Q1 2021 Huron Consulting Group Inc Earnings Call

[music].

And ladies and gentlemen, and welcome to your bonds consulting group webcast to discuss financial results for the free Quaker telephones.

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Before we begin I would.

I'd like to point all of you to that is close share at the end of the company's net.

For information about any forward looking statements that may be made all discussed on this call.

The news release is posted on you want for website.

To review that information on.

Along with the filings with the S E T.

For latest quote share all factors that may impact subjects discussed in this afternoon's webcast.

The company will be discussing one or more non-GAAP financial measures.

And they've got the earnings release and on your bonds for website for all the disclosures required by the S. E C, including reconciliation to the most comparable GAAP numbers and.

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

Good afternoon, and welcome to Huron consulting group's first quarter 2021 earnings call with me today are John Kelly, Our Chief Financial Officer, and Mark Hussey, our President and Chief operating Officer.

Our first quarter financial results were in line with our expectations revenues declined 9% and the first quarter of 2020, one as compared to the same period and the prior year driven by declines and the healthcare and education segments.

Those declines were partially offset by strong growth and the business Advisory segment.

During the first quarter, we saw an increase and our sales pipeline and the pace of signings and our healthcare and education businesses, which gives us further confidence and our ability to meet our updated full year performance expectations.

And the overall demand for our services has increased during 2021, we now believe we are past the pandemic driven low watermarks for education, and healthcare segment revenues and we expect sequential growth and these businesses moving forward in 2020 one.

We believe the low point for the education segment occurred and the fourth quarter of 2020.

While the low point for the healthcare segment for us in the first quarter of 2021.

Looking ahead, we see increased demand for our healthcare and education services as our clients prepare for a recovery in economic environment, which has also strength and growth and our business Advisory segment.

I will now share some additional insight into our first quarter performance.

During the first quarter healthcare segment revenues declined 17% over the prior year first quarter reflective of the difficult first quarter comparisons driven by the growth we experienced in this segment at the beginning of 2020 prior to the impact of the pandemic.

The healthcare business got off to a slower start this year given the continued disruption of the pandemic and vaccine rollout on our hospital and health system clients.

As for the quarter progressed, our sales pipeline increased and remained at record levels and the pace of signings and conversion to hard backlog also improved each month.

Assessments for our performance improvement offerings have continued to grow and on April assessment volume mirrored pre pandemic levels.

And as hospitals and health systems plan for post pandemic future. Many organizations are prioritizing several key initiatives among.

Among the most important priorities is making care more affordable, while also providing greater price transparency to consumers.

As we look at our pipeline market demand is focused on our core performance improvement and managed services offerings to address near term financial pressures.

In addition, we are seeing substantial demand for one of our newest offerings, which was developed collaboratively across our healthcare strategy and technology businesses.

This offering helps health systems achieve structural changes to ensure the sustainability of their business model and the future.

Given the near term financial challenges and long term growth aspirations of our clients. We believe our collective performance improvement related offerings will continue to be and ongoing source of growth for our business.

Our second priority for for healthcare providers is accelerating care transformation strategies to deliver a substantially greater amount of care virtually including through telehealth and remote patient monitoring and hospital at home models.

The pandemic has highlighted the need for providers to formalize their long term virtual care strategies and build the right consumer centric infrastructure to support patients throughout their care journey.

The breadth of our care delivery organizational transformation and digital technology and analytics offerings.

And deep expertise and implementing telehealth and hospital at home models.

<unk> Huron to add significant value to our clients as they establish and implement their care transformation.

The third priority among our healthcare clients is focusing on enhancing the digitization and use of clinical and operational data with a strong emphasis on planning and analytics.

Many healthcare organizations are making significant investments and their administrative operations comparable to some of the investments and clinical systems that have been made over the past decade.

Once again, our healthcare business is well positioned to help our clients navigate this next wave of digital transformation.

The growth of our healthcare pipeline and the pace of signings in recent months, our indications that our offerings are resonating well with our client base as they seek assistance and addressing these key priorities.

Turning to the business Advisory segment and the first quarter of 2021 business Advisory segment revenues grew 12% over the prior year quarter, 9% organically driven by strong broad based demand across our strategy digital technology and analytics and distress advisory offerings.

As we've discussed on prior calls we continue to execute on our commercial strategy, which is aimed at going to market collaboratively across the four businesses and the segment.

The business Advisory segment has grown revenues at a compound annual growth rates of 15% over the last five years, Inc.

<unk> of the recent pandemic era, which reinforces the importance of this segment to our company's growth strategy.

When looking beyond the numbers you will find several important attributes of that revenue growth that bode well for the future of this segment.

First we are winning sizable projects among numerous fortune 500 companies, particularly in energy and utilities financial services, industrials and manufacturing and life.

Sciences.

Second we continue to capitalize on one of our greatest strategic advantages by integrating our deep industry and functional expertise with our strong strategy technology and operations capabilities.

Coupled with our nimble approach to serving our clients from strategy through execution on.

Our expertise and experience allow us to compete and win against larger competitors.

We are and the process of building additional competencies that will further position. This segment for above average growth and are coming years.

In addition, our digital technology and analytics offerings continue to provide the foundation for growth and the commercial sector and our distressed advisory services continue to perform well amidst for many financial challenges impacting middle market companies.

We are also seeing solid demand for our strategy and innovation services as the economy continues to recover.

Turning now to the education segment and the first quarter of 2021 education segment revenues declined 19% over the prior year quarter reflective of the difficult first quarter comparisons driven by the strong growth we experienced in this segment at the beginning of 2020 prior to the impact of the pandemic.

Sequentially education segments revenues grew 7% over the fourth quarter of 2020, driven by strong demand and our research strategy and operations offerings.

Similar to healthcare as the quarter progressed, our sales pipeline and increased across our offerings and the pace of signings improved month over month.

While some of the larger ERP related engagements continue to be delayed a pipeline of opportunities is widening and many institutions are beginning to feel more comfortable that they have the bandwidth and financial stability undertake these significant projects.

We are also seeing smaller institutions moving ahead with their digital transformation, given greater visibility into their financial position.

While some higher education institution space sizable COVID-19 related losses, others have found the losses to be less than initially anticipated and <unk>.

Due to financial support by the federal government.

Many colleges and universities are now more aggressively evaluating how to be successful and a post pandemic environment, including trying to establish more sustainable operating models.

These attributes will continue to drive demand for our broad set of offerings and this segment.

Before I turn to our outlook for the year I'd like to add several comments about our collective technology capabilities.

As I mentioned last quarter, our technology services grew to over 30% of total company revenues and 2020.

Technology has become an increasingly important pillar of growth for this company and is deeply embedded in each of our segments.

We continue to grow our teams and North America as well as in India to support the market demand for these offers offerings.

Finally, let me turn to our outlook for the year.

Historically, we have not adjusted our annual guidance after the first quarter today.

Today, the signs of recovery and our healthcare and education businesses and continued momentum and the business advisory segment give us confidence to raise and narrow our full year guidance.

As our press release indicates we are increasing and narrowing our annual revenue guidance to $850 to $900 million.

We're also maintaining our adjusted EBITDA guidance and a range of 10, 8% to 11, 8% of revenues and increasing our adjusted diluted earnings per share and a range of $2 35 to $2 75.

We raised our revenue guidance to reflect the current and anticipated demand for our services across all segments.

We continue to anticipate modest sequential revenue growth and the first half for the year as compared to the second half of 2020, followed by stronger growth and the second half of 2021.

We are also investing for the long term further expanding our capabilities and areas. We believe have strong growth potential given current market dynamics, including our healthcare and managed services and our digital technology and analytics offerings across all of our segments.

We are focused on our financial strategy of achieving sustainable organic revenue growth and expanding margins over time, and we continue to believe our business will generate mid to upper single digit growth over the medium term.

And the disruption facing our clients and primary end markets is substantial stemming from the impacts of the COVID-19 pandemic as well as the rapidly evolving competitive landscape and we believe this disruption creates significant opportunities for growth and our business.

Before I turn it over to John Let me make two final comments first I want to recognize the challenge that our Indian colleagues are facing given the recent surge and COVID-19 cases.

We are working closely with our country leadership team to support our people and their loved ones as well as the local community and have executed our business continuity plans to minimize the disruption to our business.

Lastly, I want to thank our entire team for all they have done during the pandemic. They have demonstrated an incredible amount of agility and creativity. While also remaining focused on supporting our clients our company and each other.

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

Thank you Jim and good afternoon, everyone.

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

Press release, 10-Q, and Investor Relations page on the Huron website have reconciliations of these non-GAAP measures for the most comparable GAAP measures.

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

Management believes they provide useful information for 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 <unk> solution, which closed on February one is included in our first quarter financial results and the business Advisory segment subsequent to the acquisition day.

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

Revenue for the first quarter of 2021 were $203 $2 million down eight 7% from $222 $6 million and the same quarter of 2020.

The decline in revenues and the quarter was driven by the healthcare and education segments.

Faced challenging pre pandemic year over year comparisons and the first quarter of 2021.

This decline was partially offset by continued growth and the business Advisory segment.

Net income was $5 $4 million or 24 cents per diluted share and the first quarter of 2021 compared to net loss of $42 $3 million for $1 94 per diluted share and the same quarter and the prior year, which was inclusive of the $59 8 million pretax goodwill impairment.

On the charge taken in the first quarter of 2020.

Our effective income tax expense rate and the first quarter of 2021 was 22, 1%.

3rd% to 21% benefit rate one year ago.

Our effective tax rate for Q1 of 2021 was more favorable than the statutory rate inclusive of state income taxes.

