Q2 2022 Huron Consulting Group Inc Earnings Call

July 28, 2022

Good afternoon, ladies and gentlemen, and welcome to Huron Consulting Group's webcast to discuss financial results for the second quarter 2022. At this time, all conference call lines are on a listen-only mode. Later, we will conduct a question-and-answer session for conference call participants, and instructions will follow at that time. As a reminder, this conference call is being recorded.

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

The news release posted on the news release is posted on Tiran's website.

Please review that information along with the filings with the SEC for disclosure of factors that may impact subjects discussed in this afternoon's webcast.

The company will be discussing one or more non- GAAP financial measures. Please look at the earnings release and on Huron's website for all disclosures required by the SEC, including reconciliation of the most comparable GAP numbers. The company will be discussing one or more non- GAAP financial measures required by the SEC, including reconciliation of the most comparable GAP 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 Firaan Consulting Group, building twenty two are in the sector in spring rain seems recent.

We speak today, our Joan Kelly, our Chief Financial Officer, and more custody of our Have better health and have better health.

In the second quarter, we continue to experience strong demand across all three operating segments, enabling us to achieve 19% revenue growth over the prior year quarter and record quarterly revenues.

Our digital capability grew 47% over the prior year quarter, reflecting ongoing strong demand for our technology and analytics offerings across the healthcare, education, and commercial industries.

Despite uncertainties in the macro environment, we anticipate continued demand across all of our operating segments for the remainder of the year, leading us to raise and narrow our four-year revenue and earnings targets.

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

During the second quarter, health care segment revenues grew 12% over the prior year quarter.

The increase in revenues was driven by strong demand for our health system clients for our digital and regular cycle managed service offerings.

And digital capabilities are used in healthcare to 53% over a prior year quarter, reflective of beyond going demand for enhanced technology and analytics across the provider industry.

While many hospitals received CARES Act funding to help address the significant losses they occurred during the pandemic.

That federal support is now largely gone. What remains for many health systems, and particularly academic medical centers, are significantly higher labor costs, ongoing supply chain issues, and more recently, higher debt financing and capital costs.

Collectively, these factors are contributing to dramatically lower margins that are not expected to dissipate in the near future. While trying to offset spiraling operational costs, our hospital and health system clients continue to seek new sources of revenue and opportunities to optimize their operations, including through the use of technology and automation.

With our broad array of offerings, we are well positioned to provide strategic, operational, financial, and digital solutions to help them achieve a more sustainable future in this complex healthcare environment.

Killing out to the education segment, in the second quarter, 2022, the education segment achieved elected quarterly revenues growing 46% over the prior year of quarter.

The increase in second quarter evidence was driven by strong, broad-based demand across all their offerings.

highlighted by 44% growth in our education digital capabilities.

There are numerous reasons for the continued strong growth of our education business.

I will mention a few of the primary drivers.

First, there's been a significant increase in demand for our digital solutions, particularly a cloud-based EFT business.

The recent demand is partly reflective of delays and starting new implementations, coming from the pandemic. But more broadly, it's an indicator that the education industry as a whole is in early in the end of its own digital transformation, including much needed enhancements to core administrative student and CLM systems. All of these things are hidden in the ground and- but did on architectural teaching. For this day, we're benefiting for the wi?ks starting of this year's Wicked Sports Rootic Ball band. We started the rally, the newly appointed pe capable outside of course of keeping you

Second, research business has been very strong with left in our appliance challenges, managing complicated portfolios of clinical and federally funded research.

Third, in recent years we expanded our portfolio of strategy and operations offerings.

The investments we've made in talent in this part of our business have enabled us to offer a wider array of services to the education industry at a point in time when traditional university operating models are increasingly at risk.

Finally, in our student business, our investments in Whiteboard Higher Education in the fourth quarter of 2021 has enabled us to increase the number of clients for our student solutions and deepen our education industry relationships, achieving the strategic goals we set forth as part of that transaction.

To support this strong demand across the segment, we continue to make investments in our people. We are accelerating the hiring of resources, particularly in our digital capability, to support the backlog and anticipated demand for EFP offerings.

