Public Policy Holding Company, Inc. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars in tables in millions, except per share amounts.) Forward-Looking Statements This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws. You can identify these statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “project,” “target,” “estimate,” “intend,” “continue” or “believe” or the negatives of, or other variations of, these terms or comparable terminology. These forward-looking statements include, but are not limited to, statements regarding: our core strategy; our ability to improve our content offerings and service; our future financial performance, including expectations regarding revenues, deferred revenue, operating income and margin, net income, expenses, and profitability; liquidity, including the sufficiency of our capital resources, cash requirements; net cash provided by (used in) operating activities, access to financing sources, and free cash flows; capital allocation strategies, including any stock repurchases or repurchase programs; stock price volatility; impact of foreign exchange rate fluctuations; impact of interest rate fluctuations; adequacy of existing facilities; future regulatory changes and their impact on our business; intellectual property; cybersecurity; price changes and testing; artificial intelligence (“AI”); acquisitions; actions by competitors; dividends; future contractual obligations, including unknown content obligations and timing of payments; our global content and marketing investments; tax expense; unrecognized tax benefits; deferred tax assets; tax deposits; resolutions of disputes and other proceedings; our ability to effectively manage change and growth; our company culture; and our ability to attract and retain qualified employees and key personnel. These forward-looking statements are subject to risks and uncertainties that could cause actual results and events to differ. A detailed discussion of these and other risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included throughout this filing and particularly in Part II, Item 1A: “Risk Factors” section set forth in this Quarterly Report on Form 10-Q. All forward-looking statements included in this document are based on information available to us on the date hereof, and we assume no obligation to revise or publicly release any revision to any such forward-looking statement, except as may otherwise be required by law. The following, Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), summarizes the significant factors affecting the operating results, financial condition and liquidity, and cash flows of the Company as of and for three months ended March 31, 2026, and 2025. The unaudited consolidated financial statements and related notes to the unaudited consolidated financial statements, including our critical accounting estimates, and the related Management's Discussion and Analysis of Financial Condition and Results of Operations included in this report, should be read in conjunction with our 2025 Form 10-K. Executive Highlights The table below presents the revenue, its growth, and other financial performance measures over the period 2018-Q1 2026. Results for the period 2018-2025 provide supplemental financial information prior to our initial registration with the SEC: 2018 2019 2020 2021 2022 2023 2024 2025 YTD 2026 CAGR 2018-2025 Revenue $ 33.8 $ 55.5 $ 77.4 $ 99.3 $ 108.8 $ 135.0 $ 149.6 $ 186.5 $ 50.1 27.6 % Revenue growth (year over year) 28.0 % 64.2 % 39.5 % 28.3 % 9.6 % 24.1 % 10.8 % 24.7 % 27.5 % Organic Revenue Growth 25.3 % 32.5 % 8.3 % 24.4 % 6.7 % 2.0 % 2.7 % 6.2 % 5.1 % Net loss $ (15.0) $ (14.2) $ (24.0) $ (39.0) $ (11.5) Adjusted EBITDA (1) $ 31.5 $ 35.4 $ 38.6 $ 45.4 $ 11.2 Net loss margin (13.8) % (10.6) % (16.0) % (20.9) % (22.9)% Adjusted EBITDA margin 29.0 % 26.2 % 25.8 % 24.3 % 22.3% Top 10 clients as % of total revenue 25.9 % 17.9 % 12.3 % 14.7 % 11.0 % 10.8 % 8.7 % 9.2 % 8.0% (1) We have presented Adjusted EBITDA from 2022 onwards only as, prior to 2022, we were formed as a partnership with profits being distributed to the partners. The table below sets out the non-GAAP financial measures used by our management together, in each case, with the nearest comparable measure under GAAP. 21 As reported for the three months ended March 31, 2026 2025 $ Change % Change Revenue $ 50.1 $ 39.3 $ 10.8 27.5 % Net loss $ (11.5) $ (10.6) $ (0.9) (8.3) % Net loss margin (22.9 %) (27.0 %) 4.1 pts Adjusted EBITDA $ 11.2 $ 8.6 $ 2.6 29.7 % Adjusted EBITDA margin 22.3 % 21.9 % 0.4 pts Adjusted Net Income $ 7.4 $ 3.7 $ 3.7 100.5 % Net loss per share, basic and diluted $ (0.49) $ (0.63) $ 0.13 21.4 % Adjusted EPS, diluted $ 0.25 $ 0.14 $ 0.11 74.5 % Net cash used in operating activities $ (11.7) $ (8.6) $ (3.0) (35.2) % Adjusted Free Cash Flow $ (10.3) $ 3.2 $ (13.5) (422.4) % Cash and cash equivalents at end of period $ 42.9 $ 9.5 $ 33.3 Net Debt at end of period $ (1.8) $ (44.6) $ 42.9 Reconciliation of net loss and net loss margin to Adjusted EBITDA and Adjusted EBITDA margin Three months ended March 31, 2026 2025 $ Change % Change Net loss $ (11.5) $ (10.6) $ (0.9) (8.3) % Net loss margin (22.9) % (27.0) % 4.1 pts Adjustments: Interest income 0.0 0.0 0.0 64.9 % Interest expense 0.8 0.6 0.2 26.2 % Income tax expense 2.7 4.1 (1.4) (33.4) % Other expense (0.1) — (0.1) — Depreciation and amortization 1.6 1.3 0.3 23.6 % EBITDA (6.4) (4.6) (1.8) (40.4) % Long-term incentive program charges 1.0 1.1 (0.2) (14.3) % Share-based accounting charge 7.3 7.4 (0.2) (2.2) % Post-combination compensation charge 2.8 3.4 (0.6) (17.3) % Change in fair value of contingent consideration 6.3 1.0 5.3 541.0 % Gain on bargain purchase, net of deferred taxes (0.1) — (0.1) — Adjusted EBITDA incl. M&A expenses $ 10.9 $ 8.4 $ 2.5 29.7 % M&A Expenses 0.3 0.2 