Primarily due to a discrete tax benefit for share based compensation awards that vested during the first quarter of 2021.

This favorable tax benefit was partially offset by certain non deductible expenses.

Adjusted EBITDA was $16 $5 million and Q1, and 2021 for eight 1% of revenues compared to $19 million and Q1, and 2020 or eight 5% of revenues.

Adjusted non-GAAP net income was $7 $8 million for.

And 35 per diluted share and our first quarter 2021, compared to $9 $8 million for 44 per diluted share and the same period of 2020.

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

The healthcare segment generated 39% and total company revenues during the first quarter of 2021.

The segment posted revenues of $79 7 million for the first quarter of 2021 down $15 $9 million or 16, 6% for the first quarter of 2020.

The decline in revenue reflects the ongoing impact of the COVID-19 pandemic and the first quarter of this year relative to a quarter that was largely on impacted by COVID-19 last year.

As Jim mentioned, we believe the first quarter of 2021 will be the revenue low point for this segment related to the pandemic as we expect sequential revenue growth moving forward and 2021, reflecting the ongoing recovery of the healthcare industry.

And.

Operating income margin for healthcare was 25, 7% for Q1 of 2021 compared to 25, 2% for the same quarter in 2020.

Quarter over quarter increase and margin was primarily attributable to decreases and conference related expenses performance bonus and share based compensation expense and promotion and marketing expenses, largely offset by an increase in salaries and related expenses for our revenue generating professionals as a percentage of revenues.

Reflecting lower utilization.

As a reminder, our first quarter results included the annual resetting of our wage basis for certain fringe items like the employer portion of FICA taxes, and our 401 K match.

Yeah.

And as Jim mentioned, we continue to invest and areas of our business to align with our enterprise strategy, including managed services.

And April we hired approximately 300 healthcare professionals to expand our managed services capacity to provide revenue cycle billing and collections insurance verification and charged integrity services to our healthcare clients.

While we expect revenue of around $10 million during 2021 related to this group hire we only expect modest accretion from an earnings perspective as we.

As we invest to build out our capabilities for future growth.

The business Advisory segment generated 36% of total company revenues during the first quarter of 2021.

Segment posted revenues of $72 $9 million and Q1 2021 up $8 million for 12, 3% from the first quarter of 2020.

Revenues for the first quarter of 2021 include $2 $4 million from our acquisitions and force IQ and <unk> solution.

Our organic revenue growth rate and the business Advisory segment was 9% for the quarter for <unk>.

Order over quarter increase and revenue was broad based across our strategy.

Digital technology, and analytics and distress advisory offerings.

The operating income margin for the business Advisory segment was 17, 9% for Q1 of 2021 compared to 15, 2% for the same quarter on 2020.

Quarter over quarter increase and margin was primarily due to increases and decreases rather and restructuring charges and promotion and marketing expenses, partially offset by an increase and performance bonus expense for our revenue generating professionals.

The education segment generated 25% of total company revenues during the first quarter of 2021.

Segment posted revenues of $56 million for Q1, 2021 down $11 5 million or 18, 5% from the first quarter of 2020.

The decline in revenue and reflects the ongoing impact of the COVID-19 pandemic as compared to a quarter that was largely on impacted by the pandemic and 2020.

The education segment grew 7% percent sequentially and the first quarter of 2021 over the fourth quarter of 2020 and as Jim mentioned, we believe the fourth quarter of 2020 will be the revenue low point for this segment related to the pandemic as we expect sequential revenue growth moving forward and 2021, reflecting the <unk>.

Ongoing recovery of the higher education industry.

The operating income margin for education was 17, 1% for Q1 of 2021 compared to 21, 1% for the same quarter in 2020.

The quarter over quarter decline and margin was primarily due to a decrease in utilization, partially offset by decreases and contractor expense.

Promotion and marketing expense and performance bonuses expense for our revenue generating professionals.

Other corporate expenses not allocated at the segment level for $28 8 million and Q1 2021, compared with $27 1 million for Q1 and 2020.

Unallocated corporate expenses and the first quarter of 2021, including $800000 of expense related to the increase and liability to participants and our deferred compensation plan, which is fully offset by the corresponding gain and other income related to the increase and value of the assets used to fund this plan.

Conversely, unallocated corporate expenses and the first quarter of 2020 reflected a reduction of expense of $4 $7 million related to our deferred compensation plan.

Absent the impact of our deferred compensation plan in both periods.

$3 $8 million decrease in non allocated corporate costs.

Next decreased stock compensation and salaries and related costs for our support personnel.

Increased practice administration and meeting expenses and decreased training expenses as well as recruiting expenses.

Now turning to the balance sheet and cash flows.

DSO came in at 64 days for the first quarter of 2021 compared to 52 days for the fourth quarter of 2020, and 62 days for the first quarter of 2020.

We expect DSO to normalize to around 60 days over the course of 2021.

Total debt includes the $265 million and senior bank debt and a $3 million promissory note for total debt of $268 million.

We finished the quarter with cash of $22 million for net debt of $246 million.

This was a $110 million increase compared to Q4 of 2020 and the first quarter reflects the payment of our annual bonuses.

And first quarter also included $11 $5 million of share repurchases under our $50 million Board authorization eight.

$8 $5 million of shares redeemed and satisfy employee tax withholdings related to our share based compensation program and.

And $6 million related to business acquisitions.

Our leverage ratio as defined in our senior bank and clean it was approximately two six times adjusted EBITDA as of March 31 2021.

Third to three five times adjusted EBITDA at the end of Q1 2020.

The first quarter of 2020 leverage reflects borrowings of $125 million on our revolving line of credit out of an abundance of caution at the outset of the COVID-19 pandemic.

Our net leverage ratio was two four times trailing 12 months adjusted EBITDA as of March 31, 2021, when the bank definition and calculation is adjusted for cash on hand.

This compares to two three times trailing 12 months adjusted EBITDA as of March 31, 2020, when calculating and the same manner.

Cash flow used in operations and the first quarter of 2021 was $83 million.

We used $2 million on our cash to invest and capital expenditures inclusive of internally developed software costs, resulting in free cash flow of negative $85 million.

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

As Jim noted, we are raising and narrowing our full year 2021 on revenue guidance to $850 million to $900 million.

The increase and our revenue guidance, primarily reflects the ongoing momentum and our business advisory segment and better visibility and increased confidence that we have progressed past the revenue low points related to our healthcare and education segments.

In addition, we are affirming our full year adjusted EBIT guidance to be and a range of 10, 8% to 11, 8% of revenues.

And we are increasing our full year adjusted non-GAAP diluted earnings per share guidance.

B and a range of $2 35.

To $2.75 for.

And we expect our full year effective tax rate to be and a range of $26 29 per site.

Thanks, everyone I would now like to open the call up for questions.

Operator.

Thank you and ladies.

Thanks for all until now and if you have a question at this time please press the star key.

And one key on your Touchtone telephone.

For your question has been answered all your list can we move yourself from the queue you may do it all by pressing the pound key.

One moment for all his life.

Question. Please.

Our first question.

Comes from Tobey Sommer of true Securities. Your line is open.

Thank you with respect to the education and healthcare businesses I was wondering if you could comment on.

And what the pipeline looks like from a project size and complexity perspective, as you work your way through the year and maybe juxtapose that with different ranges of small versus large size historically. Thank you.

Tobey This is Jim I'll start I think.

I mean, a lot of things I think are beginning to look a little bit like they did towards the end of 2019 I think in terms of.

The size and complexity, we're gonna have a mix of of diesel.

Decent sized <unk>.

Large systems projects, we're going to always have strategy projects that tend to go a little bit and the middle.

And of course <unk>.

Search and students are doing very well so I think the I think the composition of the pipeline.

It's going to look fairly similar to what it was before I think what we have witnessed particularly early in 2020 and through 2020 was scaling back from a lot of clients in terms of the size just because they weren't sure for the bandwidth. They weren't sure if that was going to be other disruptions and I think we're beginning to see the pipeline and began to resemble.

It looked like prior to COVID-19 in terms of the size and complexity.

And do you want to add to that.

Jim I think.

And with what you said I think the only thing that I would add is in the education segment.

I think in terms of the research parts of our business as well as the strategy part of the business.

The pipeline as Jen said is.

And it definitely we definitely have line of sight to kind of pre COVID-19 levels and both both parts.

For those two parts of the business I would say for the larger.

Admin system replacement projects for the student system replacement projects for <unk>.

Certainly seeing opportunities and the market and and the long run we're highly confident that.

That's a very big addressable market for us and a place where we're very well positioned but and the short term just because of the sheer size and some of those projects I think.

That's probably not quite back to pace, yet with the pre COVID-19 levels on some of those bigger ones, but that's something that.

Obviously, there are there are opportunities out there and that we plan on.

And positioning ourselves well for the year goes on and that and that part of the market.

Thank you.

And give us a sense for your hiring posture for internal fulltime staff, and maybe a little bit more color about debt.

Group higher.

Sure I do I can I can start on that from a hiring perspective.

Say.

And we start to have better visibility into the back half of the year and we've seen some of the conversion of the pipeline and some of the opportunities.

Debt debt, we had since the beginning of the year I think that we have been getting more aggressive from a hiring perspective, if I take it.

And kind of segment by segment and our healthcare segment.

As you know our target utilization and that part of the business tends to be and higher <unk> and we finished the first the first quarter more and that 68% range. So I think we still have some room for utilization perspective there.

Though we are still making strategic hires where probably not adding a ton of capacity at this point just based on.

