Managing Director and Senior Equity Research Analyst at BMO Nesbitt Burns Inc.
Jeffrey Silber is a Managing Director and Senior Equity Research Analyst at BMO Capital Markets, specializing in business services, industrial services, and education, including sectors such as staffing, waste services, payroll, and education services. He covers companies like Morningstar, S&P Global, Strategic Education, and Bright Horizons Family Solutions, with a career record of 1,015 published ratings on 35 stocks, an average price target met ratio of 80.81%, and standout calls achieving up to 42.96% returns within one week. Silber began his financial services career as an accountant at KPMG, then joined Deloitte in consulting and research roles before moving to BMO Capital Markets in 1996. He holds an MBA from Wharton, a BS in accounting from Yeshiva University, is a Certified Public Accountant (CPA), and is a nine-time consecutive StarMine Analyst Award recipient, recognized as the #1 Stockpicker in his sector multiple times.
Jeff Silber asked about the general outlook for state budgets going into fiscal year 2027.
Simon Allen, Chairman, President, and CEO, reported hearing 'good things about state budgets' and expressed no concerns about decline. He noted that K-12 budgeting is primarily a local and state-run activity, and courseware constitutes less than 1% of the overall education budget, contributing to confidence.
Jeff Silber asked about the general outlook for state budgets going into fiscal year 2027.
Simon Allen, Chairman, President, and CEO, reported hearing good things about state budgets and expressed no concern about declines. He noted that K-12 budgeting is primarily a local and state activity, and courseware represents a tiny fraction (less than 1%) of the overall education budget, giving confidence for the future.
Jeff Silber asked about the pricing environment, when pricing increases are instituted, and expectations for pushback. He also inquired if the recent government shutdown had worsened conditions or slowed down business with the U.S. federal government.
Craig Safian (CFO, Gartner) stated that the bulk of their normal 3-4% price increase went into effect on November 1, with little pushback expected as clients focus on value. He confirmed that the government shutdown had a 'little bit' of an impact, requiring essential employee status for deals, but noted it was their smallest renewal quarter for federal business, with about 15% of the year's federal CV remaining.
Jeff Silber asked about the current pricing environment, the timing of Gartner's price increases, and the level of client pushback. He also inquired about the impact of the recent government shutdown on federal business.
CFO Craig Safian stated that the majority of Gartner's global price increase, averaging around 3.5%, took effect on November 1st, with minimal client pushback as clients prioritize the value received from Gartner. He confirmed that the government shutdown had a 'little bit' of an impact on federal business in October, requiring essential employees for deals to close. However, he noted that Q4 is Gartner's smallest renewal quarter for federal contracts, with most 2025 renewals already completed.
Jeff Silber inquired about the reasons for the declining number of client enterprises in both the GTS and GBS segments over the past few years.
EVP & CFO Craig Safian clarified that the primary driver for the decline in the total enterprise count is the higher-than-average churn rate among small tech vendors. Since each enterprise counts as one regardless of its spending level, this churn disproportionately affects the client enterprise metric.
Jeffrey Silber asked about the cancellation mechanics for multiyear contracts outside of the federal government and inquired about the renewal seasonality for the non-federal business.
CFO Craig Safian explained that multiyear contracts are typically non-cancelable commitments, which adds to business resilience. For non-federal renewals, he noted that Q1 and Q4 are the largest quarters. He also mentioned that while client retention is strong, wallet retention is being impacted by longer sales cycles for new and upsell business.
Jeffrey Silber asked for details on the November price increase, including its application across products and geographies and whether there was any significant pushback. He also inquired about specific business trends in Europe and China.
CFO Craig Safian confirmed the price increase averaged slightly below 4% and was applied specifically by product and geography, with a focus on offsetting wage inflation. He reported no unusual pushback. Safian described the selling environment in Europe as consistent with H2 2024 and noted that China remains 'pretty challenging,' especially with larger clients.
Jeffrey Silber asked about the renewal process, specifically the level of price increases being implemented, and inquired about the cause of the year-over-year decrease in Consulting gross margins.
CFO Craig Safian explained that the upcoming annual price increase is just under 4%, in line with the historical 3-4% range aimed at offsetting wage inflation. He confirmed that the decline in Consulting contribution margin was primarily driven by a mix shift, as the prior-year quarter had a significantly higher volume of highly profitable contract optimization deals.
Jeff Silber asked about the adjusted operating margin, particularly for Ratings and Market Intelligence, inquiring if there were any one-time items and the sustainability of the margin expansion.
Eric Aboaf, CFO and EVP, acknowledged Q3 was a "particularly strong margin expansion quarter" due to lapping incentive compensation adds from a year ago, which provided a ~3% tailwind to expenses and is "not something that repeats." He expressed confidence in revenue growth substantially exceeding expense growth, even adjusted for incentives, and suggested the trailing 12-month data is more indicative of overall performance.
