Q3 2020 Huron Consulting Group Inc Earnings Call

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Third quarter 2020 at this time all conference call lines are in a listen only mode. Later, we will conduct a question and answer session for conference call participants and instructions will follow at that time as a reminder, this conference call is being recorded before we begin I would like to point all of you to the disclosure at the end of the companies.

News release for information about any forward looking statements that may be made or discussed on this call. The news release is posted on Hurons website. Please review that information along with the filings with the S. easy for a disclosure of factors that may impact subjects discussed in this afternoon's webcast the company will be discussing one.

Or more non-GAAP financial measures. Please look at the earnings release and on here on the web site for all the disclosures required by the FCC, including reconciliation to the most comparable GAAP numbers and now I would like to turn the call over to Jim Roth, Chief Executive Officer of Huron Consulting group Mr.

Ross. Please go ahead.

Good afternoon, and welcome to cheer on consulting group's third quarter 2020 earnings call with me today are John Kelly, our Chief financial Officer, and more costly or president and Chief operating officer.

First quarter revenues were in line with our expectations declining 6% over the prior year quarter, well margins and cash flow were better than we anticipated.

Continued proactive cost management efforts companywide delivered significant savings during the third quarter and has enabled us to increase our full year 2020, adjusted EBITDA and adjusted EPS guidance.

John and I will provide more color around our updated guidance in a few minutes.

Growth in the business Advisory segment reflected solid demand for our distressed advisory offerings and increased focus on our commercial clients are using technology and analytics to improve their operations.

As has been well documented the ongoing pandemic has continued to create both disruption and opportunities for our clients in health care and education industries.

In response to the market impacts would be ongoing pandemic our team.

Measures to fortify our financial position, while continuing to meet our clients' evolving needs.

We continue to execute on our five year strategy to drive profitable growth, which generated solid results for 2019 and at the beginning of 2020.

Our priorities remain focused on actions that will position shiran for a return to growth following a pandemic.

And the strong foundation, we built over the last several years has provided us with the flexibility to weather current challenges.

Our performance in the market and our financial position allow us to continue to capitalize on emerging opportunities for growth, including our recent acquisition of force I Q.

I will now share additional insight into our third quarter performance and the demand drivers for each of our businesses and then provide some color on our expectations for the remainder of 2020.

During the third quarter healthcare segment revenues declined 13%.

Your quarter.

Utilization increased quarter over quarter into the low seventys and demand among our health system and academic medical center clients has enabled us to build a healthy sales pipeline.

We remain cautiously optimistic about performance in the segment, primarily due to intense margin pressures in the industry, resulting from lower volumes changes in payer mix and increased costs related to tele health and other service delivery models.

Hospital patient volumes have recovered in the past three to four months, but in most cases remain below pre corporate levels.

The primary questions facing our clients are one go volumes returned to historical levels and what changes post quoted well most dramatically impacted their fundamental business models.

Driven by these questions. Our pipeline is building based on clients, reaching out to us to help position them for a very different strategic and financial future.

Business Advisory segment revenues grew 6% over the third quarter of 2019, primarily driven by our digital technology and analytics and distressed advisory offerings.

The impacts of the COVID-19 pandemic continue to result in significant challenges for our commercial clients driving solid demand for our restructuring and turnaround services.

In addition, nearly every company has seen the need to accelerate their digital transformation as they rethink how work gets done to drive operational efficiencies better engage with their customers and make better data driven decisions.

This has resulted in strong demand for our digital technology and analytic offerings.

Our M&A and legacy business advisory practices has seen strong demand throughout the cold period, and the third quarter was no exception.

We continue to believe demand for our distressed advisory and technology offerings will continue to see solid demand in the fourth quarter as well.

Yeah.

[noise] indicative of our expectations for future growth in our digital technology. The analytic offerings today, we announced the closing of our acquisition of course, I, Q, which strengthens our salesforce and velocity capabilities within the us in a business.

Horse I Q excels in helping clients rethink how they digitally approach can interact with customers at scale together.

Together with our existing sales force business course, I Q enhances our position as one of the leading sales force industries partners.

Foresight Q also brings to Huron additional depth and experience in health care technology have you provided digital innovation to some of the largest payer organizations.

Our education segment revenues declined 9% over the third quarter of 2019, which is the first time segment revenues have declined in 22 consecutive quarters.

Strong growth in the first half of the year was fueled by.

Higher to the COVID-19 pandemic than.

In the second and third quarters of this year, we worked through some of our prior backlog while business development activities and pipeline conversion were significantly impacted as our clients were focused on bringing students safely back to campus and transitioning to higher quality online learning for the fall term.

Many higher education institutions faced significant revenue declines from lower enrollments and reduced funding the state's cut their annual budgets.

These challenges are putting immense pressure on colleges and universities to evaluate the sustainability of their business models.

Our education client space, a classic set of challenges, including how to balance immediate operational issues, while strategically managing for the long term.

There was also an increasing recognition among our clients that the longer term business of higher education will not resemble historical norms, necessitating a new strategic and ARPU.

That accommodates what it's likely to be a very different type of demand.

For traditional academic offerings.

Similar to health care technological advancements will play a critical role in achieving that vision and sustainable long term success.

With our deep industry knowledge and breadth of capabilities, we are uniquely positioned to help our education clients address these increasingly complex issues and help their organizations achieve sustainable future.

Before I turn to our outlook for 2020, let me break with tradition and share a few comments about 2021, something we typically do not do prior to February.

We are now in the eighth month of managing this company within the constraints and opportunities that the pandemic has presented.

Our team has done an incredible job serving clients and supporting each other during this time.

Collectively we are focused on returning our company to growth and we are aggressively working to do so in 2021, including through the continued execution of our five year strategy.

As we plan for a return to company wide growth amidst ongoing uncertainty among our clients and dramatic market reduction disruptions.

We recently took proactive measures to manage our cost space, including adjusting our workforce in targeted areas of our business delaying merit increases to employee salaries for the entire company.

Reducing our real estate footprint.

And exiting a non core business within our life Sciences practice.

We finished 2019 with strong results and we had solid solid momentum across our business during the first quarter of the year, which we believe positioned us well for another year of strong organic growth.

The workforce related actions, we took last week to better align our delivery capacity in certain businesses with the demand. We currently anticipate for our services.

While still providing us with the capacity, we need to fuel growth as the market stabilizes.

We believe these proactive measures will strengthen our financial position amidst the ongoing disruption and create a foundation from which we can grow and expand margins in 2021.

Despite the ongoing economic uncertainty in the market.

Now, let me turn to our outlook for the year we.

We are increasing the midpoint and narrowing the range of our annual revenue guidance to $835 million to $855 million and increasing our adjusted EBITDA guidance to a range of 10% to 10.5% of revenues.

We now expect adjusted diluted earnings per share in a range of $1.95 to $2.15.

The economic environment in 2020 has demonstrated the importance of our commercial businesses to our overall portfolio. These.

These businesses are well positioned to address our clients' technology strategy and operational needs as most commercial sectors respond to the emergence of very different business models.

We are excited about the continued growth of these businesses and we expect them to continue to perform well in 2021.

Theres no doubt that are in our growth in the healthcare and education industries remains a critical element of our future success we.

We are working closely with our clients to address the near term operational issues that hospitals and universities are facing.

The driver of future growth across all three of our segments will be working with our clients to ensure that they have sustainable business models and that they are appropriately positioned from a strategic operational and technology perspective.

For what is clearly going to be a very different environment when the pandemic eases for for.

For those challenges no other firm is better prepared than Sharon.

Now, let me turn it over to John for a more detailed discussion of our financial results John.

Thank you Jen and good afternoon, everyone.

Before I begin. Please note that I will be discussing non-GAAP financial measures such as EBITDA adjusted EBITDA adjusted net income adjusted EPS and free cash flow.

Our press release, 10-Q, and Investor Relations page on the Huron Web site have reconciliations of these non-GAAP measures to the most comparable GAAP measures.

Along with a discussion of why management uses these non-GAAP measures in why management believes they provide useful information to investors regarding our financial condition and operating results.

Also my comments today are on a continuing operations basis.

Our recent acquisition of foresight. He was not included in our third quarter financial results for its like you will be included in the business Advisory segment, beginning in the fourth quarter of 2012.

Now, let me walk you through some of the key financial results for the quarter.

Revenue for the third quarter of 2020 or $205.3 million down 6.4% from $219.3 million in the same quarter of 2019.

The decline in revenues in the quarter was driven by the health care and education segments, partially offset by organic growth in our digital technology and analytics and distressed advisory offerings within the business Advisory segment.

Net income was $11.1 million or 50 cents per diluted share in the third quarter of 2020 compared to $13.7 million or 61 cents per diluted share in the same quarter in the prior year.

The decline in net income was driven by the reduction in revenue in the quarter.

Adjusted non-GAAP net income was $13 million or 59 cents per diluted share in the third quarter of 2020 compared.

Compared to $17.7 million.79 per diluted share in the same period of 2019.

Our effective income tax rate in the third quarter of 2020, with 17.7% compared to 15% a year ago.

Our effective tax rate for Q3 of 2012 was more favorable than the statutory rate inclusive of state income taxes.

Primarily due to the current year to date pre tax losses, and the impact during the quarter of certain non deductible business expenses, including the nondeductible portion of goodwill impairment charges based on the allocation of these expenses to the quarter in accordance with GAAP.

The effective tax rate also reflected the positive impact of certain federal tax credits.

Adjusted EBITDA was $23.6 million in Q3, 2020 for 11.5% of revenues.

Compared to $28.8 million in Q3, 2019 or 13.1% of revenues.

Now make a few comments about the performance of each of our operating segments.

The healthcare segment generated 43% of total company revenues during the third quarter of 2020.

