Shlomo Rosenbaum

Shlomo Rosenbaum, Managing Director at Stifel, asked for more detail on WM's optimistic view of the healthy economy, requesting specific metrics like service interval trends, scale reports on mature routes, residential scale reports, and temporary roll-off activity. He also followed up on the suspension of pricing initiatives in Healthcare Solutions, asking if the Q1 2026 target for resolution is on track and if the issues preventing pricing have been addressed.

Answer

CEO Jim Fish cited a good pipeline in special waste and strong temporary roll-off activity as leading indicators for an optimistic economic outlook, noting that the C&D business grew 3.4% for the year. Regarding Healthcare Solutions pricing, Jim Fish clarified that while some price increases were suspended, the main issue was dilution from credit memos, which are believed to have peaked in Q4 2025 and are now on a downward trend, providing a tailwind for 2026 through less dilution rather than new price execution.

Shlomo Rosenbaum asked for more detail on the healthy economy and optimistic view, requesting metrics like service interval trends, scale reports on mature routes, residential scale reports, and temporary roll-off activity. He also followed up on the comment about suspending pricing initiatives in Healthcare Solutions, asking if the Q1 target was on track and if pricing would pick up.

Answer

CEO Jim Fish pointed to the strong special waste pipeline and good temporary roll-off activity as leading indicators, along with C&D volume growth, indicating a more optimistic macro outlook. He clarified that pricing suspension in Healthcare Solutions was not universal, and while most customers received increases, they were diluted by credit memos, which are believed to have peaked in Q4 and are now on a downward trend, providing a tailwind for 2026 pricing.

Shlomo Rosenbaum asked if the recent uptick in industrial volumes, excluding healthcare internalization, indicates a general improvement or just a bounce off the bottom. He also sought clarity on the timeline for stabilizing the ERP system in the healthcare business and when normal pricing implementation can resume. Additionally, he asked about the distinction between customer credits and write-offs, and how to interpret the $200 million in renewed contracts at low double-digit price increases.

Answer

President and COO John Morris confirmed that the underlying industrial business is improving, with about 50 basis points of growth unrelated to healthcare internalization, driven by less drag from temporary business and an uptick in permanent customers. EVP and CFO Devina Rankin stated the ERP stabilization period is expected through Q1 2026, moving to a scalable and growth period in Q2 2026, and clarified that customer credits reduce revenue while write-offs are SG&A costs. CEO Jim Fish noted the $200 million renewals indicate pricing power but are not yet directly tied to the 4-6% growth target.

Shlomo Rosenbaum asked for more detail on Cintas's growth verticals, including their aggregate growth versus the rest of the business and their percentage of total revenue, and a deep dive into the scrubs business, specifically the differentiator of using the balance sheet for effective dispensers.

Answer

Jim Rozakis, Executive Vice President and Chief Operating Officer, stated that healthcare is Cintas's largest vertical at about 8% of total revenue, and all four key verticals (healthcare, hospitality, state/local government, education) collectively represent about 11% of total revenue, growing slightly faster than the company average. Todd Schneider, President and CEO, explained that Cintas's strong balance sheet allows investment in dispensers for the scrubs business, which is a significant differentiator, transforming the product perception from a commodity and providing a strategic advantage through better inventory control and value for customers.

Shlomo Rosenbaum asked for more detail on the growth verticals, including their aggregate growth versus the rest of the business, growth relative to each other, and their current percentage of total business. He also asked about the differentiator of using Cintas's balance sheet to invest in effective scrub dispensers in the healthcare vertical.

Answer

Executive Vice President and COO Jim Rozakis stated that healthcare, hospitality, state and local government, and education verticals are all growing slightly faster than the company aggregate. Healthcare is the largest at about 8% of total revenue, with all four combined representing about 11%. President and CEO Todd Schneider explained that deploying dispensers in healthcare provides significant value by giving customers control over inventory, allowing them to choose higher-value products, and leveraging Cintas's balance sheet for strategic advantage and better customer experience.

Shlomo Rosenbaum from Stifel asked about the revenue mix between recurring and one-time services in the First Aid business and sought commentary on the Q4 spike in Uniform Direct Sale growth.

