Public Policy Holding (LSE:PPHC) — Investor Presentation

0:01 Good afternoon, ladies and gentlemen, and welcome to the PUBLIC POLICY HOLDING COMPANY Investor Presentation. Q and a tab that's just situated on the right hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company will review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I would like to submit

0:33 the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. And I'd now like to hand you over to CEO, Stuart Hall. Good afternoon, sir. Thank you. Thank you all for joining us. We appreciate your time this morning. With me this morning, I have my, CSO, Thomas Gensimer, and I'll let Thomas tell you a little bit about his background in a moment. Our chairman, Simon Lee, was scheduled to join us this morning, but Simon is on international travel and and couldn't be available at this time. He'll join us hopefully for another session with you, in the future just by way of background. Simon comes out of The UK business community. He was, has held a number of CEO positions within NatWest at one time and then later, was the CEO of RSA Insurance.

1:23 He joined us as our nonexecutive chair when we went public in late two thousand twenty one. By way of background, I am the CEO. I started as a staffer professional staffer in the United States Senate back in the early nineties, then later, entered into the direct advocacy or what you might commonly call registered lobbying or regulated lobbying space here in The United States. Began a firm, Then my partners and I sold that to WPP. It was actually a Oglevy public relations brand, WPPN. Their purchases in 2005. In 2010, I left post earn out period and then went and

2:07 started a new direct advocacy firm in DC called CRS, which we used as a cornerstone to found what became PPHC. Thomas? Yeah. Similar, similar backgrounds by way of Washington professional. I came out of political campaigns, started a business called Blue State Digital with a couple of cofounders, ran that for nearly ten years, also sold to WPP. So I was about, what, eight years after Stewart's transaction. But in the small world, there was a period that Washington entrepreneurs of both political parties had a natural outcome that their exit would be to a holding company. At one point, WPP owned a dozen or more shops as well as Omnicom, PUBLICY HOLDING COMPANY, STORETH and I similarly enjoyed our earn outs and and quickly sort of got back to work outside of WPP and reconnected on the good, bad, and otherwise of our experiences and realized that the what he what he was underway with of realizing a new holding company formation for a high touch, high margin professional services sector like we operate in was the right new model. I obviously joined

3:19 and was eagerly eager to become part of the team. So that is our background. You'd also hear if our other team was here, a few other. We got the band to get band back together. Deputy CFO comes out of, Kantar, North America. Our CFO comes out of Ogilvy as well. So we we we learned a lot, with with the WP experience and now are applying, again, the good and good and otherwise. Thanks. Whoops. So quickly, you know, when you look at, you know, what is what creates the market and that allows PPHC to flourish and to grow and that we're trying to address now, It really is in in the simplest of terms is if you look at it at The US, but I believe you can apply this overlay to The United Kingdom. I think you could apply it to to European Union and the member states as well.

4:12 But if you see if you start back when I started in government in '19 in the early nineteen nineties, and then versus this light this white line up here, this trend line, you look at total spending alone as a metric. Government now spends six times as much in The United States over a thirty year period as it did in 1990. Along that line, you'll also see a number of key events that we've illustrated here, which mark in US parlance, a really aggressive move of government into areas of the private economy that it did not, heretofore have been, overly aggressive in regulating. To in the early two thousands, we had accounting scandals here in The United States with public companies that led to heavy regulation of the accountancy industry.

4:59 And then moving forward to 2008, 2009, the the Great Recession, the response to that, which was not just intervent direct intervention in the financial markets, but also ultimately a very large banking and

5:13 financial services regulatory regime, which reached into a non lot of non previously nonregulated entities like investment banks and others. And then move forward into the Obama administration, the Affordable Care Act, or which is known commonly as Obamacare here, marked again a big move by the United States federal government into the regulation of health insurance markets. And then the response to COVID, where trillions of dollars in entirety programs were created literally in the span of a couple of weeks, here in The US. And, again, similarly aggressive responses that we saw in The UK and in Europe.

5:51 All of that culminating really in, what has been in a tremendous expansion of the scope reach and and expenditures in in government. That has coincided with a couple of general trends in society, one of which has been communications dispersion, digital disruption. Everything from now social media platforms to previously, you know, the the changes that's where we got our information from in terms of Internet media now.

6:19 So, all of these disruptions have changed our political conversation, and that conversation, as a result, is much more difficult to manage. And then, at the same time, there's been corollary to that, a geographic dispersion. The United States has a federal system. There are reserve powers for states and localities, that range from taxation to regulation. And, as a result, you know, much of this the activity around government has moved not away from Washington, but has dispersed from Washington to some extent, into large states like California where we'll talk about a recent acquisition we made. California is the fifth largest economy in the world. In many ways, it's its own small country. If you wanna affect what happens in The United States, you you go to places like California and New York. So we'll talk a good bit about, you know, where we see our addressable market, both in terms of geographic dispersion, communications tools, and other, aspects of our economy that we're operating in and the addressable market we have.

7:22 Go ahead, Thomas.

7:24 So just quickly, again, talking about what market has been created by this growth in government dispersion in communications. For many years, people addressed their issues, in Washington DC and in states primarily through, again, what I refer to as direct registered advocacy or person or peer to regulator slash policymaker on behalf of a client. That has really changed in that, what we what we've seen again, dispersion in the states. So we have a $4,000,000,000 a year market that we know for, quote, registered peer to peer lobbying, in at the federal level. We know that there's at least 2,000,000,000, probably more being spent at the state level, which is, again, becoming increasingly important to our clients.