The segment posted revenues of $87.4 million for the third quarter of 2020 down $12.6 million or 12.6% from the third quarter of 2019.

The decrease in revenue reflects the impact of the ongoing COVID-19 pandemic on our new business pipeline and related slower conversion of soft backlog during the quarter.

Operating income margin for health care was 29.3% for Q3 2020 compared to 32.9% for the same quarter in 2019.

The quarter over quarter decline in margin was primarily due to a decrease in billable consultant utilization.

The business Advisory segment generated 32% of total company revenues during the third quarter of 2020.

The segment posted revenues of $66 million in Q3, 2020 up $3.5 million or 5.6% from the third quarter of 2019.

The increase in revenue during the third quarter was primarily attributable to our technology and distressed advisory offerings.

The operating income margin for the business Advisory segment was 16.3% for Q3 2020 compared to 19.1% for the same quarter in 2019.

The quarter over quarter decline in margin was primarily due to increases in performance bonus expense for our revenue generating professionals.

During the year to date performance in our digital technology, and analytics and distressed advisory businesses as well as lower utilization in bill rates and our strategy practices.

Yeah indication segment generated 25% of total company revenues during the third quarter of 2020.

Segment posted revenues of $51.9 million in Q3 2020 down.

Down $4.9 million or 8.7% from the third quarter of 2019.

The decrease in revenue reflects the impact of the ongoing COVID-19 pandemic on our new business pipeline and related slower conversion of soft backlog during the quarter.

The operating income margin for education was 24.2% for Q3 2020 compared to 25.4% for the same quarter in 2019.

The quarter over quarter decline in margin was primarily due to lower billable consultant utilization during the quarter.

Other corporate expenses not allocated at the segment level were $29 million in Q3, 2020, compared with $32.3 million in Q3 2018.

The reduction and other corporate expenses was driven by reduced salaries bonus and stock compensation expenses for our support personnel outside professional fees reduced facilities expenses and general corporate savings across multiple expense categories.

These savings were partially offset by $1.8 million increase in the liability for our deferred compensation plan, which.

Which is offset in other income by the gain related to the increase in market value of assets used to fund that plan.

Now turning to the balance sheet and cash flows.

Dsos came in at 62 days for the third quarter of 2020 compared to 68 days for the second quarter of 2020, and 70 days for the third quarter of 2019.

Total debt includes the $248 million in senior bank debt and a $3 million promissory note for total debt of $251 million.

We finished the quarter with cash of $75 million for net debt of $176 million.

This was a $73 million decrease compared to Q2 2020.

Our leverage ratio as defined in our senior Bank agreement was approximately 2.1 times trailing 12 month adjusted EBITDA at the end of Q3 2020 compared to 2.6 times trailing 12 month adjusted EBITDA as of June Thirtyth 2020.

The decrease in our leverage ratio was driven by the reduction in borrowings in the third quarter as we repaid $80 million on our revolving line of credit.

Our net leverage ratio was 1.5 times trailing 12 months adjusted EBITDA as of September Thirtyth 2020.

When the bank definition calculation is adjusted for cash on hand.

This compares to two times trailing 12 months adjusted EBITDA as of September Thirtyth 2019.

When calculating in the same manner.

Cash flow generated from operations in the third quarter of 2020 with $76 million and we used $3 million of our cash to invest in capital expenditures inclusive of internally developed software costs, resulting in free cash flow of $73 million.

Our free cash flow in the quarter was better than we anticipated driven by the reduction in dsos in the quarter and continued proactive cost management efforts companywide.

Given the ongoing COVID-19 pandemic, we continue to proactively manage our cash position to support our operations.

Through September we have not seen any material degradation in our cash collections and our net debt has continued to decrease.

As Jim mentioned, we recently took proactive measures to manage our cost base driving annualized run rate savings of approximately $25 million.

These savings will be generated in two primary areas.

First in certain areas of our business given the ongoing pandemic and continued broader economic uncertainty.

Demand for our services has not yet returned to the levels, we had anticipated earlier in the year.

As such we recently executed a targeted reduction in force in our corporate support personnel and certain parts of our business that have been most impacted by the disruption in the market.

Second we have a plan to reduce our real estate footprint, while remaining in substantially all of our current geographies.

In addition, we also have implemented certain cost of one's measures, including delayed merit increases for all employees in 2021 that we believe will drive further savings.

Lastly, consistent with our long term strategy, we are exiting the life Sciences drug safety offering a small non core part of our life Sciences practice. This.

This business is small and the exit which we anticipate to occur in the fourth quarter will allow us to focus our investment in areas that are more aligned to our commercial strategy and where we see the greatest growth opportunities.

We believe these proactive measures will strengthen our financial position and that's the ongoing disruption and create a foundation from which we can grow and expand our margins to 2021.

Finally, let me turn to our expectations and guidance for 2020.

As Jim noted, we are increasing the midpoint and narrowing the range of our full year 2020 revenue guidance to $835 million to $855 million inclusive of our reconnect recent acquisition of fore sight Q.

In addition, we are raising our full year adjusted EBITDA guidance to be in a range of 10% to 10.5% of revenues and now anticipate an increase in full year adjusted non-GAAP diluted earnings per share in a range of $1.95 cents to $2.15.

We now expect our full year effective tax rate to be approximately 25% and cash flows from operations for the year to be in a range of $100 million to $110 million.

We expect capital expenditures for the year inclusive of internally developed software costs to be approximately $16 million to $20 million in free cash flow for the year to be in a range of $80 million to $90 million net of cash taxes and interest and excluding noncash stock compensation.

In closing we are taking a disciplined approach to investing in opportunities for profitable growth, while managing our costs, where we can.

And we believe we are creating a foundation from which we can grow and expand margins in 2021.

Thanks, everyone I'd now like to open the call up to questions operator.

Thank you ladies and gentlemen, if you have a question at this time. Please press star one on your touch talent telephone.

Your question has been answered or you wish to remove yourself from the queue. You may do so by pressing the pound home one moment for our first question. Please.

Our first question comes from the line of Andrew Nicholas from William Blair. Please proceed.

Hi, good afternoon.

With respect to the restructuring plan I was just hoping you could share a bit more detail on where you are focusing head count changes and at what level of the firm and then also was this something you'd be contemplating for a couple of quarters or its something materially changed about the demand picture in the pipeline.

And that led you to to make a decision last week.

John John you want to take the first part of that and I'll take the second part.

That sounds good Jim.

So Andrew it's approximately in total is approximately 140 role that were eliminated so.

Approximately 60 roles in both healthcare and education approximately 10 rolls from are on strategy in life Sciences business in the business Advisory segment and then approximately.

20 roles in our corporate team.

So thats kind of the breakout amongst the teens, Jim if you want to give a little bit of color around kind of the decision process related to those reductions.

Hi, Andrew So we had we've had probably three points during the course of last eight months, where we said that we were going to be making decisions about.

How if at all to adjust our head count and the first one was relatively early in the process and again. This was back in March April early may timeframe. When hospitals were hit the hardest at that point in time, and we were we along with.

Some others thought that this would have a chance to maybe easing in the summer and so we had opted to keep most of our people and then.

In the next timeframe was probably in the June July timeframe, where again, we based it based center kind of quarterly forecast and again, we had some modest hope that things were beginning to ease with respect to the pandemic and that we thought we would be able to.

That things would begin to return to normal hopefully later in the fall not completely normal decreased ease some of the kind of the major challenges the hospital clients we're having.

I think as a summer rolled on it became increasingly apparent particularly in September as we started developing our September forecast that that things were not going to be back to anywhere close to normal. During this current calendar year and that's really when we decided to say rather than get into a guessing game in terms of when it is going to return to normal AR.

Sense at this point in time as we just you know there are certain things that are stabilized and it certainly parts of our company that are that are doing very well and others are still reacting to some of the changes that are taking place in the market. So it was really mostly in in September and early October we began to plan for a.

Possible more protect protracted impacted the virus on our clients and naturally when we made our decisions.

Got it that's helpful. Thank you.

And then just as a follow up on a separate topic I was wondering if there's anything more you can say on the foresight you acquisition.

Terms of the size of the company what do we what it would mean in terms of revenue contribution if any anything material and then maybe a little bit more color on how you hope to leverage that acquisition within your existing practices and in the areas where its capabilities are most complementary.

Sure Andrew I can I can start with the financial parameters and I'll, probably hand, it over to market. So you can give some perspective on how it fits into that the yes in a platform. So from a financial parameters perspective, our expectation is that next year will be a.

Hi single digit revenue contribution to the company.

During the fourth quarter this year, probably expect $1 million to $2 million revenue something like that and then from a margin profile perspective, we're thinking it will be a it will be very similar to the SNA practice sort of in the mid to upper teens on EBITDA contribution perspective, and in all periods the fourth quarter. This.

Here and.

The full year next year, we expect it to be accretive from an EPS perspective markdown. If he can provide some commentary on how it fits in with the M&A team Yeah sure sure that's.

Happy to do that so so Andrew a velocity is built natively on the Salesforce platform.

And it's the leading provider of industry specific solutions for mobile software and it is actually quite focused in areas that we are all already working and so areas like health insurance energy and utilities. So it's a good play for us to take our Salesforce practice and continue to evolve into a very industry focus.

Solution, we've had had some experience working with these folks in the marketplace. So it was one of those deals that basically was not shocking the book, but came along it just made sense for us to align more closely and so we're pretty excited about what it means for the salesforce part of the practice.

Great. Thank you and then if you don't mind me squeeze one more in I, just on kind of the implied fourth quarter guidance.

At least on a top line it looks like a sequential decline maybe $5 million or so I was wondering if you could unpack that sequential decline a little bit in terms of what you're expecting from each of the segments.

I assume that most of the additional pressure.

