Public Policy Holding Company, Inc.

("PPHC", the "Company" or the "Group")

Unaudited preliminary results for the year ended 31 December 2024

Strong performance in line with expectations and strategic progress with international expansion

Public Policy Holding Company, Inc., the leading government relations and public affairs group, today announces its unaudited preliminary results for the year ended 31 December 2024 ("FY2024" or the "Period").

Financial Highlights

·     Revenue increased 11% to $149.6m (FY2023: $135.0m), with organic growth contributing 3% and the balance driven by accretive acquisitions completed in the Period and in 2023.

·     Underlying EBITDA of $36.1m, up 3% year-on-year, was achieved at a 24.2% margin. This margin performance was achieved after the Group expended $3.1m in M&A related costs and start-up investment in Concordant over the level it incurred in 2023. Adjusted for these incremental costs, the margin would have been 26.2%. Underlying Net Income of $27.7m was up 5% (FY2023: $26.5m) with an increase in finance costs offset by a more favourable effective tax rate.

·    EPS of $0.2345 was flat relative to the prior year, with increased earnings being offset by a 5% increase in the number of shares in issue.

·    The Group's balance sheet remains robust, underpinned by strong free cash flow of $22.2m, up 4% year-on-year (FY2023: $21.4m), enabling strategic progress via organic investment and earnings-enhancing M&A.

·     Net Debt at period-end of $17.5m (FY2023: net cash $3.4m) reflects a prudent leverage ratio and the deployment of $25m of new debt into two earnings-accretive acquisitions in FY2024.

·    The Board retains strong confidence in the Group's outlook and has declared a final dividend of $0.0470 per Common Outstanding Share, bringing the total dividend for FY2024 to $0.0940. This is in line with the updated dividend policy announced in January 2025, which enables the retention of more capital and for the Group to act decisively on accretive M&A opportunities, thus driving long-term shareholder returns and value creation.

(*) For presentation purposes only, the Group also presents "Adjusted Change", adjusting for an exceptional increase in M&A costs and Concordant Start-up costs of $3.1m in 2024 (going from $0.5m in FY2023 to $3.6m in FY2024)

Operational Highlights

·      The Period showcased the Group's ability to successfully execute its stated growth strategy, with ten operating companies providing an enhanced and complementary range of services to a now global client base:

o  Organic growth of 3% was achieved in a year that saw major elections, and therefore political disruption, across many of the world's largest economies including the US and UK.

o  This was supplemented by the continued execution of the Group's inorganic growth strategy, with the acquisitions of California-based Lucas Public Affairs ("LPA") and London-based Pagefield Communications ("Pagefield") completed in the Period.

o  LPA broadens the Group's presence in a state that is characterised by high regulation and would register as the world's fifth largest economy; and Pagefield established an operational presence outside of the US for the first time.

o  The integration of LPA has completed and the integration of Pagefield is being delivered as expected, with both companies benefitting from client referrals via the wider PPHC network.

·    Revenue diversification further enhanced with the top 10 Group clients representing 8.7% of revenue in FY2024 versus 10.8% in FY2023 ^(**), and increasing international revenue contribution.

·      By segment:

o  The Group's largest division, Government Relations, grew strongly at 7% (4% organically). The Group ended FY2024 again as the top federal lobbying business in the US as defined by the Lobbying Disclosure Act. PPHC has maintained this position for five consecutive years.

o  Public Affairs increased by 13% (-5% organically), with the negative organic growth a consequence of pending elections impacting client project spend in H1. In H2, organic growth in the division returned at +4%.

o  The Group's newest division, Diversified Services (Research and Compliance), grew strongly at 47% (23% organically), albeit from a lower base.

o  The revenue share of each division as a proportion of the Group's total remained broadly similar to last year, with Government Relations at 69% (FY2023: 71%), Public Affairs at 24% (FY2023: 24%), and Diversified Services at 7% (FY2023: 5%).

·     A broader client base of c.1,200 Group clients is supported by sustained high retention rates, with the Group directly representing almost half of the Fortune 100 and more than a quarter of the Fortune 500, in addition to many more via trade associations. The number of clients spending more than $100,000 increased by 15% to 503 ^(**) and the number of clients spending more than $250,000 increased by 16% to 137.

