Q4 2020 Huron Consulting Group Inc Earnings Call

[music].

Good afternoon, ladies and gentlemen, and welcome to Huron consulting group's webcast to discuss financial results for the fourth quarter and full year 'twenty 'twenty.

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 Companys 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 SEC for a disclosure of factors that may impact subjects discussed in this afternoon's webcast.

The company will be discussing one of more non-GAAP financial measures. Please look at the earnings release and on Hurons website for all of the disclosures required by the SEC.

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. Roth. Please go ahead.

Good afternoon, and welcome to Huron consulting group's fourth quarter and full year 2020 earnings call with me today are John Kelly, Our Chief Financial Officer, and Mark Hussey, our President and Chief operating Officer.

Before I begin I would like to highlight that we have placed supplemental materials on our website at IR Dot Huron consulting group Dot com to provide additional detail about the range of our views on how the COVID-19 pandemic might influence our outlook for 2021.

These supplemental materials should be reviewed in conjunction with our earnings call and not on a standalone basis.

Companywide revenues declined 4% in 2020 compared to 2019, reflecting the challenges that the pandemic presented to our two largest industry verticals health care and education.

These challenges were partially offset by strong growth in the business Advisory segment, which achieved record revenues during the year and now represents 32% of total company revenues.

Our strategic focus on expanding our offerings into commercial industries within the business Advisory segment proved to be beneficial in 2020, highlighting the benefits of increased diversification in our portfolio and end markets.

I want to spend a few minutes talking about 2020 to provide perspective on how the year evolves for Huron.

Our primary focus has been and continues to be unprofitable revenue growth.

And while we didn't achieve our objectives set prior to the pandemic share.

<unk> response during the pandemic was strengthened by our collective resiliency creativity and market relevancy amidst the many challenges that are faced our client base.

We were proactive and took critical actions during the year that we believe position this company for growth in 2021 and beyond.

In 2020, when many of our clients were experiencing substantial losses, we worked closely with them to develop solutions, which help them manage through this period of significant disruption.

In 2020, we generated over $30 million in revenue from offerings that were directly responsive to COVID-19 pressures faced by our clients.

These critical efforts demonstrated the extent to which we can be nimble and innovative and quickly create new revenue opportunities.

We also successfully recruited senior leaders into multiple businesses, including several experienced personnel that will help us further execute on our commercial strategy as we establish service lines that we believe will generate new avenues of collaborative growth beginning in 2021.

We also took proactive measures to manage our cost base throughout the year, Inc.

<unk> tightly managing our discretionary spending modestly adjusting our workforce and reducing our real estate footprint to achieve a level of operating efficiency that we believe will create a foundation from which we can grow and expand margins in 2021.

In addition to our cost management efforts, we effectively managed our cash position increasing cash flows from operating activities to $137 million for the full year.

Our strong cash flows enabled us to reduce our net debt by $60 million, while also initiating and successfully completing the implementation of a new cloud ERP system, which went live on January one 2021.

We continue to strengthen our advanced technology offerings across all of our segments. While the term digital transformation has many meeting me meetings the.

The importance of technology in helping our clients survive and thrive in environments of disruption is very apparent as evidenced by the strong demand we saw for our digital technology and analytics offerings in 2020.

Revenue from technology services throughout the company has had a compound annual growth rate of nearly 20% since 2015.

And has grown to over 30% of total company revenues in 2020.

We believe this trend will continue based on the demand we anticipate for these services across all of our end markets.

The pandemic has highlighted it's heightened I'm sorry has highlighted the need for many organizations to adopt cloud technologies automation and analytics to strengthen their competitive position and be responsive to this rapidly changing environment.

Some professional services firms have strong technical competencies, while others have deep industry experience Huron has both and these competencies are integrated across all of our businesses, enabling us to provide digital technology and analytics offerings across multiple industries.

Lastly, we continue to support our people professionally and personally as they manage through an incredibly taxing environment.

In 2020 increased our already high employee employee engagement scores clearly demonstrating that our nearly 4000 person team is supportive of how we manage through the pandemic and equally important that they continue to be excited about being a part of our growth strategy.

I will now share some additional insight into our fourth quarter and full year 2020 performance along with our expectations for 2021.

On a full year basis healthcare segment revenues declined 12% over 2019 and.

In the fourth quarter of 2020, the health care segment declined 18% over the prior year quarter consistent with our expectations.

The resurgence in COVID-19 patients, while not as disruptive as it was at the onset of the pandemic and the well justified distraction caused by the vaccine rollout during the fourth quarter took a toll on our health care clients, which resulted in some project deferrals.

We remain cautiously optimistic about performance in this segment as our sales pipeline continues to develop driven by the increased pressures facing the healthcare industry.

When the ongoing impact of the pandemic eases, we expect there to be a resurgence of demand for our health care services across the portfolio, including our performance improvement offerings.

We expect our clients will continue evolving their care delivery models and operations to accommodate the ongoing transformation taking place across the industry.

Efforts to improve cash collections and create better access to care will also be important ongoing priorities for healthcare clients with margin challenges.

Finally, and consistent with my prior comments, we expect to see an increase in technology spend among health systems, particularly in support of telehealth and the application of intelligent automation and analytics.

Turning to the business advisory segment on a full year basis segment revenue grew 6% year over year, driven by strong demand in our digital technology and analytics and distressed advisory offerings offset by softer performance in our strategy related offerings.

In the fourth quarter of 2020 business Advisory segment revenues declined 4% over the prior year quarter.

The business Advisory segment faced tough comparisons following solid growth in the fourth quarter of 2019.

The quarter over quarter decline in revenue was primarily attributable to our distressed advisory and strategy offerings, partially offset by continued growth in our digital technology and analytics offerings.

Our technology and distress advisory offerings, both achieved record revenues in 2020 in each of the four businesses. In this segment are well positioned for growth in 2021.

Driving that growth will be the need for companies across all industries to reevaluate their market position and future strategy to accommodate the disruptions and opportunities that have resulted from the pandemic.

I want to highlight our continuing investment in expanding our commercial sector expertise and capabilities we.

We believe that our investments all of which are contemplated within our guidance estimates will accelerate new growth areas and positioned Huron to take advantage of the significant market opportunities that exist across the commercial industries. We serve in addition to the collaborative opportunities within health care and education.

Turning now to the education segment revenues in the segment were generally flat in 2020 as compared to 2019.

In the fourth quarter of 2020 education segment revenues declined 21% over the prior year quarter.

Coming off of a very strong first half of the year. This segment saw several engagements get deferred until 2021.

The lack of growth in 2020, which stands in Stark contrast to consistent growth in this segment over the past five years reflects the dramatic impact from the pandemic on the operations and finances of our of our higher education clients.

Since the beginning of 2021, we have seen positive momentum in demand for our research strategy business operations and student related offerings.

While our clients remain cautious about starting significant technology related engagements given the size of these investments.

We believe that as the market stabilizes previously deferred opportunities will begin to restart.

Many educational institutions found that their digital platforms were insufficient to address the surge and remote learning and are equally deficient in terms of introducing cloud technology to the administrative research and student aspects of their business.

While many of our higher education clients, we're focused entirely on transitioning to remote learning.

During the fall semester, most colleges and universities have brought students back to campus in early 2021.

While there is some hope that this year will be less disruptive educational institutions will face a dramatically different world in the future and in many cases current business models will not suffice in the future environment, creating numerous opportunities for our services.

Let me turn to our expectations and guidance for 2021.

Our revenue guidance for the year is $830 to $890 million.

We also expect adjusted EBITDA in a range of $10 75 to 11, 75% of revenues and adjusted diluted earnings per share of $2 25 to $2 75.

I will now provide a few thoughts regarding our expectations for each segment as well as overall company profitability.

With the pandemic and its corresponding uncertainties still evolving we believe we have we will have modest sequential revenue growth in the first half of the year as compared to the second half of 2020.

Followed by stronger growth in the second half of 2021, which translates into approximately 2% growth for the full year at the midpoint of our 2021 guidance.

Several factors are in play in arriving at this estimate.

First while we have seen some positive and more sizable conversion conversions recently in our pipeline. We believe it is appropriate to be conservative in our estimates until we get better visibility as to how and when the pandemic will ease, particularly in the health care and education industries.

Second this guidance reflects a tough comparison over the first half of 2020.

Although all our health care business felt the biggest impact in the March through June timeframe last year, the education and business advisory segments had a strong first six months last year.

Third we believe that the second half of 2021 will be better than the first half of this year, particularly for health care and education it.

It is our hope that our fourth quarter run rate will be closer to our pre pandemic run rate in the fourth quarter of 2019.

At the midpoint of our guidance, we anticipate healthcare segment revenues will grow in the low single digit range 2021 as compared to 2020.

Our guidance also reflects mid single digit revenue growth in the business Advisory segment.

In the education segment, we anticipate a low single digit decline in revenue growth for the for the year reflective of a difficult first half comparisons driven by the strong growth we experienced in this segment at the beginning of 2020.

In terms of margins in 2021, our guidance reflects our commitment to expanding margins and is inclusive of the proactive cost savings measures taken in the fourth quarter as well as strategic and operational investments that we believe will enhance our revenue growth trajectory drive deeper operational efficiencies.

And create opportunities to better leverage our G&A.

My management team and I firmly believe that we have positioned this company for solid growth in the coming years.

Our growth in the commercial markets remained strong in 2020 and there is no question in my mind that we are well positioned to address significant challenges that the pandemic has had on healthcare and education industries.

Our cautiousness at this time at the end of February.

Indicative of our desire to be conservative as to the timing of increased conversion and our health care and education pipelines. Although in both cases, we have already seen some reflection of that taking place.

We are firmly committed to our financial strategy of achieving sustainable organic revenue growth and expanding margins over time.

In summary, our clients are facing significant disruption and mounting financial and operational pressures that we believe will drive strong demand for our services as the company as the economy stabilizes and we believe we are well positioned to take advantage of these opportunities as they arise.

While we believe we have navigated the near term disruption our focus has consistently remained and positioning huron for the longer term.

We are committed to executing.

On priorities to drive shareholder value, which include achieving sustainable organic growth driving margin expansion.

Strategically deploying capital and investing in our people.

Amidst the turmoil of 2020, we continued to execute on our five year strategy that will strengthen our competitive advantage across markets now let me turn it over to John from more detailed discussion of our financial results John.

Thank you Jim and good afternoon, everyone.

Before I begin. Please note that all 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-K, and Investor Relations page on the Huron website 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 and why management believes they provide useful information to investors regarding our financial condition and operating results all.

Also unless otherwise stated my comments today are all on a continuing operations basis.

Also our acquisition of force IQ, which closed in November is included in our fourth quarter financial results and the business Advisory segment.

Our recent acquisition of <unk> solutions, which closed in February is not included in our fourth quarter financial results.

<unk> solutions will be included in the business Advisory segment, beginning in the first quarter of 2021.