Jeff Silber asked about the adjusted operating margin, particularly for Ratings and Market Intelligence, inquiring if there were any one-time items and the sustainability of the margin expansion.
Eric Aboaf, CFO and EVP, acknowledged that the quarter saw particularly strong margin expansion, partly due to lapping elevated incentive compensation from a year ago, which provided a 3% tailwind to expenses. He clarified that this specific incentive impact would not repeat but expressed confidence in revenue growth substantially exceeding expense growth, suggesting the trailing 12-month margin data is more indicative of overall performance.
Jeffrey Silber asked for a reminder of the key milestones investors should track for the planned spin-off of the Mobility business over the next year.
CFO Eric Abouaf outlined the timeline, noting that internal work on carve-out operations is proceeding well. Key upcoming milestones include private regulatory filings in the fall, finalizing the management team following the CEO appointment, and, further into next year, a Mobility-specific investor day and roadshow. He confirmed the company is on track with its original 12-18 month timeline.
Jeffrey Silber asked for a reminder of the key milestones and timeline for the planned spin-off of the Mobility business.
CFO Eric Abouaf outlined the process, noting that internal work on carve-out operations is proceeding well. Key upcoming steps include private regulatory filings in the fall, the naming of the full management team in the coming months, and an investor day for Mobility planned for next year, followed by a roadshow. He reiterated confidence in the original 12-to-18-month timeline from the date of announcement.
Jeffrey Silber questioned why the reduction in free cash flow guidance appeared disproportionately large compared to the modest changes in revenue and profit guidance, especially with lower expected CapEx.
CFO Eric Aboaf explained that the adjustment was due to several 'puts and takes' within the cash flow statement. He specifically cited changes in the timing of tax payments and working capital movements as the primary factors leading to the revised forecast.
Jeffrey Silber of BMO Capital Markets asked about S&P Global's exposure to the U.S. federal government and the potential business impact from policy changes like increased tariffs on China.
Interim CFO Chris Craig stated that exposure to U.S. government contracts is less than 1% of consolidated revenue and that the company uses hedging programs to mitigate FX risk. President and CEO Martina Cheung added that while their base case doesn't assume a protracted trade war, the potential for small impacts from tariffs is factored into the current guidance.
Ryan Griffin, on behalf of Jeff Silber, asked about the Private Market Solutions initiative, inquiring how its products are positioned to win market share as the private credit space becomes more competitive.
Incoming President and CEO Martina Cheung described private markets as a transversal opportunity impacting multiple divisions. She cited strong products like iLEVEL in Market Intelligence and private market ratings in the Ratings division as key assets. She emphasized a disciplined investment approach to capitalize on the broad opportunity and deliver value to clients and shareholders.
Jeff Silber asked for an update on industry premium growth levels for the current year and expectations for the next year, seeking a refresh on Verisk's perspective.
Elizabeth Mann, Verisk's Chief Financial Officer, indicated high single-digit premium growth for 2024, normalizing to mid-single digits in 2025, noting that premium growth is an input but not the main driver for Verisk. Lee Shavel, President and Chief Executive Officer, added that Verisk's revenue growth is driven by value delivery and expanding adoption of data and analytics, with AI accelerating effective data utilization.
Jeff Silber asked for an update on the industry's premium growth levels for the current and next year, and how these trends might impact Verisk.
CFO Elizabeth Mann indicated high single-digit premium growth in 2024, normalizing to mid-single digits in 2025, clarifying it's an input, not a main driver for Verisk. President and CEO Lee Shavel added that Verisk's organic revenue growth has historically shown little differentiation between soft (6.8%) and hard (7.3%) markets, driven by value delivery and data adoption.
Jeff Silber of BMO Capital Markets asked for a quantification of the business impact from recent severe weather events during the quarter.
CFO Elizabeth Mann reported a de minimis impact from wildfires but noted a modest revenue benefit in the property estimating solutions (PES) business. This was driven by a tail from Q4 hurricanes and an active severe convective storm season. CEO Lee Shavel and Executive Robert Newbold added that the California wildfires have spurred significant client interest and dialogue around Verisk's advanced wildfire model.
Jeffrey Silber asked for an estimate of the business impact from the recent California wildfires and for clarification on Verisk's revenue exposure to the federal government.
CFO Elizabeth Mann noted that while Verisk provides support, geographically concentrated wildfires do not have the same financial impact as widespread hurricanes. CEO Lee Shavel stated that revenue from the federal government is less than 1% of total revenue and that the company has minimal direct exposure to federal policy changes, as insurance is primarily state-regulated.
Jeffrey Silber pointed out that the reaffirmed 2024 guidance implies a wide range for Q4 results and asked if management was being conservative or could provide color on what would drive performance to the high or low end.
Chief Financial Officer Elizabeth Mann responded that the company's policy is to provide full-year guidance rather than quarterly updates. She stated that with one quarter remaining, the company is tracking 'very much in line with that full year range,' without offering specific drivers for the high or low end of the implied Q4 outlook.
