Managing Director and Senior Equity Analyst at Credit Suisse International
Kevin McVeigh is a Managing Director and Senior Equity Analyst at Credit Suisse Group AG, specializing in coverage of software, human capital management, and analytics firms. He directly covers companies such as Paycom Software, SS&C Technologies, and Clearwater Analytics, consistently providing highly rated, Outperform calls and actively adjusting price targets based on market trends. With a career beginning at Bear Stearns as an Associate Analyst from 2001 to 2004, McVeigh transitioned to leadership roles at Credit Suisse Securities, where he is recognized for his insightful research and sector expertise. Professionally credentialed, he holds relevant securities licenses and is registered with FINRA.
Kevin McVeigh asked about the pace of 1-1 adoption by resellers, whether FICO is assisting with implementation, and their experienced progress.
CEO Will Lansing confirmed that FICO is on pace, without providing an exact date, and stated that things are tracking very nicely with no significant operational hurdles to overcome.
Kevin McVeigh asked if resellers are on pace for 1-1 adoption of the direct licensing program and about their implementation experience.
CEO Will Lansing confirmed that FICO is on pace with the resellers. He stated that he couldn't give an exact date but noted that things are tracking very nicely, with not a lot of operational hurdles to overcome.
Kevin McVeigh from UBS Group asked why the full-year guidance was not raised by the full amount of the Q3 earnings beat and requested any potential timeline or clarifying events regarding the regulatory situation.
CFO Steve Weber explained the guidance delta was due to some one-time expenses planned for Q4. CEO Will Lansing stated there is no clear timeline on the regulatory front, suggesting it could take years for any potential market share shifts to play out given the complexities of switching.
Kevin McVeigh of UBS asked about the potential timing for a recovery in lower CCS usage and whether partner implementation work was impacting professional services revenue trends.
CEO Will Lansing stated that predicting a rebound in CCS usage is difficult as it's tied to macroeconomic activity. CFO Steve Weber clarified that the Q2 professional services results were affected by the timing of certain milestones slipping into April and that he expects PS revenue to increase in Q3.
Kevin McVeigh of UBS asked if the lower usage in CCS (Customer Communication Services) is expected to be recovered in the second half of the fiscal year or be pushed into 2026. He also sought to reconcile professional services trends with strong bookings, asking if partners were taking on more implementation work.
CEO Will Lansing stated there is no visibility on when CCS usage might recover, as it's tied to economic activity beyond FICO's control. CFO Steve Weber explained the professional services trend was partly due to the timing of milestones slipping from March to April and that he expects PS revenue to increase in the third quarter.
Kevin McVeigh asked about a client shifting a 25 MW London lease to a 36 MW Chicago site, inquiring what drives such decisions and if more such shifts are expected given Iron Mountain's diversification.
President and CEO Bill Meaney explained that the client's load shifted, making Chicago a more important market. He described it as a win-win, allowing Iron Mountain to upsell to 36 MW in Chicago and having strong interest in the vacated London space at improved pricing. He noted such shifts are not common but reflect Iron Mountain's customer-centric approach. EVP and CFO Barry Hytinen clarified that the client had not commenced in London, so it was a pre-commencement shift.
Kevin McVeigh asked about a specific instance where a client shifted a 25 MW London lease to a 36 MW Chicago site, inquiring about the drivers behind such decisions and if more such shifts are expected.
President and CEO Bill Meaney explained that such shifts are not common but are accommodated due to Iron Mountain's customer-centric approach, driven by the customer's load shift and Chicago becoming a more important market. He noted it was a win-win, resulting in an upsell and strong interest in the vacated London space at improved pricing. EVP and CFO Barry Hytinen clarified that the client had not commenced in London, making the shift feasible, and it's not expected for already deployed sites.
Kevin McVeigh from UBS sought to confirm the updated new data center leasing target for 2025, which was revised to 30-80 megawatts, and asked for the year-to-date signed megawatts.
President & CEO William Meaney confirmed the new full-year leasing range is 30 to 80 MW and that 6 MW had been signed year-to-date. EVP & CFO Barry Hytinen emphasized that the strong data center revenue growth outlook for 2025 and 2026 is based on the existing backlog of pre-leased assets and does not require additional leasing.