In the education segment, but any other other color would be helpful. Thank you.

Sure Andrew I can I can take that on.

No. It's actually if you're looking sequentially third quarter versus fourth quarter, you're correct. It's probably some more sequential pressure and education, but then there's a little bit of pressure on the other two segments as well really just based on the calendar and it will probably being a little bit cautious there, but if.

If you look at it from a business days perspective, there is actually two less business days in the fourth quarter than the third quarter, which is a significant you've.

You've also got holidays baked into the fourth quarter and then the final pieces on there's been we're below where it would usually be pacing from a pico perspective at this time during the year, it's been a rough year for our people with the travel restrictions and just all the all.

All the effort, it's taking to be delivering from a remote perspective, and we're expecting that during the fourth quarter, there's going to be some catch up on PCL in conjunction with the holidays. It's already short by a couple of days, so that just kind of naturally across the businesses creates a little pressure, but the majority of it we do expect to sequentially come from education as you suggested.

Makes sense, thanks, a lot.

Thank you as a reminder, ladies and gentlemen, if you have a question at this time. Please press the star key touch tone telephone. If your question has been answered or you wish triangle, we're self from the queue. You may do so by pressing the pound team.

Our next question comes from the line of Kevin Thankful from Barrington Research. Your line is now open.

Hey, good afternoon.

So I wanted to ask about.

You mentioned for her to impair slope correct.

Corrected.

Yeah.

Offsetting about 50% of the revenue.

Revenue decline with cost reductions, which leads us to talk about today.

Power wise.

Trended more favorably than you had.

Initially planned.

Kevin I can I can jump in on that it was.

It was an improvement during the third quarter versus versus what we had expected.

And.

Think what really drove it for the most part was very cautious expense management across the firm.

Really across all three segments as well as our corporate areas and I'd characterize that is reduce spending on head count on careful management of third party spend and then just some natural on spend savings related to the environment right now with reduced travel and marketing meetings and things like that.

I'd say that was the primary driver coupled with revenue probably being modestly better than what we'd expected for the third quarter. So the combination of those two things produced higher EBITDA quarter than what we had anticipated I probably quantify the expense part of that is about $8 million of.

Of additional savings versus what we had projected and then there was nice flow through of that from a cash flow perspective, coupled with the decrease in Dsos from 68 days down to 62 days, which we didn't really model that end, we modeled steady DSO.

For the remainder of the year. So that was a really nice pickup for us to get those six days of sales in the door during the quarter.

Okay, Great that's helpful.

I'm just wondering.

When you think about the education segment.

We are taught out.

Students going back to campus being kind of a swing factor in the fall and Doug.

Okay.

Good.

How that that's impacted your client base is probably kind of the mid April.

Thanks.

Can it or not having them there I guess.

Kevin It's Jim I'll.

I'll take that one I know you broke up a little bit. So I think I heard most of the question, though right I think.

There's obviously a lot of uncertainty with our clients right now that they are on the one hand despite.

Despite a couple of disruptions along the way.

They are proceeding with the fall semester, sometimes having kids away Morgan they wanted.

The technology is generally considered to be better now than it was back in the spring semester. So I think you know they are I think they're getting through I would describe it must be the issues are getting through this process. So low.

Probably fewer students than they expected and a much higher cost space than they had expected. So the world is not at least from our clients perspective.

I think there are probably some uncertainties, but I would say, even Michael what used to be a worst case scenario for a lot of our clients and that would be every nobody on campus in in the in the spring probably wouldn't be that bad right now wouldn't be great, but it wouldn't be terrible and so I think they could manage through it right now.

The issue that I think a lot of our clients are really facing this is where we're we're really getting a lot of traction with our clients right. Now is are kind of going past. This they are beginning to look at the fall of 2021 and trying to figure out like what does the world look like at that point for them what can they expect in terms of student demand what can we expect in terms of pricing.

Are there going to be.

Nontraditional entrance into the market what about the technology, that's going to be required to deliver something so there's a lot of uncertainty.

About their overall business model and and.

There are getting more and more confident they can actually get through the current.

The current year.

But I think there's a lot of very valid worries about what hi, rich is going to look like and 22 in the fall of 2021, and that's where a lot of our focus has been right now.

I think about in the last thing I'll say is that you know one of the things that was that had been deferred a little bit for us in terms of some of the.

Some of the schools deferring some there.

ERP cloud implementations.

I think there are now seeing the importance of having that kind of capability with their students with their alumni with their staff on a go forward basis. So even though there has been some deferral of some of those engagements that we normally would have expected to hit during 2020, I do think we'll see a resumption.

Some of those in the coming year come the calendar year.

Okay great.

And did you.

Generate any meaningful you know what you'd call kind of co bid response type revenue in health care.

During the quarter I know.

Thank you had called that out for the second quarter, but just wondering specific to the third quarter. If you would categorize.

Characterize anything as such.

We did we had Kevin we had similar similar areas to what we talked about last quarter, we had.

Laboratory testing and tracing capacity consulting project work the add on technology projects that helped our clients with telemedicine needs and then we add work related to medically home implementation. So all those factors were still relevant this quarter and then at a similar level to what we would have described in the SEC.

Operator.

Yes.

Okay and with your your kind of plan to the downside downsize real is the real estate footprint is is that.

Contemplating some sort of Hershey.

Partial you know hybrid work from home remote type arrangement going forward or is it just more in response to the kind of the softer demand right now.

Kevin I can I can take that one its you know we've.

As we've spent a lot of time, you know talk we talk to our people trying to figure out what they're going to feel most comfortable.

With that in the in whatever kind of evolved through here and then we look at our own did a fair amount of evaluation of our usage of our existing space and I think you know that I think we don't know when exactly what's going to happen. We all know that I think it's very unlikely that we all go back to work out exactly like we did prior to the to co. Good.

I also don't think it's feasible that we're all going to stay home forever. So there's this middle ground and I think it's pretty much the middle ground that were contemplated when we start modeling out what we think our space needs are going to be and so that's what's enabled us to go back and redo some of our footprint John anything you want to add to that.

No I think Thats I think thats, while while said Jim I think we will I wouldn't describe this is outside the normal realm of Capex that we have in sort of any year, but I think we will be deploying some capex dollars to.

Reconfigure some of that some of our floor plans to allow for more of a collaborative.

Teaming environment and Hoteling type environments to facilitate more that flexible model that you referenced.

But I think thats, probably probably the big piece of it I think Jim explained kind of how we looked at it from a.

People perspective.

[noise], Okay. That's all I had for now thanks for taking the questions.

Thanks, Kevin.

Thank you. Our next question comes from the line of Tobey Sommer from true Securities. Your line is now open.

Hi, Thank you.

I was wondering if you could talk about some of the.

Gating factors.

So for.

Getting more traction in the in the healthcare practice.

In momentum for new projects because.

So just kind of curious how to put into context, specifically had in mind.

Rebound in elective procedures and.

And kind of what outside metric, we may want to look at with respect to hospitals and.

And then what kind of conditions are our best for you to be ramp in new projects. Thanks.

So tobey as Jim I'll give a partial.

Answer to a complicated question.

For starters the volumes are certainly going to be an important part of that but as we indicated in the early part of the script.

Theres a lot of factors volumes are one and they're not they're not clearly where they where they needed to be I think most places aren't expecting them to return to pre corporate levels for some time, so that puts margin pressure on the hospitals that's number one.

The you know what I think is kind of still relatively.

Unbalanced economic recovery has put a lot of pressure on the payer side of things, because you're having more and more people.

That are now on Medicaid and that puts also puts pressure on the margins.

You've got the transition to tell a health and how much of the normal competition through counters that includes as you know is going to be well above what it used to be even though it will be well below what a peak that back in March and April. So you get all those factors coming in and and I think it just creates a lot and actually just the overall.

Provision of care at this point in time is more expensive than it used to be because of all the precautions that take.

That there.

Put through so you put it all together and there's just a lot of concern over.

The margins the ability to kind of continue to do what they need to do.

So you can look at you can look at any one of those trends I think for better or for worse in the future and try to figure out what's going to happen, but they collectively.

We envision that this is going to put more and more margin pressure across the board in health care and I think that will kept those those trends tend to be good for us.

We have we have some very specific programs that we are initiating that you know that our go above and beyond just our normal.

Performance improvement capabilities, where we really are trying to.

Help our our clients but.

Fine you know what what is going to what is a business model going to look like and try to develop clinical designs that they think they can achieve could still make reasonable margins in the future and so that's where a lot of our discussions are taking place and I'll say that it's somewhat similar to what we're seeing in higher Ed and that is I think they are the future.

Even if the pandemic where to ease the future spoken to be sufficiently different that they really have to take a very serious look at.

Their business model on a go forward basis, and even if volumes were smart to proceed or to be too could revisit the historical levels. The business is still going to be the same and they're still going to have to make some adjustments that environment tends to bode well for procure arm in the services we provide.

And Jim Emanates I'll, just add to that commentary to say our pipeline is actually quite strong right now in fact, it's as big as we've seen it in recent time in the majority of that pipeline is.

The type of projects, we do and performance improvement that help clients that are under financial stress that that what we anticipated. When this started in what we knew based on the situation that our clients are dealing with and another comment I'd make is that given extra color is we talked about earlier in the call that we did have some headcount reductions.

Health care practice, none of those were within the pie part of our health care business just based on the demand that we see in the pipeline there and it's a mix again as the financial distress sort of offerings. The pipeline related to medically home implementations is quite strong and then from a non traditional perspective and this is what Jim was touching on.

From a care transformation perspective and really.

Kind of doing a deeper dive and a lot of health systems on their their cost structure and how they operate their business, we're seeing increased demand for those things so its.

Unfolding in as we had anticipated as far as the viewpoint that lots of clients are needing help in those areas right now.