0.1 29.3 % Adjusted EBITDA 11.2 8.6 2.6 29.7 % Adjusted EBITDA Margin 22.3 % 21.9 % 0.4 pts Financial Results • In the three months ended March 31, 2026, revenue increased by 27.5% to $50.1 million, with organic growth contributing 5.1%, and the balance primarily driven by the two acquisitions, TrailRunner International, LLC (“TrailRunner”) (2025 Q2) and Pine Cove Strategies, LLC (“Pine Cove”) (2025 Q3). • GAAP net losses increased from $10.6 million in three months ended March 31, 2025, to $11.5 million in three months ended March 31, 2026. The loss is primarily attributable to the $7.3 million in share-based accounting charge stemming from the 2021 UK IPO and the treatment of acquisitions in our accounts, related to the change in fair value of contingent consideration and post combination compensation charges. • The increase in net loss during the three months ended March 31, 2026 was driven by an increase in the change in fair value of contingent consideration of $5.3 million resulting from the non-cash remeasurement of acquisition-related earn-out liabilities based on updated performance forecasts and valuation assumptions. This was partially offset by a related $0.6 million decrease in post-combination compensation charges, as well as by a $1.4 million decrease in income tax expense and a positive balance between revenue growth versus growth in cost of services and salaries, general and administrative expenses. 22 • Adjusted EBITDA was at $11.2 million, up 29.7% as compared to three months ended March 31, 2025, with a 22.3% margin. • Adjusted Net Income of $7.4 million was up 100.5% as compared to prior year, driven by our increase in revenue and higher Adjusted EBITDA as well as a favorable effective tax rate of 27.1% for three months ended March 31, 2026 as compared to an effective tax rate of 52.9% for the three months ended March 31, 2025. • Adjusted EPS fully diluted of $0.25 was up $0.11 or 74.5%, with fully diluted share count increasing by 14.9% as a consequence of the recent 2026 U.S. IPO. • PPHC's net cash flows used in operating activities amounted to $11.7 million, representing a decrease of $3.0 million when compared to $8.6 million in 2025 Q1. Adjusted Free Cash Flow decreased to $(10.3) million as compared to $3.2 million in 2025. The negative cashflow in Q1 is typical as the Company pays bonuses during this quarter, resulting in a reduction of its Accounts Payable balances. This year this was exacerbated by a $13.1 million increase in Accounts Receivable resulting from the inclusion of the 2025 acquisitions as well as slower collections. EPS and Adjusted EPS, fully diluted for the three months ended March 31, 2026 and 2025, were as follows: Three months ended March 31, 2026 2025 GAAP Adjustments (1) Non-GAAP GAAP Adjustments Non-GAAP Net loss and Adjusted Net Income $ (11.5) $ 18.9 $ 7.4 $ (10.6) $ 14.3 $ 3.7 Adjustments to Net Income Amortization of intangible assets 1.6 1.3 Share-based accounting charge 7.3 7.4 Post-combination compensation charge 2.8 3.4 Change in fair value of contingent consideration 6.3 1.0 Long-term incentive program expense 1.0 1.1 Gain on bargain purchase price (0.1) — $ 18.9 $ 14.3 Weighted average number of shares outstanding - Common Shares 23,301,135 16,903,655 - Legally outstanding shares 27,610,190 23,978,176 - Fully Diluted 29,294,654 25,501,023 Earnings per share (EPS, $), based on - Common Shares (0.49) $ (0.63) - Legally outstanding shares $ 0.27 0.15 - Fully Diluted $ 0.25 0.14 (1) Table may not sum due to immaterial rounding differences Segment Results of Operations As discussed in Note 7. Segment Reporting, we have three reportable segments as of March 31, 2026, Government Relations Consulting, Corporate Communications & Public Affairs Consulting and Compliance and Insights Services. The results of operations of our segments are as follows (1) : 23 Three months ended March 31, 2026 2025 Change % Change Government Relations Consulting Revenue $ 28.4 $ 26.2 $ 2.2 8.4 % Staff costs 12.9 12.6 0.3 2.4 % Non-staff costs 2.6 2.1 0.5 23.9 % Segment Adjusted Pre-Bonus EBITDA 12.9 11.5 1.4 12.2 % Segment Adjusted Pre-Bonus EBITDA Margin 45.5 % 43.9 % 1.5 pts Corporate Communications & Public Affairs Consulting Revenue 18.3 10.0 8.3 82.7 % Staff costs 11.0 6.3 4.7 73.7 % Non-staff costs 2.5 1.5 1.1 73.3 % Segment Adjusted Pre-Bonus EBITDA 4.8 2.2 2.6 114.1 % Segment Adjusted Pre-Bonus EBITDA Margin 26.2 % 22.4 % 3.8 pts Compliance and Insights Services Revenue 3.5 3.1 0.3 10.8 % Staff costs 1.5 1.3 0.2 11.5 % Non-staff costs 0.3 0.1 0.1 81.5 % Segment Adjusted Pre-Bonus EBITDA 1.7 1.7 0.1 4.3 % Segment Adjusted Pre-Bonus EBITDA Margin 50.2 % 53.4 % (3.1) pts Total Revenue 50.1 39.3 10.8 27.5 % Segment Adjusted Pre-Bonus EBITDA 19.4 15.4 4.0 26.1 % Segment Adjusted Pre-Bonus EBITDA margin 38.8 % 39.2 % (0.4) pts Unallocated bonus expense (3.9) (3.1) (0.8) (23.9) % Unallocated corporate costs (4.4) (3.7) (0.7) (19.4) % Adjusted EBITDA $ 11.2 $ 8.6 $ 2.6 29.8 % Adjusted EBITDA Margin 22.3 % 21.9 % 0.4 pts (1) Table may not sum due to immaterial rounding differences. The staff costs for the three months ended March 31, 2026 for the Government Relations Consulting segment increased by $0.3 million, primarily a result of the acquisitions of Pine Cove in 2025 Q3. Furthermore, for the three months ended March 31, 2026, the staff costs for the Corporate Communications & Public Affairs Consulting segment increased $4.7 million, of which $4.2 million reflects the acquisition of TrailRunner. Government Relations Consulting segment Adjusted Pre-Bonus EBITDA increased by $1.4 million, or 12.2% for the three months ended March 31, 2026, driven by higher organic revenue for the segment, offset by increases of $0.3 million of staff costs and $0.5 million of non-staff costs a result of increased