The sub debt capacity, given our current workforce on the education side, I'd say, there and certain parts of the business have rebounded strongly I think that we do see is getting more aggressive in terms of our hiring within the education part of the business. It's a nice sequential growth and the first quarter versus the fourth quarter and based on our projections for the rest of the year.

And I think debt, we expect utilization and tighten up as the year goes on and for the need to expand and then on the business advisory segment that segments and growing at a nice pace really throughout the pandemic and we've been hiring on throughout the pandemic as well and our expectation is that that trend will continue on as it.

And it goes on.

And last question for me and I'll get back in the queue could you talk about.

On a either headwind or tailwind that had been created out of that.

And the money kind of for.

Factual appropriations.

Out of Washington, and or the sort of prospective ones I think there was.

Some comment about basic research in.

And the infrastructure related bill that that maybe could play and the education space All wanted to get your perspective, there too.

Tobey. This is John are you talking about healthcare or education or both.

Both because there's just there's so many different appropriations that have Ah, it's actually kind of come out of D C and and several more for him to work so.

Yeah, well so a couple of I'll make a couple of comments on the first of all I think.

In both cases, and health and education and a call out of our clients certainly took a hit.

I think and the and better.

And I don't want to be presumptuous to assume that this is the and but at this stage I think some of the losses that they initially thought were going to happen alright gonna be a severe it doesn't mean for losses Werent tough.

But a lot of them I think are ending up for.

<unk> thousand 14 months after the pandemic started are probably in better shape than their worst fears earlier and the pandemic. So I think that's likely to be a little bit of that.

On a tailwind for us I think in terms of the appropriations, particularly around healthcare I mean, so I'm, sorry, and particularly around research I think they are generally very good. This administration seems to be very supportive of research. So that should also work out well.

On the.

<unk>.

I think some other question marks will be around for kind of what happens with respect to reimbursement, particularly around Medicare and Medicaid and whether there ends up being any state for pay for public universities, whether there ends up being any.

Assistance in terms of from the state and local governments in terms of providing support that remains a question Mark I think but in general I think a lot of our clients are are are positioned now better than they thought they would be say 789 months ago, and so I think in general.

Those are the the tailwind that we're seeing and I think that's probably the reason that we're seeing and the pipeline buildup.

Because I think they're beginning to realize that they now have a little bit more confidence and their own future.

And sustainability and their own ability to accomplish what they want to accomplish.

Thank you.

Our next question comes from Andrew Nicholas of William Blair. Please proceed sir.

Thank you and good afternoon.

Wanted to ask a follow up on on the hiring environment I. Appreciate your color on kind of segment level expectations, but.

Could you maybe speak to the competitiveness of finding talent right now it seems like Theres a lot of your competitors, who have similar ideas in terms of adding adding head count and I'm. Just wondering how you kind of take that into account when you're thinking about.

Building into demand later on this year.

Andrew This is Jim.

I think it's fair to say that the hiring environment has become more competitive and par.

It's competitive among our competitors are natural competitors and part it's competitive across kind of other industries and people just book into two different things are certainly, particularly around technology and other areas. There's a lot of growth and so I think because of the economy accelerates quickly you're going to find.

I think a lot of organizations are going to be hiring so we do find it to be a more competitive environment.

I think our Howard Howard.

And our ability to recruit is actually quite good I think we we kind of and I don't say this slightly but we think we really have a very strong culture and to which recruit people know that.

People have heard that among their colleagues and friends and so that gives us a real benefit but it is it is a more difficult environment in which to just.

And just more competitive environment, rather that we're dealing with right now and so.

At the same time.

And there may be some people that.

But wanted to make a transition the part that I think that were somewhat focused on right. Now is that if you had gone back over the last decade or two decades, and you said what was the hardest part about consulting and in terms of recruiting it would be the expectations for a heavy dose of travel and our sense right now Andrew is that I think and.

Most cases and I'll just throw out a rough number my guess is in most cases and the amount of travel that you can required there's probably going to be half of what it was and it may be less that'd be isolated instances, where it's more but it's mostly going to be less and so you end up having one of the hardest things about consulting and that's fairly frequent travel and you reduce it substantially creates a much better and.

And to which to recruit so we think that's going to be beneficial for us.

And kind of COVID-19 impact begins to settle on.

Perfect that's all.

And then for my follow up and then I'll get back in the queue, just asking about the pipeline and a different way and just overall visibility.

Across each of the businesses. It seems like pipeline is building quite nicely.

The different segments are having and easier time, making decisions, but could you just compare visibility now relative to three months ago, and we spoke on our fourth quarter call and and how either of those compares to kind of the summer months I'm, just trying to get a sense for for even if it's something isn't in there.

Pipeline, how quickly you would expect those decisions become more rapid thank you.

I would say I could take the first stab at that if I look across the business and I start with our healthcare segment.

And I think I think the difference probably over the past three months is on certainly our clients have been impacted by what's happened over the past year and even before that it was a.

For the challenging environment for many of our clients and so we saw a lot of those opportunities and our pipeline we've been having a lot of good conversations and I think.

Probably the progression for more and we were on.

On a quarter ago is really towards the back end of the first quarter and non even into the month of April we.

We had a conversion on.

On some of those opportunities and some of those projects.

That we think are going to be.

Very nice projects for us as the year progresses and to help get us back on a growth trajectory thing. In addition to that on one of the things that we always look at is our volume of assessment activity. So that's clients that come to us who have.

Issues for me.

And our financial and operating perspective, and bring us and to assess the opportunity to hop on and on the volume of those assessment activities within healthcare.

And is.

Within line of sight again kind of where we were on pre COVID-19. So we feel like that's another key indicator for us debt on those number of projects that are on the pipeline and then we've been building out our managed service offerings as well over the course of the past year and that's another area, where we're just seeing a lot of interest from our clients.

And they're really coming forward to us with opportunities there to help them. All so I'd say that that kind of summarizes the healthcare side of it from and education perspective, I'd say, one big differences and we had a really nice.

Quarter of sequential revenue growth off of what was probably the low point and the fourth quarter.

Similar to what I would describe and healthcare I think we've seen a very nice pick up and the pace of conversion of some of those opportunities that we've talked about for the past call or two that were in the pipeline on and that was.

Whereas some of the healthcare conversions, where more and they happened towards the end of the first quarter or the first part of the second quarter I would say on the education side of the business, particularly within our research and our strategy offerings.

We're seeing a lot of those conversions on throughout the first quarter. So that's another thing that has given us all.

Confident and I'd say take zoom and off for a second to Bolthouse care and education I'd say just in general on the progress that we've made and the U S and terms of the vaccine and really for a lot of our clients and our leaders that we talked with those clients kind of a sense that they are able to now start to think more about the strategic priorities and our strategic objectives I think.

And that factors in a while we see is while we see a lot of clients coming forward.

Who are starting to rethink about the things that we are on their plate before the pandemic hit and they were severely disrupted over the past year and then finally from a business advisory perspective, Jim mentioned it in his remarks on the strategy side of the business. We've seen a nice rebound there are technology business continues quite frankly to build momentum on that very.

And.

Full suite of technology offerings that we have at this point is resonating very well with our commercial clients as well as clients across the healthcare and education industries and then.

And the one maybe area that's a little bit different is our distressed business, which actually had a very nice first quarter and posted some nice growth during the first quarter year over year I would just note that they are up against a couple of tough comps and the second and third quarter.

Based on how hot that market was and the second and third quarter. So we still and still feel good about the pipeline and the opportunities for that business, but it probably will be a challenge and couple of quarters of comp share just based on what happened last year.

Great. Thank you.

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

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Our next question comes from.

Kevin Steinke of Barrington. Please proceed sir.

Good afternoon.

So I think you've touched on this a bit and response to other questions, but maybe just.

Can you talk about.

And <unk>.

Why are the pipeline and healthcare and education continue.

Continue to move.

Move forward and convert maybe a little bit more quickly than you would've expected.

And your original guidance you know, perhaps you had kind of built and.

Some more conservative conservatism into that original guidance based on the uncertainty of this situation, but it is this.

As you talk to.

Leaders and healthcare and education is it just kind of the vaccination rollouts that are really give them the confidence to move forward a little more quickly than you would expect there.

What other factors would you highlight there.

Kevin This is Jim and I think there's a couple of ways and looking at this for all of US for all of US. This has happened and so quickly and I think if you look at the sequence of events that took price over the last.

And year, plus I mean, we went through that kind of horrific March April may timeframe, where healthcare healthcare is kind of health systems, where it's kind of completely absorbed and the urgency every new virus and health and education was kind of look and I'm wondering kids had already gone off campus and they were wondering are we even be able to have kids back in September and.

And but there was still hope that the summer would be better and part of the summer was better and that got a lot worse and so that's set things back a little bit in the fall and then we had that other surge again in December our clients have gone through this horrible period of kind of ups and downs and and really trying to guess at it and I think the fact that the vaccines came out in January and have begun to announce.

Fred and take hold and I think he was just everybody. It's more confidence they can begin to not just kind of do stuff that they actually thought they wanted to do historically, particularly on improving their digital transformations, but at the same time try to get to the point, where they can now be responsive to what in many cases, including education and healthcare is going to be very different markets.

And coming up shortly and so that I think is why we're seeing this pick up and the pipeline right now and just in terms of and their ability to go back and say okay. So so far we've kind of survived. This we can't just go back and see if things are going to resume kind of do things differently. So across the board whether its care transformation and changes that are taking place there.

All of health and healthcare whether it's.

New business models and education.