Answer

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.

Shlomo Rosenbaum from Stifel inquired about the revenue mix between recurring and one-time services in the First Aid business and asked if the Q4 spike in Uniform Direct Sale revenue was a one-off event.

Answer

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.

Shlomo Rosenbaum asked if there have been any noticeable changes in the competitive landscape and requested the workday count for fiscal 2026 for modeling purposes.

Answer

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.

Shlomo Rosenbaum requested details on the quarter's $145 million in acquisitions, asking for their expected revenue contribution and segment breakdown. He also asked for more color on the performance of Cintas's targeted verticals, such as healthcare and hospitality.

Answer

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.

Shlomo Rosenbaum from Stifel asked if any particular client types or verticals showed standout growth and requested clarification on a discrepancy between the share repurchase figures in the press release and the cash flow statement.

Answer

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.

Shlomo Rosenbaum (Stifel) asked about the drivers behind FactSet's accelerated organic growth across all geographic units, seeking to understand the balance between internal company-specific initiatives and a general improvement in the market environment.

Answer

Sanoke Viswanathan, CEO of FactSet, noted strong positive sentiment and client conviction, with a stronger pipeline than last year, driven by both internal initiatives (better retention, expansion) and a robust market environment. Goran Skoko, CRO, added that investments are resonating, leading to improved retention in banking and diversified product contributions, with increased client demand, especially in Asia-Pacific due to regulatory relaxation.

Shlomo Rosenbaum asked about the drivers behind FactSet's accelerated organic growth across geographic units, seeking to understand whether it's primarily due to internal initiatives and improved sales execution or a broader improvement in the market environment.

Answer

CEO Sanoke Viswanathan noted very positive sentiment and high client conviction, with a stronger and more diversified pipeline compared to last year. He attributed growth to both internal initiatives improving retention and expansion, and a strong market environment with growing demand for new data products and consumption through new channels like APIs and Cloud Connectors. CRO Goran Skoko added that investments are resonating, leading to improved retention in banking (e.g., aftermarket research, Deep Sector) and significant contributions from trading solutions. He also cited positive impacts from regulatory relaxation in China.

Shlomo Rosenbaum asked whether FactSet's significant AI investments are expected to materially accelerate the company's growth rate or if they are primarily necessary to maintain market position amidst industry changes.

Answer

Sanoke Viswanathan, CEO, characterized the current phase of AI adoption as early and a 'discovery phase,' with a future 'breakout phase' where clear winners will emerge. He believes current investments position FactSet as a leader in client conversations and progressive dialogue, which will ultimately translate into significant winning products. Helen Shan, CFO, added that the 'green shoots' observed from existing AI investments provide confidence for further strategic investment in data, workflow, and AI to drive future growth.

Shlomo Rosenbaum questioned whether FactSet's significant AI investments are expected to materially accelerate the company's growth rate or primarily serve to maintain its current market position amidst industry transformations, seeking insight into the realistic return on these investments.

Answer

Sanoke Viswanathan, CEO & Director, FactSet, stated that the industry is in an early phase of AI adoption, characterized by experimentation and dynamic technology. He believes FactSet's current investments position it as a leader in client conversations and progressive dialogue, which will ultimately translate into significant winning products. Helen Shan, CFO, FactSet, added that the 'green shoots' from existing investments provide confidence for further investment in data, workflow, and AI to drive future growth.

Shlomo Rosenbaum questioned whether FactSet's significant AI investments are expected to materially accelerate the company's growth rate or primarily serve to maintain its current market position amidst industry transformations.

Answer

Sanoke Viswanathan, CEO, stated that the industry is in an early, discovery phase of AI adoption, where FactSet's current investments position it as a leader in client conversations and progressive dialogue. He believes this will translate into significant winning products in the future. Helen Shan, CFO, added that the 'green shoots' from existing AI investments provide confidence for further investment in data, workflow, and AI to drive future growth.

Shlomo Rosenbaum of Stifel asked whether the recent uptick in ASV growth is due to an improving macro environment or primarily driven by better execution and product traction.