business. Corporate Communications & Public Affair Consulting segment Adjusted Pre-Bonus EBITDA increased by $2.6 million, or 114.1% for the three months ended March 31, 2026, as a consequence of strong organic growth, in tandem with the acquisitions of TrailRunner (2025 Q2). Compliance and Insights Services segment Adjusted Pre-Bonus EBITDA increased by $0.1 million, or 4.3% for the three months ended March 31, 2026, reflecting strong organic growth and strong pricing of subscription contracts in this area, in combination with the increased use of technology in servicing our clients. Consolidated Results of Operations The table below presents the detailed components of our consolidated income statement: 24 Income Statements Three months ended March 31, 2026 2025 % Variance $ Variance Revenue $ 50.1 $ 39.3 27.5 % $ 10.8 Operating expenses: Staff cost - direct 25.4 20.1 26.4 % 5.3 Share-based accounting charge - direct 6.6 6.7 (2.3) % (0.2) Long term incentive program charges - direct 0.7 0.8 (15.0) % (0.1) Post-combination compensation - direct 2.8 3.4 (17.3) % (0.6) Bonus - direct 3.7 2.8 32.1 % 0.9 Salaries and other personnel costs 39.2 33.9 15.7 % 5.3 Amortization expense – technology 0.1 0.1 — (0.0) Office costs 1.6 1.3 21.4 % 0.3 Office and other direct costs 1.8 1.5 19.4 % 0.3 Cost of services 41.0 35.4 15.9 % 5.6 Staff cost - indirect 1.9 2.0 (7.4) % (0.2) Share-based accounting charge - indirect 0.7 0.7 (1.4) % (0.0) Long term incentive program charges - indirect 0.2 0.3 (12.2) % (0.0) Non-staff costs 6.2 4.1 52.4 % 2.1 Bonus - indirect 0.2 0.4 (37.9) % (0.1) Salaries, general and administrative 9.3 7.5 24.0 % 1.8 Mergers and acquisitions expense 0.3 0.2 29.3 % 0.1 Amortization 1.5 1.2 30.7 % 0.4 Depreciation 0.0 0.0 5.2 % 0.0 Depreciation and amortization expense 1.5 1.2 29.9 % 0.4 Change in fair value of contingent consideration 6.3 1.0 541.0 % 5.3 Total operating expenses 58.3 45.2 29.1 % 13.1 Loss from operations (8.2) (5.9) (39.4) % (2.3) Gain on bargain purchase 0.1 — — 0.1 Other income, net 0.2 — — 0.2 Interest income 0.0 0.0 (64.9) % (0.0) Interest expense (0.8) (0.6) (26.2) % (0.2) Net loss before income taxes (8.8) (6.5) (35.3) % (2.3) Income tax expense 2.7 4.1 (33.4) % (1.4) Net Loss $ (11.5) $ (10.6) (8.3) % $ (0.9) Revenue Refer to Note 2 - Revenue in this Form 10-Q for our revenue recognition policy. The components of fluctuations in revenue by reportable segment for the three months ended March 31, 2026 and 2025 were as follows: Three months ended March 31, 2026 2025 Revenue from acquisitions Organic revenue Total revenue Total revenue Organic Revenue Growth (1) Total Growth Government Relations Consulting $ 0.8 $ 27.5 $ 28.4 $ 26.2 5.2 % 8.4 % Corporate Communications & Public Affairs Consulting 8.0 10.3 18.3 10.0 3.3 % 82.7 % Compliance and Insights Services — 3.5 3.5 3.1 10.8 % 10.8 % Total $ 8.8 $ 41.3 $ 50.1 $ 39.3 5.1 % 27.5 % 25 (1) Refer to the Non-GAAP Financial Measures section below for the Company’s definition of Organic Revenue Growth. Our total revenue increased 27.5%, to $50.1 million for the three months ended March 31, 2026 compared to $39.3 million for the three months ended March 31, 2025, with Organic Revenue Growth contributing 5.1% of growth. This performance was supported by increased client demand, particularly within our Compliance and Insights Services segment as well as sustained demand for Government Relations Consulting and Corporate Communications & Public Affairs Consulting. These increases demonstrate the stability of the Company’s core business operations, the dedication of our management teams across our member companies, and the critical importance of our work to our clients, with the balance of growth driven by the successful integrations of our 2025 Q2 acquisition of TrailRunner and the 2025 Q3 acquisition of Pine Cove. Organic growth of 5.1% for the three months ended March 31, 2026 was primarily attributable to the strong organic growth in Compliance and Insights Services at 10.8%, as a result of high renewal rates, price increases, and new clients wins, all together reflective of a unique and high value-added offering together with strong organic growth in both our Corporate Communications & Public Affairs segment at 3.3% and Government Relations segment at 5.2%. During the three months ended March 31, 2026, 56.6% of the Company’s revenues were attributable to our Government Relations segment as compared to 66.6% during the three months ended March 31, 2025. That decrease was a result of the TrailRunner acquisition in Q2 2025 which also led to an increase in our Corporate Communications & Public Affairs segment, which increased to 36.5% during the three months ended March 31, 2026 compared to 25.5% in the prior year; 6.9% of our total revenues were from our Compliance and Insights Services segment, a decrease as compared to the previous year's 8.0%. Our Government Relations Consulting segment’s revenue increased by 8.4%, to $28.4 million for the three months ended March 31, 2026, compared to $26.2 million as reported for the three months ended March 31, 2025. This increase reflects Organic Revenue Growth of 5.2% in tandem with the acquisition of Pine Cove (completed in 2025 Q3). Our Corporate Communications & Public Affairs Consulting segment’s revenue increased by 82.7% to $18.3 million for the three months ended March 31, 2026, compared to $10.0 million for the three months ended March 31, 2025. This increase reflects Organic Revenue Growth of 3.3% stemming from increased client demand for our Corporate Communications & Public Affairs Consulting services, as well as the acquisition of TrailRunner (completed in 2025 Q2). Our Compliance and Insight Services segment’s revenue grew by 10.8% to $3.5 million for the three months ended March 31, 2026, compared to $3.1 million for the three months ended March 31, 2025. 