The <unk> solutions acquisition strengthens our data management and governance capabilities as we help clients better manage their data and optimize their operations.

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

Revenue from the fourth quarter of 2020 were $198 $3 million down 14, 6% from $232 $3 million in the same quarter of 2019.

The decline in revenues in the quarter was primarily driven by the health care and education segments as the impact of the pandemic continued.

Yes.

For full year 2020 revenue was $844 1 million.

Down three 7% from $876 $8 million in 2019.

As Jim mentioned the decline in revenue over the prior year was driven by the health care and education segments, which was partially offset by solid organic growth in the business Advisory segment.

The performance of the business Advisory segment, which achieved record revenues in 2020 emphasizes the benefits of a more balanced portfolio across our services and end markets.

Net loss was $6 $1 million per 28 per diluted share from the fourth quarter of 2020.

It includes the pre tax impact of restructuring and lease impairment charges of $18 7 million.

This compares to net income of $14 4 million or <unk> 63 per diluted share in the same quarter in the prior year.

Full year 2020, net loss was $23 $7 million.

Our $1 <unk> per diluted share and includes the previously mentioned fourth quarter pre tax restructuring charges as well as the first quarter pre tax goodwill impairment charge of $59 8 million.

This compares to net income of $42 million from $1 87 per diluted share in 2019.

Our effective income tax rate in the fourth quarter of 2020 was a benefit of 43, 7% on a pre tax loss of $10 8 million.

Compared to 18, 5% from pretax income of $17 6 million a year ago.

The tax rate for Q4 of 2020 was more favorable than the statutory rate inclusive of state income taxes, primarily due to the impact of our net operating loss that will be carried back to prior year income at a higher prior year tax rate as provided for under the cares Act and federal tax credits recognized during the quarter.

On a full year basis, our effective income tax rate from 2020 was 30%, which is more favorable than the statutory rate inclusive of state income taxes, primarily due to year to date pre tax losses.

Tax benefits related to federal tax credits, a discrete tax benefit from investments share based compensation awards and tax benefits related to non taxable gains on our investments used to fund our deferred compensation liability.

These favorable items were partially offset by increases in our valuation allowance primarily due to increases in deferred tax assets recorded from foreign tax credits.

Certain nondeductible business expenses and the non deductible portion of the goodwill impairment charges recorded during the first quarter of 2020.

Yes.

Adjusted EBITDA was $17 $1 million in Q4, 2020, or eight 6% of revenues compared.

$29 4 million in Q4 2019 net.

All 6% of revenues.

For full year 2020, adjusted EBITDA as a percentage of revenues declined 10, 3% compared to 12.0% in 2019.

Adjusted non-GAAP net income was $10 $2 million 45 per diluted share in the fourth quarter of 2020 compared to $18 million from <unk> 79 per diluted share in the fourth quarter of 2019.

For the full year 2020, adjusted non-GAAP net income was $47 9 million or $2 15 per share compared with $61 6 million or $2 74 per share in 2019.

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

Healthcare segment generated 43% of total company revenues during the fourth quarter of 2020.

Posted revenues of $85 1 million.

$18 5 million or 17, 9% from the fourth quarter of 2019.

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

On a full year basis healthcare revenue declined 11, 5%.

Lawrence based fees for the full year 2020 were $69 3 million.

Compared to $71 $1 million in 2019.

Operating income margin for healthcare was 28, 3% for Q4 2020 compared to 36% from the same quarter in 2019.

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

Partially offset by higher average consulting fill rates and lower indirect costs on a per.

Full year basis operating margin was 26, 9% compared to 31, 5% in 2019.

The business Advisory segment generated 33% of total company revenues during the fourth quarter of 2020 and posted revenue of $65 $9 million down $3 million or four 3% from the fourth quarter of 2019.

Revenue for the fourth quarter of 2020, including $1 $3 million from our acquisition of force IQ.

The quarter over quarter decline in revenue was primarily attributable to our distressed advisory strategy offerings, partially offset by continued growth in our digital technology and analytics offerings. The business Advisory segment tough comparison relative to the fourth quarter of 2019, which benefited from higher success fees.

And the recognition of revenue that had been previously deferred upon receipt of a signed contract.

On a full year basis, the business Advisory segment revenues grew five 9% year over year, driven by strong demand for our digital technology and analytics and distress advisory offerings.

The operating income margin for business Advisory segment was $16 three percentage for Q4 2020 compared to 24, 2% from the same quarter in 2019.

The quarter over quarter decline in margin was primarily due to increases in performance bonus expense based on full year results from a revenue generating professionals increased contractor expenses and increased restructuring charges.

On a full year basis operating margin was 18% compared to 19, 7% in 2019.

The decrease in operating margin year over year was primarily attributable to the shift in revenue mix toward digital technology and analytics offerings.

We have a relatively lower margin.

From our strategy offerings, which traditionally have evolved in the higher margin.

Our strategy offerings were impacted by the effects of the pandemic during 2020.

The education segment generated 24% of total company revenues during the fourth quarter of 2020 and posted revenues of $47 3 million.

Down $12 5 million from.

28% from the fourth quarter of 2019.

This 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.

On a full year basis education segment revenues were largely flat versus the prior year, our education business had a strong start to the year driven by the momentum we had built in 2019 before our clients were severely disrupted by the pandemic.

The operating income margin for education was 12, 1% for Q4 2020 compared to 29% for the same quarter in 2019.

Quarter over quarter decline in margin was primarily due to a decrease in billable consultant utilization and restructuring charges related to the head count reductions during the quarter.

On a full year basis operating margin was 21, 3% compared to 24, 8% in 2019.

Other corporate expenses not allocated to the segment level were $47 $4 million in Q4, 2020, compared with $34 9 million in Q4 2019.

Quarter over quarter increase in corporate expenses was primarily attributable to $14 5 million of restructuring charges taken in the quarter to reduce our operating costs.

Addressing the impact of the COVID-19 pandemic on our business, including the work force reduction announced on our last earnings call as well as certain office exit costs.

Fourth quarter corporate expenses also included $3 $1 million in expense related to the increase in liability for our deferred compensation plan, which.

Which is fully offset by a corresponding gain in other income related to the increased value of the assets used to fund that obligation.

Now turning to the balance sheet and cash flows.

So came in at 52 days from the fourth quarter of 2020 compared to 62 days from the third quarter of 2020.

This record low DSO reflects the efforts of our project and corporate teams to work closely with our clients during 2020 to ensure collections, while supporting the needs of our clients.

Total debt includes the $200 million in senior bank debt and a $3 million promissory note for total debt of $203 million.

We finished the year with cash of $67 million for net debt of $136 million.

This was a $40 million decrease compared to Q3, 2020, and a decrease of $60 million compared to the end.

Compared to year end 2019.

Our leverage ratio as defined in our senior Bank agreement was approximately one nine times adjusted EBITDA as of December 31, 2020, compared to one six times adjusted EBITDA as of December 31, 2019.

Our net leverage ratio was one three times trailing 12 months EBITDA as of December 31, 2020, when the bank definition calculation is adjusted for cash on hand.

This compares to one six times trailing 12 months EBITDA as of December 31, 2019, when calculating in the same manner.

Cash flow from operations for 2020 was $137 million.

We used $60 million of our cash to invest in capital expenditures, resulting in free cash flow of $121 million.

We also used $27 $1 million of our cash to repurchase approximately 425000 shares 2020 to partially offset the dilution created by our share based compensation programs.

All right.

Finally, let me turn to our expectations and guidance for 2021.

For the full year 2021, we anticipate revenues before reimbursable expenses in a range of $830 million to $890 million.

Adjusted EBITDA in a range of 10, 75% to 11, seven 5% of revenues.

And adjusted non-GAAP EPS in a range of $2 25 to.

The $2 75.

We expect cash flow from operations to be in the range of $70 million to $90 million.

Capital expenditures are expected to be approximately $15 million to $20 million and free cash flow as are expected to be in a range of $55 to $75 million net of cash taxes and interest and excluding noncash stock compensation.

Sure.

Weighted average diluted share count for 2021 is expected to be $22 5 million.

Finally, with respect to taxes, you should assume an effective tax rate in the range of 20% to 30%, which comprises a federal tax rate of 21%.

Our blended state tax rate of 5% to 6% and incremental tax expense related to certain nondeductible expense items.

Let me add some color to our guidance starting with revenue.

Given the ongoing uncertainty created by the COVID-19 pandemic.

From a wider revenue range than we typically would at the outset of the year.

The midpoint of the guidance range reflects just under 2% revenue growth over 2020 revenue of $844 million.

The midpoint of guidance assumes that we will report a year over year decline in revenue and <unk>.

Low double digit range in the first quarter.

And the first quarter of 2020 was relatively uninfected by the pandemic.

Our guidance assumes that we will see sequential growth from the second and third quarters and.

And that the back half of 2021.

Flex strong year over year growth when compared to 2020.

With regards to the health care segment.

We expect low single digit revenue growth for full year 2021, and we expect operating margins will be in a range of approximately 26% to 30%, reflecting lower utilization in the first quarter that improved sequentially from the year progresses.

And the business Advisory segment, we expect to see mid single digit revenue growth for 2021, and we expect our operating margin in this segment to be in a range of approximately 19% to 21%.

The education segment, we expect revenue to decline in the mid single digit range in 2021, reflecting a very tough first half comparison to 2020 prior to the impact of the pandemic on this segment.

We expect operating margins will be in a range of approximately 23% to 25%, reflecting lower utilization in the first quarter net improve sequentially as the year progresses.

We expected, we expect unallocated corporate SG&A to be relatively flat on a full year basis in 2021 compared to 2020.

When excluding the fourth quarter restructuring charges incurred during 2020.

From the corporate expense impact of our deferred comp plan.

Turning to the total company.

Your line is adjusted EBITDA margin is expected to be in the range of 10, 75% to 11, 75% of revenues an increase of 95 basis points at the midpoint of guidance compared to 2020.

We anticipate that the first quarter of 2021 will be our lowest revenue producing quarter of the year.

Also in the first quarter, the reset of fringe rates at the beginning of the year, including FICA and our 401 K match.

It will have an impact on our first quarter expenses in this reset is fairly significant given our people driven business.

Lastly in the quarter, we expect an increase in stock compensation expense from restricted stock awards that will be granted in March to retirement eligible employees.

Yeah.

Based on these factors, we anticipate approximately 15% of our full year adjusted EBITDA and full year adjusted EPS to be generated during the first quarter.

As a closing reminder, with respect to 2020 adjusted EBITDA adjusted net income and adjusted EPS.

Other items that you will need to consider when reconciling these non-GAAP measures to comparable GAAP measures.

Reconciliation schedules that we included in our press release will help walk you through these reconciliations.

Thank you everyone I would now like to open the call to questions operator.