Thank you that dovetails into my next question and that was going to be could you comment on.

The bill rates and where.

Where do you see closing out the year and whether you have.

How you would characterize pricing momentum as you enter next year.

I think from a I'll, maybe take that one by by segment Tobey. So from a healthcare perspective, it was a particularly strong quarter in the third quarter with bill rates being in excess of $250 I don't know that I would forecast that for the fourth quarter, but it is indicative.

Of.

A market right now where.

We're working with clients from a performance based fee perspective, and having arrangements.

Were there it's more contingent based so that the client gets to see the actual savings before they.

They pass for them and I think that Thats.

Thats attracted to the clients, but it still preserves our bill rate on those types of projects. So I think it's still going to be relatively strong bill rate environment for health care, though I wouldn't necessarily count on $250 plus again for the fourth quarter from an education perspective, you did see a dip in bill rate there.

100, Eightys and I'd say that does reflect a part of the business right now where it's it's very competitive.

As some there's been a slowdown in conversion of some of the projects in the pipeline and competitors have become more aggressive in that area I don't necessarily forecast a further decline in the bill rates, but you might see bill rates in that general area for some time at this point and then from a business advisory perspective I'd say.

I think the bill rates that we experienced this quarter are probably a reasonable though rate to think about for the foreseeable future.

We continue to have very strong bill rates in our distress advisory practice, given the demand there.

Yeah.

Competitive environment for that technology practices, but it's.

At the same time and environment that was robust demand. So I'd say bill rates are pretty steady there.

Then on the consulting side, the bill rates were a little bit lower during the third quarter we.

Probably expect there to be some rebound on the from a strategic perspective.

Strategy consulting perspective.

In upcoming quarters.

Thank you it does the pipeline that you described as being high I guess.

Particularly in healthcare and performance improvement does.

How does that inform your view as to.

The future the bill rates and profitability.

Of the segment is there any kind of difference between the current complex or what you reported in the third quarter within the segment and what the margin and pricing profile looks like in the pipeline.

I think from a pricing perspective I think.

Again, it was a good pricing quarter in the third quarter and health care, so that might moderate a little bit I think we do expect overtime.

Over time, our utilization to.

[music] improve as we convert some of those projects that are in the pipeline and that should be on something that helps our EBITDA margin were kind of year to date. It was a strong margin during the quarter because of those bill rates year to date were more in the 26% range in healthcare and I think thats the metric bread look at the year.

To date, 26% plus for that to improve over time, it probably won't happen overnight in the fourth quarter or even during the first or second quarter of 2021 as we at this point.

We'll likely still see some utilization at a lower rate than what it's been historically as we ramp up to meet that demand, but the expectation based on what we see now in the pipeline and what we expect is that that utilization will pick up as the year goes on and that you'll see on.

Healthy or healthier margins in that business as the year progresses in 2021.

Tobey This is Jim I'll, just add one thing to John's comments.

Market.

Market share is always kind of a hard thing to truly kind of gauge effectively in our business, but having said that.

Our sense is that we have throughout all of this throughout the last eight months or sensors, we've not lost any market share. We've probably gained some I think the billing rates the steadiness of the bill rates probably reflects some of that.

We have the intensity and complexity of the issues that our clients are facing.

Really really.

Puts a focus on firms that have the experience to address these needs and them and I think that's really where we're very well positioned so.

I think I think the pressure that you know the revenue pressure. We've had is less from a competitive perspective, it's our sense and more from just an ability for our clients to take on additional work at this point in time, while they've either been busy developed.

Developed going with the cobot crisis back and not for hospitals back earlier in the spring and the universities. This fall terms of in terms of the having.

Having students on campus, but I feel really good about the way that this is materializing for us because there is an absolute premium on firms that really no no the business well, particularly when you're dealing with such complicated and and to some extent strategic issues that are facing the clients that were they want somebody that knows the business well and that's where we are.

We have got such great experience and Mek and credentials.

Thank you.

Thank you. Our next question comes from the line of Bill Sutherland from the Benchmark Company. Your line is now open.

Thanks, and good evening guys.

Most of mine have been asked but I was wondering if you could give a little more granular education just in terms of maybe the direction of the pipeline and other activity as you think about that based on research administration technology and strategy and ops.

Yeah.

So I'll give a I'll give a kind of a general comment John you can may be supported by numbers if necessary I think research.

Research has been.

Relatively strong throughout there was a period of time when a lot of the research couldn't be done just because people really weren't allowed on campus I think researchers were able to could begin coming back to campus.

Quicker than students and so that part of the business for the most part I think have stabilized and and I think throughout this whole thing Tech research, particularly bio medical research is going to end up happening.

I think it even bigger future then.

Our wise would have pre corporate so research is pretty steady.

The ethanol and strategy not britches business also is very steady I think the intensity of the work that they're doing they're particularly abound clients wanting to either.

Either kind of readjust their strategic view or more importantly, and more frequently they are now looking to kind of do two or three or four trials of of trying to develop a budget model, that's actually going to work for them in the future based on the new reality. So that business has actually continued to do well as well.

The the technology part of it is the one where I think earlier in the year certainly pre call. Good we had anticipated some larger cloud implementation, starting mid year, and that's where things have been delayed a little bit and so on.

I think thats beginning to pick up there certainly the clients are not totally dormant, but and we've won a couple that will likely get started in in in.

First quarter, but I think that's where you're going to start seeing the fact I think once once they understand that they can actually deal with the fall semester and it's not going to be terrible I think they are going to begin looking at focusing on how to begin to go back and get back on track with their technology strategy and my guess is it'll begin starting in the first and second quarter.

And now I'll add to that Jim that similar to health care that the pipeline in education is as robust as it's been.

Hey, perhaps a record, but certainly in recent times and that.

I think not only do we feel good about that as we transition to more of a normalization of the operating environment education and the reality that there is a lot of projects right now that are pent up and need to be need to be completed but in talking with our teams when we look longer term clearly.

There have been some delays in 2020, given everything that's going on in the higher end environment, but we know at our client base, which as a reminder is typically the top 150 research universities in the west that those projects still need to get done and ultimately even if they are.

Delayed we feel very strongly that they're still going to come through and just commenting on something you know Jim mentioned earlier, we feel very good about our win rate on the projects that have closed during this period of time. So we continue to feel good about our competitive position and the volume of work. That's there in the pipeline supports that so we feel good where the.

Business is trending over the longer run it's just been a very disruptive period in the short run for for higher Ed for reasons that I think we all understand.

Got it that's helpful does John does the fourth quarter guidance the implied guidance.

Reflect.

Any of the anticipated.

Benefits of restructuring in terms of the cost structure.

Only to a very minimal extent, though.

There's still going to be had.

The we expect that the majority of.

Actions related to the office space will happen by the end of the fourth quarter, though some of that office space may move into the first quarter and filed.

Fall from an employee perspective.

Any employee that was impacted as the notified on those employees will still be providing service in many cases through midway through the fourth quarter. So the impact is going to be minimal from a fourth quarter operating results perspective.

Okay.

That's all I got thanks, guys.

Yes.

Thank you as a reminder, ladies and gentlemen, if you have a question at this time. Please press star one on your Touchtone telephone. If your question has been answered or you wish trainload yourself from the queue. You may do so by pressing the pound team.

Our next question comes from the line of Kevin Steinke from Barrington Research. Your line is now open.

Hi, just had one follow up I'm, just wondering as it relates to your health care clients.

How they're reacting to preparing for.

Yeah.

David serve.

Surge were seeing in the fall here.

And you know Thats impacted.

The pace of your.

Type line conversion at all.

Kevin I think you know if you go back and you look at the anticipated pace that happier when the first quarter was for sitting back in March and April I mean, it was devastating to basically shut down everything just to make room for actual or potential corporate patients.

And certainly even though it's.

Scheme of things, it's been a relatively short period of time reality as there has been incredible.

Knowledge gained in terms of how better to treat covert patients. So you've got several that and that impacts our hospitals in several ways number one the length of stay is.

Is dramatically less than it used to be the severity of the offices that are coming in are less that's partly a result of the fact that the heavier younger population that that is getting more and more is increasingly getting the virus.

And but I think the biggest issue is that it just have learned how to deal with that much better. They've also appear to be found ways to kind of cordoned off the call. Good patient. So that you actually can keep to the to the extent possible keep the rest of the hospital.

Trying to operate as normal as can be and so I think that even with the current trend.

Trends and even with the increase in recent hospitalizations I don't think this is going to have anything close to the kind of devastating impact that had on hospitals backing them back in the earlier in the spring.

So the one other point that I'll mention is that I think the health care clients in general benefited from a lot more financial support back in the spring than University clients are getting right now and that may become a political issue you know.

Post election, I don't know for sure, but I think it's it's interesting that you really found that the federal support for a lot of the hospitals actually eased some of what appeared at one point to be huge huge deficits actually enabled most of them to kind of close to breakeven and some actually to make some money. So I think it's a long way of saying I think the current situation.

And it's going to be handled much.

Much better than than they were able to handle that back in March April and May.

Okay. That's helpful. Thank you very much.

Thank you there is no more questions in the queue I'd like to turn the call back over to Mr. Roth.

Thank you and I want to thank all of our employees of Shiran for staying focused and representing this company, so well and that's a key.

Surely and burst and unusual conditions I'm very fortunate to be able to work with such innovative collaborative and talented colleagues everyday.

Well I think that at work.

As is our normal practice during the fourth quarter, we will be conducted outreach with our shareholders regarding matters of corporate governance and hope to connect with you as part of this process before our next call in February.

We encourage all shareholders to contact us simply have questions or wish to provide feedback.

Thank you for joining the call. This afternoon, and we look forward to our next call in February have an accident.