Jeffrey Silber asked for clarification on Stride's full-year enrollment guidance, specifically inquiring about the impact of platform implementation issues and strategic decisions to limit enrollment growth on the reported 10,000-15,000 fewer enrollments.
CFO Donna Blackman clarified that while the count date enrollment growth was 11.3%, the company does not anticipate the same level of in-year enrollment growth as in prior years. CEO James Rhyu attributed the majority of the 10,000-15,000 fewer enrollments to system implementation issues impacting customer experience and withdrawal rates, noting that limiting enrollment was also a strategic decision to maintain program quality amidst these challenges.
Jeff Silber of BMO Capital Markets inquired about the specific trends driving the strong Q1 FY26 enrollment growth forecast of 10-15% and asked for details on any significant new or lost contracts, referencing the recent situation in New Mexico.
CEO James Rhyu explained that the enrollment forecast is based on strong early funnel activity, particularly application volumes, which are a reliable indicator of demand. Regarding New Mexico, Rhyu framed the loss of one partner as a testament to Stride's franchise strength, as the company quickly secured new district partners and successfully migrated the vast majority of families to its new programs, preventing any negative impact.
Jeffrey Silber from BMO Capital Markets requested more detail on the drivers behind the strong growth in career learning for middle and high school students. He also asked for clarification on the enrollment 'constraints' mentioned in the prepared remarks.
CEO James Rhyu reframed the growth question, suggesting the real issue is a missed opportunity to drive similar growth in lower grades, which the company will address with investments in reading tutoring. Regarding constraints, Rhyu explained that the issue is not new enrollment caps but rather an acute spike in demand during a time of year when school enrollment windows are typically closed, a phenomenon that has always existed but is more pronounced now due to high demand.
Jeffrey Silber asked why Stride's enrollment growth is significantly outperforming the industry and what specific strategies are driving this. He also questioned the company's financial exposure to potential federal funding changes from Washington.
CEO James Rhyu attributed the outperformance to significant improvements in operational execution, a focus area from previous years, which has allowed Stride to gain market share. Rhyu stated that direct federal funding exposure is minimal, 'well less than 5%,' and that the company is prepared to manage any indirect impacts while focusing on its state-level business.
Jeffrey Silber requested quantification of the revenue and profit impact from the ESSER funding roll-off and its effect on current guidance. He also asked about the impact of any new or lost schools and future risks to the school portfolio.
CEO James Rhyu reiterated that last year's ESSER revenue impact was under 3% with an immaterial profit impact, shifting focus to strong forward-looking demand. He confirmed no significant programs were lost for the current year and none are currently known to be at risk, adding that the company continues to look for opportunities to add programs.
Jeff Silber asked for a reminder of Robert Half's capital allocation policy regarding share repurchases versus dividends and the drivers behind those decisions. He also requested the year-over-year change in Contract Talent Solutions' hours worked and average hourly billing rates, along with the billing days by quarter for 2026.
CEO Keith Waddell explained the capital allocation policy: free cash flow, after business needs, first goes to growing the dividend, with the residual used for repurchases. He noted that current free cash flow heavily favors dividends, leaving less for repurchases, and emphasized maintaining a conservative, unlevered balance sheet. Mr. Waddell confirmed adjusted billing rates were up 3.7% but did not have hours worked readily available. He provided 2026 billing days: Q1 61.9, Q2 63.1, Q3 64.6, and Q4 61.1.
Jeff Silber asked for a reminder of Robert Half's capital allocation policy regarding share repurchases versus dividends and the drivers for those decisions. He also requested the year-over-year change in the number of hours worked and average hourly billing rates for Contract Talent Solutions, and the billing days by quarter for 2026.
CEO Keith Waddell explained that the capital allocation policy prioritizes growing the dividend as the first call on free cash flow, with the residual used for share repurchases, a practice maintained for 20-25 years. He noted that current free cash flow heavily favors dividends, leaving little for repurchases, and the company maintains a conservative balance sheet. Mr. Waddell did not have the year-over-year change in hours worked readily available but confirmed the adjusted billing rate was up 3.7%. He provided the 2026 billing days: Q1 (61.9), Q2 (63.1), Q3 (64.6), Q4 (61.1).
Jeffrey Silber from BMO Capital Markets inquired about Robert Half's revenue exposure to the U.S. federal government, particularly in light of potential policy changes. He also asked for a follow-up on the Q1 tax rate, clarifying if it should be used as a run-rate for the rest of the year.
Executive M. Waddell stated that the company's exposure to the federal government is 'very low,' with any public sector work being substantially concentrated at the state and local levels. CFO Michael Buckley clarified that the higher Q1 tax rate is a first-quarter-specific event tied to annual stock vesting and that the rate should come back down for the remainder of the year.
Jeff Silber sought clarification on Moody's Analytics' top-line growth target, questioning if the current high single-digit expectation replaced a previous low-to-mid teens medium-term guidance, and asked about margin expansion.
