Jasper Bibb

Jasper Bibb asked about trends at Strayer, specifically regarding unaffiliated non-healthcare exposure, how the cost structure is being managed, and if downsizing campus count is being considered. He also questioned how much of the 2026 cost cutting from the notional model would drop to the bottom line versus being reinvested.

Answer

Karl McDonnell, President and CEO, explained that Strayer's campus count has been reduced as leases expire, and this may continue, though campuses still hold significant value. He noted that future expense reductions across the portfolio, including Strayer, will primarily come from automation efforts. Daniel Jackson, Executive Vice President and CFO, clarified that the notional model's 200 basis points of margin expansion per year assumes productivity benefits, with the allocation between reinvestment and margin contribution depending on growth opportunities.

Jasper Bibb inquired about trends at Strayer, particularly its unaffiliated non-healthcare exposure, and how Strategic Education plans to manage its cost structure, including potential campus count downsizing. He also asked for clarification on the allocation of cost-cutting benefits in 2026, specifically how much would drop to the bottom line versus being reinvested in growth and marketing, in the context of the notional model.

Answer

President and CEO Karl McDonnell explained that marketing efforts have shifted towards healthcare and Capella, leading to a steady reduction in Strayer's campus count as leases expire, though campuses still hold value. He noted that significant expenses have already been removed, with future reductions expected from automation efforts across the entire portfolio. Executive Vice President and CFO Daniel Jackson clarified that the notional model's 200 basis points of margin expansion per year already accounts for productivity benefits. The exact split between bottom-line contribution and reinvestment will depend on growth opportunities each year, potentially leading to margin outperformance.

Jasper Bibb of Truist Securities sought more detail on the enrollment weakness at Strayer University, including leading indicators. He also asked for confirmation of the 2025 outlook relative to the Investor Day model and an update on the progress of a major new employer partnership within the Education Technology Services (ETS) segment.

Answer

President & CEO Karl McDonnell characterized the pressure on unaffiliated undergraduate students at Strayer as a familiar cycle and affirmed that the company remains on track with its 2025 trajectory outlined at Investor Day. Regarding the new ETS partnership, he reported that the onboarding is progressing very well, the client is pleased, and it is driving significant revenue growth that will continue through the second half of the year.

Jasper Bibb asked for details on the ANZ segment's enrollment mix between domestic and international students, an update on the launch of a new large employer partner in the ETS segment, and confirmation of the company's confidence in its long-term revenue growth model.

Answer

Karl McDonnell, President and CEO, stated that the ANZ enrollment mix is shifting more toward domestic students, in line with the company's strategy. He reported that the new ETS partner launch is proceeding well, with demand for Sophia Learning from that client's employees exceeding initial plans. McDonnell also confirmed that the company remains confident that its 2025 revenue growth will align with the 4% to 6% range outlined in its notional model.

Jasper Bibb sought to confirm the 2025 framework, asking about the expected cadence of margin expansion and the reasons for the Q4 decline in revenue per student in U.S. Higher Education.

Answer

President and CEO Karl McDonnell affirmed the company's confidence in its five-year notional model, including 200 basis points of margin expansion, but did not provide specific quarterly guidance. Executive Vice President and CFO Daniel Jackson explained that margin improvement would likely occur throughout the year and attributed the Q4 revenue per student decline to the mix shift toward employer-affiliated students and higher scholarships, expecting it to be stable in 2025. Chairman Robert Silberman added that the company's strategy is to lower student costs, not aggressively raise prices.

Jasper Bibb of Truist Securities sought clarification on the full-year 2024 operating margin outlook, the potential impact of Australian student caps on Torrens University, capital allocation priorities after debt repayment, and the drivers of the decline in U.S. higher education revenue per student.

Answer

EVP & CFO Daniel Jackson confirmed that 2024 operating margin expansion would likely be at the higher end of the previously guided 150-175 basis point range. He and CEO Karl McDonnell noted the uncertainty around Australian student caps but highlighted Torrens' past success in growing domestic enrollment. Chairman Robert Silberman detailed the capital allocation framework, prioritizing internal investments first. Daniel Jackson attributed the lower revenue per student to the continued mix shift toward employer-affiliated students.

Jasper Bibb inquired about the assumption for project demand in APi Group's guidance, specifically the low to mid-single-digit growth projection for the year, contrasting it with the cited strong project pipeline in areas like data centers, and whether this reflects conservatism or harder comps.

Answer

President and CEO Russ Becker affirmed that the analyst 'nailed all three of the reasons' for the project demand assumption at the midpoint of the guidance range, implying a combination of conservatism, being early in the year, and facing harder comparisons.

Jasper Bibb questioned the assumption of low to mid-single-digit project demand growth in APi Group's guidance, given the cited strength in the project pipeline, particularly in data centers, asking if this reflects conservatism or harder comps.

Answer

President and CEO Russ Becker confirmed that the reasons mentioned, including conservatism, harder comparisons, and being early in the year, are all valid factors contributing to the midpoint of the guidance range.