And it just as a new strategies that are going to be required to kind of meet a very different environment. This is really it's all across the board large small public private.

Any kind of hospital and they're all really kind of looking at this very uncertain future I think and now theyre, having enough confidence to know that at least and it seems right now the worst of its over and they can now begin focusing on their business I think and the last 12 months was hard to focus on your business. When you really thought that there might be another surge coming and in a matter of weeks for months.

So that on the collect on what's just kind of a mindset that it's enabling people to go back and say, we've got and I'll take care of our business and I would say more than anything. That's those are the factors behind are having greater a bigger pipeline and.

Greater visibility into that pipeline.

Okay, Great that's helpful.

And also I wanted to follow up on your discussion of.

Hiring about 300 people on the managed services area.

Is this kind of an outgrowth of.

And that original.

Managed services project, you had and healthcare and for all.

A larger client and maybe you've had some success there and does that kind of speak to.

Why is this your.

Being able to expand this offering and just wanted to see if I could tie that together with.

What you had been originally doing and in the healthcare arena.

Thank God I think Kevin it's a it's clearly a continuation of our strategy as it relates to managed services, we do see the need and the market, we see a number of clients.

We're very interested in opportunities too.

And improve their operations and.

Improve their financial results and they view managed services with a trusted partner as.

One way to be able to achieve those objectives and so we've had a really great partnership on that first project that we've talked about and we feel like we've been very successful working with our client there to drive and really positive impact for them and that has kind of opened the door for more opportunities for us.

Continue to build out those capabilities and to be thoughtful about how we can continue to on build out the team there to meet the demand that we expect to be coming so on it is it is an offshoot in that regard.

And we think debt.

300 debt, we've hired on quite frankly, some of them. There are some there is some specific revenue that will comp associated with that group, but there are a number of things and our own pipeline, where we really made the determination that bringing these employees on are going to help us execute and most effectively deliver on some of those opportunities that were separately existing and our pipeline.

And so.

And we're very excited that and then join the team and I think our viewpoint is it really helps.

Round out our offerings from a managed services perspective and healthcare.

Okay, Great that's helpful.

You talked about also on your prepared comments.

And just.

Yes, how sizable technology has become as part of your offerings and.

And that Youre in and continue to invest there.

Wood Wood technology focused.

Acquisitions still kind of be at top of mind, when you're thinking about M&A going forward and and are you contemplating when you were talking about investing and your technology offerings and potentially further acquisitions.

And that space.

Yeah, Hey, Kevin This is mark I'll address that one I think the answer is certainly yes.

See continuing opportunities just to fill in what we think is a fairly comprehensive suite of enterprise platform capabilities today, and its expanded into data and analytics as well so.

There's definitely opportunities for us just the strength in various areas and I think youll see us continue to be active.

Where we see opportunities and the marketplace.

Okay, Great how do you.

And just overall feel like.

And where your capacity stands in terms of balance sheet too.

To pursue the your acquisition strategy.

And I assume youre going to continue to pay down debt here, but maybe.

Maybe John just talked about.

Debt, paydown, and where and where you'd like to get from a leverage perspective.

Sure Kevin and answer your first question I think we feel very good about our capacity given.

Given the amount that we have on our revolving line of credit as well as our expected free cash flow for the year and.

As you know its our seasonal high watermark in terms of borrowings just after the annual incentive payments in March and so that's expected and the defaults coming out first quarter of course is to pay.

Pay down debt, but I think clearly as with that kind of large cash outflows behind us.

And our expected free cash flow for the rest of the here and we think that gives us plenty of opportunity to both continue to pay down our debt and to get back down you know call for the.

For two times level.

And while also having capacity to repurchase shares to the extent that it's.

We think that that's a good opportunity and clearly to the extent and we can offset some of the dilution that comes from our share based compensation programs, but as well for strategic tuck in type M&A I think our perspective is that.

Everything we do is kind of focused on our organic growth strategy as we've talked about before but that from time to time.

It does make sense to buy on.

And when we think there are certain assets on the market that can give us a quicker entry point on technology, as often and area, where we see that opportunity and he and the extent that we see those opportunities we feel very comfortable with our leverage very comfortable with our cash flow and be able to execute on those and make sure we're bringing on the talent and to the organization that we need to.

And in order to execute on our strategy.

Okay, great. Thanks for taking the questions I appreciate it.

Our next question comes from Josh Vogel of Sidoti. Please proceed sir.

Thank you and good afternoon guys.

A lot of my questions were covered but maybe another way to frame the pipeline and visibility conversation.

And are you seeing increases and the sales pipeline and the pace of signings and healthcare and education.

But also a sales cycle that remains somewhat elongated and I'm just curious given the recent conversions is that while there has been some easing there relative to last year and and you think that the cycle back to pre pandemic caused by the second half of the year for or perhaps even quicker given how long clients for kind of sitting on their hands and maybe looking at a rapid.

Reengage.

Josh This is Jim I'll start there.

I think I think the thing that we saw probably more deferred than anything and there's probably two areas one of them would be and healthcare and some of the performance improvement areas again deferred while we were going through the worst for the pandemic and in education and the thing that got the most deferred was the larger ERP projects and and as we've described.

I think in both cases healthcare and education, you've seen the environment transitioned quite a bit I. Just think it was really hard to undertake for our clients for very hard to undertake those kind of large projects and a point in time when they weren't sure about their financial stability. They weren't sure about there on the bandwidth or their own people.

And to take it on and I guess and and <unk>.

And is that a lot of it would probably have to be done remotely you put it all together and I think a lot of them just sorted through and so and you don't want this is urgent but its not bad urgent that's weighted a little bit that's what's kind of picking up right now.

I think I think and the case of the larger systems projects. There, there's a pretty high degree of coordination and gets to take place at our clients and forget about how suits and our clients just to get these things effective it's not like we come in and do everything they've got to play a major role on it and so I think you're seeing some of those as they kind of regroup themselves they're good.

And back in the point, where they can envision taking on those more complicated projects same thing I think is happening and healthcare right now.

I talked to somebody today, who basically said that the current year financials are actually going to look pretty good because the biggest hit we took was probably in the prior fixed fiscal year, but were worried a lot more about the cost structure.

In the coming years, and that's what's causing them to go back and begin to think through how do they how do they reposition their business to be successful and.

And the future. So I think I think this was just a you know as it was.

To us it was.

Really easy to understand why these delays are taking place, but I think a lot of those reasons are now dissipating and we're now beginning to see things open up and people are more capable of addressing the future and that I think is why we are seeing pick up and.

And the size and complexity and visibility into our pipeline.

That's good insights there thank you.

The the hiring of the 300 FTE Ftes I think Johnny said, we'd add about 10 million to revenue is that all going to be and Q2.

No no. That's that's for the remaining nine months of the year Josh.

Okay.

And I'm just thinking on a higher these SUV ftes are targeted specifically for this project.

Do you think there's an opportunity, though perhaps keep these people on your bench when the project is over hoping that you can deploy them to other engagements considering how the pipeline is building.

Josh Yes, just to debt.

Clarify on that point.

So they weren't they actually work hired for any specific project. They really are and they really were brought on to broaden our capabilities from a managed services perspective and.

And.

They are going to be.

Able to be deployed on some of the opportunities that we had and our pipeline.

Before we acquired them as well as.

On some specific work related related to that and so absolutely the plan is.

And to build around this team and to continue to build out.

On build out these capabilities and we expect the team to grow quite frankly so.

Based on the demand that we see and the market, we think that theres going to be a lot of opportunity.

For these employees to help serve our clients and that when we start to look forward to 2022, we actually think this is going to be an area. That's going to help drive organic growth within this business and that these employees will be a key part of that.

Understood I appreciate the clarification around that and just one last one and a lot of.

And talk out there about.

And unprecedented and overwhelming wave of applications at colleges.

And especially as some of weighted the S&P and <unk> and I was just curious on.

Is that a potential.

Tailwind for your business.

I don't think so Josh I think I mean, I think that's just.

First of all it's not clear to me that the number of seats for all of those applicants has really changed and therefore I think he may have a lot more applicants, but it doesn't necessarily transition and more revenue and certainly it's not a headwind, but I don't think it's gonna be a tailwind either I think there's just kind of anomaly, where we're at right now where everyone's just try and do the best they can get in because there's so many uncertainties in terms of crews and go back to campus.

And the higher branded places will have no problem, but everyone should thinking I think that maybe I can apply to a price that otherwise might not be able to get into it because I'm. All for disruption is taking place and time will tell whether that happens or not but I don't think it's going to be that much of a differentiator I think it's just gonna be and add statistic that.

It sits out there for a while.

I got you, okay, great well, thanks for taking my questions.

Our next question comes from Tobey Sommer of <unk> Securities. Please proceed sir.

A question for you on the education space.

President and <unk> initiatives.

And the community College and changed some things and in terms of education, making it free.

What would that those things that are on the table do for demand for your services do you think.

Tobey I think I think it remains to see what's going to happen there I would not anticipate that having a big impact on our core client base, which is.

It's certainly the largest research universities and also maybe the top 200 or 300.

Ranked institutions.

It has a big impact for people wanting to get and education that may not be able to afford to do it but I.

I don't think it's going to have a big impact on our business.

Okay. Thank you very much.

All my questions and I'd like to try and call back all that kind of go wrong.

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

Yeah.

That concludes today's conference call. Thank you Arthur one for you on participation.

Okay.

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Good afternoon, and ladies and gentlemen, and welcome to your bonds consulting group webcast to discuss financial results for the first quarter two cell phones for anyone.

At this time all conference call lines are on a listen only mode and Lee.

