Prepared remarks
Greetings, and welcome to the Andersen Group Q2 2026 Earnings Conference Call. Please note this conference is being recorded. I would now like to turn the conference over to Greg Vistica, Head of Investor Relations. Please proceed.
Thank you, Latonya, and welcome, everyone, and thank you all for joining the Andersen call to discuss our second quarter earnings. I'm Greg Vistica, Head of Investor Relations. And joining us today are Mark Vorsatz, our Chairman and CEO; Neal Livingstone, Chief Financial Officer; Bill Deckelman, Chief Legal Officer. With that, Bill, I'll turn it over to you to read our disclaimer.
Okay. Thank you, Greg. 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 10-Q for our second quarter of 2026. 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. Now Mark, I will turn the call over to you.
Thanks, Bill. I'm going to cover three things. I'll highlight an overview of the financial information that was already distributed. I'll comment on a few key financial factors that are probably not included in that information but I think will be important to you in terms of evaluating our company. And the third thing I'm going to talk about is our transactional strategy. I first want to thank our partners and our people. I think we had a very solid second quarter. I also want to thank our Board for all the support that they've given and also those investors that have taken this journey with us, along with the analysts who have given me a lot of good personal input for which I'm extremely appreciative. So we had indicated in the call we had in May that we gave guidance for the second quarter of a 13% increase in revenue, with a range of $190 million to $205 million. We came in at about $217.7 million. So that's an increase of 23.7%. Of particular relevance is our organic growth rate was about 20.5%. I went back — I have all of our financials for the last 24 years, and I went back and looked at each quarter. I stopped at about year 7 or 8 earlier. This is the best second quarter we've had in terms of percentage growth, which, considering the size that we're getting in terms of revenue, is particularly relevant. On the adjusted EBITDA side, we came in for the second quarter a little under $46 million versus about $30 million for 2025. So we had an increase of about 54%. For the first half, our revenue was about $458 million, an increase of over $74 million, which was 19.3%. Keep in mind, the inorganic revenue was really nominal in the second quarter, so most of that growth rate is pure organic. Our adjusted EBITDA year-to-date is up over 41%. And if you look at our margin and compare June 30, 2026, to June 30, 2025, we're at 26.8% versus 22.6%. Keep in mind, we're still investing in Global Mobility and Consulting, and so the margins would be much higher but for those investments. Several key statistics I think are relevant if I were sitting on the other side of the call. I mentioned Dan DePaoli has been working on our productivity. While the productivity growth has been modest year-to-date, it's at an increasing rate. So for the first half of the year, our productivity has increased 3.9%. That may not sound like a lot, but what I had indicated before is if we add one hour a week based on our effective rate, that's about $40 million at the bottom line. Our rate per hour continues to be very strong. It's come in year-over-year at a 10.1% increase. We had a rate adjustment in July, so I would expect we may get some modest improvement on that in the second half of the year. I'll talk about client selectivity in a minute because I think that's a big factor in our growth and what's driving that number. I indicated on the last call that the one statistic I am particularly focused on — and I mentioned that, based on accountants today who track about 60 tax firms, we've been number one last year in revenue per professional — our revenue per professional through the first half of the year was up 16.4%. That's a very, very important statistic in how I view our business. On the client side, on a gross basis, we added over 1,300 clients, which was a 10.6% increase. We had a modest net increase because we've had some clients where we've either completed work or we've terminated relationships because we didn't view them as productive as we would like. On attrition, because that may be an issue you're focused on, Alexa LaBianca, I give her a shout-out. She tracks all this stuff in HR. While our attrition is up a little bit, we had a rating system of 1 to 5, with 5 being the highest, and we probably have a lousy curve because if you're below 4, maybe you shouldn't be working here. Seventy percent of our attrition was rated 1 to 3. I view that as a positive, not a negative. Kelly Rath, who runs our recruiting group, has done a terrific job. We have a great recruiting team. The first half of this year for 2026 hires, we've had the best year we've ever had in 24 years with acceptance rate. Most of our candidates have multiple offers. We're not just competing with accounting firms; we're competing with law firms. By way of example, in San Francisco, probably about 70% to 75% of our hires are lawyers. Our acceptance rate is tracking for 2026 starts at about 73%. When we were WTAS, we would run at about 36%. When we flipped to the Andersen brand, we were at about 65%. There's probably a lot