100% of this growth was organic, driven by increasing demand for specialized services, including compliance, grant writing, and research-driven policy insights, and characterized by high renewal rates, favorable pricing and new clients wins, all together reflective of a unique and high value-added offering. For the three months ended March 31, 2026, we generated $2.8 million, or 5.5% of our total revenue, outside of the US, as compared to $1.6 million, or 4.1% for the three months ended March 31, 2025, being a result of our growing international presence resulting from our Pagefield and TrailRunner acquisitions. Cost of Services The table below presents the components of cost of services: 26 Three months ended March 31, 2026 2025 $ Change % Change Salaries and other personnel costs Staff cost - direct $ 25.4 $ 20.1 $ 5.3 26.4 % Share-based accounting charge - direct 6.6 6.7 (0.2) (2.3) % Long term incentive program charges - direct 0.7 0.8 (0.1) (15.0) % Post-combination compensation - direct 2.8 3.4 (0.6) (17.3) % Bonus - direct 3.7 2.8 0.9 32.1 % Total salaries and other personnel costs 39.2 33.9 5.3 15.7 % Office and other direct costs Amortization developed software 0.1 0.1 (0.0) — Office costs 1.6 1.3 0.3 21.4 % Total office and other direct costs 1.8 1.5 0.3 19.4 % Cost of services $ 41.0 $ 35.4 $ 5.6 15.9 % Salaries and other personnel costs represent our largest component of cost of services. Its principal components include employee salaries and benefits, share-based accounting charges, long term incentive program charges, post-combination compensation expense, and employee bonuses from operations that deliver services to our clients. For the three months ended March 31, 2026, salaries and other personnel costs increased by 15.7% to $39.2 million compared to $33.9 million for the three months ended March 31, 2025. The $5.3 million increase, $6.8 million was driven by the acquisitions of TrailRunner and Pine Cove in 2025. Annual bonus amounts increased by $0.9 million to $3.7 million for the three months ended March 31, 2026 compared to $2.8 million for the three months ended March 31, 2025. Bonus amounts represent annual payments paid to senior executives and employees which are awarded based on the Company’s performance, the relative performance of their respective member company and for the individual meeting specific performance goals companywide. The increase is primarily attributable to the acquisitions completed in 2025 and the Company performance improving as compared to the previous year. These increases were partially offset by our non-cash post-combination compensation expense which decreased by $0.6 million or $2.8 million when excluding the impact of TrailRunner and Pine Cove compared to Q1 2025. Office and other direct costs also represent a component of cost of services. Its principal component includes operating lease expenses for office space leased by the Company’s members and holding companies. Office and other direct costs increased by 19.4% in the three months ended March 31, 2026 to $1.8 million, compared to $1.5 million for the three months ended March 31, 2025. This increase was primarily a result of additional office spaces associated with the acquisitions of Pine Cove and TrailRunner. Salaries, general and administrative expenses The table below presents the components of general and administrative expenses: Three months ended March 31, 2026 2025 $ Change % Change Non-staff costs $ 6.2 $ 4.1 $ 2.1 52.4 % Staff cost - indirect 1.9 2.0 (0.2) (7.4) % Share-based accounting charge - indirect 0.7 0.7 (0.0) (1.4) % Bonus - indirect 0.2 0.4 (0.1) (37.9) % Long term incentive program charges - indirect 0.2 0.3 (0.0) (12.2) % Salaries, general and administrative $ 9.3 $ 7.5 $ 1.8 24.0 % Salaries, general and administrative expenses comprise of general and administrative expenses, employee salaries, share-based accounting charges, long term incentive program charges, post-combination compensation expense, U.S. and UK public company and related costs, advisory costs, benefits and bonuses of employees employed in our corporate function. Salaries, general and administrative expenses increased 24.0% in the three months ended March 31, 2026, to $9.3 million, compared to $7.5 million for the three months ended March 31, 2025. Of the $1.8 million increase, $0.8 million was driven by the acquisitions of TrailRunner and Pine Cove in 2025. The remaining $1.0 million is primarily made up of $0.4 million in incremental audit fees, along with a $0.3 million increase in bad debt expense and $0.2 million in higher IT consulting, software, and license costs to support our new reporting requirements. 27 Mergers and acquisitions expense The principal components of mergers and acquisitions expense include legal, audit and other advisory expenses, transaction taxes, and debt origination costs. Mergers and acquisitions expense increased by 29.3% in the three months ended March 31, 2026, to $0.3 million, compared to $0.2 million in the three months ended March 31, 2025. Depreciation and amortization expense The table below presents the components of depreciation and amortization expense: Three months ended March 31, 2026 2025 Cost of services Amortization – technology $ 0.1 $ 0.1 Charged to cost of services 0.1 0.1 Depreciation and amortization expense Amortization – customer relations companies acquired 1.3 1.0 Amortization – non-compete companies acquired 0.2 0.1 Depreciation 0.0 0.0 Charged to depreciation and amortization expense 1.5 1.2 Total depreciation and amortization expense $ 1.6 $ 1.3 The principal components of depreciation and amortization expense include the amortization of intangible assets related to customer relationships, developed technology, and non-compete contracts. Depreciation