Jasper Bibb from Truist Securities asked if the revenue contribution from data centers is expected to continue building significantly in the coming quarters, potentially exceeding the 9-10% cited. He also sought an update on the early progress of APi Group's technology investments, particularly the ERP system, and key milestones for 2026.

Answer

President and CEO Russ Becker clarified that data center revenue contribution is not expected to be 'materially higher,' likely peaking around 10-11%, as fire and life safety components are a smaller fraction of total project value compared to other trades. EVP and CFO David Jackola reported that the ERP investment in Safety Services is progressing as planned, currently in the pilot deployment phase. He noted that 2025 marks the peak spend for the ERP project, with costs expected to decrease in 2026 and 2027.

Jasper Bibb asked if the revenue contribution from data centers is expected to materially increase beyond the 9-10% cited, and sought an update on the early progress and key milestones for APi Group's tech investments, specifically the ERP system.

Answer

Russ Becker, President and CEO, stated that data center revenue contribution is not expected to be materially higher, perhaps creeping to 10-11%, but unlikely to reach 12%. He clarified that fire and life safety components of these projects are significantly smaller than other trades, limiting their overall impact on APi Group's revenue compared to peers. David Jackola, EVP and CFO, reported that the ERP investment in Safety Services is progressing as expected, having moved out of the blueprinting phase and into pilot deployment. He noted that 2025 will be the high-water mark for ERP spend, with costs stepping down in 2026 and 2027.

Jasper Bibb of Truist Securities asked for more detail on the Specialty projects pipeline and the expected organic growth composition for the third quarter.

Answer

President and CEO Russ Becker described the pipeline as very solid, with record backlog now exceeding $4 billion and strong margins embedded within it. EVP & CFO David Jackola provided Q3 guidance, expecting mid-single-digit organic growth in Safety Services and high-single-digit organic growth in Specialty Services.

Jasper Bibb of Truist Securities, Inc. sought to confirm if the revenue mix directly exposed to tariffs is around 15-20% and asked if the company is currently seeing increased material costs or just managing future risk. He also requested an update on the rural broadband program's progress and its impact on guidance.

Answer

EVP and CFO Glenn Jackola confirmed the 15% estimate for tariff-exposed revenue is fair. President and CEO Russell Becker noted that hot-rolled coil prices, which affect pipe costs, had peaked earlier in the year but have recently moderated. He reiterated that APi has contractual protections for cost increases. Regarding the rural broadband program, Becker described its cadence as 'choppy' but affirmed that this variability is already factored into the company's forecast and guidance.

Jasper Bibb inquired about the underlying mix and growth rates within SendTech for 2026, specifically comparing shipping technology to core hardware and mailing meters, and asked for an update on capital return priorities including share repurchases and dividends.

Answer

CEO Kurt Wolf segmented SendTech into mailing meters (expecting efforts to slow decline post-IMI migration), shipping software (focusing on product offerings and competitive advantage with aggressive market testing), and the bank (excited about growth opportunities with new hire Steve Fischer, but with caution). EVP, CFO, and Treasurer Paul Evans described share buybacks as opportunistic and disciplined, noting the company's commitment to a net debt to EBITDA around 3x. He reiterated that the stock is undervalued and they will continue to buy it, with dividends being a quarter-by-quarter decision, and Q4 capital allocation prioritizing debt and share buybacks.

Jasper Bibb asked about the underlying mix in SendTech for 2026, specifically how the company views growth rates in shipping technology versus core hardware (mailing meters) and the bank. He also sought an update on capital returns, including the balance of share repurchases, dividends, and other priorities for 2026, noting the aggressive pace of buybacks in Q4.

Answer

CEO Kurt Wolf segmented SendTech into mailing meters (aiming to slow decline after IMI headwinds), shipping software (focusing on competitive advantage and aggressive market testing), and the bank (excited for growth with new leadership, but with caution). CFO Paul Evans described capital allocation as opportunistic, emphasizing disciplined share and debt buybacks, commitment to a net debt to EBITDA ratio around 3x, and viewing the stock as undervalued. He noted that the dividend is a quarter-by-quarter decision.

Jasper Bibb asked if the RWJBarnabas contract is comparable in size to the Penn Medicine win, its launch timeline, and its material contribution to fiscal 2026 versus 2027. He also sought insights into the drivers of strong Europe growth, future opportunities, and the pipeline for that business.

Answer

CEO John Zillmer confirmed RWJBarnabas is larger than Penn Medicine with potentially similar revenues, launching this summer with significant FY26 impact, though the schedule is being finalized. He praised the International team's extraordinary job, attributing success to hyper-focus on growth, improved performance, investment in sales/leadership, and high expectations for continued success. CFO Jim Tarangelo added that healthcare contracts typically require less capital and have a faster ramp-up to profitability due to cost-plus structures.