of factors involved, but I think execution is a very important one. Certainly, being public and the brand, I think, is also particularly relevant. The last topic I'll touch on briefly, and then I'll turn it over to Neal, is the transactions. I don't call these acquisitions because these are our partners. I have been involved in transactions for over 40 years, and I will tell you, I've done hundreds, if not a thousand transactions, some of them very large. It's been my observation that the reason transactions don't work isn't because of economics; it's because of culture. Our whole process in identifying firms, having the collaboration agreement and working with those firms — how we interact with them — comes down to values. We want to be best-in-class. We want to make this a better place for the next generation. We think we can do those things and also reward our investors. That's a really important litmus test for us. I would say the acquisitions are taking longer than I would hope and a little longer than expected, and I'll comment about what the economics of that will be. As you've seen now, because we had to disclose for financial purposes, we included two acquisitions that we did on Monday and Tuesday. So we now have signed 16 transactions; eight of those have closed that represent over $130 million of revenue. That, based on our 2025 revenue, would be about a 15.5% increase in our revenue over and above what the inorganic revenue will likely be for this year. We had originally planned to do about $55 million of inorganic revenue. One of the analysts had sent Greg a note, which he forwarded to me, and I thought we would address it on this call so we could deal with it comprehensively. We are going to come in far short of that. So it is likely we will probably come in somewhere around $25 million to $30 million. It's not because of a lack of opportunity; it is because these transactions take longer than we would hope. We've added additional resources. We now have three full-time lawyers in-house working on the transactions. Ed Prokop, who leads that group, spent 20 years at Sidley Austin as a partner and then 10 years as a partner at Winston & Strawn. We've added two more people on the finance side. We have four full-time people on finance. We're supplementing that with our skills internally because we have about 60 people in the U.S. in M&A. We have deep skills in cross-border taxation, but there are regulatory requirements that sometimes make the deals take a bit longer. As we do deals in each country, we're building a prototype, and I hope in the future those deals will go a little faster. We're not changing our guidance of $980 million to $1 billion of revenue because I think our organic performance will continue to be much higher than we had originally anticipated. I would say we also had a strong July. The third quarter is our biggest quarter because September is our busiest month in revenue and August is our second busiest month. So I actually view this as a positive. We're being deliberative, measured and disciplined about these transactions. We're going to do this right, not fast. We have quite a pipeline. This year, last year, every other year we do a global partner meeting; this year there are regional partner meetings in Singapore, Athens, Barcelona, Atlanta and Cancun. I'm bringing our deal team with me to Singapore, Athens, Barcelona and Cancun. Our dance card is completely full with meetings with new groups that want to join. So we have quite the pipeline. I would say our biggest challenge right now is maintaining our discipline on doing this thoughtfully and correctly. I believe we have enough existing deals where we have active conversations that at a pace of two to three a month, we have enough deals in process through the end of next year. So while there is a little slippage in timing of closings — the deals we just announced — we've now completed a little over $130 million of deals this year in terms of annualized revenue. Some of that revenue will slip into 2027, but our organic performance for 2026 is so strong that we'll compensate for that differential. Those are generally positive things. I always say when Kelly Rath sends me a note and says we had a 73% acceptance rate, much like how I deal with my children who are both adults, I say, 'what happened to the other 27%?' So we obviously have areas for improvement. We still have areas for improvement in pricing. We have significant areas of improvement from productivity. Even though we've added a gross client increase of 10%, I think we can do a much better job in that area. We had an internal U.S. Board call yesterday where we spent a fair amount of time talking about how we can do a better job on business development, and we're going to have a call on Sunday to talk through that in greater detail. We're starting to see some continued modest improvement in integration, but we're just scratching the surface. Now the way I look at it is at 20% organic growth, better than 20% organic growth for the second quarter. As my partners know, I'm never happy. I look at this and say the glass is half full, but it's half empty. Let's focus on how we can fill up the rest of the glass. I'm very confident we're going to continue to execute and do an even better job going forward. So that's my overview. I'm going to turn it over to Neal.