8:09 But more importantly, the complexity of the space and the geographic size and the difficulty of shaping an environment for active policy outcomes. And that means both managing your risk and your opportunity requires much, much more. So if you look at the right side of the top of this chart, you see that public affairs is a rapidly growing market here in The United States. And when we use the term public affairs here, it's important to note that we we use that really in the communication sense, which that means digital data. It means, media management, both earned and paid, etcetera. So

8:45 that is really where the bulk of the new spend is going there and into The States. And that is, again, what is creating, you know, what we think is a a very, very opportunistic $17,000,000,000 plus, addressable market for us and also a very fragmented market that's begging for some consolidation and consistency, because our clients, again, find it too complex to handle it, you know, in an ad hoc fashion anymore. Thomas, you wanna talk a little bit about Sure. We're gonna do q and a later, but I saw one pop up about international expansion, and I'll use that opportunity to just this as a as a translation for services. When we look outside of The US, the term lobbying or advocacy is often conflated as a number of things that sort of involve a lot of these tactics. What I tried to do here with this slide is articulate where some of the clear tactics are, some that fall within the registration regime of the federal government. Stewart's background is as a lobbyist, Mine is as a communicator, as a non lobbying communicator.

9:46 And so while there is sort of supportive crossing, it is clear sort of what tactic

9:51 is deployed as to what, you know, budget one would be in. The key thing for us as a professional services entity is that for these corporates and for these major NGOs and causes and such that you see just a few of the more than a thousand logos that could appear here. This is a pretty permanent line in their c suite budget. This is akin to an auditor and an accountant and to a corporate law firm and to a you know, we we are not doing marketing services per se. We are doing,

10:24 you know, either issue risk or or opportunity sort of work for them along the government axis. And the different tools are deployed and and accounted for based on the both availability, the political capital, the moment in time, and such. So, again, it was we're not we're not doing campaigning, although, obviously, we are managing the reputations, voices of interests of these corporate leaders and entities in a very fractious campaigning time. And, yes, they do translate directly to what these same corporates or otherwise are doing in Europe European capitals, you know, in in London and and and sort of global global sessions.

11:10 So just quickly, the construction of the company. One of the things that that it was a foundational principle of PPHC was I don't I don't wanna use the term interoperability, but certainly complementary services. Again, I think policy is shaped these days not again by a single actor influencing a single actor to make or take it. It's take an action on behalf for for against an entity. Instead, it's a very complex world that we live in where, again, if the surround sound, so to speak, a term Thomas frequently uses in terms of public opinion, and media coverage is not correct, very few political actors are going to take an action, that would be favorable to one's interest. Therefore, there's a multiplicity of needs here, both, again, geographic, again, again, the dispersion of of issues into other jurisdictions, both, again, federal in The US, local, and then international, but also, in terms of capabilities.

12:10 So if you look across these firms as we put them together, you'll see, you know, O'Neil and Associates and KP Public Affairs. That's Boston, Massachusetts. KP is Sacramento, California. You know, again, reflecting, again, large state capitals where there's a great deal of activity and a great deal of risk, again, on behalf of our clients or, in many cases, opportunity. Our most recent acquisition on the far right multistate, operates essentially what is a lobbyist brokerage for all 50 states, hooking corporate clients up with, appropriate lobbying entities who can help them with direct advocacy in the states. They also have a couple of other services we'll get into. But then you see, for example, Alpine Group. Alpine Group is a federal reregistered lobbying firm that does most direct advocacy and advisory services.

13:01 Seven Letter, for example, is pure play public affairs firm, that does nothing but public affairs, has no registered advocacy. It's all communications. So as we put the company together and we reached a point where we had five operating verticals, That was a combination of eight companies. We did it on an all equity basis, which is very important, I think, to keep in mind. So, when we reached 2021, we really were at a serious inflection point where, you know, we needed to find a way we felt to accelerate our m and a, and that meant obviously access to some form of capital or currency. So we settled on doing the IPO, rather than taking private equity money, And part of that was the result of what Thomas

13:46 alluded to earlier, which was there was some good and bad at WPP and doing acquisitions in the client base and service space. And what we found in ours and some others that we looked at with some of our peers was that the cash based buyouts with with with fixed terms on the buyout, did not necessarily have any longevity beyond, the end of the purchase agreement, period. So as a result, we really wanted to look at a methodology where we could build something long lasting and that our acquisitions would be very sticky for the key people beyond the period again where their purchase agreements expired. So, really, having the equity instrument became very critical to us. There was no real opportunity in The United States for someone of our market cap potential market cap to be public.

14:35 So the AIM market offered a very attractive option for us. Hence, we often get the question, why London? Why AIM? The answer is because it was there and it was different and perfect place for us to start. So we and we've been very happy for the last year there. Go ahead, Thomas. Here's just digging in a bit on where our where our brands sort of stand. Again, in The US, there is a sort of clear at the federal level, especially, there's a very clear, you know, every quarter who charges what to what client. It's published in POLICCO. It's published in Bloomberg. Sort of the the trade pays close attention. There are more than 2,500 registered lobbying firms at the federal level. We own three of them, and those three are in consistently in the top 20. They are they're ranked amongst the sort of top regular sort of in and out different political seasons, different administrations.