We established a strong training and development program between combined with our deep industry, functional and technical expertise provides us with additional leverage to achieve our strong growth goals in the segment.

Turning to the commercial segment in the second quarter of 2022, commercial segment revenue is increased 3% over the prior year quarter, including by strong demand for our digital offerings across commercial industries.

The increase in second quarter revenues from our digital offerings were partly offset by a decrease in demand for financial advisory offerings.

as well as the decrease in revenues associated with our life sciences business, which we sold in the fourth quarter of 2021.

Excluding the life sciences business, the commercial segment grew 13% in the second quarter of 2020-22, over the prior year quarter.

The digital offerings in the commercial market screened 45% to 2nd quarter of 2022 as prepared in the same period a year ago. Before they were demonstrating the strong demand for technology and analytics related services across the commercial industries.

The man for our digital offerings and the commercial segment is coming primarily from the financial services and energy and utilities industries, where each industry is facing new competitive events as these markets evolve. These market attributes are fueling strong demand for our digital transformation services and our deep industry expertise has provided us with an increasing competitive leverage.

Similar to the investments we are making in education, we continue to invest in hiring and training of resources to support increased demand in the commercial industries.

Please leave these investments for further position us for accelerated growth in this segment.

Finally, let me turn to our outlook for the year. As our pressure leaks indicates, we are increasing and narrowing our annual revenue guidance to 1.04 billion to 1.08 billion.

We are also raising and narrowing our adjusted EBITDA guidance in a range of 11.5% to 12% of revenues and our adjusted deluded earnings push air in a range of $3.15 to $3.45.

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

So we are cognizant of the challenges in the US and global economies. We believe that the underlying demand for our offerings will continue to be strong throughout the remainder of the year, and we are encouraged by our growing pipeline in backlog for 2023. So yeah what have I found out?

Among the key reasons for our belief in continued growth is the extent of the transformation that is taking place in our core industries, where we have deep relationships and a tremendous amount of role we experience. and a tremendous amount of role we experience.

Applied to operating in a challenging environment and amidst those circumstances, they tend to rely on experts in whom they have confidence to help them achieve their desired strategic Waterfall.

In turn, we remain focused on delivering on our commitment to sustainable revenue growth and improve profitability.

Our first half results demonstrate our ability to achieve our financial objectives. The market remains vibrant for our offerings and we anticipate demand across industries to continue as our clients' businesses face myriad strategic, operational, and digital challenges and opportunities.

Before I turn it over to John , I'd like to make a few comments. First, as we execute our CEO transition, we are excited to have Ronnie Dale promoted to into the chief operating officer role.

Yes, recently Ronnie Letter helped to have the performance improvement business unit the largest business within Iran.

In his new role, he will be responsible for ensuring operational excellence across the company while supporting our strategy of achieving consistent regular growth and improved profitability. tbsp the organ to grow and improve profitability.

We look forward to working with Ronnie in his new role.

Second, the strong results we achieved in the first half of the year are only possible because of the hard work of our incredible team.

They have demonstrated a tremendous amount of dedication to our clients, our company and to each other through a highly challenging time throughout the pandemic.

I'm extremely proud of the team we have built and the culture we have fostered together, and I look forward to growing the company with the most talented team in the business.

Now I want to turn it over to John for a more detailed discussion about financial results. John ?

Thank you Jim and good afternoon everyone.

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

Our press release, TENQ, and investor relations page on the GERON website have reconciliations of these non-GET measures, the most comparable GET measures, along with the discussion of why management uses these non-GET measures, and why management believes they provide useful information to investors regarding our financial condition and operating results.

Now I'll let you do some of the key financial results for the quarter.

The revenues for the second quarter of 2022, with $273.3 million dollars.

Up 18.8% from $230.1 million in the same quarter of 2021.

The increasing revenues in the quarter was driven by growth across all three operating segments with a strong demand for digital offerings across all industries.

Revenue within our digital capability increased 47% in the second quarter of 2022, or with the same period in 2021. Revenue within our digital capability increased 47% in the second quarter of 2021.

