Marc Riddick

Marc Riddick asked about Deluxe's opportunities, focusing on build versus buy investment decisions, referencing the CheckMatch acquisition, and later inquired about client receptivity to AI-focused opportunities across different industry verticals or geographies.

Answer

President and CEO Barry McCarthy highlighted Deluxe's fiscal responsibility, mentioning small, accretive acquisitions like CheckMatch and ISO residuals, alongside significant internal investments in capabilities such as Tap on Glass, Visa integration, and AI tools for data marketing. CFO Chip Zint added that the $90M-$100M CapEx reflects a balance of internal investments for efficiency and growth. McCarthy further explained that AI is applied across all business segments to solve specific customer problems, citing examples in B2B lockbox, data marketing, and chatbots, emphasizing value delivery over technology for its own sake.

Marc Riddick asked about Deluxe's approach to investment opportunities, specifically regarding build versus buy decisions for enhancing capabilities and the company's appetite for acquisitions, referencing the CheckMatch acquisition. He also inquired about client receptivity to AI-focused opportunities across different industry verticals or geographies.

Answer

Barry McCarthy, President and CEO, emphasized fiscal responsibility and a balanced approach, highlighting successful internal developments (e.g., Apple Tap on Glass, Visa integration, AI tools for data) alongside strategic tuck-in acquisitions like CheckMatch and ISO residual rights that meet high hurdles and are accretive. Chip Zint, CFO, added that the guided CapEx of $90M-$100M reflects ongoing organic investment, and expanding free cash flow provides optionality for opportunistic investments while continuing deleveraging. McCarthy clarified that AI application is problem-driven across all business segments (B2B lockbox, data marketing, merchant self-service chatbots) rather than specific geographies or client types, leading to great receptivity due to delivered value.

Marc Riddick of Sidoti & Company, LLC inquired about the business pacing throughout the quarter, any notable impacts from macroeconomic trends, and the potential pipeline for similar bolt-on acquisitions or partnerships following the CheckMatch announcement.

Answer

CEO Barry McCarthy noted that the quarter saw a continuation of generalized consumer stress rather than any new, extreme trends. CFO Chip Zint added that forecasting was highly accurate across the business, with the only softness occurring in the low-margin promotional products, a strategic choice to protect profitability. On the M&A pipeline, McCarthy reiterated a disciplined capital allocation strategy focused on debt reduction, stating the company will remain opportunistic for acquisitions like CheckMatch that add scale to existing businesses rather than pursuing deals for the sake of it.

Marc Riddick asked about the catalysts for driving additional financial institution partnerships like the recent Town Bank deal and followed up on capital allocation, inquiring about the timing of CapEx for the year.

Answer

President and CEO Barry McCarthy attributed partnership success to the trusted Deluxe brand, a flexible product platform, and provably superior customer service. CFO Chip Zint addressed the capital allocation question, reiterating the full-year CapEx guidance of $90-$100 million and stating that while not perfectly linear, no material quarterly fluctuations are expected. He also reaffirmed the year-end leverage target of approximately 3.3x.

Marc Riddick of Sidoti & Company inquired about any observed changes in client demand or business confidence following the presidential election and asked about the future cadence of new product introductions across the enterprise, especially following the launch of Deluxe Pay.

Answer

CEO Barry McCarthy responded that it is too early to see any meaningful impact from the change in administration and that the company's guidance assumes a stable macroeconomic environment. He noted that consumer spending appears solid but bifurcated. On product innovation, McCarthy confirmed a continued focus on B2B Payments, Merchant, and Data, leveraging the company's cloud infrastructure to add features more rapidly. He highlighted the R36+ platform in B2B and ongoing investments in the Data platform as examples of this strategy, signaling more to come through 2026.

Marc Riddick asked about the drivers of the Check segment's strong performance, particularly regarding client behavior, and requested an update on the North Star program one year after its introduction, including any areas of increased optimism.

Answer

President and CEO Barry McCarthy credited the Check segment's stability to strong execution and prior investments in variable-cost printing technology. Regarding North Star, McCarthy expressed pride in the progress, confirming that projects comprising over $100 million of the $130 million targeted EBITDA improvements are now in execution or complete. CFO Chip Zint added that the program's restructuring spend is trending toward the low end of the initial forecast, improving its overall financial returns and positively impacting free cash flow.

Marc Riddick asked about ABM's potential acquisition pipeline following the WGNSTAR purchase, the expected leverage levels post-transaction, and the company's comfort range for leverage. He also inquired about any particular seasonality or geographic distribution of WGNSTAR's business.

Answer

Scott Salmirs, President and CEO, ABM Industries, stated that ABM actively seeks opportunities in specific markets like semiconductor, data center, and pharma, but will maintain a balanced approach, aiming for a leverage range around three times post-WGNSTAR. He emphasized a disciplined M&A strategy focused on compelling strategic imperatives and IRRs. Salmirs clarified that WGNSTAR has no significant seasonality due to indoor fab operations and exhibits good geographic diversity across nine U.S. regions with semiconductor facilities, with 85% of its business in the U.S. and 15% in Ireland.

Marc Riddick asked about ABM Industries' potential acquisition pipeline following the WGNSTAR purchase, the expected leverage levels post-transaction, and the company's comfort range for leverage. He also inquired about any particular seasonality or geographic skew associated with the WGNSTAR acquisition.