Answer

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.

Shlomo Rosenbaum inquired whether management's more positive tone reflects an improving market environment or stronger company-specific execution amidst ongoing challenges.

Answer

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.

In a follow-up, Shlomo Rosenbaum asked about the pickup in client activity in the last six weeks, questioning if it was due to FactSet's product efforts, post-election optimism, or other factors.

Answer

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.

Shlomo Rosenbaum asked for clarification on the ASV calculation, noting that total company organic ASV growth of 4.5% was higher than its buy-side (4.3%) and sell-side (3.5%) components.

Answer

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.

Shlomo Rosenbaum of Stifel Financial Corp. sought clarification on a calculation discrepancy where total organic ASV growth was 4.5%, while its buy-side (4.3%) and sell-side (3.5%) components were lower.

Answer

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.

Shlomo Rosenbaum asked about a potential philosophical shift between focusing on growth versus margins, and what gives management confidence in a second-half 2025 improvement compared to a similar, less successful forecast made last year.

Answer

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.

Shlomo Rosenbaum from Stifel asked for comments on the general employee engagement levels across Vestis, what they were when Jim Barber joined, the actions being taken on this front, and any trends in employee turnover.

Answer

Jim Barber, President and CEO, acknowledged that employee engagement levels are likely not at their highest due to recent challenges and the ongoing transformation. He stated that the company plans to communicate a "new day at Vestis" to employees, backed by commitments to prove the business can turn around. Regarding turnover, Mr. Barber noted that historically, the most critical areas are plants and RSSs, where turnover is decreasing but not yet at desired levels. He indicated that overall turnover numbers would shift due to the transformation, emphasizing the goal to convince employees that staying with Vestis is the right decision.

Shlomo Rosenbaum asked about Vestis Corporation's employee engagement levels since Jim Barber joined, the actions being taken to improve them, and current employee turnover trends.

Answer

President and CEO Jim Barber acknowledged that employee engagement might not be at its highest due to recent challenges and the ongoing transformation. He stated that management's job is to convince employees that staying with Vestis is the right decision, with further communications planned. Regarding turnover, Jim Barber noted that rates in plants and RSSs (Route Service Representatives) are decreasing but not yet at desired levels, while other turnover numbers are influenced by the transformation.

Shlomo Rosenbaum questioned what is being done differently to fix persistent service issues, why Vestis is seeing volume declines when competitors are not, and whether the incoming CEO will need to make significant new investments.

Answer

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.

Shlomo Rosenbaum questioned the financial materiality of efficiency efforts and asked about the primary drivers for future revenue growth, specifically the mix between pricing and volume.

Answer

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.

Shlomo Rosenbaum inquired about the planned headcount additions for the sales force, the ramp-up time for new sellers, and progress on previously cited challenges like new win ramp-ups and service quality.

Answer

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.

Shlomo Rosenbaum asked about carry costs incurred for contracts that didn't start as expected in Q4 2025, whether these costs extend into Q1 2026, and sought clarity on the visibility for managing such impacts. He also questioned if the current high retention rate is a new steady state or an unusually high figure.

Answer

CEO John Zillmer confirmed some ramp-up and starting costs for delayed accounts in Q4 2025, with a minor dribble into Q1 2026, but highlighted medical costs (including GLP-1s) and higher incentive compensation as the primary financial impacts in Q4. He stated decisive action on GLP-1s would reduce future costs. Regarding retention, Zillmer expressed a desire to maintain or exceed 96% and views 95% as a floor, emphasizing continuous efforts to improve performance and proactively extend client agreements.

Shlomo Rosenbaum asked about any carry costs incurred from contracts that didn't start as expected in Q4, their impact on Q1 margins, and the visibility in managing the business around these delays.

Answer

CEO John Zillmer acknowledged some ramp-up and startup costs dribbling into Q1 but characterized them as not overly significant. He emphasized that the two major financial impacts in Q4 were higher medical costs (including GLP-1s) and increased incentive compensation due to record net new business. Zillmer noted decisive action taken on GLP-1 coverage, effective January, to significantly reduce future costs, and expressed satisfaction with paying incentives for strong growth. Rosenbaum also inquired about the retention rate, asking if the current 96%+ is a new steady state or an unusually high figure, and if 95% should be considered a floor. Zillmer expressed a desire to achieve 96% or higher again, setting high expectations for continuous improvement, and affirmed that 95% should be a floor, with the company striving to do even better.