Noémie Heuland, CFO of Moody's Corporation, confirmed that the updated medium-term outlook for Moody's Analytics is high single-digit ARR and revenue growth, a revision from earlier targets. She highlighted significant margin expansion, with the full-year MA margin outlook raised to approximately 33%, reflecting strategic investments and efficiency programs.
Jeff Silber sought clarification on Moody's Analytics' top-line growth target, comparing the current high single-digit management goal to a previous medium-term guidance of low-to-mid teens.
Noémie Heuland, CFO, confirmed that the updated medium-term outlook for MA, revised earlier in the year, is high single-digit ARR and revenue growth, coupled with significant margin expansion. Rob Fauber, President and Chief Executive Officer, added that this revised target reflects investor feedback for a balance of high single-digit growth and further margin expansion.
Jeffrey Silber questioned the drivers behind the significant operating margin expansion in the quarter, asking if any expenses were deferred from Q2 into the latter half of the year.
CFO Noémie Heuland confirmed that no expenses were shifted. She attributed the margin outperformance, particularly in Moody's Analytics, to deliberate execution on strategic priorities, including investment prioritization, vendor optimization, disciplined spending, and the deployment of internal productivity tools like GenAI, which have enhanced efficiency without material headcount growth.
Jeffrey Silber from BMO Capital Markets followed up on the reduced Moody's Analytics (MA) ARR guidance, asking if there were any signs of a slowdown or uncertainty beyond the cited federal government exposure, as some metrics appeared to be slowing.
CEO Robert Fauber stated that there were no other significant slowdowns, attributing the change primarily to federal government and some ESG-related attrition. He noted that while sales cycles have not extended yet, the revised guidance prudently acknowledges the possibility of future delays in a volatile environment. He also highlighted that the sales pipeline remains robust, up double-digits year-over-year.
Jeffrey Silber of BMO Capital Markets asked about Moody's exposure to the U.S. federal government as a customer and the potential business impact of expected policy changes from Washington, D.C.
CFO Noemie Heuland stated that revenue from the U.S. federal government is minimal, accounting for less than 1% of consolidated revenue. CEO Robert Fauber commented that while there could be sector-specific impacts from policy changes (e.g., tariffs, energy policy), Moody's would anchor its analysis on the credit implications, noting the global economy has proven surprisingly resilient to various shocks.
Jeffrey Silber questioned the implied Q4 adjusted EPS guidance, which appears to be flat to down year-over-year, asking if this reflects conservatism or a specific operational factor.
CFO Noemie Heuland confirmed the implied Q4 EPS outlook is relatively flat to slightly down, which she stated is aligned with the expected moderation in top-line growth for the MIS segment. CEO Robert Fauber added that lower expected Q4 revenues in MIS would naturally result in a lower operating margin for that segment during the quarter.
Jeffrey Silber from BMO Capital Markets questioned how the company can be confident in an enrollment recovery before next summer, given the weakness was linked to the summer period. He also asked for an update on labor cost trends.
CFO Tony Amandy explained that enrollment follows a seasonal pattern, typically troughing during the back-to-school period and then growing incrementally each week until the following May, providing many opportunities for improvement. CEO Paul Thompson added that new digital tools being rolled out will help drive enrollment. Regarding labor, Amandy stated that costs have been 'extremely stable,' with record teacher numbers and strong retention.
Jeffrey Silber requested a breakdown of Q1 revenue growth by the components of the company's long-term algorithm and inquired about the M&A environment, including seller interest and valuation multiples.
CFO Tony Amandi provided the Q1 breakdown: occupancy (-0.5%), tuition (+2.5%), B2B (+0.5%), NCOs (+0.5%), M&A (+1.0%), and closures (-1.0%). He described the M&A market as robust and consistent with recent quarters, with multiples averaging 3-5x, though some strategic deals have reached the 6x range.
Jeffrey Silber asked for the rationale behind guiding tuition increases to the low end of the 3-5% range and whether the company was detecting any changes in CCDBG fund allocation at the state level.
CFO Tony Amandi explained that tuition pricing is set based on costs, primarily teacher wages. Given stable hiring trends, the company is confident it can maintain a healthy margin spread with a lower tuition hike. CEO Paul Thompson added that the company's dedicated subsidy team, which maintains direct state-level relationships, has not reported any concerns about potential changes to state funding allocations.
Jeff Silber asked about the trajectory of tuition increases, questioning the path from the reported 6% to the long-term low single-digit target. He also inquired about the potential impact of immigration reform on staffing.
CFO Anthony Amandi clarified that the 6% tuition growth figure was inflated by the timing of registration fees moving into Q3 this year, which will not be a factor going forward. CEO Paul Thompson expressed confidence in the company's ability to attract staff regardless of potential immigration changes, citing the strength of their recruiting, benefits, and career development.