Thank you ladies and gentlemen, if you have a question at this time. Please press. The Star then the one can you touch tone telephone. If your question has been answered or you wish to remove yourself from the queue. You may do so by pressing the pound key.

One moment for your first question. Please.

Our first question comes from Tobey Sommer with tourists Securities. Please proceed sir.

Thank you.

As you envision.

The year unfolding with things more subdued in the first half per minute improving in the second.

As you start to add head count.

In grow again from that perspective, do you think youll be able to continue to generate leverage or will it take a little bit of time to absorb that acceleration process still.

Spanned margins.

Hey, Tobey its John I can.

Can start and then Jim or Mark can jump in with any color I think that given particularly in healthcare and education, where the utilization levels of the segments.

Segment level right now are lower they are in the mid $60 per the fourth quarter.

That is we do start to see growth and acceleration I think that we will be able to add.

First ramp up utilization.

We're hiring across the business right now and that includes in health care and education, I'd say the hiring that we're doing.

Those segments right now tends to be more strategic and more investments in areas, where we think we're going to see a lot of growth in the near term as opposed to really kind of adding capacity, but I think that as the year progresses on step one will be to utilize some of the capacity. That's there right now due to the lower utilization.

And then once we get into the back half of the year I do expect us to transition to hiring more aggressively including adding capacity at that point based on what our expectations for revenue are going to be in the back half of the year.

Yes, Tobey this is Jim I would only add that.

We have we have.

A good pipeline right now is for US. It's just a question of converting the pipeline and so I think as John indicated I think all.

Our sense would be that as the pipeline begins to open up and we've already seen signs of that happening across the board, including health care and education I think the first focus as John indicated would be that we would use the existing capacity but.

We also feel pretty confident about our ability to hire in a pretty timely basis, if that pipeline picks up quickly.

Okay.

Another kind of numerical thing, but also strategic.

Yeah.

Balance sheet and leverage that you outline here does show leverage going down could you.

Update us on your thoughts of the ranges of leverage that you would like to manage the business to <unk>.

<unk> sort of between acquisition size.

Hey, Tobey.

John again, I would say that from a <unk>.

Leverage perspective, our target leverage at this point is probably somewhere in the mid one range I'd say I think our viewpoint is that that.

It gives us flexibility to the extent that there is opportunities either as it relates to buybacks or as it might relate to strategic tuck in acquisitions to be able to execute on those things.

Well as to maintain a balanced approach in general we're able to take advantage of those opportunities, but still gives us plenty of plenty of room from a <unk>.

That covenant perspective, so I think the kind of the resting rate. If you will is probably around the mid ones and we're comfortable flexing all the way up to the mid twos I'd say anything above that just given the current economic environment, we tend to want to have a little more cushion.

And our balance sheet and to go much above above the mid twos, but thats generally how we think about it.

Thank you and then I have one question on the pipeline and I'll get back in the queue.

You did describe a sort of an active pipeline is there any any sort of comment you can give us on the size of projects and the nature of projects that light diff.

Defer to the extent there is a.

Our focus in the pipeline that is.

Something that's maybe different or new that you haven't been working on in the last year or so thank you.

Tobey. This is Jim I think I think the composition of the pipeline in terms of size is probably pretty consistent with what we've seen before.

And and so I think from our perspective as we tried to indicate in our traditional comments here.

What I mean, there really has been enormous changes, particularly in health care and education, but really across our markets and and I think.

Our pipeline reflects the fact that a lot of our clients are really facing a very different environment. When this pandemic begins to ease and so I think our pipeline reflects some of the seriousness of some of those changes that are likely to take price and that's why I said, we feel good about we feel very good about the demand for our <unk>.

Services is just a question of trying to get.

Timing right at this point in time, and as John and I both indicated during this call.

We had we had disruptions that we went back in June of last year, we thought well, maybe the fall would be a lot quieter and it obviously was far from quiet and so now things kind of appear to be kind of maybe maybe quieting down again and I think our clients are frankly looking at the exact same thing so I feel good about the pipeline I feel.

Good about the portfolio of offerings that we have I mean, I'm sorry, the portfolio of opportunities that are ahead of us. It's just for US it's just going to be a question of <unk>.

The timing at this point in time, and having them come to fruition.

Thank you.

Our next question comes from Andrew Nicholas with William Blair. Your line is now open.

Hi, good afternoon.

Just wanted to follow up on colby's questions around margins, just just wondering kind of underlying that guidance what does guidance assume in terms of kind of the return of some of the more temporary cost savings you realized.

Because of the pandemic I'm thinking about kind of the more discretionary items like travel and entertainment and marketing meetings and what that might mean.

For long term.

Thoughts on the cost structure.

I'll start on that one Andrew I would say the guidance generally contemplates that it's probably still a predominantly remote work environment through the first half of the year and that by the time, we get to the second half of the year that we do see some of those expenses related to business development.

Coming coming back into the system at that point. We also expect I think based on how we see the revenue growth trajectory that we're going to be as I said earlier question that we're going to be more aggressively hiring at that point as well too. So I think that you will see.

Relatively certainly if youre looking year over year, you're going to see lower expense levels in the first half of 2021 compared to what we had in the first half of 2020 I think by the time you get to the back half of the year you will see some of those expenses, increasing but can be commensurate to the revenue growth that we see and in fact, I think all thats going to be a period of expanding margins.

Net time, so you're going to see the revenue growth outpacing expense growth, but you will start to see more expenses come into the system to support that growth in the back half of the year.

Great. Thank you that's helpful and then.

For my follow up I, just wanted to touch on healthcare hiring specifically I think on.

On last quarter's call you touched on are estimated about 60 employees or 60 staff members.

Potentially leaving as a result of the restructuring, but it looks like.

John actually.

Came in quite strong so I'm just wondering if there is anywhere in particular.

That we should be thinking about in terms of where that hiring is focused on and what that says about demand.

Demand for specific subsectors within that business.

I think I can.

I think the first crack at it Andrew I think that.

Even as we talked about during the call last quarter on the actions that we take in the fourth quarter and were really around some of those areas of the business that we thought.

Would it be a little bit of a longer lasting impact due to the pandemic, but in the areas where based on the conditions. We see in the market for example, the performance improvement.

Loosens within within health care on there, we do expect a rebound during 2021. So we're much more cautious there as far as reducing any heads I think as far as the hiring goes.

We do continue to make strategic hires and Thats really at all levels, we're bringing in.

Key leadership in certain areas and on people that we think are really going to drive our growth to accelerate in the recovery that we're expecting as the Euro zone. So I think what you see there is a little bit of a mix where <unk> got.

Some reductions in areas are likely to be a little bit slower to return to growth.

Offsetting partially by some head count increases in areas that we expect to grow more aggressively during 2021.

Got it thank you all get back from Q.

Our next question comes from Bill Sutherland with benchmark. Your line is now open.

Thank you.

Good evening everybody.

I'll just noticing the hourly bill rate for health care John.

Jumping up from the fourth quarter.

Is that anything to do with the nature of the projects are.

Okay.

Yes.

During the fourth quarter, we had some really nice performance on several key projects.

In terms of reaching from contingent fee milestones.

The accounting rules for contingent fees now are generally more on a per cent complete basis like our fixed fee jobs, but when you do reach certain milestones.

You can get benefits that flow through the P&L. So we had some of that during the fourth quarter as well as some jobs were keen just operating with excellence efficiency during the fourth quarter and growth.

Able to pick ups from efficiency gains too. So all of that is flowing through that bill rate for the fourth quarter, if I kind of spin net into future looking I would not take the fourth quarter healthcare bill rate and use that as a injections per year.

I, probably though I think it is fair to look at the full year Bill rate that we had in healthcare for this year, which was up nicely over 2019, I think that that rate probably is a reasonable way to look at things going going into the future.

Okay.

And then just to revisit the M&A topic for a second.

Doug couple of nice bolt ons here for business advisory.

Should is that kind of what your pipeline as you look at the new additional opportunities is that kind of what it looks like.

Anything that.

Might be more of a difference maker more strategic.

Bill. This is Jim I think I think what you saw is going to be pretty much reflective of the things that we're looking at right now when there is an opportunity for us to really take on a really important strategic addition to our competencies will look at it we were fortunate to get two really good companies too.

Become a part of us, but I think that that will probably be reasonably reflective of any M&A that would take price in the future. Obviously, we look at all kinds of opportunities.

But I think my my sense is at this time it would be mostly in line with what you've seen so far.

And I would expect.

I'm sorry go ahead Jim.

I was going to add though.

Add to Jim's comments, when we were looking at M&A really.

Almost never more capacity or things that we already do it's usually adding new capabilities and obviously that technology area is an area where.

E C.

<unk> K.

Capabilities that are out there in the market and other things that are coming to market for our clients are continuing evolving so oftentimes smaller tuck in type acquisitions or quicker way to get those capabilities into our portfolio.

And all the way we always look at it is first kind of going back to the strategy second thinking about what in the long run is going to really accelerate our organic growth.

And then make decisions about okay. So what capabilities are you going to grow internally versus maybe where theres an opportunity to go and buy an accelerate something and so I think the last couple of acquisitions that you've seen are perfect examples where our conclusion was that.

It was the area, where the technology was evolving it was going to be important to our clients and is the fastest way for us to move into that space was via the acquisition versus building internally and we're optimistic as we look forward that in the long run over the last couple of years is going to provide more organic growth for us on having.

Haven't gone the M&A route.

Bill This is Jim.

I'm, sorry, I don't want them to John's comments and that is sometimes as we've seen not just with.

<unk> and unit cost, but also in prior acquisitions of that size, we often kind of get to know them. When we're working with them on a client site and we see the immediate immediate synergies that exist and so it gives us a really good understanding.

To know how they would kind of sequence into our core set of services. So that's an added advantage and I suspect that.

As things go on particularly in the technology area that will be indicative of what we're going to see in the future and that is just you know organizations that are.

Smaller organizations that we think can really add value to us in our in our technology portfolio and that.

And that we also have a chance to kind of gauge their culture as well so.

It's been a it's been a very good strategy for us to follow and I feel I think we'll probably see more of that from the future as well.

And maybe bill this is mark I, just wanted to throw one more comment and thats drained the swamp on those but one other reason we can move on just tuck ins is that.

Kind of a unbeknownst to many people over the last three years, we've really built full enterprise platform practices within our technology capabilities, So ERP CRM EPS.

Data and analytics, and so with that scale and going to now 20 partners in the mix, we have the opportunity to be a lot more targeted and selective. So that's why you probably won't see us do something.

More of a larger strategic acquisition in that space absent, a very clear and compelling reason to do so.

All right.

Makes sense thanks, guys.

As a reminder, if you have a question. Please press the Star then the one can you touch tone telephone.

Our next question comes from Kevin Spanky with Barrington Research. Your line is now open.

Hi.

Wanted to ask about <unk>.

Education segment you noted.

Some positive.