and amortization expense increased by 23.6% in the three months ended March 31, 2026, to $1.6 million, compared to $1.3 million in the three months ended March 31, 2025 reflecting additional costs associated with the acquisitions of TrailRunner and Pine Cove in 2025. Change in fair value of contingent consideration Contingent consideration represents a liability that is settled through a combination of cash and shares of our common stock based on the respective purchase agreement. The amount ultimately paid is dependent on the achievement of certain operating results. Change in fair value of contingent consideration represents changes in obligations relating to historical acquisitions, to the extent those obligations are not subject to vesting or claw-back provisions. Change in fair value of contingent consideration increased by 541.0% in the three months ended March 31, 2026, to $6.3 million, compared to $1.0 million in the three months ended March 31, 2025. This increase is primarily the result of a non-cash remeasurement of the acquisition-related earn-out liabilities that were revised based on updated performance forecasts and valuation assumptions that occurred in 2025 Q4. Gain on bargain purchase Gain on bargain purchase comprises of the difference between the fair value of the net identifiable assets acquired and the purchase price paid, where the purchase price is lower than the fair value of the acquired assets. There was a $0.1 million gain on bargain purchase for the three months ended March 31, 2026 resulting from an immaterial acquisition in 2026 compared to none in the three months ended March 31, 2025. Interest income Interest income represents the interest income accrued on interest bearing accounts and financial instruments. Interest income remained relatively flat in the three months ended March 31, 2026 as compared to the three months ended March 31, 2025. Interest expense Interest expense represents the interest expense incurred under our Term Loans as defined in Note 6. Notes Payable . Interest expense includes cash interest and debt discount amortization amounts. 28 Interest expense increased by 26.2% in the three months ended March 31, 2026, to $0.8 million, compared to $0.6 million in the three months ended March 31, 2025, reflecting interest on increased principal amounts that are associated with new Term Loans with financial institutions that were obtained in 2025. Non-GAAP Financial Measures We use a variety of financial and operating metrics to analyze our performance. These metrics are significant factors in assessing our operating results and profitability. These financial and operating metrics include Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA Including M&A expense, Adjusted net income, Adjusted EPS basic, Adjusted EPS fully diluted, Organic Revenue Growth, and Adjusted Free Cash Flow which are financial measures not recognized under U.S. GAAP. These non-GAAP financial measures are used by management to measure our operating performance, but may not be directly comparable to similar measures, such as EBITDA or Adjusted EBITDA, relied on or reported by other companies, including other companies in our industry. We believe excluding items that neither relate to the ordinary course of business nor reflect our underlying business operating performance, such as equity-based compensation, the amortization of acquired intangible assets, acquisition-related post-combination compensation and contingent consideration, gains on bargain purchase price, interest and tax enables meaningful period-to-period comparisons of our operating performance. We also use these non-GAAP financial measures when publicly providing our business outlook, for internal management purposes, and as a basis for evaluating potential acquisitions and dispositions. For full description of our Non-GAAP Financial Measures please refer to our 2025 Form 10-K. Liquidity and Capital Resources Our primary sources of liquidity have been cash flows from operations and bank borrowings, and our principal uses of cash flows from operations include investment in strategic acquisitions and distributions to our shareholders. Our ability to fund future acquisitions, capital expenditures and working capital, and to make scheduled payments of principal, or to pay the interest on, or to refinance, our indebtedness, will depend on our future performance and our ability to generate cash, which, to a certain extent, is subject to general economic, financial, competitive, legislative, legal, regulatory and other factors that are beyond our control. We believe that our cash flows from operating activities and bank borrowings will be sufficient to fund our anticipated acquisitions, capital expenditure, working capital requirements and debt service requirements as they become due. Our working capital cycle typically peaks during the first and second quarter of the year due to the timing of payments for incentive compensation, income taxes and contingent purchase price obligations. In addition, we have contractual obligations related to our long-term debt (principal and interest payments), recurring business operations, lease obligations, and acquisition-related obligations. Our principal discretionary cash spending includes dividend payments to common shareholders and strategic acquisitions. We have adjusted our dividend policy in January 2025, approximately halving the dividend paid per share, in order to preserve capital for future M&A opportunities. We anticipate continuing to avail ourself of debt facilities, however management will continue to consider all available sources of capital. Historical cash flows The following table summarizes our cash flows, as reported in our accompanying consolidated financial statements: Three months ended March 31, 