Kevin McVeigh requested a breakdown of the $90 million increase in full-year revenue guidance, asking how much was attributable to currency fluctuations, revenue management, and the Premier acquisition.
CFO Barry Hytinen detailed the $90 million revenue guidance increase, attributing just under $75 million to favorable foreign exchange rates, $10 million to the Premier acquisition, and the remaining $5-$10 million to pure operating outperformance. He added that this guidance does not yet include the new Department of Treasury contract.
Kevin McVeigh asked for an explanation of the 4.4% churn in the data center business during Q4 and whether it was related to the large deal the company passed on.
Barry Hytinen, EVP and CFO, clarified that the churn was unrelated to the passed deal and was an anticipated event. It was driven by two long-term clients (over 10 years) who moved their workloads to the cloud. Hytinen noted that the space has already been re-leased and projected that the overall churn for 2025 would be below historical levels, potentially at 5% or lower.
Kevin McVeigh questioned why full-year guidance was only reaffirmed at the high end instead of being raised after a Q3 beat, asking if foreign exchange was a contributing factor.
CFO Barry Hytinen clarified that the Q4 projection implies full-year revenue and EBITDA will likely finish slightly above the high end of the guidance range. He confirmed that significant FX headwinds, particularly from Latin American currencies, impacted results and prevented a more substantial guidance increase. He noted the company is still running well ahead of its long-term 10% CAGR target.
Kevin McVeigh asked about the drivers behind the impressive 121% net revenue retention (NRR) rate and how GenAI is impacting client behavior, consumption, and pricing models.
CFO David Morton attributed the strong NRR to continued success in upsell and cross-sell activities, densification of the enterprise model, low single-digit churn, and positive product adoption. CEO John Hall explained that Intapp is leveraging its position as a scaled, compliant system to integrate GenAI into workflows, differentiating with 'vertical AI.' He noted positive client reception, ongoing experimentation with various AI tools, and the ability to meter charging through existing contract structures (per-user, firm-size, and new models under development).
Kevin McVeigh asked about the drivers behind the strong net revenue retention (NRR) of 121%, which was an increase from the previous quarter, and also inquired about any behavioral changes or shifts in charging models from clients due to GenAI, despite the positive financial results.
David Morton (CFO, Intapp) attributed the strong NRR to continued inroads in upsell and cross-sell activity, densification of key accounts with cloud offerings, low single-digit churn, and welcomed product adoption. John Hall (Chairman and CEO, Intapp) stated that Intapp is a strong believer in GenAI's potential for the market, focusing on vertical AI solutions integrated into workflows for compliance and leveraging proprietary data, with plans to meter charging in different ways beyond per-user and firm-size models.
Kevin McVeigh of UBS Group AG inquired about the key drivers for the 120% cloud net revenue retention (NRR) rate and the assumptions for NRR embedded in the fiscal 2026 guidance. He also asked about the source of the strong incremental margin leverage expected in 2026.
CFO David Morton explained that the strong NRR is a result of low churn, which is characteristic of a sticky vertical SaaS model, and larger expansion deals as Intapp moves further into the enterprise market. He noted that the company has incorporated a conservative NRR assumption into its 2026 forecast. Regarding margins, Morton stated that leverage comes from continued efficiency improvements in the business model and product offerings, allowing the company to sell on value rather than just price.
Kevin McVeigh asked for an update on the contribution from strategic alliances like Microsoft and questioned the drivers behind the strong margin performance and future reinvestment plans.
CEO John Hall highlighted the growing Microsoft partnership, citing increased co-selling, Azure Marketplace traction, and joint success with AI products. CFO David Morton attributed margin upside to services mix, cloud optimization, and G&A efficiency. He confirmed Intapp will continue to reinvest profits into product-led growth, particularly for its GenAI roadmap.
Kevin Mcveigh asked about the timing of Agentic AI launches on the legal side, specifically whether they are already permeating the base or scaling later, and the go-to-market motion for enhanced GenAI products in tax and accounting for different firm sizes.
CFO Mike Eastwood confirmed that Agentic AI launches from mid-August are already showing benefits, with increasing penetration expected in Q4 and throughout 2026 across all law firm segments. Regarding tax and accounting, Mike Eastwood and CEO Steve Hasker explained that Global Seven firms (part of the Corporate segment) are more likely to use APIs, while smaller firms are receptive to turnkey solutions, indicating varied go-to-market approaches across different client segments.
