ANDG

Overall Financial Performance

• Q2 2026 organic growth hit 20.5%, the strongest second quarter percentage growth in 24 years, despite the company's larger current revenue size.
• Adjusted EBITDA for Q2 2026 was ~$46 million, a 54% year-over-year increase; adjusted EBITDA year-to-date is up 41%, with a margin of 26.8% (up from 22.6% in the prior year period), even with ongoing investments in consulting and global mobility.
• Productivity increased 3.9% year-to-date; hourly rates rose 10.1% year-over-year, with an additional 3% client surcharge introduced for Q2 2026 contracts; revenue per professional is up 16.4% year-to-date.

Client and Talent Operations

• Gross client additions exceeded 1,300, a 10.6% increase, with modest net growth due to intentional pruning of low-productivity client relationships; 70% of employee attrition was among low-performing staff (performance ratings 1-3), which management views as positive.
• 2026 new hire acceptance rate hit 73%, the highest in 24 years, up from 36% pre-Anderson brand repositioning and 65% just after the rebrand. The company competes for talent with both accounting and law firms.

M&A / Transaction Strategy

• 16 total transactions have been signed, 8 have closed, representing $130 million in 2025 annualized revenue, which would add ~15.5% to base revenue. However, deal closing has taken longer than expected due to regulatory requirements across jurisdictions, so 2026 inorganic revenue will come in at $25-30 million, well below the original target of $55 million.
• Management prioritizes cultural and value alignment over deal speed, and is being deliberately disciplined with target selection; the company has added dedicated in-house transaction resources (3 full-time lawyers, 4 full-time finance staff) to accelerate the process.
• A strong pipeline of deals exists, enough to support 2-3 closings per month through the end of 2027, with most targets being pre-vetted firms with existing long-term relationships to Anderson; most revenue from currently signed deals will slip into 2027.

Profitability and Margin

• GAAP net loss for Q2 2026 was $10.1 million, an improvement from a $96 million net loss in Q2 2025; first half 2026 GAAP net income was $7.6 million, a swing from a $45.4 million net loss in the prior year, driven by higher revenue and lower equity-based compensation.
• Adjusted EBITDA margin for Q2 2026 was 21.1%, up 420 basis points year-over-year; for the last 12 months, adjusted EBITDA margin was 28.8%, up 560 basis points, reflecting strong favorable operating leverage.
• The company holds no third-party debt, has $175.6 million in cash and cash equivalents, and maintains a conservative leverage posture; existing liquidity is sufficient for all foreseeable funding needs.

• Management reaffirms full year 2026 guidance, maintaining the revenue range of $980 million to $1 billion, representing ~18% annual growth. The strong organic performance in the first half is expected to offset the delayed closing of M&A transactions that will push their revenue into 2027.
• Full year 2026 adjusted EBITDA guidance is maintained at $225 million to $250 million, representing ~5% annual growth, with an adjusted EBITDA margin range of 22% to 23%. Management intentionally kept guidance conservative despite stronger than expected first half results, adhering to a longstanding policy of underpromising and overdelivering.
• Management expects Anderson Consulting to reach organic profitability in the second half of 2027, and Global Mobility to reach profitability in 2028, with balanced ongoing investment in these new service lines.

Revenue for Q2 2026 totaled $217.7 million, a 23.7% year-over-year increase, with $5.5 million coming from closed acquisitions, resulting in 20.6% organic revenue growth. First half 2026 total revenue was $458 million, up 19.3% year-over-year, with 17.9% organic growth. For the 12 months ended June 30, 2026, total revenue was $913 million, up 18% year-over-year, with 17.2% organic growth.

• Business Tax Services: Reported 36.9% year-over-year revenue growth for Q2 2026, accounting for 39.2% of total Q2 revenue.
• Private Client Services (largest segment): Reported approximately 17% year-over-year revenue growth for Q2 2026.
• Consulting and Global Mobility: Revenue is up year-over-year, with continued investment in these segments ongoing.

• M&A transaction closing timelines are extended by cross-border regulatory requirements, leading to lower than expected 2026 inorganic revenue, even with a strong pipeline of qualified deals.
• Unsupervised use of generative AI carries risks of output hallucinations, which have already led to fines for other professional services firms outside the U.S.
• The company has areas for improvement in pricing, productivity, business development, and post-acquisition integration, despite strong overall performance.
• Large incumbent firms have large existing workforces focused on leveraged commodity services, which creates uncertainty around how incumbents will adjust to AI-driven productivity gains that reduce labor demand.

Q: What drove the extremely strong quarterly performance in the Business Tax Services segment? / A: The strength comes from the company's intentional client selection strategy: Anderson intentionally focuses on high-value, non-commoditized services (it does not offer audit work, and does minimal large-scale tax compliance) and prioritizes relationships with decision-making clients that value quality service over low cost. This client and service mix enables consistent pricing power and strong growth. There are no one-off factors driving the quarter's outperformance.

Q: Why is adjusted EBITDA guidance held steady even with the strong first half organic performance? / A: Guidance is intentionally maintained at the original range as a conservative approach, which is consistent with management's longstanding philosophy of being modest in projections to avoid overpromising. Approximately $100 million of annualized revenue from recently signed deals will not be recognized in 2026 at all, pushing that revenue into 2027. Management is more bullish on 2026 results than the guidance reflects, and expects strong adjusted EBITDA performance in the third quarter, which is historically the company's strongest quarter.

Q: How is Anderson integrating AI/technology into operations, and how does the firm manage associated risks? / A: Anderson is running a systematic, phased AI training program with university and third-party partners, with over 500 staff trained to date. AI is used for three core purposes: identifying client service opportunities, sourcing technical solutions, and implementing work. AI improves productivity dramatically, enabling faster fixed-fee work that saves clients money while increasing Anderson's profitability. Management mitigates hallucination risk by requiring human oversight of all AI output, and views AI as a tailwind that will improve profitability over time by flattening the firm's organizational pyramid, reducing the number of junior staff per partner.

Q: What is the typical profile of new senior hires, and what markets is Anderson prioritizing for talent expansion? / A: Entry-level hires are mostly former interns, who have a 50% higher retention rate than external entry hires, with a 75% offer rate and ~80% acceptance rate. Lateral senior hires are targeted to specific high-growth practice areas and high-potential markets. Key priority markets for additional investment and hiring are Silicon Valley, which is seeing explosive economic and tech growth, and Florida, which is experiencing a massive generational wealth migration. As these markets mature and reach critical mass, management expects margins to rise toward the 28-39% range seen in the company's most mature large markets.