Andersen Group Aktie

Greetings, and welcome to the Andersen Group First Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Greg Vistica, Managing Director, Investor Relations. Thank you. You may begin.

Thank you, Diego. Good afternoon, everyone, and thank you for joining the Andersen call to discuss our first quarter earnings results with Andersen Global Chairman and Chief Executive Officer, Mark Vorsatz; and CFO, Neal Livingston. After their presentation, we will take questions from the analysts. Our call today is scheduled for approximately 45 minutes. But before we begin, our Chief Legal Officer, Bill Deckelman, will discuss forward-looking statements. Bill?

Okay. Thank you, Greg. Please note that certain statements made on this call are forward-looking statements within the meaning of federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied. These risks and uncertainties are described in our earnings release and our SEC filings, including our Form 10-K for the year ended December 31, 2025. Except as required by law, we undertake no obligation to update any forward-looking statements. We will also reference certain non-GAAP financial measures today. Reconciliations to the most directly comparable GAAP measures are included in our earnings release and will be available on our website. And with that, Mark, I will turn the call over to you.

Thanks, Bill. Good day to everybody. This is Mark Vorsatz. I'm going to keep my comments real short, and then I'm going to turn it over to Neal to talk about our guidance for the balance of the year. We had -- I want to, first of all, I want to thank the investors who have been along with us on this ride, and we definitely appreciate the support. I also want to thank our partners and our people. We had a very solid first quarter. Greg had circulated a little bit ago the release on our earnings.

Our revenue came in at a little under $241 million. That was an increase of 15.7%. That does not include any inorganic growth on the acquisitions that we have completed. That was about 4.5% better than what we had included in the projections that we had provided to the analysts. The financial performance was broad-based. If you look at the 10-Q, you'll see that we were up across all four major areas of our tax service lines. All were up more than double digits, each at least 12% in growth.

An important statistic I want to highlight, and we'll talk about this more on future calls, is revenue per professional. For me, that's probably the #1 metric that I focus on. We had excellent growth in that area in the first quarter at 12.7%, a combination of some moderate improvement in productivity and also moderate improvement in pricing, a little bit of that, as we're edging forward, is on the technology side, and we're making very good progress in that area. On the adjusted EBITDA numbers, we came in at around $72.3 million. That was an increase of 26.4% over first quarter last year. And the adjusted EBITDA number was -- the margin was 30%. That includes about a $7.4 million loss in Global Mobility and Consulting.

We are starting to get more traction in those areas. But as we had anticipated, we're going to lose money in both of those practices this year. That's part of our continued investment in expansion. Without that loss, our adjusted EBITDA number would have been 33%. So I think very strong across the board. Those are my comments on our financials for the first quarter, and I'm going to turn it over to Neal. He can fill in some additional detail, and he'll talk about guidance for the balance of the year.

Mark, thanks very much. Good afternoon, everyone, and thanks for joining us today. It's Neal Livingston here, Chief Financial Officer. This is our second earnings call as a public company, and we very much appreciate the ongoing interest from the analysts and investors alike. As Mark has noted, I will cover our financial performance for the most recent quarter in some detail and then provide updated guidance for the next quarter and also for the full year 2026. So let me start with revenue. As Mark has noted, revenue for the first quarter '26 was $240.7 million. That was an increase of $32.7 million, equating to 15.7% growth over the same quarter last year.

Also, as Mark noted, that exceeded the midpoint of the guidance that we had provided on our last earnings call, where you may recall, we indicated first quarter revenue of between $230 million and $235 million. So we exceeded that by approximately $8.2 million. Also, Mark noted, revenue across all of our key service lines, private client services, business tax, alternative investment funds, and valuation services all increased for the quarter. Our largest service line, Private Client Services, reported strong revenue growth of 18.2% for the quarter, resulting in that service line representing approximately 51.2% of revenues, up from 50.1% in the same quarter of 2025.

Also, pleasingly, and linking to Mark's comments about investment, revenue increased in both Andersen Consulting and Global Mobility, being our newer practice areas, where we continue to invest in alignment with our expansion strategy. At a regional level, all of the three regions recorded increases in revenue, with the East region, in particular, reporting strong revenue growth of 22.4% for the quarter. The growth was driven by a balanced mix of drivers with no large one-time or project-related items for the quarter.

And just to reconfirm, there were no inorganic or M&A revenue -- there was no inorganic or M&A revenue recorded in the first quarter of 2026. In terms of the underlying business drivers, the strong top line performance is driven by a number of factors. At a macro level, obviously, this is very much linked to our business model and client selection criteria. At an operational level, I would note a couple of points. Firstly, that we continue to maintain favorable operating leverage, whereby annual revenue growth has consistently outpaced the growth in our core operating costs, highlighting platform scalability and opportunities for margin expansion. We have continually demonstrated good pricing power, illustrated by revenue per hour, which increased 8%.

And as Mark noted, revenue per professional, which increased 13% for the first quarter of '26 compared to the same quarter in '25. Also, while we're on pricing, the 3% tech charge that we shared previously, that was introduced for client contracts signed in the first quarter of 2026. I'd say that has met, if not exceeded our internal expectations, and it will provide a meaningful source of incremental revenue for 2026, which will be reflected in the revised full year guidance I'll provide later on the call. In terms of headcount, our capacity to support clients increased by 2.8% in the quarter or 62 additional colleagues. That's in line with expectations for single-digit growth and enabling ongoing tight control of staffing costs.

Within that, the ratio of managing directors to non-managing directors remained stable during the quarter. In terms of client groups, our active client groups increased 3.5% for the quarter and the number of client engagements that we undertook for those client groups increased 2%, confirming the ongoing growth in demand for the firm's services.

Turning now to net income. So on a GAAP basis, our net income for the quarter was $17.7 million, with a net income margin of 7.4%. That compares to net income of $50.6 million and a net income margin of 24.3% for the same quarter of 2025. The reduction in net income and net income margin was primarily attributable to $41.2 million of non-cash equity-based compensation expense associated with the equity granted in connection with the IPO and the reorganization. These expenses did not exist in the first quarter of 2025 when the firm was still privately held.

In addition, interest expense increased $6 million for the quarter. This is due to the related party notes issued as part of the IPO reorganization, and transaction costs increased by $2.6 million in the first quarter as compared to the previous year in support of the firm's ongoing inorganic expansion plans. This equated to net income per share EPS of $0.04 on a basic and $0.03 on a diluted basis. Let me pivot now to the non-GAAP measures and again, comparing to the first quarter of 2025. Our adjusted net income was $62.9 million compared to $55.2 million for 2025, an increase of approximately 14%. The adjusted net income margin was 26.1% compared to 26.5% in 2025. Looking at adjusted EBITDA. The adjusted EBITDA for the first quarter of 2026 was $72.3 million, as Mark noted, that compares to $57.2 million for 2025, an increase of 26%.

This again exceeded the midpoint of the guidance provided on our last earnings call, where we indicated adjusted EBITDA between $55 million and $60 million. So we exceeded that by approximately $15 million or 26%. The adjusted EBITDA margin for Q1 was 30%. That compares to 27.5% in the prior year. Again, that exceeded the midpoint of the guidance provided where we had indicated an EBITDA margin between 25% to 26%, so a healthy 4.5% or 450 basis point excess.

I'll briefly cover on costs, balance sheet, and cash flow. Cost of services increased by approximately 41% for the first quarter. SG&A increased approximately 36% in the first quarter. The majority of these increases was again attributable to the $41 million of non-cash equity-based compensation expense that I mentioned previously, which did not occur in the first quarter of 2025. As a reminder, these equity-based compensation charges are non-cash and non-dilutive as no incremental equity was issued as part of these awards. In terms of the firm's balance sheet, the balance sheet remains liquid and provides significant flexibility to support growth.

As of March 31, 2026, our current assets comprised cash and cash equivalents of approximately $207 million and accounts receivable, including both billed and unbilled services, net of allowances for credit losses of approximately $214 million. On the short-term liability side of the balance sheet, we had accrued payroll and benefits of approximately $50 million and distributions and short-term notes payable of approximately $85 million.

At the end of the quarter, the firm had no third-party debt, and we continue to maintain a conservative stance towards the use of financial leverage. We believe that our existing cash and cash equivalents, the cash flow from operations, and the net proceeds from the IPO remain sufficient to meet our working capital investment and other general corporate funding requirements for the foreseeable future. I'll pivot now towards the outlook and forward guidance. We are going at some pace here, hopefully leaving time for questions. But looking ahead, we are providing updated guidance on today's call, which obviously reflects our current best judgment. For the second quarter of 2026, we are expecting revenue in the range of $190 million to $205 million, equating to a growth of approximately 13%.

We are anticipating a net loss for the quarter and negative EPS. That is due to seasonality and principally the aforementioned non-cash equity-based compensation expenses. Looking to the full year, we currently expect revenue in the range of $980 million to $1 billion, equating to a growth rate of approximately 18%. We are anticipating positive net income and EPS for the full year. We expect adjusted EBITDA in the range of $225 million to $250 million, with an adjusted EBITDA margin in the range of 23% to 25%. As we've announced separately, the firm has closed several acquisitions in the second quarter, approximately one quarter ahead of schedule.

Based on this and the additional acquisitions and business combinations in the pipeline, we are raising our full year inorganic revenue guidance from $33 million to $55 million. This is included in the full year numbers, which I mentioned previously. We'll be updating the impact of closed acquisitions and business combinations on both our GAAP and non-GAAP financial metrics in conjunction with our second quarter financial results.

A final point, which is on seasonality. Just as a reminder to everybody, our business is seasonal with a significant share of full year revenue and net income historically generated in the third quarter. This creates some uncertainty in projecting full year results, which is reflected in our updated guidance. As before, our guidance is based on multiple assumptions, including macroeconomic conditions, levels of client demand, staffing, investment, the impact of AI, integration of acquired firms, and so forth. These assumptions are, of course, dynamic and subject to change.