Answer

Scott Salmirs, President and CEO, stated that ABM Industries actively seeks acquisition opportunities that accelerate growth in specific markets like semiconductor, data center, or pharma. He noted that the WGNSTAR acquisition would bring leverage to about three times, which is the company's desired range, indicating a balanced approach to future M&A in 2026. Mr. Salmirs confirmed that WGNSTAR has no significant seasonality due to its indoor fab operations and boasts good geographic diversity within the U.S. across nine semiconductor regions, with 85% of its business in the U.S. and 15% in Ireland.

Marc Riddick (Sidoti) asked about the visibility and benefits of client retention through renegotiated contracts, specifically regarding contract lengths and how margins are worked back up over time. He also inquired about the timing and expected shape of AI benefits for ABM and its relationship with the ERP system.

Answer

President and CEO Scott Salmirs explained that renegotiating contracts, even with initial margin hits, secures long-term extensions (4-5 years) with marquee clients, allowing ABM to strategically work margins back up over time. Regarding AI, Salmirs sees it as a nascent but exciting technology, expecting meaningful impact from 2026-2028, primarily in overhead savings and client-facing acceleration, emphasizing ABM's core services are 'AI-resilient' as they are people-led and not easily automated.

Marc Riddick of Sidoti & Company, LLC asked for an update on capital usage priorities, including the current M&A pipeline and valuation environment. He also inquired about any notable regional differentiation in activity levels within the B&I segment.

Answer

President and CEO Scott Salmirs described the M&A pipeline as the most robust it has been in the last couple of years, with a focus on acquisitions that deepen capabilities and create strategic value in key segments like M&D. For B&I, he noted significant regional variations, highlighting strength in the Midwest and New York City, a rebound in San Francisco driven by AI, and pockets of growth in the Carolinas, while also pointing out that performance can vary even within a single city.

Marc Riddick asked for an expansion on the benefits of AI and inquired about the current M&A pipeline, including deal flow and seller willingness.

Answer

President and CEO Scott Salmirs described AI applications as being in 'early days' but highlighted examples like the ABM Clean app for labor deployment, improving RFP responses, and future HR uses for predicting candidate retention. On M&A, Salmirs noted a slight increase in deal flow and that ABM is now in a position to consider acquisitions again after pausing for its major internal technology transformation.

Marc Riddick asked about the timeframe for adding new sales talent and its expected impact on 2026 performance.

Answer

Cliff Skelton, President and CEO, indicated that while the addition of sales talent will affect 2026 performance, it necessarily needs to happen in Q4 2025.

Marc Riddick from Sidoti & Company, LLC asked about the client mix and industry verticals engaging in AI endeavors, specifically regarding first movers and key learnings, particularly concerning the fraud focus. Riddick also inquired about Conduent's commercial growth opportunities, areas needing increased bandwidth, and confidence in meeting these opportunities. Finally, he asked about the timeframe for adding new sales talent and its anticipated impact on future performance.

Answer

Cliff Skelton, President and CEO, explained that in the commercial space, 30-40% of opportunities are in healthcare, focusing on efficiency and potential fraud reduction. In the government sector, it's primarily Medicaid processing and eligibility, offering significant fraud reduction and expense opportunities. Both sectors see early AI adoption centered around healthcare. Regarding commercial growth, Skelton highlighted a focus on increasing product penetration within the top 60-80 clients (currently less than two products per client), particularly in the continuum of claims adjudication services and new software licensing opportunities like the HSP license. He noted that a new business development team is being assembled to strengthen the top of the commercial pipeline, which he identified as an Achilles' heel. Giles Goodburn, EVP and CFO, added that new capability sales into existing clients are up year-to-date, and excluding the largest client, 24 out of 25 top commercial clients are showing year-over-year growth. Skelton confirmed that the addition of sales talent is expected to happen in Q4 2025 to impact 2026 performance.

Marc Riddick of Sidoti & Company, LLC inquired about Conduent's progress in gaining a greater share of wallet with existing clients and the competitive landscape. He also asked for more detail on commercial deals that were delayed from Q2 and are now expected in the second half of the year.

Answer

CFO Giles Goodburn highlighted early success in expanding share of wallet, noting over 40 new capabilities were sold to existing clients in the last two quarters. CEO Cliff Skelton added that share of wallet involves both selling more products and retaining volume through operational stability. Regarding deal timing, Mr. Skelton clarified that several smaller commercial deals, not one large one, were pushed into Q3, contributing to an optimistic outlook for the quarter. He also noted some government contracts have similarly shifted to the right.

Marc Riddick asked about the feedback from state and local government clients regarding federal initiatives, the key drivers behind the year-over-year increase in new business wins, and sought confirmation on the net leverage ratio's trajectory.

Answer

CEO Clifford Skelton described the feedback from states as a "mixed bag," with some proactively seeking help on fraud reduction while others are in a "wait and see" mode, but noted all are looking for efficiencies. CFO Giles Goodburn attributed the strong new business wins to investments in sales talent, a new client partner structure, and investments in new capabilities that help clients solve cost issues. Mr. Skelton added that there is a strong focus on expanding share of wallet with existing clients. Regarding leverage, Mr. Goodburn confirmed the 2.7x ratio was as of quarter-end and is expected to trend down toward 1.5x in the second half of the year and exit 2025 near 1.0x as EBITDA recovers and cost efficiencies take hold.

Marc Riddick of Sidoti & Company asked about the timeline for ongoing portfolio rationalization, the potential for a new share repurchase authorization, and the current pricing environment.