Mark, thanks very much, and good afternoon, everyone. Thanks for joining us today. Obviously, we appreciate the ongoing interest in Andersen. This is our third earnings call as a public company. I'm going to cover aspects of our financial performance that Mark has not already covered. Let me just start with revenue. To reiterate the top-line numbers for the quarter: for the second quarter, revenue was $217.7 million. That equates to a $41.7 million or 23.7% increase year-over-year. Included in that is $5.5 million of revenue from acquisitions that closed during the second quarter. So excluding acquisitions, organic revenue increased 20.6% year-over-year for the quarter. That result exceeds the midpoint of the second quarter revenue guidance previously provided by around 10%, which we view as a solid top-line beat for the quarter. We provided first-half information as well. Mark mentioned the revenue for the first half, which was up 19.4% or 17.9% on an organic-only basis. Going forward, and you'll note in the 10-Q, we are now including last 12-month financial information in the MD&A section of our quarterly reports. This is intentional to provide additional insight on the annualized performance of the business, excluding some of the seasonal effects driven by U.S. tax filing deadlines. Looking at the last 12 months ended June 30, 2026, our revenue was $913 million. That equates to a year-over-year increase of $176 million or 18%. Taking out the inorganic piece, on an organic-only basis that equates to a revenue increase of 17.2%. So solid top-line momentum. Breaking that down, the growth in the second quarter was underpinned by solid growth across all of our service lines and U.S. regions. We had no large nonrecurring items of revenue for the second quarter. Specifically, I'd call out Business Tax Services, which reported strong growth of 36.9% for the quarter and accounted for 39.2% of revenues. Our largest service line, Private Client Services, also reported solid growth of approximately 17% for the quarter. Mark mentioned it, but we are seeing positive momentum in Consulting and Mobility while continuing to invest; revenue from those service lines is up year-over-year. One of the underlying drivers that contributed to that growth is an increase in volume, up 5% as measured by chargeable hours for the first half of 2026. So alongside the pricing increase and productivity increases that Mark has already mentioned, we see a nicely balanced picture in terms of underlying revenue drivers. We also added headcount for the quarter, albeit at a more moderate pace compared to prior periods on a net basis. As part of our 2026 pricing strategy, we introduced a 3% tech surcharge for client contracts signed from the second quarter of 2026. This has contributed to the year-over-year revenue increase and is over and above the rate increase Mark mentioned previously. Overall, the picture is one of revenue growth that is well diversified across practice lines, U.S. regions and drivers. Turning to net income: for the second quarter, we recorded a net loss on a GAAP basis of $10.1 million. That compares to a net loss of $96 million for the second quarter of 2025. Earnings per share for the second quarter was negative $0.08 per share basic and negative $0.09 per share on a diluted basis. That is in line with previous guidance where we indicated a net loss and negative earnings per share for the second quarter. For the first half of 2026, we recorded net income on a GAAP basis of $7.6 million, compared to a net loss of $45.4 million for the same period of 2025. The smaller net loss in the second quarter and the swing to net income for the first half of 2026 is primarily attributable to a combination of higher revenue and reduced equity-based compensation expense. Turning to non-GAAP measures: for the second quarter, we had adjusted net income of $39 million with an adjusted net income margin of 17.9%, compared to $28 million and 16% for the equivalent period in 2025. Our adjusted EBITDA was $45.9 million, an increase of approximately 55% with an adjusted EBITDA margin of 21.1%, compared to $29.7 million or 16.9% for the equivalent period in 2025. That represents a margin increase for the quarter of approximately 420 basis points. Looking at the same numbers for the last 12 months, adjusted net income was $240.6 million with an adjusted net income margin of 28.8% compared to $172.8 million and 23.2% for 2025. Adjusted EBITDA was $262.9 million, about a 46% increase with an adjusted EBITDA margin of 28.8%, compared to $179.6 million and a 23.2% adjusted EBITDA margin for the same period in 2025. That represents a margin increase of 560 basis points for the last 12 months. Why is that? There are many underlying reasons, but primarily this reflects favorable operating leverage in our business: our annualized revenue growth has consistently outpaced growth in operating costs, excluding noncash equity restructuring costs