·     The quality of PPHC's operating companies continues to be reflected in the 2024 Lobbying Disclosure Act rankings, with Group agencies, when aggregated, topping the rankings as the US market leader in both Q3 and Q4 2024, as well as for the previous 16 consecutive quarters.

(**) Historic client data has been re-stated based on client-consolidation analysis.

Current Trading and Outlook

·     The Group has strong trading momentum in FY2025, with organic growth rates year-to-date well ahead of FY2024. The strong strategic execution and robust results achieved during FY2024 give the Board confidence in FY2025.

·      Following the US elections, management has observed significant new business activity in the United States.

·     Strategic execution continues in 2025, and the Group announced the earnings-accretive acquisition of Texas-based TrailRunner International LLC ("TrailRunner") for initial consideration of $33m in January 2025, with closing foreseen for April 1, 2025. TrailRunner operates with a global team across offices in Texas, New York, Nashville, and Northern California, London, Shanghai, Abu Dhabi, and Dubai.

·    The focus continues to be on driving client retention rates, new business generation following the outcomes of elections in the US and UK, and the continued cross-selling of services across the Group's broad operating company base to support organic growth prospects.

·    The market for public affairs and professional lobbying services in key geographies remains fragmented and the Board continues to view the Group as a natural consolidator with favourable bipartisan positioning.

·     The pipeline of acquisition opportunities under development in the US, UK and Mainland Europe remains strong in an active market for the government relations and strategic communications sectors. The Group is actively seeking to expand its portfolio of operating companies internationally with strategically and financially attractive opportunities while adding complementary specialisations.

·     The Board remains confident in the ongoing prospects for the Group, as reflected in its stated ambition to achieve $500 million in profitable revenues in the medium term, and reiterates its medium-term guidance to achieve:

o  organic revenue growth between 5% and 10%;

o  incremental growth from future M&A; and

o  underlying EBITDA margin between 25% and 30%.

Stewart Hall, CEO of PPHC, commented:

"2024 demonstrated the resilience and adaptability of PPHC. Public Affairs navigated a challenging environment with clients adopting a traditionally more cautious approach to project spending in a US presidential election year. However, we saw a decisive turnaround in the second half as clients prepared for 2025. Government Relations continued to perform strongly and the high quality of our operations in this sphere is renowned, while Diversified Services showed exceptional growth, highlighting the value of our balanced portfolio approach.

"The M&A we achieved in FY2024 reflects significant milestones in our growth strategy, expanding our geographic reach and service capabilities. With M&A continuing in FY2025, via TrailRunner International, we have a sun-to-sunset presence with global operations. The addition of TrailRunner significantly enhances our global communications capabilities and client offerings across key markets in the US and Asia.

"We remain extremely well positioned to capitalise on increased policy activity following the US election cycle and growing demand for our services internationally. The strong finish to FY2024, coupled with robust new business activity and M&A, gives us confidence in delivering accelerated growth in the year ahead as we progress towards our ambition to reach $500 million revenue in the medium-term".

This announcement contains inside information under the UK Market Abuse Regulation. The person responsible for arranging for the release of this announcement on behalf of the Company is Roel Smits, CFO.

Enquiries

About PPHC

Incorporated in 2014, PPHC is a US-based government relations, public affairs and strategic communications group providing clients with a fully integrated and comprehensive range of services including government and public relations, research, and digital advocacy campaigns. Engaged by approximately 1,200 clients, including companies, trade associations and non-governmental organisations, the Group is active in all major sectors of the US economy, including healthcare and pharmaceuticals, financial services, energy, technology, telecoms and transportation. PPHC's services support clients to enhance and defend their reputations, advance policy goals, manage regulatory risk and engage with US federal and state-level policy makers, stakeholders, media and the public.

PPHC operates a holding company structure and currently has ten operating entities in the US and UK. The Group has a strong track record of organic and acquisitive growth, the latter focused on enhancing its capabilities and to establish new verticals, either within new geographies or new related offerings.

For more information, see www.pphcompany.com.

Chairman's Statement

On behalf of the Board of Directors, I am pleased to report on a transformative year for PPHC in 2024, marked by strategic international expansion and a resilient financial performance across our increasingly diversified operations. The Group has demonstrated its ability to navigate market challenges while executing on growth opportunities, particularly evidenced by our successful entry into the UK market with Pagefield and nearly finalised acquisition of TrailRunner, which extends our reach into key Asian and Middle East markets.