In closing, I'd say on behalf of the team, we are extremely proud to announce a back-to-back set of quarterly financial results that exceeds our previously issued guidance and the base case projections published by most of the analysts who cover our stock. Moreover, these financial results provide a solid foundation for ongoing value creation over the medium term. So thank you very much for listening. And with that, we'd be happy to take any questions, or Mark, if you'd like to make any summary comments.

No, that's fine. We'll go to questions.

[Operator Instructions] And your first question comes from Mark Marcon with Baird.

Congratulations on the strong results, Mark and the whole team. I was wondering, can you talk a little bit about -- you had very strong growth in Private Client Services. To what extent are you already starting to feel the impact of all of the various initiatives that we're reading about, whether it's in California with the potential billionaire tax, New York in terms of various proposals to raise taxes, even more moderate states like Virginia or Washington that are now proposing increased taxes. What are you seeing at this point? Where do you think we are in terms of potentially leveraging some of those dynamics?

I don't think, Mark, those are baked into the numbers for the first quarter at all. I would say a lot of people are evaluating alternatives. I'll use the Washington state tax as an example. For those that are not familiar with it, the governor had signed legislation on March 31 to create an income tax for anyone who makes over $1 million at a 9.9% tax rate. Literally within 2 weeks of the signing of that legislation, litigation was filed on the basis that it's unconstitutional. This is going to play out for a while.

I think a lot of people are evaluating how to deal with these things. We certainly have had discussions with a number of clients about it. Although we have had some clients, particularly in California that had decided last year to relocate, we're really expecting that to the extent that these types of legislative acts pass, a lot of that work is going to be in the future. So I wouldn't say that's a material amount of our revenue. I'd say the bigger issue on the PCS practice is we continue to add more clients and larger clients.

So I think that's -- I mean, just this morning, I had a discussion with a new client that is worth several billion dollars. I'm going to put a younger partner on the job with me to do most of the real work. But we're seeing more and more of those kind of opportunities. And I would say the second thing, and it's just really at a very early stage, is we're doing a little bit better on the integration side. So if you looked at our valuation performance in the first quarter, it was 17.3% growth rate, just behind PCS. Most of that work is internal feed. It's internal referrals. So I think on the integration side, we're making some moderate progress. We have a lot more to do. What's exciting to me about the financial results we announced today is that we have a lot of room for improvement.

That's fantastic. And then you mentioned the pricing and the revenue per hour being up nicely. Did the January price increase go through as you expected?

Yes, I think pretty much. I mean on the pricing side, we're coming in about where we had anticipated. I would say we're -- I think for the balance of the year, we'll see much greater lift will be on the productivity side. I can tell you that we really have started getting some benefit of that starting around the end of February, but it's carrying through. And so as I commented on the last call, I'm very excited. We're doing fine. These are solid numbers, but we have a lot of room for improvement.

And keep in mind, these are just pure organic growth numbers. We will continue to have a lot of conversations with groups about joining us. We did sign a deal yesterday with Switzerland. So we've now closed eight deals in the last 10 weeks. I'm not going to suggest that, that is an indicator of future activity. A lot of these transactions take quite a long time to put to a conclusion. But I will say that we expect in a systematic fashion that we'll be continuing to add groups in key markets. What's particularly important about that is the managing partner of that practice co-manages Europe. And as I indicated on the last call, similar with our practice in Nigeria, similar with our practice in Uruguay, we're focused on adding groups that are -- have a significant role in the management of our Swiss verein. So as we add more practices, we've got the management already put in place.

That's fantastic. And just with regards to the guidance, the second quarter, I fully recognize, is seasonally slower. Do you have any of the acquisitions built in for the second quarter? And then the full year guidance basically anticipates a fairly significant acceleration. How should we think about that? What's being layered in? What are the key drivers for the acceleration for the full year?

Well, I would say that, first of all, we have some very modest revenue included in the second quarter numbers. It's a little less than $7 million. So when we've announced deals, most of the deals -- any of the deals that we announced after May 1 will not close until July 1. So that revenue won't be until the second half of the year. So as Neal indicated, what we had previously given the analysts was $33 million of actual revenue for 2026 from acquisitions. We've now increased that to $55 million. That's not an annualized number. That's the revenue that we expect on those deals will hit our financials this year. That is primarily almost exclusively in the second half of the year. Ergo, we anticipate this will continue to go up. One other thing I would mention because I expect we'll get a question on this. We just started the implementation of our artificial intelligence -- I'll call it, technology plan on Friday.

As I mentioned on the prior call, we are still doing two more pilots with the University of San Francisco. One is in process in May. It started yesterday. The other is in June. But we actually started the rollout of our internal training. We're doing it in increments of 500 people, and that started on Friday, which I participated in. That is something that we expect over time is going to increase our efficiency. Some of that efficiency will go to our clients. Some of it will go to us. But we do anticipate that number of revenue per professional, pay attention to that each quarter because that's the #1 factor I look at. We anticipate that's going to continue to increase at a healthy pace.

Your next question comes from Faiza Alwy with Deutsche Bank.

I wanted to follow up on the M&A transactions that you've done so far. Could you comment on the structure of the deals? I know that you're not making upfront payments as you're completing these acquisitions. But it was interesting to me that your EBITDA margin guide is above where it was last quarter. And so I'm curious to see if that's more related to underlying margin expansion organically or if these deals are actually margin accretive?

So all the margin expansion for the first quarter is 100% organic because there is no revenue in the first quarter from any of the acquisitions. So what I've kind of agreed conceptually with Neal is any transaction that is done in the quarter will be closed on the first of the beginning of the following quarter. So most of the transactions that we've closed won't hit the numbers until the second quarter. And again, they're fairly modest.

I will tell you from a conceptual standpoint, we are focusing on adding quality platforms where we have a relationship. So Paolo Mondia, who is the Managing Partner of Switzerland, who co-manages Europe. Paolo has been with us for 12 years, and they used the brand during that period of time. This was an easy thing for us. A lot of legal work, a lot of paperwork. We've got separate law firms in each country working on us. We have quite a few conversations going. So it takes a lot of time. But none of that's in our numbers.

In each deal, there'll be some level of transition costs. So we expect that margins on the acquisition component may slide a little bit in the short term simply because we've got to get groups integrated. That just takes time. This is no different than if we hire a lateral partner in the United States, we go through those issues. But all of the growth in the EBITDA and the margin is purely organic. I think we're doing a little bit better in how we're running the firm.

Great. That's very helpful. And then, Mark, could you comment a bit more on the pipeline sort of -- I know this is -- it's part of your strategic plan. And I'm curious, as you become a public company, sort of is the pipeline in line with your expectations? Kind of what has been the feedback with potential companies that you might acquire outside the U.S.?

I'm not going to get into specifics, and I'm not going to speculate on how many or revenue or those factors, but I will say this. Our biggest challenge right now is execution. We are adding another full-time attorney in the transaction group. That will give us three full-time attorneys in the transaction group. In addition to that, I've spoken with Bill Deckelman and Oscar Alcantara in the legal department who both can spend time swinging in that area. Oscar has worked with me on the expansion for the last 8 or 9 years. We also just hired two more people in the financial group for the acquisition team. So that will give us now three full-time lawyers and four full-time people on the financial side. We do not lack opportunity. It's just a question of how fast can we manage the opportunities. And in each deal, there are some components of it that we have to negotiate economics and negotiate specific terms.

It will be easier for us to replicate transactions in countries where we do a deal, for example, let's say, we do a deal in South Africa. We have four or five other opportunities in South Africa of parties that are interested in moving forward. The time it takes is to build that prototype for that country. Once we have the prototype built, those subsequent transactions can be done in probably 90 to 120 days. So I would say, as a practical matter, while we'll be a little slow out of the box this year on a relative basis for us, I do think that what we'll see is in 2027, as we have more resources and we've built this model, that we will have plenty of opportunity to continue to add groups. Keep in mind, many of these groups are groups that have been with us for a long time. And in total, we had over 400 groups between consulting in the United States and other practices, consulting, legal, tax, et cetera, outside the United States.

And your next question comes from Toni Kaplan with Morgan Stanley.

Nice job on the quarter. Given AI increasing efficiency, I was hoping you could talk about if you're thinking about changing from a rate per hour to a different monetization model and what potential options you'd consider and if you are talking to clients about that, their receptivity to that because I know you, I think, want to maybe move to a per value type of model. So maybe if you could just talk about what's going on with that.

So I would say, Toni, there are going to be components of both time and materials and components of an increasing amount on fixed fees. So I'll give you an example. We like to consider ourselves a relationship firm, not a commodity firm. Most of the services that we provide, we believe, are relationship-driven. So I had -- an example I had on a different client this morning is we have a family group that is looking at diversifying their asset base, and that is an opportunity for them to sell a portfolio of real estate that has a gross value of about $2 billion. I have another client that has some substantial investors in Japan. And those substantial investors may be interested in the opportunity to acquire a portfolio like that. So with the second group, I set up a call on Friday with the principal to explore discussion.

Well, obviously, if we're able to bring that transaction to a conclusion, that lends itself to a value fee. There are some components of that where technology will be very helpful in making the delivery of our service more efficient. But the reason we have that opportunity to guide that relationships with two different groups that we do continuing work on and those relationships are pretty extensive, and that's just an illustration of what we do in our practice. That's different, and I don't mean this in a disrespectful way to other types of firms. We're not providing an audit because a client has a covenant with a lending institution. And typically, those clients don't necessarily assign a lot of value to that.

So as I've said on a number of occasions, one of the advantages and what drives our pricing -- there are really multitude of things, but the two that stick out the most. One is our client selection. The second are the types of services that we focus on. And more and more where we can use technology to increase the value that we can provide, those types of engagements will lend themselves to fixed fees. But on some work for that client, we may bill time and material, some will be fixed fee.

