Shlomo Rosenbaum • Stifel, Nicolaus & Company, Incorporated

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CEO Scott Staples explained that performance swings across verticals have narrowed, with staffing holding its own and financial services performing well. He highlighted transportation's resilience due to its diverse compliance products. Staples clarified the cautious outlook is driven by client conversations about policy uncertainty, not by observed changes in their hiring actions, noting that Q2 and July performance were strong.

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CEO Scott Staples explained that the firm is maintaining conservative guidance due to macroeconomic uncertainty, as clients are in a 'just-in-time' hiring mode, leading to strong current volumes but reluctance to forecast further out. He attributed the strong 96% retention rate to a 'laser focus' on over-communicating the benefits of the combined company's 'best-of-breed' technology approach to the Sterling customer base, citing the rollout of the 'Click Chat Call' feature as a key example of an upgrade.

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CEO Scott Staples explained that weaker seasonal hiring peaks have become a multi-year trend of normalization, which is now factored into 2025 guidance. Regarding the platform strategy, he highlighted an innovative 'best-of-breed' approach that allows clients to access features from both First Advantage and Sterling platforms without disruptive migrations, ensuring customer continuity and protecting synergy targets.

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CEO Scott Staples clarified that Sterling's margin pressure was from a mix shift—successful upsells in lower-margin health services combined with normal-course attrition of higher-margin screening clients—not an increased rate of attrition. He described the macro environment as one of 'stabilization and normalization,' with customers using a just-in-time hiring model. Staples agreed with the characterization that the base business was 'bouncing around a little bit on the bottom.'

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CFO and COO Tamar Rapaport-Dagim addressed the backlog by emphasizing the positive 3% year-over-year growth and noted that the timing of deal signings, such as the significant BT contract signed after quarter-end, can cause minor sequential fluctuations. Regarding AI, she explained that revenue contribution is starting in small increments, with data-related services currently larger than specific use-case revenue. She expects the latter to grow as more POCs convert to commercial deals.

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President and CEO Joshua Sheffer stated there has been no change in customer spending behavior, which remains cautious. CFO and COO Tamar Rapaport-Dagim clarified that fluctuations in unbilled receivables are normal due to the milestone-based nature of large transformation projects. Sheffer added that while he could not name specific clients, Amdocs is seeing good commercial progress on data-related activities that support GenAI.

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CFO & COO Tamar Rapaport-Dagim explained the backlog increase was a mix of new deals, the full-year impact of the AT&T cloud deal, and a contribution from the PROFINET acquisition, which accounted for less than half the increase. She noted the acquisition was already factored into guidance. CEO Joshua Sheffer identified data readiness as a key gating factor for AI adoption, which was a rationale for the PROFINET deal. He also mentioned that solution maturity and accuracy are critical for widespread deployment in areas like customer care.

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CFO and COO Tamar Rapaport-Dagim confirmed that Amdocs expects revenue growth to accelerate throughout fiscal 2025, driven by the conversion of its pipeline and backlog. For restructuring costs, she advised modeling a figure similar to fiscal 2024's, which was in the range of $70 million to $75 million.

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President & CEO William Meaney explained that growth is propelled by the DXP platform's unique ability to automatically structure unstructured data, which is a key differentiator. He cited a recent win with a major SaaS company as evidence. EVP & CFO Barry Hytinen noted the business is now at a run rate over $540 million, with potential for significant expansion from large projects.

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CEO William Meaney affirmed confidence in the 125 MW leasing goal, citing a strong hyperscale pipeline in the U.S., Europe, and India, alongside solid enterprise leasing. CFO Barry Hytinen explained the minimal tariff risk, noting that labor and design are major cost components and that the strong market pricing would likely absorb any tariff impacts.

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Barry Hytinen, EVP and CFO, confirmed that the two primary factors for the revenue miss were a larger-than-expected foreign exchange headwind and the intentional, strategic reduction in the consumer business to improve profitability. He stated that the ALM business performed in line with expectations, with recently acquired businesses performing slightly better than planned.

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CEO William Meaney explained that while leasing can be lumpy, revenue growth is set to accelerate in Q4 due to commencements, creating strong momentum for 2025. CFO Barry Hytinen added that since most Q3 commencements occurred late in the quarter, there is high visibility for over $20 million in incremental data center revenue in Q4, with margins expected to continue improving.

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CEO John Zillmer reported a very successful selling season in both K-12 and higher education, which is still ongoing. He attributed the high client retention rate, exceeding 97%, to proactive service and strong relationships, not competitive pricing, noting it's a key component of employee incentives.