15:27 These are multi specialty, multi generational partnerships. So that combined leads us to be the largest provider in town. Some other law firms you'll see are up there. We we maintain our brands for the mix of largely its founders and operators still running, and they're known for different things in, you know, different specializations, different sort of pasts. And so we can we can manage the portfolio. Again, that's one of the goods out of WPP is we could both mitigate client conflicts and manage talent across several brand brands that have distinction. I think it's important to note outside of this, outside of just the lobbying lobbying side, which again, you can see is about 65,000,000 of our of our revenues.

16:12 We have the stand alone public affairs, research,

16:16 polling, and grassroots businesses within seven letter O'Neill and a companion part of the Forbes Tate entity. They're doing regular, you know, regular client services updates. They tend to margin a little higher than a PR firm. We're doing more senior c suite engagements that sort of coupled with their legislative affairs efforts. But they stand alone and compete with big agencies and small agencies, both for talent and clients and are in the PR weeks and the and the various rankings. So you can see different things about our brands here in our website and otherwise. Here then is Per Stewart's sort of build from 2015 onwards to the full year last year, where we were just just under a $100,000,000.

17:02 It's put sort of post the the IPO that was late twenty one. We've done the half year reports for this year, and we've done guidance to a 109 on our forthcoming annuals. Hopefully, you will join us again when we go through some new materials at the annual meetings in the in the coming month or month and a half. Summary income statement. What is,

17:25 I guess, wonderful about this business from both our perspective and hopefully investors is the simplicity is it's a it's a talent business. We have high impact talent. And managing that both retention of talent, attracting the talent, being the talent brand that the right new solar energy people wanna come to, for example, is how we really have to manage both on the client side of it and

17:48 then the dollars and cents that you see coming to light here in the in the summary p and l. It is close to 75% of our cost is within people. We then have the offices that we still have offices in the post COVID reality. I think we're we're we're adjusting to more and more of a three day a week, but in fact, there are Downtown DC offices and Sacramento offices that are of the traditional sense. We manage them to a margin on a blended basis. So upon the IPO, all of what were stand alone LLCs,

18:20 significant owners were converted to dividend holding stock dividend receiving stockholders. We now are proud of the fact that we have 70 owners across the group, so that conversion upon IPO really allowed us to reward talent and build for the future. We're also exercising that option or rather that equity instrument in in future m and a that we'll get through when we talk about the recent the recent transactions. Here you see a healthy margin margin profile. Again, this is on a blended basis. Those that may know more about the sort of communication space or our password with WPP or what have you will realize there's a portfolio of companies here with sort of varying margin portfolio varying margin profiles.

19:06 On the pure play lobbying business, that of, like, a CRS or Alpine in our collection, or very high end charging, you know, 5, even $700,000 per professional. When you get into even the high stakes public affairs that I would say, the crisis communications and the sort of companion research that may go into that, We're looking at high margin for the sector, but it doesn't rank quite as high as the lobbying margin. So we're managing a a blended margin profile here across the disciplines that will end up in the in the in the high twenties, really, when you bonus out and everything. We've normalized all the bonus plans such that we have a 25% return. You then also have a high dividend producing stock, which is another advantage for why the AIM listing, as Stuart mentioned, worked for us. We don't have the market in The States, NASDAQ, or otherwise. It would really find our market cap, and then we don't have the investor body that really appreciates the the high dividend payback that the that the stock is currently designed for.

20:09 So just quickly, why are you here? Why are we here today?

20:13 Thomas alluded to it earlier that, you know, we are you know, we have a a very, very stable platform. We are, again, a true business services company that typically is a service that all large corporations or trade associations and a number of large NGOs will consume as a matter of regular practice. It's consistent spend. One of the great things about our business too is that all of our companies are thoroughly bipartisan. People often think we live and die by election cycles. We actually don't. So we have very low sensitivity to elections and also economic cycles as a result.

20:55 Government is steady state. It does not change. Better, for worse, sometimes we're even countercyclical. When things are bad, government tends to get more active these days. As a result, people must address these problems or potential challenges in in new government activity. So, really, what we we count on in our business is ongoing and growing activity in the government space. That's what drives our business. Everything else is just ancillary noise, so to speak. You know, our client base, again, as Thomas showed you earlier, blue chip, you know, Fortune 500, two fifty, Fortune 100 companies, and, again, their trade associations and, again, a number of leading nonprofits. There's a question here I see on the screen from from Nick.

21:41 Nick, I'll answer your question now. We have very low client concentration. In fact, you know, we have over a thousand clients. I think before our recent acquisition, multistate, which added a couple of 100 new clients,

21:56 we actually, Thomas, you'll correct me if I'm wrong. I think I think our client concentration this year with one client, our largest client, was less than 3%. Yeah. Yeah. It's about 2.6, and it had three contracts across the group. Yeah. And that was top 10 yeah. And then the top 10 clients were were sub 8% of the business. So low client concentration. Our retention rates are extremely high. You know, our lobbying our lobbying entities slash direct advocacy entities run well over an 80% annual renewal rate. They're retainer based. Our PA firms run-in the 70%, range. They also, actually have, which is really odd for the end their industry. They have, generally a large amount of retainer based work too. So it's not all project work, for financial planning. That makes it great for us to put an annual budget together because we don't begin the years from when I was, owned by Ogle VPR.