Answer

President and CEO Clifford Skelton stated that while the strategy to divest non-core assets continues, it is a time-consuming process without a specific timeline. Both Skelton and CFO Stephen Wood described their capital allocation approach as balanced and agile, with proceeds from any future divestitures potentially funding debt reduction, share repurchases, or internal investments. Regarding pricing, management explained it is balanced with a focus on trust and quality, while margin is also being driven by shifting more work offshore.

Marc Riddick inquired about the progress of Conduent's portfolio rationalization and divestiture program and asked if any state or local election results could impact the business.

Answer

CEO Clifford Skelton indicated that the divestiture program is not over, stating they are "not in the ninth inning" and will remain opportunistic. He and CFO Stephen Wood affirmed that while all assets can grow, rationalization is necessary to optimize focus and scale. On elections, both executives asserted that the business is driven by long-term, critical state needs like technology upgrades for core services, which are more significant tailwinds than political changes.

Marc Riddick asked for insights on which industry verticals are leading in AI-driven activity, trends in state and local government work, and details about the Martino and Partners acquisition and the broader M&A pipeline.

Answer

Chairman & CEO Michael Connors identified energy, utilities, banking, pharma, and healthcare as key commercial verticals driving AI demand. He also noted that public sector work is growing, particularly among state governments focused on optimization. Regarding M&A, he described the Martino and Partners acquisition as a strategic move to expand public sector reach in Italy and stated that ISG continues to surgically target acquisitions that add recurring revenue and AI capabilities.

Marc Riddick asked about the sustainability of high utilization rates, potential hiring needs, the company's use of cash for repurchases and M&A, and business activity with state and local governments.

Answer

CFO Michael Sherrick explained that Q1's high utilization is at the upper end of their target range and is not expected to increase further, with hiring remaining disciplined. He also noted that with leverage at the low end of their target, they will continue to evaluate all capital allocation options. CEO Michael P. Connors added that their M&A focus is on recurring revenue and digital/AI assets. He also confirmed that the U.S. public sector business saw double-digit growth in Q1 and has a solid pipeline.

Marc Riddick of Sidoti & Company, LLC asked for details on the company's strategic repositioning as an AI-centered firm, including its go-to-market strategy. He also followed up with a question clarifying the timing of cash receipts from the automation unit sale and its impact on the year-end balance sheet.

Answer

Michael P. Connors, Chairman and CEO, detailed the AI repositioning, highlighting investments in AI-specific research, the AI-powered Tango platform, a growing AI advisory business, and AI certification for all client-facing staff. Michael Sherrick, EVP and CFO, clarified that of the $7 million sale escrow, $2 million was collected in Q4, with another $2 million sitting as a receivable on the year-end balance sheet to be collected in Q1.

Marc Riddick asked for the quarter-end headcount before the asset sale, the company's target leverage ratio, the potential M&A pipeline, and whether client projects are shifting from defensive cost-saving initiatives to offensive growth-driven ones.

Answer

CFO Michael Sherrick provided the Q3 headcount as 1,467, noting it would decrease by about 115 post-divestiture. CEO Michael P. Connors outlined a target debt-to-EBITDA ratio of 2.0x to 2.5x and confirmed ISG is actively exploring acquisitions focused on recurring revenue or AI. Connors also noted that while the project mix is still heavy on cost optimization, he expects a shift toward transformation projects in 2025 as business confidence improves.

Marc Riddick of Sidoti & Company, LLC asked for insights into the new branch openings in Chicago and Dallas, the outlook for further geographic expansion, and how client hiring activity paced through the quarter in response to macroeconomic uncertainty.

Answer

CEO Gary Kramer expressed confidence in the company's asset-light expansion model, confirming plans for one or two more branch openings by year-end and viewing the strategy as a consistent future growth driver. Regarding client activity, Kramer stated that hiring was slower than forecasted in Q2 due to macroeconomic uncertainty causing businesses to pause, but he now sees greater stability, allowing clients to resume long-term planning.

Marc Riddick inquired about which new service offerings are resonating particularly well in the current environment and if any areas are taking longer than expected to gain traction.

Answer

Executive Gary Kramer highlighted the Kaiser Permanente medical offering as a major success, noting that participant additions were 2.5 times higher than initial annual estimates within just seven months. He also mentioned the new applicant tracking system is receiving positive early feedback. Conversely, Kramer identified the broader IT product roadmap, aimed at building out the full 'hire to retire' employee life cycle, as a longer-term play. He stated that full adoption will take time and is not expected to have a material effect on the organization in 2025.

Marc Riddick inquired about which client industry verticals were leading the strong start to the year and asked about the competitive positioning of the benefits offering that is driving its success, particularly with white-collar clients.

Answer

Executive Anthony Harris responded that the strong performance was broad-based across geographies and industries, rather than being driven by a specific vertical, though he highlighted the success of the asset-light market development managers. Executive Gary Kramer emphasized that BBSI's core differentiator remains its local, high-touch service teams. He explained that when product offerings are comparable to competitors, the value of BBSI's people becomes the deciding factor for clients.

Marc Riddick inquired about potential new product or service offerings beyond the current benefits plan and asked for more detail on client retention trends.

Answer

CEO Gary Kramer hinted at a 'well-baked product road map' with new products currently in beta testing that will be announced next quarter, declining to share specifics prematurely. Regarding retention, he stated it remains strong and above their 90% target. The majority of client runoff is due to businesses closing or being sold via M&A, which he described as a natural part of the business cycle. He attributed the high retention to the deep integration of BBSI's local service teams with client operations.