and some of the stock-based compensation expense associated with the IPO and the vesting of Class X Aggregator Units. Costs also improved in Q2 for similar reasons: cost of services reduced from 128% to 79.7%. For the second quarter, SG&A decreased from 30.6% to 23.2%, primarily related to equity-based compensation changes. Let me speak briefly to stock-based compensation because that's an important part of our P&L. For the second quarter, stock-based compensation expense was $48.2 million, of which $42.3 million, or 88%, was linked to the vesting of Class X Aggregator Units. For the first half, that number was $93.9 million, of which $83.4 million, or 89%, was linked to the vesting of those Class X Aggregator Units. Again, as a reminder, that expense item is noncash and non-dilutive with no cash flow or operational impact. I'll briefly cover our balance sheet and cash flow and comment on the lock-up and Tax Receivable Agreement, since we get those questions from time to time. As of June 30, 2026, our cash and cash equivalents were $175.6 million and investments in U.S. Treasury securities were $2.1 million. We had no third-party debt, and the company continues to maintain a conservative stance towards financial leverage. Our net working capital, defined as current assets less current liabilities, was stable at $220 million as of the end of June compared to $216 million at the end of December 31, 2025. Historically, we've generated sufficient cash flow to meet our funding needs. We believe existing cash and cash equivalents, cash flow from operations and the residual proceeds from the IPO will be sufficient to meet our foreseeable funding requirements. On the lock-up and Tax Receivable Agreement: as of June 30, 2026, we had not yet incurred any liability in connection with the Tax Receivable Agreement. As a reminder, there are limits on the number of Class X units and the paired Class B shares that can be exchanged for Class A shares post expiration of the IPO lock-up in the middle of June; there's a 10% cap that's relevant to us in aggregate. I'll reiterate our outlook and forward guidance: we are reaffirming our 2026 full-year guidance, revenue in the range of $980 million to $1 billion, which equates to annualized growth of approximately 18%. Adjusted EBITDA is projected to be in the range of $225 million to $250 million, which equates to growth of approximately 5%. Adjusted EBITDA margin remains expected in the range of 22% to 23%. In closing, we're really proud of our second quarter results, which surpassed previous guidance. We think this financial performance is indicative of a business that is performing well and an affirmation of our no-audit business model and some of the discipline around client selection that Mark is passionate about and our approach to client service. That's it for me. Thank you very much for listening. With that, we'd be happy to take any questions.
Questions and answers
The first question comes from Toni Kaplan with Morgan Stanley.
This is Greg Parrish on for Toni. Congrats on another great result. Maybe just to start with Business Tax. It was a really fantastic quarter there specifically. Anything to call out on what drove the strength there?
I'll make a couple of comments. This is Mark Vorsatz, and then I'll let Neal respond. I think some of it is client focus. I often say that a couple of the considerations and why our financial performance continues to be very strong — and this isn't like we just had a good quarter; we've had 96 good quarters. So we've never had a down quarter in revenue or net income for the U.S. in 24 years. Part of it is client selection. It's the type of clients we pursue in our business development strategy. When we started, we had to do that just to survive. Today, we're a little bit better than that. I'd say the other thing is the types of services we're providing to those clients. We're not providing services I would consider more commoditized. We don't do audit work. We don't do, for the most part, large-scale tax compliance engagements. The reason I think we drive so well on pricing is because we try to build relationships with clients. The reason they hire us isn't necessarily because we're the lowest-cost provider. They hire us because they think we can add the most value. That's a focus embedded in our business development strategy: we want to help our clients be successful and help them achieve their financial objectives. Neal, do you want to add some comments?
I'll come off mute. No, that's well said, Mark. Thank you. Nothing to add. Thanks for the question, Greg.
Great. And just as a follow-up, maybe just add some color on the acquisitions this week. I think six of the eight were U.S.-based consulting firms, but you can correct that if that's wrong. Given how fast technology is evolving with AI, how do you judge the capabilities of these firms? What gives you confidence in their ability to continue to grow as technology evolves?