This is part of an internal training that we're going to go through with all 2,000 of our line people. So we started on Friday with the first 500. We all have separate case studies to do. One is technical, one is not technical. We're going to build those skills. It isn't going to happen tomorrow. It isn't going to happen next week. It won't happen over time. But we do see a much, much higher yield, and we also see a much better delivery system for our clients and bringing them more cost-effective value services.

That's terrific. And I guess my follow-up is exactly on that topic. Are there any sort of targets or milestones that we should be thinking of in terms of what you're hoping to accomplish with that technology program? I know you talked about increased yield, et cetera. But anything we should be aware of and be able to sort of understand the timing and implication of how much of an impact you should get from it?

I would just say it's a little premature to be in a position to give you information on that. And even if I could, I probably wouldn't because that gets into projections on things that I don't think, today, we are prepared to do. What I will say is I anticipate our continued focus on areas of improvement. Sometimes people say to me, they're a little surprised at our margins, and they're probably more surprised that I think we have an ability to improve our business. It's all about execution. Execution, integration, providing great client service in areas that they value. We think that's the secret to improving our profitability.

Your next question comes from Tobey Sommer with Truist Securities.

As you look at the opportunity for acquisitions over time, how big an opportunity do you see to reassemble and sort of assimilate these partner firms over the next 2 or 3 years? And has that changed since we were leading up to the IPO around 6 months or so ago?

Tobey, I would say that what we have stopped is we're not soliciting new groups, although we're still adding -- you guys may get announcements from us on new collaborating relationships. That collaboration process is a great form of due diligence. We typically had at least 2 or 3 years of a collaborating relationship. We're not proactively seeking those because we have currently about 436 groups, okay? Now not all of those are going to make sense to merge into the public company, either because they're too small or they're in markets that aren't appropriate for us as a public company. We do need the footprint.

So we want to maintain those relationships. But we see this as -- we have an existing pipeline that if I had 100% capacity, I could spend the next 3 years just working on deals with people that we already have a relationship with. So as I indicated, it's not a lack of opportunity. It's just a question of we have to manage this in a deliberative, thoughtful way that is profitable for us. I have some conversations going with a very large firm outside the United States. And what I basically suggested to them, that I wouldn't consider a deal with them at this point because I don't think -- I think they need to improve their profitability too much before we would entertain that.

And we have a plan with them that I'm working on, and I'm hoping to visit them in June. They would be a terrific addition and bring in an area of geography where we would have a major presence. But we're going to be very deliberate about this. We're going to be very responsible financially. I think, Tobey, when we talked with this group, I've explained to you that I'm pretty conservative. We drew on our operating line one time in the first quarter of 2008. When we paid off our MBO debt about 10 or 12 years ago, we've never borrowed any money. We're being very financially responsible, and we're going to do this with the acquisitions.

And I was wondering if you could comment a bit more on the growth and arc of profitability within Global Mobility and Consulting as you see it now, sort of when does the profitability start to close its gap and start inching towards breakeven and eventually, positive?

I think second half of this year in both, we see a big pickup in revenue. We're still investing in headcount because we think we can grow the practice. I would like to lose money on a more moderate basis, but I don't want to sacrifice growth for immediate profitability because we have to build out an infrastructure for those practices. I would say as between the two, it's more likely that Consulting could be in the black second half of next year.

Global Mobility, I would say, probably 2028 is educated guesswork. We're still working on building out the platform in Global Mobility. With respect to Consulting, at this juncture, it's a question more of executing on implementing the integration of practices. And you will see that we will add practices in Consulting in the third quarter. We have a number of conversations going with consulting groups, primarily initially in the United States because from a pure integration standpoint, those are going to be much easier for us to execute.

And your next question comes from Kevin McVeigh with UBS.

Congratulations on the results. Mark, I think you mentioned the rate per hour increased 8%, but the growth of the professionals was 13%. Is -- help us understand the delta, the 8% to 13%. And it sounds like you're relatively new in terms of the phasing of AI. So is there any way to think about what that 13% can become over time as it becomes more embedded in the organization?

I would say, Kevin, it's a little bit tough to estimate specifics. I haven't taken out pen and paper and crank through the numbers, and I haven't asked anybody else to do that. I will say this. We have a lot of room for improvement, and I discussed on the last call, Dan DePaoli has taken on the responsibility. We run as a team. Nobody worries about titles or what position they play. Everybody just wants to make a contribution. Dan is a terrific partner. Dan has taken on the productivity responsibility.

We think that will move productivity on a systematic basis this year. We are going to set aside each quarter, which is in our numbers. We set aside a $1 million bonus for our non-partners, and we will continue to do that in a responsible way. I want to see all the investors make a lot of money, but we're only going to make a lot of money if our people have an opportunity, both professionally and financially. So we're going to balance those things just as we're going to balance the growth in the Global Mobility and Consulting area with profitability. As I indicated on our last call, last year, we were up 48% in net income on a traditional price earnings basis. On a pro forma basis, if we excluded Consulting and Global Mobility, that would have been 64%.

To me, that is a very good way to balance growth with profitability. I don't think any business would mind growing their net income 48%, but we also have to expand, and we have to invest in our people. Ergo, we're going to see some modest volatility in productivity because of the artificial intelligence training. We have to invest in our people, and we have to build their skill set so that we can continue to perform very strong in the future.

That's helpful. And then, Mark, I think you had mentioned that, if I heard it right, that the source of the upside was greater client wins. I wonder where are those clients coming from? And is it constant rhetoric from the governments around taxes and things like that, that's driving that? Or is it the public structure you're in now or just scale? Because obviously, the numbers are terrific. But when you think about where you're sourcing those clients from, maybe we can understand that a little bit more.

I would just say it's the quality of our services, okay? I don't think any of the noise around wealth taxes or anything else right now has really been much of a catalyst to our business. The call that myself and a younger partner had today was somebody who was referred to me by a law firm and they have an inflated view of my capabilities. I'm not going to try to dissuade them from that. I'm going to try to demonstrate that they're making a good decision.

I would say more often than not, our partners get work because we focus on trying to provide great service to clients, and we try to focus also on those opportunities that create the greatest value to clients. So I would say it's not really any one thing. It's a combination of things. Where I think we can get a geometric multiplier is going to be on the integration of services. We're already starting to see traction with the groups that are affiliated with us in Consulting in the United States, and we're building on that. And that brings another dimension of capabilities to the relationship. We think that's a huge factor in the opportunity for growth for our business.

Your next question comes from Jason Haas with Wells Fargo.

This is Jun-Yi on for Jason Haas. Relative to your own projections that you gave back in 4Q for 1Q, where did you outperform the most at a segment level? And then excluding the change in inorganic revenue, you only increased the full year revenue guide by $5.5 million at the midpoint. So why not flow through more of the beat there?

I would say, Jason, that is a question that Neal probably should comment on. I would say we tend to be conservative. I would say the area that probably surprised me the most in the first quarter, the two areas were both PCS and valuation. 18.2% growth rate in PCS is probably a little higher than I would have anticipated. And valuation, there are some projects that we're getting that I think we're executing better on integration. And so those two numbers surprised me. My surprise that we came in at 15.7%, 14.6%, 15%, 15.7%, 13.3%, 17%. I expect we're going to be somewhere in those ranges. Neal, do you want to comment?

Yes. I think that's right, Mark. Those are the areas where we've had sort of outperformance, if you will, or where we've kind of raised the profile at a service line level. But if you look across the business from an organic perspective, just putting aside inorganic for now, you'll see that pretty much our numbers have been taken up across the board. So I wouldn't say there's any one specific service line or region or area of the business. But we're taking the overall organic up considerably, about 2.5% from where we were in the original projection. So we think that's a meaningful increase.

Got it. And then your client group count growth was 3.5% in the first quarter. It seems a bit lower than historical growth rates. Curious if that was in line with your expectations. And then given the revenue outperformance, it sounds like maybe you guys are winning some larger clients. I'm curious if there's a shift in your strategic focus on your go-to-market.

I would say the biggest issue I would say the biggest issue is our client penetration. And by that, I mean we are doing more things for clients. And as we build more dimensions of the business, I think that will be a big factor. Neal, do you want to comment?

I agree with that, Mark. I would say the previous numbers that we've shared in terms of client group growth and engagement growth were very strong. And bear in mind, what we are measuring here is active clients on the platform for the time period that's under measurement. So if you're looking just for the quarter, we're comparing Q1 with Q1 and which clients that are actually active on the platform. When you look across the full financial year, you'll get a different readout. And the underlying point here to mention is that seasonality in the business. So we don't think those numbers are unusual. In fact, we're very pleased to see both the engagement and the client group numbers grow because of -- because that gives us that tailwind.

And your next question comes from Andrew Nicholas with William Blair.

Mark, the first question I wanted to ask was just on the M&A strategy. You've mentioned both this quarter and last quarter about all the different things that you're kind of contemplating as you kind of line people up in the pipeline. Is there a way for us to think about kind of the prioritization of targets here? Is it about the leadership and involvement with the Swiss verein? Is it specific types of work, consulting versus tax versus legal, geography, profitability, I think, was another metric that you're looking at. So just kind of curious how you stack them up because it doesn't sound like there's a shortage of opportunities. So just trying to figure out how you prioritize within that group.

Sure. So number one, I think you'll see us continue to add practices that have existing management for our group, okay? So we are in discussions with several other firms who provide existing management to regions. I would say, second of all, you'll probably see this year a concentration in Europe. Our practice in Asia is relatively immature because that's the last practice that -- last region that we started building out. And so I'm hoping that as we get enough of the two, because I spend time with our acquisition team on every deal, I'm hoping that as we get enough structure in place on this, I can move to some of those groups that are not part of the Swiss verein who have an interest.