Jeffrey Silber inquired about the primary drivers behind the significant market share gains at Chamberlain and Walden universities. He also asked about the potential impact of regulatory changes, specifically concerning student loan caps, on student demand for longer-term programs like medical school.
Chairman & CEO Steve Beard attributed the performance to the flexibility of their program offerings (campus, online, hybrid), a strong reputation for student success, and clear pathways to employment through employer partnerships. Regarding regulatory concerns, Beard stated they are not seeing any dampening in demand, expressing confidence in alternative financing options, like the new letter of intent with Sallie Mae, and noting that grandfathering provisions protect current students from disruption.
Jeffrey Silber of BMO Capital Markets asked if the political discussions in Washington were causing any enrollment hesitancy among students. He also requested details on the significant margin decline in the Medical and Veterinary segment despite its return to enrollment growth.
Chairman and CEO Stephen Beard confirmed there has been no observed hesitancy in student enrollment behavior. Regarding segment margins, CFO Robert Phelan explained that the decline in the Medical and Veterinary segment was due to a combination of one-time costs and structural investments aimed at positioning the segment for sustained future growth.
Jeffrey Silber asked for more detail on the drivers behind Chamberlain University's impressive growth acceleration and its sustainability. He also inquired about the plan to shift marketing expenses and questioned why Chamberlain's margins were flat despite the shift.
President and CEO Stephen Beard explained that Chamberlain's growth is driven by taking market share in the post-licensure RN to BSN category and strong student persistence, which he believes is sustainable. He also noted that marketing resources are allocated dynamically. CFO Bob Phelan added that while some planned marketing spend was shifted to Q2, year-over-year marketing investment for Chamberlain still increased. Stephen Beard also cited incremental investments in student support as a factor impacting margins.
Jeffrey Silber of BMO Capital Markets requested an update on the progress and client traction of the digital identity business. He also asked about any potential long-term business impacts from the recently passed OBBBA tax law, beyond the immediate cash tax benefits.
CEO Scott Staples described digital identity as the "hottest topic" in the industry, dominating client conversations, and confirmed continued new deal wins, though it's too early to share specific revenue metrics. CFO Steven Marks explained that while the full impact of the OBBBA tax law is still being assessed, the primary benefit for now is significantly higher free cash flow, which enhances their ability to deleverage and invest.
Jeffrey Silber inquired about what First Advantage has learned from Sterling since the acquisition and asked if it was possible to parse out customer retention rates between the two legacy client bases.
CEO Scott Staples emphasized that the integration was treated as a 'merger' with a 'best-of-breed' approach, adopting the best processes and technology from either company, and highlighted the 'amazing culture fit' as key to the smooth integration. CFO Steven Marks added that while client platform migrations are blurring the lines, the 96% retention rate is 'very consistent' across both legacy First Advantage and legacy Sterling customer sets.
Jeffrey Silber requested specific examples of how First Advantage is converting Sterling's fixed-cost model to a more variable one and sought clarification on whether the expected second-half improvement is due to easier comps or a macro shift.
CFO Steven Marks detailed plans to implement First Advantage's flexible fulfillment staffing models and harmonize duplicative platforms to create a more variable cost structure at the legacy Sterling business. CEO Scott Staples added that rolling out FA's automation tools, like AI-powered customer care, will also drive efficiencies. Marks confirmed the second-half improvement is based on easier comps and market stabilization, not a forecasted macro change.
Jeffrey Silber of BMO Capital Markets inquired about the specific factors driving the acceleration in enrollment growth during Q2 and asked about the potential impact of new graduate student loan regulations on GCE's partners.
President, CEO & Director Brian Mueller attributed the enrollment surge to strong growth in teacher education programs for paraprofessionals, high demand for prerequisite science courses for nursing, and a rising number of recent high school graduates opting for fully online degrees. He noted that over 95% of partner programs are undergraduate, minimizing the impact of graduate loan changes. Mueller also cautioned that Q3 has tougher year-over-year comparisons despite being a seasonally strong quarter.
Jeffrey Silber inquired about the specific drivers behind the better-than-expected Q1 enrollment growth and asked about the potential impact of federal funding cut concerns on student sentiment and fall ground campus enrollment.
CEO Brian Mueller attributed the strong enrollment to two key factors: the rollout of new, in-demand programs that competitors lack, and the expansion of direct contracts with corporations, school districts, and military bases. Regarding funding, Mueller stated he does not anticipate cuts to core student financial aid programs like Title IV and believes any changes would likely affect research grants, which do not significantly impact GCE, thus foreseeing no material impact on their operations or enrollment.
Jeffrey Silber of BMO Capital Markets asked for clarification on the GCU master services agreement's expiration date, the current number of hybrid locations and the ramp-up plan, and the impact of regulatory noise from Washington, D.C.