Kevin Mcveigh inquired about the timing and penetration of the agentic AI launches in the legal segment from summer 2025, asking if benefits are already permeating the base or will scale more into 2026. He also asked about the go-to-market motion for enhanced GenAI products in the tax and accounting business, differentiating between the 'big four' and mid-market firms.
CFO Mike Eastwood confirmed that benefits from the mid-late August agentic AI launches (Co-Counsel, Westlaw Advantage) are already being seen, with further penetration expected in Q4 and throughout 2026, citing strong October sales. Regarding tax and accounting, Mike Eastwood clarified that the 'global seven' (including the big four) are in the corporate segment. CEO Steve Hasker added that while the G7 are sophisticated and investing heavily in technology, they might prefer APIs to build upon, whereas smaller firms seek turnkey solutions. He noted that the opportunity is equally weighted across the customer base, with different go-to-market motions.
Kevin McVeigh asked for clarification on the sensitivity and impact of the one processing day difference between Q1 and Q2. He also inquired why both client funds and extended strategy float income increased by a similar $10 million, despite significantly different principal balances.
CFO Peter Hadley stated that the one processing day impact is modest, around $10 million, and not a significant driver of the Q1 to Q2 revenue growth rate cadence. He explained that the similar $10 million increase in float income for both client funds and the extended strategy is primarily balance-driven, stemming from strong client funds balance growth in Q1 due to wage growth, rather than significant movements in yield expectations. He noted that moderation in wage growth is contemplated for the rest of the year.
Kevin McVeigh asked for clarification on the sensitivity of a single processing day's impact from Q1 to Q2. He also sought an explanation for the similar $10 million increase in both client funds interest revenue and the extended investment strategy, despite the principal balances being significantly different.
Peter Hadley (CFO) stated that the processing day impact is "modest," approximately $10 million, and not a "meaningful number" for the overall growth rate cadence. He clarified that the $10 million increase in both client funds interest and the extended investment strategy is primarily "balance-driven," not yield-driven. Strong client funds balance growth in Q1, fueled by wage growth, led to this increase, with an anticipated moderation in wage growth factored into projections for the rest of the year.
Kevin McVeigh asked for a reconciliation of improving retention against lower pays per control growth, and questioned the drivers behind the client funds interest revenue increase.
CFO Don McGuire attributed the strong retention to record-high NPS scores and less client switching. The new Treasurer, Peter Hadley, explained that the client funds balance increase was driven by higher wage levels and a strong bonus season, not a change in interest rates, as ADP is relatively well-hedged.
Kevin McVeigh asked for specifics on what drives the expected revenue reacceleration from Q3 to Q4, particularly within the Employer Services segment. He also asked for a reminder on the seasonal patterns of client retention.
CFO Don McGuire explained the Q4 reacceleration is mainly in the ES segment, driven by a reduced impact from lower short-term interest rates on the client funds portfolio compared to Q3, along with heavier WorkForce Software integration expenses being concentrated in Q3. Regarding retention, he noted that Q3 is seasonally the weakest quarter due to client switching at the start of the calendar year, but that performance is judged on a year-over-year basis.
Kevin McVeigh asked about the potential revenue contribution from the WorkForce Software acquisition as it scales and the potential multiplier effect across ADP's client base.
CFO Don McGuire stated that while the company is excited about the growth potential, it is too early to quantify the future revenue contribution or multiplier effect. He noted that the deal only closed two weeks prior and that work teams are now identifying opportunities among shared clients, new logos, and by leveraging ADP's financial strength to enhance WorkForce Software's market position.
Kevin McVeigh congratulated SS&C on strong results, noting the EPS came in $0.07 above the high end of the range, and asked about the source of this upside. He also inquired about the opportunity to implement Calastone's tokenization technology across other SS&C business lines, similar to the Blue Prism integration.
Bill Stone, Chairman and Chief Executive Officer, attributed the upside to the Australia liftout boosting the GIDS business, strong performance from GlobeOp, and Intralinks remaining very profitable despite weaker revenue. He noted that most businesses were performing well in Q3 and expressed optimism for Q4. Regarding tokenization, Bill Stone emphasized SS&C's approach of getting technology right, citing the $1.6-$1.7 billion investment in Blue Prism and its 1,400 experts. He stated that SS&C is adding AI agent capabilities in a controlled manner to become a trusted source for AI in regulated and complex industries.