And also, I've started some conversations with a couple of larger groups that are completely unaffiliated from the firm. In fact, I'm going to be in the East Coast in June, having a very preliminary conversation with one of those groups. For the most part, I'm not interested in pursuing practices that are fully mature. The ideal practice for me is one where we have an existing platform, but it's much more cost effective for us to expand that platform than to buy a practice that's very mature.

So sometimes people can look at deals and say, why would you be interested in a practice that has 20 people? And I can say because I know where the next 300 people are coming from. And it's going to be much easier for me to get to 400 people and much more cost effective for me to do that than to go out and buy a practice that's got 400 people. And that practice that I'm describing has a lot more upside, and that's a real fact pattern that I'm working on right now. That is one country in particular, where we actually have a practice that has 22 people, and there are five other groups that we have a verbal agreement with to go forward. And it's not inconceivable we will get all six of those deals done in one country this year that will give us a very significant position in that market.

So I would say I'm looking at where we can replicate opportunities by adding other complementary practices. Uruguay is a good example. We added a tax practice. We also had a legal practice. That's a very -- those are both very strong businesses run by Cecilia and Federico, and they've been with us for over 8 years. We are now a very significant presence in a gateway to Latin America. I could tell you that there are other countries where if we get one deal done, we'll get four deals done. So getting critical mass in the markets, Andrew, is something that's important to me because when you start looking at the efficiencies of economies of scale, cross-selling, integration, you're going to drive your profitability.

Very helpful. And then just for my follow-up, in the release this afternoon, you mentioned accelerating momentum in Andersen Consulting. Can you just flesh that out a little bit more where you're seeing success, how headcount growth looks, and your ambitions near term there?

I would say the greatest penetration we'll get is in the United States because it's easier because we've got a significant presence in the United States. We actually have 22 affiliates -- no, 24 affiliates in the United States in Consulting. We have active conversations going with six of those groups. That would provide us a very good initial platform and would be the first steps in the process. And I would say those groups are already reasonably integrated into the firm, but we have a lot of improvement to do there. So I would say on the Consulting side, we're going to probably start with the United States. And from a revenue standpoint, it's by far the biggest market. It also is the most profitable market. That doesn't mean that we aren't focused on the other areas.

There are three other countries in Europe where I have suggested to our Consulting leadership. I have given them a list where we have eight or nine affiliates in each of those three countries. And those three countries in Consulting will be high priorities probably around the fourth quarter of this year. So Andrew, I have literally my own back-of-the-envelope plan that I don't share widely. I have a plan with conversations that would go all the way through the third quarter of next year. That doesn't mean we're going to close all those deals, but we have a known pipeline of firms that would give us plenty to do for the next 18 months in terms of implementation.

And that's all the questions we have today. I'll hand it back to Mark Vorsatz for closing remarks.

I just want to thank everybody for taking the time. I know how busy people's schedules are. I am actually in Maui right now. And we had an event in Hawaii on Thursday with our think tank, and we did a think tank Board meeting on Wednesday, and we did a PubCo Board meeting on Friday. And when I surveyed everybody about whether that was a good venue, I had unanimity that everybody would like to do an annual Board meeting in Hawaii. I'm limited to one, but I'm going home tomorrow, and I always keep myself busy wherever I am. My wife is very supportive, and she's part of the team. So thank you all for taking the time out of your busy schedules to share the time with us. Thanks, everybody.

Thank you. And that concludes today's call. All parties may disconnect. Have a good day.

Greetings, and welcome to the Q4 2025 Andersen Group Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Greg Vistica, Managing Director of Investor Relations. Thank you. You may begin.

Before we begin, please note that certain statements made on this call are forward-looking statements within the meaning of federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied. These risks and uncertainties are described in our earnings release and SEC filings, including our prospectus dated December 16, 2025, and our Form 10-K for the year ended December 31, 2025, that will be filed with the SEC.

Except as required by law, we undertake no obligation to update any forward-looking statements. We will also reference certain non-GAAP financial measures today. Reconciliations to the most directly comparable GAAP measures are included in our earnings release and will be available on our website.

Our 2 speakers today are Mark Vorsatz, Andersen's CEO and Global Chairman; and Neal Livingstone, Andersen's CFO. I turn it over to Mark Vorsatz now.

Thanks, Greg. Greg, with that introduction, I think you can work with Bill Deckelman and our legal department. So I have a couple of introductory comments, and I'm going to cover 4 points, and then I'm going to turn it over to Neal to talk a little bit more about the detail on our financial results.

People often say to me, what's different about your business? And I would say the #1 difference about our business is culture. I often comment that we operate like a family business. Steve Foley, who writes for the Financial Times, I've gotten to know over the last few years, asked me about our business when we did the launch of the IPO. And I said, we're like a family business.

I often comment to my partners, my wife rang the bell to open the New York Stock Exchange because she's my best partner. I talk to my daughter today. We're very lucky we have 2 wonderful children, my son, Blair, my daughter, Tori, and she said that her 2.5-year-old -- we have 2 grandchildren, 2.5 years old and 6 months old, both girls. She said, Maya, our 2.5-year-old would be listening in on this call. So I want to give a shout out to Maya.

I also want to express my appreciation to the investors who have demonstrated confidence in our business model. I think when you hear the results of our conversation today, I hope that we begin to earn your trust in that confidence. I also want to [indiscernible] who have been terrific advisers, mentors to me, all the good, the bad and the ugly. I've been blessed to have people who have been willing to share their perspectives, counsel me, give me some advice. And I think it's been very, very helpful to me personally.

I'm going to cover 4 points today. I'm going to do a macro overview on our financial results for the fourth quarter. Neal will fill in a lot of the detail on that, but I want to communicate what I think is an important message here. The second is, I want to talk about areas that I think are focused with respect to our 2026 strategy. Thirdly, I'm going to talk a little bit about acquisitions. I'm going to not get into a lot of information about projections, but I will give you an update on where we are in the process and where we think we're going to go conceptually and what the strategy is around that. It's probably different than any other professional service firm that you've encountered. Because we've built out a network of different firms.

Many of these groups, we have a close working relationship with, and we know them very well. I know their spouses, I know their children, I know their partners, I know their business. And then the last thing I'm going to talk about is technology. I'm not going to call it AI. Everybody wants to talk about AI. I think that's a little bit of a misnomer. I think it's a broader concept around technology as a competitive advantage. We see it as a massive opportunity for our firm, and I'll talk about some of those considerations.

With respect to our fourth quarter financial operations, in 2024, our revenue was $142 million. We have provided the analysts with a projection 7% for the fourth quarter, which would have been $157 million. We actually came in a little bit better than I anticipated. We came in at $170 million of revenue. That was a 19.6% increase in revenue, a little better than I would have expected, multitude of factors in that. All 4 of our segments of the business, that would be Private Client Services, commercial, alternative investment funds and valuation had double-digit growth for last year.

At the bottom line, we really exceeded -- we beat what we provided the investors by -- by the analysts by about $33 million. So I think by any measure, a quarter, I'm never happy with anything, but I think that's reasonable progress. For 2025, we came in at 14.6% growth in revenue at about $839 million. When people said to me before we went public, what do you anticipate? And my reaction was, well, we didn't just had a good year. We had a really good year last year, but we had 24 good years.

Our average revenue growth for 24 years has been 15%. Our average net income growth for the last [indiscernible] we've been private has been over 25%. I tend to focus more on the historical numbers because a lot of the GAAP numbers because we unvested 59% of our equity, create a little bit of confusion if you're trying to figure out the story as to whether we had income or we had a loss. We unvested 59% of our equity. That was -- that has no dilution effect. It has no cash flow effect. That was done because of culture, which is our biggest strength.

I joke with some of the investment banking firms if I had a meeting with your managing directors and said, we're all going to vote on unvesting 59% of your equity, how many people do you think would have voted in favor of that? We had unanimity. 100% of our partners voted in favor of that because it underscores our point about culture. I tend to look more at price earnings because that's what we used historically.

For 2024, our net income was $134 million. Our plan for 2025 was $175 million, and we came in at $199 million, even a little better than I expected. That was about a 48% growth in net income. What I find I'm very proud of is a group of partners and our investors, we [Technical Difficulty] Mobility and Andersen Consulting, and we lost $22 million [Technical Difficulty] because those are start-ups. We needed to build an infrastructure.

On a pro-forma basis for 2025, our net income was really up 64%. So I think by any measure, a pretty solid year. Areas of focus for this year, what's exciting to me is we have a lot of room for improvement. I will also tell you how lucky I am. There's an expression, it's hard to fly like an eagle when you're surrounded by a bunch of turkeys. It's hard to fly like a turkey when you're surrounded by a bunch of eagles. I'm surrounded by a bunch of eagles who leave their eagle at the door and not tie those, but how they can contribute to the success of our business.

And there are areas that we're going to focus on in 2026. One is productivity. Dan DePaoli, who many of the investors and analysts have met. Dan is a partner in our New York office and is serving as an operating partner for the U.S. the last few years. Dan is going to focus on productivity. We have [Technical Difficulty] improvement. As I've communicated to our partners, if we can improve our productivity an hour a week in terms of client service across the board for this year, that would add $42 million to our net income. That certainly is an incremental approach that I think has a lot of value.

The second is area of profitability. That includes not only how we manage our client base, but also cost control. Peter Kasha, who's also a partner in our New York office, is taking on that responsibility. Last year, we grew our [ GS&A ] by about 3% or more. We were averaging in the high 14s. We grew it to about 18%. I'm confident with economies of scale, we'll move that number down about 1% a year over the next couple of years. Peter is going to be working with me on the functional areas of our business on how we can operate those more effectively.

Also, Peter, in the last few years has been working on client retention issues and profitability. We are not the right firm for everybody. Our focus is on client selection and value solutions, and I'll talk about the latter in a little bit.