That concludes today's conference call. Thank you everyone for your participation.

[music].

[music].

[music].

Good afternoon, ladies and gentlemen, and welcome to Huron consulting groups webcast to discuss financial results for the third quarter 2020 at this time all conference call lines on a listen only mode. Later, we'll conduct a question and answer session for conference call participants and instructions will follow at that time either.

During this conference call is being recorded before we begin I would like to point all of you to the disclosure at the end of the Companys News release Corporation about any forward looking statements that may be made or discussed on this call. The news release is posted on <unk> website.

Just to review that information along with the filings with the S. easy for a disclosure of factors that may impact subjects discussed in this afternoon's webcast. The company will be discussing one or more non-GAAP financial measures. Please look at the earnings release and on here on the website for all the disclosures required by the FTC.

Quoting reconciliation to the most comparable GAAP numbers.

And now I would like to turn the call over to Jim Roth, Chief Executive Officer of Huron Consulting Group Mr. Roth. Please go ahead.

Good afternoon, and welcome to shoe on consulting group's third quarter 2020 earnings call with me today are John Kelly, Our Chief Financial Officer, and more closely our president and Chief operating officer.

Our third quarter revenues were in line with our expectations declining 6% over the prior year quarter, well margins and cash flow were better than we anticipated.

Continued proactive cost management efforts companywide delivered significant savings in the third quarter and has enabled us to increase our full year 2020, adjusted EBITDA and adjusted EPS guidance.

I don't know I will provide more color around our updated guidance in a few minutes.

Growth in the business Advisory segment reflected solid demand for our distressed advisory offerings and increased focus among our commercial clients and using technology and analytics to improve their operations.

As has been well documented the ongoing pandemic has continued to create both disruption and opportunities for our clients in health care and education industries.

In response to the market impacts of the ongoing pandemic our team.

Measures to fortify our financial position, while continuing to meet our clients' evolving needs.

We continue to execute on our five year strategy to drive profitable growth.

Which generated solid results through 2019 and at the beginning of 2020.

Our priorities remain focused on actions that will position shiran for a return to growth following a pandemic.

And the strong foundation, we built over the last several years has provided us with the flexibility to weather current challenges.

Our performance in the market and our financial position allow us to continue to capitalize on emerging opportunities for growth, including our recent acquisition of forced by Q.

I will now share additional insight into our third quarter performance and the demand drivers for each of our businesses and then provide some color on our expectations for the remainder of 2020.

During the third quarter healthcare segment revenues declined 13%.

Your quarter.

Utilization increased quarter over quarter into the low seventys and demand among our health systems and academic Medical center clients has enabled us to build a healthy sales pipeline.

We remain cautiously optimistic about performance in the segment, primarily due to intense margin pressures in the industry, resulting from lower volumes changes in payer mix and increased costs related to tell a health and other service delivery models.

Hospital patient volumes have recovered in the past three to four months, but in most cases remain below pre corporate levels.

The primary questions facing our clients are wonderful volumes returned to historical levels and what changes post call. Good well most dramatically impacted their fundamental business models.

Driven by these questions. Our pipeline is building based on clients, reaching out to us to help position us for a very different strategic and financial future.

Business Advisory segment revenues grew 6% over the third quarter of 2019, primarily driven by our digital technology and analytics and distressed advisory offerings.

The impacts of the COVID-19 pandemic continue to result in significant challenges for our commercial clients driving solid demand for our restructuring and turnaround services.

In addition, nearly every company has seen the need to accelerate their digital transformation as they rethink how work gets done to drive operational efficiencies better engage with their customers and make better data driven decisions.

This has resulted in strong demand for our digital technology and analytic offerings.

Our M&A and legacy business advisory practices have seen strong demand throughout the corporate period and the third quarter was no exception.

We continue to believe demand for our distressed advisory and technology offerings will continue to see solid demand in the fourth quarter as well.

[music].

[noise] indicative of our expectations for future growth in our digital technology analytic offerings today, we announced the closing of our acquisition of fore sight, Q, which strengthens our sales force and velocity capabilities within the U.S. in a business.

Coresite Q excels in helping clients rethink how they digitally approach and interact with customers at scale.

Together with our existing sales force business Coresite Q enhances our position as one of the leading sales force industries partners.

Foresight few also brings to Huron additional depth and experience in healthcare technology have you provided digital innovation to some of the largest payer organizations.

Our education segment revenues declined 9% over the third quarter of 2019, which is the first time segment revenues have declined in 22 consecutive quarters.

Strong growth in the first half of the year was fueled by.

Higher to the COVID-19 pandemic.

The second and third quarters of this year, we worked through some of our prior backlog while business development activities and pipeline conversion were significantly impacted as our clients were focused on bringing students safely back to campus and transitioning to higher quality online learning.

Fall term.

Many higher education institutions face significant revenue declines from lower enrollments and reduced funding as states cut their annual budgets.

These challenges are putting immense pressure on colleges and universities to evaluate the sustainability of their business models.

Our education client space, a classic set of challenges, including how to balance immediate operational issues, while strategically managing for the long term.

There was also an increasing recognition among our clients, but the longer term business of higher education will not resemble historical norms, necessitating a new strategic and Apple.

That accommodates what it's likely to be a very different type of demand.

For traditional academic offerings.

Similar to health care.

Technological advancements will play a critical role in achieving that vision and sustainable long term success.

With our deep industry knowledge and breadth of capabilities, we are uniquely positioned to help our education clients address these increasingly complex issues and help their organizations achieve sustainable future.

Before I turn to our outlook for 2020, let me break with tradition and share a few comments about 2021, something we typically do not do prior to February.

We are now in the eighth month of managing this company within the constraints and opportunities that the pandemic has presented.

Our team has done an incredible job serving clients and supporting each other during this time.

Collectively we are focused on returning our company to growth and we are aggressively working to do so in 2021.

Putting through the continued execution of our five year strategy.

As we plan for a return to company wide growth amidst ongoing uncertainty among our clients and dramatic market Ruddock disruptions.

We recently took proactive measures to manage our cost space, including adjusting our workforce in targeted areas of our business delaying merit increases to employee salaries for the entire company.

Reducing our real estate footprint.

Exiting a non core business within our life Sciences practice.

We finished 2019 with strong results and we had solid solid momentum across our business during the first quarter of the year, which we believe positions us well for another year of strong organic growth.

The workforce related actions, we took last week better align our delivery capacity in certain businesses with the demand. We currently anticipate for our services.

While still providing us with the capacity, we need to fuel growth as the market stabilizes.

We believe these proactive measures will strengthen our financial position amidst the ongoing disruption and create a foundation from which we can grow and expand margins in 2021.

Despite the ongoing economic uncertainty in the market.

Now, let me turn to our outlook for the year we.

We are increasing the midpoint and narrowing the range of our annual revenue guidance to $835 million to $855 million and increasing our adjusted EBITDA guidance to a range of 10% to 10.5% of revenues.

We now expect adjusted diluted earnings per share in a range of $1.95 to $2.15.

The economic environment in 2020 has demonstrated the importance of our commercial businesses to our overall portfolio. These.

These businesses are well positioned to address our clients' technology strategy and operational needs as most commercial sectors respond to the emergence of very different business models.

We are excited about the continued growth of these businesses and we expect them to continue to perform well in 2021.

Theres no doubt that our that our growth in the healthcare and education industries remains a critical element of our future success.

We are working closely with our clients to address the near term operational issues that hospitals and universities are facing.

The driver of future growth across all three of our segments will be working with our clients to ensure that they have sustainable business models and that they are appropriately positioned from a strategic operational and technology perspective for what is clearly going to be a very different environment when the pandemic eases for.

For those challenges no other firm is better prepared than Sharon.

Now, let me turn it over to John for a more detailed discussion of our financial results John.

Thank you Jen and good afternoon, everyone.

Before I begin. Please note that I will be discussing non-GAAP financial measures such as EBITDA adjusted EBITDA adjusted net income adjusted EPS and free cash flow.

Our press release, Thank you Investor Relations page on the year on web site have reconciliations of these non-GAAP measures to the most comparable GAAP measures.

Along with a discussion of why management uses these non-GAAP measures.

Why management believes they provide useful information to investors regarding our financial condition and operating results.

Also in my comments today are on a continuing operations basis.

Our recent acquisition of foresight. He was not included in our third quarter financial results for its like you will be included in the business Advisory segment, beginning in the fourth quarter of 2012.

Now, let me walk you through some of the key financial results for the quarter.

Revenue for the third quarter of 2020 or $205.3 million down 6.4% from $219.3 million in the same quarter of 2019.

The decline in revenues in the quarter was driven by the health care and education segments, partially offset by organic growth in our digital technology and analytics and distressed advisory offerings within the business Advisory segment.

Net income was $11.1 million or 50 cents per diluted share in the third quarter of 2020.

$13.7 million or 61 cents per diluted share in the same quarter in the prior year.

The decline in net income was driven by the reduction in revenue in the quarter.

Adjusted non-GAAP net income was $13 million or 59 cents per diluted share in the third quarter 2020 compare.

Compared to $17.7 million.79 per diluted share in the same period of 2019.

Our effective income tax rate in the third quarter of 2020 was 17.7% compared to 15% a year ago.

Our effective tax rate for Q3 of 2020 was more favorable than the statutory rate inclusive of state income taxes.

Primarily due to the current year to date free tax losses, and the impact during the quarter of certain non deductible business expenses, including the nondeductible portion of goodwill impairment charges based on the allocation of these expenses through the quarter in accordance with GAAP.

The effective tax rate also reflected the positive impact of certain federal tax credits.

Adjusted EBITDA was $23.6 million in Q3, 2020 for 11.5% of revenues.

Compared to $28.8 million in Q3, 2019 or 13.1% of revenues.