22:55 I learned that at the beginning of the year, most of their business lines had a lot of unidentified revenue. Thomas saw the same thing at parts of Marsdeller. We don't start the year that way. We really have probably about 75% of our revenue identified at at the beginning of the year cycle, which, again, makes for strong financial planning and makes it a lot easier, obviously, to execute the expectations. Again, I would say that, you know, just quickly hit a couple more points on this chart. We don't have any CapEx. You know, again, it's a simple business as long as we maintain, you know, the, correct rate of of pay for employees and and and re remuneration, and and manage our lease costs, which you can all imagine is going down everywhere in the world because remote work.

23:44 You know, we we can manage to a couple of numbers, and it makes our life very, very simple. Again, Thomas mentioned the dividend payout. 70% of our after tax profit. PAT is generally about in the 20% range. So, we're paying 70% of that in the form of dividends. The good thing is that has not just been a powerful tool for attracting, investors, over in The UK, but it's also, been very helpful for us to convert what in The US products was a cash out partnership,

24:18 where every year, you know, the cash all went to the partners after all the expenses, and instead, you know, generating a real profit, but at the same time being able to have such a large employee shareholder base that they they benefit from, the dividend payments. So there's strong alignment between the outside investors and the internal income incentives of, the employee owners. And then finally, again, you know, we think we're positioned in a very fragmented market. We've clearly been able to execute. There was another question about potential editors out there, and I'll let Thomas answer that, as well. But as far as, you know, being able to create, a place where, again, clients can get comprehensive solutions, at this scale, no one has achieved this level of scale dedicated solely to the policy access, and we see a lot of headroom again in that $17,000,000,000 addressable market.

25:14 Go ahead, Thomas. Great. I'll get into m and a. We will touch on some of the questions, but, unfortunately, it's all tracking well and we're on time. We've mentioned some of the geographic reality of this, both within The United States and abroad. I'll give two examples of that. When you know, we mentioned California was an early target for us because it is very much the vanguard of progressive policy globally, really. I mean, if you look at the tech companies spending, you know, the the axis from Sacramento to Brussels was direct

25:50 for much of the past fifteen years, and it's re returning now as another another round of that. When you think of of of car emissions and necessary electrification, it was California that moved first. Even while at that point the Trump administration tried to block it. If you're sitting at Ford Motor Company or you're still you're sitting at GM, you're selling two, you know, two out of five cars in California, so you have to comply. It is a nation state in and of itself and and and really, whether it be on supply chain or everything else. Similarly here, I'm I'm talking to you from Brooklyn, New York where I live, and financial services regulation in New York state is more significant than just the size of the state. So looking at these key access points in our federal system here and then in companion, the Brussels, London, Paris, Frankfurt, etcetera, will be very much sort of both immediate opportunities and and in in our in our tier of growth.

26:49 Again, we look at our our portfolio of a thousand clients now and say, where do they need us? Where do they need the sort of standardization and professionalization of this work? And where do the policies we're working on here have companion efforts, you know, within states and then certainly international?

27:08 Companion to that, and it's really much two sides of the same coin, is this issue specialization. We have to be one step ahead of where our clients need our support. So last year, The US budget battle was really held up, it seems in retrospect, somewhat ridiculously over over crypto taxation and sort of mining ability for and,

27:31 well, you know, the crypto regulation was see, again, it seems like not as important now and a year later, but you can see why we needed to sort of develop and market and bring to bring to bear for our financial services clients and otherwise a crypto specialization, green energy rollout, chips manufacturing, all the things that are on the top of the minds. And at at the heart of that is shifting from just risk manager to pursuit of all these opportunities. And that government growth from 1,000,000,000,000 to 6,000,000,000,000 means a lot of supportive business efforts. It is it is quasi industrial strategy that's going on from central governments, and we have to be ahead of that to unlock the value for our clients. Here on The States, I'll just say we having been in networks of the past, ugly PR, person, etcetera, that had dots on the map in a lot of places that were part of a of a different era, we're not planning for that.

28:29 The unique thing with multistate that we'll get into is they look at sort of subject matter experts across geographies, and they can essentially be a talent brokerage. I saw a question on this, how it works. They put together your advocacy strategy. Here's the six states you need to be active in as well as Washington, and here's the talent you need for it. They're sort of unifying you know, they they put the army together without needing to have full time full time sort of DC Operatives or otherwise. A lot of state capitals don't demand or deserve the sort of full time attention, but still have issues at hand. Again, whether it be taxation, whether it be regulation, or business opportunities. On this axis here on the left, you'll see where we basically did a pretty simple analysis of output GDP, you know, size of state economy, and then the intensity score of their state legislative sessions.

29:23 Some states like like like Texas, forgive me, has a part time legislature, very short time, very powerful governor. So it's a different type of machinery that goes to work there to make government work for you or to or to push back on things. Score you know, the the scoring can you can take a couple of different swipes at this, but we're basically saying we knew California was first. We even wanted to do it three years ago before our IPO, but we just needed to find the right asset, the right clientele, the right rate card, and the right synergies. KP was perfect for us. They're already well underway. We're sort of convening a lot of the sort of they maintain their brand, and they have a stellar reputation in the state, but now they're bringing a bunch of connectivity to Washington to differentiate themselves.

30:06 And vice versa, we're connecting our clients with them. I mentioned New York. We, you know, we're we're actively looking in Texas and Florida. The same time, through the multistate transaction that we just did, we're checking a lot of these boxes for a lot of clients. There may still be opportunity at top or alongside multistate to develop public affairs and government relations slash sort of lobbying specializations in certain capitals. But now with multistate, I think, Stuart and I can agree, we're looking abroad because the opportunity is to sort to sort of translate what we do and looking at our pipeline in London, Brussels, and otherwise, which makes both our listing here and audiences like yours really interesting. Good segue, Thomas. I think we've had three questions about Exactly. Plans. So So here here's the yeah. Exactly. Here's the here's a a, again, an analysis that we've done. It's taken from different registration regimes around the world of which you'll be familiar with, particularly in The UK.