Demand momentum there in several areas, although it sounds like the larger technology projects are still being deferred.

What do you think it will take for.

Higher education institutions to start moving forward with those larger technology.

Projects in this.

Whether or not they do kind of a swing factor as to how.

Where you are going to fall in the guidance range I guess for the year.

Kevin All all of those Jim I'll start off by saying that I think.

What's going what it's going to take I think for them to get more confident about their ability to take on.

<unk> projects, particularly bigger projects is probably to stability I think I think back in the late spring and early summer there was virtually zero stability in there on our campuses.

In the fall there was some but not a lot of stability I think theres, a little bit more right now and so unless theres. Some other major blip I think youre beginning to see kind of an increasingly stable environment and thats, what theyre looking for and I think once they get confidence that that's going to be the case.

I know theyre, hoping I know were hoping that that comes relatively soon.

I think youre going to start seeing things open up pretty quickly in part because.

The pandemic has really highlighted is exactly the need for the kind of services, we're doing particularly on our technology front, but also on a strategic front within education.

They just really are I think in most cases, including even the larger research universities many of them were very.

Behind the curve in terms of being able to.

Incorporate advanced technology into their business and so it came to fruition during the pandemic and they were really kind of hindered by that so I think I think once they sense from stability.

In terms of the pandemic and our confidence that they're going to have kids can safely return to campus I think thats when youll see things begin to open up.

All I'll add Kevin that.

Just to be clear, we do see some.

Some of the larger technology projects coming to market.

So it isn't that uniformly university or paused on those projects and we have seen a number of them come through we continue to see ones that we expect to close during the first half of this year. So that the projects are there. It's more a case of just getting back to that growth trajectory that we had in 2018 and 19.

And Thats were mixed in with some of those that are going to market you do have some where there have been delays.

Which.

That's kind of what we're waiting for is for it to get back to that level that we saw.

Enter into 2019, Ironically as much as in the short term. This is an area of the business. We're in the education side, where there is some reduced visibility compared to what we had in 2018 in 2019. The flip side. This is an area of the business where.

The needs of our clients are pretty well defined and the market is pretty well defined and it's a big market and we think in the long run it's going to be on perhaps.

The greatest market opportunity for this business.

Once that stability that Jim referred key comes back into the system, but it is a bit of timing right now and just.

Just to kind of reduce visibility from what we're used to when it given the impact of the pandemic.

Yes, that's helpful. All good things.

I'll also ask about.

Within business advisory.

Strategy offerings, you mentioned that.

All for your.

Businesses within this segment are positioned for growth in 2021.

So what does the pipeline look like on the strategy piece of the business.

Is there a case to where clients are still kind of holding off until they get some more comfort or is that.

Pipeline.

Moving forward at all.

<unk>.

Yes.

I think the pipeline for the strategy business is actually moving along quite nicely I think I think the hardest hit so that business was probably at the very beginning of the pandemic back in.

Certainly the first half of the year and probably into some of the summers as companies were just trying to figure out.

Where this was going we've seen the pipeline pick up nicely in that business and I think there I think.

Pretty confident they're going to have a much better 'twenty one than they did 20.

Yes.

The thing that earlier in the year, Kevin was do you think about kind of their strategy offerings and an immediate.

In the immediate aftermath of the pandemic when comp.

He is necessarily our first force to look a little more short term focused they weren't going to be pretty heavily impacted because of that shifting priority prioritization from our clients, but we said that on the flip side.

Coming out of an event like that the expectation would be the demand would actually pick up.

Because of clients need kind of in the aftermath to start to rethink their strategy and how they're going to move forward in the new environment and to Echo everything Jim said I think we're I think we're very optimistic that we're seeing that now in the pipeline and we definitely expect growth from that part of the business in 2021.

Okay. Good.

I wanted to ask about you mentioned that you internally.

The new cloud based ERP system go.

A lot of January one.

Should we think about the providing a longer term opportunity to generate cost savings or.

What other sort of benefits might be able to derive from that.

In the long run Kevin we are we are thinking of it as.

Unity in the long run to support.

<unk> margins for the business as we grow and I think.

The real opportunity there from our perspective is.

Just the additional visibility the new system is going to provide from our projects as far as.

Giving us visibility to <unk>.

Situations, where we might have an overrun in where things are progressing as we would expect day kind of getting better real time information about that will be great and then in terms of just our talent.

Really excited about the tool as far as its ability to really help us.

Identify the best talent within Huron from different projects, even across all different segment line in different projects.

Different different land in terms of different practices and the ability to make sure that we are able to get the right resources on the right projects at the right time. So from our perspective those are two things when you think about running a professional services business that should enable a lot more efficiency.

As we move forward and there is automation that's part of the tool to that when we think about growing the business as we plan to do over the course of time.

We expect to be able to use that efficiency that comes with a tool to be able to grow more efficiently without having to lay around a bunch of newer incremental SG&A costs.

<unk>.

As we grow so I think those are probably the fastest of it where we see the opportunity to expand margins over time.

Okay. Good.

Two last quick ones here.

So.

How are you thinking about capital allocation in 2021.

Still want to continue to pay down debt.

Are you kind of or are you kind of where your comfort leverage ratio now so that they would open up the opportunity.

Per share repurchases it sounds like you still want to pursue the <unk>.

And M&A, but how you're thinking about capital allocation this year.

And then Kevin from our perspective, it's going to we're going to continue with our balanced approach to it.

As you noted.

If there are tuck in M&A opportunities.

That we think have.

Have a good chance to really.

Add new capabilities to the business that will spur organic growth into future periods. So that's something that we would pursue.

Far as share buyback goes we currently have.

$50 million authorization from our board of which we've got $45 million left and so I guess depending on.

The opportunity there thats another area, where we may deploy cash and then just from a principal perspective, we do have dilution of our share base from our share based compensation programs and.

To the extent, we can do share buybacks to offset some of that dilution that's something that we're committed to doing.

Then from a debt perspective, I think it is it does just remain important to us to make sure that we have flexibility and to make sure that.

Our balance sheet remains in a healthy shape that it's in now so kind of default when we're not doing either M&A or share buybacks will be too.

<unk> reduced our net net debt balance.

Okay, Great and then just the last one to have you back.

And any.

Performance fee number.

<unk>.

2021 guidance.

Yes.

I think.

Kevin If you look at the past two years, it's been pretty consistent around $70 million and while we don't have perfect visibility as to exactly how the mix is going to evolve over the course of the year I think that that.

I think that that run rate when we think about 2021 based on what we can see right now is probably a reasonable way to look at it.

Okay. Thanks, a lot appreciate it.

Our next question comes from Josh Vogel with Sidoti <unk> Company. Your line is now open.

Thank you good afternoon guys.

Hey, John.

Thinking about the current bench and you know just kind of going back to one of the earlier questions, but thinking about the current venture potential hiring as the year progresses. What is your target utilization rate and do you think you can get there by late 'twenty one within the existing base, if youre optimistic scenario plays out.

I think we can get there.

After the last question first by the end of the year, that's certainly the way our internal plans are built.

Our target utilization it varies a little bit by segment, just given the leverage models of the different businesses.

And size of projects different factors like that that can be unique I'd say within the healthcare business upper seventies is where our target utilization is.

Within the education business tends to be mid to upper <unk> and then in the business Advisory segment. It tends to be low to mid seventies and that really reflects the strategy and distressed businesses, which tend to have less of a leverage model.

And so that tends to bring down utilization for that part of the business but.

I think what we'll see is more of a ramp throughout the year I think youll, probably see in Q1 utilization in the mid to high <unk> for health care and education, I think youll see that progress too on.

Low to mid Seventy's by the second quarter in line. The expectation is about by the time with the back half of the year that we're getting to utilization rates that are more consistent with those targets.

Thank you for the insights there.

A comment around around the incremental $30 million in revenue that came from those offerings that were in direct response to COVID-19, what exactly does that work in tail and has any of that carried into 2021 and baked into your guidance.

So there are elements of that work on that it really falls into a few different categories and mark or Jim feel free to jump in if I leave any components of it out but.

We did a lot of work as it relates to.

Testing treatment and tracing from a COVID-19 perspective, helping.

Health care and higher Ed institutions as well as laboratories.

Manage their flow of testing volume all manage their capacity to make sure that we're finding the right routes to be able to.

Manage that flow so that process could work as efficiently as possible.

We're definitely technology projects included in there from where we helped our clients.

On the fly update their technology to better support.

Remote activities, whether it was telemedicine support.

Supporting remote education.

Another area that came up was the hospitals wanting to buildup virtual capacity.

For hospital patients given initially the surge of Covid cases, but then eventually also just wanting to have an option for patients that was outside the four walls all hospital for people that weren't comfortable going in for elective procedures and so we all clients.

Clients with some of those activities as well so I'd say that that was probably the bulk of the $30 million during the year and indeed, all some of those projects.

Are expected to continue on into 2021, another one would.

It would be stimulus funding management.

We kind of built other gateway at the beginning of the pandemic when the stimulus packages came out there that really laid out in our core industry areas, where there are opportunities for that stimulus funding and we had a number of kind of strategic projects.

Going through those stimulus opportunities and figuring out the best way to manage from a client perspective.

Yes. This is Jim I think John that was a good summary, the one point I would reiterate though.

All of the creating additional capacity for the hospitals by having hospital at home type of environments. We had started doing some of that work before the pandemic hit and the intent at that point in time was really.

For hospitals that we're interested in trying to take lower.

<unk> patients and getting them out of hospital, if it was feasible.

And and so that started to kind of pre pandemic and then when the pandemic hit from the timing was made it even that much more critical to get those patients out whenever you could so I think that combination is still going to see we're going to still see a lot of that continue.

Well into the future I think what the last year has proven was that there are a lot of opportunities for patients to be treated.

More efficiently and in some cases more effectively.

Outside the hospital and so.

And in all the way the last year really gave us an opportunity and the partners that we work, which gave us an opportunity to really kind of take advantage of it I think youre going to.

See that increased demand as time goes on.

Alright, great.

One more from me.

Be a little bit higher level, but you talked about in the past.

Health care clients they were impacted by the drop.

And elective and non urgent surgeries and I was just curious what are you seeing around activity levels, there with regards to those procedures.

And what your health care clients are saying is it.

Carrying into an improving thus far this year, especially as the vaccine is getting rolled out.

Well, it's actually there's a couple of things that have occurred I first of all to answer your question directly I mean I think.

Obviously, it varies but I think in most cases I think most hospitals have not yet got back to a 100% I think some of them are hovering between 85% to 95%.

Because you've had this kind of a couple of blips with with a lot of COVID-19 patients coming in and then you still have a fair number of people that are just reluctant to get treatment right now which is a problem that's going to cause a problem later on so I think a lot of them have seen the elective surgeries come back.

Relatively strongly but not too often to the levels that they were at pre pandemic. So that create some revenue pressure on.