CFO Dan Bachus clarified the 15-year GCU contract does not expire but has an early-out option in July that has not been exercised. CEO Brian Mueller stated GCE has 45 hybrid sites open and plans to add 6-8 per year toward its goal of 80. Mueller also noted no negative regulatory impact, believing the administration's focus on outcomes aligns well with GCE's model of producing graduates in high-demand fields like nursing and teaching with low debt, which he expects will be viewed favorably.
Jeffrey Silber of BMO Capital Markets inquired about the recent decline in student spending attributed to inflation and the potential business impact of a new presidential administration.
CEO Brian Mueller explained that inflationary impacts on family spending were delayed but are now visible in ancillary revenues. He expressed confidence in a ground campus rebound due to new strategies for FAFSA issues, the appeal of 3-year degree programs, and less aggressive offers from financially strained in-state competitors. Regarding the election, Mueller was bullish, anticipating that a new administration would be more receptive to GCE's creative delivery models and view the company as a solution to higher education's challenges, in contrast to the restrictive stance of the previous administration. CFO Dan Bachus added that the drop in ancillary revenue growth was an anomaly compared to prior years.
Jeffrey Silber of BMO Capital Markets inquired about monthly revenue trends, including into the current quarter, and asked for more details on the 'green shoots' management mentioned. He also asked about the board's reasoning for rejecting the unsolicited buyout offer from HireQuest.
CEO Taryn Owen highlighted momentum from double-digit growth in skilled businesses, overall market stabilization, and an expected return to company-wide growth in Q3. CFO Carl Schweiss provided specific trends for the PeopleReady segment, noting it exited Q1 at -8% and Q2 at -3%, with a return to growth in July. Regarding the HireQuest offer, CEO Taryn Owen referred to public disclosures and affirmed the board's commitment to maximizing shareholder value.
Jeffrey Silber of BMO Capital Markets asked for the number of centers opened and closed during the quarter, the geographic mix of the closures, and an update on the UK business's progress toward achieving breakeven.
Chief Financial Officer Elizabeth Boland reported that the company opened five centers and closed eight, with more than half of the closures being in the US. She confirmed that the UK business is still on track to reach its goal of breakeven by year-end, a significant improvement from the nearly $10 million loss in the prior year, driven by strong operations and a supportive demand environment.
Jeffrey Silber inquired about the current labor environment, including staffing and wage inflation, and asked about the company's capital allocation philosophy given recent debt paydowns and share buybacks.
CEO Stephen Kramer described the labor situation as much improved, with staff retention back to 2019 levels, which eases recruiting pressure. CFO Elizabeth Boland stated that the top priority for capital is investing in the business (M&A, new centers). Share repurchases and debt management are used to flexibly return capital and maintain a strong balance sheet while pursuing growth opportunities.
Jeffrey Silber inquired about current labor supply conditions, specifically wage inflation trends, and whether the company has the flexibility to raise prices mid-year if necessary. He also asked about the rationale for resuming share repurchases in the quarter.
CEO Stephen Kramer stated they are comfortable with wage estimates due to significant prior investments and do not anticipate unexpected inflation, though they retain pricing flexibility for new families if needed. CFO Elizabeth Boland explained that the share repurchase was an opportunistic use of capital, prompted by strong cash generation, future cash flow visibility, and well-priced debt.
Jeffrey Silber questioned the reasons for muted participation growth in the EdAssist business, asking if it was an industry or execution issue. He also asked about the potential impact of proposed federal government caps on childcare costs.
CEO Stephen Kramer explained the EdAssist performance is a mix of market factors (fewer people upskilling in a strong economy) and internal focus. He outlined a transformation plan involving team, platform, and marketing investments. Regarding government policy, he noted that such proposals have been discussed for years but have not materialized due to the immense financial resources required, with federal support historically focused on the neediest families.
On behalf of Jeffrey Silber, an analyst asked about the student application pipeline for Mexico's upcoming primary intake and sought clarification on the drivers behind the second-quarter revenue outperformance.
President & CEO Eilif Serck-Hanssen stated that the main intake is about halfway complete and trends are encouraging, highlighting high single-digit growth in the recent working adult intake. SVP & CFO Rick Buskirk attributed the $20 million revenue beat primarily to favorable foreign exchange rates ($18 million), with the remaining $2 million from operational outperformance carried over from strong prior enrollments.
Jeffrey Silber inquired about potential student hesitancy in Mexico for the upcoming fall intake, given the uncertain economic environment and recent trade discussions.
Eilif Serck-Hanssen, President and CEO, responded that the recent secondary intake, primarily for working adults, showed robust demand as these students are less dependent on household income. For the larger upcoming primary intake, he stated it is too early for specific guidance but the company assumes a similar economic environment to late last year and expects growth to mirror the 4-5% rate seen then.
Jeffrey Silber inquired about the potential impact of Mexico's geopolitical uncertainty and trade-related noise on the economic environment and future student enrollments. He also requested further details on Laureate's capital allocation policy, particularly concerning the return of excess capital to shareholders.
