Andersen Q1 FY2026 earnings call

• Core Financial Performance

  • The company delivered a solid Q1 2026, with revenue exceeding prior guidance midpoint by $8.2 million and adjusted EBITDA exceeding prior guidance midpoint by ~$15 million, outperforming analyst consensus projections.
  • All four core tax/valuation service lines delivered double-digit year-over-year revenue growth, with broad-based performance not reliant on one-time projects or inorganic growth.
  • Key operational metrics showed strong improvement: revenue per professional grew 12.7% year-over-year, and revenue per hour grew 8% year-over-year, driven by moderate productivity gains and pricing improvements.

• Strategic Investment & Expansion

  • Management is continuing strategic investment to expand the new Anderson Consulting and Global Mobility practices, and expects these segments to remain unprofitable for full year 2026, aligned with the firm's long-term growth strategy.
  • The firm has closed multiple acquisitions in Q2 2026, approximately one quarter ahead of its original inorganic growth schedule.
  • Cross-service line internal referral integration is showing moderate improvement, driving growth in the Valuation segment from core client relationships.

• Pricing & Operational Efficiency

  • A new 3% technology charge introduced for all client contracts signed in Q1 2026 met or exceeded internal expectations, and will be a meaningful source of incremental full-year 2026 revenue.
  • The firm maintains favorable operating leverage, with consistent revenue growth outpacing core operating cost growth, demonstrating platform scalability and margin expansion opportunity.
  • Headcount grew 2.8% (62 additional employees) in the quarter, in line with targeted single-digit growth to keep staffing costs tightly controlled, while active clients grew 3.5% year-over-year and total client engagements grew 2%.

• Balance Sheet & Capital Structure

  • The firm maintains a conservative, liquid balance sheet with $207 million in cash and cash equivalents as of March 31, 2026, and no outstanding third-party debt.
  • Existing cash, operating cash flow, and net IPO proceeds are sufficient to fund working capital, investment, and all general corporate needs for the foreseeable future, providing significant flexibility for continued growth.

Service line segments: 1. Private Client Services: 18.2% year-over-year revenue growth, contributing 51.2% of total Q1 2026 revenue (up from 50.1% in Q1 2025). 2. Business Tax: Double-digit year-over-year revenue growth of at least 12%. 3. Alternative Investment Funds: Double-digit year-over-year revenue growth of at least 12%. 4. Valuation Services: 17.3% year-over-year revenue growth, double-digit growth of at least 12%. 5. Anderson Consulting: Revenue increased, but the segment reported a loss as part of ongoing strategic investment. 6. Global Mobility: Revenue increased, but the segment reported a $7.4 million combined loss with Anderson Consulting as part of ongoing strategic investment. Regional segments: 1. East Region: 22.4% year-over-year revenue growth. 2. All three operating regions recorded positive year-over-year revenue growth. Total Q1 2026 company revenue was $240.7 million, 15.7% year-over-year growth, with no contribution from M&A/inorganic growth. Adjusted EBITDA for the quarter was $72.3 million, 26% year-over-year growth, with a 30% adjusted EBITDA margin (excluding the $7.4 million loss from new segments, the adjusted EBITDA margin would have been 33%). GAAP net income was $17.7 million, with a 7.4% margin; the year-over-year drop was driven by $41.2 million in non-cash post-IPO equity compensation expense that did not exist in 2025.

• Second Quarter 2026: Management projects revenue in the range of $190 million to $205 million, representing ~13% year-over-year growth. Management expects a net GAAP loss and negative GAAP EPS for Q2, driven by seasonal trends and recurring non-cash post-IPO equity-based compensation expenses.
• Full Year 2026: Management updated full-year guidance to a revenue range of $980 million to $1,000 million, representing ~18% year-over-year growth, with positive expected full-year GAAP net income and EPS. Adjusted EBITDA is projected to be between $225 million and $250 billion, with an adjusted EBITDA margin range of 23% to 25%.
• The impact of the recently closed Q2 2026 acquisitions on GAAP and non-GAAP full-year financial metrics will be disclosed alongside Q2 2026 financial results.
• Guidance reflects the inherent seasonality of the firm's business, which historically generates the majority of full-year revenue and net income in the third quarter, leading to greater uncertainty for full-year projections that is reflected in the current guidance range. All guidance is based on dynamic assumptions including macroeconomic conditions, client demand, staffing levels, AI impact, and acquisition integration, and is subject to change.

• Forward-looking statements on this call are subject to inherent risks and uncertainties that could cause actual results to differ materially from projected outcomes, as detailed in the company's SEC filings including the 2025 Form 10-K.
• New state high-income tax policy changes that could drive incremental client service demand are still in early stages of legal challenges and policy implementation, so the magnitude of future revenue from this dynamic is uncertain at this time.
• Full-year guidance relies on multiple dynamic assumptions including macroeconomic conditions, client demand levels, staffing, integration of acquired firms, and the impact of technology/AI, all of which are subject to change that could alter actual results.

Q: What impact have recent proposed and passed state high-income tax increases (in high-tax states like California, New York, and Washington) had on Private Client Services revenue, and is the firm positioned to leverage this trend going forward?

A: Management noted these policy changes have not contributed material revenue to Q1 2026 results. Most new tax changes are still facing ongoing litigation that will take time to resolve, and most clients are still evaluating options rather than executing restructuring plans. The firm has begun client discussions about these changes, and expects any incremental revenue from this trend will be realized in future quarters rather than the first quarter. The core driver of Private Client Services growth right now is adding more, larger clients, with incremental cross-service integration improvement supporting growth.

Q: Did the January pricing increases (including the new 3% tech charge) roll out as management previously expected?

A: Management confirmed that pricing changes came in approximately in line with prior expectations. Management noted that the largest incremental lift to full-year margins and performance from these pricing changes will be driven by related productivity improvements, which began delivering measurable benefits starting at the end of February 2026.