And as well, but at the same time I think they are beginning to find that there's new avenues for treating some of those patients. That's both good and bad hospitals are learning or others are all.

Obviously other entrants into the market are also learning that theres, some opportunity share to take samples clients to those patients rather than.

And treat them in additional cash different fashion, so I think I think.

The net result of what the pandemic does if the pandemic were to miraculously disappeared Tomorrow I think the big question for a lot of our health care clients is what does the future look like and that's where we're doing a lot of our work right now is helping I'm trying to figure out what did change what's going to change and how do we respond to that in a way that enables us to be.

Efficient and make the kind of margins we're looking for.

That is where I think youre going to see a lot of opportunity for us both on the strategy side.

The operational side and also the technology side.

All right well I appreciate all the insight thanks, guys have a good night.

Hugh.

Mr. Roth, we have concluded the allotted time for this call I would like to turn the conference back over to you.

Thank you all for spending time with US. This afternoon, we look forward to speaking with you again in May when we announce our first quarter results have a nice evening.

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

Yeah.

Yeah.

Yeah.

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All right.

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Good afternoon, ladies and gentlemen, and welcome to Huron consulting group's webcast to discuss financial results for the fourth quarter and full year 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.

And 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 Companys news release for information about any forward looking statements.

<unk> 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 SEC for a disclosure of factors that may impact subjects discussed in this afternoon's webcast.

The company will be discussing one of them one non-GAAP financial measures.

Look at the earnings release and on your own website all of the disclosures required by the SEC.

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. Roth. Please go ahead.

Good afternoon, and welcome to Huron consulting group's fourth quarter and full year 2020 earnings call with me today are John Kelly, Our Chief Financial Officer, and Mark Hussey, our President and Chief operating Officer.

Before I begin I would like to highlight that we have placed supplemental materials on our website at IR Dot Huron consulting group Dot com to provide additional detail about the range of our views on how the COVID-19 pandemic might influence our outlook for 2021.

These supplemental materials should be reviewed in conjunction with our earnings call and not on a standalone basis.

Companywide revenues declined 4% in 2020 compared to 2019, reflecting the challenges that the pandemic presented to our two largest industry verticals healthcare and education.

These challenges were partially offset by strong growth in the business Advisory segment, which achieved record revenues during the year and now represents 32% of total company revenues.

Our strategic focus on expanding our offerings into commercial industries within the business Advisory segment proved to be beneficial in 2020, highlighting the benefits of increased diversification in our portfolio and end markets.

I want to spend a few minutes talking about 2020 to provide perspective on how the year evolves for Huron.

Our primary focus has been and continues to be unprofitable revenue growth and while we didn't achieve our objectives set prior to the pandemic Huron.

<unk> response during the pandemic was strengthened by our collective resiliency creativity and market relevancy amidst the many challenges that are faced our client base.

We were proactive and took critical actions during the year that we believe position this company for growth in 2021 and beyond.

In 2020, when many of our clients were experiencing substantial losses, we worked closely with them to develop solutions, which help them manage through this period of significant disruption.

In 2020, we generated over $30 million in revenue from offerings that were directly responsive to COVID-19 pressures faced by our clients.

These critical efforts demonstrated the extent to which we can be nimble and innovative and quickly create new revenue opportunities.

We also successfully recruited senior leaders into multiple businesses, including several experienced personnel that will help us further execute on our commercial strategy as we establish service lines that we believe will generate new avenues of collaborative growth beginning in 2021.

We also took proactive measures to manage our cost base throughout the year, Inc.

<unk> tightly managing our discretionary spending modestly adjusting our workforce and reducing our real estate footprint to achieve a level of operating efficiency that we believe will create a foundation from which we can grow and expand margins in 2021.

In addition to our cost management efforts, we effectively managed our cash position increasing cash flows from operating activities to $137 million for the full year.

Our strong cash flows enabled us to reduce our net debt by $60 million, while also initiating and successfully completing the implementation of a new cloud ERP system, which went live on January one 2021.

Yeah.

We continue to strengthen our advanced technology offerings across all of our segments. While the term digital transformation has many meeting me means the.

The importance of technology in helping our clients survive and thrive in environments of disruption is very apparent as evidenced by the strong demand we saw for our digital technology and analytics offerings in 2020.

Revenue from technology services throughout the company has had a compound annual growth rate of nearly 20% since 2015.

And has grown to over 30% of total company revenues in 2020.

We believe this trend will continue based on the demand we anticipate for these services across all of our end markets.

The pandemic has highlighted it's heightened I'm sorry has highlighted the need for many organizations to adopt cloud technologies automation and analytics to strengthen their competitive position and be responsive to this rapidly changing environment.

Some professional services firms have strong technical competencies, while others have deep industry experience Huron has both and these competencies are integrated across all of our businesses, enabling us to provide digital technology and analytics offerings across multiple industries.

Lastly, we continue to support our people professionally and personally as they manage through an incredibly taxing environment.

Efforts in 2020 increased our already high employee employee engagement scores clearly demonstrating that our nearly 4000 person team is supportive of how we manage through the pandemic and equally important that they continue to be excited about being a part of our growth strategy.

I will now share some additional insight into our fourth quarter and full year 2020 performance along with our expectations for 2021.

On a full year basis healthcare segment revenues declined 12% over 2019.

In the fourth quarter of 2020, the health care segment declined 18% over the prior year quarter consistent with our expectations.

The resurgence in COVID-19 patients well not as disruptive as it was at the onset of the pandemic and the well justified distraction caused by the vaccine rollout during the fourth quarter took a toll on our health care clients, which resulted in some project deferrals.

We remain cautiously optimistic about performance in this segment as our sales pipeline continues to develop driven by the increased pressures facing the healthcare industry.

When the ongoing impact of the pandemic eases, we expect there to be a resurgence of demand for our health care services across the portfolio, including our performance improvement offerings.

We expect our clients will continue evolving their care delivery models and operations to accommodate the ongoing transformation taking place across the industry.

Efforts to improve cash collections and create better access to care will also be important ongoing priorities for healthcare clients with margin challenges.

Finally, and consistent with my prior comments, we expect to see an increase in technology spend among health systems, particularly in support of telehealth and the application of intelligent automation and analytics.

Turning to the business advisory segment on a full year basis segment revenue grew 6% year over year, driven by strong demand in our digital technology and analytics and distressed advisory offerings offset by softer performance in our strategy related offerings.

In the fourth quarter of 2020 business Advisory segment revenues declined 4% over the prior year quarter.

The business Advisory segment faced tough comparisons following solid growth in the fourth quarter of 2019.

The quarter over quarter decline in revenue was primarily attributable to our distressed advisory and strategy offerings, partially offset by continued growth in our digital technology and analytics offerings.

Our technology and distressed advisory offerings, both achieved record revenues in 2020 in each of the four businesses. In this segment are well positioned for growth in 2021.

Driving that growth will be the need for companies across all industries to reevaluate their market position and future strategy to accommodate the disruptions and opportunities that have resulted from the pandemic.

I want to highlight our continuing investment in expanding our commercial sector expertise and capabilities. We believe that our investments all of which are contemplated within our guidance estimates will accelerate new growth areas and positioned Huron to take advantage of the significant market opportunities that exist across.

The commercial industries, we serve in addition to the collaborative opportunities within healthcare and education.

Turning now to the education segment revenues in the segment were generally flat in 2020 as compared to 2019.

In the fourth quarter of 2020 education segment revenues declined 21% over the prior year quarter.

Coming off of a very strong first half of the year. This segment saw several engagements get deferred until 2021.

The lack of growth in 2020, which stands in Stark contrast to consistent growth in this segment over the past five years reflects the dramatic impact from the pandemic on the operations and finances of our hedge of our higher education clients.

Since the beginning of 2021, we have seen positive momentum in demand for our research strategy business operations and student related offerings.

While our clients remain cautious about starting a significant technology related engagements given the size of these investments we.

We believe that as the market stabilizes previously deferred opportunities will begin to restart.

Many educational institutions found that their digital platforms were insufficient to address the surge and remote learning and are equally deficient in terms of introducing cloud technology to the administrative research and student aspects of their business.

While many of our higher education clients, we're focused entirely on transitioning to remote learning.

During the fall semester, most colleges and universities have brought students back to campus in early 2021.

While there is some hope that this year will be less disruptive educational institutions will face a dramatically different world in the future and in many cases current business models will not suffice in the future environment, creating numerous opportunities for our services.

Let me turn to our expectations and guidance for 2021.

Our revenue guidance for the year is $830 to $890 million.

We also expect adjusted EBITDA in a range of $10 75 to 11, 75% of revenues and adjusted diluted earnings per share of $2 25 to $2 75.

I will now provide a few thoughts regarding our expectations for each segment as well as overall company profitability.

With the pandemic and its corresponding uncertainties still evolving we believe we have we will have modest sequential revenue growth in the first half of the year as compared to the second half of 2025.

Followed by stronger growth in the second half of 2021, which translates into approximately 2% growth for the full year at the midpoint of our 2021 guidance.

Several factors are in play in arriving at this estimate.

First while we have seen some positive and more sizable conversion conversions recently in our pipeline. We believe it is appropriate to be conservative in our estimates until we get better visibility as to how and when the pandemic will ease, particularly in the health care and education industries.

Second this guidance reflects a tough comparison over the first half of 2020.

Although all are.

Our healthcare business felt its biggest impact in the March to June timeframe last year, the education and business advisory segments had a strong first six months last year.

Third we believe that the second half of 2021 will be better than the first half of this year, particularly for health care and education.

It is our hope that our fourth quarter run rate will be closer to our pre pandemic run rate in the fourth quarter of 2019.

At the midpoint of our guidance, we anticipate healthcare segment revenues will grow in the low single digit range in 2021 as compared to 2020.

Our guidance also reflects mid single digit revenue growth in the business Advisory segment.

In the education segment, we anticipate a low single digit decline in revenue growth for the for the year reflective of the difficult first half comparisons driven by the strong growth we experienced in this segment at the beginning of 2020.

In terms of margins in 2021, our guidance reflects our commitment to expanding margins and is inclusive of the proactive cost savings measures taken in the fourth quarter as well as strategic and operational investments that we believe will enhance our revenue growth trajectory drive deeper operational efficiencies.

And create opportunities to better leverage our G&A.

My management team and I firmly believe that we have positioned this company for solid growth in the coming years.

Our growth in the commercial markets remained strong in 2020 and there is no question in my mind that we are well positioned to address the significant challenges that the pandemic has had on healthcare and education industries.

Our cautiousness at this time at the end of February is indicative of our desire to be conservative as to the timing of increased conversion and our health care and education pipelines. Although on both cases, we have already seen some reflection of that taking place.

We are firmly committed to our financial strategy of achieving sustainable organic revenue growth and expanding margins over time.