We will conduct all the question and answer session for conference call participants and instructions will follow at that time.

And as a reminder, this conference call is being recorded.

Before we begin I would like to point all of you because that is closer to at the end of the company's news release for information about any forward looking statements that may be made or discussed on this call.

And the news release is posted on you want for website.

Please review that information along with other filings with the S E C.

For it is quote share all factors that may impact subjects discussed in this afternoon's webcast.

The company and we'll be discussing one or more non-GAAP financial measures.

If you look at the earnings release and on Gabon for website for all the disclosures required by the S. E C Inc.

<unk> on the consultation 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 first quarter 2021 earnings call with me today are John Kelly, Our Chief Financial Officer, and Mark Hussey, our President and Chief operating Officer.

Our first quarter financial results were in line with our expectations revenues declined 9% and the first quarter of 2021 as compared to the same period and the prior year, driven by declines and the healthcare and education and segments.

All these declines were partially offset by strong gross and the business Advisory segment.

During the first quarter, we saw an increase and our sales pipeline and the pace of signings and our healthcare and education businesses, which gives us further confidence and our ability to meet our updated full year performance expectations.

And the overall demand for our services has increased during 2021, we now believe we are past the pandemic driven low watermarks for education, and healthcare segment revenues and we expect sequential growth and these businesses moving forward and 2021.

We believe the low point for the education segment incurred and the fourth quarter of 2020, while the low point for the healthcare segment was in the first quarter of 2021.

Looking ahead, we see increased demand for our healthcare and education services as our clients prepare for a recovering economic environment, which has also strength and growth and our business Advisory segment.

I will now share some additional insight into our first quarter performance.

During the first quarter healthcare segment revenues declined 17% over the prior year first quarter reflective of the difficult first quarter comparisons driven by the growth we experienced in this segment at the beginning of 2020 prior to the impact of the pandemic.

The healthcare business got off to a slower start this year given the continued disruption of the pandemic and vaccine rollout on our hospital and health system clients.

And for the quarter progressed, our sales pipeline and increased and remained at record levels and the pace of signings and conversion to hard backlog also improved each month.

Our substance for our performance improvement offerings have continued to grow and on April assessment volume mirrored pre pandemic levels.

And as hospitals and health systems planned for a post pandemic future. Many organizations are prioritizing several key initiatives.

Among the most important priorities is making care more affordable, while also providing greater price transparency to consumers.

As we look at our pipeline market demand is focused on our core performance improvement and managed services offerings to address near term financial pressures.

In addition, we are seeing substantial demand for one of our newest offerings, which was developed collaboratively across our health care strategy and technology businesses.

Offering helps health systems achieve structural changes to ensure the sustainability of their business model and the future.

Given the near term financial challenges and long term growth aspirations of our clients. We believe our collective performance improvement related offerings will continue to be and ongoing source of growth for our business.

Our second priority for for healthcare providers is accelerating care transformation strategies to deliver a substantially greater amount of care and virtually including through telehealth and remote patient monitoring and hospital at home models.

The pandemic has highlighted the need for providers to formalize their long term virtual care strategies and build the right consumer centric infrastructure to support patients throughout their care journey.

The breadth of our care delivery organizational transformation and digital technology and analytics offerings.

And deep expertise and implementing telehealth and hospital at home models.

<unk>, Sharon to add significant value to our clients and establish and implement their care transformation.

The third priority among our healthcare clients is focusing on enhancing digitization and use of clinical and operational data with a strong emphasis on planning and analytics.

Many healthcare organizations are making significant investments and their administrative operations comparable to some of the investments and clinical systems that have been made over the past decade.

Once again, our healthcare business is well positioned to help our clients navigate this next wave of digital transformation.

The growth of our healthcare pipeline and the pace of signings in recent months, our indications that our offerings are resonating well with our client base as they seek assistance and addressing these key priorities.

Turning to the business Advisory segment and the first quarter of 2021 business Advisory segment revenues grew 12% over the prior year quarter, 9% organically driven by strong broad based demand across our strategy digital technology and analytics and distress advisory offerings.

As we've discussed on prior calls we continue to execute on our commercial strategy, which is aimed at going to market and collaboratively across the four businesses and the segment.

The business Advisory segment has grown revenues at a compound annual growth rate of 15% over the last five years, Inc.

And this isn't the recent pandemic era, which reinforces the importance of this segment to our company's growth strategy.

When looking beyond the numbers, you'll find several important attributes of that revenue growth that bode well for the future of this segment.

First we are winning and sizeable projects among numerous fortune 500 companies, particularly in energy and utilities financial services, industrials, and and manufacturing and life Sciences.

Second we continue to capitalize on one of our greatest strategic advantages by integrating our deep industry and functional expertise with our strong strategy technology and operations capabilities.

Coupled with our nimble approach to serving our clients from strategy through execution, our expertise and experience allow us to compete and win against larger competitors.

We are on the process of building and additional competencies that will further position. This segment for above average growth and are coming years.

In addition, our digital technology and analytics offerings continue to provide the foundation for growth and the commercial sector and our distressed advisory services continue to perform well amidst for many financial challenges impacting middle market companies.

We are also seeing solid demand for our strategy and innovation services as the economy continues to recover.

Turning now to the education segment, and the first quarter of 2021 education segment revenues declined 19% over the prior year quarter reflective of the difficult first quarter comparisons driven by the strong growth we experienced in this segment at the beginning of 2020 prior to the impact of the pandemic.

Sequentially education segments revenues grew 7% over the fourth quarter of 2020, driven by strong demand and our research strategy and operations offerings.

Similar to healthcare as the quarter progressed, our sales pipeline and increased across our offerings and the pace of signings improved month over month.

While some of the larger ERP related engagements continue to be delayed the pipeline of opportunities is widening and many institutions are beginning to feel more comfortable that they have the bandwidth and financial stability undertake these significant projects.

We are also seeing smaller institutions moving ahead with their digital transformation, giving greater visibility and to their financial position.

Well, some higher education institution space sizable COVID-19 related losses, others have found the losses to be less than initially anticipated and part due to financial support by the federal government.

Many colleges and universities are now more aggressively evaluating how to be successful and a post pandemic environment, including trying to establish more sustainable operating models.

These attributes will continue to drive demand for our broad set of offerings and this segment.

Before I turn to our outlook for the year I'd like to add several comments about our collective technology capabilities.

As I mentioned last quarter, our technology services grew to over 30% of total company revenues and 2020 <unk>.

Technology has become an increasingly important pillar of growth for this company and it's deeply embedded and each of our segments.

We continue to grow our teams and North America as well as in India to support the market demand for these offerings offerings.

Finally, let me turn to our outlook for the year.

Historically, we have not adjusted our annual guidance after the first quarter today.

Today, the signs of recovery and our healthcare and education businesses and continued momentum and the business advisory segment give us confidence to raise and narrow our full year guidance.

As our press release indicates we are increasing and narrowing our annual revenue guidance to $850 and $900 million.

We're also maintaining our adjusted EBITDA guidance and a range of 10, 8% to 11, 8% of revenues and increasing our adjusted diluted earnings per share and a range of $2 35 to $2 75.

We raised our revenue guidance to reflect the current and anticipated demand for our services across all segments.

We continue to anticipate modest sequential revenue growth and the first half for the year as compared to the second half of 2020, followed by stronger growth and the second half of 2021.

We are also investing for the long term further expanding our capabilities and areas. We believe have strong growth potential given current market dynamics, including our healthcare and managed services and our digital technology and analytics offerings across all of our segments.

We are focused on our financial strategy of achieving sustainable organic revenue growth and expanding margins over time, and we continue to believe for business will generate mid to upper single digit growth over the medium term.

The disruption facing our clients and primary end markets is substantial stemming from the impacts of the COVID-19 pandemic as well as the rapidly evolving competitive landscape and we believe this disruption creates significant opportunities for growth and our business.

Before I turn it over to John Let me make two final comments first I want to recognize the challenge that our Indian colleagues are facing given the recent surge and COVID-19 cases, we are working closely with our country leadership team to support our people and their loved ones as well as the local community and have executed on.

Continuity plans to minimize the disruption to our business.

Lastly, I want to thank our entire team for all they have done during the pandemic. They have demonstrated an incredible amount of agility and creativity. While also remaining focused on supporting our clients our company and each other.

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

Thank you Jim and good afternoon, everyone.

Before I begin please note that I'll be discussing non-GAAP financial measures such as EBITDA adjusted EBITDA adjusted net income adjusted EPS and free cash flow are for.

Press release, 10-Q, and Investor Relations page on the Huron website have reconciliations of these non-GAAP measures for 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 for investors regarding our financial condition and operating results.

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

Also our acquisition of Unica solution, which closed on February one is included in our first quarter financial results and the business Advisory segment subsequent to the acquisition day.

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

Revenues for the first quarter of 2021 were $203 $2 million down eight 7% from $222 $6 million and the same quarter of 2020.

The decline in revenues and the quarter was driven by the healthcare and education segments, which faced challenging pre pandemic year over year comparisons and the first quarter of 2021.

This decline was partially offset by continued growth and the business Advisory segment.

Net income was $5 $4 million for 24 cents per diluted share and the first quarter of 2021 compared to net loss of $42 $3 million for $1 94 per diluted share and the same quarter and the prior year, which was inclusive of the $59 $8 million pretax goodwill impairment.

Charge taken in the first quarter of 2020.

Our effective income tax expense rate and the first quarter of 2021 was $22 one per cent compared to 21 per cent benefit rate one year ago.