In addition, revenues reflect continued strong demand for our consulting and managed services offerings within the education segment, which grew 47% in the second quarter of 2022 over the same period in 2021.

That income was $13.9 million for 66 cents per the Looted Chair in the second quarter of 2022, compared to $12.8 million for 59 cents per the Looted Chair in the same quarter in the prior year.

Our effective income tax rate in the second quarter of 2022 was 36 percent compared to 48 percent one year ago.

Our effective tax rate for Q2 of 2022 was less favorable than the statutory rate, inclusive of state income taxes, primarily due to tax expense related to non-deductible losses on our investments used to fund our deferred compensation liability, reflecting the broader investment market conditions during the second quarter.

The earnings per share impact of the tax expats really because now they got to their losses with six cents during the quarter. The earnings per share impact of the tax expats really because now they got to their losses with six cents during the quarter.

Just to be the though was $33.2 million in Q2 2022 or 12.2% of revenues compared to $25.6 million in Q2 2021 or 11.1% of revenues.

Adjusted non-GAAP net income was $17.5 million, or 83 cents per deleted share in the second quarter of 2022, compared to $15.1 million, or 69 cents per deleted share in the same period of 2021.

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

The healthcare segment generated 47% of total company revenues during the second quarter of 2022.

This segment posted revenues of $128.5 million for the second quarter of 2022, up $13.7 million for 12% from the second quarter of 2021.

Revenues for the second quarter of 2022 included $1.2 million from our acquisition of Perception Health.

The increasing revenue and the quarter of stocks strong demand for our digital offerings as well as our revenue cycle management services offerings.

The digital capability in healthcare will be by 53%, with a fucking increased demand for electronic health record and ERP offerings. The digital capability in healthcare will be by 53%, with a fucking increased demand for a fucking increased demand

Operating income margin for healthcare was 23.6% for Q2 2022, compared to 26.6% for the same quarter of 2021.

The quarter over quarter decrease in margin percentage is primarily attributable to the mixed impact of the strength of our digital offerings during the quarter.

We still expect full year healthcare industry margins to be in a range of 24 to 26 percent.

The education segment generated 32% of total company revenue is turning the second quarter of 2022.

Segment posted record revenues of $88.2 million in Q2 2022, up $27.8 million, or 45.9% from the second quarter of 2021.

Revenues in the second quarter of 2022 included $1.9 million from our acquisition of Whiteboard.

The increase in revenue reflects the continued strong demand for all of our offerings across the segment.

including digital capability growth in the education segment of 44 percent.

The continued demand for our offerings is further demonstrated by the education segments 9% sequential growth in the second quarter of 2022 over the previous record of the first quarter of 2022. Hence slices can zajm Big Mac will have to happen in Bolivia.

The operating income margin for education was 24.6% for Q2 2022 compared to 23.4% for the same quarter in 2021.

The quarter of a quarter increase in margin was primarily due to revenue growth and outpaced our corresponding cost with the liver during the quarter.

We now expect a four-year education industry margins to be in a range of 22 to 24% with effective environmental investments in head count growth and cloud-based technology training that we expect to drive continued strong growth for the industry into 2023.

The commercial segment generated 21% of total compensating revenues during the second quarter of 2022.

Second posted revenues of $56.6 million in Q2 2022, up $1.7 million, or 3.1% from the second quarter of 2021.

For the use of the second quarter of 2022, included $900,000 of inorganic contributions from our acquisition of any data.

The increase in revenues reflects continued strong demand for digital offerings, partially offset by decreasing demand for our financial advisor offerings, as well as the declining revenues due to the divestiture of our life sciences business.

In the second quarter of 2021, the life sciences business generated revenues with $5 million dollars. Now this digital technology offers aamente powerful workspace by giving commitments to companies you

I'll give you the offerings in the commercial markets to prove 45% in the second quarter of 2022 has compared the same period a year ago.

The operating income margin for the commercial segment was 21% for Q2 2022 compared to 20.1% for the same quarter in 2021. The operating income margin for the commercial segment was 21% for the same quarter in 2021.