In summary, our clients are facing significant disruption and mounting financial and operational pressures that we believe will drive strong demand for our services as the company as the economy stabilizes and we believe we are well positioned to take advantage of these opportunities as they arise.

Why why do we believe we have navigated the near term disruption. Our focus has consistently remained and positioning huron for the longer term.

We are committed to executing on.

On priorities to drive shareholder value, which include achieving sustainable organic growth driving margin expansion.

Strategically deploying capital and investing in our people.

Amidst the turmoil of 2020, we continued to execute on our five year strategy that will strengthen our competitive advantage across markets now let me turn it over to John from more detailed discussion of our financial results John.

Yes.

Thank you Jim and good afternoon, everyone.

Before I begin. Please note that all 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-K, and Investor Relations page on the Huron website 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 and why management believes they provide useful information to investors regarding our financial condition and operating results.

Also unless otherwise stated my comments today are all on a continuing operations basis.

Also our acquisition of force IQ, which closed in November is included in our fourth quarter financial results and the business Advisory segment.

Our recent acquisition of <unk> solutions, which closed in February is not included in our fourth quarter financial results.

<unk> solutions will be included in the business Advisory segment, beginning in the first quarter of 2021.

The <unk> solutions acquisition strengthens our data management and governance capabilities as we all clients better manage their data and optimize their operations.

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

Revenue for the fourth quarter of 2020 were $198 $3 million down 14, 6% from $232 3 million in the same quarter of 2019.

The decline in revenues in the quarter was primarily driven by the health care and education segments as the impact of the pandemic continued.

For full year 2020 revenue was $844 1 million down three 7% from $876 $8 million in 2019.

As Jim mentioned the decline in revenue over the prior year was driven by the healthcare and education segments, which was partially offset by solid organic growth from the business Advisory segment.

The performance of the business Advisory segment, which achieved record revenues in 2020 emphasizes the benefits of a more balanced portfolio across our services net markets.

Net loss was $6 $1 million for 28 cents per diluted share in the fourth quarter of 2020.

And includes the pre tax impact of restructuring and impairment charges of $18 7 million.

This compares to net income of $14 4 million or <unk> 63 per diluted share in the same quarter in the prior year.

Full year 2020, net loss was $23 7 million.

Our $1 eight per diluted share includes the previously mentioned fourth quarter pre tax restructuring charges as well as the first quarter pretax goodwill impairment charge of $59 8 million.

This compares to net income of $42 million from.

Our $1 87 per diluted share in 2019.

Our effective income tax rate in the fourth quarter of 2020 was a benefit of 43, 7% on a pre tax loss of $10 8 million compared.

Compared to 18, 5%.

Pre tax income of $17 $6 million a year ago.

The tax rate for Q4 of 2020 was more favorable than the statutory rate inclusive of state income taxes, primarily due to the impact of our net operating loss that will be carried back to prior year income at a higher prior year tax rate as provided for under the cares Act and federal tax credits recognized during the quarter.

On a full year basis, our effective income tax rate for 2020 was 30%, which is more favorable than the statutory rate inclusive of state income taxes, primarily due to year to date pre tax losses.

Tax benefits related to federal tax credits, a discrete tax benefit from vested share based compensation awards tax.

Tax benefits related to non taxable gains on our investments used to fund our deferred compensation liability.

These favorable items were partially offset by increases in our valuation allowance primarily due to increases in deferred tax assets recorded from foreign tax credits.

Certain nondeductible business expenses and the non deductible portion of the goodwill impairment charges recorded during the first quarter of 2020.

Yes.

Adjusted EBITDA was $17 1 million Q4, 2020, or eight 6% of revenues compared to $29 4 million in Q4, 2019, and 12, 6% of revenues.

For full year 2020, adjusted EBITDA as a percentage of revenues declined to 10, 3% compared to 12.0% in 2019.

Adjusted non-GAAP net income was $10 $2 million from 45 per diluted share in the fourth quarter of 2020 compared to $18 million or <unk> 79 per diluted share in the fourth quarter of 2019.

For the full year 2020, adjusted non-GAAP net income was $47 9 million or $2 15 per share compared with $61 6 million.

Or $2 74 per share in 2019.

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

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

We posted revenues of $85 1 million down.

Down $18 5 million or 17, 9% from the fourth quarter of 2019.

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

On a full year basis healthcare revenue declined 11, 5% per.

Performance based fees for the full year 2020 was $69 $3 million.

Compared to $71 $1 million in 2019.

Operating income margin for healthcare was 28, 3% for Q4 2020 compared to 36% from the same quarter in 2019.

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

Partially offset by higher average consultant bill rates and lower indirect costs.

Full year basis operating margin was 26, 9% compared to 31, 5% in 2019.

The business Advisory segment generated 33 percentage of total company revenue during the fourth quarter of 2020 and posted revenue of $65 9 million down $3 million or four 3% from the fourth quarter of 2019.

Revenue for the fourth quarter of 2020 included $1 $3 million from our acquisition of force IQ.

Quarter over quarter decline in revenue.

Primarily attributable to our distressed advisory and strategy offerings, partially offset by continued growth in our digital technology and analytics offerings. The business Advisory segment tough comparison relative to the fourth quarter of 2019, which.

Which benefited from higher success fees in our recognition of revenue that had been previously deferred upon receipt of a signed contract.

On a full year basis, the business Advisory segment revenues grew five 9% year over year, driven by strong demand for our digital technology and analytics and distress advisory offerings.

The operating income margin for the business Advisory segment was $16 three percentage for Q4 2020 compared to 24, 2% from the same quarter in 2019.

The quarter over quarter decline in margin was primarily due to increases in performance bonus expense.

Full year results from a revenue generating professionals increased contractor expenses and increased restructuring charges.

On a full year basis operating margin was 18% compared to 19, 7% in 2019.

The decrease in operating margin year over year was primarily attributable to the shift in revenue mix toward digital technology and analytics offerings.

Have a relatively lower margin and away from our strategy offerings, which traditionally have evolved and the higher margins.

Our strategy offerings were impacted by the effects of the pandemic during 2020.

The education segment generated 24% of total company revenues during the fourth quarter of 2020 and posted revenues of $47 3 million.

Down $12 5 million or 28% from the fourth quarter of 2019.

This 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.

On a full year basis education segment revenues were largely flat versus the prior year, our education business had a strong start to the year driven by the momentum we built in 2019 before our clients were severely disrupted by the pandemic.

The operating income margin for education was 12, 1% for Q4 2020 compared to 29% for the same quarter in 2019.

Quarter over quarter decline in margin was primarily due to a decrease in billable consultant utilization and restructuring charges related to the head count reductions during the quarter.

On a full year basis operating margin was 21, 3% compared to 24, 8% in 2019.

Yeah.

Other corporate expenses not allocated to the segment level were $47 $4 million in Q4, 2020, compared with $34 9 million in Q4 2019.

The quarter over quarter increase in corporate expenses was primarily attributable to $14 5 million of restructuring charges taken in the quarter to reduce our operating costs.

Address the impact of the COVID-19 pandemic on our business, including the work force reduction announced on our last earnings call as well as certain office exit costs.

Fourth quarter corporate expenses also included $3 $1 million in expense related to the increase in liability for our deferred compensation plan.

Which is fully offset by a corresponding gain in other income related to the increased value of the assets used to fund that obligation.

Now turning to the balance sheet and cash flows.

<unk> came in at 52 days from the fourth quarter of 2020 compared to 62 days from the third quarter of 2020.

This record low DSO reflects the efforts of our project and corporate teams to work closely with our clients during 2020 to ensure collections, while supporting the needs of our clients.

Total debt includes the $200 million in senior bank debt and a $3 million promissory note for total debt of $203 million.

We finished the year with cash of $67 million per net debt of $136 million.

This was a $40 million decrease compared to Q3, 2020, and a decrease of $60 million compared to the end compared to year end 2019.

Our leverage ratio as defined in our senior Bank agreement was approximately one nine times adjusted EBITDA as of December 31, 2020, compared to one six times adjusted EBITDA as of December 31, 2019.

Our net leverage ratio was one three times trailing 12 months EBITDA as of December 31, 2020, when the bank definition calculation is adjusted for cash on hand.

This compares to one six times trailing 12 months EBITDA as of December 31, 2019, when calculating in the same manner.

Cash flow from operations for 2020 was $137 million.

And we used $60 million of our cash to invest in capital expenditures, resulting in free cash flow of $121 million.

We also used $27 $1 million of our cash to repurchase approximately 425000 shares 2020.

Partially offset the dilution created by our share based compensation programs.

Okay.

Finally, let me turn to our expectations and guidance for 2021.

For the full year 2021, we anticipate revenues before reimbursable expenses in a range of $830 million to $890 million.

Adjusted EBITDA in a range of 10, 75% to 11, seven 5% of revenues and.

And adjusted non-GAAP EPS in the range of $2 25.

From $2 75.

We expect cash flow from operations to be in the range of $70 million to $90 million.

Capital expenditures are expected to be approximately $15 million to $20 million free cash flows are expected to be in a range of $55 to $75 million net of cash taxes and interest and excluding noncash stock compensation.

All right.

Weighted average diluted share count for 2021 is expected to be $22 5 million.

Finally, with respect to taxes, you should assume an effective tax rate in the range of 28% to 30%, which comprises the federal tax rate of 21% of.

Our blended state tax rate of 5% to 6% and incremental tax expense related to certain nondeductible expense items.

Let me add some color to our guidance starting with revenue.

Given the ongoing uncertainty created by the COVID-19 pandemic.

From a wider revenue range than we typically would at the outset of the year day.

Mid point of the guidance range reflects just under 2% revenue growth over 2020 revenue of $844 million.

The midpoint of guidance assumes that we will report a year over year decline in revenue from the low double digit range in the first quarter and the first quarter of 2020 was relatively on impact by the pandemic.

Our guidance assumes that we will see sequential growth from the second and third quarters and.

And that the back half of 2021.

Flex strong year over year growth when compared to 2020.

With regard to the health care segment.

We expect low single digit revenue growth for full year 2021, and we expect operating margins will be in a range of approximately 26% to 30%, reflecting lower utilization in the first quarter that improved sequentially from the year progresses.

And the business Advisory segment, we expect to see mid single digit revenue growth for 2021, and we expect our operating margin in this segment to be in a range of approximately 19% to 21%.

In the education segment.

Expect revenue to decline in the mid single digit range in 2021, reflecting a very tough first half comparison to 2020 price.

Prior to the impact of the pandemic on this segment.

We expect operating margins will be in a range of approximately 23% to 25%, reflecting lower utilization in the first quarter net improved sequentially as the year progresses.

We expected, we expect unallocated corporate SG&A to be relatively flat on a full year basis in 2021 compared to 2020.

When excluding the fourth quarter restructuring charges incurred during 2020.

From the corporate expense impact of our deferred comp plan.

Turning to the total company.