Jasper Bibb asked if the RWJBarnabas contract is comparable in size to the Penn Medicine win and about its timeline for reaching a mature run rate, specifically if it will be a material driver in fiscal 2026 or primarily 2027. He also sought insights into the drivers of strong Europe growth and the pipeline for that business.

Answer

CEO John Zillmer confirmed that the RWJBarnabas Health system is larger than Penn Medicine's, and its potential revenues are likely as strong. He expects a staged opening beginning this summer, with a significant impact in fiscal 2026, though the final implementation schedule is still being determined. Regarding Europe growth, Zillmer praised the international team's extraordinary job, attributing their multi-year success to a hyper-focus on growth, improved performance, and investments in sales resources, processes, systems, and leadership. He expressed high expectations for their continued success.

Jasper Bibb requested more detail on the organic run rate into fiscal 2026, specifically asking about organic growth in October or September, excluding the 53rd week, and also inquired about the quarterly cadence of margins, expecting lower first-half margins due to contract ramps.

Answer

CFO Jim Tarangelo noted that the 53rd week in fiscal 2025 impacts the Q1 2026 cadence, leading to a roughly 3-3.5% lower growth rate in Q1 that will be recaptured in Q2, evening out the first half. He confirmed that the first half's margin cadence would also reflect this revenue shift, with Q1 experiencing a margin impact due to less revenue, but overall the first half would look normal. He stated that Aramark is exiting Q4 2025 with good momentum into October and Q1 2026.

Jasper Bibb asked for more details on the organic run rate heading into fiscal 2026, specifically what organic growth looked like in October or September, excluding the 53rd week impact.

Answer

CEO John Zillmer (likely referring to CFO Jim Tarangelo's response) explained that the 53rd week in fiscal 2025 impacts the 2026 cadence, with a strong operating week in higher education and K-12 being absorbed into fiscal 2025. This results in a slight calendar shift, causing a ~3-3.5% lower growth rate in Q1 2026 compared to the run rate, which will be recaptured in Q2. He noted good momentum exiting Q4 2025 and into October. Bibb also inquired about the quarterly cadence of margins, expecting them to be lower in the first half due to contract ramps and stronger in the back half. Tarangelo confirmed this interpretation, stating that the margin impact in Q1 would be due to lower revenue, but it would even out for the full first half.

Jasper Bibb of Truist Securities inquired about the competitive landscape in the education sector, given a competitor's weakness, and asked for more detail on the confidence behind an 8%+ organic growth run-rate heading into fiscal 2026.

Answer

CEO John Zillmer attributed Aramark's success and market share gains in education to superior leadership and operational performance. Both Zillmer and CFO Jim Tarangelo confirmed that the combination of new education contracts starting in the fall and strong sports business performance drives their confidence in exiting the year with a high growth run-rate.

Jasper Bibb inquired about discussions with healthcare clients facing potential subsidy changes and margin pressures. He also asked for the current percentage of net new business derived from first-time outsourcing.

Answer

CEO John Zillmer noted that cost pressure is a constant in the healthcare industry, which creates ongoing opportunities for Aramark to help clients by adding services and driving efficiencies. He stated that first-time outsourcing remains an elevated portion of net new business, currently in the 'mid-40s' percent range, with significant opportunities across healthcare, education, and corrections.

Jasper Bibb sought to clarify if the potential 30 basis point impact from tariffs included levies on goods from China, Mexico, and Canada. He also asked about the drivers of strength in the U.S. Business & Industry (B&I) segment and the impact of return-to-office trends.

Answer

CEO John Zillmer clarified the 30 basis point figure was an increase in food cost, not a margin decrement, from potential tariffs on goods from all three countries, prior to any mitigation actions. He also stated that the return-to-work trend continues to be a tailwind for the B&I segment, driving higher daily participation rates and significant new account wins.

Jasper Bibb asked about the expected quarterly cadence of organic growth in fiscal 2025, considering new contracts, exited work, and the 53rd week. He also inquired about the benefits of launching Avendra International.

Answer

CFO Jim Tarangelo projected that quarterly organic growth will accelerate through fiscal 2025, with Q4 likely being the highest due to the timing of new business and lapping contract losses. CEO John Zillmer clarified that the Avendra International launch is a rebranding of an already consolidated international GPO organization, whose benefits in supply chain management are already being realized.

Jasper Bibb asked about the drivers behind the expected reacceleration of student starts over the balance of the year, particularly the strong fiscal second quarter, and sought clarification on the size of initial start cohorts for San Antonio and Atlanta. He also inquired about marketing yield and student acquisition costs.

Answer

CEO Jerome Grant explained that the reacceleration is driven by momentum from new program launches, the Dallas campus expansion, and the opening of the San Antonio campus in Q2, followed by Atlanta later. He noted that individual new cohorts are small but collectively move the needle with over 20 programs launching. CEO Jerome Grant stated that marketing yield is improving due to AI-driven technology and more precise targeting. CFO Bruce Schuman added that marketing dollar efficiency as a percentage of revenue is up slightly year-over-year in Q1 due to new campus and program openings.