FY2024 was characterised by distinct halves, with challenging conditions in Public Affairs during the first six months followed by encouraging momentum in H2. This recovery, combined with the consistent strength of our Government Relations practice and exceptional growth in Diversified Services, underscores the fundamental strength of our business model and its ability to perform through different market cycles.

2024 has been pivotal in advancing our strategic vision of becoming the world's premier provider of government relations and related services. The acquisitions of LPA and Pagefield represented significant steps in expanding our geographic footprint and service capabilities. The announced acquisition of TrailRunner in early 2025 further accelerates this strategy, adding significant global communications capabilities and geographic expansion.

The Group's management has demonstrated commendable operational discipline throughout the year, maintaining robust margins while continuing to invest in growth initiatives and successfully integrating acquired businesses. Their focused approach to cost management positions us well for the future. The integration of recent acquisitions and the launch of new service offerings reflect the deep expertise and operational excellence across our operating companies.

As we move into 2025, the expertise of our teams across policy, communications, and public affairs has never been more relevant. In an environment characterised by complex regulatory changes, technological advancement, and evolving stakeholder expectations, our ability to help clients navigate challenges and seize opportunities sets us apart. The strengthening momentum we saw in the latter part of 2024, combined with our expanded global capabilities, gives us confidence in our ability to deliver enhanced value for our clients and shareholders in the year ahead.

Dividend

The Board of Directors of the Company has declared a total dividend for 2024 of $0.094 per Common Share, which equates to an aggregate amount, based on the anticipated number of outstanding Common Shares, of approximately $11.4m. Because $0.047 per Common Share was paid as interim dividend in October 2024, a final dividend of $0.047 per Common Share remains payable to the holders of record of all the issued and outstanding shares of the Company's Common Stock as of the close of business on the record date, 25 April 2025. The ex-dividend date is 24 April 2025. The final dividend will be paid no later than 23 May 2025.

This proposed final dividend reflects the intended dividend reduction announced in January 2025, aimed at retaining more of the Group's strong cash flow, and enabling the Group to continue pursuing accretive M&A and drive long-term growth

Board Update

The Group's former Chief Administrative Officer and Chief Financial Officer, Bill Chess, transitioned from an Executive Director role to a Non-Executive Director role, effective as of his retirement from his full-time executive career on 30 June 2024. The Board remains focused on ensuring strong governance and strategic oversight as PPHC continues to grow and expand its capabilities.  

Simon Lee

Chair of the Board

March 2025

Chief Executive Officer's report

As we reflect on 2024, I want to express my gratitude to our investors, clients, employees, and partners who have been integral to our journey.

2024 has been a year of strategic expansion and resilient performance for PPHC. Despite market challenges, we've strengthened our position as the leading advisory firm in our core markets while successfully executing our international growth strategy.

Our Government Relations segment, representing 69% of Group revenue, delivered organic growth of 4% and maintained, for the fifth consecutive year, its position as the leading provider of federal lobbying services in the US. This performance demonstrates the enduring value of our services during periods of policy change and complexity. Experience shows that times of transition create increased demand for sophisticated government relations advice, as organisations seek to understand and adapt to evolving policy dynamics.

A defining milestone in this strategy has been our expansion into strategic communications and corporate affairs, furthering our ability to serve clients navigating high-stakes regulatory, reputational, and policy challenges. The acquisitions of Pagefield in the UK and LPA in California, complemented by our recently announced acquisition of TrailRunner International, represent a major step forward in our goal to build a global, integrated advisory platform.

In our Public Affairs segment (24% of revenue), we saw a marked turnaround from -13% organic growth in H1 to +4% in H2 as project work returned following the conclusion of various elections. Meanwhile, our Diversified Services segment demonstrated exceptional organic growth of 23%, validating our investment in specialised capabilities across AI regulation, energy transition, and strategic communications.

As we enter the second decade of PPHC's operations, our founding vision has evolved from providing sophisticated government relations services at scale to building a truly global platform supporting clients across markets and policy areas. There is significant global opportunity in our operating spheres, and as a group, we consider ourselves ideally positioned to capitalise on the opportunities ahead. The successful integration of recent acquisitions represents significant progress toward this goal.

Looking ahead, we see substantial opportunities in the evolving political and policy landscape. To our team of c.400 professionals, thank you for your continued excellence. And to our more than 1,200 clients, we remain committed to helping you navigate an increasingly complex global environment with clarity and confidence.