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CFO James Tarangelo attributed the moderate education growth to the timing of net new business, expecting it to accelerate. CEO John Zillmer added that underlying university enrollment remains supportive. Regarding Quantum, both executives clarified it is not a significant revenue driver initially but is accretive to earnings after the first year by adding to purchasing scale and driving long-term margin benefits.

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CEO Githesh Ramamurthy reported a slight acceleration in Q2, particularly for emerging solutions, where customers are now moving from pilot to contract more quickly. He noted that while core solutions are stable, some large EvolutionIQ deals are taking longer to implement. CFO Brian Herb clarified that a $2 million item was a cost benefit, not revenue, and confirmed the core business grew about 8% year-over-year after excluding the 4% contribution from EvolutionIQ.

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CEO Githesh Ramamurthy explained that the current growth rate reflects a typical transition period as customers adopt the broadest set of next-generation AI solutions the company has ever released, which requires significant change management. He clarified that the primary goal of bundling is not to increase price, but to simplify adoption for customers by packaging synergistic solutions together, thereby increasing the overall ROI for their implementation effort.

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CEO Githesh Ramamurthy responded that while there are some market share shifts among its top-10 carrier clients, the aggregate impact is not material. He reiterated that consumer behavior is the primary driver of claim frequency. Regarding payroll, he highlighted the large addressable market and mentioned plans for other back-office solutions for repair facilities, without providing specific details.

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Christophe Beck, Chairman & CEO, affirmed his confidence in the 20% margin target by 2027, pointing to the 170 bps expansion in Q2 as proof of leverage. He also confirmed that the complex shift to Pest Intelligence requires investment that can create a near-term headwind but will ultimately strengthen the business and its margin profile.

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Christophe Beck, Chairman and CEO, expressed confidence that Pest Elimination's growth would return to the high single-digit range sometime in the second half of 2025 and certainly in 2026, driven by the build-out of its advanced digital platform. On the second question, CFO Scott Kirkland explained that Agentic AI solutions are being developed within the 'One Ecolab' program, starting with processes closest to customers and the sales team, like lead-to-cash, with the intent to expand these capabilities across the enterprise.

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Scott Kirkland, CFO, explained that the increase to 7% is not a new long-term trend but reflects accelerated near-term investments in growth platforms like AI Dishmachine, Pest Intelligence, and digital systems. Christophe Beck, Chairman and CEO, added that the company is capitalizing on its strong cash flow and balance sheet to fund these high-return opportunities.

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CEO Christophe Beck stated the goal is a combination of 2-3% value pricing and the remainder from volume growth. He noted that achieving the 12-15% EPS growth target doesn't immediately require hitting the 5-7% revenue range, as strong value pricing and productivity gains provide a solid foundation. He expressed confidence in the progression towards the long-term revenue goal, supported by new growth engines and digital offerings.

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CEO Robert Fauber clarified that revenue from standalone GenAI products is not yet material. The metric refers to the total ARR from a cohort of 'GenAI early adopters'—customers who have purchased at least one AI-related offering. He explained that the total relationship spend from this highly engaged group is growing at double the rate of the rest of the Moody's Analytics customer base, demonstrating the broader positive impact of the AI strategy.

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CEO Robert Fauber noted that while GenAI features have been integrated into eight core solutions to enhance value, the newer à la carte products are in their early days and face longer sales cycles with banks. Stephen Tulenko, President of Moody's Analytics, added that conversations with large institutions are becoming transformational, with some exploring using Moody's tools to save millions of labor hours and potentially displace outsourced services.

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CEO Robert Fauber detailed the rollout of AI-enabled 'navigators' for existing products, an AI early warning system, and automated banking workflow tools. He described adoption as a 'mixed bag,' with smaller firms moving quickly while larger banks are taking longer due to the need to establish internal risk and control frameworks, resulting in longer sales cycles.

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CEO & Chairman Ari Bousbib clarified that while the market environment remains 'unsettled' due to policy uncertainty, clients are moving forward with critical programs they can no longer afford to delay, indicating a slight improvement. However, he attributed the strong results primarily to IQVIA's intensified 'see more, win more' strategy, which involves responding to more RFPs and aggressively pursuing wins, particularly in the emerging biopharma (EVP) segment.

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Chairman and CEO Ari Bousbib stated that while general uncertainty is a concern, it has not yet impacted the TAS segment, which is benefiting from pent-up demand for drug launch support. He believes the major R&D pipeline reprioritization driven by the IRA is largely complete. The current R&DS slowdown is characterized by delayed decision-making, reflected in a 10% longer RFP-to-award timeline, rather than new program cancellations.

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Ari Bousbib, Chairman and CEO, explained that the operating environment remains challenging, consistent with previous commentary. He stated that while the bulk of large pharma portfolio reprioritization has occurred, some volatility could persist for another one to two quarters. He confirmed there was no change in the status of two large delayed trials, which are still expected to commence in late 2025.