Kevin McVeigh asked about the primary sources of upside in Q3 EPS, which came in $0.07 above the high end of the range. He also questioned the opportunity to implement Calastone's tokenization technology across other SS&C business lines, similar to the Blue Prism integration.
Chairman and CEO Bill Stone attributed the Q3 EPS upside to the successful liftout in Australia boosting the GIDS business, strong performance from GlobeOp, and the continued profitability of Intralinks despite weaker revenue. He expressed optimism for Q4. Regarding tokenization, Bill Stone emphasized SS&C's approach of being "customer zero" and investing significantly in technologies like Blue Prism to build substance and functional expertise, enabling them to add AI capabilities in a controlled manner to become a trusted source for AI in regulated industries.
Kevin McVeigh asked for details on the professional services component within the GIDS business and inquired about the seasonality of the record quarterly EBITDA.
Chairman and CEO William Stone described professional services as a 3-6 month client-funded process to build out technology, which then typically converts into a recurring services contract. EVP & CFO Brian Schell explained that EBITDA seasonality is tied to revenue, with Q4 often seeing a lift from higher-margin software sales, and the company continues to focus on leveraging its scale.
Kevin McVeigh of UBS asked for an explanation of the resilience and continued growth of SS&C's assets under administration (AUA) despite market volatility and hedge fund de-grossing. He also asked for clarification on which business segment the Insignia acquisition would report under.
Bill Stone (Executive) explained that during volatile periods, investors seek the non-correlated, risk-adjusted returns historically offered by the hedge fund industry, driving flows to the space. He noted that hedge funds have moved to cash and are waiting to "pounce," which supports AUA stability. Rahul Kanwar (Executive) clarified that the Insignia business will primarily be reported within the Global Investor and Distribution Services (GIDS) segment.
Kevin McVeigh of UBS asked for the potential low and high ends of the 2025 organic growth guidance range and the factors driving those outcomes. He also questioned if the Q4 software sales in the healthcare business could be a leading indicator for larger future contracts.
Executive Rahul Kanwar explained the guidance range is approximately $80 million in revenue on either side of the midpoint, with outcomes dependent on new sales, the timing of implementations, and macroeconomic factors like deal volume. CEO Bill Stone clarified that the healthcare software sales are likely independent events, but noted that industry-wide pressure on medical loss ratios is driving demand for SS&C's cost-saving technologies like DomaniRx.
Kevin McVeigh asked about the intended use of the higher-than-normal cash balance expected to be deployed in Q4. He also sought confirmation that the $8 million in pushed healthcare license deals from Q3 would now benefit Q4.
CFO Brian Schell stated that the cash would be deployed for share repurchases and debt reduction, leveraging opportunistically raised lower-cost funds, and that investors should not assume material M&A in Q4. He also confirmed that the pushed healthcare license revenue would indeed shift to Q4.
Kevin McVeigh asked about dimensionalizing the start to 2026 by considering the typical seasonal sequential EPS trends from Q4 to Q1, and whether less leverage should be expected given the current base earnings. He also followed up on the generative AI discussion, asking if recent temp industry adjustments were due to AI or other pressures.
CEO Keith Waddell confirmed that sequential EPS impacts in the $0.20s per share for Q1 are not unusual, consistent with historical patterns, and Q1 is seasonally low due to Protiviti's circumstances. Regarding AI's impact on the temp industry, Mr. Waddell stated internal studies and external research (Stanford, Harvard, Yale) show no significant impact on Robert Half's business or the broader labor market, particularly for the professional roles they staff. He attributed the industry downturn to less churn (fewer hires and quits) and narrow job growth concentrated in sectors not typically served by Robert Half, leading clients to reduce contractor usage to retain full-time staff and control costs.
Kevin McVeigh sought to frame Q1 2026 EPS, referencing the historical sequential decline of approximately $0.27 from Q4 to Q1, and asked if less leverage should be expected given the Q4 base earnings. He also followed up on the discussion of AI's impact, specifically contrasting it with the adjustments seen in the temporary staffing industry over the past two to three years.