Jasper Bibb with Truist inquired about the drivers behind the anticipated reacceleration of student starts in the balance of the year, particularly the strong fiscal second quarter, and the expected size of initial student cohorts for the San Antonio and Atlanta campuses. He also asked about trends in marketing yield and student acquisition costs.

Answer

CEO Jerome Grant explained that the reacceleration is driven by momentum from new program launches, the Dallas campus expansion, and the opening of the San Antonio campus in Q2, followed by Atlanta later. He noted that individual cohort sizes are small but collectively move the needle as over 20 programs launch. CEO Jerome Grant also stated that marketing yield is improving due to efficient tools, AI-driven technology, and more precise targeting. CFO Bruce Schuman added that marketing dollar efficiency as a percentage of revenue increased slightly due to new campus and program openings, which is a justified investment.

Jasper Bibb with Truist inquired about the expected start growth for 2026, specifically asking for a breakdown between the UTI and Concorde segments, and sought clarification on the projected number of annual campus openings.

Answer

Bruce Schuman, CFO, indicated that 2026 start growth would be similar to 2025, around 8-9%, with a comparable segment profile for both UTI and Concorde. Jerome Grant, CEO, clarified that the 'up to five campus openings annually' refers to a combined total across both divisions, an increase from the previous expectation of two to three per year. Regarding the Department of Education's ID verification measures, Jerome Grant, CEO, confirmed no impact on front-end student acquisition, noting only a temporary slowdown in cash collection due to a backlog, which is now returning to normal.

Jasper Bibb of Truist Securities requested more detail on Q4 student interest levels, the program mix for incoming high school students, the potential size of the short-term training programs that could benefit from Pell Grant eligibility changes, and current capacity constraints at Concord campuses.

Answer

CEO Jerome Grant explained that roughly 50% of UTI division starts occur in Q4, driven by high school graduates who predominantly enroll in auto and diesel programs. He stated that short-term program revenue is currently minimal but the new Pell eligibility creates a future growth opportunity. For Concord, he clarified they are approaching 'soft caps' on student enrollment which they are now working to get raised, rather than facing hard capacity constraints.

Jasper Bibb from Truist asked for a segment-level breakdown of enrollment growth expectations for the second half of the year and sought more specific framing on the expected moderation in EBITDA growth in fiscal 2026 and 2027.

Answer

CEO Jerome Grant stated that Concorde's growth will likely moderate as it laps prior investments and nears capacity, while UTI's second-half growth will slow as the high school recruitment season is largely complete. CFO Bruce Schuman added that while revenue growth should remain linear, EBITDA margin expansion will be temporarily moderated in FY26-27 by strategic investments in new campuses before accelerating in FY28-29.

Jasper Bibb asked about the relative new enrollment growth rates for the UTI and Concorde divisions, the amount of deferred expense from Q1, and the expected cadence of EBITDA margins for the rest of the fiscal year.

Answer

CEO Jerome Grant indicated that Concorde would likely see a larger organic growth increase, whereas UTI is operating more predictably. Management clarified that about $5-6 million in expenses were deferred from Q1 to Q2. Executive Matthew Kempton projected EBITDA margins would be in the low double digits for Q2 and Q3, with a seasonal jump to the upper teens in Q4.

Jasper Bibb from Truist Securities asked about the expected fiscal 2025 EBITDA margin expansion, specifically whether it would be balanced between the UTI and Concorde segments or skewed by growth investments. He also sought confirmation on the number of new program launches for FY25 and whether this higher number represents a new baseline for the North Star strategy.

Answer

CEO Jerome Grant projected that EBITDA margin expansion would likely be stronger at the Concorde division. This is due to lower relative investment in new campuses for Concorde, as its Heartland co-branded campus is funded by the partner, and ongoing operational optimization efforts are beginning to pay dividends. He confirmed 9 full-length and 10 short-course programs are planned for FY25, stating the 'at least 6' target is a consistent baseline for UTI, with Concorde's program expansion expected to accelerate after 2026.

Jasper Bibb requested an update on sourcing costs and tariffs relative to expectations, and details on the underlying mix and margin health of the first-aid business.

Answer

Todd Schneider, President and CEO, stated that Cintas's diversified supply chain and efficiency efforts help mitigate the dynamic tariff environment, with costs trending as expected due to amortization. For the first-aid business, he expressed satisfaction with its low double-digit growth, noting that mix changes can impact margins within a healthy range, and the focus remains on overall operating margin growth and future investments. Jim Rozakis, Executive Vice President and Chief Operating Officer, added that the first-aid team executed fantastically.

Jasper Bibb asked for an update on sourcing costs and tariffs, comparing current trends to initial fiscal year expectations, and sought more detail on the underlying mix in the First Aid business, specifically regarding recurring revenue versus training.

