily on early-career entry-level roles, which are not Robert Half's core business. He attributed the industry downturn to reduced churn, narrow job growth in non-staffing-heavy sectors, and client caution leading to decreased contractor usage, rather than AI.

George Tong asked for specifics on the weekly sequential growth rate of contract talent revenues in September and October, including linearity, and assessed the risk of large enterprises automating finance departments with AI, potentially leading to 50%+ labor cost savings, for Robert Half's future.

Answer

CEO Keith Waddell stated that September and early October showed a 1.5%-2% sequential growth rate for contract talent, which provides a cushion for Q4 guidance. Regarding AI automation, Mr. Waddell cited studies indicating modest ROI for generative AI so far and that impacts on labor are primarily for early career/entry-level roles, which are not Robert Half's core business. He emphasized that historical trends show such changes take longer than initially anticipated, and current client observations do not reflect 50%+ productivity gains.

George Tong questioned why permanent placement revenues declined more than temporary staffing and why the admin and customer support business declined faster than finance and accounting for a second consecutive quarter.

Answer

President & CEO M. Keith Waddell explained that permanent placement is inherently more volatile than contract staffing, making short-term divergences normal. For the admin and customer support segment, he attributed the slightly faster decline to tougher year-over-year comparisons and a higher concentration of project-based work, stating there was not a significant underlying story.

George Tong asked about current trends in white-collar hiring, the assumptions underlying the Q4 guidance, and the factors driving the expected sequential step-down in operating margins.

Answer

CEO M. Waddell pointed to a 14-week stretch of stable weekly results as an encouraging sign for white-collar hiring but noted the Q4 guidance remains conservative. He explained the anticipated Q4 margin decline is almost entirely due to operating deleverage from fewer billing days in the holiday-shortened quarter. He contextualized this by comparing current trough margins to prior cycles, expressing strong confidence in a recovery to double-digit margins.

George Tong asked about the expected shakeout of VantageScore mortgage market shares among bureaus given different pricing strategies (Equifax $4.50, TransUnion $4, Experian free/50% below FICO). He also inquired about the monetization strategy for EFX.AI™ products and how it compares to deployment costs.

Answer

CEO Mark Begor clarified his understanding that Experian is not offering VantageScore for free but at 50% below FICO. He emphasized Equifax's competitive $4.50 pricing, the strong industry response, and the profit advantage for Equifax when selling VantageScore. He explained that EFX.AI™ deployment costs are in COGS, and monetization comes from higher predictability and ROI for customers (e.g., 10-point lifts in scores), driving platform adoption and share gains, in addition to internal AI use for productivity and cost savings.

George Tong asked about the expected shakeout of VantageScore mortgage market shares among credit bureaus, given Equifax's $4.50 pricing compared to TransUnion's $4 and Experian's perceived free offering. He also inquired about Equifax's plan to monetize its AI products, such as the Ignite AI Advisor, and how this monetization compares to the cost of deploying AI.

Answer

Mark Begor, Chief Executive Officer, advised checking Experian's actual pricing, stating his understanding is it's not free. He emphasized that with a 3B credit file requirement, each bureau competes on its score offering. He reiterated that Equifax's $4.50 price is a substantial discount to FICO's $10, driving strong industry response and conversions, which are beneficial for Equifax's profitability. Mark Begor explained that AI costs are embedded in COGs, with long-standing investment in AI and patents. Monetization comes from AI-powered solutions delivering higher predictability and ROI for customers (e.g., 10-point lifts in scores), driving adoption of platforms like Ignite, and ultimately leading to share gains. He also mentioned future discussions on AI's role in internal productivity and cost savings.

George Tong asked if Equifax is considering alternative pricing strategies, such as subscriptions, to mitigate revenue volatility in the EWS government segment arising from state-level funding variability.

Answer

CEO Mark Begor confirmed that Equifax is being 'super flexible' with states to help them navigate current budget challenges. He mentioned offering subscription-type solutions to bridge them through their budget cycles, emphasizing the goal is to support customers and be flexible on contract structures during this period.

George Tong asked for a breakdown of which markets are more 'frozen' or 'thawing' in terms of hiring and workforce reductions, and which regions are seeing the most restructuring and headcount reductions.

Answer

Chairman and CEO Jonas Prising identified financial services, logistics (seasonal), and defense as sectors starting to pick up, while auto and construction remain sluggish. He explained employers are holding onto workforces more than in past slowdowns due to the memory of post-pandemic talent shortages. EVP and CFO Jack McGinnis stated Northern Europe, particularly Germany, saw the most restructuring in Q3, with ongoing efforts across the organization, including global business service centers.