Sincerely,

G. Stewart Hall

Chief Executive Officer

Operational Review

Introduction

PPHC continued to make strong progress in 2024. The Group's diversified service offerings, long-standing client relationships, and ability to provide fully integrated solutions across government relations and public affairs have enabled it to navigate election-year uncertainties while maintaining steady growth.

Clients

PPHC provides a comprehensive suite of Government Relations and Public Affairs services to its clients. In 2024, the Group serviced over 1,200 clients, demonstrating the resilience and continued demand for its expertise. Client retention remains strong, with an annual renewal rate of ~71% and revenue retention between 80% to 85% in line with historic norms.

The Group's divisions experienced varied performance in 2024:

·    Government Relations: the largest division grew revenue by 7%, of which 4% was organic, underpinned by robust demand for regulatory and legislative support. All three of PPHC's lobbying firms maintained their leading position in the Federal lobbyist rankings, as reflected in public disclosures mandated by U.S. federal law.

·    Public Affairs: revenue increased 13%, largely driven by the acquisitions of Lucas Public Affairs and Pagefield. The organic performance of -5% reflects a weaker H1 of -13% followed by a return to good growth of 4% in H2 as project work rebounded with clients responding to clearer political direction.

·    Diversified Services: the fastest-growing division, up 47% year-over-year, with 23% organic growth. While coming from a lower base, the division's expansion reflects increasing demand for specialised services, including compliance, grant writing, and research-driven policy insights.

PPHC's strategy continues to focus on clients with annual spending above $100,000, a critical growth metric. The Group ended FY2024 with 503 such clients, reflecting a 15% increase compared to 437 in FY2023 (restated for client consolidation). Similarly, the clients spending above $250,000 increased from 118 in FY2023 to 137 in FY2024, reflecting a 16% increase.

This expansion has been supported by:

·      Internal referral incentives and Group-wide performance-linked compensation.

·    Concordant, which provides clients a single touchpoint for strategic communications integrated with PPHC's full service offerings.

·   Expanded premium non-lobbying services, including state and federal compliance, stakeholder research, and procurement-related expertise.

PPHC now directly represents nearly half of the Fortune 100 and more than a quarter of the Fortune 500, in addition to serving many more via numerous trade associations.

Investing to accelerate growth

In Q2 2024, PPHC successfully completed the acquisitions of LPA and Pagefield. These were the Group's third and fourth significant acquisitions since IPO, the first being Sacramento-based KP Associates, which completed in 2022, and the second being MultiState Associates, which completed in 2023. Pagefield is a leading strategic communications and cross-party public affairs advisory firm in the UK, which is measured as the sixth largest global economy and, along with the EU, is at the forefront of global policy issues. LPA is a leading public affairs agency in California, the largest state economy in the US and is measured as the fifth largest global economy.

The acquisition of LPA strengthens the Group's position in a key US state and increases expertise in critical sectors including technology, green energy, and healthcare. The acquisition of Pagefield delivers on the Group's ambition to enter into international political capitals. LPA has now been fully integrated and the integration of Pagefield is progressing in line with our expectations. Both companies are successfully utilising the newly expanded PPHC network and have registered new business wins via intra-group client referrals.

The government relations and strategic communications markets remain active around the world and the Group is seeking to capitalise on the current pipeline of opportunities as it aims to further broaden its geographic base into key political geographies while adding complementary specialisations. The M&A pipeline remains strong across the US, UK, and mainland Europe, with the Group actively evaluating opportunities to expand into strategic political geographies and adjacent service areas.

Current Trading and Outlook

The FY2024 results reaffirm the Group's strong positioning. The client pipeline for FY2025 is significantly stronger, driven by post-election policy shifts and increased government and corporate spending on regulatory and public affairs services.

The Board reiterates its medium-term guidance:

·      organic revenue growth between 5% and 10%;

·      incremental growth from future M&A; and

·      underlying EBITDA margin between 25% and 30%.

With a strong balance sheet, continued expansion, and a diversified service offering, PPHC is well-positioned for sustained long-term growth. The Group has a stated ambition to achieve $500 million in profitable revenues in the medium term.