Your line is adjusted EBIT margin is expected to be in a range of 10, 75% to 11, 75% of revenues and.

An increase of 95 basis points at the midpoint of guidance compared to 2020.

We anticipate that the first quarter of 2021 will be our lowest revenue producing quarter of the year.

Also in the first quarter, the reset of fringe rates at the beginning of the year, including FICA and our 401 K match.

Have an impact on our first quarter expenses is this reset is fairly significant given our people driven business.

Lastly in the quarter, we expect an increase in stock compensation expense for restricted stock awards that will be granted in March to retirement eligible employees.

Based on these factors, we anticipate approximately 15% of our full year adjusted EBITDA and full year adjusted EPS to be generated during the first quarter.

As a closing reminder, with respect to 2020 adjusted EBITDA adjusted net income and adjusted EPS growth.

Other items that you will need to consider when reconciling these non-GAAP measures to comparable GAAP measures.

The reconciliation schedules that we included in our press release will help walk you through these reconciliations.

Thank you everyone I would now like to open the call to questions operator.

Thank you ladies and gentlemen, if you have a question at this time please press the star.

All right then the one can you touch tone telephone. If your question has been answered or you wish to remove yourself from the queue. You may do so by pressing the pound key.

One moment for your first question. Please.

Our first question comes from Tobey Sommer with tour Securities. Please proceed sir.

All right.

Thank you.

As you envision.

The year unfolding with things more subdued in the first half per minute improving in the second.

As you start to add head count.

Grow again from that perspective, do you think youll be able to continue to generate leverage or will it take a little bit of time to absorb that acceleration process and still expand margins.

Hey, Tobey its John I can't I can start and then Jim or Mark can jump in with any color I think that given particularly in healthcare and education, where the utilization levels of the segments.

Segment level right now are lower they are in the mid $60 for the fourth quarter I think that as we do start to see growth and acceleration I think that we'll be able to add <unk>.

First ramp up utilization.

We're hiring across the business right now and that includes in health care and education, I'd say, the hiring that we're doing and build those.

Those segments right now tends to be more strategic and more investments in areas, where we think we're going to see a lot of growth in the near term as opposed to really kind of adding capacity, but I think that as the year progresses on step one will be to utilize some of the capacity. That's there right now due to the lower utilization.

And then once we get into the back half of the year I do expect us to transition to hiring more aggressively including adding capacity at that point based on what our expectations for revenue are going to be in the back half of the year.

Yes, Tobey this is Jim I would only add that I think we have we have.

A good pipeline right now is for US. It's just a question of converting the pipeline and so I think as John indicated I think all.

Our sense would be that as the pipeline begins to open up and we've already seen signs of that happening across the board, including health care and education I think the first focus as John indicated would be that we would use the existing capacity but.

We also feel pretty confident about our ability to hire in a pretty timely basis, if that pipeline picks up quickly.

Okay.

Another kind of numerical thing, but also strategic.

Yeah.

Balance sheet and leverage that you outline here does show leverage going down could you.

Update us on your thoughts of the ranges of leverage that you would like to manage the business to <unk>.

<unk> sort of between acquisition what size. Thanks.

Hey, Tobey.

Hey, John again, I would say that from <unk>.

Leverage perspective, our target leverage at this point is probably somewhere in the mid one range I'd say I think our viewpoint is that that.

It gives us flexibility to the extent that there's opportunities either as it relates to buybacks or as it might relate to strategic tuck in acquisitions to be able to execute on those things.

Well as to maintain a balanced approach in general we're able to take advantage of those opportunities, but still gives us plenty of plenty of room from a <unk>.

That covenant perspective, so I think the kind of arresting rate. If you will is probably around the mid ones and you know we're comfortable flexing all the way up to the mid twos I'd say anything above that just given the current economic environment, we tend to want to have a little more cushion.

In our balance sheet and to go much above above the mid twos, but thats generally how we think about it.

Thank you and then I have one question on the pipeline and I'll get back in the queue.

You did describe a sort of an active pipeline is there any any sort of comment you can give us on the size of projects in the the nature.

There are projects that light.

Defer to the extent there is a.

Our focus in the pipeline that is.

Something that's maybe different or new that you haven't been working on in the last year or so thank you.

Tobey. This is Jim I think I think the composition of the pipeline in terms of size is probably pretty consistent with what we've seen before.

And so I think from our perspective as we tried to indicate in our initial comments here.

What I mean, there really has been enormous changes, particularly in health care and education, but really across our markets.

Thank.

Our pipeline reflects the fact that a lot of our clients are really facing a very different environment. When this pandemic begins to ease and so I think our pipeline reflects some of the seriousness of some of those changes that are likely to take price and that's why I said, we feel good about we feel very good about the <unk>.

And for our services is just a question of trying to get the timing right at this point in time and as John and I. Both indicated during this call. We had we had disruptions that we went back in June of last year, we thought well, maybe the fall would be a lot quieter and it obviously was far from quiet and so now things to kind of a peer.

To be kind of maybe maybe quieting down again and I think our clients are Frank frankly looking at the exact same thing. So I feel good about the pipeline I feel good about the portfolio of offerings that we have I mean, I'm sorry, the portfolio of opportunities that are ahead of us. It's just for US it's just going to be a question of.

The timing at this point in time with having them come to fruition.

Thank you.

Our next question comes from Andrew Nicholas with William Blair. Your line is now open.

Hi, good afternoon.

Just wanted to follow up on wanted to all these questions around margins just.

Just wondering kind of underlying that guidance.

What does guidance assume in terms of kind of the return of some of the more temporary cost savings you realized.

Because of the pandemic I'm thinking about kind of the more discretionary items like travel and entertainment and marketing meetings and what that might mean.

For long term.

Thoughts on the cost structure.

I'll start on that one Andrew I would say the guidance generally contemplate that it's probably still a predominantly remote work environment through the first half of the year and net by the time, we get to the second half of the year that we do see some of those expenses related to business development.

Coming coming back into the system at that point. We also expect I think based on how we see the revenue growth trajectory that we are going to be as I said earlier question that we're going to be more aggressively hiring at that point as well too. So I think that you will see.

Relatively certainly if youre looking year over year, you're going to see lower expense levels in the first half of 2021 compared to what we had in the first half of 2020 I think by the time you get to the back half of the year you will see some of those expenses, increasing but it's going to be commensurate to the revenue growth that we see and in fact, I think all thats going to be a period of expanding margins.

Net time, so you're going to see the revenue growth outpacing expense growth, but you will start to see more expenses come into the system to support that growth in the back half of the year.

Yes.

Great. Thank you that's helpful and then.

From my follow up I, just wanted to touch on healthcare hiring specifically I think on last quarter's call. You touched on are estimated about 60 employees or 60 staff members.

Potentially leaving as a result of the restructuring, but it looks like.

Count actually.

Came in quite strong so I'm, just wondering if theres anywhere in particular.

That we should be thinking about in terms of where that hiring is focused on and what that says about day.

Demand for specific subsectors within that business.

I think.

I can take the first crack at it Andrew I think that.

Even as we talked about during the call last quarter on the actions that we had to take in the fourth quarter and were really around some of those areas of the business that we thought.

Or would it be a little bit of a longer lasting impact due to the pandemic, but in the areas where based on the conditions. We see in the market for example, the performance improvement.

Loosens within within healthcare there, we do expect a rebound on during 2021. So we're much more cautious there as far as reducing any heads I think as far as the hiring goes.

We do continue to make strategic hires and Thats really at all levels are bringing in.

Key leadership in certain areas and people that we think are really going to drive our growth to accelerate in the recovery that we're expecting as the year goes on so I think what you see there is a little bit of a mix where you've got.

Some reductions in areas on they're likely to be a little bit slower to return to growth.

All set partially by some head count increases in areas that we expect to grow more aggressively during 2021.

Got it thank you I'll get back in the queue.

Our next question comes from Bill Sutherland with benchmark. Your line is now open.

Thank you.

Good evening everybody.

I was just noticing the hourly bill rate for health care John.

Jumping up from the fourth quarter.

Is that anything to do with the nature of the projects.

Yes.

During the fourth quarter, we had some really nice performance on several key projects.

In terms of reaching from contingency milestones.

As you know the accounting rules for contingent fees now are generally more on a percent complete basis like our fixed fee jobs, but when you do reach certain milestones.

You can get benefits that flow through the P&L. So we had some of that during the fourth quarter as well as some jobs were on Keene, just operating with excellence efficiency during the fourth quarter and growth.

To pick up some efficiency gains too. So all of that is flowing through that bill rate for the fourth quarter, if I kind of spin net into future looking I would not take the fourth quarter healthcare bill rate and use that as sort of projections for net.

I, probably though I think it is fair to look at the full year Bill rate that we add in health care for this year, which was up nicely over 2019, I think that that rate probably is a reasonable way to look at things going going into the future.

Okay.

And then just to revisit the M&A topic for a second.

Doug couple of nice bolt ons here for business advisory.

Should is that kind of what your pipeline as you look at the new additional opportunities is that kind of what it looks like.

Is there anything that.

Might be more of a difference maker more strategic.

Bill. This is Jim I think I think what you saw is going to be pretty much reflective of the things that we're looking at right now.

There is an opportunity for us to really take on a really important strategic addition to our competencies will look at it we were fortunate to get two really good companies too.

Become a part of us, but I think that that will probably be reasonably reflective of any M&A that would take price per future. Obviously, we look at all kinds of opportunities.

I think my my sense is at this time it would be mostly in line with what you've seen so far.

And I would expect.

I am sorry go ahead Joe.

I was going to add in.

Net add to Jim's comments.

When we were looking at M&A really it's almost never more capacity or things that we already do it's usually adding new capabilities and obviously the technology area is an area where we.

ESG capabilities that are out there in the market all the things that are coming to market for our clients are continuing evolving so oftentimes smaller tuck in type acquisitions or quicker way to get those capabilities into our portfolio.

And the other way we always look at it is first kind of going back to the strategy second thinking about what in the long run is going to really accelerate our organic growth.

Then make decisions about okay. So what capabilities are you going to.

Grow internally versus maybe where theres an opportunity to go and buy an accelerate something and so I think the last couple of acquisitions that you've seen are perfect examples where our conclusion was that it.

The area, where the technology was evolving it was going to be important to our clients and is the fastest way for us to move into that space was via the acquisition versus building internally and we're optimistic as we look forward that in the long run over the last couple of years is going to provide more organic growth for us on having haven't gone.

On the M&A route.

And Bill this is Jim.

I'm, sorry, I had one thing to John's comments and that is sometimes as we've seen not just with.

First of all Q and unit cost, but also in prior acquisitions of that size, we often kind of getting all of them. When we're working with them on a client site and we see the immediate immediate synergies that exist and so it gives us a really good understanding.

To know how they would kind of sequence into our core set of services. So that's an added advantage and I suspect that.