31:04 Your lobbying registrations will be changing, you know, likely in the next election season or thereafter. And now covers, you know, in in my crafts, American understanding covers all the sort of cabinet ministries, but then the the MPs and house of lords are sort of different requirements. That may evolve. For us, we think that's an advantage if that evolves because we're coming from a place in The US that we have $66,000,000 of very transparent revenue on the federal registrar. You can go look for every client and every dollar and every and every registered lobbyist we have. Every every three months. No. Every three months. The red lines here, like we mentioned in early on, is that is that public affairs, political communication, the surround sound that we speak of that's ever more necessary for the successful deployment of the lobbying.

31:55 That's different in different regimes. A lot more of it in The UK. I think if I if I was to be be the the the line between red and blue here, I would extend the red. We all know a lot of public affairs people in London. It is a small world. However, you know, you see where the registrations lie. We see these as sort of a mix of opportunity to bring our clients to these places or displace other providers that are less connected to the c suite of the clients. And then, obviously, to bring, you know, degree of registration requirements or transparency to to the portfolios of the efforts abroad. So just very quickly, I wanted to touch on our our acquisition we announced last week. I think as much as anything, it's illustrative of how we wanna structure deals. Again, going back to the point, again, we made twice now, is that we didn't want an all cash. We didn't wanna do all cash deals that were done in this space, many years ago when we sold our businesses.

32:54 So, first, you know, the fit itself. Multistate serves both a strategic and a financial fit for us. One of the things you will never see from us is an RNS, where we're announcing that we bought a bunch of revenue with no profit margin. You know, we're we're not a speculative company, so we buy people that stay within, you know, our range of expected EBITDA and and profit after tax. We evaluate and pay deals on profit after tax, especially because we buy different tax jurisdictions. So, you know, the numbers will will always add up and, will very rarely, if any, have any dilutive effect on margin. The other thing that we're doing go ahead, Thomas. Next slide. Yep. Sorry. With our deals.

33:40 Yep. Is that, you know, we make sure, obviously, there is that again, as we went through that bar chart earlier that there is a strategic and a synergistic fit in terms of the service overlay. So the first thing is strategically multistate. Thomas showed you the heat map earlier with the dots on it, you know, based upon state capitals, and you'll see them illustrated here, in a particular odd shape of pea green or whatever the You know, Albany, Springfield, Illinois, Tallahassee, Florida, Austin, Texas, to some extent, Arizona, but certainly California. Those are states where they have very mature markets in both public affairs and direct advocacy. And as Thomas calls it, the rate card, you can get DC type advocacy rates by operating there as an independent.

34:31 You know, aspirationally, we still want to be in many of those those states with freestanding brands. But you don't really want to take the time. If you think, you know, a market I've described at the federal level was fragmented with 2,000 lobbying firms, imagine what you're dealing with in small states. You know, where what are you seeing in a a Little Rock, Arkansas or in Missouri or something like that? As a result, you know, that is a place where we don't see a lot of advantage owning any freestanding brands and managing, you know, 50 dogs and cats, so to speak. The beauty of multistate is and, again, we had another question about how their brokerage actually works. Their core business flip to the next slide, Thomas. Their core business, as you'll see in that top darker blue box, is what we call lobbying, again, advocacy.

35:20 But they don't do the lobbying and advocacy. As I mentioned, they broker it. In other words, if a corporate client, a trade association says, we have which is a very colony now, we have a problem in 15 states, and those states are not of large scale. They don't have anybody there. Based upon your issue needs. There's a roster in every state of different types of advocacy advocates, depending on their level of specialization and area area of specialization the client need, and they will make a match there. And they take a fee for that. So they themselves don't do the lobbying. But what they found was in selling those services, and that was where the business when it was started in 1980 was originally centered, is that there were a lot of ancillary things the clients needed once they went into those states.

36:09 The first was compliance. Every state has a different just like the federal government has its own disclosure regime for these activities, the states, have different regimes. So compliance was an easy sell for them, to install a compliance department that can help you file the right papers in Oregon just as easily as you could file the right ones in Vermont. And then secondarily, in their fastest growing and most profitable line of business now, which we're very excited about and is a big differentiator for us, is their legislative tracking and analysis and the and regulatory tracking and analysis ability of the states. So they for clients, we'll create a customized product. It's it's data driven to some extent, but it's not it's not we're not trying to compete with POLICCO, Bloomberg, any of these other, data aggregators who who look into these, state legislative bay resource basis.

37:05 Instead, there's a human l overlay and element to it of analysis. It's a customized product the client. Helps them keep abreast, again, of threats and opportunities in The States. Much like a publishing, entity, it renews it well into the high nineties each year. It's largely self perpetuating, but tremendous cross sell. You know? Again, we talk about the fit with the overall PPHC portfolio. One of the great things about multistate is we can sell, you know, we can sell our clients if they're not already consuming it there, you know, on the research, and also, obviously, on filling out their state needs, especially in some of these secondary markets that that we don't want to have freestanding brands in. Yep. Go ahead, Thomas. I'll just point out here too the quality of the client roster. When we go into, again, a Sacramento and a New York and we say, we're looking for synergies in our corporate portfolios.