Marc Riddick from Sidoti & Company, LLC inquired about new features for the JobStack platform and client receptivity. He also asked for management's views on candidate availability, particularly for skilled roles, and participation in apprenticeship programs.

Answer

CEO Taryn Owen explained that the JobStack roadmap is focused on customer experience, sales effectiveness, and operational efficiency, highlighting a new pricing feature and matching technology that has driven fill rates to an all-time high. Regarding talent, she stated that candidate availability has not changed significantly. She pointed to the company's 'workup' and apprenticeship programs as key initiatives for expanding the skilled talent pool, noting that participation levels have remained similar to historical trends.

Asked about the flow and availability of job candidates, year-over-year pricing trends outside of revenue mix, and the performance and market share impact of the JobStack platform.

Answer

Executives reported strong candidate flow, with fill rates in the 90% range. They acknowledged expected pricing pressure in the current market but stated they are maintaining pricing discipline. The JobStack platform is performing as expected, with high user satisfaction and effective features contributing to operational efficiency.

The analyst requested details on the rollout of the new proprietary JobStack app, including feedback and initial impressions. He also asked for more specifics on the 'bright spots' in the business, whether they are industry-specific, sector-focused, or geographical.

Answer

Executives reported a successful and ahead-of-schedule rollout of the new JobStack app, which allows for faster implementation of user feedback, citing examples like an improved candidate access feature and an easier order extension tool for clients. The 'bright spots' were identified across several sectors: renewables (new project wins), skilled trades (growth in commercial trucking), healthcare (new RPO and driver support wins), and higher-skilled placements (a new global tech firm client for PeopleScout).

Marc Riddick from Sidoti & Company asked for details on the rollout of the proprietary JobStack app, including user feedback and initial results. He also requested more specifics on the 'bright spots' in the business, such as key industries or sectors showing strength.

Answer

Executive Taryn Owen confirmed the successful and ahead-of-schedule rollout of the new JobStack app, highlighting new features developed from user feedback that have improved adoption rates and usability. Regarding bright spots, she pointed to new wins in renewables, continued growth in commercial trucking, new healthcare clients in PeopleScout, and a significant RPO deal with a global technology firm to hire professional and technical roles.

Marc Riddick questioned the current flow of potential job candidates and fill rates, trends in year-over-year pricing, and the specific benefits and market share impact being driven by the JobStack technology platform.

Answer

CFO Carl Schweihs confirmed that candidate availability is strong, with fill rates reaching 90% in Q1. Executive Taryn Owen stated that while there is pricing pressure typical for the current environment, the company has maintained discipline. She also detailed the success of the JobStack platform, highlighting high user ratings, ease of use, and features like ReadyMatch and digital onboarding that are performing as expected.

Marc Riddick of Sidoti & Company, LLC inquired about Heidrick & Struggles' second-half hiring plans, including the rationale, scale, and timing of associated expenses. He also asked about the company's priorities for cash usage and potential new investment opportunities.

Answer

CEO Tom Monahan explained that hiring is crucial for growth to capture 'white space' with existing and new clients, leveraging the firm's culture to attract talent, particularly early-career professionals. CFO Nirupam Sinha clarified that the hiring impact would be moderate but sufficient to support 2026 growth, with costs coming online smoothly in the second half. Regarding cash, Sinha noted upcoming earn-out payments and the potential for using cash for acquisitions or lift-outs that originate from hiring conversations.

Marc Riddick of Siddoti & Company, LLC asked about historical parallels for the current economic environment, the company's use of cash and M&A pipeline, and whether M&A activity is a significant driver of client demand.

Answer

Executive Thomas Monahan explained that every economic downturn is unique, but Heidrick is well-positioned due to its diversified business, variable cost structure, and zero debt. He noted they are not yet seeing a slowdown. Executive Nirupam Sinha added that cash use priorities are upcoming earn-out payments from past acquisitions and organic investments, which can sometimes evolve into smaller acquisitions. Monahan concluded that client M&A is one of many transformation activities, like cost-outs or digital initiatives, that drive demand for Heidrick's leadership advisory services.

Marc Riddick from Sidoti & Company questioned the current levels of C-suite turnover compared to historical trends, potential business opportunities arising from shifts in U.S. federal government spending, and how the outlook for M&A activity influenced the company's guidance.

Answer

CEO Tom Monahan responded that C-suite turnover has been relatively consistent, with the company's success driven by strong client engagement. He noted that federal government spending is an immaterial part of their business, but broader economic changes prompt clients to re-evaluate their leadership needs, creating opportunities. Regarding M&A, he stated it was not a significant factor in the guidance, observing that while there's some optimism, higher interest rates remain a consideration, though clients are adapting to this new reality.

Marc Riddick of Sidoti & Company, LLC posed several questions, asking about state and local activity and whether a shift in responsibilities from the federal level, particularly concerning FEMA, is becoming visible. He also inquired about the current M&A pipeline and valuation environment. Finally, he requested more details on the competitive advantages and rollout of the new ICF Fathom AI solution.

Answer

CEO John Wasson addressed all points. On state and local, he noted that despite speculation about FEMA's future role, federal funding for disaster recovery has not decreased, and ICF is prepared to support states if their responsibilities increase. On M&A, Wasson stated the primary focus is on acquiring firms in the commercial energy sector to add scale and scope, while deals in federal and disaster recovery are unlikely in the near term due to market uncertainty. Regarding ICF Fathom, he described it as a proprietary platform using agentic AI to modernize federal systems, enabling rapid prototyping and demonstrating value to clients quickly.