CEO Keith Waddell confirmed that sequential EPS impacts in the $0.20s per share are not unusual for Q1, which is historically the low point due to Protiviti's seasonal circumstances. On AI, Mr. Waddell reiterated that internal and external studies show minimal to no impact on Robert Half's business or the broader labor market, particularly for their target senior talent. He attributed the industry downturn to reduced churn (fewer hires and quits), narrow job growth in sectors not heavily utilizing temporary staff, and client caution leading to a preference for retaining full-time staff at the expense of contractor usage.
Kevin McVeigh sought clarification on the timing and accounting of the restructuring charges, specifically asking if the charge for Protiviti's cost actions was taken in Q1 or Q2. He also asked for the EPS benefit of these savings included in the Q2 guidance.
Executive M. Waddell clarified that all restructuring charges, including those for actions taken at Protiviti in April, were accrued and recorded in the first quarter. He detailed that the Q2 guidance includes $18 million in cost savings from these actions, which translates to an approximate EPS benefit of $0.12 for the quarter.
Kevin McVeigh of UBS asked about the root of client hesitancy, questioning why, despite highly optimistic indicators, clients are not yet fully re-engaging in hiring. He also requested clarification on the drivers behind the higher Q1 tax rate guidance.
Executive M. Waddell suggested clients are in a 'show-me' state, waiting to see tangible economic improvement before committing to new hires. CFO Michael Buckley explained the higher Q1 tax rate is due to the annual vesting of restricted stock. A lower share price results in a smaller tax deduction relative to the book expense, creating a higher effective tax rate for the quarter, which he noted is a seasonal Q1 event.
An associate for Kevin McVeigh asked for confirmation on the Q3 restructuring charge related to Protiviti, which was previously guided at $0.08 per share, and its impact on reported EPS.
CEO M. Waddell confirmed the financial impact was exactly as guided, totaling $5.6 million in SG&A and $2.5 million in tax provision, which equates to the forecasted $0.08 per share. He noted this was fully embedded in the guidance and results, stemming from the conversion of their Mainland China operation to a member firm.
Kevin McVeigh asked for clarification on whether the 2026 revenue guidance would fall within the 7%-10% organic framework, given recent mortgage market developments. He also inquired about Equifax's definition of success for VantageScore market share longer term, considering the historical FICO monopoly, and the role of Vantage partners in the go-to-market strategy.
Mark Begor, Chief Executive Officer, stated that 2026 guidance would be provided in February, but clarified that the FICO and Equifax announcements regarding mortgage pricing do not change the company's existing long-term outlook for 2026, which views the Vantage opportunity as a net upside over the medium to long term. He emphasized that success would be defined by share gains, driven by the significant pricing umbrella FICO created. He noted alignment with tri-merge resellers and highlighted the new, substantial profit pool for Equifax from VantageScore. John Gamble, Chief Financial Officer, added that the push for VantageScore is broad, extending across auto and P loans.
Kevin McVeigh asked if the 2026 revenue guidance would be within the 7% to 10% organic framework and what Equifax defines as success for VantageScore market share longer term, given FICO's historical monopoly.
CEO Mark Begor clarified that 2026 guidance was not provided but stated that the FICO and VantageScore announcements do not change the long-term outlook, which views the mortgage opportunity as a net upside. He defined success as share gains driven by FICO's price increase, which acts as a catalyst, creating a substantial new profit pool for Equifax and delivering savings to customers.
Kevin McVeigh asked if the mortgage pricing increases have been fully implemented or 'seasoned' and inquired about the overall contribution of pricing to revenue growth across the rest of the business.
CEO Mark Begor confirmed that pricing for the year, including the larger pass-through of credit score pricing in mortgage, was broadly implemented on January 1st and is reflected in the current guidance. He noted that non-mortgage pricing is typically much lower than the mortgage credit score pass-through, and EWS has its own pricing structures also implemented at the start of the year.
Kevin McVeigh asked what gave Equifax the confidence to initiate its new capital return program this quarter amidst macro uncertainty and whether recent pricing dynamics were an incremental benefit to the guide.
CEO Mark Begor explained the confidence stems from reaching key milestones, primarily the substantial completion of the cloud transformation (>85%), which lowers CapEx. CFO John Gamble added that the balance sheet is at their 2.5x leverage target. Begor confirmed that pricing dynamics, including the mortgage partner pass-through, were already factored into the February guidance and were not an incremental benefit.