37:57 If we go into love Little Rock. Isn't Stuart like to call out on Little Rock? But you're not going to find national brands there. You're gonna find a lot of local real estate holdings. You're gonna find a lot of you know? So this this multistate ad, you keep the quality brands here, but that they have real exposures across multiple jurisdictions. It's a really sweet spot for us. So just quickly just quickly on the deal overview, I think it's important to note that, again, that this is really our template. We use a similar approach to Sacramento, and we're we're going to insist on doing this going forward. You know you know, we mentioned earlier, Thomas and I both had a sale on an earn out. We're not really changing that formula that much. You know, we think it's important that we align the company's growth incentives, you know, properly so that they can glean, you know, more equity and cash payments over time. But, also, that's tied to growth, which directly benefits PPHC and our bottom line.

38:56 But the difference is is that we can we want stickiness. We want the principles to remain with the business long after the and the period of their purchase agreement expires. So in the case of multistate, we paid 80% cash up front, 20% in stock, total consideration of 22,000,000. And then, all future payments will be 50% stock and 50% cash. And, again, there's similar formulas and metrics that apply to the KP deal as well. If you look at this chart, though, you'll see that while we have a deal cap, a potential deal cap of total payments, cash, and and equity of $70,000,000, that is all highly contingent on growth, mostly contained in that dark blue box up there.

39:42 So they would have to hit, they would have to hit, you know, on on average, you know, a 25% growth rate, to capture that $70,000,000, which, again, is a great problem for us to have. We we wish them the best. We want to help them in every way possible as we would absolutely love to add that amount of aggregate profit to to our bottom line. Go ahead, Thomas. Here, yeah, we've gone through this, and I'm looking I'm scrolling through questions. So I think we'll we'll go to questions. I did just wanna spend a moment on bringing this to light a bit because it tends to be helpful. And we won't go through the details of these. There's several more on our on our website. I think we now have about a dozen or so cases up with brands and coalitions. But here's how, you know, companies come together or our operating companies come together. Obviously, in the in the inflation reduction act, there's a historic investment in solar, wind, alternative energy rollouts.

40:36 There's a lot of pieces of that, and sometimes, you know, you can't it's not all just the headline value. In this one, there was a challenge within the commerce department on some solar subsidies for international manufacturers, and they compromised some jobs here amongst people installing and selling. So seven letter led this. They did some polling on messaging. They activated both a a really bipartisan coalition to drive the jobs message and the alternative energy message, which you can see in our it's quite binary politics, leads people in different directions. This ended up taking the form of paid and and earned media, a petition to to the to the commerce department, sort of a digital tactic. And, ultimately, the Biden administration did end up putting a stay on the on this particular little niche policy that does change a lot of sort of a lot of exposures on both employment and manufacturing of. So this was a trade association of more than a dozen solar manufacturers coming together along with labor.

41:38 Another is one from a tax policy. We went through a lot of tax debate with the, you know, congressional with the budget last year and, obviously, the Biden administration coming in. Something called the double death tax, which was a sort of step act in where your basis would be on a on a inheritance tax perspective. Longtime corporate client, also a family office, came Stewart's CRS, Stewart's legacy firm, CRS, worked along with tax experts on the DEM side within Forbes Tate, and a seven letter, again, a public affairs activation, both on TV ads, print, a lot of outreach, and, yes, a lot of a lot of lobbying, a lot of sort of policy development, a lot of explanations, a lot of sort of, you know, highlighting both benefits and downside of certain tax policy.

42:26 We ended up winning this one. It was a major win for this family office, but also a whole category of of privately owned enterprises. This wasn't just a investment family office. This is a major a major manufacturing family office. So all things in the details of this. You can see with both of these, these aren't headline campaigns. These aren't brand campaigns. These aren't political attack ads. These are how a bill becomes a law involve many, moving pieces, and the chess match of those pieces involve insider connections, information, and such, and shaping the narrative outside to build a coalition that both elected officials and regulators will pay attention to. These aren't again, you know, if you if you get a 100,000 signatures on a solar petition into the commerce department, that lights up the attention, and suddenly people begin. This is my past as a political tactician, but this is how really advocacy gets done. Rarely broadcast, it's more very micro targeted to necessary stakeholders or those whose lives will be impacted.

43:30 So I wanna get at some of the questions and keep them coming in, and they'll keep us honest. On the acquisitions, oh, go ahead, Stuart. Let's let's Oh, no. I was just gonna say just to you know, we'll we'll just we'll just knock these out as quickly as we can. I think they're all good questions. A few of these we've answered, so I've deleted them because I think they were answered and asked. But just, you know, just briefly, I've got a question here from Steve. It says, you know, recent acquisition's been fully integrated. What lessons have been learned? What's your headcount, etcetera? You know, Steve, I think it's really important to remember, again, our model is not vertical integration. You know, we have a reason to respect our brands. Some of that is just simply because they're great they're great brands in their space.

44:15 But also, you know, conflict management, it's very helpful. Again, that's what again, a a a really powerful lesson we took from the WPP model. So we really are a horizontally integrated company, but the the companies are highly cohesive from a financial and a and a regulatory, and an administrative standpoint. You know, we don't you know, again, because it's people, and I think one of the things people often ask, well, do you find savings and synergies across these companies? I think the answer is, there are some on the administrative side, but, you know, we're not we're not a widget manufacturer, so we can't close a factory and combine things. So, you know you know, really, the synergies are in the financial integration, and, that's that's where we stick to.