Our effective tax rate for Q1 of 2021 was more favorable than the statutory rate inclusive of state income taxes.

Primarily due to a discrete tax benefit for share based compensation awards that vested during the first quarter of 2021.

This favorable tax benefit was partially offset by certain non deductible expenses.

Adjusted EBITDA was $16 $5 million and Q1 and 2021 for <unk>.

$8, one per cent of revenues compared to $19 million and Q1, and 2020 or eight five per cent of revenues.

Adjusted non-GAAP net income was $7 $8 million for.

<unk> 35 per diluted share and at first quarter 2021, compared to $9 $8 million for 44 per diluted share and the same period of 2020.

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

The healthcare segment generated 39% and total company revenues during the first quarter of 2021 and.

Segment posted revenues of $79 $7 million for the first quarter of 2021 down $15 $9 million or 16, 6% from the first quarter of 2020.

The decline in revenue reflects the ongoing impact of the COVID-19 pandemic and the first quarter of this year relative to a quarter that was largely on impacted by COVID-19 last year.

As Jim mentioned, we believe the first quarter of 2021 will be the revenue low point for this segment related to the pandemic as we expect sequential revenue growth moving forward and 2021, reflecting the ongoing recovery of the healthcare industry.

Yeah.

Operating income margin for healthcare was 25, 7% for Q1 of 2021.

Share to 25, 2% for the same quarter in 2020.

Over quarter increase and margin was primarily attributable to decreases and conference related expenses and performance bonus and share based compensation expense and promotion and marketing expenses, largely offset by an increase in salaries and related expenses for our revenue generating professionals as a percentage of revenues.

And lower utilization.

As a reminder, our first quarter results included the annual resetting of our wage basis for certain fringe items like the employer portion of FICA taxes, and our 401 K match.

As Jim mentioned, we continue to invest and areas of our business to align with our enterprise strategy, including managed services.

And April we hired approximately 300 and healthcare professionals to expand our managed services capacity to provide revenue cycle billing co.

Elections insurance verification and charged integrity services to our healthcare clients.

While we expect revenue of around $10 million during 2021 related to this group hire we only expect modest accretion from an earnings perspective as we.

As we invest to build out our <unk> capabilities for future growth.

The business Advisory segment generated 36% of total company revenues during the first quarter of 2021.

Segment posted revenues of $72 $9 million, and Q1, 2021 up $8 million for 12, 3% and the first quarter of 2020.

Revenue for the first quarter of 2021, Inc.

$2 $4 million from our acquisitions and force ICU and Utica solution.

Our organic revenue growth rate and the business Advisory segment was 9% for the quarter.

<unk> over quarter increase and revenue was broad based across our strategy.

Digital technology, and analytics and distress advisory offerings.

And the operating income margin for the business Advisory segment was 17, 9% for Q1 of 2021 compared to 15, 2% for the same quarter on 2020.

Quarter over quarter increase and margin was primarily due to increases and decreases rather and restructuring charges and promotion and marketing expenses, partially offset by an increase and performance bonus expense for our revenue generating professionals.

The education segment generated 25% of total company revenues during the first quarter of 2021.

And we posted revenues of $56 million, and Q1, 2021 down $11 $5 billion or 18, 5% from the first quarter of 2020.

The decline in revenue and reflects the ongoing impact of the COVID-19 pandemic as compared to a quarter that was largely on impacted by the pandemic and 2020.

The education segment grew 7% percent sequentially and the first quarter of 2021 over the fourth quarter of 2020 and as Jim mentioned, we believe the fourth quarter of 2020 will be the revenue low point for this segment related to the pandemic as we expect sequential revenue growth moving forward and 2021 reflect any other.

Ongoing recovery of the higher education industry.

The operating income margin for education was $17 one per cent for Q1 of 2021 compared to 21, 1% for the same quarter in 2020.

The quarter over quarter decline and margins, primarily due to a decrease in utilization, partially offset by decreases and contractor expense promotion and marketing expense and pro for.

And as bonuses expense for our revenue generating professionals.

Other corporate expenses not allocated at the segment level for $28 $8 million, and Q1, 2021, compared with $27 $1 million and Q1 and 2020.

Unallocated corporate expenses and the first quarter of 2021 include $800000 of expense related to the increase in liabilities to participants and our deferred compensation plan.

Which is fully offset by the corresponding gain and other income related to the increase and value of the assets used to fund this plan.

Conversely, unallocated corporate expenses and the first quarter of 2020 reflected a reduction of expense of $4 $7 million related to our deferred compensation plan.

Absent the impact of our deferred compensation plan in both periods.

For $3 $8 million decrease and on allocated corporate costs reflects decreased stock compensation and salaries and related costs for our support personnel.

Decreased practice administration and meeting expenses.

And decreased training expenses as well as recruiting expenses.

Now turning to the balance sheet and cash flows.

DSO came in at 64 days for the first quarter of 2021 compared to 52 days for the fourth quarter of 2020 and.

62 days for the first quarter of 2020, we.

And we expect DSO to normalize to around 60 days over the course of 2021.

Total debt includes the $265 million and senior bank debt and a $3 million promissory note for total debt of $268 million.

We finished the quarter with cash of $22 million for net debt of $246 million.

This was a $110 million increase compared to Q4 of 2020 and the first quarter reflects the payment of our annual bonuses.

The first quarter also included $11 $5 million of share repurchases under our $50 million Board authorization eight.

$8 $5 million of shares redeemed and satisfy employee tax withholdings related to our share based compensation program and $6 million related to business acquisitions for <unk>.

Average ratio defined in our senior bank and clean it was approximately two six times adjusted EBITDA as of March 31, 2021, compared to three five times adjusted EBITDA at the end of Q1, 2020.

The first quarter of 2020 leverage reflects borrowings of $125 million on our revolving line of credit out of an abundance of caution at the outset of the COVID-19 pandemic.

Our net leverage ratio was two four times trailing 12 months adjusted EBITDA as of March 31, 2021, when the bank definition and calculation is adjusted for cash on hand disc.

This compares to two three times trailing 12 months adjusted EBITDA as of March 31, 2020, when calculating and the same manner.

Cash flow used in operations and the first quarter of 2021 was $83 million and we used $2 million on our cash to invest and capital expenditures.

And of internally developed software costs, resulting in free cash flow of negative $85 million.

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

As Jim noted, we are raising and narrowing our full year 2021 revenue guidance to $850 million to $900 million.

The increase and our revenue guidance, primarily reflects the ongoing momentum and our business advisory segment and better visibility and increased confidence that we have progressed past the revenue low points related to our healthcare and education segments.

In addition, we are affirming our full year adjusted EBITDA guidance to be and a range of 10, 8% to 11, 8% of revenues.

And we are increasing our full year adjusted non-GAAP diluted earnings per share guidance to be in a range of $2 35.

For $2 75 sites.

Finally, we expect our full year effective tax rate to be and a range of 26, 29%.

Thanks, everyone I would now like to open the call up for questions operator.

Thank you and latest Ghansham Panjabi, if you have a question at this time lease price.

At this time.

And for one key on your Touchtone telephone. If your question has been answered or you wish to remove yourself from the queue. You may do it all by pressing the pound key.

One moment for all that's right.

Question. Please.

Our first question.

Comes from Tobey Sommer of Trimble.

Your line is open.

Thank you with respect to the education healthcare business as I was wondering if you could comment on.

What the pipeline looks like from a project size and complexity perspective, as you work your way through the year and maybe juxtapose that with different ranges of small versus large size historically. Thank you.

Tobey. This is Jim I'll start I think we have a lot of things I think are beginning to look a little bit like they did towards the end of 2019 I think in terms of.

And size and complexity, we're going to have a mix of all.

Decent sized <unk>.

<unk> systems projects, we're going to always have strategy projects that tend to go a little bit in the middle and.

And of course.

Research and students are doing very well so I think the I think the composition of the pipeline.

It's going to look fairly similar to what it was before I think what we have witnessed particularly early in 2020 through 2020 was scaling back from a lot of clients in terms of the size just because they weren't sure for the bandwidth. They weren't sure if that was going to be other disruptions and I think we're beginning to see the pipeline and begin to resemble what.

And it looked like prior to COVID-19 in terms of the size and complexity.

And if he wants that.

You know Jim I think.

And with what you said I think the only thing that I would add is in the education segment.

I think in terms of the research parts of our business as well as the strategy part of the business.

And I think the pipeline is gen set is.

And there's definitely we definitely have line of sight for kind of pre COVID-19 levels and both both parts of all.

Are those two parts of the business I'd say for the larger.

Admin system replacement project and the student system replacement projects.

Certainly seeing opportunities and the market and on the long run we're highly confident that.

That's a very big addressable market for us and a place where we're very well positioned but and the short term just because of the sheer size and some of those projects I think.

That's probably not quite back to pace, yet with the pre COVID-19 levels on some of those bigger ones, but that's something that.

Obviously, there are there are opportunities out there and that we plan on.

And positioning ourselves well for the year goes on and that and that part of the market.

Thank you.

And give us a sense for your hiring posture for internal fulltime staff, and maybe a little bit more color about debt.

Group higher.

Sure I do I can I can start on that from a hiring perspective.

Say.

And we start to have better visibility into the back half of the year and we've seen some of the conversion of the pipeline and some of the opportunities.

Debt debt, we had since the beginning of the year I think that we have been getting more aggressive from a hiring perspective, if I take it.

And kind of segment by segment and our healthcare segment.

As you know our target utilization and that part of the business tends to be and higher <unk> and we finished the first the first quarter more and the 68% range. So I think we still have some room for utilization perspective there.