We now expect full-year commercial industry margins to be in a range of 22 to 24%, the fucking favorable mix of revenue within our commercial technology offerings.

Corporate expenses not allocated to 7 of the level, or $29.9 million in Q2 2022, and $34.3 million in Q2 2021. $34.3 million in Q2 2021.

On allocated corporate expenses in the second quarter of 2022, it's included a $5 million reduction of expense related to the decrease in liability to participant or deferred compensation plan, which is fully offset by the corresponding loss in other income related to the decreasing value of the assets used upon that plan.

Conversely, on allocated corporate expenses in the second quarter of 2021, reflected an increase of expenses of 2.1 million dollars related to the deferred compensation plan.

Absolutely impact of our deferred compensation plan in both periods, on allocated corporate expenses increased $2.6 million, which is primarily due to increases in salaries and related expenses for our support personnel and a leadership meeting during the quarter, partially offset by decreased immigration legal fees.

Now, I'll turn to the balance sheet and cash flows.

The ESO came in at 81 days for the second quarter of 2022, compared to 75 days for the first quarter of 2022, and 73 days for the second quarter of 2021.

We expect the SO to be between 70 and 75 days for the remainder of 2022, as we collect on several large projects that have contractual payment schedules extending into the back half of the year.

We finished the quarter with borrowings on our revolving credit facility at $342 million and with cash of $12 million from that debt of $330 million.

Second quarter also included $28.3 million of share refreshes, but approximately $498,000 shares under our current authorization of about $200 million.

$78 million remained available for repurchases as of June 30, 2022.

Our leverage ratio, defined in our senior bank agreement, was approximately 2.2 times adjusted EBITDA as of June 30, 2022, compared to 2.8 times adjusted EBITDA at the end of 2022-2021.

Cash flow generated from operations in the second quarter of 2022 was $29 million, and we used $5 million of our cash to invest in capital expenditures, inclusive of internally developed software costs, resulting in a free cash flow of $24 million.

Finally, let me turn to our expectations and guidance for 2022.

As Jim noted, we are raising and narrowing our four-year 2022 revenue guidance to be in a range of $1.04 billion to $1.08 billion.

The increase in our revenue guidance primarily reflects the strong momentum across our business and the significant growth opportunities in each of our core industries.

In addition, the narrowing of full-year adjusted e-bedding guidance to be in range of 11.5% to 12% of revenues.

Enraging and eroding are four-year, adjusted non-gap diluted earnings per share guidance to be in a range of $3.15 to $3.45. $3.45.

Finally, we expect our full year effective tax rate to be in a range of 29% to 31%.

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

Thanks everyone. I would now like to open up the call to questions. Operator?

Thank you. Ladies and gentlemen, if you have a question at this time, please press star 11 on your touch tone telephone.

Again, that's star one one to ask a question.

Our first question comes from the line of Toby Summer of Truist Securities.

Toby Summer, your line is open.

Part.

recruiting, retention, and headcount growth. How do you think the back half shapes up in terms of those?

compared to the trends year to date that we already kind of have on the books.

So we did some John , I can start. I think from a head count perspective, we continue to expect to see our head count increase into the back half of the year, reflecting expectations for continued revenue growth. And then also really getting us prepared for 2023, where we're based on the pipeline and the backlog that we see right now. And we're counting that we're going to continue to revenue growth in the 2020 degrees. So really getting the team involved.

Thanks. And – Okay.

Ask the question specifically on the healthcare side in performance improvement. What does large projects look like or project size in general? And any shifting preferences among your customers for the format with which they contract or In a …

I can start on that. From a job size perspective, we really haven't seen a material shift in terms of either the size of the jobs in the performance improvement area in healthcare or...

So kind of a mix between fixed fee and contingent. I think that that's been relatively stable over the past few years. And so as we talked about before, depending on the size of the system we're working on, depending on the size of the scope, that can be a project in the upper single digit million range or even in the double digit millions is the potential depending on the size of the project for the client. So that's kind of a mix between fixed fee and contingent.