The third area of opportunity for us is integration. James Frost, who has worked with me, James is based in the U.K. James has worked with me for the last 12 years on our expansion. James knows just about all of our partners because of that role. James will be working on integration. I'll be involved in that. When we first started expanding internationally, I used to say to my partners in the U.S., 1 plus 1 equals 7. What does that mean? Well, if Dan has 2 clients and I have 2 clients and we introduce each other, now I have 4. If Peter has 4, now I have 8. If James has 8, now I have 16.

Our ability to drive solutions through our client base and help our clients be successful is a huge competitive advantage because of our platform. What I used to say when I was a partner at Arthur Andersen, I used to say to my partners, it's harder to get fired in 10 countries than it is to get fired in 1.

And then the last area is acquisitions. As I think most of people on this call realize, we have built out a terrific network over the last 12 or 13 years. The opportunity for us is to selectively roll that network up into the business. It's a process. It's an ongoing process. We have a lot of conversations in place. In the [Technical Difficulty] we've signed a handful of deals, and I'll explain to you the rationale in that.

In the projections for 2026 that we provided to the analysts for the second half of this year, $10 million of revenue in tax and legal and $23 million in revenue in consulting. In the last week or so, we've signed 4 deals. I'll give you a little context on those. We signed our practice in Canada for a variety of strategic reasons. It's in West Canada. It's based in Vancouver. Steve Flynn and Krista Rabidoux are the 2 lead partners in that practice. The original group had been Ernst & Young. We've had a working relationship with them. They've been part of our network for over 7 years. We know them very well. They're a terrific group. They focus mostly on PCS, a lot of synergy with our business in the United States.

The second is our tax practice in Nigeria. It's run by Leah. Leah was a director at Arthur Andersen. They joined us almost [Technical Difficulty] when they joined us, they had 13 people. Today, they have 128 [Technical Difficulty] with the growth of most of the groups that we've added internationally. The third and fourth groups are based in Uruguay. And by the way, Leah is a -- is the co-managing partner in charge of Africa, which will be a theme as I talk about how we're going to add groups.

We're going to essentially prioritize our global management. So having Leah at the front end of the story was really important because there's no one who has a better perspective of our business in Africa than Leah. And as we move groups in, we're first going to prioritize our global management group that exists currently for our Swiss verein.

And then the third and fourth groups are our legal practice and our tax practice in Uruguay. They have been with us for over 8 years. Cecilia Ricciardi runs the Tax and Accounting practice in Uruguay. Juan Federico Fischer runs our legal practice. Juan Federico is also on our global Board of our Swiss verein. Those 4 groups and our strategy will be around adding groups where we have a platform and expanding those groups and building them out. That is a much more cost-effective way than to buy big practices with groups you're not familiar with.

These people are like family to us. We know them very well. It's a total of 270 people in headcount. It is about $21 million in revenue. What we put in the plan that we provided to the analysts was that we would do $10 million in that space in the second half of this year. So we're already off to a beat. We will be updating -- Neal is going to go over later the projections that we gave to the analysts. We'll be updating those in the second quarter. And when we announce our first quarter financial results, we'll also announce our projections for the balance of the year.

We have quite a few conversations in process. We had a new partner meeting in Las Vegas last week, along with a meeting for our consulting firm. Our consulting colleagues, I have the honor and privilege to do the opening on both of those meetings. While I was in Las Vegas over a 4-day period, we met with 17 consulting firms that we're advancing conversations with. As I indicated that we had put in our plan a $23 million in revenue in the second half of this year. I will tell you that we will substantially outperform that plan.

The last topic I'm going to touch on before I turn it over to Neal is technology. We have had a joint venture with the University of San Francisco that we do a lot of activity with. We did a pilot program in November and December in technology, Anthropic is providing the licensing. We also did one in January. We are being measured, thoughtful, deliberative about this. What I have observed with other firms is they're a little precipitous in acting on technology.

Two firms outside the United States had regulatory problems because of the way they've introduced artificial intelligence into their solutions. We are going to manage this in a thoughtful process. We are going to have 2 more pilots with senior people, in May and June. We have a potential candidate to run what we'll call artificial intelligence or technology, some other candidates to add to that. This is a process that's going to take some time. We're going to be thoughtful about it. We're going to be measured about it. We're going to be deliberate, but we're also going to be decisive and nimble.

My take on this, we're already implementing it and getting economies of scale in the tax compliance areas. I think there's going to be a number of [Technical Difficulty] in our business model in the next 3 to 4 years. Today, we run in the U.S. [Technical Difficulty] 2.5:1. I think that's going to change to about 3 to 3.5:1. I think the level of productivity of senior people is going to be much higher. I think this will be the first year when we probably hire more lateral people than we hire new associates.

We had a call today with the office managing partners, and Dan underscored a point that I have emphasized for the last 10 or 12 years is that probably in the future, virtually 100% of our associates [Technical Difficulty] with us either in the spring or in the summer. It's an incubation of how we build our relationships. The 2 things I will suggest that are continue to what I would call [Technical Difficulty] I'm not going to suggest we're better than other firms. I'm just going to talk about how we're different.

The first is client selection and the second is the area of [Technical Difficulty] how we deliver our services. I'm going to use -- give you a quick few examples on that. Sandra Van De Walle, who works at our national tax group at the request of Mary Duffy, who runs that group and myself, spearheaded an initiative as part of the 2025 legislation to work on getting cost segregation projects out of our existing client base. In the fourth quarter alone, we secured 64 projects. I'll give you an example of one of my clients.

I reviewed the valuation last week, along with the tax return on that client. We saved that client because of soft cost segregation where we could expense anything that a useful life of less than 20 years, we saved that client $19 million in front-end costs. That client will not pay any income taxes in 2025 for federal purposes. The second is a strategy that we launched on October 16. I have made an introduction to several of our clients in the area of cybersecurity for family offices.

Peter Kasha, who is working with some of our colleagues in private client services. We had a call, October 16 with 65 partners in what we call PCS. Over a period of about 2 months, we were able to secure about 230 qualified introductions for cybersecurity for our family offices.

The third initiative that we've launched is what we call tax transformation. It's about 15% or 20% tax and the [Technical Difficulty] we've added a terrific group that's led by Mark Tucker, who used to be a partner in Ernst & Young. We're ramping up that business. A fourth area that we're working on has to do with the tariff refunds. Many companies were not equipped to pay the tariffs. They're less equipped to secure refund. I've suggested to our national tax group is that would be a business that would lend it's agency fee, where we would provide services to both existing clients and non-clients.

The last 2 I'll comment on. One is what's emerging in the United States is a wealth tax. And there were a couple of questions from the analysts. I'm happy to expand the discussion on this later. California has a potential proposition to impose a wealth tax of 5% on anybody with a net worth in addition -- in excess of $1 billion. Senator Sanders just introduced a bill in the Congress that would tax unrealized appreciation on anybody with a net worth of over $1 billion. The new mayor of New York is introducing a variety of legislation, one that would reduce the inheritance tax by 90% or increase the inheritance tax by 90% by reducing the [Technical Difficulty].

The state of Washington has introduced potential legislation to create an income tax and only tax those worth over $1 million. For the type of client base it is a huge opportunity because of our technical capabilities in this space and also our resources across the entire country.

The last comment I'll make is just a bread and butter, and I got an e-mail on Sunday from somebody who runs a family office for a client of mine. And what they needed indicated that because of a variety of considerations, they needed services in New Zealand, in Singapore and in Norway. The strength of our global platform enables me to identify resources immediately. They said, why don't we start with New Zealand? I made an introduction today. We've already got a call in process. This is the strength of having a global platform.

We are continuing conversations on the tax, legal and valuation side and expanding that in consulting to build this out and merge these groups into our public company. So with that, I'm going to stop, and I'm going to turn it over to Neal.

Mark, thanks very much. Good afternoon, everyone, and thanks for joining us today. Obviously, this is our first earnings call as a public company. And as Mark noted, we really appreciate the strong interest from the analysts and the wider investment community.

So I'm going to cover our performance for the fourth quarter as well as the full year 2025. I'm going to discuss our results on both a GAAP and a non-GAAP basis and then share our financial outlook for Q1 '26 and the full year '26. As Greg noted, we will be sharing today non-GAAP financial measures. We think these provide meaningful insight into the underlying performance of the company. And there are reconciliations of everything we're discussing today in the earnings release and also on the investor slides that have been posted to the firm's Investor Relations website.

So with that, let me quickly turn to Q4 quarterly performance. So to recap what Mark has noted, revenue for the fourth quarter, $170.3 million. That's a $27.9 million increase or 19.6% year-over-year. That exceeded our internal expectations and was driven by both client fees being higher than expected and volume, notably in the month of December as compared to the prior year. Again, growth was balanced across all service lines, and there were no large onetime or project-related items for the quarter.

On a GAAP basis, we incurred a net loss of $195.9 million for the quarter. That compares to a net loss of $9.7 million for 4Q 2024. That GAAP net loss was primarily due to the one-off equity restructuring costs that you can see in our P&L of $193.2 million and other IPO-related expenses. The net result of that is a net loss per share on a diluted basis of $0.22 per share. That's on a GAAP basis.

On a non-GAAP basis for the fourth quarter, I'll give you both our adjusted net income and adjusted EBITDA numbers. Adjusted net income was $7.5 million. That compares to a net loss of $8.4 million for the fourth quarter of 2024. And our adjusted EBITDA was $9.4 million as compared to a loss of $7.9 million for the fourth quarter of 2024.

Our margins expanded across both of those metrics by more than 100 basis points in each case. So strong underlying performance. On a full year basis, again, following the same pattern, just to recap, full year revenue, $838.7 million. That was a $107 million increase or 14.6% on a year-over-year basis. That compares with 14.5% revenue growth for 2024. So reinforcing the enduring nature of the firm's business model and obviously, ongoing demand for our core services.