Though we are still making strategic hires are probably not adding a ton of capacity at this point just based on.

Some of the capacity and our current workforce on the education side, I'd say, there and certain parts of the business have rebounded strongly I think that we do see is getting more aggressive in terms of the hiring within the education part of the business day of some nice sequential growth and the first quarter versus the fourth quarter and based on our projections for the rest of the year.

And I think debt, we expect utilization and tighten up as the year goes on and for the need to expand and then on the business advisory segment that segments and growing at a nice pace really throughout the pandemic and we've been hiring on throughout the pandemic as well and our expectation is that that trend will continue.

And it goes on.

And last question for me and I'll get back in the queue could you talk about.

Either headwind or tailwind that had been created out of that.

And the many kind of factual.

<unk> appropriations.

And out of Washington, and or the sort of prospective ones I think there was a.

And some comment about basic research in.

And the infrastructure related bill that maybe could play in the education space. So wanted to get your perspective, there too.

Tobey. This is Jim are you talking about healthcare or education or both.

Both because there's just there's so many different appropriations that have.

It's actually kind of come out of D C and and several more sort of and the work so.

Yeah, well so a couple of I'll make a couple of comments on and first of all I think.

In both cases, and health and education and a lot of our clients certainly took a hit.

I think and the and better.

And I don't want to be presumptuous to assume that this is behind but it's at this stage I think some of the losses that they initially thought were going to happen alright gonna be a severe it doesn't mean for losses Werent tough.

But a lot of them I think are ending up for.

14 months after the pandemic started are probably in better shape than they than their worst fears earlier and the pandemic. So I think that's likely to be a little bit of a.

On a tailwind for us I think in terms of the appropriations, particularly around healthcare I mean, so I'm sure and particularly around research I think they are generally very good. This administration seems to be very supportive of research. So that should also work out well.

On the.

<unk>.

I think some other question marks would be around kind of what happens with respect to reimbursement, particularly around Medicare and Medicaid and whether there ends up being any state for pay for publicly.

Public universities, and whether there ends up being any.

Assistance in terms of free in the state and local governments in terms of providing support that remains a question Mark I think but in general I think a lot of our clients are all.

And are positioned now better than they thought they would be say 789 months ago, and so I think in general.

Those are the tailwind that we're seeing and I think that's probably the reason that we're seeing and the pipeline buildup.

Have because I think they're beginning to realize that they now have a little bit more confidence and their own future.

Sustainability and their own ability to accomplish what they want to accomplish.

Thank you.

Our next question comes from Andrew Nicholas of William Blair. Please proceed sir.

Thank you good afternoon.

Wanted to ask a follow up on on the hiring environment I.

Appreciate your color on kind of segment level expectations, but.

Could you maybe speak to the competitiveness of finding talent right now it seems like Theres a lot of your competitors, who have similar ideas in terms of adding adding head count and I'm. Just wondering how you kind of take that into account when you're thinking about.

Building into demand later on this year.

Andrew This is Jim I.

I think I think it's fair to say that the hiring environment has become more competitive and part it's competitive among our competitors are natural competitors and part is competitive across kind of other industries and people just bookings and do different things and there's certainly, particularly around technology and other areas. There's a lot of growth and so I think because of the economy.

Accelerates quickly you're going to find.

I think a lot of organizations are going to be hiring so we do find it to be a more competitive environment.

I think our Howard Howard.

Our ability to recruit is actually quite good I think we we kind of and I don't just say this slightly but I think we really have a very strong culture and to which recruit people know that.

People have heard that among their colleagues and friends and so that gives us a real benefit but it is it is a more difficult environment in which to.

And just more competitive environment, rather and that we're dealing with right now and so.

At the same time.

There may be some people that debt.

Wanted to make a transition the part that I think that were somewhat focused on right. Now is that if you had gone back over the last decade or two decades, and you said what was the hardest part about consulting and in terms of recruiting it would be the expectations for a heavy dose of travel and our sense right now Andrew is that I think and.

Most cases and I'll just throw out a rough number my guess is in most cases and the amount of travel and that's been required there's probably going to be half of what it was and it may be rush there'll be isolated instances, where it's more but it's mostly going to be less and so you end up having one of the hardest things about consulting and that's fairly frequent travel and you reduce and substantially creates a much better <unk>.

Ironman and to which to recruit so we think that's going to be beneficial for us once kind.

Kind of COVID-19 impact begins to settle on.

Perfect. That's helpful. And then for my follow up and then I'll get back in the queue, just asking about the pipeline and a different way just overall visibility.

Across each of the businesses. It seems like pipeline is building quite nicely.

The different segments are having and easier time, making decisions, but could you just compare visibility now relative to three months ago. When we spoke on our fourth quarter call and and how either of those compares to kind of the summer months I'm, just trying to get a sense for for even if it's something isn't timna.

Pipeline, how how quickly you would expect those decisions become more rapid thank you.

And I would say I could take the first stab at that if I look across the business and I'll start with our healthcare segment.

And I think I think the difference probably over the past three months is and certainly our clients have been impacted by what's happened over the past year and even before that it was a.

For the challenging environment for many of our clients and so we saw a lot of those opportunities and the pipeline we have been having a lot of good conversations and I think.

Probably the progression for more and we were a quarter ago is really towards the back end of the first quarter and then even into the month of April.

And conversion on on some of those opportunities and some of those projects.

And that we think are going to be.

Very nice projects for us as the year progresses and to help get us back on a growth trajectory I think in addition to that on one of the things that we always look at is our volume of assessment activity. So that's clients that come to us who have.

Issues for.

And our financial and operating perspective, and bring us and to assess the opportunity to hop on and on the volume of those assessment activities with a healthcare is.

Within line of sight again kind of where we were on pre COVID-19. So we feel like that's another key indicator for us debt on those number of projects that are on the pipeline and then we've been building out our managed service offerings as well over the course of the past year and that's another area, where we're just seeing a lot of interest from our clients.

And and they're really coming forward to us with opportunities there.

All of them all so I'd say that that kind of summarizes the healthcare side of it from and education perspective, I'd say, one big differences and we had a really nice quarter.

Quarter of sequential revenue growth off of what was probably the low point and the fourth quarter on.

Similar to what I would describe and healthcare I think we've seen a very nice pick up and the pace of conversion and some of those opportunities that we've talked about for the past call or two that were and the pipeline on and that was.

Whereas some of the healthcare conversions were more they happened towards the end of the first quarter or the first part of the second quarter I would say on the education side of the business, particularly within our research and our strategy offerings.

We've seen a lot of those conversions on throughout the first quarter. So thats another thing thats given us on.

Confident and I would say.

Zoom in and out for a second and both healthcare and education and I'd say just in general on the progress that we've made and the U S and terms of the vaccine and really for a lot of our clients and the leaders that we talked with those clients kind of a sense that they're able to now start to think more about our strategic priorities and our strategic objectives I think that those that that factors in a while we see.

And as well, we see a lot of clients coming forward.

Who are starting to rethink about the things that were on their plate before the pandemic hit and they were severely disrupted over the past year and then finally from a business advisory perspective, Jim mentioned it in his remarks on strategy side of the business. We've seen a nice rebound there are technology business continues quite frankly to build momentum on that very.

Hum.

Full suite of technology offerings that we have at this point is resonating very well with our commercial clients as well as clients across the healthcare and education industries and then.

And the one maybe area that's a little bit different is our distressed business, which actually had a very nice first quarter and posted some nice growth during the first quarter and year over year I would just note that they are up against a couple of tough comps and the second and third quarter on this.

And based on how hot that market was and the second and third quarter. So we still and still feel good about the pipeline and the opportunities for that business, but it probably will be a challenge and a couple of quarters of comp share just based on what happened last year.

Great. Thank you.

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

Again, if you would like to ask a question. Please press star one.

Our next question comes from.

Kevin Steinke of Barrington. Please proceed sir.

Good afternoon.

So I think you've touched on this a bit and response to other questions, but maybe just.

Can you talk about.

On.

You know why the pipeline and healthcare and education continue.

Continue to move.

Move forward and convert maybe a little bit more quickly than you would've expected.

And your original guidance you know, perhaps you had kind of built in.

Some more conservative conservatism into that original guidance based on the uncertainty of this situation because this is.

As you talk to.

And leaders and healthcare and education is it just kind of the vaccination and rollouts that are really give them the confidence to move forward a little more quickly than you would expect there.

What other factors would you highlight there.

Kevin This is Jim and I think there's a couple of ways and looking at this for all.

All of us for all of US. This is happening so quickly and I think if you look at the sequence of events that took price over the last.

Year.

Yes, I mean, we went through that kind of horrific March April may timeframe, where healthcare healthcare is kind of health systems was kind of completely absorbed and the urgency of a new virus and health and education was kind of looking and wondering kids had already gone off campus and they're wondering are we even have you all have kids back in September and then but there was still hope that the <unk>.

And would be better and part of the summer was better and that got a lot worse and so that's set things back a little bit in the fall and then we heard that other surge again in December our clients have gone through this horrible period of kind of ups and downs and really trying to guess it and I think the fact that the vaccines came out in January and have begun to now spread and take hold.

I think he was just everybody it's more confidence they can begin to not just kind of do stuff that they actually thought they wanted to do historically, particularly improving their digital transformations, but at the same time try to get to the point, where they can now be responsive to what in many cases, including education and healthcare is going to be very different markets coming up shortly.

And so that I think is why we're seeing this pick up and the pipeline right now and just in terms of and their ability to go back and say okay. So so far we've kind of survived. This we can't just go back and see if things are going to resume we've got to do things differently. So across the board whether its care transformation and changes that are taking place there, whether it's telehealth and healthcare.