2026 2025 $ Change % Change Net cash used in operating activities $ (11.7) $ (8.6) $ (3.0) (35.2) % Net cash used in investing activities (2.4) (18.5) 16.1 86.9 % Net cash provided by financing activities 36.6 22.1 14.5 65.6 % Effect of exchange rate changes on cash and cash equivalents (0.1) 0.1 (0.1) (200.0) % Net increase (decrease) in cash and cash equivalents 22.4 (5.0) 27.4 548.6 Cash and cash equivalents as of beginning of year 20.4 14.5 5.9 40.6 % Cash and cash equivalents as of end of year $ 42.9 $ 9.5 $ 33.3 349.2 % 29 Cash flows used in operating activities Net cash used in operating activities was $11.7 million for the three months ended March 31, 2026, compared to net cash used in operating activities of $8.6 million for the three months ended March 31, 2025. This decrease of $3.0 million was due to the payout of higher bonuses during this quarter, resulting in a reduction of our Accounts Payable balances, along with a $13.1 million increase in Accounts Receivable resulting from the inclusion of the 2025 acquisitions as well as slower collections. Cash flows used in investing activities Cash flows used in investing activities was $2.4 million for the three months ended March 31, 2026, compared to $18.5 million for the three months ended March 31, 2025, representing a decrease of $16.1 million, or 86.9%. The cash invested in 2026 Q1 primarily related to the acquisition of Westminster Policy Partners Limited (completed April 1, 2026), while the cash used in 2025 Q1 primarily related to the acquisition of TrailRunner (completed April 1, 2025). Cash flows provided by financing activities Cash flows provided by financing activities were $36.6 million for the three months ended March 31, 2026, compared to $22.1 million for the three months ended March 31, 2025. In 2026 Q1, the cash flows provided by financing activities was primarily a result of the 2026 U.S. IPO in January 2026, while in 2025 Q1 financing cash flow resulted from the acquisition of new Bank Credit Facilities (as defined above) for the TrailRunner acquisition, in both years partially offset by repayment on bank facilities. In addition to our GAAP statement of cash flows, we use a non‑GAAP liquidity measure, Adjusted Free Cash Flow, to evaluate our cash generation. Adjusted Free Cash Flow should be viewed as supplemental to, and not a substitute for, GAAP net cash used in operating activities and total changes in cash and cash equivalents. The following table reconciles net cash used in operating activities, as reported under GAAP, to Adjusted Free Cash Flow and other components of changes in cash and cash equivalents: 30 Three months ended March 31, 2026 2025 $ Change % Change Net cash used in Operating Activities - as reported $ (11.7) $ (8.6) $ (3.0) (35.2) % Prepaid post-combination expense 1.9 $ 10.1 $ (8.2) (81.1) % Change in other liability — $ 1.7 $ (1.7) (100.0) % Capex (0.5) $ — $ (0.5) — Adjusted Free Cash Flow (Non-GAAP) (10.3) $ 3.2 $ (13.5) (422.4) % Prepayment on business acquisition (1.9) (18.5) 16.6 89.7 % Acquisition Payments included in Cash flow from Operations (1.9) (11.8) 9.9 83.8 % Cash Flow related to acquisitions (3.8) (30.3) 26.5 87.4 % Proceeds from notes payable — 24.0 (24.0) (100.0) % Payment of debt issuance costs — (0.1) 0.1 100.0 % Principal payment of note payable (2.4) (1.8) (0.6) (32.9) % Cash Flow related to debt financing (2.4) 22.1 (24.5) (110.9) % Payment of deferred equity offering costs (3.9) — (3.9) — Proceeds from U.S. initial public offering, net of underwriting fees of $3.0 million 42.9 — 42.9 — Cash Flow related to equity financing 39.0 — 39.0 — Effect of foreign exchange rate changes on cash and cash equivalents (0.1) 0.1 (0.1) (200.0) % Net Cash Movement $ 22.4 $ (5.0) $ 27.4 548.6 % Adjusted Free Cash Flow is a non‑GAAP liquidity measure. It adjusts GAAP net cash used in operating activities for acquisition‑related and capital expenditure cash flows as described above. These are cash outflows that recur in connection with our acquisition strategy and ongoing investment needs, and Adjusted Free Cash Flow should not be construed as representing additional cash available for use. Future Capital Requirements We are actively seeking to expand our portfolio of member companies internationally with strategically and financially attractive opportunities while adding complementary specializations. We expect to fund the purchase price for such acquisitions with net cash from operating activities and a combination of new stock issuance and debt financing. Our capital expenditures principally include investments in office build-outs and small equipment, and have not historically been material to the Company. Contractual Commitments and Contingencies Contractual obligations Our principal contractual obligations consist of our obligations in respect of financial indebtedness that is owed under our credit facilities. In addition, we have obligations under leases, trade and other payables, capital commitments and other contractual commitments. Finally, we have earnout obligations under acquisition agreements. We expect that our contractual commitments may evolve over time in response to current business and market conditions, with the result that future amounts due may differ considerably from the expected amounts payable set out in the table below. Payments due by Contractual obligations Remainder of 2026 2027 2028 2029 Thereafter Total Debt obligations (excluding interest) $ 7.1 $ 9.0 $ 16.7 $ 11.9 $ - $ 44.7 Operating lease obligations 4.3 6.0 6.6 5.2 12.8 34.9 Total $ 11.4 $ 14.9 $ 23.3 $ 17.1 $ 12.8 $ 79.6 31 Financial Obligations Bank Credit Facilities As of March 31, 2026, there was no balance outstanding under the 2023 Facility 1; $3.2 million outstanding under the 2023 Facility 2; $4.7 million outstanding under the 2024 