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Chairman and CEO Ari Bousbib clarified the delays are due to client-specific logistical issues, which are confidential under NDAs, and are unrelated to the drug's efficacy, financials, or IQVIA's performance. He distinguished these from broader industry pressures like IRA-driven reprioritizations and a separate large cancellation due to drug futility. Bousbib expressed high confidence the trials will resume in 2025.

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President & CEO Todd Schneider did not provide a specific revenue mix for the First Aid business but stated the company expects the segment to grow in the low double digits going forward. Regarding the Uniform Direct Sale business, he confirmed the strong Q4 performance was not expected to continue at that rate, and the plan remains for low single-digit growth due to the lumpy nature of that business.

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President & CEO Todd Schneider did not provide a specific revenue mix for the First Aid business but stated the company is focused on reinvesting in valuable products and expects low double-digit growth going forward. He confirmed that the strong Q4 performance in the Uniform Direct Sale business was not expected to continue, reiterating that the plan for that lumpy, rollout-driven business is low single-digit growth.

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President and CEO Todd Schneider stated that the industry remains highly competitive with no significant changes, reiterating that Cintas's primary growth comes from converting 'no-programmers' rather than from direct competitors. EVP and CFO Mike Hansen confirmed that fiscal 2026 will have the same workday count as fiscal 2025, with 65 days in each quarter.

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CFO Mike Hansen confirmed acquisitions occurred in the rental, fire, and first aid spaces, with a focus on rental, but declined to provide specific revenue figures. CEO Todd Schneider stated that all four focus verticals continue to perform well and grow at rates above the company average, driven by dedicated teams and tailored product offerings.

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President and CEO Todd Schneider responded that growth was broad-based, with the four focus verticals performing well as expected. EVP and CFO Mike Hansen clarified the repurchase numbers, explaining that the cash flow statement figure includes shares withheld for taxes on employee stock plans, while the press release commentary refers to the board-authorized buyback program.

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CEO Philip Snow stated that while the macro environment has not significantly changed, clients are undergoing multi-year technology transformations where FactSet is well-positioned. Chief Revenue Officer Goran Skoko added that momentum is mostly attributable to strong product resonance, particularly in data solutions and new GenAI offerings, and improved execution.

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CEO Phil Snow and Chief Revenue Officer Goran Skoko confirmed the operating environment remains challenging. Snow attributed the confidence to successfully de-risking major renewals for the year and seeing strong execution in enterprise-level sales to the buy-side, particularly in managed services and data feeds. He emphasized that the improved outlook does not depend on a banking recovery. Skoko noted that the LiquidityBook acquisition enhances their front-office solutions and creates significant cross-sell opportunities.

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CEO Frederick Snow attributed some optimism to the election being over, which bankers believe will be good for M&A activity. Chief Revenue Officer Goran Skoko added that the pickup is a combination of improved market sentiment and FactSet's own initiatives to increase client-facing activities and sales force optimism.

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Chief Financial Officer Helen Shan explained the discrepancy, stating that the buy-side and sell-side calculations do not include CGS (Content and Technology Solutions) issuance growth. In Q1, strong CGS issuance contributed approximately 25 basis points to the total organic ASV growth rate.

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CFO Helen Shan explained that the difference was due to the strong performance of CGS (Content and Technology Solutions) issuance, which is included in the total organic ASV calculation but not allocated to the buy-side or sell-side figures. She noted that CGS issuance contributed about 25 basis points to the total growth.

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Executive Frederick Snow stated there has been no major philosophical change, as the company has always balanced growth with cash flow delivery. He attributed recent performance to a tough market and the focus on margin as a way to deliver earnings growth. Regarding confidence in the 2H '25 outlook, he cited a more constructive market view and the platform's evolution to handle larger, 7- and 8-figure deals. Executive Goran Skoko added that confidence is also driven by the high level of innovation and new products delivered this year, which are expected to contribute to second-half results.

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Interim CEO Phillip Holloman stated there is a 'renewed focus' on service execution, including better resource organization and empowering Route Sales Representatives (RSRs) to succeed. CFO Kelly Janzen suggested the volume discrepancy with competitors could be due to Vestis's heavier product mix in hospitality linens, which have greater seasonality. Regarding the new CEO, Holloman declined to speak for him but noted he will inherit a 'very robust base of operation' to build upon.

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CEO Kimberly Scott positioned cost initiatives as a continuous program and pointed to amortization costs as a key metric for tracking merchandise reuse benefits. She emphasized that volume growth, not pricing, is the core strategy, aiming to leverage the company's 35% idle plant capacity. Growth will be driven by national accounts, SME sales, and improved customer retention.