Shlomo Rosenbaum of Stifel Financial Corp. asked for an update on the Education segment's selling season, its growth outlook, and the drivers behind the company's high client retention rate.

Answer

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.

Shlomo Rosenbaum asked for an explanation for the relatively light 2.6% growth in the education business and requested details on the Quantum acquisition's financial impact, including its revenue run rate and profitability.

Answer

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.

Shlomo Rosenbaum sought a deeper understanding of organic growth trends in Canada versus the U.S., asking for a breakdown of commodity price impacts and how these factors translated into regional organic growth rates. Rosenbaum also questioned the implied conservatism in the Q4 EBITDA guidance, asking for the puts and takes, considering Q3 outperformance, M&A, pricing, and FX tailwinds versus potential headwinds.

Answer

Luke Pelosi (CFO, GFL) explained that Canada's higher organic growth was driven by EPR contribution (an incremental $15 million), with both markets pricing above 6%. The U.S. experienced negative volume due to soft C&D (-3%) and special waste (-8%), while Canada saw positive special waste volumes. Pelosi clarified that Q4 guidance reflects conservatism due to seasonal climates, potential post-Q3 softness, incremental commodity headwinds, and a tough prior-year comp from hurricane cleanup volumes, advising against direct extrapolation of Q3 results.

Shlomo Rosenbaum asked for a deeper understanding of GFL's organic growth trends, specifically differentiating between Canada and the U.S., and the impact of commodity prices. Rosenbaum also questioned the implied conservatism in the Q4 EBITDA guidance, considering Q3 outperformance and other positive factors.

Answer

Luke Pelosi, CFO of GFL, explained that Canada's higher organic growth was driven by EPR contributions and positive volumes, while the U.S. experienced negative volumes due to softness in C&D and special waste. He acknowledged conservatism in Q4 guidance, citing seasonal factors, incremental commodity headwinds, and a tough comparable from Q4 2024's hurricane cleanup volumes.

Shlomo Rosenbaum asked about the expected energy capacity to be energized in the next 12 months to spur near-term data center leasing activity, aiming to understand if large leasing numbers seen in previous quarters could return soon.

Answer

President and CEO Bill Meaney detailed that 250 MW will be energized in the next 18 months, followed by another 200 MW in the subsequent six months, totaling 450 MW over 24 months. He expressed confidence in maintaining strong revenue growth. EVP and CFO Barry Hytinen added that these assets are in tier-one markets like London, Virginia, Madrid, Miami, Amsterdam, and Richmond, supported by a $250 million pre-leased backlog beyond 2027.

Shlomo Rosenbaum followed up to ask for confirmation and more detail on the sequential decline in both storage and services gross margins, assuming it was primarily due to mix.

Answer

EVP and CFO Barry Hytinen confirmed that the storage margin decline was mostly due to data center power, which is a pass-through with no incremental profit, and that data center is a lower gross margin business despite its accretive EBITDA margin. For services, the decline was entirely due to mix, with strong growth in lower-margin ALM and Digital businesses, and improved retention rates leading to fewer permanent withdrawals, which is a headwind to rate but positive long-term.

In a follow-up question, Shlomo Rosenbaum of Stifel asked for more detail on the growth drivers within the digital business and how its capabilities are differentiated in the market.

Answer

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.

Shlomo Rosenbaum inquired about the recent lower data center leasing activity, the company's confidence in its 125 MW annual target, and sought details on the sub-5% tariff exposure for data center construction.

Answer

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.

Shlomo Rosenbaum requested an unpacking of the factors that led to Q4 revenue coming in slightly below guidance, asking if it was due to FX, the storage business exits, or other factors like ALM performance.

Answer

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.

Shlomo Rosenbaum requested details on the pacing of data center construction commencements and how that will translate to revenue growth in Q4 and into the next year.