As with the fourth quarter, revenue growth was well diversified, all regions and service lines showing positive revenue growth year-over-year and no large onetime or project-related items in those numbers. PCS, Private Client Services continues to be our largest service line. And for the year, that represented 51.5% of total revenue, although there was no substantive change in the mix of revenue by service line for the year.

I'll mention some of the drivers of this performance. On the client side, we expanded the number of clients -- we expanded our client relationships. For 2025, we had 687 client groups that generated over $250,000 in revenue. That was up from 629 groups in 2024. So a healthy growth in the number of clients that we're achieving that 250,000 threshold. We also increased the number of active client groups by 650 or 5.6% on a net basis. So that's excluding previously active clients that became inactive during 2025. And the number of client engagements with those client groups expanded by 10.6% over the same period.

Again, just to emphasize the point we've made previously of revenue diversification. So we've got -- our revenue is dispersed across a broad range of clients. There's no single client group accounted for more than 1% of revenue in either '25 or '24. And our top 10 client groups accounted for approximately 5% of revenue across those 2 financial years.

In terms of pricing, our average rate per hour increased approximately 11% year-over-year. That's confirming the firm's ongoing ability to increase pricing. Our total headcount increased 5% in 2025, and our voluntary attrition rate of our staff teams was 14%, again, exactly in line with 2024.

I'll mention briefly some of the expansion initiatives that we executed in 2025, where we established new offices in Atlanta, Georgia and Charlotte, North Carolina. Those offices contributed approximately $1 million in incremental revenue. And as Mark noted, we continue to make investments in Andersen Consulting and Global Mobility, which delivered combined revenue growth of approximately 38% in 2025. That's on a non-GAAP -- that's in terms of summary of our revenue.

On a GAAP basis, we incurred a net loss for the year of $130.2 million. Again, that's primarily due to the $193 million one-off equity restructuring charge. and the stock-based compensation expense that we incurred leading up to the IPO. As a result, for the year, our earnings per share was negative and our effective tax rate was also negative 2.4% to be precise. That's on a GAAP basis.

Turning now to non-GAAP results. Our adjusted net income for 2025 was $217 million, and our adjusted net income margin was 25.9%. That's a 72 basis point expansion year-over-year. Adjusted EBITDA was $226.3 million. That's a 59% increase year-over-year, and the adjusted EBITDA margin was 27%. That is a 75 basis point expansion year-over-year. So we will get the question. I'll anticipate the margin expansion reflected in those non-GAAP metrics highlights the operating leverage in our business model where as revenue scales, together with disciplined cost management that Mark noted, there's a strong flow-through from revenue growth to bottom line profitability.

I'll turn now briefly to balance sheet and cash flow. As of December 31, 2025, we had cash and equivalents on the balance sheet of $258.5 million, and we had no third-party debt. Hence, our balance sheet remains liquid and provides significant flexibility to support growth whilst maintaining prudent financial leverage going forward. In terms of cash flow, net cash flow from operations for the year was $184.6 million. That was an increase of 21% over 2024, reflecting the strong underlying earnings and working capital discipline that has been maintained. CapEx for the year was pretty modest at $10.6 million, primarily related to nonstrategic technology investments, but aligned to our long-term growth strategy.

Mark mentioned a number of expansion initiatives. As we've discussed previously, our overall strategy is to build the platform, add content and integrate it. And central to that is geographic and service line expansion with the aim, as Mark noted, of building a differentiated multidimensional professional services firm. So we will continue to prioritize investments in expansion in people and infrastructure that are culturally and economically aligned to those underlying core principles. We think those investments -- we believe those investments position us well for sustained growth and margin expansion over the medium-term, all the while, as I've noted, maintaining strong liquidity with a conservative financial leverage.

Last point I'm going to cover is our outlook and forward guidance. Overall, we are pleased with the underlying performance of the business. Looking ahead, we are providing guidance for 2026 as follows: revenue is expected to be in the range of $955 million to $970 million that equates to an anticipated growth rate of 14% to 15% and includes approximately $33 million of inorganic revenue. We are projecting adjusted EBITDA to be in the range of $213 million to $220 million, with adjusted EBITDA margin in the range of 22% to 23%.

Growth drivers there are ongoing revenue growth in our core tax practice with a step-up in growth in Consulting and Global Mobility plus the inorganic revenue that Mark has noted. We currently expect a net loss in 2026. This is primarily due to the non-cash equity-based compensation expense associated with the vesting of the Class X aggregator units that were issued prior to and in anticipation of the IPO. As a reminder, these are non-cash accounting-driven charges, which have no impact on the operations of the company. But with a net loss, as in 2025, we anticipate EPS also being negative for the year.

Finally, turning to the first quarter of 2026. Firstly, allow me to remind everyone that our business has a seasonal pattern, which is driven by the tax filing deadlines where client activity peaks in Q1 and again in Q3. This leads to seasonal variability in revenue and net income as our resourcing and related costs remain largely fixed during those periods of fluctuating client activity.

Historically, our core tax business has generated approximately 25% of revenue in Q1, 21% in Q2, 34% in Q3 and 20% in Q4. Consequently, as you can see, Q3 for us is a bellwether quarter where we have historically generated significantly more than 50%, sometimes up to 2/3 of our annual net income with Q4 often reported as a loss period. Given the seasonal pattern, there's a level of conservatism, which is necessarily applied to projections for the preceding quarters, the quarters prior to Q3.

I wanted to give that context because we are providing guidance for Q1 with that as a backdrop. And the guidance is as follows: we anticipate revenue for Q1 to be in the range of $230 million to $235 million. We anticipate adjusted EBITDA to be in the range of $55 million to $60 million and adjusted EBITDA margins to be in the range of 25% to 26%. I'm obliged just to note some of the key assumptions underlying those -- that forward guidance, which is obviously reflecting our best judgment.

So there's a number of variables here to note. One is return on investment in consulting and mobility. Another is the successful implementation of our 2026 pricing strategy, including successful rollout of the 3% technology surcharge, which we've discussed previously. There's a dependency on net customer acquisition. There's a dependency on the productivity initiative and staffing levels, which Mark mentioned that Dan DePaoli is leading. There's a dependency on integration of acquired firms, investment in technology, automation and AI and last but not least, ongoing discipline and management of compensation and other operating expenses. So all of those assumptions are, of course, dynamic.

And as Mark noted, we will update our forward guidance in conjunction with our Q1 results. So in closing, I'd say we are extremely proud of these first set of results as a public company. We've delivered strong top line growth. expanding margins and solid cash generation while laying the foundation for the value creation over the medium-term. And unsurprisingly, as financial people, our executive team is very focused, laser-focused on both growth and profitability. So thank you for your time and ongoing interest in Andersen. We appreciate -- really appreciate the opportunity to engage with the investor community. And with that, we'll be happy to take analyst questions.

[Operator Instructions] Our first question comes from the line of Mark Marcon with Baird.

Mark, are you on mute? We can't hear Mark.

Can you hear me now?

Yes.

Sorry about that. Congratulations on the very strong quarter. The fourth quarter, you had acceleration to 19.6% year-over-year growth. I'm wondering to what extent should we think about that momentum carrying forward through the balance of this year?

And Mark, you mentioned a number of initiatives, increasing the billable hours by 1 hour across the associates. You also mentioned all of the different tax initiatives, which I would imagine are driving all sorts of conversations with some of your clients. So I'm wondering like to what extent is the Q1 and fiscal '26 guidance relatively conservative given some of those initiatives that you have coming across the 4?

Yes. So first of all, Mark, I will say I want to thank you for the guidance and direction that you've given to me. Yes, as you know from our prior conversations, we run this business in a very conservative fashion. Once we paid off our MBO debt about 10 years ago, we've had no bank debt. I would say probably the most telling thing for what I would expect in 2026 is the recurring revenue that we had in August and September and October. So those are months -- our busiest month of the year is September. Our second busiest month historically has been August. Our third busiest month is March. It's usually an indicator of what our business will be like in the next year.

And we had -- in September, my recollection is we had 18% revenue growth. In October, we had 17% revenue growth. So the numbers that we have provided to the analysts, I would say, when we have this conversation in a couple of months on first quarter, we will elevate those numbers. I'm not going to get into specifics. I'm just going to generally say that we are further ahead of where I had anticipated that we would be. I will also say that on [Technical Difficulty] side, it's literally as fast as we can manage. We are not lacking groups that want to join us.

As I commented on many discussions with both the analysts and investors, the inorganic revenue through different affiliations is almost $5 billion. I don't anticipate that all those groups are going to become part of the public company. A number of reasons, why? Some is the practices are too small. We need the geographic coverage, but the practices are too small in those countries and/or their countries that have different kinds of risks, both from a business standpoint as well as a corruption standpoint. But I would say, based on our conversations to date, we would expect that an ordinary course of business that we will have groups continue to join us in a systematic fashion.

As I indicated, I'm focused on those that bring immediate benefits. And that would be -- we added a group in Canada, Mexico is on our list. The U.K. is on our list, Spain, Italy, mature economies where we already have a lot of interaction. So without getting into specifics, I would say [Technical Difficulty] end up with $33 million of revenue this year in acquisitions that I would probably resign from my role.

On the organic side, we continue to see clients with a lot of needs where we can help them be successful. I'm continuing to push for us to not focus on those types of services that tend to be commodity that are driven by price. We had a call with our office managing partners and our internal U.S. Board this morning and a few other folks. We had 25 people on the call. And yes, those spaces where services tend to be more commodity is -- our primary competition is pushing price down. And my view is, let's not do that work. Let's focus.

I had a situation with a client where we just implemented it last week, where the client wanted to transfer a piece of property, and we came up with a structure on that client. And we just concluded all the documents last week, and I pointed out to the client that on a present value basis, we were going to save him $12 million, okay? That's the space we want to play in. We want to play where we can drive great cost benefits, help our clients solve their most significant issues and get the most value, okay?

