Public Policy Holding Company, Inc.

Our primary sources of liquidity have been cash flows from operations and bank borrowings, and our principal uses of cash flows from operations include investment in strategic acquisitions and distributions to our shareholders.

Our ability to fund future acquisitions, capital expenditures and working capital, and to make scheduled payments of principal, or to pay the interest on, or to refinance, our indebtedness, will depend on our future performance and our ability to generate cash, which, to a certain extent, is subject to general economic, financial, competitive, legislative, legal, regulatory and other factors that are beyond our control. We believe that our cash flows from operating activities and bank borrowings will be sufficient to fund our anticipated acquisitions, capital expenditure, working capital requirements and debt service requirements as they become due.

Our working capital cycle typically peaks during the first and second quarter of the year due to the timing of payments for incentive compensation, income taxes and contingent purchase price obligations. In addition, we have contractual obligations related to our long-term debt (principal and interest payments), recurring business operations, lease obligations, and acquisition-related obligations. Our principal discretionary cash spending includes dividend payments to common shareholders and strategic acquisitions. We have adjusted our dividend policy in January 2025, approximately halving the dividend paid per share, in order to preserve capital for future M&A opportunities. We anticipate continuing to avail ourselves of debt facilities, however management will continue to consider all available sources of capital.

Historical cash flows

The following table summarizes our cash flows, as reported in our accompanying consolidated financial statements:

Cash flows used in operating activities

Net cash used in operating activities was $16.5 million for the nine months ended September 30, 2026, compared to net cash provided by operating activities of $10.0 million for the nine months ended September 30, 2025. This decrease of $26.5 million was attributable to the Company's acquisitions and increased use of cash for working capital. In 2026, cash used for prepaid post-combination expense balance was $27.5 million compared with $10.3 million in 2025, driven primarily by the significant portions of the acquisition payments of TAP and Tancredi being tied to future employment. Additionally, contract and unbilled receivables increased by $11.6 million in conjunction with accounts payable and accrued expenses decreasing by $2.9 million, totaling a $14.5 million increased use of cash for working capital; while in 2025, it was less pronounced at $8.0 million ($8.3 million increase in contract and unbilled receivables and $0.3 million increase in accounts payable and accrued expenses). The result was an increased use of cash for working capital of $6.5 million in the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. The remainder of the change is primarily driven by the change in the deferred income tax provision which was $5.8 million in 2026 compared with $1.6 million in 2025, and a decrease in contingent consideration of $1.4 million in 2026 versus a negligible change in the nine months ended September 30, 2025.

Cash flows used in investing activities

Cash flows used in investing activities were $9.5 million for the nine months ended September 30, 2026, compared to $21.7 million for the nine months ended September 30, 2025, representing a decrease of $12.2 million, or 56.0%. The cash invested in 2026 primarily related to the acquisition of WPI (completed April 1, 2026), Tancredi (completed July 1, 2026), and TAP (completed August 1, 2026), net of cash acquired, while the cash used in 2025 primarily related to the acquisition of TrailRunner (completed April 1, 2025) and Pine Cove (completed August 1, 2025).

Cash flows provided by financing activities

Cash flows provided by financing activities were $24.1 million for the nine months ended September 30, 2026, compared to $8.1 million for the nine months ended September 30, 2025. In 2026, the cash flows provided by financing activities was primarily a result of the 2026 U.S. IPO in January 2026, while in 2025 financing cash flow resulted from the new Bank Credit Facilities (as defined above) for the TrailRunner acquisition, in both years partially offset by repayment on bank facilities and dividend payments.

In addition to our GAAP statement of cash flows, we use a non‑GAAP liquidity measure, Adjusted Free Cash Flow, to evaluate our cash generation. Adjusted Free Cash Flow should be viewed as supplemental to, and not a substitute for, GAAP net cash used in operating activities and total changes in cash and cash equivalents.

The following table reconciles net cash used in operating activities, as reported under GAAP, to Adjusted Free Cash Flow and other components of changes in cash and cash equivalents:

Adjusted Free Cash Flow is a non‑GAAP liquidity measure. It adjusts GAAP net cash used in operating activities for acquisition‑related and capital expenditure cash flows as described above. These are cash outflows that recur in connection with our acquisition strategy and ongoing investment needs, and Adjusted Free Cash Flow should not be construed as representing additional cash available for use.

Future Capital Requirements

We are actively seeking to expand our portfolio of member companies internationally with strategically and financially attractive opportunities while adding complementary specializations. We expect to fund the purchase price for such acquisitions with net cash from operating activities and a combination of new stock issuance and debt financing.

Our capital expenditures principally include investments in office build-outs and small equipment, and have not historically been material to the Company.

Contractual Commitments and Contingencies

Contractual obligations

Our principal contractual obligations consist of our obligations in respect of financial indebtedness that is owed under our credit facilities. In addition, we have obligations under leases, trade and other payables, capital commitments and other contractual commitments. Finally, we have earnout obligations under acquisition agreements. We expect that our contractual commitments may evolve over time in response to current business and market conditions, with the result that future amounts due may differ considerably from the expected amounts payable set out in the table below.

Financial Obligations

Bank Credit Facilities

As of September 30, 2026, there was no balance outstanding under the 2023 Facility 1; $2.0 million outstanding under the 2023 Facility 2; $4.3 million outstanding under the 2024 Term Loan A; $13.5 million under the 2024 Term Loan B; and $20.0 million outstanding under the 2025 Term Loan C.

As of September 30, 2026, under the 2023 Facility 1, we had capacity to re-borrow up to $3.0 million, less any outstanding letters of credit, or 80% of our eligible receivables, whichever is less.

As of September 30, 2026, the principal maturities under the Bank Credit Facilities were as follows:

The table below sets forth a reconciliation of cash and cash equivalents at period-end to net debt at period-end.

This reconciliation includes other debt and unamortized issuance costs along with the Bank Credit Facilities. See Note 6. Notes Payable for more detail.

Contingent Obligations

Earnout obligations

As part of the typical structure of our acquisition of new member companies, we commit to making certain earnout payments. These earnout payments are based on a profit-driven formula and only materialize if the acquired company realizes profit growth after the date of completion. Payments are typically made in a mix of cash and shares. In turn, each of the components of earnout payments may be subject to further vesting requirements and employment conditions, which keeps the recipients financially committed to business.

In relation to these earnout payments, as of September 30, 2026, we have recorded liabilities of $32.5 million on our balance sheet, spread across the line items Contingent Consideration and Other Liabilities. This number reflects both the estimated foreseen nominal payments, and also discount factors, probability of reaching goals, and fair value estimates. In nominal terms, over the period Q4 2026 to 2031, based on expected performance of each of the acquired companies, we anticipate having to make earnout payments of $80.2 million, of which $43.8 million would be payable in cash, and the remainder in shares. The maximum earnout liability over that same period, which would only be reached if each acquisition meets very aggressive profit growth targets, would be $194.5 million, of which $111.6 million would be payable in cash, and the remainder in shares. Generally, in order for an acquisition to reach maximum earnout payments, it would need to grow its profit by 25-30% annually during the earnout period. For more information, see Note 9. Fair Value Measurement.

Revisions to these expectations, relative to those reported in prior periods, are attributable to the execution of actual earnout payments as well as to modifications in the financial forecasts of the acquired companies.

The following tables summarizes nominal earnout expectations:

We expect that our contingent obligations may evolve over time in response to current business and market conditions, with the result that future amounts due may differ considerably from the expected amounts payable set out in the table above.