45:03 We want our our companies to compete with each other where they compete in competing lines, but we also want them to know what the others do. And we strongly encourage cross sell. There's actually financial incentives, internal financial incentives that are built in to cross sell services into the type of campaigns that Thomas was just illustrating. And I'll say on that, that's the that's the most important integration is that that didn't that we didn't have at WPP is the reasons to work well together. And there There wasn't the equity instrument that ran through, and there wasn't a benefit to my p and l to bring Stuart's team in or vice versa. And so when we speak of the integration and current lessons, I think a lesson for us we can be modest about is it takes more than just telling owners and principals about it. We gotta build the build the infrastructure to make this subject matter expert in California meet and greet well with the subject matter under and build the incentives to make sure that it's not just a financial engineering, but we can build those sort of communities of practice that make the client referral access really, work.

46:05 Not just about the 10% referral, but so the client understands, oh, wow. Right. They work well together. This is my this is my wallet of of opportunity here, and they're gonna and they're gonna do well by me. Yep. And the answer on the headcount question is after last Wednesday, we're at about 330 full time employees. So interesting. I'm gonna hand this one to Thomas. How much competition do you come up against in m and a? That's from Chris. It's Chris, it's a it's a somewhat wonderful and and terrifying small world in that we're occupying. We have been somewhat positioned as the, you know, the alternative for private equity. Really, since WPP, Omnicom, and others have retreated from the space, the space being, you know, acquisitions under $50,000,000 or with a sort of a political tie, They've just really, really retreated, and so it left a you know, if I did my deal in 2011, it's one of the last that WPP did in the in the in the DC space.

47:07 We've seen private equity pick up a couple couple of the strategic communication shops. There was one federal lobbyist along with a companion communication shop that did sell to private equity last year. A a recent transaction was done of another sort of White House connected and a former alum of mine. We know the world very well. We're watching the multiples very closely. Some we're walking away from because we don't really believe in the multiple. We're paying a good sort of six to seven times of an EBITDA, if you were to look at it that way. But like like Stewart says, we are looking at post tax basis, and we're laying in we're we're insisting on equity exposure for the founders. So it is a different alternative, though post IPO.

47:53 And now that we've gotten two transactions in the year done, I think we're on more radars and people are watching that we do we we have become a sort of platform for growth as as silly as it may sound, and that they're seeing the benefits of referrals. They're seeing the things we're we're sort of wind in the sails on growth in a way that a PE fund may not be. So I think we're we're well positioned in this competitive space. It's not as competitive as it could be, but, yes, there are some that are, even on an international basis, neck and neck with us or side by side. We're finding ourselves in a lot of common conversation with a relatively few set of people. So two quick financial questions, and I'll take these, and then I'm gonna get another one. I'll hand back to Thomas.

48:39 Chris asked, dividend yield is 10 per circa 10%, 70% payout of PAT. Is that sustainable? And why not use this for m and a as well? I I mean, obviously, Chris, you've hit on the fact that our free cash flow is is excellent. Obviously, it is a a choice to make that level of dividend payment. We could put that cash to work, and we've had that inquiry, especially from this side of the Atlantic, from American investors, quite frequently, to ask, you know, about the dividend payout. Thomas mentioned earlier, there's a bit of a cultural difference. For right now, you know, we believe that based upon where the bulk of our our investment investor interest lies, which is, again, over in The UK and Europe, and then also an alignment, again, is was is mentioned in this box again right above my head, or I don't know what you're looking at, but, but the alignment of the internal and external shareholders. Again, you know, we had people that were making quite a bit of compensation a year and here in cash and being able to but they are also our top earners and our top shareholders, within the company and to be able to convert, you know, their income at least at some level to a dividend payment, both from a tax standpoint and an income standpoint, was was very helpful with them. I think over the over time, that picture will obviously change.

50:01 But for right now, you know, based on the alignment of our most of our external shareholders and our employees, we're going to try to maintain that, you know, for as long as possible. I think the yield amount, obviously, is related directly to price and to and and and to the number of shares out there. So, obviously, that, you know, that yield percentage probably over time go down just simply because of dilution and other factors. Then one other quick question. There was another question about, again, free cash flow free free cash flow at debtor days. We run about again, because we're retainer based, because our revenue is very predictable, our DSO has averaged between, literally thirty two and thirty five days for as long as we've been doing this for so eight years now. So, you know, we we really turn cash very quickly.

50:49 And then, by the same token, you know, we we we accumulate pretty large cash reserves. Obviously, a good bit of that is committed for, you know, again, dividends, remuneration, etcetera. But, again, we're sitting on a good amount of cash at any given time. We use some of our IPO and just generate cash, pay the cash portion of the KP acquisition. We just applied some of our free cash toward the multistate acquisition, and we use a good bit of it too for investing in talent. You know, one of the things that was mentioned, earlier is that, you know, people in our business can be extremely impactful if they have, you know, a group of loyal clients that pay well. So, you know, you can you can bring in a single person or a couple of people in a small partnership into an existing firm, and they can bring several million dollars US business.

51:42 So finding ways to incentivize them again with both equity and and some upfront cash, you know, is another use for that cash flow. So, again, yes, we we sit on a lot of cash, and, we generate it pretty quickly. Good, Thomas. I think there's another question I wanted to hand to you. I can do relative someone asked about the EBITDA margins relative to Okay. I I said that this is the well, I'm sorry. It's from Ben again. Oh, yeah. Client concentration is low at at less 3% for the top client, but what types of clients do you work with? Yeah. I mean, we can go back to the to the logo slide just to give. It's it's it's certainly not all, and forgive the sort of dizzying thing here with it, but I'll just speak on some.