Answer

President and CEO Todd Schneider stated that while tariffs present a dynamic environment, Cintas's flexible supply chain and geographic diversity help mitigate impacts, with current trends aligning with expectations. Regarding First Aid, he noted strong double-digit growth and attractive margins, acknowledging that business mix (e.g., training vs. recurring services) can cause margin fluctuations within an acceptable range, as Cintas prioritizes long-term investment and value creation.

Jasper Bibb requested an update on tariff-driven expense growth at Cintas and how it compares to initial expectations for the year, and also asked if there has been any change in sales cycles for non-programmers this year.

Answer

President and CEO Todd Schneider acknowledged Cintas is not immune to tariffs but highlighted their global supply chain as a competitive advantage, leveraging process improvements, purchasing power, geographic diversity, and multiple providers to mitigate impacts. He confirmed that the guidance already accounts for the current tariff environment. He also stated that there has been no real change in sales cycles for non-programmers or in general, noting they have remained consistent.

Jasper Bibb asked for an update on the impact of tariff-driven expense growth on Cintas and how it compared to initial expectations for the year.

Answer

Todd Schneider, President and CEO, acknowledged that Cintas is not immune to tariff impacts but highlighted its global supply chain as a competitive advantage. He explained that the company's culture drives process improvements and efficiencies, rather than simply passing on increased costs, supported by significant purchasing power, geographic diversity, and multiple providers for over 90% of products. The current guidance already contemplates the tariff environment. For a follow-up on no-programmer sales cycles, Mr. Schneider stated there has been no real change in sales cycles for no-programmers or in general, remaining consistent, and reiterated Cintas' ongoing investment for future success.

Jasper Bibb sought an update on Cintas' tariff-driven expense growth and how it compared to initial expectations for the year. He also asked if there had been any changes in sales cycles for 'no-programmers' this year.

Answer

Todd Schneider, President and CEO, acknowledged that Cintas is not immune to tariffs but highlighted its global supply chain as a competitive advantage, driving efficiencies through purchasing power, geographic diversity, and multiple providers. He confirmed that the guidance contemplates the current tariff environment. He also stated that sales cycles for 'no-programmers' and in general have remained consistent with no real changes.

Jasper Bibb from Truist Securities asked for more detail on the expected cadence of the fiscal 2026 outlook, particularly concerning difficult comparisons for incremental margins, and inquired about trends in ad/stops.

Answer

President & CEO Todd Schneider stated the FY26 revenue guidance of 6.4%-7.8% reflects strong business momentum. He noted the EPS guidance of 7%-10.2% implies margin expansion, with the midpoint representing an operating margin above 23% and high-20s incrementals. On ad/stops, Schneider commented that the customer base is performing well, especially the 70% in the services sector, but did not provide specific metrics.

Jasper Bibb of Truist Securities asked for more detail on the expected cadence of the fiscal 2026 outlook, particularly regarding margin comparisons, and inquired about recent trends in customer additions versus losses ('ad stops').

Answer

President & CEO Todd Schneider outlined the fiscal 2026 guidance, which implies margin expansion and incrementals in the high 20s at the midpoint, consistent with prior years. Regarding customer trends, Mr. Schneider stated that the customer base is performing well and expressed confidence in the business momentum, though he did not provide a specific 'ad stop' metric.

Jasper Bibb asked for an update on the cost of goods sold (COGS) impact from potential tariffs on Mexico and China, and separately, about the M&A pipeline for midsized private platforms.

Answer

President and CEO Todd Schneider stated it was too early to quantify tariff impacts but highlighted Cintas's strategic supply chain, with less than 10% of products being sole-sourced, as a key advantage. On M&A, he affirmed that tuck-in acquisitions are a highly attractive and active part of their strategy across all route-based segments to gain efficiencies and customers, though the timing is often unpredictable.

Jasper Bibb asked about the potential impact of proposed administrative tariffs on material costs and whether the company's sourcing from Mexico, Canada, or China could be affected.

Answer

CEO Todd Schneider stated that while it's too early to know the exact impact, Cintas's global supply chain is well-positioned to pivot, sourcing over 90% of products from diverse geographic locations. CFO Mike Hansen added that the amortization of rental material costs over time provides a buffer against immediate P&L impacts from tariff changes.

Jasper Bibb from Truist Securities inquired about the progress of the SmartTruck technology and the Google partnership, associated margin benefits, and the performance of the Fire Protection business, including its operating margin and the status of its SAP implementation.

Answer

President and CEO Todd Schneider highlighted that the SmartTruck and Google/SAP partnerships are creating efficiencies and allowing more time with customers. EVP and CFO Mike Hansen added that the Fire business achieved a 50% gross margin for the second consecutive quarter, though SG&A is seeing some pressure from the ongoing SAP implementation, which is factored into the annual guidance.

Jasper Bibb asked about ABM Industries' experience with pricing concessions in the Business & Industry (B&I) segment, particularly in challenged U.S. office markets, and whether the pace of customer concessions has slowed. He also requested more details on the remaining phases of the ERP roadmap for 2026 and its expected impact on the free cash flow outlook.