Kevin McVeigh from UBS asked for insight into the potential 'yield' on the mortgage recovery opportunity, considering the significant increase in TWN records since the 2015-2019 baseline. He also asked for the revenue contribution from the Employee Retention Credit (ERC) at its peak versus today.
CEO Mark Begor acknowledged the difficulty in modeling the unprecedented market but reiterated his conviction that as rates normalize, the mortgage market tailwind will be additive to Equifax's P&L. CFO John Gamble provided specifics on ERC, stating it is now around $1 million per quarter, down from a peak of approximately $10 million or more per quarter, representing a significant headwind for the Employer Services business.
Kevin McVeigh asked for details on the Q3 guidance, the drivers behind the strong free cash flow forecast, and the sources of strength in both public and private cloud services.
CFO Mark Marino explained that Q3 guidance reflects sequential stability, with the strong free cash flow outlook driven by the absence of H1 one-time payments and improved working capital. CEO Amar Maletira added that Private Cloud revenue has stabilized for three consecutive quarters, supported by larger, longer-term deals. He also highlighted that Public Cloud services revenue is expected to accelerate, projecting 10-20% year-over-year growth in Q4 2025, driven by strong performance in data, applications, and a high services attach rate to infrastructure sales.
Kevin McVeigh asked for clarification on the fiscal 2025 outlook for the Private Cloud business, questioning the expected modest decline given the strong bookings momentum in the second half of 2024. He also inquired about the free cash flow forecast for 2025.
CEO Amar Maletira confirmed that Private Cloud revenue is projected for a modest decline in 2025, which he framed as a significant improvement after years of double-digit declines and a positive sign of a turnaround. He highlighted strong bookings and expects revenues to flatten year-over-year by the second half of 2025. Both CEO Amar Maletira and CFO Mark Marino affirmed they anticipate positive operating cash flow and free cash flow in 2025, driven by margin improvements and ongoing efficiency gains.
Kevin McVeigh asked for more details on the scale of the major healthcare win and for a breakdown of the vertical mix within the Private Cloud segment, specifically government versus healthcare.
CEO Amar Maletira clarified that the healthcare win, signed in Q4 of the prior year, was valued in the hundreds of millions of dollars in Total Contract Value (TCV). The recent milestone was the successful migration of 38,000 concurrent users for that client. Regarding verticals, Maletira stated that key verticals (Healthcare, BFSI, Sovereign) grew from ~25% of total revenue in FY23 to a projected one-third by the end of FY24, with Healthcare and Sovereign expected to reach nearly 15% of total revenue.
Kevin McVeigh of UBS Group asked for specifics on how Paycom plans to monetize iWant, questioning whether it would be part of a base platform, an individual add-on, or included in a core package based on module adoption.
CEO Chad Richison clarified that iWant's monetization is indirect. The tool's value is maximized when clients use the full suite of modules, as it can pull data from all of them. This is expected to drive more full-solution deployments, increase overall sales volume due to its innovative nature, and improve long-term client retention by removing barriers to accessing the system's full value.
Kevin McVeigh asked about the expected scaling timeline for the three new sales offices and whether the improvement in client retention was driven by the runoff of Beti-related issues or a mix shift to larger clients.
CEO Chad Richison explained that new offices take 24 months to become fully staffed and productive, with a more meaningful revenue impact expected in 2026 and beyond. He attributed retention improvements to increased client ROI from using the full automated system, including Beti, which helps both win and win back clients.
Kevin McVeigh sought to understand the breakdown of the EBITDA beat between revenue and automation, the progress of the automation initiative, and whether the record September sales were driven by new logos or competitive takeaways.
CEO Chad Richison stated that there is significant automation work remaining, with the goal of a system that operates without user intervention, and noted that automation benefits Paycom's own operations. He clarified that the record September sales bookings were overwhelmingly driven by new business and new logo additions.
Kevin McVeigh of UBS Group AG sought clarification on the math behind the revised revenue guidance, calculating a larger second-half reduction than implied. He also requested a specific outlook for project revenue in Q4.
CFO Jeremy Heaton corrected the calculation, stating the midpoint-to-midpoint revenue reduction was approximately $47 million. He attributed this to a $35 million impact from the timing of new wins and a $10-12 million impact from flat participant volumes. For Q4, Heaton projected that project revenue would still be down year-over-year but would improve to a rate closer to flat, likely in the low-single-digit negative range.