52:29 It is really Fortune one thousand and their trade associations. We do not I mentioned we don't really do politics. We're not working for political action committees. We're not working for presidential campaigns. We're not working for, you know, international governments. You know, we've done what's called FARA here across the group. I think we've done in the last five years two foreign representations, one for Quebec and one for Japan. So safe actors. You see here everything from from Boeing to Google to Apple. These are again sort of the corporates that have both significant interests around risk and opportunity in Washington at the federal level and then have obviously concerns across the states be that in the form of a factory, Amazon warehouse center, you know, a a a telephone wire. I mean, there's a range of things across sectors.

53:18 If you look at our revenue across the sectors, the heaviest concentrations are much like that of the general lobbying pool. We have financial services, health care and pharma, transportation, energy. We're working on everything from energy transition to affordable pharma pharma rollout. I mean, it's it's really a varied thing. I think what we concentrate more on what we don't do, and that's a lot of the either very sensitive political matters that could jeopardize our sort of client standing or things that are sort of deeply partisan on either side or the international representation. Great. Another question. I had and it's maybe a little bit of a loaded one, so Thomas and I will take this together. How does PPHC generate such strong EBITDA margins relative to professional service firms in The UK? Yeah. Thomas, you wanna take the Well, I'll say at the start, you know, we'll go back to why we're not at WPP today, and this is not a a slight at all for either tenure of leadership or or anything. They run a 15 margin business, and they and they focus on, you know, at least in The US, but globally, a $280,000,000,000 media spend. US US media is about 20 we identify our market as about 5% of that.

54:39 And while we were very profitable members of the WPP family, Stuart's firm running 40 points margin doesn't work well and doesn't doesn't really fit in Ogilvy running 15 points. And that's just because we're servicing different clients. And so four years after our earn outs, and in our cases, we were both founders, so we had cash earn outs. We didn't really need to be there for a salary job with ordinary income pursuing a really quite small piece of the overall corporate budget, especially if you think of the past ten years of where their orientation has been, them plus publicist plus all you know, it's all of them. We just have deep familiarity. They're chasing Google and Facebook for digital advertising. I mean, it's not pursuing the sort of high impact crisis and other work. So it's really around peg square hole or or or vice versa. On the EBITDA profile, we go you know, if I look at the portfolios of my verse and Marstellar, there was a slightly higher even at the high end of crisis communications in The States, you're paying slightly more than you are in London. That's just a market reality.

55:44 But when we look at the businesses that we are focused on, be it in Sacramento, be it in Brussels, we're still looking at a rate card that is substantially higher than consumer or even financial PR. It's just a sector thing on where clients are paying and where their sensitivities are. We're closer to law firm rates than we are to marketing services rates. So we've got a couple three minutes left, and there's two questions that are essentially the same as perfect placed in. This is basically what are your what are your long term, you know, plans and ambitions and goals for PPHC, and how will the group scale over time? Yeah. You know, I think the first thing is that all to address that question is to say, you know, again, why did we pursue again the IPO? Because we really did want to build something long lasting even if we had to start at a small level.

56:34 So we are in this for the long play. We're not trying to build something. We could have taken an easy exit ramp by now and sold the entire company, to some entity. We have not. We could have taken private equity money, and done a half sale. We didn't do that. So, again, we're in this for the long term. We believe there's an awful lot of headroom, again, in in this market. Again, the slide address is right here. And that we think that, you know, over time, you know, we can, you know, increase revenue by several $100,000,000, just staying ancillary to, again, you know, the political opportunity and risk access Ultimately, I mean, frankly, we would love to pursue a dual listing possibly in The United States.

57:20 You know, liquidity as an interim goal is very important to us. That would be a long term piece of that puzzle. You know, we need to get more stock into the free float. You know? And, you know, we we are, you know, anxiously and and aggressively focusing on that issue now, post this recent acquisition. And, you know, that, you know, long term shareholder liquidity and and the creation of value by appreciation of the stock is really the goal for the employees who are the owners, and then also, again, for our outside investors. So, again, you know, we think we've got a long way to go. We're a business services company. I think we fit all the profiles, client facing business services out there, whether it's accounting, legal. I think the difference is we started a year in a very specified place, as Tom was pointing out, and it just happens to be very, very high margin environment.

58:12 So, you know, that's where we see ourselves going over the coming years. And, frankly, unless there's anything else, I really appreciate the time and your attention today, and hope you got anything out of it. Any follow-up questions, obviously, please submit, and and we'll do our best get answers to you. Thomas We hope no. We hope to see you in a couple weeks. We'll be doing annual results in late April, and so stay tuned. Thank you for attending today. We were delayed in getting to this, and I think it was a great start. So appreciate the questions. Stuart, Thomas, that's great. And thank you very much for both your presentation this afternoon and for being so generous of your time then addressing all of those questions that came in from investors this afternoon. Stuart, I was just going to ask you for a few closing comments to wrap up, but I think you just well delivered those. So if it's okay, what I'll do is I'll redirect those on the call for feedback, which I know is particularly important to you guys.

59:04 So could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback in all that the management team can better understand your views and expectations. This won't take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of PUBLIC POLICY HOLDING COMPANY, we would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all.