A couple of factors. First, we know these firms very well. I'll highlight several of the firms that have joined us. Zenger Folkman: they're not just a talent management firm; they are the benchmark of talent management firms. Unfortunately, Jack passed away about three or four weeks ago, but they have a very deep bench, and Joe is a superstar. Those two individuals have written 21 books on the subject. They are best-in-class, and it's totally consistent with our strategy around being in the C-suite. We want to be where the real decision-makers are. We're not interested in dealing with the head of procurement; we want to deal with the CEO, the Board and the people who make decisions around the company. We have a forum to provide services to those groups to help them be successful. I was so impressed with them when we first started recruiting them that we hired them to do a program for us; they've now done a program for 75 of our partners. Amy Daniels out of Chicago used to work at Andersen. Amy has a very close relationship with Rosa De Luna, who is the head of our Chicago office — their husbands were roommates in college. So this isn't cold outreach; we have a long-time relationship. Her firm in Chicago is also in talent management and gives a lot of depth. SPR, Rob — we've talked to them for a long time. Joe Karczewski is one of our best partners. Long-time relationship. I've spent a fair amount of time with Rob working through technical aspects of the deal. We traded a couple of notes today because in every deal we're giving RSUs to managers and directors as a retention tool, but also because we want these people to participate in the financial upside. Strategically, you'll see a focus on the U.S., North America, Canada and Mexico. We announced a deal with Alonso Montes' firm in Mexico; I've known Alonso for a long time. They've been with us for 11 years. I've known his father much longer; his father started at Arthur Andersen in 1968 and was a partner with me for 15 years. They share our values and culture. What's already transpiring: I had a Board call this morning and commented that transactions are generating more transactions. Alonso and I have a call within two weeks with a law firm in Mexico that's approached us about merging. We've identified what we think is the best Private Client Services practice in Ireland and are advancing conversations because of their relationship with our colleagues in Ireland. Our group in New Zealand sent me a note yesterday that they have two deals that have been approached since they've been announced as part of Andersen and the public company. So strategically, we'll do deals in North America because of the U.S., Canada and Mexico relationships. We announced the U.K. deal with Kevin Hindley managing partner there. We've worked with him for a long time. I helped recruit Kevin when he came to the firm. That group was started by a former Andersen person. Paul Finlan has been affiliated with us for years. You will see more deals in France, Germany, Italy and Spain, and activity in Asia as well. We can walk and talk and chew gum at the same time, so we'll have a lot of conversations. You'll see deals in Latin America and Africa. An interesting phenomenon: in South Africa they may allow a region to provide legal services outside the country where the regulatory issues are more permissive. We see opportunity in those spaces. We're looking at groups with significant relationships where we believe we can help leverage them into our business model and add a lot of value to clients.
Great. That color is very helpful. Congrats again on the really strong quarter.
Thanks, Greg. If I could say to the analysts, let's just ask one question this time around. And if we have time for follow-up, we'll follow up.
The next question comes from Andrew Nicholas with William Blair.
I wanted to ask on EBITDA and maybe margins broadly. Another really, really good quarter in Q2. I understand you reaffirmed guidance on the top line because maybe a little bit slower cadence of deals. But on the EBITDA front, I think even at the top end it's implying a little bit of a step down year-over-year in the back half, which doesn't sound consistent with the mid-teens plus organic growth that your guidance implies. Can you talk a bit about the EBITDA guide, whether there's some conservatism in there and any potential impact from the deals you've announced?
Thanks, Andrew. First, thank you for your note to Greg; you really nailed it about the inorganic revenue, and that's why I wanted to address it on this call. What's really exciting is these are just timing issues for us. In some countries it just takes a little more time to get deals done because we're actually, in some markets, creating the strategy. Getting regulatory approval in Canada took us three or four months. Yes, Neal advocated increasing our guidance on adjusted EBITDA, and I said no. Does that mean I'm less bullish? As I've shared before, we haven't borrowed money since the first quarter of 2008 when we went private. I'm a conservative guy. While I am very bullish on our third quarter — I think you'll see an increase in our adjusted EBITDA in Q3 because it's clearly our best quarter — we're going to continue to be modest about how we communicate. When I was younger I played football; when our team scored a touchdown I didn't give high-fives until I looked for flags. We have a lot more work to do. Now am I less bullish? I'm even more bullish. We've had two outstanding back-to-back months, far exceeding my expectations. When we gave guidance of 13% for Q2 that was conservative; we came in at 23.7%. If you had said to me in May to take the over/under on 23.7%, I would have been balanced. So we'll continue to focus on improving areas within the firm. We don't take anything for granted. I'll volunteer that in some of the projections we looked at multi-year, we probably have $100 million of revenue that has joined us that will not hit the 2026 numbers — $100 million of annualized revenue. As you evaluate projections, think about that. We have quite a few conversations going. I can't guarantee anything, but realistically I'd be disappointed if we didn't sign another eight to ten deals between now and year-end. I think we can do two to three deals a month in periods where the prototype is built, and the process is quicker.