Financial Review

The financial information contained in this preliminary announcement is unaudited. The audit of the financial statements for the year ended 31 December 2024 is substantially complete, pending finalisation of certain procedures. The statutory accounts for 2024 will be finalised on completion of the audit, consistent with the process for prior years. This is the first year that ForvisMazars has conducted the audit, and the transition has progressed smoothly.

Underlying Profit & Loss Statement

Bridge from Underlying to Reported Results

Please refer to the section 'basis of preparation' for an explanation of the non-cash items excluded from Underlying Net Income.

Revenue

FY2024 revenue increased by 11% to $149.6m (FY2023: $135.0m), with organic growth contributing 3% and the balance driven by the acquisitions of Lucas Public Affairs on 1 May 2024, of Pagefield Communications on 7 June 2024, as well as the annualisation of MultiState's contribution which was acquired on 1 March 2023. Organic growth of 3% was the outcome of slower organic growth of 1% in H1, followed by stronger organic growth of 4% in H2, especially fuelled by a return of project work (and growth) on the Public Affairs side. By segment, for FY2024 the Group saw organic growth of 4% in Government relations, of -5% in Public Affairs and of 23% in Diversified Services.

In FY2024, 69% of the Group's revenues stemmed from Government relations (FY2023: 71%), 24% came from Public Affairs (FY2023: 24%), and 7% from Diversified Services (FY2023: 5%).

In 2024, 3% of revenue was generated outside of the US, pursuant to the acquisition of Pagefield in the UK in June 2024.

With non-US$ denominated operations, in future periods the Group intends to report growth numbers on a constant currency basis in addition to its reported basis. For FY2024 the difference between 'constant currency' and actually reported was negligible and therefore not explicitly illustrated.

Profit

Underlying EBITDA increased 3% to $36.1m and was achieved at a margin of 24.2%, close to the Group's historic performance and guidance that margins will typically range between 25% and 30%. In 2024 the Group incurred $3.6m in exceptional expenses which was $3.1m more than in 2023 (2023: $0.5m). Of the $3.1m increase, $2.1m was from M&A related expenses (especially driven by the Group's first international acquisition) and $0.9m from additional start-up losses at Concordant. Adjusting for the $3.1m in incremental exceptional expenses, Group margin was 26.2%.

After interest and taxes, the Group's Underlying Net Income for FY2024 amounted to $27.7, up 5% from $26.5m in FY2023.

Other

The Group's net finance costs for FY2024 were $1.7m (FY2023: $0.9m), reflecting the $25.0m additional debt acquired in support of the LPA and Pagefield acquisitions in Q2 2024.

The tax provision for FY2024 was $6.5m (FY2023: $7.5m), reflecting a blended tax rate of 19.1% on Underlying Profit before Tax, down from 22.1% in FY2023. The decrease is primarily due to temporary differences between tax and accounting profit, mainly related to goodwill treatment

The Group ended 2023 with 333 employees and at 31 December 2024 this had increased to 367, primarily as a result of the acquisitions of LPA and Pagefield. The Group's average employee count during the year was 349 (FY2023: 308).

Cash flow

Adjustment to Presentation of Cash Flow

GAAP

During the Company's preparation of its consolidated financial statements for the six months ended 30 June 2024, management determined that certain cash flow items relating to payments made in respect of its acquisitions had been incorrectly classified within the consolidated statements of cash flows for the six months ended 30 June 2023 (unaudited) and the year ended 31 December 2023 (audited). As a result, the Company has adjusted the GAAP statement of cash flow for its consolidated financial statements in this filing. Management emphasises that these changes did not impact the Company's total assets, liabilities, equity or net profit or Earnings Per Share as of 30 June 2023 or 31 December 2023 or during the period or year then ended.

The adjustments all relate to the fact that, as part of the acquisitions that have been completed since PPHC's IPO in 2021, and in order to protect the interests of the Group, some of the shares and cash payable as part of these transactions can be clawed back and forfeited on certain events of termination of employment. In the P&L, the addition of these provisions to purchase price paid creates a post-combination compensation charge in accordance with accounting guidance under US GAAP (Accounting Standards Codification, ASC 805-10-55-25). In examining the accounting guidance in ASC 230, Classification of Certain Cash Receipts and Cash Payments, the Group has decided to classify the cash flow impact of the post-combination compensation charges as cash used for operational purposes and in certain cases as cash used for financing purposes, as appropriate.