Answer

Scott Salmirs, President and CEO, stated that pricing discussions in the B&I segment have stabilized and were less dramatic in Q4 compared to Q3, indicating normalization. He clarified that some prior pricing discussions in Manufacturing & Distribution were strategic, anticipating the WGNSTAR deal. David Orr, Executive Vice President and CFO, explained that the vast majority of transactions are now on the new ERP system, with remaining groups being less complex. He highlighted significant improvements in cash flow and DSOs in the latter half of 2025, projecting a strong normalized free cash flow of approximately $250 million for 2026, even with incremental capital spend.

Jasper Bibb asked for an update on pricing concessions within ABM's B&I business, particularly in challenged U.S. office markets, and whether the trend of concessions has slowed. He also sought details on the remaining phases of the ERP roadmap for 2026 and its anticipated impact on the free cash flow outlook.

Answer

Scott Salmirs, President and CEO, ABM Industries, confirmed that pricing discussions have stabilized and are no longer as significant as in Q3, noting that some prior M&D pricing decisions were made in anticipation of the WGNSTAR deal. David Orr, EVP and CFO, ABM Industries, stated that the majority of transactions are now on the new ERP system, with less complex groups remaining. He emphasized the significant improvement in cash flow and DSOs in the latter half of 2025, projecting a strong normalized free cash flow target for 2026, even with planned capital expenditures.

Jasper Bibb (Truist Securities) asked for clarification on the nature of margin headwinds, specifically if they were incremental growth investments or an operating leverage challenge, given strong B&I and M&D growth. He also inquired about progress on cash collections, potential delinquency concerns, and current billing cycles for new revenue.

Answer

President and CEO Scott Salmirs explained that B&I margin pressure was defensive, protecting client footprint in specific geographic areas, while M&D pressure was opportunistic for new business in strategic markets. Executive VP and CFO David Orr reported no material concerns on delinquencies, highlighting a 7% sequential reduction in Day Sales Outstanding (DSOs) from Q2 to Q3 due to intense focus on collections.

Jasper Bibb of Truist Securities asked if mid-single-digit organic growth was achievable for the company in the second half of the year. He also requested more detail on the recently announced battery energy storage contract win and the broader pipeline for that service offering within the ATS segment.

Answer

President and CEO Scott Salmirs declined to provide specific revenue growth guidance but emphasized the positive trend of all industry groups returning to organic growth. Regarding the ATS segment, he highlighted a record-high backlog of $700 million and noted that while the company is monitoring potential impacts from tariffs and energy tax credit legislation, the microgrid business remains strong and clients are still moving forward with projects.

Jasper Bibb inquired about the Manufacturing & Distribution (M&D) segment, asking for visibility on the impact of a large client exit and the outlook for the second half. He also asked for quantification of deferred collections and the potential for ERP-driven cost savings.

Answer

President and CEO Scott Salmirs noted that the impact of client exits in M&D has been lapped or will be lapped, and he expects the segment to return to growth in the second half, driven by a strong pipeline. CFO Earl Ellis stated they expect to recover deferred cash flow in Q2 and meet full-year targets, with full ERP cost savings to be realized in the next fiscal year after legacy systems are retired.

Jasper Bibb from Truist Securities asked for an update on the revenue expectations for the Business & Industry (B&I) segment for the remainder of fiscal 2024. He also requested details on the ramp-up of the large $180 million microgrid contract within the ATS segment.

Answer

President and CEO Scott Salmirs stated that while the B&I segment has shown great resilience, the company is not yet ready to call a full recovery in the commercial real estate market but remains optimistic. Regarding the large contract, he confirmed it is progressing on a steady cadence across its 180+ sites and is expected to run through at least the beginning of fiscal 2026.

Jasper Bibb sought an update on Ask Gartner, including early indications of customer engagement and confirmation that it's part of the normal license access without separate charges. He also asked about the client count ticking down quarter-over-quarter, specifically if it's due to small tech vendor churn and if stabilization or increase is expected in 2026.

Answer

Gene Hall (Chairman and CEO, Gartner) confirmed that Ask Gartner is rolled out to 100% of licensed users with no additional fees, and it has increased overall content usage and engagement, which is expected to help retention. Craig Safian (CFO, Gartner) attributed the client count decrease primarily to small tech vendor churn (despite adding many), and expects stabilization then modest growth in enterprise count over the medium term to achieve double-digit CV growth.

Jasper Bibb requested an update on AskGartner, including early indications of customer engagement and confirmation of its pricing model. He also asked about client count trends and expectations for stabilization or increase in 2026.

Answer

Chairman and CEO Gene Hall confirmed that AskGartner has been rolled out to all licensed users at no additional cost, leading to increased overall content usage and engagement, which is expected to positively impact retention. CFO Craig Safian explained that the slight quarter-over-quarter decline in client count is primarily due to churn among small tech vendors, despite new additions. He anticipates stabilization and modest growth in enterprise count over the medium term to support the goal of double-digit CV growth, while acknowledging that significant growth can also be driven by existing clients.