Marc Riddick inquired about potential upside opportunities from shifting priorities at Health and Human Services (HHS), the company's M&A pipeline and strategy, and whether acquisition multiples have changed recently.

Answer

Executive John Wasson identified potential HHS opportunities related to children's health, pesticides, and food additives, with more clarity expected in the second half of the year. He stated that any near-term M&A would likely be a smaller, tuck-in acquisition in the energy sector. CFO Barry Broadus added that federal M&A activity has slowed, but valuations in other target markets like energy remain stable, and ICF has the balance sheet capacity to execute a deal.

Marc Riddick from Sidoti asked about capital allocation priorities, focusing on the M&A pipeline and valuations in the current environment. He also inquired about the rationale for providing quarterly guidance.

Answer

Executive John Wasson stated that a federal acquisition is highly unlikely in 2025 due to market uncertainty, but a tuck-in acquisition in the energy sector could be possible later in the year. He confirmed that key priorities are managing the business carefully, buying back stock, and deleveraging. Executive Barry Broadus explained that Q1 guidance was provided to offer direction amid market volatility and that the practice may continue.

Marc Riddick of Sidoti & Company asked about the company's comfort level with its debt reduction, its capacity for M&A activity, and the current valuation environment for potential acquisition targets.

Answer

CFO Barry Broadus stated that strong cash flow has enabled significant debt reduction, giving the company ample capacity and flexibility to pursue M&A. CEO John Wasson added that ICF is actively but disciplinedly exploring targets, particularly in energy and federal health IT. Wasson noted that while valuations in high-interest areas remain lofty, there has been some movement toward alignment, and the key factor for a deal is identifying synergistic value.

Marc Riddick of Sidoti & Company, LLC inquired about the primary drivers behind the company's increased financial guidance, the current level of business visibility, and any shifts in M&A regulatory needs. He also asked about the size and duration of recent deals, the current pricing environment, and the specific timing of share repurchase activity during the quarter.

Answer

Paul Maleh, Chairman, President & CEO, attributed the guidance raise to strong, continuous performance and a healthy lead flow, noting that visibility remains stable despite geopolitical uncertainty. He stated that while the antitrust practice is performing at a record level, there hasn't been a noticeable shift in regulatory approach or deal size in the short term. Maleh confirmed that recent rate increases have been successfully implemented, with a continued focus on delivering value and efficiency. He also explained that the bulk of share repurchases occurred in Q2, reflecting the company's bullish outlook and a limited buying window in Q1.

Marc Riddick from Sidoti & Company asked if the improving business cadence throughout Q1, from a slow January to a strong March, could be linked to specific external events. He also inquired about any particular client industry verticals showing increased activity and sought commentary on return-to-office trends.

Answer

CEO Paul Maleh stated he couldn't tie the quarter's momentum to any single cause, attributing the initial slowness to general uncertainty that can cause client pauses. He emphasized the broad-based nature of the recovery, with contributions coming from all parts of the portfolio rather than a specific vertical. On the return-to-office topic, Maleh noted no significant shift at CRA, with employees averaging just over three days in the office, which he compared to a flexible pre-COVID environment.

Marc Riddick of Williams Trading, LLC inquired about the drivers behind the high Q4 utilization rate and its potential impact on 2025 headcount, any early effects observed from the new administration, and whether the quarter's strong performance was consistent or back-end loaded.

Answer

Paul Maleh, an executive, explained that the high 78% utilization was driven by both a busy Q4 and a structural mix shift towards the higher-utilization Legal & Regulatory segment. He affirmed that long-term headcount growth should still align with revenue growth. Maleh stated it was too early to assess the new administration's impact, despite low January M&A figures, and confirmed that Q4's strength was consistent throughout the period, not just a late surge.

Marc Riddick asked about the performance cadence during the quarter, the specific drivers behind the Antitrust practice's strong growth, and how current lead flow conversion rates compare to historical norms. He also inquired about any expected seasonality or unusual factors for the upcoming fourth quarter.

Answer

CEO Paul Maleh stated that the quarter's strength was consistent month-over-month, unlike the volatility seen in the prior year. He attributed the Antitrust practice's nearly 30% growth to the team's exceptional performance, noting that projects are larger and longer-lived, supplemented by constant pipeline replenishment. Maleh confirmed that lead conversion rates have returned to the historical norm of roughly two-thirds. For Q4, he anticipates no unusual disruptions beyond normal holiday seasonality.

Marc Riddick of Sidoti & Company, LLC asked for an update on client feedback regarding the Markham integration and for more detail on the specific areas of discretionary spending that are experiencing the most significant headwinds.

Answer

President & CEO Jerry Grisko explained that client-facing changes were intentionally minimized during the busy season. He acknowledged some initial, well-intended process friction on the Attest side that has since been course-corrected. Grisko identified two main areas of discretionary weakness: M&A-related advisory services, where transaction sizes are smaller, and the market-dependent SEC attest practice from Markham, which has seen reduced activity due to fewer IPOs and debt issuances.

Marc Riddick inquired about client reception, specifically the timing and impact of known client conflicts, when the slowdown in the audit and advisory practices began, and the current pricing environment.

Answer

President and CEO Jerry Grisko stated that client conflicts resulting from the Marcum transaction were anticipated, factored into their financial model, and are now largely resolved. He explained the slowdown in the SEC audit practice, a new area for CBIZ from Marcum, is logically tied to clients pausing fundraising and S-1 filings due to market uncertainty. Regarding pricing, Grisko noted that CBIZ's disciplined approach resulted in a 'nice lift' in Q1, but acknowledged that a prolonged challenging environment could increase competitive pricing pressure in the future.