Answer

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.

Shlomo Rosenbaum asked for more details on the restructuring program, specifically if there would be structural process improvements for future margin leverage beyond the exit of specific areas. He also sought clarification on the $25M-$30M operating income improvement, asking if it included both cost savings and revenue impact. Additionally, he questioned the lower capital intensity guidance, asking if it was purely timing or a shift to less capital-intensive growth.

Answer

CFO Ryan Robinson clarified that the restructuring involves exiting service lines representing approximately 1% of current revenue, which are less profitable, alongside a broader expense reduction initiative, primarily people-related costs, with the majority of impact expected in 2027. CEO Jennifer Scanlon confirmed ongoing business process improvement supported by technology investments. Mr. Robinson stated that the change in CapEx guidance is mostly due to timing shifts into 2026, and the portfolio of growth initiatives remains strong.

Shlomo Rosenbaum asked about the structural impact of the restructuring program on future margins beyond the immediate cost reductions, including process improvements. He also sought clarification on the $25-$30 million savings, specifically how much is from cost savings versus revenue impact, and questioned the reduced capital intensity guidance, asking if it reflects less capital-intensive growth drivers or just timing.

Answer

CFO Ryan Robinson clarified that the restructuring involves exiting ~1% of current revenue from less profitable service lines and broader expense reductions, primarily people-related costs, with the full operating income improvement expected by Q1 2027. CEO Jennifer Scanlon confirmed ongoing business process improvement through technology investment. Ryan Robinson stated the CapEx guidance change is due to timing shifts, not a change in the strong portfolio of growth investments.

Shlomo Rosenbaum of Stifel asked for more detail on demand trends and expansion plans for the company's battery labs. He also sought clarification on what is included in the "services and materials" costs that partially offset revenue growth.

Answer

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.

Shlomo Rosenbaum asked for a breakdown of revenue growth between volume and price. He also inquired about the potential business impact of a more tariff-focused U.S. administration, particularly concerning China sourcing and the ULTRUS platform.

Answer

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.

Shlomo Rosenbaum inquired about the future pace of portfolio moves after Market Intelligence optimization and Mobility spin-off, asking if other divisions like Commodity Insights would see similar strategic adjustments, and sought clarification on market growth versus S&P Global's execution in Market Intelligence.

Answer

Martina Cheung, President and CEO, stated that portfolio optimization in Market Intelligence is substantially complete, with future divestitures expected to be tactical. Regarding Market Intelligence, she emphasized that the Capital IQ Pro desktop is performing strongly and growing faster than the end market, attributing success to strong execution, product strength, and partnerships with the Chief Client Office to consolidate customer spend and increase value.

Shlomo Rosenbaum asked about the methodology for setting guidance, specifically why the outlooks for Ratings and Indices were changed while others were maintained, and whether this reflects a lack of impact so far or a wider range of outcomes.

Answer

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.

Shlomo Rosenbaum of Stifel asked about the level of visibility into the Ratings issuance forecast given the current political and geopolitical environment, and what factors could cause results to deviate from guidance.

Answer

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.

Shlomo Rosenbaum from Stifel asked Jonathan Collins about the financial impact (revenue and EBITDA) of multiple large ebook transactions that occurred before the company's exit from that area. He also asked Matti Tov for his perspective on the long-term potential and growth trajectory of Clarivate's business after a year of implementing strategic changes.

Answer

Jonathan Collins, EVP and CFO, stated that without the large ebook transactions in Q3, disposals would have been down over $20 million, indicating a material top-line impact with low margins. Matti Tov, CEO, expressed confidence in returning the company to market growth rates (3-4% for A&G, 4.5% for IP, slightly higher for Life Sciences) over time, citing strong fundamentals, valuable assets, a supportive customer base, and talented personnel as key drivers.

Shlomo Rosenbaum asked to quantify the revenue exposure to large U.S. universities that may be affected by government funding probes or cancellations.

Answer

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.

Shlomo Rosenbaum questioned whether the company is investing enough in product innovation to drive sustainable long-term organic growth, noting that capital spending is guided down for 2025 while margins are being held flat despite a significant revenue reduction.