The next question comes from Kevin McVeigh with UBS.
Great. Obviously, a lot to like here. Mark, I think one of the understated parts of the story is the client success you have. Maybe help us understand why you continue to add clients at such a high level. My sense is there's probably some incubation that's perpetual. Help us understand that client add motion a bit.
Kevin, some of it is our frame of reference and orientation. If you look at the groups that joined us and the original group, we had to go get business to survive originally. When I was a partner at Arthur Andersen I used to say most partners thought business development was answering the phone. We're not in that position now. We're never going to be. We hustle and we have a responsibility to each other, our people and our investors, so we put more energy into business development. My strategy initially was let's build the platform — we checked that box: 1,100 locations from six. The second was build out content; we're probably 50% there. My anticipation is that Andersen Consulting organically in the second half of next year should be in the black; we're hoping Global Mobility will be in the black in 2028. We're making continued investments because we think we can differentiate in the marketplace. I already have two or three new businesses in mind and we'll add resources gradually, balancing profitability with investment. The third difference: we're not selling commodities or audits; we're building relationships, establishing and selling value and getting paid fairly for it. In the U.S. it's easy to quantify tax benefit. I had a recent family office client where we identified an opportunity that could save them $200 million while costing $3 million to $5 million in fees — likely a flat fee. The principal is an entrepreneur: if I say you can make 50x on your investment in 12 months, he's going to focus on the upside, not my billing rate. That's why client selection and the services we provide are driving pricing improvement over the last five or six years.
The next question comes from Tobey Sommer with Truist.
I wanted to talk about senior hires or organic hires. Can you talk about the profile of where they're coming from, what you see their revenue generation looks like and how it compares to existing staff at that level within the organization?
Tobey, we look at two different areas. One is entry level: typically people coming out of graduate or undergraduate programs. Today, probably about 70% of our new hires have interned with us. We implemented this program about 15 years ago. Dan DePaoli now runs it. We do an InternConnect program in St. Charles each year — typically 300 to 400 people. We usually extend offers to about 75% of those and get around an 80% acceptance rate or better. At entry level, we've done a much better job of bringing on known quantities. About 15 years ago I analyzed retention and found interns have about 50% better retention than non-interns. On the lateral side, it's driven by focus and needs. We're expanding our tax controversy and project practice and are in discussions with a lateral hire from a major U.S. law firm. I'm not sure if we'll get that done. We've targeted areas where we see opportunity to represent clients in ways many accounting firms don't — appeals, tax litigation, and more intensive controversy work. In our internal call yesterday, I emphasized Silicon Valley. The marketplace reminds me of 1998: rent increases in San Francisco are explosive; half the top 100 companies are in Silicon Valley. Another market with big migration of wealth is Florida — we have three locations there and see it's underserved. We'll prioritize which U.S. markets to invest in and add resources. Our top five offices in maturity are Southern California, Northern California, Chicago, Boston and New York. Margins range: worst 27.7%, best Northern California at 38.8%. As we mature markets in Texas, Florida and build out Seattle, we expect margins to move higher due to critical mass and economies of scale.
The next question comes from Mark Marcon with Baird.
Let me add my congratulations. Terrific organic performance. Can we focus on the inorganic growth in terms of the recently announced acquisitions? I'm wondering about the growth rates of these organizations, either as a consolidated group or individually. Also, can you talk about the terms — did they follow the blueprint we've discussed before in terms of cash upfront relative to stock-based compensation and earn-outs?