Now make a few comments about the performance of each of our operating segments.

The healthcare segment generated 43% of total company revenues during the third quarter of 2020.

The segment posted revenues of $87.4 million for the third quarter, 2020 down $12.6 million or 12.6% from the third quarter of 2019.

The decrease in revenue reflects the impact of the ongoing COVID-19, pandemic and our new business pipeline and related slower conversion soft backlog during the quarter.

Operating income margin for health care was 29.3% for Q3 2020 compared to 32.9% for the same quarter in 2019.

The quarter over quarter decline in margin was primarily due to a decrease in billable consultant utilization.

The business Advisory segment generated 32% of total company revenues during the third quarter of 2020.

The segment posted revenues of $66 million in Q3, 2020 up $3.5 million or 5.6% from the third quarter of 2019.

The increase in revenue during the third quarter was primarily attributable to our technology in distressed advisory offerings.

The operating income margin for the business Advisory segment was 16.3% for Q3 2020 compared to 19.1% for the same quarter in 2019.

The quarter over quarter decline in margin was primarily due to increases in performance bonus expense for our revenue generating professionals.

During the year to date performance, our digital technology, and analytics and distressed advisory businesses as well as lower utilization and bill rates and our strategy practices.

Yeah indication segment generated 25% of total company revenues during the third quarter of 2020.

Segment posted revenues of $51.9 million. Thank you to read 2020 down.

Down $4.9 million or 8.7% from the third quarter of 2019.

The decrease in revenue reflects the impact of the ongoing COVID-19 pandemic on our new business pipeline and related slower conversion of soft backlog during the quarter.

The operating income margin for education was 24.2% for Q3 2020 compared to 25.4% for the same quarter in 2019.

The quarter over quarter decline in margin was primarily due to lower billable consultant utilization during the quarter.

Other corporate expenses not allocated at the segment level were $29 million in Q3, 2020, compared with $32.3 million in Q3 2019.

The reduction and other corporate expenses was driven by reduced salaries bonus and stock compensation expenses for our support personnel outside professional fees reduced facilities expenses and general corporate savings across multiple expense categories.

These savings were partially offset by $1.8 million increase and the liability for our deferred compensation plan, which.

Which is offset in other income by the gain related to the increase in market value of assets used to fund that plan.

Now turning to the balance sheet and cash flows.

Dsos came in at 62 days for the third quarter of 2020 compared to 68 days for the second quarter of 2020, and 70 days for the third quarter 2019.

Total debt includes the $248 million and senior bank debt and a $3 million promissory note for total debt of $251 million.

We finished the quarter with cash of $75 million for net debt of $176 million.

This was a $73 million decrease compared to Q2 2020.

Our leverage ratio as defined in our senior Bank agreement was approximately 2.1 times trailing 12 month adjusted EBITDA at the end of Q3 2020.

Her to 2.6 times trailing 12 month adjusted EBITDA as of June Thirtyth 2020.

The decrease in our leverage ratio was driven by the reduction in borrowings in the third quarter as we repaid $80 million on our revolving line of credit.

Our net leverage ratio was 1.5 times trailing 12 months adjusted EBITDA as of September Thirtyth 2020.

When the bank definition calculation is adjusted for cash on hand.

This compares to two times trailing 12 months adjusted EBITDA as of September Thirtyth 2019 when.

When calculating in the same manner.

Cash flow generated from operations in the third quarter of 2012 was $76 million and we used $3 million of our cash to invest in capital expenditures inclusive of internally developed software costs, resulting in free cash flow of $73 million.

Our free cash flow in the quarter was better than we anticipated driven by the reduction in dsos in the quarter and continued proactive cost management efforts companywide.

Given the ongoing koby 19 pandemic, we continue to proactively manage our cash position to support our operations.

Through September we have not seen any material degradation in our cash collections and our net debt has continued to decrease.

As Jim mentioned, we recently took proactive measures to manage our cost base driving annualized run rate savings of approximately $25 million.

These savings will be generated in two primary areas.

First in certain areas of our business given the ongoing pandemic and continued broader economic uncertainty.

Demand for our services has not yet returned to the levels, we had anticipated earlier in the year.

As such we recently executed a targeted reduction in force in our corporate support personnel and certain parts of our business that have been most impacted by the disruption in the market.

Second we have a plan to reduce our real estate footprint, while remaining in substantially all of our current geographies.

In addition, we also have implemented certain cost avoidance measures, including delayed merit increases for all employees in 2021 that we believe will drive further savings.

Lastly, consistent with our long term strategy, we are exiting the life Sciences drug safety offering a small non core part of our life Sciences practice. This.

This business is small and the exit which we anticipate to occur in the fourth quarter will allow us to focus our investment in areas that are more aligned to our commercial strategy and where we see the greatest growth opportunities.

We believe these proactive measures will strengthen our financial position and that's the ongoing disruption and create a foundation from which we can grow and expand our margins to 2021.

Finally, let me turn to our expectations and guidance for 2020.

As Jim noted, we are increasing the midpoint and narrowing the range of our full year 2020 revenue guidance to $835 million to $855 million inclusive of our required at recent acquisition for Subcu.

In addition, we are raising our full year adjusted EBITDA guidance to be in a range of 10% to 10.5% of revenues and now anticipate an increase in full year adjusted non-GAAP diluted earnings per share in a range of $1.95 cents to $2.15.

We now expect our full year effective tax rate to be approximately 25% and cash flows from operations for the year to be in a range of $100 million to $110 million.

We expect capital expenditures for the year inclusive of internally developed software costs.

Be approximately $16 million to $20 million in free cash flow for the year to be in a range of $80 million to $90 million net of cash taxes and interest and excluding noncash stock compensation.

In closing we are taking a disciplined approach to investing in opportunities for profitable growth, while managing our costs, where we can.

And we believe we are creating a foundation from which we can grow and expand margins in 2021.

Thanks, everyone I'd now like to open the call up to questions operator.

Thank you ladies and gentlemen, if you have a question at this time. Please press star one on your Touchtone telephone.

To your question has been answered or you wish to remove yourself from the queue. You may do so by pressing the pound home one moment for our first question. Please.

Our first question comes from the line of Andrew Nicholas from William Blair. Please proceed.

Hi, good afternoon.

With respect to the restructuring plan I was just hoping you could share a bit more detail on where you're focusing head count changes and at what level that firm and then also was this something you'd be contemplating for a couple of quarters or at something.

Materially changed about the demand picture the pipeline there.

You too to make a decision last week.

John John you want to take the first part of that and I'll take the second part.

That sounds good Jim.

So Andrew it's approximately in total is approximately 140.

All that were eliminated.

Approximately 60 roles in both healthcare and education approximately 10 rolls from are on strategy and life Sciences business and the business Advisory segment and then approximately.

20 roles in our corporate team.

So that's that's kind of the breakout amongst the teams Jim if you want to get a little bit of color around kind of the decision process related to those reductions.

Yes, Andrew So we had we've had probably three points during the course of last eight months, where we said that we were going to be making decisions about.

How if at all to adjust our head count and the.

First one was relatively early in the process and again. This was back in March April early may timeframe. When hospitals were hit the hardest at that point in time, and we were we along with.

Some others thought that this would have a chance you may be easing in the summer and so we had opted to keep most of our people and then.

In the next timeframe was probably in the June July timeframe, where again, we base that based on our kind of quarterly forecast and again, we had some modest hope that things were beginning to ease with respect to the pandemic and that we thought we would be able to that.

That things would begin to return to normal hopefully later in the fall not completely normal, but just ease some of the some of the major challenges the hospital clients were happy.

I think as a summer rolled on it became increasingly apparent particularly in September as we started developing our September forecast that that things were not going to be back to anywhere close to normal. During this current calendar year and thats really when we decided to say rather than get into a guessing game in terms of when it is going to return to normal.

Sense at this point in time as we just you know there are certain things that are stabilizing and certainly parts of our company that are that are doing very well and others are still reacting to some of the changes that are taking place in the market. So it was really mostly in September and early October we began to plan for.

A possible more protect protracted impacted the virus.

Our clients and that's really when we met or decisions.

Got it that's helpful. Thank you.

And then just as a follow up on a separate topic I was wondering if there's anything more you can say on the foresight you acquisition.

In terms of the size of the company what do we what it would mean in terms of revenue contribution if any anything material and then maybe a little bit more color on how you hope to leverage that acquisition within your existing practices and in the areas where its capabilities are most complementary.

Sure Andrew I can I can start with the financial parameters, then I'll probably hand, it over to Marcus you can give some perspective on how it fits into that the yes in a platform.

So from a financial parameters perspective, our expectation is that next year will be a.

High single digit revenue contribution to the company.

During the fourth quarter this year, probably expect $1 million to $2 million revenue something like that and then from a margin profile perspective, we're thinking it will be a it will be very similar to the SNA practice sort of in the mid to upper teens EBITDA contribution perspective, and in all periods in the fourth quarter. This year.

And the.

The full year next year, we expect it to be accretive from an EPS perspective, Mark I don't know if you can provide some commentary and how it fits in with the yesterday team Yeah sure sure that's.

Happy to do that so.

Andrew velocity is built natively on the Salesforce platform.

And it's the leading provider of industry specific solutions for mobile software and it is actually quite focused in areas that we are already working in so areas like health insurance energy and utilities. So it's a good play for us to take our Salesforce practice continued to evolve into a very industry focus.

Solution, we had had some experience working with these folks in the marketplace. So it was one of those deals that basically was not shocking the book, but came along it just made sense for us to align more closely and so we're pretty excited about what it means for the salesforce part of the practice.

Great. Thank you and then if you don't mind me squeeze one more in I, just on kind of the implied fourth quarter guidance.