So we're going to be -- we're going to continue to move in a disciplined fashion. I would say [Technical Difficulty] we have a good year last year? We had a pretty good year. 45% growth in net income or 48% and on a pro-forma basis, 64%, 65%. Anybody you would want to compare us to would be happy to have our financial results for last year. That's all organic, okay?

Having said that, I'm very disappointed because I see tremendous areas of opportunity, tremendous areas of improvement. And I may be -- my partners will call me a lot of things, but I will tell you, one is, I am somebody who is just going to continue to push our organization to achieve its potential.

So I hope that addresses your question. We're not going to get into specifics at this point. I will tell you that when we have this call in a couple of months and cover our first quarter financials, I would anticipate because we've already gone through a few drafts, we're having conversations with outside directors on, we will elevate both the revenue objectives as well as the adjusted EBITDA objectives.

Great. And then 2 quick questions, hopefully. With regards to your annual price increase or your semi-annual price increase, did that one go through in January as you typically would have it go through? And are you hearing any sort of pushback from any clients with regards to being able to work more efficiently because of AI and therefore, reducing price increases. That's the second follow-up question.

And then the third is basically along the lines of -- in terms of the groups that you are bringing in, are they coming in under the economic framework that was previously discussed with regards to how you price acquisitions?

So on the latter question, the answer is yes. As you probably have observed, our trading activity has been pretty limited. And while everyone has advised me that you shouldn't use stock at all, we are going to use stock. Part of it will pick up our float a little bit. The other part is these are our partners, and we want -- we're imposing the same restrictions on the equity component that we're imposing on our U.S. partners because we don't want to buy shell corporations [Technical Difficulty] serving as an exit strategy for somebody. We're interested in people that want to build a great company.

Are we getting a little pushback on pricing? Yes, we are. And I would say it's in those scenarios where the service model is much more competitive, where clients tend to get multi -- proposals from multi-organizations. And it's, in part -- the clients, it's, in part, our competition. There's a race to the bottom in some of these spaces. My view is we don't want to be in those spaces, okay?

We don't want to be in the space where the only decision the client is making is based on pricing. We want to be paid fair for what we do, and we want to deliver value. So more and more, we will migrate to a less leveraged model where the spreads on our value proposition is much greater [indiscernible] start moving probably in the second half of this year. There were some regulatory issues with our auditor to move a little more to fixed pricing. That will be a continual process.

We're not unreasonable people. We want our clients to benefit from some of the technology advantages. We also want to benefit from implementing those technology solutions. There's plenty of pricing benefit to spread. So we want to help our clients be successful. We also want to be fair to ourselves.

But the basic model of the acquisitions, Mark, is not different than what we had previously communicated. And quite frankly, we have so much interest not only within our organization. As I indicated, we've got 436 affiliates with over 50,000 people. But I'm getting solicited by groups outside of our organization that are much larger that get the strategy we're pursuing, which Neal underscored what I've been doing from the beginning, which is build a platform, add content and integrate it.

We are not -- we're about 50% through the content. We're about 3% through the integration model. We have so much room for improvement. I'm so excited about the upside in our business. All we have to do is execute. This is just an execution strategy. What I've explained to you on the acquisition side, I'm working 24/7. I had 24 meetings in 4 days in Las Vegas with different groups that are excited about being part of our organization. These things take time, and we're going to be measured, and we're going to be disciplined. We're not going to do things.

We had a group that wanted to advance a conversation back in early January and wanted to negotiate the price with me, and I canceled the call with them, and they actually flew to Las Vegas to meet with me to request that we revisit those conversations, and they will agree with the business model that we had articulated. We have a responsibility to the groups that join us. We have a responsibility to our public shareholders. We have responsibility to our people. I am very sensitive to all of those responsibilities.

Mark, if I can add one comment there. You asked about pushback on pricing. Just to give you one data point on the tech surcharge, which we discussed previously, around the time of the road show, our expectation was we would get traction on about 50% of that. We are actually tracking 2/3 of our clients, and we're not happy with that, by the way, because on some clients, we said we'll give them a year before we implement that surcharge. So that is going quite well, but more to do.

Our next question comes from the line of Toni Kaplan with Morgan Stanley.

I'll just hop on asking about pricing as well. So you talked about, in the past year, the pricing was up about 11%. Maybe just help us frame the pricing contribution for 2026 that you've embedded in the guidance.

Neal, do you want to take that, and I'll add it?

Yes. Toni, we haven't changed our outlook on pricing from what was shared pre-IPO with the analyst group. So it is not at the double-digit level, but it is high single digits is where we're forecasting. But you can see our run rate is pleasingly exceeding that. And as we implement this tax surcharge, which will be a nice one-off gain, that should give us a good tailwind. So yes, we're being conservative, but we're optimistic that we can sustain that level of pricing going forward, Mark?

And Toni, I'll just [indiscernible] if you read my CEO founder's letter in the S-1, I commented that we had grown our pricing over 4 years at 33%. So if you add in last year, that's 44% over 5 years. So call it, roughly 9% a year. This isn't like we had one good year last year. Okay, it was a little bit better than we had in the past? Yes. Are we a little more attentive to it? Yes. Are we focused more on value services? Will we change our business model over time in a systematic way to capture some of the upside in pricing based on the value proposition with our clients? Yes.

And as indicated, I don't mind leaving a few bucks on the table with our clients. These are relationships. We want our clients to be happy. We also want to be fair to our firm, and we want to be fair to our shareholders. So do I anticipate any significant change in pricing this year? I do not. And that is built into our model.

And when you see an update on that model come, whenever we schedule next call, probably some [indiscernible] you'll probably see 2 major changes. One is a major change on what we would expect to execute on acquisitions because I do think in the next 16 [indiscernible] we will be in a much better position to project the balance of the year in that area. And I also think on the financials, we'll be in a much better position to project the subsequent quarters.

Great. And just on the acquisitions point, you mentioned the $33 million of inorganic revenue in the guide. How much of that revenue is from acquisitions that have already -- that are already within the Andersen Group versus yet to acquire?

So the 4 deals that we just implemented are about $21 million. Those deals will be effective April 1. So call it, $15 million of the $33 million is already in the bank. I would say, we may, depending upon the activity, we may consider having either a call or a press release sometime in the next 60 days. And just to kind of give you some context here, these are not people that we don't know. I mean these are people -- every one of these deals, all 436 of them I've done. And every one of them, I know their family, I know their kids. These are people we have relationships with. They are excited about building a great global company and being part of this journey.

So does it take time? Absolutely. It's probably 6 months to get a deal done from start to finish. It was -- we have a terrific outside Board. I needed to spend some time with them because most of those people have extensive acquisition experience. And what I had to help them understand is we've got groups that have been with us for 12 years. We have close personal relationships as well as business relationships. So I would say, Toni, bottom line is we'll give you some [indiscernible] the end of May or so, I would say, do I think we will outperform the $33 million? I think we will substantially outperform that number, but I'm not going to give you any specifics at this point.

Got it. And lastly for me, you've talked about the sort of part of the business that is commodity -- that you don't tend to focus on business that's commodity, excuse me, very high-end service, et cetera, and that's definitely been clear throughout the whole process. Are there parts of your business that you are starting to see some competition in from AI players or anything like that? Or have you not really seen that at all because you are focused on much more high-end value-added services?

I would say there are areas in the large corporate area where you're going to see prices be much more competitive. On the value side of the business, we don't -- we have not seen solutions in that area in artificial intelligence being implemented in a very extensive way. Are we using it? Absolutely. I typically have quarterly calls with my clients. I had a call with one of my clients about 6 weeks ago. While I was on the call, an issue came up that I used -- my preferred solution is Gemini. I use Gemini and on that, within 3 or 4 minutes, I was able to do a financial analysis that 5 years ago, I would have given to a manager and it would take me a week to get back an answer. That actually led to a bigger project, okay?

Now will we see more of that, which is why I suggest our leverage model is going to change. Groups that are talking about extensive growth in headcount, I think we have a different view on this. We think the clients are going to want more experienced people who can use technology more effectively to drive value in a much faster time period. We had some folks within our organization that about 6 or 8 months ago that had said to me, we got to get out in front on this, we should license with a particular group.

What we've learned in the last 6 months is that particular group does not have the best solution from our perspective. We're evaluating multiple solutions. I get a lot of articles all over the world. There are 2 major international firms that have used artificial intelligence and solutions that turned out to be disadvantaged and created -- they got fined by regulators because [indiscernible] that was wrong.

We're not going to be the first, but we'll move very quickly once we have concluded on the strategy, and we definitely think it's going to change our business. We actually think it's a massive opportunity for us. I think it's going to drive greater value through our client relationships because we'll be much more nimble today than we were a year ago. And I think because of that, we will have a much more profitable business than a lot of the groups that we traditionally compete with. You know what, Toni? Toni is going to have to increase her projections. What do you think, Toni?

[indiscernible], I think we've got a couple of minutes left perhaps for one question.

Our last question comes from the line of Faiza Alwy with Deutsche Bank.

I wanted to ask if -- just given the somewhat uncertain macro environment that we're in post the geopolitical events, I'm curious if just over the last couple of weeks, if there's any specific part of the business where you're seeing any impact or if we should be anticipating any impact from macro uncertainty?

We haven't seen it ripple through yet into our core business. I would say, and I think Dan has commented in some of our prior calls and meetings that where we see a downturn in the value of financial assets that actually creates a big planning opportunity for us with our clients. I do [indiscernible] Federal Reserve Chair, Kevin Warsh, who I know a little bit. I have nothing but maximum respect for him. I do think in an early process, interest rates will come down. That may be because of some [indiscernible] may be because of the Federal Reserve's policy.