Marc Riddick from Sidoti & Company, LLC asked about client retention trends and feedback from legacy Marcum clients since the acquisition. He also inquired about the pricing environment for the combined entity and whether any specific industry verticals were showing standout client activity.

Answer

CEO Jerry Grisko reported that client retention from both legacy Marcum and CBIZ has been very strong, with attrition from client conflicts coming in at or below modeled expectations. He noted significant excitement from the Marcum team about cross-selling opportunities. Regarding pricing, Grisko stated that strong demand allows for continued pricing power, which will be a key driver of organic growth. He highlighted that the combined firm now has 10 industry or specialty practices with over $100 million in revenue each, significantly accelerating their industry-focused growth strategy.

Marc Riddick of Sidoti & Company, LLC sought further clarification on the pricing dynamics, asking about the common components of the gains and any potential revenue mix benefits. He also inquired about client retention trends at CBIZ and how they compare to Marcum's historical performance.

Answer

CFO Ware Grove attributed sustained pricing power to analytical tools implemented years ago that allow for granular, targeted pricing actions, a practice now embedded in the annual process. He also noted Marcum employs a very similar approach. President and CEO Jerry Grisko added that Marcum's client retention rates are very similar to CBIZ's, describing both as 'best-in-class' and in the top decile of the industry, indicating no need for corrective action.

Marc Riddick asked for more details on the company's technology investments, the current M&A pipeline for tuck-in acquisitions, the monthly pacing of improvement in portable storage, and the outlook for interest expense and debt reduction.

Answer

CEO Joseph Hanna described technology investments as essential for system upgrades, cloud migration, and incorporating new tools like AI to remain competitive. He confirmed the M&A pipeline is active, with a focus on building relationships to be prepared for opportunities. CFO Keith Pratt reiterated a measured outlook on portable storage, stating that while Q2 was encouraging, it is prudent to await more evidence of a sustained recovery. Pratt also noted that lower interest expense was driven by lower rates and debt, and the current run rate is a good indicator for the remainder of the year.

Marc Riddick asked for more details on the M&A pipeline, how it relates to the company's cash usage, and the opportunities presented by the current low leverage. He also inquired about the company's comfort level with its current talent and any ongoing hiring needs.

Answer

Executive Joseph Hanna confirmed an active M&A pipeline with both large and tuck-in opportunities and stated that the company's low leverage provides the 'dry powder' to execute strategic transactions. Regarding personnel, Hanna said that hiring has resumed successfully after being paused during a previously terminated merger. He expressed satisfaction with the quality of available candidates and the company's ability to fill necessary roles.

Marc Riddick asked about the business impact from the recently passed $10 billion school facilities bond in California and whether recent weather events in the state could create demand. He also inquired about the merger and acquisition pipeline for domestic expansion, specifically asking about the availability and valuation of potential targets.

Answer

Executive Joseph Hanna responded that the California bond is positive news that ensures funding is available for education projects. However, he stated that while the company is positioned to assist with any weather-related recovery, he does not expect it to be a 'huge needle mover' for financial results. On the topic of M&A, Hanna explained that opportunities still exist in the consolidated modular space. He noted the portable storage market is more fragmented, with tuck-in acquisition opportunities often arising from owner-specific life events rather than broad economic cycles, ensuring a steady stream of potential deals.

Marc Riddick from Sidoti & Company, LLC followed up on the Q3 debt reduction, asking about the company's long-term leverage targets and its strategy for resuming M&A activity. He also inquired about plans for internal investments, such as hiring and technology projects, that were paused during the terminated merger process.

Answer

Executive Keith E. Pratt explained that the merger termination fee was used to pay down debt in Q3, resulting in a comfortable leverage ratio of 1.75x, and he anticipates Q4 SG&A will increase due to resumed hiring. Executive Joseph Hanna added that McGrath is updating its M&A priorities, focusing on the Modular and Portable Storage businesses to expand its geographic footprint. He also confirmed that some delayed internal investments in personnel and IT will now move forward.

Marc Riddick asked for the final consultant count, trends in client demand and pacing throughout the quarter, performance of specific customer industry verticals, the new CEO's initial impressions, and the drivers behind the recent increase in bill rates.

Answer

CFO & COO Kannan Sugantharaman reported the billable consultant count ended at 991 and noted that while demand was broad-based, the healthcare and life sciences vertical showed fair traction. He also confirmed that average bill rates rose to between 84.5% and 85.5% due to higher rates on new assignments. CEO Nirav Patel shared his cautiously optimistic outlook, stating that while clients are more deliberate with spending, the long-term demand for AI-driven transformation remains strong.

Marc Riddick of Sidoti & Company asked for details on the Q4 Data & Analytics bookings, which were below expectations, inquiring about their progression and any vertical-specific trends. He also questioned the extension of the share repurchase program and the company's current stance on M&A.

Answer

CFO John Cronin attributed the lower-than-expected bookings to project delays caused by broad market uncertainty and longer sales cycles, rather than issues in specific verticals. He also noted the company expects more share buyback volume in 2025 under the extended program. CEO Nirav Patel stated that while M&A is part of the long-term plan, he is currently focused on defining the company's overall strategic direction before pursuing acquisitions.

Marc Riddick of Sidoti & Company asked for specifics on the quarter-end consultant headcount, the average bill rate, the types of projects and industry verticals driving growth, and the revenue cadence throughout the third quarter.