Term Loan A; $15.0 million under the 2024 Term Loan B; and $21.8 million outstanding under the 2025 Term Loan C. As of March 31, 2026, under the 2023 Facility 1, we had capacity to re-borrow up to $3.0 million, less any outstanding letters of credit, or 80% of our eligible receivables, whichever is less. As of March 31, 2026, the principal maturities under the Bank Credit Facilities were as follows: ($ millions) Principal amount maturing under 2023 Facility 2 2024 Term Loan A 2024 Term Loan B 2025 Term Loan C Total 2026 (excluding the three months ended March 31, 2026) $ 1.6 $ 0.7 $ 2.1 $ 2.7 $ 7.1 2027 1.6 0.9 2.9 3.6 9.0 2028 — 3.2 10.0 3.6 16.7 2029 — — — 11.9 11.9 Total $ 3.2 $ 4.7 $ 15.0 $ 21.8 $ 44.7 The table below sets forth a reconciliation of cash and cash equivalents at period-end to net debt at period-end. March 31, 2026 March 31, 2025 December 31, 2025 Cash and cash equivalents as of end of period $ 42.9 $ 9.5 $ 20.4 Notes payable, long-term, net (34.1) (46.1) (37.9) Notes payable, current portion, net (10.5) (8.1) (9.1) Total debt, net (44.6) (54.2) (47.0) Net debt at period-end $ (1.8) $ (44.6) $ (26.6) This reconciliation includes other debt and unamortized issuance costs along with the Bank Credit Facilities. See Note 6. Notes Payable for more detail. Contingent Obligations Earnout obligations As part of the typical structure of our acquisition of new member companies, we commit to making certain earnout payments. These earnout payments are based on a profit-driven formula and only materialize if the acquired company realizes profit growth after the date of completion. Payments are typically made in a mix of cash and shares. In turn, each of the components of earnout payments may be subject to further vesting requirements and employment conditions, which keeps the recipients financially committed to business. In relation to these earnout payments, as of March 31, 2026, we have recorded liabilities of $31.9 million on our balance sheet, spread across the line items Contingent Consideration and Other Liabilities. This number reflects both the estimated foreseen nominal payments, and also discount factors, probability of reaching goals, and fair value estimates. In nominal terms, over the period 2026-2030, based on expected performance of each of the acquired companies, we anticipate having to make earnout payments of $79.5 million, of which $45.2 million would be payable in cash, and the remainder in shares. The maximum earnout liability over that same period, which would only be reached if each acquisition meets very aggressive profit growth targets, would be $142.5 million, of which $84.0 million would be payable in cash, and the remainder in shares. Generally, in order for an acquisition to reach maximum earnout payments, it would need to grow its profit by 25-30% annually over the earnout period. For more information, see Note 9. Fair Value Measurement . The following tables summarizes nominal earnout expectations: 32 ($ in millions) Remainder of 2026 2027 2028 2029 2030 Total Expected earnout payments in Cash $ 11.8 $ 4.9 $ 23.0 $ 1.4 $ 4.1 $ 45.2 Expected earnout payments in PPHC stock $ 4.6 $ 1.7 $ 23.0 $ 0.8 $ 4.1 $ 34.3 Expected earnout payments - total $ 16.4 $ 6.6 $ 46.0 $ 2.2 $ 8.2 $ 79.5 Maximum earnout payments in Cash $ 17.3 $ 15.4 $ 23.1 $ 18.0 $ 10.0 $ 84.0 Maximum earnout payments in PPHC stock $ 7.5 $ 6.9 $ 23.1 $ 11.0 $ 10.0 $ 58.6 Maximum earnout payments - total $ 24.9 $ 22.4 $ 46.3 $ 29.1 $ 20.0 $ 142.5 We expect that our contingent obligations may evolve over time in response to current business and market conditions, with the result that future amounts due may differ considerably from the expected amounts payable set out in the table above. Off-Balance Sheet Arrangements As of March 31, 2026, we had no off-balance sheet arrangements. Critical Accounting Estimates For a more complete understanding of our accounting estimates and policies, the unaudited consolidated financial statements and the related Management's Discussion and Analysis of Financial Condition and Results of Operations, readers are encouraged to consider this information together with our discussion of our critical accounting policies under the heading, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2025 Form 10-K. Business Acquisitions and Valuation of Contingent Consideration and Post-Combination Liabilities The Company accounts for business acquisitions using the acquisition method. Under ASC 805 - Business Combinations , a business combination occurs when an entity obtains control of a “business.” The Company determines whether or not the gross assets acquired meet the definition of a business. If they meet this criteria, the Company accounts for the transaction as a business acquisition. If they do not meet this criteria the transaction is accounted for as an asset acquisition. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognized in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issuance of debt or equity securities. Contingent consideration is measured at fair value at the date of acquisition and is based on expected cash flow of the acquisition target discounted over time using an observable market discount rate. The Company generally utilizes outside valuation experts to determine the amount of contingent consideration. We estimate and record the acquisition date fair value of contingent consideration as part of purchase price consideration for business acquisitions. Additionally, each reporting period, we estimate changes in the fair value of contingent consideration and recognize any change in fair value in our consolidated statements of operations and other comprehensive loss. The fair value of the contingent consideration is generally measured using Monte Carlo simulations to estimate the achievement