At least on the top line it looks like a sequential decline maybe $5 million or so I was wondering if you could unpack that sequential decline a little bit in terms of what you're expecting from each of the segments.

I assume that most of the additional pressure.

In the education segment, but any other other color would be helpful. Thank you.

Sure Andrew I can I can take that on.

Yes, actually if you're looking sequentially third quarter versus fourth quarter, you're correct, it's probably some more sequential pressure and education, but then there's a little bit of pressure on the other two segments as well really just based on the calendar and it will probably being a little bit cautious there but.

You look at it from a business days perspective, there's actually two less business days in the fourth quarter than the third quarter, which is significant.

You've also got holidays baked into the fourth quarter and then the final pieces.

There's been we're below where we usually be pacing from a pico perspective at this time during the year, it's been a rough year for our people with the travel restrictions and just all the although.

All the effort, it's taken to be delivering from a remote perspective, and we're expecting that during the fourth quarter, there's going to be some catch up on PCL in conjunction with the holidays and it's already short by a couple of days. So that just kind of naturally across the businesses creates a little pressure, but the majority of it we do expect to sequentially come from education as you suggested.

Makes sense, thanks, a lot.

Thank you as a reminder, ladies and gentlemen, if you have a question at this time. Please press the star key on your Touchtone telephone. If your question has been answered or you wish trend, where we're self from the queue. You may do so by pressing the pound team.

Our next question comes from the line of Kevin Thankful from Barrington Research. Your line is now open.

Hey, good afternoon.

I wanted to ask about.

Matt or to impair slope.

Acted.

Yeah.

Offsetting about 50% of the.

Revenue decline with cost reductions between just can we talk about today.

How or why.

And as more favorably than you had in.

Initially planned.

Kevin I can I can jump in on that it was.

It was an improvement during the third quarter versus versus what we had expected.

And I think what really drove it for the most part was very cautious expense management across the firm really across all three segments as well as our corporate areas and I'd characterize that is reduce spending on head count.

People management, a third party spend and then just some natural on spend savings related to the environment right now with reduced travel and marketing meetings and things like that.

I'd say that was the primary driver coupled with revenue probably being modestly better than what we'd expected for the third quarter. So the combination of those two things produced higher EBITDA quarter than what we had anticipated.

How to quantify the expense part of that is about $8 million.

Additional savings versus what we had projected and then there was nice flow through of that from a cash flow perspective, coupled with the decrease in Dsos from 68 days down to 62 days, which we didn't really model that and we model steady DSO.

For the remainder of the year. So that was a really nice pickup for us that to get those six days of sales in the door during the quarter.

Okay, Great that's helpful.

I'm just wondering.

When you think about the education segment.

We are taught out.

Students going back to campus being kind of a swing factor in the fall and Doug.

Okay.

Good.

How that that's impacted your client base is probably kind of the mid April.

Thanks.

Okay. So are not having them there I guess.

Kevin It's Jim I'll.

I'll take that one you broke up a little bit so I think I heard most of the question, though right I think.

There's obviously a lot of uncertainty with our clients right now that they are on the one hand despite.

Despite a couple of disruptions along the way.

They are proceeding with the fall semester, sometimes having kids away more than they wanted I.

I think the technology is generally considered to be better now than it was back in the spring semester. So I think they're I think they're getting through I would describe it must be the overseas are getting through this process, although we probably fewer students than they expected and a much higher cost space than they had expected.

So you know the.

The world is not at least from our clients perspective I.

I think there are probably some uncertainties, but I would say even like you know what used to be a worst case scenario for a lot of our clients and that would be every nobody on campus in in the in the spring probably wouldn't be that bad right now wouldn't be great, but it wouldnt be terrible and so I think they could manage through it right now.

The issue that I think a lot of our clients are really facing this is where we're we're really getting a lot of traction with our clients right. Now is are kind of going past. This and they are beginning to look at the fall of 2021 and trying to figure out like what does the world look like at that point for them what can they expect in terms of student demand what can we expect in terms of pricing.

Are there going to be.

Nontraditional entrance into the market what about the technology, that's going to be required to deliver something so there's a lot of uncertainty.

About their overall business model and and I think there are getting more and more confident they can actually get through the current.

The current year.

But I think theres a lot of very valid worries about what hi, rich going to look like and 22 in the fall 2021, and that's where a lot of our focus has been right now.

Think about in the last thing I'll say is that one of the things that was that had been deferred a little bit for us in terms of some of the.

Some of the schools deferring some of you there.

ERP cloud implementations.

I think there are now seeing the importance of having that kind of capability.

With their students with their alumni with their staff on a go forward basis. So even though there had been some deferral of some of those engagements that we normally would have expected to hit during 2020.

I do think we'll see a resumption of some of those in the coming year coming calendar year.

Okay great.

And did you do.

Generate any meaningful what you'd call kind of co bid response type revenue in health care during the quarter I know thank.

I think you had called that out for the second quarter, but just wondering specific to the third quarter. If you did.

Ted rise anything as such.

We did we had Kevin we had similar similar areas to what we talked about last quarter. We had on test laboratory testing and tracing capacity consulting project work the AD com technology projects that helped our clients with Tele medicine need.

And then we add work related to medically home implementation. So all those factors are still relevant this quarter.

At a similar level to what we would have described in the second quarter.

Yes.

Okay and.

Your your kind of plan to the downside downsize real is the real estate footprint is that.

Contemplating some sort of partial.

Partial you know hybrid work from home remote type arrangement going forward or is that just more in response to the kind of the softer demand right now.

Kevin I can I can pick that one it's we've.

As we've spent a lot of time talk we talk to our people try to figure out what would they are going to feel most comfortable with in whatever kind of evolved through here and then we look at our own did a fair amount of evaluation of our usage of our existing space and I think you know that.

Without knowing exactly what's going to happen. We all know that I think it's very unlikely that we all go back to work exactly like we did prior to the call good.

I also don't think it's feasible that we're all going to stay home forever. So there's this middle ground and I think it's pretty much the middle ground that were contemplated when we start modeling out what we pick our space needs are going to be and so that's what's enabled us to go back and redo some of our footprint John anything you want to add to that.

No I think Thats I think thats, while well said, Jim I think we will add wouldn't describe this is outside the normal realm of capex that we have in sort of any year, but I think we will be deploying some capex dollars to.

Reconfigure some of that some of our core plans to allow for more of a collaborative.

Teaming environment and Hoteling type environments to facilitate more that flexible model that you referenced.

But I think thats, probably probably the big piece of it I think Jim explained kind of how we looked at it from a.

People perspective.

Okay. That's all I had for now thanks for taking the questions.

Thanks, Kevin.

Thank you. Our next question comes from the line of Tobey Sommer from Truest Securities. Your line is now open.

Hi, Thank you.

I was wondering if you could talk about some of the.

Gating factors.

For.

Getting more traction in the in the healthcare practice and momentum for new projects because.

Just kind of curious how to put it into context, specifically had in mind that rebound in elective procedures and.

And kind of what outside metric, we may want to look at with respect to hospitals and.

And what kind of conditions are our best for you to be ramping new projects. Thanks.

So tobey as Jim I'll give a partial.

Answer to a complicated question.

Well for starters the volumes are certainly going to be an important part of that but as we indicated in the early part of the script.

There is a lot of factors volumes are one and they're not they're not clearly where they where they need it to be I think most places aren't expecting them to return to pre corporate levels for some time, so that puts margin pressure on the hospitals that's number one.

The you know what I think is kind of still relatively.

Unbalanced economic recovery has put a lot of pressure on the payer side of things, because you're having more and more people.

That are now on Medicaid and that puts also puts pressure on the margins.

You've got the transition to tell a health and how much of the normal competition through counters that includes as you know is going to be well above what it used to be even though it will be well below what it peaked at back in March and April So you get all those factors coming in and.

And I think it just creates a lot and actually just the overall.

Provision of care at this point in time is more expensive than it used to be because of all the precautions that take a deck that they have to put through so you put it all together and there's just a lot of concern over.

The margins and the ability to kind of continue to do what they need to do.

So you can look at you can look at any one of those trends I think for better or for worse in the future and try to figure out what's going to happen, but they collectively.

We envision that this is going to put more and more margin pressure across the board in healthcare and I think that will kept those those trends tend to be good for us.

We have we have some very specific programs that we are initiating that you know that our go above and beyond just our normal.

Performance improvement capabilities, where we really are trying to.

Help our our clients to.

To find you know what is going to what does the business model going to look like and try to develop clinical designs that they think they can achieve and still make reasonable margins in the future and so that's where a lot of our discussions are taking place and I'll say that it's somewhat similar to what we're seeing in higher Ed and that is I think they are the future.

Even if the pandemic where to ease the future is still going to be sufficiently different that they really have to take a very serious look at.

Their business model on a go forward basis, and even if volumes were miraculously to read to revisit the historical levels. The business is still going to get same and they're still going to have to make some adjustments that environment tends to.

Well for procurement and the services we provide.

And Jim I'm going to I'll, just add to that commentary to say our pipeline is actually quite strong right. Now in fact, it's as big as we've seen it in recent times and the majority of that pipeline is.

The type of products, we do and performance improvement that help clients that are under financial stress that that what we anticipated. When this started in what we knew based on the situation that our clients are dealing with and another comment I'd make is that given extra color as we talked about earlier in the call that we did have some headcount reductions.

In healthcare practice, none of those were within the pie part of our health care business just based on the demand that we see in the pipeline there and it's a mix again as the financial distress sort of offerings. The pipeline related to medically home implementations is quite strong and then from a non traditional perspective and this is what Jim was touching on.

Provide care transformation perspective and really.

Kind of doing a deeper dive at a lot of health systems on our cost structure and how they operate their business, we're seeing increased demand for those things so its.