In addition, with respect to contingent consideration paid not within three months of the acquisition date, after examining the accounting guidance of ASC 230, Classification of Certain Cash Receipts and Cash Payments, from this interim filing onwards the Group will classify these payments as cash flow from financing activities (for the portion up to the acquisition date fair value of the contingent consideration liability) and cash flow from operating activities (for the portion in excess of the acquisition date fair value of that liability).

Non-GAAP

Notwithstanding the abovementioned adjusted GAAP presentation, as part of this Management commentary the Group also continues to provide a non-GAAP summary of Cash Flows. In this non-GAAP summary, all acquisition-related payments have been clustered and reported under 'Cash Flow from Investments'. In addition, the Group also presents, as part of Management commentary, the often used measure 'Free Cash Flow'.

Cash Flow summary

The Group recorded strong (non-GAAP) Cash Flow from Operations of $22.3m (FY2023: $21.6m), and Free Cash Flow of $22.2m increased to the same degree (FY2023: $21.4m). Similar to prior years, the Group generated most Free Cash Flow in the second half, as a result of the payment of annual bonuses across the Group in Q1 and seasonal working capital trends.

*2023 GAAP Cash Flow statement was re-stated, as explained in Note B to the GAAP financials and explanation in this section

Conversion Cash flow from Operations to Free Cash Flow

Balances end of period

The Group's debt position at the end of the Period was $32.0m, offset by cash of $14.5m, resulting in a Net Debt position of $17.5m (FY2023: net cash $3.4m). Debt increased following the Q2 2024 acquisitions of Lucas Public Affairs and Pagefield Communications, but the Company's strong cash generation allows for the steady repayment of debt.

Earnout obligations

As part of the typical structure applied for the acquisitions that were completed post-IPO, the Group also committed to making certain earnout payments. These earnout payments are based on a profit-driven formula and only materialise if the acquired company realises profit growth after the date of completion. Payments are typically made in a mix of cash and shares. In turn, each of these components of earnout payments may be subject to further vesting requirements and employment conditions, which keeps the recipients financially committed to the Group.

In relation to these earnout payments, the Group has liabilities recorded of $15.8m on its balance sheet, spread across the line items 'Contingent Consideration' and 'Other Liabilities'. This number is a reflection not only of the estimated foreseen nominal payments, but also of discount factors and fair value estimates.

In nominal terms, over the period 2025-2029, based on expected performance of each of the acquired companies, we anticipate having to make earnout payments of $44.1m, of which $24.6m payable in cash and the remainder in shares. The maximum earnout liability over that same period, which would only be reached if each acquisition meets very aggressive profit growth targets, would be $97.1, of which $57.4m payable in cash and the remainder in shares. Generally, in order for an acquisition to reach maximum earnout payments, it would need to grow its profit by 25-30% annually over the earnout period.

Expected earnout liabilities - in nominal terms

Note that these earnout liabilities do not yet include the anticipated acquisition of Trailrunner.

Information per share

For the purpose of giving investors a useful view on Earnings Per Share, the Group computed EPS not only on a GAAP Reported Profit basis, but also on an Underlying Profit basis. As explained in the section below, for the latter calculation the Group includes in the denominator (1) those shares that have been issued in relation to post-IPO acquisitions but have not yet vested and (2) unvested Restricted Stock Awards (RSA's). While those shares are still subject to vesting rules, and therefore not part of the Common Outstanding share count per GAAP definition, they entitle the recipients to dividends and voting rights.

Note that the growth in weighted of average number of shares in FY2024 (5% basic, 7% fully diluted) was not only driven by customary drivers such as LTIP issuance and M&A related issuances, but also importantly by the one-off issue of 2.1m shares in the fourth quarter of 2023 in relation to the Alpine remediation plan. It should also be noted that the dilution pool - impacting the fully diluted statistics - includes stock options that are currently 'under water' versus the share price in February 2025.

Basis of preparation

The financial statements have been prepared in accordance with US GAAP (Generally Accepted Accounting Principles).

When the Company purchases services or goods on behalf of its clients (for example in the case of media purchases), the Group does not recognise the purchased goods as net revenue, but only the net fees earned on the purchases. Therefore, purchases on behalf of clients do not materially impact the top-line or the margins.