Kevin McVeigh asked for clarity on the pacing of the 200-basis-point revenue headwind from 2023 client runoffs throughout 2025. He also questioned if the previously guided $100 million in cost savings was still accurate or if new synergies had been found.
CFO Jeremy Heaton explained the headwind from losses impacts Q1 most heavily, with revenue ramping through 2025 as new ARR deal go-lives occur. He clarified the $100 million savings target became $75 million for the ongoing business post-divestiture, with $55 million of that benefit included in the 2025 EBITDA guidance, supplemented by other productivity efforts.
Kevin McVeigh inquired about the timing of the COBRA headwind runoff and whether the recent major client wins like Siemens, Nokia, and HP were influenced by the new CEO's efforts or if they were new logos.
CFO Jeremy Heaton clarified that the COBRA headwind was largely a Q3 2024 event with a minor tail in Q4. CEO David Guilmette stated that the client wins were the result of the commercial team's long-term efforts preceding his arrival and confirmed they were new logos.
Kevin McVeigh inquired about the timing of the COBRA headwind runoff and whether the recent major client wins with Siemens, Nokia, and HP were new logos or add-on work influenced by the new CEO's arrival.
CFO Jeremy Heaton clarified that the COBRA headwind largely concluded in Q3, with only a small tail end in Q4. CEO David Guilmette explained that the new client wins were the result of long-term efforts by the commercial team, not his recent arrival, and confirmed they are new logos for the company.
Kevin McVeigh questioned the decision to reaffirm full-year guidance despite two quarterly beats, asking if it reflected conservatism or a potential shift in back-half expectations. He also asked for the financial dimension of the late claims from 2024 and how that impact was offset.
EVP & CFO Kelly Tuminelli explained that guidance was reaffirmed due to expected seasonality in the business, particularly with the insurance cost ratio, but noted that earnings are tracking 'modestly above the midpoint' of the range. She clarified that the negative financial impact from the outsized, older health claims was almost entirely offset by anomalous strength in interest income, with both items viewed as one-time events.
Kevin McVeigh of UBS questioned the seemingly abrupt deceleration in Client In-Year Employment (CIE) and sought to confirm if this was purely an employee-driven trend rather than a result of client loss.
CEO Mike Simonds explained that the flat CIE was due to a hiring slowdown in TriNet's core verticals like tech and financial services, which contrasts with broader national job reports. He confirmed the trend was not due to client loss, emphasizing that TriNet is on track for a record client retention year, but rather a lack of new hires to offset normal attrition.
Kevin McVeigh sought clarification on the Government of Canada contract, asking if the contract was extended and if the dollar amount was increased.
CEO David Ossip clarified two points. First, he announced a separate win: a new contract with a different federal government agency was signed in Q1. Second, regarding the Government of Canada, he confirmed they signed a 15-month extension valued at CAD 105 million (USD 72 million), primarily for additional services, which bodes well for the project's continuation.
Kevin McVeigh asked about the drivers behind Dayforce Wallet's revenue growth from $12 million to over $30 million and whether system integrators (SIs) are now driving sales volume.
CEO David Ossip attributed the Wallet's growth to both increased adoption and new capabilities like direct-to-bank transfers, stating he expects momentum to continue. He also confirmed that SIs are driving sales traction, which is reflected in the improving professional services margins. An executive added that partners are increasing brand amplification and pipeline.
Kevin McVeigh asked about the confidence behind the initial 2025 guidance, particularly regarding free cash flow conversion, and inquired about the strategy for the ongoing share buyback program.
CEO David Ossip stated that the business is highly predictable due to its recurring revenue model and go-live forecast, providing strong confidence in guidance. CFO Jeremy Johnson added that the company is focused on leveraging its inherent profitability to drive free cash flow and noted the share buyback program is primarily for managing dilution from stock-based compensation, with potential for opportunistic repurchases.
Kevin McVeigh questioned if revenue outperformance was driven by competitive dynamics from industry consolidation and if the noted client caution was specific to any particular segment.
President and CEO Toby Williams attributed the strong results to internal execution rather than competitive shifts. Executive Chairman Steven Beauchamp clarified that client caution is a qualitative, anecdotal observation from the sales team about decision-making cycles and is not yet reflected in quantitative metrics or the company's outlook.