Unfolding in as we had anticipated as far as the viewpoint that lots of clients are needing help in those areas right now.

Thank you that dovetails into my next question and that was going to be could you comment on.

The bill rates and.

Where do you see in closing out the year and whether you have.

How you would characterize pricing low.

As you enter next year.

I think from a I'll, maybe take that one by by segment Tobey. So from a healthcare perspective, it was a particularly strong quarter in the third quarter with bill rates being in excess of $250 I don't know that I would forecast that for the fourth quarter, but it is indicative.

Of.

A market right now where.

We're working with clients from a performance based fee perspective, and having arrangements where there is more contingent based so that the client gets to see the actual savings before they.

They pass for them and I think that that.

That's attracted to the clients, but still preserves our bill rate on those types of projects. So I think it's still going to be relatively strong bill rate environment for health care, though I wouldn't necessarily count on $250 plus again for the fourth quarter from an education perspective, you did see a dip in bill rate there.

100, Eightys and I'd say that does reflect a part of the business right now where it's it's very competitive.

As some there's been a slowdown and conversion of some of the projects in the pipeline and competitors have become more aggressive in that area I don't necessarily forecast a further decline in the bill rates, but you might see bill rates in that general area for some time at this point and then from a business advisory perspective I'd say.

I think the bill rates that we experienced this quarter, probably a reasonable rate to think about for the foreseeable future cutting.

We continue to have very strong bill rates and our distress advisory practice given the demand there.

Yeah.

Competitive environment for that technology practices, but it's.

At the same time and environment that would as robust demand. So I'd say bill rates are pretty steady there and then.

Then on the consulting side, the bill rates were a little bit lower during the third quarter we.

Probably expect there to be some rebound on that from a strategic perspective.

Hubs strategy consulting perspective.

In upcoming quarters.

Thank you.

Does the pipeline that you described as being high I guess.

Particularly in health care and performance improvement does.

How does that inform your view as to.

The future bill rates and profitability.

Of the segment is there any kind of difference between the current complex and what you reported in the third quarter within the segment and what the margin and pricing profile looks like in the pipeline.

I think from a pricing perspective I think.

And again it was a good pricing quarter in the third quarter in health care, so that might moderate a little bit I think we do expect.

Over time our utilization.

Will improve as we convert some of those projects that are in the pipeline and that should be on something that helps our EBITDA margin were kind of year to date. It was a strong margin during the quarter because of those bill rates year to date were more in that 26% range in health care and I think thats, the metric where I look at the year.

To date, 26% plus for that to improve over time, it probably won't happen overnight in the fourth quarter or even during the first or second quarter of 2021 as we at this point.

We'll likely still see some utilization at a lower rate than what it's been historically as we ramp up to meet that demand, but the expectation based on what we see now in the pipeline and what we expect is that that utilization will pick up as the year goes on and that you'll see.

Healthy or healthier margins in that business as the year progresses in 2021.

Tobey This is Jim I'll, just add one thing to John's comments.

Market.

Market share has always kind of a hard thing to truly kind of gauge effectively in our business, but having said that.

Our sense is that we have throughout all of this throughout the last eight months or sensors, we've not lost any market share. We probably gained some I think the billing rates the steadiness of the bill rates probably reflects some of that.

Intensity and complexity of the issues that our clients are facing.

Really really.

It's a focus on firms that have the experience to address these needs and and I think thats really where were very well positioned so.

I think I think the pressure that the revenue pressure. We've had is less from a competitive perspective, it's our sense and more from just an ability for our clients to take on additional work at this point in time, while they've either been busy developed.

Developed going with the corporate crisis back in that for hospitals back in earlier in the spring and the universities. This fall term so but in terms of having.

Having students on campus, but I feel really good about the way that this is materializing for us because there is an absolute premium on firms that really no no the business well, particularly when you are dealing with such complicated and and to some extent strategic issues that are facing the clients and where they want somebody that knows that business well and that's where we are.

I've got such great experience and credentials.

Thank you.

Thank you. Our next question comes from the line of Bill Sutherland from the Benchmark Company. Your line is now open.

Thanks, and good evening guys.

Most of mine have been asked but I was wondering if you could give a little more granular education just in terms of maybe the direction of the pipeline and other activity as you think about that based on research administration technology and strategy and ops.

Yeah.

Well good luck I'll give a kind of a general comment John you can maybe supported by numbers if necessary I think research.

Research has been.

Relatively strong throughout there was a period of time when a lot of the research couldn't be done just because people really weren't allowed on campus I think researchers were able to could begin coming back to campus.

Quicker than students so that part of the business for the most part I think has stabilized and and I think throughout this whole thing. So research, particularly biomedical research is going to end up having.

I think it even bigger future then.

Or wise would have pre corporate so research is pretty steady.

The economic strategy not britches business also is very steady I think the intensity of the work that theyre doing there, particularly around clients wanting to.

Either kind of readjust their strategic view or more importantly, and more frequently they are now looking to kind of do two or three or four trials of of trying to develop a budget model, that's actually going to work for them in the future.

Based on the new reality, so that business has actually continued to well as well.

The technology part of it is the one where I think earlier in the year certainly pre call. Good we had anticipated some larger cloud implementation, starting mid year, and that's where things have been delayed a little bit and so I think thats beginning to pick up there certainly the clients are not totally dormant but and.

And we've won a couple that will likely get started in in in the first quarter, but I think that's where you're going to start seeing the fact I think once once they understand that they can actually deal with the fall semester, and it's not going to be terrible.

I think they are going to begin locally focusing on how to begin to go back and get back on track with their technology strategy and my guess is that will begin starting in the first and second quarter.

And now I'll add to that Jim that similar to health care that the pipeline in education is as robust as Dan.

Perhaps a record, but certainly in recent times and that.

I think not only do we feel good about that as we transition to more of a normalization of the operating environment education and the reality that there is a lot of projects right now that are kind of top that need to be need to be completed but in talking with our teams when we look longer term.

Clearly there have been some delays in 2020, given everything that's gone on in the higher end environment, but we know at our client base, which as a reminder is typically the top 150 research universities in the last.

Those projects still need to get done and ultimately even if they are delayed we feel very strongly that they're still going to come through and just commenting on something Jim mentioned earlier, we feel very good about our win rate on the projects that have closed during this period of time. So we continue to feel good about our competitive position and.

Volume of work Thats there in the pipeline supports that so we feel good.

Where the business is trending over the longer run it's just been a very disruptive period in the short run for for higher Ed for reasons that I think we all understand.

Got it that's helpful.

John to support quarter guidance, the implied guidance reflect.

Any of the.

Dissipated.

The benefits of restructuring in terms of cost structure.

Only to a very minimal extent, though.

They're still going to be.

The we expect that the majority of.

On actions related to the office space will happen by the end of the fourth quarter, though some of that office space may move into the first quarter and.

Fall from an employee perspective.

Any employee that was impacted has been notified on those employees will still be providing home service in many cases through midway through the fourth quarter. So the impact is going to be minimal from a fourth quarter operating results perspective.

Okay.

That's all I got thanks, guys.

Yes.

Thank you as a reminder, ladies and gentlemen, if you have a question at this time. Please press star one key on your Touchtone telephone. If your question has been answered or you wish to remove yourself from the queue. You may do so by pressing the pound team.

Our next question comes from the line of Kevin Steinke from Barrington Research. Your line is now open.

Hi, I just had one follow up I'm, just wondering as it relates to your health care clients.

How they're reacting to preparing for.

Yes.

Cobot serve.

Surge were seeing in the fall here.

And you know Thats impacted.

The pace of your pipeline conversion at all.

Kevin I think if you go back and you look at the anticipated pace that happened when that when the first quarter was for sitting back in March and April I mean, it was devastating to basically shut down everything just to make room for actual or potential corporate patients.

Certainly even though it's.

Scheme of things, it's been a relatively short period of time reality as there has been incredible.

Knowledge gained in terms of how better to treat patients.

Patients so you've got to several that and that impacts our hospitals in several ways number one the length of stay is.

Is dramatically less than it used to be the severity of the owners that are coming in are less that's partly a result of the fact that they have a younger population at that is getting more and more is increasingly getting the virus.

But I think the biggest issue is that it just have learned how to deal with that much better. They've also been found ways to kind of cordon off the call. Good patient. So that you actually can keep that to extent, possibly keep the rest of the hospital.

Trying to operate as normal as can be and so I think that even with the current.

Trend that even with the increase in recent hospitalizations I don't think this is going to have anything close to the kind of devastating impact that it had on hospitals back and back in the earlier in the spring.

So the one other point that I'll mention is that I think the health care clients in general benefited from a lot more financial support back in the spring than University clients are getting right now and that may become a political issue.

Post election, I don't know for sure, but I think it's interesting that you really found that the federal support for a lot of hospitals actually eased some of what appeared at one point to be huge huge deficits actually enabled most of them to kind of close to breakeven and some actually to make some money. So I think it's a long way of saying I think the curve.

The situation is going to be handled much.

Much better than than they were able to handle that back in March April and May.

Okay Thats helpful. Thank you very much.

Thank you there is no more questions in the queue I'd like to turn the call back over to Mr. Roth.

Thank you and I want to thank all of our employees of Shiran for staying focused and representing this company so well admits.

Surely adverse and unusual conditions I'm very fortunate to be able to work with such innovative collaborative and talented colleagues everyday.

Oh gosh that at work.

As is our normal practice during the fourth quarter, we will be conducted outreach with our shareholders regarding matters of corporate governance and hope to connect with you as part of this process before our next call in February we.

We encourage all shareholders to contact us if you have questions or wish to provide feedback.

Thank you for joining the call. This afternoon, and we look forward to our next call in February have a nice evening.

That concludes today's conference call. Thank you everyone for your participation.