George Tong inquired about which specific markets are more 'frozen' versus showing signs of 'thawing' in terms of hiring and workforce reductions. He also asked about the regions seeing the most restructuring and headcount reductions as part of accelerated initiatives to remove structural costs.

Answer

Chairman and CEO Jonas Prising identified financial services, logistics, and defense as sectors showing some pickup, while auto and construction remain sluggish. He explained that employers are holding onto their workforces more than in past slowdowns due to the memory of post-pandemic talent dislocation. EVP and CFO Jack McGinnis detailed Q3 restructuring efforts, primarily focused on Northern Europe (Germany), Spain, the U.K., and the U.S., noting significant progress in improving Northern Europe's operating unit profit trend.

George Tong from Goldman Sachs inquired about the focus of cost-cutting actions in Europe and asked where the impact of AI might first appear in the business and what percentage of revenue could be affected.

Answer

EVP & CFO Jack McGinnis clarified that recent cost actions were focused on the Nordics, Netherlands, and Germany, involving a mix of rightsizing producers and significant back-office reductions. Chairman & CEO Jonas Prising explained that AI's impact is currently focused on augmenting human capabilities, such as with a virtual recruiter assistant, and that it's too early to see a structural impact on revenue, viewing it as an evolution that will enhance roles like clerical support.

George Tong (represented by Sammy) asked about the performance and outlook for Consulting new business, including key drivers and regional expectations. Tong also questioned the significant reduction in digital consultant headcount, particularly ahead of the TalentSuite launch, and whether current headcount aligns with demand or if further adjustments are expected.

Answer

CEO Gary Burnison indicated that the Consulting outlook depends regionally, with continued momentum expected in Europe and Asia but challenges in the Americas without Fed action. He emphasized the firm's shift towards larger, more integrated, multi-year engagements, evidenced by increased average rates and a growing backlog with 42% of engagements over $1 million. Burnison described Consulting new business as "decent" and on the "plus side." Regarding digital headcount, Burnison explained it's part of continuous workforce management across the firm, repositioning talent to enable the entire firm to deliver the TalentSuite platform, focusing on unlocking human and organizational performance rather than just digital sellers.

George Tong from Goldman Sachs inquired about current sales cycle dynamics, client spending behaviors across segments, and the specific year-over-year new business growth for the Consulting and Digital segments.

Answer

CEO Gary Burnison highlighted a 'cost of living crisis' that is forcing corporate clients to cut costs, making growth elusive. He noted consulting engagements are becoming larger and take longer to implement. CFO Robert Rozek specified that in Q4, Digital new business grew 4% year-over-year at constant currency, while Consulting new business was flat.

George Tong from Goldman Sachs requested specific, diverse examples of the local market issues affecting enrollment and asked if a unified playbook exists to address them. He later followed up on whether the previously mentioned elongated sales cycles for private pay families are still being observed.

Answer

CEO Paul Thompson provided examples such as localized teacher turnover requiring a review of wage competitiveness, or a drop-off in the inquiry-to-enrollment conversion funnel necessitating specific staff training. He explained that while the issues are local, a unifying diagnostic approach using data allows for efficient, targeted solutions. He also confirmed that private pay families are still taking longer to make enrollment decisions compared to subsidy families. CFO Tony Amandy added that the company's scale allows for centralized expertise to be applied locally.

George Tong asked about the typical duration of enrollment delays and whether the company has sufficient pricing power to raise tuition beyond the low end of its guided range.

Answer

CEO Paul Thompson responded that it is difficult to predict the exact length of delays but noted the focus is on coaching staff to accelerate decisions. On pricing, he stated that while they constantly evaluate it, the company prefers to implement increases on January 1 to minimize disruption. Given current cost controls, the next major increase is planned for January 2026.

George Tong inquired about occupancy rate trends within the B2B employer-sponsored business and the expected growth in new center openings from this channel.

Answer

CEO Paul Thompson reported that occupancy for on-site employer centers is trending in the high 70s, with opportunities for further expansion. He highlighted the value of their flexible model, which also allows employees to use community centers. CFO Tony Amandi projected that new employer-sponsored center openings would be in the low-to-mid single digits, similar to the prior year, with the tuition benefit program being a larger growth driver.

George Tong asked about specific initiatives to improve retention of center directors and teachers, and inquired about the expected pace of new center openings going forward.

Answer

CEO Paul Thompson detailed retention efforts including engagement surveys, benefits, professional development, and internal career pathing. CFO Anthony Amandi added that the pace of new center openings is expected to accelerate, as the current rate is still affected by pandemic-era capital decisions, and the current pipeline is strong.