and amount of certain future operating results. The Monte Carlo simulations utilize subjective assumptions and estimates including expected volatility of future operating results, discount rates applicable to future results, and expected growth rates. Future revisions to these assumptions could materially change the estimate of the fair value of contingent consideration and, therefore, materially affect our future financial results. The contingent consideration liability is to be settled through a combination of cash and shares of common stock based on each respective purchase agreement and the amount ultimately paid is dependent on the achievement of certain future operating results. During the three months ended March 31, 2026 and 2025, the Company recorded a loss from the change of fair value of contingent consideration of $6.3 million and $1.0 million, respectively, which are included in operating expenses on the accompanying consolidated statement of operations. Furthermore, the contractual purchase price of business acquisitions may include future payments to the seller that are not accounted for under ASC 805 - Business Combinations due the existence of contractual vesting periods or claw-backs. Such future payments are generally recorded as liabilities of the Company. When a component of the contractual purchase price of an acquired business is determined not to be consideration transferred in exchange for the business, and should therefore be accounted for as a separate transaction (such as compensation costs), the Company may, on occasion, recognize a gain on bargain purchase price because the accounting purchase price is not inclusive of such a separate 33 component of the contractual purchase price when being compared to the fair value of the identifiable net assets of the acquired business which, in some cases, may result in the fair value of the identifiable net assets being in excess of the fair value of the purchase price consideration. The Company records post-combination business expense over the vesting or claw-back period applicable for these future payments on a straight-line basis with the amount accrued recorded as other liability. The future earnout payments that have vesting or claw-back rights tied to employment will reduce the amount of the other liability when paid. The fair value of other liabilities is measured using the same Monte Carlo simulation with the same assumptions and inputs as outlined above for contingent consideration liabilities. The fair value of post-combination compensation obligations is remeasured at each reporting date, any changes in fair value are reflected as a cumulative catch up to post-combination compensation expense in the period in which the remeasurement occurred. Goodwill and Indefinite-lived Intangible Assets Goodwill represents the excess of the purchase price in a business combination over the fair value of the net tangible and intangible assets acquired and the indefinite-lived intangible assets which consists of trademarks. In accordance with ASC 350 - Intangibles - Goodwill and Other , goodwill and indefinite-lived intangible assets are not amortized but tested for impairment annually and whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. We test our goodwill and indefinite-lived intangible assets for impairment annually on October 1st using the qualitative assessment. The process of evaluating the potential impairment is highly subjective and requires the application of significant judgment. We first assess whether there are qualitative factors which would indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying value. We consider events and circumstances such as, but not limited to, macroeconomic conditions, industry and market conditions, our overall financial performance, and other relevant entity-specific events. If the qualitative assessment indicates that the fair value of the reporting unit is less than its carrying amount, a quantitative assessment is performed. Other Intangible Assets Our definite-lived intangible assets consist of customer relationships, developed technology and non-compete agreements that have been acquired through various acquisitions. Our indefinite lived assets consist of trademarks that have been acquired through various acquisitions. The Company generally utilizes third-party specialists to determine the fair value of acquired intangible assets. The valuation of these assets involves significant judgment and the use of valuation techniques such as the multi-period excess earnings method and the with-and-without method. These models require management to make assumptions about future revenue growth, customer attrition, operating margins, contributory asset charges, and discount rates. Changes in these assumptions could materially affect the fair value assigned to the intangible assets and the related amortization expense. We amortize these assets over their estimated useful lives. Long-lived assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for an amount by which the carrying amount of the asset exceeds the fair value of the asset. Long-term incentive program charges The fair value of awards issued under the Company’s long-term incentive program are estimated using a Black-Scholes option-pricing model on the grant date which requires subjective inputs. The inputs of the option-pricing model include the fair market value of our common stock based on the closing price as reported on the date of the grant on the AIM, estimated dividend yield, expected stock price volatility and risk-free interest rate. The amortization of the fair value of share-based awards is recorded as an expense in the statement of operations either within salaries and other personnel costs within cost of services or to general and administrative costs.