As things go on particularly in the technology area that will be indicative of what we're going to see in the future and that is just you know organizations that are.

Smaller organizations that we think can really add value to us in our in our technology portfolio and that.

And that we also have a chance to kind of gauge their culture as well so.

It's been it's been a very good strategy for us to follow what I feel I think we'll probably see more of that in the future as well.

Yeah, and maybe Bill this is mark I just wanted to throw one more comment on net drained the swamp on those but one of the reasons. We can move on just tuck ins is that.

Kind of a unbeknownst to many people over the last three years, we've really built for enterprise platform practices within our technology capabilities. So ERP CRM EPS.

Data and analytics, and so with that scale and going to now 20 partners and the mix, we have the opportunity to be a lot more targeted and selective. So that's why you probably won't see us do something.

More of a larger strategic acquisition in that space absent, a very clear and compelling reason to do so.

Great.

Makes sense thanks, guys.

As a reminder, if you have a question. Please press the Star then the one can you touch tone telephone.

Our next question comes from Kevin Spanky with Barrington Research. Your line is now open.

Okay.

Hi.

I wanted to ask about the education segment you noted.

Some positive day.

<unk> momentum there.

All areas, although it sounds like the larger.

Technology projects are still being deferred.

What do you think it will take for.

Higher education institutions to start moving forward with those larger technology.

Projects in as well.

Whether or not they do kind of a swing factor as to how.

Where you're going to fall in the guidance range I guess for the year.

Kevin All all of those Jim I'll start off by saying that I think.

What's going what it's going to take I think for them to get more confident about their ability to take on increasing projects, particularly at bigger projects is probably just stability I think I think back in the late spring and early summer there was virtually zero stability in there on our campuses.

In the fall there was some but not a lot of stability I think theres, a little bit more right now and so unless there is some other major blip I think youre beginning to see kind of an increasingly stable environment and thats, what theyre looking for and I think once they get confidence that that's going to be the case.

No theyre, hoping I know were hoping that that comes relatively soon.

I think youre going to start seeing things open up pretty quickly in part because.

The pandemic has really highlighted is exactly the need for the kind of services, we're doing particularly on our technology front, but also on a strategic front within education.

They just really are I think in most cases, including even the larger research universities.

Many of them were very.

Behind the curve in terms of being able to.

To incorporate advanced technology into their business and so it came to fruition during the pandemic and they were really kind of hindered by that so I think I think once they sense from stability.

In terms of the pandemic and our confidence that they're going to have kids can safely return to campus I think thats when youll see things begin to open up.

All I'll add Kevin that.

Just to be clear, we do see some.

Some of the larger technology projects coming to market.

So it isn't that uniformly university, a pause on those projects and we have seen a number of them come through we continue to see ones that we expect to close during the first half of this year. So that the projects are there. It's more a case of just getting back to that growth.

Trajectory that we had in 2018 and 19 and Thats were mixed in with some of those that are going to market you do have some where there have been delays.

Which.

That's kind of what we're waiting for is for it to get back to that level that we saw.

Enter into 2019, Ironically as much as in the short term. This is the area of the business. We're in the education side, where there is some reduced visibility compared to what we had in 2018 in 2019. The flip side. This is an area of the business where.

The needs of our clients are pretty well defined and the market is pretty well defined and it's a big market and we think in the long run it's going to be on perhaps.

The greatest market opportunity for this business.

Once that stability that Jim referred <unk> comes back into the system.

It is a bit of timing right now and just.

Just to kind of reduce visibility from what we're used to when it given the impact of the pandemic.

Great. Yes, that's helpful. All right. Thanks.

I'll also ask about.

Within business advisory.

Strategy offerings, you mentioned that.

All for your.

Businesses within this segment are positioned for growth in 2021.

So what does the pipeline look like on the strategy piece of the business.

Is there a case to where clients are still kind of holding off until they get some more comfort or no is that.

Pipeline.

Moving forward at all.

Yes.

Yes I.

I think the pipeline for the for the strategy business is actually moving along quite nicely I think I think the hardest hit so that business was probably at the very beginning of the pandemic back in the.

Certainly the first half of the year and probably into some of the summer as companies were just trying to figure out.

Where this was going we've seen the pipeline pick up nicely in that business and I think there I think.

Pretty confident they're going to have a much better 'twenty one than they did 20.

Yes.

The thing that earlier in the year, Kevin was do you think about kind of their strategy offerings and an immediate.

In the immediate aftermath of the pandemic when companies necessarily our first forced to look a little more short term focused.

We're going to be pretty heavily impacted because of that shifting priority prioritization from our clients, but we said that on the flip side coming out of an event like that the expectation would be that demand would actually pick up.

Because our clients need kind of in the aftermath to start to rethink their strategy and all.

On how they're going to move forward in the new environment and to Echo everything Jim said I think we're I think we're very optimistic that we're seeing that now in the pipeline and we definitely expect growth from that part of the business in 2021.

Okay. Good.

Wanted to ask about you mentioned that you internally.

The new cloud based ERP system.

Go live January one.

Should we think about the providing a longer term opportunity to generate cost savings or.

What other sort of benefits might be able to derive from that.

In the long run Kevin we are we are thinking of it as a.

The opportunity in the long run to support <unk>.

Enhance margins for the business as we grow and I think.

The real opportunity there from our perspective is.

Just any additional visibility the new system is going to provide from our projects as far as.

Giving us visibility to <unk>.

Situations, where we might have an overrun in where things are progressing as we would expect a kind of getting better real time information about that will be great and then in terms of just our talent.

Really excited about the tool as far as its ability to really help us.

Identify the best talent within Huron from different projects, even across all different segment line in different projects.

Different different land in terms of different practices and the ability to make sure that we are able to get the right resources on the right projects at the right time so.

From our perspective those are two things when you think about running a professional services business that should enable a lot more efficiency.

As we move forward and automation, that's part of the tool to that when we think about growing the business as we plan to do over the course of time, we expect to be able to use that efficiency that comes with a tool to be able to grow more efficiently without having to lay around a bunch of newer incremental SG&A costs.

<unk>.

As we grow so I think those are probably net facets of it where we see the opportunity to expand margins over time.

Okay. Good just.

Two last quick ones here.

So.

How are you thinking about capital allocation in 2021 or you still want it.

Two new to pay down debt.

Or are you kind of where your comfort leverage ratio now so that they would open up the opportunity.

Per share repurchases. It sounds like you still want to pursue the tuck in M&A, but how you're thinking about capital allocation this year.

And then Kevin from our perspective, it's going to we're going to continue with our balanced approach to it.

As you noted.

If there are tuck in M&A opportunities that.

That we think.

A good chance to really.

Add new capabilities to the business that will spur organic growth into future periods. So that's something that we would pursue.

As far as share buyback goes we currently have.

$50 million authorization from our board of which we got $45 million last and so I guess depending on.

The opportunity there thats another area, where we may deploy cash and then just from a principal perspective, we do have dilution of our share base from our share based compensation programs in two.

To the extent, we can use share buybacks to offset some of that dilution that's something that we're committed to doing.

And then from a debt perspective, I think it is it does just remain important to us.

Sure that we have flexibility and to make sure that.

Our balance sheet remains in a healthy shape that it's in now so kind of default when we're not doing either M&A or share buybacks will be too.

Reduce our net net debt balance.

Okay, Great and then just the last one have you baked in any.

Performance fee number.

2021 guidance.

I think Ken.

Kevin If you look at the past two years, it's been pretty consistent around $70 million and while we don't have perfect visibility as to exactly how the mix is going to evolve over the course of the year I think that that.

I think that that run rate when we think about 2021 based on what we can see right now is probably a reasonable way to look at it.

Okay. Thanks, a lot appreciate it.

Our next question comes from Josh Vogel with Sidoti <unk> Company. Your line is now open.

Thank you good afternoon guys.

Hey, John.

Thinking about the current bench and Im just kind of going back to one of the earlier questions, but thinking about the current mentioned potential hiring as the year progresses.

What is your target utilization rate and do you think you can get there by late 'twenty, one with it within the existing base, if youre optimistic scenario plays out.

Yes.

I think we can get there.

After the last question first by the end of the year, that's certainly the way our internal plans are built.

Our target utilization it varies a little bit by segment, just given the leverage models of the different businesses.

The size of projects different factors like that that can be unique I'd say within the healthcare business upper seventies is where our target utilization is within.

Within the education business tends to be mid to upper <unk> and then in the business Advisory segment. It tends to be low to mid <unk> and that really reflects that strategy and distressed businesses, which tend to have less of a leverage model.

And so that tends to bring down utilization for that part of the business but.

I think what we'll see is more of a ramp throughout the year I think you'll probably see in Q1 utilization in the mid to high <unk> for health care and education, I think youll see that progress too.

Low to mid <unk> by the second quarter and non the expectation is that by the time, where the back half of the year that we're getting to utilization rates. They are more consistent with those targets.

Thank you for the insights there.

The comment around around the incremental $30 million in revenue that came from those offerings that were in direct response to COVID-19, what exactly does that work in tailwind is any of that carried into 2021 and baked into your guidance.

So there are elements of that work it really falls into a few different categories and mark or Jim feel free to jump in if I leave any components of it out but.

We did a lot of work as it relates to.

Testing treatment and tracing from a COVID-19 perspective, helping.

Health care and higher Ed institutions as well as laboratories.

Manage their flow of testing volume all manage their capacity to make sure that all while refining the right routes to be able to.

Manage that flow so that process could work as efficiently as possible.

We're definitely technology projects included in there from where we helped our clients.

On the fly update their technology to better support.

Remote activities, whether it was telemedicine suppor.

Supporting remote education.

Another area that came up with the hospital volume to buildup virtual capacity.

For hospital patients given initially the surge of Covid cases, but then eventually also I just want you to have an option for patients that was outside the four walls of the hospital for people that werent comfortable going in for elective procedures and so we all clients with some of those activities as well.

Say that that was probably the bulk of the $30 million during the year and indeed all of some of those projects.

<unk> are expected to continue on into 2021 another one.

It would be stimulus funding management.

We kind of built all the gateway at the beginning of the pandemic on the stimulus packages came out there that really laid out in our core industry areas, where there are opportunities for that stimulus funding and we had a number of kind of strategic projects.

Going through those stimulus opportunities and figuring out the best way to manage from a client perspective.

Yes. This is Jim I think John that was a good summary, dwan port I would reiterate though.

Creating additional capacity for the hospitals by having hospital at home type of environments.

You had started doing some of that work before the pandemic hit and the intent at that point in time was really.

For hospitals that we're interested in trying to take care all lower.

Acuity patients and getting them out of hospital, if it was feasible.

And so that started to kind of pre pandemic and then when the pandemic hit from it the timing was made it even that much more critical to get those patients out whenever you could so I think that combination is still going to see we're going to still see a lot of that continue.

All into the future I think I think what the what the last year has proven was that there are a lot.