Answer

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.

Shlomo Rosenbaum asked if the plan to rationalize the portfolio implies a substantial 'shrink-to-grow' strategy that would make the business significantly smaller.

Answer

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.

Shlomo Rosenbaum asked for details on the growth of TASS subcomponents, specifically real-world evidence, consulting, and analytics, and whether consulting is acting as a leading indicator for market improvement.

Answer

Chairman and CEO Ari Bousbib noted that despite a tough year-over-year comparison, TASS performed strongly in Q3, primarily driven by very strong growth in real-world evidence. He confirmed that the consulting segment, which had been negative in late 2023 and early 2024, is now showing positive growth, indicating an improving market environment.

Shlomo Rosenbaum asked about the growth trends within TASS subcomponents, specifically real-world evidence, consulting, and analytics, and what these indicate about the broader market, particularly regarding a pickup in consulting.

Answer

Ari Bousbib, Chairman and Chief Executive Officer, highlighted strong TASS performance in Q3, led by real-world evidence, despite tough year-over-year comparisons and typical Q3 seasonality. He confirmed that consulting, which was previously negative, is now positive, signaling an improving market, with other components showing low to mid-single-digit growth.

Shlomo Rosenbaum of Stifel Financial Corp. inquired about the R&D Solutions (RDS) business, asking whether the improved performance was due to a better market environment or IQVIA gaining market share through its own initiatives.

Answer

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.

Shlomo Rosenbaum questioned the potential risk of the uncertainty impacting the R&DS segment spilling over into the shorter-cycle TAS business, and whether further R&DS pipeline reprioritizations could occur.

Answer

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.

Shlomo Rosenbaum asked for an update on the operating environment's progression through Q4, the status of vendor relationship reassessments, and any changes in expectations for previously discussed delayed contracts.

Answer

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.

Shlomo Rosenbaum from Stifel asked for more detail on the two major trial delays, questioning the nature of the 'logistical issues' and the company's confidence in a 2025 resumption.

Answer

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.

Shlomo Rosenbaum asked about Equifax's strategy to drive VantageScore 4.0 adoption in the mortgage market, including potential increases in sales and marketing budgets, and support for customers in back-testing against FICO.

Answer

CEO Mark Begor described the effort as having 'a lot of momentum' due to FICO's significant price increase. He highlighted Equifax's competitive pricing ($4.50 vs. FICO's $10), a two-year price freeze, offering free VantageScores across all verticals, incentivizing commercial teams, and providing analytics support to customers. He also noted VantageScore's established use in other lending verticals.

Shlomo Rosenbaum asked about Equifax's strategy to drive VantageScore adoption in the mortgage market, including potential increases in sales and marketing budgets, and support for customers in back-testing against FICO.

Answer

Mark Begor, Chief Executive Officer, described it as a 'downhill effort' with significant momentum due to FICO's price doubling. He highlighted Equifax's competitive pricing ($4.50, frozen for two years), free VantageScores across all verticals, and the commitment to leverage commercial teams with incentives and provide analytics support. He emphasized that VantageScore's performance is comparable or better than FICO, and it's already widely accepted in other verticals.

Shlomo Rosenbaum inquired about the current behavior of banking customers in response to economic uncertainty and asked for Equifax's perspective on the acquisition of Truework by Checker.

Answer

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.

Shlomo Rosenbaum asked what Equifax is hearing from its banking clients regarding their macro expectations and how different areas of credit are performing.

Answer

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.

Shlomo Rosenbaum of Stifel Financial Corp requested more color on vertical performance, particularly in staffing, and asked about the timing and drivers of the cautious "wait and see" sentiment influencing the second-half outlook.

Answer

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.

Shlomo Rosenbaum asked for a reconciliation of strong April results with client 'wait-and-see' attitudes, and inquired about customer retention trends within the legacy Sterling base versus the original deal model.

Answer

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.

Shlomo Rosenbaum inquired about the specific drivers behind the Q4 weakness in seasonal hiring for retail and transportation, and asked about the strategic implications of using the Sterling platform for a major new healthcare client.