Answer

CEO Vivek Gupta and CFO John Cronin provided the quarter-end IT staffing consultant count of 1,071 and an average bill rate of $82.80. Vivek Gupta explained that growth was broad-based across industries like retail, healthcare, and manufacturing, with Data & Analytics projects focusing on intelligent data foundation and GenAI. He also confirmed that revenue growth was steady and evenly spread across the three months of the quarter.

Marc Riddick of Sidoti & Company, LLC asked for details on the drivers of improved resource utilization and revenue mix, changes in client activity across verticals, and the company's share repurchase activity and future uses of cash.

Answer

CEO Vivek Gupta attributed higher utilization in the Data & Analytics segment to improved processes for bench management, resource planning, and project execution. He also noted that clients are becoming more comfortable with spending and are receptive to the company's broader data modernization and AI-embedded offerings. CFO John Cronin addressed capital allocation, stating that no shares were repurchased in Q2 due to a blackout period but affirmed the company's intent to resume the program when possible.

Marc Riddick asked for an update on candidate availability and whether the supply of talent has changed recently. He also inquired about the thinking behind the company's accelerated share repurchase activity.

Answer

COO David Kelly stated that candidate availability has not materially changed over the last 9-12 months, which is reflected in the stability of pay rates. CFO Jeff Hackman explained that Kforce became more aggressive with buybacks in Q1 and April to capitalize on market volatility, reflecting management's confidence in the firm's future. He emphasized Kforce's long-term strategy of returning capital to shareholders, noting approximately $1 billion has been returned since 2007.

Marc Riddick inquired about cash usage priorities, specifically the company's thoughts on M&A versus share repurchases and dividends. He also asked about any business disruptions experienced from the recent hurricanes in the fourth quarter.

Answer

CFO Jeff Hackman reiterated Kforce's long-standing capital return strategy, noting the company returned ~75% of operating cash flow in 2024 and expects more of the same in 2025. He emphasized that the bar for M&A remains very high due to past experiences, and the focus remains on organic growth and returning capital. Regarding disruptions, Hackman and Executive Joseph Liberatore confirmed there was no material business impact from the hurricanes, but Liberatore commended the team's fortitude in advancing strategic initiatives despite personal challenges.

Marc Riddick asked for details on capital allocation priorities, Kforce's competitive positioning regarding its talent pipeline, and the specific catalysts behind improved demand from the financial services vertical.

Answer

CFO Jeff Hackman reaffirmed the company's commitment to its historical capital return policy, noting no change in approach. CEO Joseph Liberatore credited Kforce's competitive strength to its focused execution and simple business model. COO David Kelly clarified that the improvement in financial services was not broad-based but driven by specific clients' mission-critical projects, cautioning against viewing it as a sector-wide trend.

The analyst inquired about the drivers behind the full-year revenue guidance, specifically regarding demand expectations. He also asked about the expected revenue mix, pricing dynamics, and the factors that contributed to the year-over-year RevPas growth in the fourth quarter.

Answer

The company's guidance is based on continued focus on contract leasing, diversifying demand drivers to include hospitality and residential, and decelerated attrition. They are particularly excited about the new 24/7 residential parking product, which comes at a higher rate. The Q4 RevPas growth was attributed to the flattening of attrition rates and targeted rate increases implemented in November and December.

Marc Riddick inquired about the new Revenue Per Available Stall (RevPas) metric, asking for the specific drivers behind its year-over-year growth in the third quarter. He also sought clarification on seasonality patterns and questioned how the event and concert landscape in 2024 compared to the strong performance seen in 2023.

Answer

Executive Manuel Chavez explained that the Q3 RevPas growth was primarily driven by increased utilization. He noted that new business growth finally outpaced the significant headwind from COVID-related contract cancellations that impacted late 2023 and early 2024. Stephanie Hogue, President, addressed seasonality, stating that Q1 is typically the lowest period while Q3 is the peak due to a higher mix of event and travel traffic. Chavez added that 2023 saw an unusually strong 'bounce back' in experiential spending, whereas 2024 has seen a reversion to more normal, single-digit growth trends for transient revenue.

Inquired about the components of the RevPas metric, what drove its year-over-year growth in Q3, the impact of seasonality on the business, and a comparison of event-driven demand between 2023 and 2024.

Answer

The executives clarified that RevPas growth was primarily driven by increased utilization as new business outpaced prior COVID-related contract cancellations. They detailed the business's seasonality, with Q3 being the peak and Q1 the lowest. They also noted that 2023 saw an unusual post-COVID bounce in event demand, while 2024 has reverted to a more normal growth pattern.

Marc Riddick from Sidoti & Company, LLC asked for details on the November acquisition of Children's Therapy Center and inquired about the company's capital allocation strategy, specifically its appetite for future share repurchases and any shifts in M&A priorities.

Answer

CEO Peter W. Quigley explained that the Children's Therapy Center acquisition adds brick-and-mortar clinics, complementing its in-school therapy business with a higher-margin service. CFO Troy Anderson addressed capital allocation, stating that while a $10M share repurchase was completed in Q4, the near-term bias is toward debt repayment and investing in growth, though returning capital to shareholders remains an option.

Marc Riddick inquired about the potential investment opportunities and technology spend related to the MRP integration and asked for any early client feedback on the combined entity.