Okay, and on the

education business, I've noticed that in the news more sort of really small liberal arts schools kind of merging into larger schools. Is that something that drives any demand for your services either directly or indirectly or just sort of a symptom of the stress.

that industry is under.

It's totally the gym, you know, the trend you're identifying is absolutely a trend. There are more. I think there's not nearly as many as I think many of us once thought there would be when it depends on the kit.

I think some of the federal funding is also dropping off for some of the educational industries. To answer your question directly though, yeah, we do, we have been involved in some of these mergers or integrations, whatever the appropriate case may be, and it does vary. But for the kinds of services we're providing at this point in time, it's not a material amount. We have been asked, and typically we get asked by a larger, much more healthy institution that's interested.

the sort of mother ships and software firms have described slightly longer sales cycles.

Some of them have reported that it does.

Could it change any change in appetite among your customer set for green lighting, new deployments and new engagements?

Hey, Toby. Johnny, you woke up a little bit during the question, but I think that the question was, you know, based on some of the platforms, and I'm having a reported longer sales cycle as opposed to seeing any of that. I think we've seen some isolated cases here or there, where we've seen a little bit of that, but I'd say from an overall perspective, in terms of our pipeline and our backlog, it is not going to be a big factor.

in our political realm. Yeah, I think I would say, I think it's made me a little different thing. They're asking, Toby, but as I indicated, I do think from the strength in our digital business, particularly in education right now, and to some extent in healthcare also, less so on the commercial side, has really been things that have now freed up and that are now the sales cycles are beginning to come through because there are ones in hesitancy during the pandemic. You saw that in our revenues, in the last year, during the pandemic, and I think that you see in some of the strength right now, that you see in the last year,

That totally is the deferred comp plan. So we have a deferred comp plan for

for our employees that is funded by market assets, so think stocks, things like that. And so during the second quarter, when the broader macro market went down quite a bit, we had, it's a net zero to our P&L. It reduced our corporate expenses by about $5 million, but then we had the offsetting loss of the assets that we used to fund the plan by about $5 million. So it was a net zero.

Other than the tax impact, the loss on the assets is not tax deductible for us. And so we did encourage some extra income tax expense, but I quantified and removed my remarks is about six cents. But that's what that is. Let's see another income.

Thanks for the refresh.

No problem.

Thank you. Our next question comes from the line of Andrew Nicholas of William Blair & Company.

Andrew Nicholas, your line is open.

Thanks, and good afternoon. I wanted to first ask a question on education and the sustainability of growth there. Obviously. Obviously. obviously.

two really really good quarters in a row not expecting 44% plus growth forever but is this a business that can reliably grow Maintains in your view and as we look ahead to next year Is there anything particularly lumpy to call out from the first half that would make it? Is there anything particularly lumpy to call out from the first half that would make it?

an especially difficult comp. Sounds like there was a bit of pent-up demand from delayed projects.

that came through in the first half. So just looking to get any additional color you can provide there.

Yeah, Andy, I just, I think, you know, I'm a team at, first of all, is re-indicated the growth.

frankly in the first quarter and second quarter was actually very broad base to cross the whole segment. And we expect that to continue for the rest of the year. And I think in 2023, we feel really good about the underlying reasons for the growth. And I went through many of those in the comments. I don't see the change in.

There has been a freeing up of some of the larger ERP projects that are beginning to kick in right now. But I think many of those larger projects are also going to be, you know, are going to continue to kind of roll out over the next 3, 4, 5 years. So I think we expect that they'll continue to be pretty strong demand for education services for quite some time to come. It's not going to be certainly at the percentages that we've shown in the last two quarters, but it's going to be quite strong in the coming years.

That's helpful. Thank you. And then I guess you partially answered this question right there, but in terms of the growing pipeline for 2023, is it more of the same in terms of what you saw in the first half, in terms of it being broad-based and across the various sub-segments within each practice, or are there particular pockets of strength that we might even be seeing yet in the numbers?