Answer

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.

Shlomo Rosenbaum inquired about the nature of Sterling's customer attrition, specifically if a loss of higher-margin clients was an ongoing risk. He also asked for an update on the operating environment, client hiring expectations, and whether recent softness in base business was an erosion or simply 'bouncing around the bottom'.

Answer

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.'

Shlomo Rosenbaum of Stifel Financial Corp asked for an explanation of the slight sequential decline in the 12-month backlog, a first in many years, and sought to dimensionalize the new AI deals and their expected timeline for contributing to incremental revenue growth.

Answer

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.

Shlomo Rosenbaum asked for an update on customer spending behavior, whether the recent decline in unbilled receivables is a new trend or normal fluctuation, and if any large AI POCs have converted into significant contracts.

Answer

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.

Shlomo Rosenbaum of Stifel sought more detail on the $80 million sequential backlog growth, asking about its composition and any unusual factors post-business-exit. He also asked about the PROFINET acquisition's impact on organic growth guidance and the primary gating factors for landing large AI deals.

Answer

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.

Shlomo Rosenbaum of Stifel inquired about the expected cadence of revenue growth for fiscal 2025, noting that guidance implies an acceleration. He also asked for an estimate of the restructuring costs that will be factored into the adjusted free cash flow guidance.

Answer

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.

Shlomo Rosenbaum of Stifel asked if the previously discussed elongation in sales cycles was tracking to expectations or improving. He also sought to clarify the underlying organic growth rate for the core business in Q2.

Answer

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.

Shlomo Rosenbaum questioned why organic revenue growth is migrating to the low end of the long-term range and asked why the new solution bundling isn't expected to drive better growth through pricing.

Answer

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.

Shlomo Rosenbaum questioned if claim volume softness could be due to market share shifts among carriers, like Progressive's growth, and asked for examples of potential extensions for the new payroll product.

Answer

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.

Shlomo Rosenbaum from Stifel asked a two-part question: whether the 20% OI margin target is still credible with 3% organic growth, and if the Pest Intelligence transition is creating a near-term revenue headwind.

Answer

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.

Shlomo Rosenbaum of Stifel asked when Pest Elimination revenue growth is expected to re-accelerate to the upper single-digit range and requested more detail on the company's use of Agentic AI.

Answer

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.

Shlomo Rosenbaum sought clarification on the increase in CapEx guidance to 7% of sales for 2025, asking if this represents a 'new normal' for the company.

Answer

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.

Shlomo Rosenbaum asked about the path to achieving the 5-7% target revenue growth, questioning whether the company would lean more on pricing or if volume would improve as raw material tailwinds fade.

Answer

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.

Shlomo Rosenbaum requested clarification on the company's GenAI metrics, specifically the $200 million ARR figure associated with a faster-growing customer cohort, to better understand what this number represents.

Answer

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.

Shlomo Rosenbaum of Stifel asked for an update on customer traction for newer GenAI capabilities beyond Research Assistant, such as automated credit memos and early warning systems, and their likely adoption path.

Answer

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.

Shlomo Rosenbaum asked for an update on the development and customer adoption of Moody's various AI products, and whether the pace of adoption is meeting initial expectations.

Answer

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.

Shlomo Rosenbaum asked about success in moving customers along the services continuum, the specifics of the new EBITDA calculation, the impact of vault cash interest expense, and the status of third-party hardware financing.

Answer

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.

Shlomo Rosenbaum questioned the drivers of strong self-service banking performance, the current stage of the ATM refresh cycle, the reasons behind the sequential decline in ATM as a Service ARPU, and the competitive landscape in the APAC region.

Answer

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.

Shlomo Rosenbaum asked about the trend in market conditions and sought context for the 2-4% organic growth guidance given management's enthusiasm. He also inquired about the drivers behind the strong free cash flow, particularly the decrease in unbilled receivables.

Answer

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.

Shlomo Rosenbaum focused on tactical items, asking about the drivers for the expected Q4 revenue and EBIT step-up and the reasons for the significant sequential increase in Q3's adjusted gross margin.

Answer

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.