Answer

CEO Peter W. Quigley reported that client feedback has been 'universally positive,' with customers excited about the combination of capabilities. He noted that the integration plan, set to begin in Q2 2025, will focus on leveraging best practices and scaling MRP's exciting technology across the broader Kelly enterprise. CFO Olivier Thirot confirmed that a detailed plan for business, technology, and back-office integration is in place to achieve previously stated synergy targets.

Marc Riddick inquired about the company's comfort level with its current debt and leverage, how that affects future M&A plans, and the outlook for technology investments and capital expenditures.

Answer

CFO Olivier Thirot expressed comfort with the balance sheet, noting that debt has been reduced to $210 million with a debt-to-EBITDA ratio of 1.7x. He highlighted strong free cash flow and improved DSO of 57 days as factors enabling deleveraging and future acquisitions. For CapEx, Thirot stated a recurring base of $20-$25 million annually, primarily for technology, which could temporarily increase for MRP integration, an expense he feels the company can comfortably absorb.

Marc Riddick asked for more detail on early cross-selling successes, the initial results of the new technology platform go-live, and any changes in client sentiment related to the political landscape.

Answer

Executive Bhadresh Patel highlighted cross-selling success in finance transformation (ERP), digital transformation, and supply chain. CFO Jennifer Ryu reported the platform go-live went very smoothly. Executive Kate Duchene characterized post-election client sentiment as 'generally more positive,' with more planning discussions and an expectation of increased transactional work.

Inquired about which client segments are most responsive to the new go-to-market strategy, the internal training and planning that supported the changes, and the current M&A pipeline and capital allocation priorities.

Answer

The positive reception to the new strategy is broad across all sectors, not concentrated in any one, as it allows for expansion beyond just finance and accounting conversations. Internally, the sales team is being trained to act as a 'concierge' for clients, supported by new tools and defined target personas. The current focus is on integrating recent acquisitions (Reference Point, CloudGo) rather than new M&A, so capital allocation will shift more towards share buybacks.

Marc Riddick of Sidoti & Company, LLC inquired about the drivers behind regional performance disparities, particularly the weakness in Asia Pacific versus growth in the Americas and EMEA. He also asked for an update on industry vertical trends, the potential impact of the political environment on client demand, and the company's capital allocation strategy regarding free cash flow, M&A, and share repurchases.

Answer

Jeffrey Eberwein (Executive) and Jacob Zabkowicz (Executive) explained that the Asia Pacific weakness was primarily due to significantly lower-than-normal hiring volumes from long-time financial sector clients, which they believe is temporary. They noted the 'land and expand' strategy is successfully increasing wallet share with existing clients. Zabkowicz identified life sciences and pharmaceuticals as stable sectors, while financial services remain weak and technology is seeing slow improvement. Regarding capital allocation, Eberwein stated a preference for organic growth and talent investment over M&A, though they are always looking for strategic targets. He confirmed a strong commitment to share buybacks, viewing the stock as an excellent use of capital.

Marc Riddick followed up on the spending slowdown by financial customers, asking if it was linked to any uncertainty in the Attorney General's office. He also inquired about the current M&A landscape, including valuations and target areas, and asked for an update on CapEx expectations for the remainder of the year.

Answer

CEO Julie Howard clarified the financial services slowdown was not linked to the AG's office but rather a client focus shift, the wind-down of a large monitorship, and delays on new engagements. Chief Growth and Transformation Officer Lee Spirer described the M&A pipeline as robust, with a competitive but stable valuation environment. CFO Stephen Lieberman confirmed the full-year CapEx forecast remains around $20 million, weighted towards the second half of the year.

Marc Riddick of Sidoti & Company, LLC inquired whether delayed opportunities in the FSAC segment could be recaptured later in the year, what factors are driving recent large engagement wins in the Energy segment, and what the headcount growth expectations are for 2019.

Answer

Chairman and CEO Julie Howard expressed confidence that delayed FSAC opportunities would be recaptured over the course of the year. She attributed the Energy segment's success to its thought leadership and a strategic shift toward providing end-to-end solutions, resulting in larger engagements. Management projected 2019 headcount growth to be roughly in line with revenue growth, driven by strategic hiring and technology investments, with CFO Stephen Lieberman noting some of this growth would be in centralized, lower-cost locations like India. Chief Growth and Transformation Officer Lee Spirer added that they also expect to improve utilization on the consulting side.

Marc Riddick from Sidoti & Company inquired about the momentum in healthcare project wins, customer feedback on the post-divestiture Navigant, and the company's appetite for international acquisitions, particularly in the Energy segment.

Answer

CEO Julie Howard noted that momentum in healthcare is driven by health systems moving forward with large transformation projects due to financial pressures, and that clients appreciate the firm's more streamlined industry focus. She also explained that Navigant is predominantly a domestic firm but will follow global client needs, rather than acquiring internationally just to establish a presence. Chief Growth and Transformation Officer Lee Spirer added that clients are beginning to expect more from the company's shared investments in digital and data.

Marc Riddick from Sidoti asked about client feedback regarding the recent divestiture and increased focus on core verticals. He also inquired about the drivers for headcount additions in the FSAC segment and whether strategic shifts in Energy and FSAC were improving revenue visibility.

Answer

CEO Julie Howard stated that there has been minimal client feedback on the transaction, as clients are more focused on their specific engagements. CFO Stephen Lieberman explained that headcount additions in FSAC are focused on enhancing technology delivery capabilities to meet growing demand. Howard concluded that the new, more focused business model provides greater long-term sustainability and visibility, and the nature of recent large engagements in FSAC and Energy also contributes to better near-term predictability.