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CEO Kim Scott stated that new sales hiring will be adjusted based on the rising productivity of the existing team, which is seeing 'best-in-class' results in some regions. She highlighted significant progress in new wins, including a major food services contract, and detailed service improvements like a new on-time delivery notification system and a 50% reduction in shortages at pilot locations.

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CFO Jonathan Collins clarified that less than half of the A&G segment's business is in the U.S. and that a meaningful portion of that has already renewed for the year. He reiterated that the company's risk analysis confirms any potential impact is contained within the existing financial guidance.

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CFO Jonathan Collins explained that the ability to lower capital expenditures while maintaining margins is a direct result of exiting low-margin transactional businesses. CEO Matti Shem Tov added that he believes the investment profile is appropriate, with a new focus on fewer, more impactful projects and leveraging existing technology, like the Academic AI platform, across other segments to drive innovation efficiently.

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CEO Matti Shem Tov confirmed that the company has identified businesses to potentially divest, wind down, or shrink. He noted that teams are currently deliberating the best approach to execute these changes while protecting the company's reputation and core businesses, with more specifics to be shared in February.

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CEO Martina Cheung clarified that the guidance process is strictly bottom-up for each division. It is based on a rigorous analysis of key operating metrics like renewals, sales pipelines, and cancellations. The final guidance for each segment is a direct result of this individual analysis, not an aggregate-level netting of effects.

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President and CEO Martina Cheung noted that the wider guidance range for market-driven businesses like Ratings reflects this inherent uncertainty. She stated that forecasts are informed by direct customer feedback, maturity walls, interest rates, and opportunistic activity. She also pointed to ongoing momentum in specific sub-asset classes like infrastructure and private credit.

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CEO Mark Begor stated that banking clients are responsive but haven't yet shown signs of stress, such as increased portfolio rescoring projects. CFO John Gamble added that the offline Financial Marketing Services business saw strong growth, indicating continued customer investment. Regarding Truework, Begor noted it's a very small player from which they feel no market impact and that the acquisition was not on their radar.

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CFO John Gamble reported that banks see low unemployment as a positive, but note that higher inflation is pressuring subprime consumers, leading to increased delinquencies. Outside of the rate-driven weakness in mortgage and auto, he indicated there has been no major change in broader credit behavior or bank expectations for 2025.

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CEO Timothy Oliver and CFO R. Wamser addressed the questions. Oliver confirmed success in migrating 'managed services' customers to full AaaS. Wamser explained the new EBITDA calculation excludes volatile 'other income and expense' items like pension and FX. He also noted that expiring hedges will increase vault cash interest costs, pressuring Network margins, though they will remain strong. Both confirmed that off-balance sheet financing for AaaS is a key focus for Q2 2025.

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CEO Tim Oliver described the company as being in the 'early innings' of a multi-year hardware refresh cycle that should contribute to growth in 2025-2026. CFO Paul Campbell explained the sequential ARPU dip is a timing anomaly due to the small unit base and expects it to rise given the high-value backlog. Regarding APAC, Oliver stated that competitive pricing pressure is primarily on services, not hardware, and he has not seen changes in behavior from major competitors.

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CEO Jennifer Scanlon confirmed the battery testing business is performing very well, driven by broad demand across vehicles and energy storage systems. CFO Ryan Robinson explained that "services and materials" costs include subcontracting testing services to partners, which occurs when volume is high or when evaluating new service lines before committing capital to build in-house capacity.

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EVP and CFO Ryan Robinson confirmed that Q3 growth was driven by both volume and price, with volume being a slightly larger contributor. President and CEO Jennifer Scanlon stated that demand remains consistent across administrations and that the primary impact of sourcing shifts is on the testing (TIC) side for recertification as clients move manufacturing, rather than on the ULTRUS software.

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CEO Brian Shepherd acknowledged that while Q4 organic growth was strong at 5%, the full year 2024 was disappointing. He stated that despite entering 2025 with better backlog and visibility, market conditions remain tough, justifying the 2-4% guidance. CFO Hai Tran attributed the strong free cash flow to operating income growth and a high-intensity focus on improving net working capital, which gained traction in the second half of the year, rather than a single factor like unbilled receivables.

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CFO Hai Tran attributed the anticipated Q4 revenue uplift to strong seasonality in the payments business, which is compounded by a recent acquisition, and the timing of revenue recognition from large global telecom deployments shifting into year-end. For the Q3 gross margin improvement, Tran cited two main drivers: ongoing cost efficiency actions and a favorable revenue mix shift towards higher-margin SaaS business.

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