Jasper Bibb of Truist Securities asked about the potential impact of the 'big beautiful bill,' specifically questioning if any of APEI's schools have exposure to the new accountability standards included in the legislation.

Answer

CEO Angela Selden stated the bill has a minimal negative impact and a positive one through the $100 million in additional Tuition Assistance funding, which should expand the market for military students. CFO Richard Sunderland added that APEI has always performed well against gainful employment-style metrics due to its focus on affordable programs in high-demand fields. He noted that lifetime loan caps are not a significant issue for APEI students due to the affordability of its programs.

Jasper Bibb inquired about the margin and enrollment impact from the Tuition Assistance (TA) portal downtime at APUS in Q1, the potential EBITDA drag from Graduate School, and the number of Rasmussen nursing campuses that met the state NCLEX threshold during the quarter.

Answer

CFO Richard Sunderland stated that the APUS team minimized the impact of the portal outage, which had no material effect on the margin, and noted a sequential improvement in registration guidance for Q2. CEO Angela Selden added that the full-year guidance incorporates the expected downside from Graduate School, but specific guidance for the segment is not being provided as strategic options are explored. She also confirmed that NCLEX performance is now consistently strong, with 24 of 25 campus programs meeting benchmarks, so the company no longer reports it as a key metric.

Jasper Bibb asked about the potential G&A savings from the planned institutional consolidation, the key drivers of Rasmussen's strong online enrollment growth, and the expected contribution from Rasmussen to the full-year 2025 EBITDA guidance.

Answer

CEO Angela Selden stated the institutional consolidation is primarily focused on accelerating growth and realizing revenue synergies, such as cross-selling programs, rather than significant cost reductions. She attributed Rasmussen's online growth to a successful shift toward organic lead generation and hyperlocal marketing for campuses. While not providing a specific margin breakout, Ms. Selden confirmed that Rasmussen's revenue improvements are expected to have a substantial positive flow-through to EBITDA in 2025.

Jasper Bibb inquired about the recent pricing change for APUS Masters programs and its potential impact on 2025 revenue. He also asked about the long-term profitability path for the Hondros segment and its current enrollment capacity.

Answer

EVP and CFO Rick Sunderland stated the APUS pricing change affects a small graduate student population and was made to uphold the core value of no out-of-pocket costs for military members, with a negligible impact on overall revenue per student. CEO Angela Selden agreed. Regarding Hondros, Selden detailed that profitability improvements are expected from strategic campus relocations, new program launches, and a strong focus on student retention, which is now above a 70% benchmark at several Ohio campuses. She confirmed they expect EBITDA improvement at Hondros in 2025 and are optimizing the physical footprint for growth without providing a specific capacity number.

Jasper Bibb of William Blair inquired about the comparative growth rates of Exponent's proactive and reactive business segments during the quarter, the current portfolio mix, and any recent changes in proactive work driven by supply chain shifts.

Answer

Executive Richard Schlenker stated that reactive business grew in the low single digits, offset by a slight decline in proactive services. Executive Catherine Corrigan confirmed the business mix is approximately 60% reactive and 40% proactive. Both executives noted that while supply chain diversification is creating opportunities in areas like electronics and medical devices, the impact is still emerging and has not yet significantly moved the needle on overall results.

Jasper Bibb of Truist Securities asked for clarification on the expected cadence of full-time equivalent (FTE) employee growth in 2025, the reasons for weaker reactive business performance in the quarter, and the outlook for key industry groups like consumer electronics and chemicals.

Answer

Executive Richard Schlenker stated that Exponent expects FTEs to grow 1-2% sequentially each quarter in 2025. Executive Catherine Corrigan explained that the reactive business slowdown was due to difficult year-over-year comparisons and the completion of several large projects, not a fundamental market shift. She added that the consumer electronics sector is showing healthy signs of growth driven by new product pipelines and AI features, while the chemicals sector faces near-term headwinds from industry restructuring but retains strong long-term drivers.

Jasper Bibb of Truist Securities inquired about the Q1 outlook for Nurse and Allied gross margins, the impact of labor disruption revenue, and the market catalysts needed for sequential volume growth.

Answer

CFO and COO Brian Scott explained that the underlying Q4 Nurse and Allied gross margin was closer to 22.5% after excluding certain reserve reversals, and Q1 is expected to be similar due to stabilizing bill rates. CEO Caroline Grace added that for volume growth, they are watching for the projected 3-4% increase in patient demand to translate into higher order fill rates, as the premium for travel nurses has normalized.

Jasper Bibb, on for Tobey Sommer, asked for more detail on mid-market client retention during Q4 and the specific impact of the Workday partnership. He also questioned the magnitude and timing of the assumed improvement in net client hiring for the 2025 outlook.

Answer

CEO Paul Sarvadi highlighted a dramatic improvement in large account retention, with attrition down significantly, attributing this directly to the Workday partnership and noting some large clients are already lined up for beta testing. He clarified that the 2025 guidance assumes a conservative improvement in net hiring, remaining below historical norms and weighted toward the second half of the year.