Kevin McVeigh asked for guidance on the top-line growth trajectory for 2026 and 2027, the pacing of margin improvements, and how the newly acquired Bistro fits into the go-to-market strategy.
CFO Jim Cox reiterated the long-term 20% growth target and 200 basis point annual EBITDA margin expansion for the consolidated company. CEO Sandeep Sahai specified that Enfusion's growth is expected to re-accelerate to 20% by Q2 2027. Sahai also explained that Bistro, like Beacon, is a horizontal capability for visualizing alternative assets that will be offered across all of Clearwater's client segments.
Kevin McVeigh asked for clarification on the Q4 revenue beat, noting that the NAIC project accounted for $3 million of the $7 million beat. He also asked for the key drivers behind achieving the 116% Net Revenue Retention (NRR) rate a year ahead of schedule.
CFO James Cox explained that the additional revenue beat was driven by a strong bookings quarter, faster conversion of bookings to revenue, and the outperformance of NRR itself. He detailed that the 116% NRR was fueled by nearly 7% from upsell of the core platform, 3% from new product cross-sell, and nearly 5% from normalized price increases. CEO Sandeep Sahai added that literally every element of the business outperformed expectations in Q4.
Kevin McVeigh of UBS requested specifics on the revenue contribution from the TopBloc acquisition in Q1 and its expected impact on Q2 guidance. He also asked whether the financial impact from DOGE is now fully accounted for.
CEO Ted Hanson stated that TopBloc's Q1 contribution was immaterial due to the late-quarter close and referred to the full-year expectations provided at the time of the acquisition announcement. On the topic of DOGE, Executive Vice Chairman Rand Blazer explained that while some effects may continue, the primary focus is on clients managing their own spend, and ASGN's mission-critical work provides a degree of insulation.
Kevin McVeigh asked for clarification on TopBloc's implied bill rates, the impact of acquisition-related leverage on the share buyback program, and whether the quarterly revenue miss was due to federal license sales.
CEO Theodore Hanson confirmed the revenue miss was solely due to a $20-30 million shortfall in low-margin federal software license sales, unrelated to a broader federal pause. Regarding capital allocation, CFO Marie Perry and Hanson stated that post-acquisition leverage will be a modest 2.4x, and while deleveraging is a focus, the company maintains the flexibility to repurchase shares depending on the best use of capital.
Kevin McVeigh asked about the expected quarterly cadence for share repurchases and inquired about the progress of internal GenAI deployment across the business.
Executive Marie Perry explained that the share repurchase strategy is to deploy free cash flow, with the cadence dependent on M&A opportunities. On internal AI, Executive Randolph Blazer provided examples such as firm-wide cybersecurity, proposal development, and AI-assisted recruiting, noting these capabilities are shared across federal and commercial segments to drive productivity.
Kevin McVeigh asked where PEO market share gains were coming from and requested clarification on the revenue outlook for Q3 and the second half of the year.
CEO John Gibson explained that share gains are primarily from introducing new clients to the PEO concept rather than taking clients from other PEOs, crediting their strong technology and advisory services. An executive reiterated Q3 revenue growth guidance of 4.5% to 5.0% and noted that excluding ERTC headwinds, back-half growth should be similar to the 7% growth seen in the first half.
Kevin McVeigh asked about the drivers of revenue growth pacing from Q1 to Q2 and how the company offset lower interest income guidance to reaffirm its full-year adjusted EPS forecast.
Executive Robert Schrader clarified that underlying business performance is expected to be consistent, with the apparent revenue ramp-up in the guidance being a result of easing year-over-year comparisons as the ERTC headwind diminishes. Schrader explained that better-than-expected Q1 performance, strong business momentum, and good retention gave them the confidence to absorb the interest rate headwind and maintain the full-year guidance.
Asked for a breakdown of the revenue growth deceleration from 19% in FY '24 to the ~10% guided for FY '25, and inquired about the impact of pricing in the guidance.
The deceleration is attributed to a few points of pressure from lower interest income, about one point from form filing headwinds, and conservatism given the macro environment. The mix of employee growth versus PEPM growth (which includes pricing) is expected to be similar to FY '24, roughly 50/50.
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