Eilif Serck-Hanssen, President and CEO, explained that while Laureate is not directly impacted by tariffs, a slowdown in GDP does affect consumer spending. He noted the company's guidance for 2025 assumes a modest 1% GDP growth in Mexico. Regarding capital allocation, Mr. Serck-Hanssen reaffirmed the target of converting 50% of adjusted EBITDA to unlevered free cash flow, which, after funding growth, is available to be returned to shareholders.
Jeffrey Silber asked for clarification on revenue and EBITDA timing between Q3 and Q4, and sought a macro perspective on Mexico, including post-election enrollment softness and the potential impact of President Sheinbaum's proposal to expand public university capacity.
CFO Rick Buskirk clarified the timing of a $13 million revenue and $11 million adjusted EBITDA shift from the first half to the second half of the year. CEO Eilif Serck-Hanssen explained that Mexico's post-election softness was driven by a pullback in government stimulus and increased consumer caution due to proposed judicial reforms. Regarding the university expansion, he noted the proposal represents less than 2% CAGR in public capacity over six years, slower than market growth, and is focused on rural areas with limited overlap with Laureate's urban network.
Jeffrey Silber of BMO Capital Markets asked for clarification on the international student enrollment caps in Australia, including their effect on transfer students. He also inquired about any potential positive impacts for Strategic Education from recent legislation, such as the increased cap on employer-provided tuition assistance.
President & CEO Karl McDonnell explained the Australian caps restrict new international students needing visas and also limit the ability of onshore students to transfer, both of which have impacted Torrens University. He noted they expect to lap these declines in early 2026. McDonnell confirmed that the increase in the employer tuition assistance tax-free limit to index with inflation is a "net positive" and that the inclusion of workforce Pell grants could also be beneficial.
Jeffrey Silber asked about the slowdown in U.S. Higher Education enrollment growth compared to peers, potential strategies to accelerate it, and the key drivers behind the strong performance of the Education Technology Services (ETS) segment.
Karl McDonnell, President and CEO, explained that the flat enrollment in U.S. Higher Education reflects normal cyclicality and expects it to normalize to mid-single-digit growth, driven by strong corporate partnerships. For the ETS segment, he attributed its success to the high-quality Sophia Learning product, effective marketing investments with near-term ROI, and the maturation of Workforce Edge client partnerships.
Jeffrey Silber asked about the enrollment slowdown in the latter half of 2024, the specifics of regulatory changes in Australia, and the potential business impact from the U.S. government.
President and CEO Karl McDonnell explained that the enrollment slowdown was a normalization toward their long-term mid-single-digit growth model. Regarding Australia, he and Chairman Robert Silberman clarified that proposed student caps were replaced by a ministerial direction to manage international student levels via visa processing speeds, which they are modeling as having a similar effect. McDonnell also noted they are monitoring the new U.S. administration's impact, highlighting their historical strength with federal government employees.
Jeffrey Silber of BMO Capital Markets inquired about the moderation in enrollment growth, the specifics of proposed international student caps in Australia, and the nature of the new large client signed by Workforce Edge.
President and CEO Karl McDonnell explained that the enrollment growth rate was normalizing to the expected mid-single-digit range. He and EVP & CFO Daniel Jackson detailed that Australia's proposed student caps aim to reduce immigration to pre-COVID levels but are not yet legislated. Karl McDonnell also confirmed the new Workforce Edge client was a large company that switched from a competitor, though he could not disclose the name.
Jeffrey Silber from BMO Capital Markets inquired about the current state of corporate L&D budgets and asked about the potential impact of the new 'workforce Pell' grant legislation on Coursera's business.
CEO Greg Hart described a mixed corporate spending environment, with macro caution balanced by a strategic need for AI upskilling. Regarding Pell grants, he noted that while he couldn't speak to specifics, the policy shift towards skills-based, credit-bearing credentials aligns perfectly with Coursera's strategy of working with bodies like ACE and ECTS to accredit its micro-credentials.
An analyst on behalf of Jeff Silber asked how to measure the success of product innovation externally, including conversion metrics, and about any potential impact from increased Department of Education scrutiny on higher ed.
CEO Gregory Hart responded that while specific conversion metrics are not disclosed, they expect initiatives to improve the rate of registered learners becoming paid learners. Regarding regulatory scrutiny, he positioned Coursera as a valuable partner for universities, providing a crucial revenue stream that can help them offset potential government funding challenges.
Jeffrey Silber noted the sizable adjusted EBITDA beat in Q3 and asked if the lower implied Q4 guidance was due to a timing shift of expenses from the third quarter into the fourth.
CFO Ken Hahn clarified there was no specific timing shift. He explained that the company targets a full-year EBITDA margin and invests for growth within that constraint. The Q3 beat and subsequent guidance increase occurred because the company was unable to deploy enough recurring spend (like hiring) to meet its original targets. He added that they may deploy some non-recurring expenses in Q4 to support future growth.