For the most part, the basic concept is the same. We made an exception for the U.K. because the U.K. over the last five years has had annual revenue growth of over 30%, much of that work coming from the network. We see the U.K. as a potential huge market. Today we have about $20 million of revenue in tax there, but I view the market potential for tax, legal and consulting as being as high as $600 million down the road. We did that deal at 12x earnings; most deals are at 10x. We accommodate where some sellers are older and want some cash up front, but the basic construct is the same for every deal. We view some markets as an ability to add other groups systematically. For example, in Mexico we have active conversations with two consulting groups and a law firm that could merge in; we've asked those consulting groups to waive conflicts to streamline deals. One consulting group that's affiliated with us has already done three acquisitions of their own. Regarding margins and growth rates, in tax and legal globally growth last year was a little over 13% collectively in revenue, similar to the U.S. Margins vary across markets. As part of the deal we have contractual agreements on partner compensation as a percentage of revenue, and that drives the economics. If partners want to take more money out, acquisition price tends to be lower. If they sustain lower partner compensation and accept RSUs, economics differ. Our teams have been through enough deals now — we've signed 16 and closed eight. My hope is the remaining eight will close by year-end, though probably late in Q4. That's why we won't see a lot of revenue from those deals this year, but there is likely at least $100 million of revenue from already-signed deals that will land in 2027 rather than 2026. As you model, you should take that into account.
The next question comes from Jason Haas with Wells Fargo.
Curious if you could talk more about how you're integrating technology and AI into your process?
Sure, Jason. About a year ago we entered into an agreement with University of San Francisco. They have an agreement with Anthropic and we are also using Accordance in that program. We did four pilot programs — one in November, one in December — and we debriefed and restructured those. Jeff Malo has been running that program and has done a terrific job. We launched our internal program on May 8 and have now trained over 500 of our people. It's a systematic process, both technical and nontechnical, where participants are given projects to do. We're seeing tangible efficiencies: last week I had a technical matter with a fixed-fee project concerning the liquidation of certain trusts. I used AI to refine technical sources and in about one hour drafted a memorandum with technical sources that normally would have taken six to ten hours. We're systematically moving more work to fixed pricing or project pricing. We'll always have time-and-materials work because we're a relationship business and spend time with clients, but more work will be fixed fee. I have a current situation where we will do over 50 valuation projects for a client on a fixed-fee basis. We want to share efficiency with clients, but not give away efficiency; there's a way to be more efficient where the client saves money and we are more profitable. I'm hoping to be done with U.S. implementation by the end of this year, and after October 15, which is our heavy recurring compliance period, we'll continue advancing the strategic approach. Implementation will be in three ways: identifying client opportunities (e.g., cost segregation studies for acquisitions or improvements over $50 million), using AI to source solutions, and using AI for implementation. I sent a note to partners about challenges some Big Four firms have had where AI solutions were implemented without sufficient supervision — two firms outside the U.S. have been fined due to hallucinations in their work product. AI will not replace us; people who understand AI will drive the marketplace. There's a human component and a technology component; we view it as a tailwind. Jeff Malo is all over this, he's on our U.S. internal board and we are making systematic progress and measuring it.
At this time, I would like to turn the call back to management for closing comments.
Thank you, Latonya. Mark, Neal, would you like to make some closing comments?
I just want to thank everybody for attending. I want to continue to thank our partners and our people because this is a people business. Our products are our people and they enable us to be successful. I want to thank the investors for the loyalty you've extended. I want to thank the analysts because I've learned a lot from you. I've done a lot of transactions over 40 years — over 500 transactions just in our firm — and it's been a continued learning process. I want to thank our directors. We have an all-star Board. Our Board is superb; they're talented and they understand the professions. I enjoy being challenged by them and they will continue to challenge me. I think we have a lot of opportunity ahead of us.
Yes. Thanks, Mark. Great summary. I just want to appreciate everyone who dialed in today — there's a lot of you on the line. We welcome your engagement. This is about building relationships with our investors. We are a people business, and it's important that we invest in and build those relationships. I really appreciate your engagement. Thanks very much.
Take care, everybody.
Thanks, Neal.
Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.