What we see is volatility creates opportunity for us. Whether it's a lot of upside or a lot of downside, it creates opportunity for us because we plan with our clients. So where we have those relationships, our clients need us in downturns. It also represents huge opportunities for state planning. What I described earlier is there are 4 major jurisdictions that are considering wealth taxes, and that's a huge stimulus for us. There isn't a client -- there isn't a wealthy client we have that isn't interested in how we can help them mitigate those issues.

So I would say, will the general core business in professional services get a little softer, particularly if there's a downturn in M&A and IPOs and so forth? Yes, probably. I will say this, as I commented at the beginning of this call, we had a -- we had a pretty good year last year. I'm never happy, but we think we should do better this year. We had a call this morning to talk about that. Having said that, we were the only tax firm in the United States of any of the major tax firms that had positive revenue in 2008 and 2009. We've never had a down year in revenue. We've never had a down year in net income.

Now several of you have suggested to me, yes, but you got to prove it once you're public. Well, I think we're off to a very good start in the first quarter. I even think Mark Marcon would say 19.6% revenue growth for a quarter that historically for us is soft is pretty good progress. And what I'm excited is that we have so much opportunity to improve.

We are -- one thing I am, Faiza, is I'm relentless, okay? I'm a 24/7 relentless person who will never be happy and never be satisfied. Okay, we did a pretty good job last year, but we can do so much better. And we have so many talented people and so many talented partners. As I commented earlier, I'm lucky to be surrounded by such talent. And all we have to do is organize it, harness it and unleash it. And if we do that, and we have the level of intensity that I know we are capable of, everyone who invests with us, I am thrilled with today's -- announcing today's results for anybody that's short in our stock. I hope you [indiscernible] tomorrow.

Tim Wylie, Could we extend to see if there are any more questions in the queue from analysts?

Sure. Our next question comes from the line of Kevin McVeigh with UBS.

Congratulations on the results. I guess -- and Mark, the results speak for themselves. So just how are you approaching the AI efficiencies internally and across the clients? I mean, clearly, it's not manifesting itself in pricing. It seems like that ratio is going to get tighter. But is it -- you continue to expand the service offerings, so any efficiencies? I guess my question is, how are you expressing the efficiencies in the business to your clients?

So first of all, let me [indiscernible] back when Greg Vistica sent me questions or topics you guys want to talk about, I had to look up what an agentic world was. So [indiscernible] my vocabulary. I'm going to let Neal talk a little bit about the operational side, and I'll come back and talk a little bit about the client service side.

Kevin, I'm going to repeat something that we've discussed previously, and I think there's actually a more important point to make currently given the kind of market nervousness around different sectors and who are the winners and losers. I think we've previously communicated that we are not and we don't have an aspiration to morph into a software business. That's not our core competence. That's not how we add value to clients. So I think making that distinction first up is super important. Yes, we are imposing a pricing technology surcharge. That's not a SaaS equivalent. That's not because we've got software that we are recharging to clients. That's simply recoupment of core investment in technology and automation and so forth.

Operationally, we have deployed enterprise AI capability. But the real sort of nirvana point for us will come when we can deploy this on the more complex client engagements. At this point, we're not seeing ready deployable solutions in that space. We are continuing to monitor to watch. And as we mentioned previously, it's on the investor presentation, if you'd like to take a look, we are partnering very deeply with a number of experts and specialists in this area, the Palantir's of the world and so forth.

I also just mentioned briefly on the consulting side of the business, which is obviously still in early growth stage. But that is a business that is being built as AI-enabled from the get-go. We do not have legacy infrastructure that we have to reshape, reconfigure, restructure in order to live in, as you noted, the new world of AI. So operationally, this is an ongoing journey. There's a huge amount to do without question. But just to emphasize the point, this is about partnering very deeply and getting access to proprietary technology that our competitors may not be able to access as rapidly as we are.

Kevin, I would say on the client -- Kevin, on the client service -- on the client service side, Kevin, I would say we are doing it incrementally. I'll give you an example of an engagement I work with another younger partner on where we probably have improved the efficiency of our delivery of recurring work by somewhere around 15% to 20% this year. We are capturing that differential at the bottom line.

Is it going to happen all at once? It's not going to happen all at once. We're going to go through a process where, first of all, we improve some of those -- some of the compliance areas, which we're already doing. And then the second area is the service from a planning perspective, how do we leverage value propositions. We've got some ideas that we're going to probably unveil second half of this year about how we leverage our intellectual capital.

How do we leverage our intellectual capital and deliver to clients more effectively? I was talking to Dan over the weekend about an idea I have on a client that I'm actually drafting some agreements on, to work with their counsel to how to implement it. It's a high-value solution. It's something we could clearly leverage throughout a large segment of our client base. So some of this is really leveraging our distribution channels, leveraging our delivery of service, leveraging our intellectual capital, leveraging our technology and combining those.

In our prior life, we were probably known as the firm that had the most training. We were the first firm internationally to ever buy a training facility. In 1969, we bought what had been a college outside of Chicago. We generally require our people training. We think investing in our people is really critical. That's kind of -- it's all -- it's a number of factors, Kevin, but that clearly is going to change over time. And we think we're going to be -- we think it's an opportunity for us.

I think some of the organizations that have leveraged their business by loading up people on a bus and sending them out to the client to have the client train them, I think they're going to have challenges that are much different than we have. So -- and I also see, as I indicated, our leverage model is going to shrink. We're going to have higher pricing. We're probably going to look a little more like a law firm than an accounting firm or somewhere in between.

And that's something we're already working on, and Dan and Peter Kasha and I have been having conversations about it, and we're already implementing it this year. This is the first year, we'll probably hire more lateral hires than we hire at entry level.

That's super helpful. Then just one quick numbers. You dimensionalized the inorganic $33 million. How much EBITDA is there against that $33 million?

I would defer to Neal on that. And if we can't address it right now, maybe we can send you a note or we can send a note to the analysts or whomever.

That's fine. We can take it offline.

Our next question comes from the line of Andrew Nicholas with William Blair.

I appreciate you fitting me in here. I'll just ask one. It sounds like really good growth, albeit off a small base for Global Mobility and Consulting organically in 2025. Can you speak to kind of what's embedded in your guidance for acceleration or I guess, I should say, growth in those 2 businesses in '26? And at what point can those 2 businesses maybe, combined or separate, however you want to answer it, become profitable or at least be in a position where they're not a headwind to margin?

So I would say in Global Mobility, sales for this year that exceed our plan in revenue. Consulting is going to grow, we made a strategic decision. We've got 136 consulting firms who we recruited all with the understanding that if we like them and they like us in a 2-year period or so that we would want to merge them into the public company. Are we going to merge all 136? We're not. But we've started that process, and we made a strategic decision that we're not going to hire up a lot of people when we have groups that we can merge in, in 2026, who can provide the resources to do the work on opportunities that we can introduce.

I would say, as I commented, we lost about $22 million in those businesses last year. On the organic side, we will lose money this year. My recollection is we probably have a plan to lose about $7 million or so less. We'll update that, as I indicated, in the next quarter projections. But I would anticipate in the next 2 years, we'll lose money in both of those businesses because we're still investing in the infrastructure.

When we started our office in Chicago in February of 2006, we hired 4 people. And Joe Karczewski, who was the partner that we hired to run that, over an 8-year period, we lost money at an increasing pace, and that was my decision because in our prior life, Chicago was our home court, and we had 65% market share. We were not just bigger than the big 4, we were bigger than the big 4 put together.

Chicago in tax went to Deloitte. Deloitte had 140 people in tax. We had over 1,000, okay? So we made a decision strategically, at least I did, to lose money because I thought we would, long-term, grow it much faster. I would say the last 5 years, Chicago has been our fastest market for growth and is #3 in profitability. And we now have almost 300 people in that office, and there's no reason why we can't compete with anybody in Chicago.

I would say similar strategic issues for Global Mobility and Consulting. We will balance the strategy around investment with net income, which I think we did last year, driving 48% increase in net income and losing $22 million in 2 new businesses was a reasonable thing to do. And I would say, as an investor, I think that was a measured approach. We anticipate doing that in other areas.

I'm particularly focused on consulting. We have 2 excellent [indiscernible] used to run PwC's practice, John Shea and Sameer Mammadov. But Dan DePaoli now has recently taken on oversight of that business. We see huge opportunities. I would anticipate in the near to intermediate term, we'll create separate subsidiaries for both of those businesses because I think that will house them more effectively.

And we see other areas. I'm not going to get into it today, but there's another new business that we have a tremendous expansion opportunity, and I have interviewed a candidate to run that business. The timing of that, to some degree, will be driven by how fast we can progress consulting and global mobility and get them into the black. So we will continue to balance new investment with profitability. I think we did a pretty good job of that last year. I think we'll do a pretty good job of it this year.

Tim Wylie, do we have others in the queue?

There are no other questions.

Okay. Mark, if I could have you clarify one thing. On the USF program, is it Anthropic or Accordance?

It's Anthropic.

Okay. Thank you.

I want to just thank everybody for the time, and I want to reiterate my appreciation for those groups that have invested in us and particularly some of those groups that not only invested with us pre-IPO, but have continued to buy shares in the company. I'm grateful for that. I know I'm going to have a handful of calls coming up in the next week with some of the investors.

I also want to thank the analysts for all the great feedback that we've gotten. I'm the kind of person that appreciates criticism. I can learn and I can improve even at this stage of my life. I think there's still opportunities that I can improve on. And so I want to thank you all for the comments. I will say this group of analysts has been incredibly helpful to us and that has helped us in shaping our vision for what we're trying to accomplish.

So thank you all very much, and I appreciate it, and wish you have a good week.

Thank you. And this does conclude...

Thanks very much.

Thank you. This concludes today's conference, and you may disconnect your lines at this time. We thank you for your...