George Tong of Goldman Sachs requested elaboration on the company's goal to achieve a 'healthier balance of volume, price and mix' for the 2026 tax season. He also asked about the key factors that would determine whether H&R Block's performance lands at the high, mid, or low end of its guidance range, particularly concerning market share.

Answer

CFO Tiffany Mason clarified that a 'healthier balance' means driving revenue through a combination of volume growth and improved client mix (e.g., higher-income clients, premium DIY SKUs), rather than relying solely on price increases. President & CEO Jeffrey Jones identified two key levers for the assisted business that will influence performance against guidance: improving the conversion rate of clients who start the process but don't file, and effectively driving more qualified demand to the top of the marketing funnel.

George Tong of Goldman Sachs questioned the disparity between H&R Block's total Assisted volume decline of 0.8% and the broader industry's reported growth of 1.7%. He also asked about the competitive landscape in the Assisted category, particularly whether a large DIY competitor's aggressive push into the space had a noticeable impact.

Answer

Executive Jeffrey Jones acknowledged that H&R Block did not grow market share in the Assisted category but emphasized that the company significantly improved its performance trajectory, citing a second consecutive year of improved client conversion and better retention, especially among higher-value clients. Jones asserted that the primary competitor in the Assisted space remains the fragmented independent tax preparer market, not large DIY players. He stated that the main DIY competitor's efforts have not impacted H&R Block's performance to date.

George Tong of Goldman Sachs questioned the sustainability of the 32% revenue growth in ATM as a Service and asked about the drivers for the expected return to positive growth in Network segment managed units.

Answer

EVP & COO Stuart MacKinnon cited the 105% year-over-year growth in the ATM as a Service backlog as a key indicator of sustainability, projecting growth will accelerate to over 40% for the remainder of the year. President & CEO Tim Oliver explained that new Network unit additions from partners like 7-Eleven and Casey's will more than offset remaining declines in the pharmacy space, driving positive unit growth.

George Tong asked about the sustainability of the 32% revenue growth in ATM as a Service and the expected drivers for the positive turn in Network managed units, specifically the contribution from new versus existing partners.

Answer

COO Stuart MacKinnon highlighted the 105% year-over-year growth in the AaaS backlog as a key indicator of sustainability, projecting growth to accelerate above 40% for the remainder of the year. CEO Tim Oliver stated that growth in Network units will be driven by new partners like 7-Eleven, Casey's, and Access Cash, which will more than offset minor declines elsewhere. Stuart MacKinnon added that Q2 was a low point for Network profitability, with sequential improvement expected.

George (Keen Fai) Tong asked for future revenue targets for ATM as a Service, given the strategic shift away from unit counts, and inquired about the customer profile for asset-light deals where clients retain hardware ownership.

Answer

CEO Tim Oliver stated that specific 2025 revenue guidance for ATM as a Service would be provided later, but highlighted it is currently a $200 million run-rate business growing at 30% with a strong backlog. He explained that large bank customers with a lower cost of capital often prefer to own their hardware, making asset-light deals more economical for both parties, especially when devices are already installed.

George Tong from Goldman Sachs inquired about the economic attractiveness of the recent $89 million bulk account purchase and ADT's appetite for future deals. He also asked for an update on the State Farm partnership's progress in customer acquisition.

Answer

CEO Jim DeVries explained that the bulk purchase involved 50,000 high-quality accounts with strong returns comparable to the dealer business, and noted the bulk pipeline remains strong. Regarding State Farm, DeVries stated that while the 33,000 subscribers acquired to date is below original hopes, they are redesigning the program to focus on movers and that the outcome will not materially affect ADT's financial commitments.

George Tong asked about the favorable revenue mix in the MIS segment during the quarter and how the updated debt issuance guidance might impact mix in the second half of the year.

Answer

CEO Robert Fauber explained that the positive Q2 mix was driven by activity in structured finance (ABCP, covered bonds) and a shift away from lower-fee repricing and sub-sovereign issuance. For the second half, he anticipates that a potential increase in issuance from infrequent issuers, along with continued strength in CMBS and CLOs, could be favorable to mix. A pickup in M&A would also be a positive driver.

George Tong inquired about the assumptions driving the 2025 revenue growth cadence, which is expected to start at the low end of the range in Q1 and finish at the high end in Q4. He also asked if the exit of nonstrategic partnerships is now complete and requested a reminder of the financial impact.

Answer

CFO Bryan Hipsher explained the Q1 guidance reflects the impact of the ongoing strategic process, while the Q4 guidance benefits from an easier comparison due to revenue shifts from 2024. CEO Anthony Jabbour stated that the major partnership exits are complete, reiterating the impact as a $6 million revenue reduction in Q4 2024 and a $14 million reduction in 2025, which will be accretive to EBITDA.