And whether it's.

New business models and education.

It just is a new strategies that are going to be required to kind of meet a very different environment. This is really it's all across the board large small public private.

Any kind of hospital Theyre, all really kind of looking at this very uncertain future I think and now theyre, having enough confidence to know that at least and it seems right now the worst of its over and they can now begin focusing on their business I think and the last 12 months. It was hard to focus on your business. When you really thought that there might be another surge coming in a matter of weeks for months.

So that on the collectible, it's just kind of a mindset that it's enabling people to go back and say, we've got and not take care of life business and I would say more than anything. That's those are the factors behind are having greater a bigger pipeline and.

Greater visibility into that pipeline.

Okay, Great that's helpful.

And also I wanted to follow up on your discussion of.

Hiring about 300 people on the managed services area.

Is this kind of an outgrowth of.

And that original.

Managed services project, you had and healthcare and for all.

A larger client and maybe you've had some success there and does that kind of speak to.

And why this.

Being able to expand this offering and just wanted to see if I could tie that together with.

What you had been originally doing and the healthcare arena.

Thank God I.

I think Kevin it's a it's clearly a continuation of our strategy as it relates to managed services, we do see the need and the market, we see a number of clients.

We're very interested and opportunities too.

And improve their operations and.

Improve their financial results and they view managed services with a trusted partner as.

On one way to be able to achieve those objectives and so we've had a really great partnership on that first project that we've talked about and we feel like we've been very successful working with our client there to drive a really positive impact for them and that has kind of opened the door for more opportunities for us to.

Continue to build out those capabilities and we'll be thoughtful about how we can continue to build out the team there to meet the demand that we expect to be coming so on it is it is an offshoot in that regard.

And we think debt.

300 debt, we've hired on quite frankly, some of it there are some there is some.

<unk> revenue that will comp associated with that group, but there are a number of things on our own pipeline, where we really made the determination that bringing these employees on are going to help us execute and most effectively deliver on some of those opportunities that were separately existing and our pipeline. So.

We're very excited that and then joined the team and they think.

You point is it really helps.

On round out our offerings from a managed services perspective and healthcare.

Yes.

Okay, Great that's helpful.

You talked about also on your prepared comments.

Just.

And how sizable technology has become as part of your offerings and.

And that you are and and continue to invest there.

Wood Wood technology focused.

Acquisitions still kind of be top of mind, when you're thinking about M&A going forward and and are you contemplating when youre talking about investing and your technology offerings and potentially further acquisitions and.

And that space.

Yeah, Hey, Kevin This is mark I'll address that one I think the answer is certainly yes.

We see continuing opportunities just to fill in what we think is a fairly comprehensive suite of enterprise platform capabilities today and.

And it has expanded into data and analytics as well so.

And there's definitely opportunities for us just to strengthen various areas and I think youll see us continue to be active.

And where we see opportunities and the marketplace.

Okay, great how how do you.

We're just overall feel like.

And where your capacity stands in terms of balance sheet too.

To pursue the your acquisition strategy.

And I assume youre going to continue to pay down debt here, but.

Maybe John just talked about.

<unk>.

Debt pay down and where.

Where you'd like to get from a leverage perspective.

Sure Kevin to answer your first question and I think we feel very good about our capacity.

Given the amount that we have on our revolving line of credit as well as our expected free cash flow for the year. As you know is our seasonal high watermark in terms of borrowings just after the annual incentive payments in March and so that's expected and the defaults coming out first quarter of course is to pay.

Pay down debt, but I think clearly as with that kind of large cash outflow behind us.

And our expected free cash flow for the rest of the here and we think that gives us plenty of opportunity to both continue to pay down our debt and to get back down call for the two times level.

And while also having capacity to repurchase shares to the extent that it's.

We think that that's a good opportunity and clearly to the extent and we can offset some of the dilution that comes from our share based compensation programs, but as well for strategic tuck in type M&A I think our perspective is that.

Everything we do is kind of focused on our organic growth strategy as we've talked about before but that from time to time.

It does make sense to buy on.

And when we think there are certain assets on the market that came and give us a quicker entry point on technology, as often and area, where we see that opportunity and to the extent that we see those opportunities we feel very comfortable with our leverage very comfortable with our cash flow and be able to execute on those and make sure we're bringing on the talent and the organization that we need to.

And in order to execute on our strategy.

Okay, great. Thanks for taking the questions I appreciate it.

Our next question comes from Josh Vogel of Sidoti. Please proceed sir.

Thank you and good afternoon guys.

A lot of my questions were covered but maybe there's another way to frame the pipeline and visibility conversation.

And now Youre seeing increases and the sales pipeline and the pace of signings and healthcare and education.

But also a sales cycle and there remains somewhat elongated and I'm just curious given the recent conversion does that and while there's been some easing there relative to last year and do you think that the cycle back to pre pandemic caused by the second half of the year for or perhaps even quicker given how long clients for kind of sitting on their hands and maybe look and a rapid.

Reengage.

Josh This is Jim I'll start there.

I think I think the thing that we saw probably more deferred than anything and there's probably two areas one of them would be and healthcare and some of the performance improvement areas again deferred while we were going through the worst for pandemic and and education. The thing that got the most deferred was the larger ERP projects and and as we've described.

I think in both cases healthcare and education, you've seen the environment transitioned quite a bit I. Just think it was really hard to undertake for our clients for very hard to undertake those kind of large projects and a point in time when they weren't sure about their financial stability. They weren't sure about there on the bandwidth of their own people.

And to take it on and they're just really and acknowledge.

And is that a lot of it would probably have to be done remotely you put it all together and I think a lot of them sorted through and so and you don't want to this is urgent but its not bad urgent, let's wait a little bit that's what's kind of picking up right now.

I think I think and the case on the larger systems projects, there Theres, a pretty high degree of coordination and gets to take place at our clients and forget about how suits and our clients just to get these things effective it's not like we come in and do everything they've got to play a major role and it's and so I think you're seeing some of those as they kind of re group themselves. They are good.

And back in the point, where they can envision taking on those more complicated projects. The same thing I think is happening and healthcare right now.

All right I talk to somebody today, who basically said that the current year financials are actually going to look pretty good because the biggest hit we took was probably in the prior fixed fiscal year, but were worried a lot more about the cost structure.

And in the coming years, and that's what's forcing them to go back and begin to think through how do they how do they reposition their business to be successful and.

And the future. So I think I think this is just so you know it was.

To us it was.

Really easy to understand why these delays are taking place, but I think a lot of those reasons are now dissipating and we're now beginning to see things open up and people are more capable of addressing the.

For future and that I think is why we're seeing the pick up and.

And the and the size and complexity and visibility into our pipeline.

That's good insights there thank you.

The the hiring of the 300 FTE Ftes I think Johnny said it would add about 10 million to revenue is that all going to be and Q2.

No no that's for the remaining nine months of the year Josh.

Okay.

And just thinking and a higher these SUV ftes there targeted specifically for this project.

Do you think there's an opportunity, though perhaps keep these people on your bench when the project is over hoping that you can deploy them to other engagements considering how the pipeline is building.

Josh Yes, just to just to clarify on that point.

They weren't they actually work hired for any on a specific project. They really are and they really brought on to broaden our capabilities from a managed services perspective and.

They are going to be.

We're able to be deployed and some of the opportunities that we had and our pipeline.

Before we acquired them as well as.

On some specific work related related to that and so absolutely the plan is.

And to build around this team and to continue to build out.

On build out these capabilities, we expect that the unit growth quite frankly so.

Based on the demand that we see and the market, we think that theres going to be a lot of opportunity.

For these employees to help serve our clients and that when we start to look forward to 2002, we actually think this is going to be an area. That's going to help drive organic growth within this business and that these employees will be a key part of that.

Understood I appreciate the clarification around that and just one last one.

A lot of.

Talk out there about.

And unprecedented and overwhelming wave of applications like colleges.

And especially as some of the SPT and <unk> and I was just curious.

Is that a potential.

And for your business.

I don't think so Josh I think I mean, I think that's just.

First of all it's not clear to me that the number of seats for all of those applicants has really changed and therefore I think he may have a lot more applicants, but it doesn't necessarily transition more revenue and certainly it's not a headwind, but I don't think it's going to be a tailwind either I think theres just kind of anomaly, where we're at right now where everyone's just try and get the best they can to get in because there's so many uncertainties in terms of who's going to go back to the campus.

The higher branded places will have no problem, but everyone should thinking and I think that maybe I can apply to a price that otherwise might not be able to get into it because of all for disruption is taking place and time will tell whether that happens or not but I don't think it's going to be debt metric a differentiator I think it's just gonna be and odd statistic that that sits out there for a while.

I got you, okay, great well, thanks for taking my questions.

Our next question comes from Tobey Sommer of Channel Securities. Please proceed sir.

A question for you on the education space.

President <unk> initiative to make community College and changed some things and in terms of education, making it free.

And what would that those things that are on the table do for demand for your services do you think.

Tobey I think I think it remains to see what's going to happen there I would not anticipate that having a big impact on our core client base, which.

It's certainly the largest research universities and also maybe the top 203 hundred.

Ranked institutions.

It has a big impact for people wanting to get and education that may not be able before and to do it but I think I do.

Don't think it's going to have a big impact on our business.

Okay. Thank you very much.

And no more questions and I'd like to try and call back. All go ahead go Mr. Roth.

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

That concludes today's conference call. Thank you for Arthur one for you on participation.