Jasper Bibb from Truist Securities sought to confirm if underlying demand is stable, suggesting that adjusted for working days and the Trilogy acquisition, Q3 revenue guidance is effectively flat sequentially. He also inquired about the correlation between M&A activity and Korn Ferry's business.

Answer

Executive Gary Burnison confirmed that the sequential outlook is impacted by holiday timing affecting the consulting and interim businesses. He highlighted a positive indicator or "green shoot" in the RPO business, where new business shifted significantly to new logos (60% in Q2, and even higher in November), suggesting strong momentum. Regarding M&A, Burnison stated that inorganic growth has historically accounted for about 40% of their expansion and that the company will continue its systematic approach to acquisitions, leveraging its robust capital base.

Jasper Bibb, on for Tobey Sommer, questioned why the 20% sequential increase in Q4 orders is not translating into volume growth and asked for clarification on the expected trend for bill rates.

Answer

CEO John Martins explained that while order growth is encouraging, over 50% of incoming orders are not at a marketable bill rate, causing a lag in converting them to filled positions. He expects this gap to close in the coming months. CFO William Burns specified that travel bill rates are anticipated to be roughly flat sequentially in Q4, with a potential variance of plus or minus 1%.

Jasper Bibb, on behalf of Tobey Sommer, questioned the 20% sequential increase in Q4 orders, asking if bill rates were sufficient to attract supply and clarifying the expected sequential trend for bill rates.

Answer

CEO John Martins acknowledged that while the 20% order growth is encouraging, over 50% of those orders are not at the market rate required to attract clinicians. He views this as a leading indicator that will eventually lead to an inflection point. CFO William Burns clarified that the Q4 guidance assumes travel bill rates will be approximately flat, down plus or minus 1%.

Jasper Bibb from Truist Securities inquired about the drivers behind the revised organic growth guidance, specifically the balance between softer Global Services demand and stronger AMS/DRS performance. He also questioned the timeline for achieving the long-term free cash flow conversion target and asked about potential incremental FX headwinds.

Answer

CEO Mark Eubanks explained that the Global Services headwind was due to low volatility in precious metals markets, and the company is not forecasting a significant change in Q4. CFO Kurt McMaken confirmed the long-term free cash flow conversion target of nearly 50% remains intact, but declined to provide a specific timeline for achieving it. Eubanks also acknowledged that recent U.S. dollar strength, occurring after the quarter's end, would likely be an incremental headwind to the current guidance.

Jasper Bibb, on behalf of Tobey Sommer, asked for a breakdown of performance drivers in the Healthcare segment, including pricing and utilization, and its impact on margins. He also questioned the achievability of the mid-teens EBITDA margin target for 2025.

Answer

Chief Financial Officer John Kelly explained that while Q3 Healthcare growth was driven by digital and managed services, the sales pipeline is well-balanced and includes significant performance improvement projects. He expects the segment's full-year margin to land at the upper end of the guided range. Regarding the 2025 EBITDA margin target, Kelly expressed strong confidence, highlighting the consistent margin improvement trajectory and the potential for further gains as utilization, which is currently not fully optimized, improves.

Jasper Bibb, on for Tobey Sommer, asked if Kforce expects any F&A project work related to recent hurricanes and requested a framing of the incremental addressable market unlocked by the new in-house offshore delivery capability in India.

Answer

COO David Kelly clarified that Kforce will not be pursuing hurricane-related project work, as the company strategically shifted its F&A business towards higher-skilled areas synergistic with technology about two years ago. Regarding the India center, he stated that while difficult to quantify, it unlocks a "significant amount" of incremental opportunity, especially in managed solutions, by allowing Kforce to bid on projects it was previously precluded from.

Jasper Bibb, on for Truist Securities, asked about the core margin drivers for 2025 and whether the development of the New York City market and rail assets could materially change the margin profile of the Northeast region.

Answer

CFO Mary Anne Whitney reiterated that the key margin drivers for 2025 remain price-led organic growth and benefits from improving employee retention and safety. Regarding the Northeast, she noted that while the NYC franchise model will provide local efficiencies, the region's overall margin profile is influenced by higher transfer and disposal costs compared to other regions.

Jasper Bibb, on for Tobey Sommer, inquired how the mix of new LNG and recycling projects might impact STS segment margins relative to the flattish view from Investor Day. He also sought clarification on whether the 2025 assumptions for HomeSafe revenue remain on track despite the slower 2024 start.

Answer

President and CEO Stuart Bradie reiterated that KBR is holding to its long-term STS margin targets of circa 20%, acknowledging quarterly mix volatility but affirming the overall guide through 2027 remains unchanged. Regarding HomeSafe, he confirmed the 2025 revenue assumptions are still on target, as the company took a conservative view in its long-term plan, and sees potential upside as domestic moves ramp up.