Management believes that Underlying EBITDA and Underlying Net Income are more useful performance indicators than the reported Net Income. Six elements distinguish our Underlying Net Income from our Reported Net Income:

(1) Share-based accounting charge: As already mentioned in the previous reports, shares issued to employee shareholders at the time of the IPO are subject to a vesting schedule; Also, their employment agreements contain certain provisions which enable cash derived from the sale of shares at the time of the IPO to be clawed back and forfeited on certain events of termination of employment. These items create a share-based accounting noncash charge in accordance with accounting guidance under US GAAP (Accounting Standards Codification, 718- 10-S99-2, compensation-stock compensation). Based on the value of the Company at the time of admission ($197m) and taking into account the 14.6% of pre-admission employee shares sold in 2021, the FY2024 non-cash charge is $31.8m (FY2023: $30.9m). The increase has primarily been driven by the acceleration of vesting of the shares of William Chess at his retirement as CFO. This share-based accounting non-cash charge has no impact on either tax or Company operations.

(2) Post-combination compensation charge: In the acquisitions that have been completed since the IPO in 2021, the Group makes payments in cash and shares. In order to protect the interests of the Group, to a large extent the shares issued as part of these transactions were made subject to vesting schedules. To a similar degree, also the cash paid as part of these transactions can be clawed back and forfeited on certain events of termination of employment.

The addition of these provisions to purchase price paid creates a post-combination compensation charge in accordance with accounting guidance under US GAAP (Accounting Standards Codification, ASC 805-10-55-25). The FY2024 charge was $11.6m (FY2023: $6.3m). Again, this is a non-cash charge and has no impact on either tax or Company operations.

(3) LTIP charges. In 2022 the Group issued the first stock-based compensation units under the Omnibus Plan. This plan was introduced at the time of the IPO and allows the Group to issue up to a certain number of stock-related units (e.g. options, restricted stock). In FY2024, PPHC issued 0.3m (FY2023: 0.7m) stock options at a premium exercise price (market price at time of grant plus 20%), exercisable at the 3^rd anniversary of the grant. Also, the Group issued 2.9m restricted stock units (FY2023: 2.3m), and 0.7m restricted stock awards (FY2023: 3.0m, of which 2.1m in relation to the Alpine re-investment plan). No stock appreciation rights were awarded (FY2023: 1.9m) as they are getting phased out. The charges relating to these issuances, $4.2m in FY2024 (FY2023: $2.8m), as reflected in our P&L were computed using the Black Scholes method.

(4) Amortization of intangibles: The non-cash amortization charge of $4.7m (FY2023: $3.9m) relates to the amortization of customer relationships, developed technology, and noncompete agreements per ASC 805.

(5) Bargain purchase: As laid out in point 2, because a significant part of the purchase price of our acquisitions is tied to continued employment, this part has been accounted for as post-combination compensation in the Group's P&L. As a consequence, for certain acquisitions, the remaining book purchase price is lower than the tax purchase price. The reason for the bargain purchase gain is tied directly to the tax purchase price significantly exceeding the book purchase price and is not a reflection of a true bargain purchase of the actual intangible and tangible assets of these acquisitions. The income recorded relating to the bargain purchase was $2.5m in FY2024 (FY2023: $4.8m).

(6) Change in Contingent Consideration: The contingent consideration liability recorded as part of the acquisitions is adjusted at each reporting period for the change in the estimated fair value of that liability. The fair value changes over time based on management assumptions, the passage of time, payments made, and other external inputs, such as discount rates and volatility. The change in the estimated fair value of the contingent consideration is recorded as a non-operating expense of $1.9m in FY2024 (FY2023: 1.7m).

For the calculation of Earnings per Share (EPS) based on GAAP Profit, as a denominator, the Group uses the weighted average number of Common Outstanding shares during the period. For the calculation of Earnings per Share (EPS) based on Underlying Profit, as a denominator, the Group uses the weighted average number of Legally Issued shares during the period. This comprises all the Common Outstanding shares, as well as those shares that were yet unvested but entitled the owner to dividends and voting rights (e.g. shares issued in relation to one of our post-IPO acquisitions). Consequently, the weighted average number of legally issued shares in FY2024 was 118,217,173 (FY2023: 112,596,711) and on a fully diluted basis (taking into account any issued stock instrument, regardless of exercise price), this number was 124,791,886 (FY2023: 116,692,759).

PUBLIC POLICY HOLDING COMPANY, INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2024 and 2023

Consolidated Balance Sheets

Consolidated Statements of Operations and Other Comprehensive Loss