Jeffrey Silber from BMO Capital Markets asked for clarification on the financial impact from the DOGE contract conclusion for Q2 and Q3, and questioned the general business tone across the commercial segment, comparing the consulting and assignment businesses.
CFO Marie Perry stated the DOGE impact was less than 2% of total revenues in Q2, in line with expectations, and is projected to be the same in Q3. CEO Ted Hanson and President Shiv Iyer described the commercial segment tone as one of 'cautious optimism.' They noted strong bookings in consulting for cloud, data, and AI, and saw 'little incremental positive' signs in the assignment business, but are waiting for a recovery in major verticals like banking to signal a broader turn.
Jeffrey Silber of BMO Capital Markets inquired about the mechanics of federal contract cancellations, such as notice periods. He also asked how ASGN's internal plans for investment, hiring, and capital allocation have been adjusted for the current environment.
CEO Ted Hanson explained that the contract modification process is fluid, with agencies having the ability to terminate for convenience, which provides a notice period. He stated that internal investments are being reallocated to high-demand areas like AI and data. Hanson affirmed that the company's long-term capital allocation principles, including strategic M&A and share repurchases, remain consistent despite short-term market conditions.
Jeffrey Silber inquired about the nature of conversations with Federal Government clients regarding the new administration's initiatives, such as the Department of Government Efficiency (DOGE), and asked if there have been any tangible slowdowns in contract awards or payments.
CEO Theodore Hanson explained that while the market is still assessing the impact, ASGN's focus on high-demand areas like cyber, AI, and IT modernization is durable. He noted that two-thirds of their federal revenue comes from resilient agencies like the DoD and Intel. Hanson confirmed they have not seen a slowdown in payments, but new contract awards are a mixed bag, with some wins and some pauses depending on the specific agency.
Jeffrey Silber of BMO Capital Markets asked returning CFO Brian Scott for his perspective on the company's strategic direction and also inquired about the current state of hospital efforts to reduce contract labor.
CFO and COO Brian Scott highlighted the significant progress already made through a unified go-to-market strategy, key technology investments like Passport and ShiftWise Flex, and improved operational efficiency. CEO Caroline Grace added that while hospitals still focus on contract labor, it is less of a cost-saving lever than a year ago, with the conversation shifting toward broader, sustainable workforce solutions.
Jeffrey Silber asked if AMN or the industry could proactively do anything to narrow the gap between provider bill rates and clinician pay expectations.
President and CEO Cary Grace responded that while the company provides market data and transparency, the dynamic largely needs to work itself out. She explained that bill rates fell quickly post-COVID while clinician pay expectations, influenced by wage inflation, did not. She noted that the market is starting to rationalize, with clients raising rates for hard-to-fill specialties, which is a sign of normalization, but more time is needed for the gap to close.
Jeffrey Silber asked about the margin outlook, noting that Q1 margins were flat while full-year guidance suggests a slight decline, and inquired about the expected cadence for the rest of the year.
Chief Financial Officer Helen Shan explained that Q1 benefited from lower people costs and favorable timing of some credits. She expects expenses to ramp up from Q2 onward due to hiring and investments, particularly in technology infrastructure and cloud spend. She guided for the first-half margin to be closer to the midpoint of the full-year guidance range.
Jeffrey Silber from BMO Capital Markets questioned the operating margin trajectory, noting that margins were flat in Q1 while full-year guidance suggests a slight decline, and asked about the expected cadence for the rest of the year.
CFO Helen Shan explained that Q1 benefited from lower people costs and timing of some credits. She anticipates expenses will ramp up from Q2 onward due to hiring and increased technology and infrastructure spending, bringing the H1 margin closer to the midpoint of the full-year guidance range.
Jeffrey Silber asked about the common themes or specific drivers behind the top 10 competitive wins during the fiscal year, noting that nine were take-aways from competitors.
Executive Frederick Snow highlighted several themes: more enterprise-level deals, success in the wealth management space, and the strength of the core desktop product, particularly in banking. Executive Goran Skoko added that improved fixed income content has enhanced their ability to compete for higher-end terminals in wealth management. He also emphasized that recent wins involve expanding into adjacent workflows like performance reporting and portfolio analytics, diversifying ASV sources.
Ryan Bohren, on for Jeff Silber of BMO Capital Markets, noted that retention seems to be trending well while new subscriber acquisition is difficult due to AI competition. He asked for thoughts on this dynamic and where in the funnel Chegg is losing potential customers.
President and CEO Nathan Schultz agreed that retention and the product experience are linked. He acknowledged market turbulence as students determine which tools to use for different needs. Schultz explained that Chegg is positioning itself as the platform for deep learning and competency. The strategy involves refining the top of the funnel to emphasize trust in Chegg's content and evolving packaging to allow students to explore the product more before hitting a paywall, thereby attracting users who are genuinely looking to learn rather than just find a quick answer.
Performance on expert-authored financial analysis tasks