I think the portfolio mix is going to look relatively similar in 2023. The one exception is that I think the one thing that's been a little bit subdued despite the great performance has been our studio and I think that's going to really start to begin to pick up in 2023 in a bigger way as well. But beyond that, I think if we look across the board at our strategy and operations to digital practice or research, they're all really doing well and I expect that to be key.

Thank you.

Thanks very much.

Thank you. Our next question comes from the line of Bill Sutherland of Benchmark.

So, southern line, your line is thanks and can't call everybody.

I was, um,

Wondering on the hiring front, if you are seeing some of your candidate flow.

from some of the big fours that where there's a little bit of

where there's a little bit of

you know, uncertainty right now, I have some others give them the discussions about. I have some others give them the discussions about.

their business plans.

Can you, are you seeing any.

and we can't base on that score.

Hey Bill, it's Mark. You know there's always been a low on that front, but I would say there's been no material change as a result of some of the recent discussions that's happened about the changes there. Certainly something to keep an eye on and you know we anticipate perhaps is a potential, but nothing that we're seeing today.

There's always been a low on that thought, but I would say there's been no material changes, a result of some of the recent discussions that's happened about the changes there. Certainly, something that you keep an eye on, and we anticipate that perhaps is potential, but nothing that was seen today. Thank you.

The recession, if it begins to take on a little bit more impact in the economy, how should we think about your commercial segment in that scenario?

Yeah, I think our commercial segment has been focused on financial services and energy and utilities and I think our sense is at this point in time that there could be a drop off in that. I mean, we've seen in the last year in our business advisory segment we've seen a drop off, but I don't think at this stage that we're not seeing anything in the market, at least the way that any so called recession may be.

forming we don't we don't know any weaknesses that give us major concern at this point. I know there's just going to add is it's a little bit of sector specific based on how those particular structures would be affected by the broader economy. So you know energy and totes exactly that we're following well for us and you know we had a little bit of one financial services where there's more impact and I think that next we'll continue to be on that we'll watch for the end of the show.

And one other comment.

from a digital perspective.

A lot of what we're seeing in our clients are, they've already started to make some pretty big investments in cloud-based technology. And part of why they're doing that is they are trying to automate as many of their business processes as possible, especially in this tight labor market. And so a lot of the indications that we see from our clients is in this market, there's a premium on trying to automate, trying to get to the cloud. And so we're still seeing,

you know, good demand and good inbound inquiries related to our commercial technology or rather our technology in the commercial markets related to that trend line.

John , remind me how big the turnaround.

bankruptcy businesses.

You say how big is it? Yeah.

It's about 5% of our consolidated revenues.

Okay.

And then last for me while I got you John is the guidance.

as I just level out the revenue from the second quarter levels for the segments.

I get to the top end of your revenue guidance. So maybe is there any colleague from the right as far as the midpoint? in tons?

Yeah, so when we looked at the guidance bill, we obviously were really pleased with the growth we've had during the first half of the year. And frankly, it's been, it's outpaced even our initial planning assumptions at the beginning of the year. So when we look out to the back half of the year, we're still confident that we're going to be able to post a pretty strong year over year growth numbers. I think right now when we look at the third quarter, our expectation is that we'll have growth in the 20% range year of year.

If you then talk about what would be the scenario to get to more of the upper bounds of the range, that would be where we have some continued sequential bull nights into the back half of the year, and that's what we're looking at. And maybe just an additional color to give, I think at this point, if you look at the midpoint of guidance, we're expecting from an industry perspective, healthcare to be significant.

up in the mid teen range. We're expecting education to be up in the mid 30% range. We're expecting the commercial industry to be up in the mid single digit range, but that's got the life sciences headwind in there. So if you were to strip that out, that's probably low double digit range. And then I'll also just give the spread between our capabilities. So if you're looking at digital, we expect that to be for the full year 30% over year growth.

and for consulting and man show this is in the low double digit range for full year, all those numbers I gave, so we're...

for year over year percentages.

Got it. Thanks for all that.

And um...

they

Another question for your percentages.

Thanks for all that.

And um...

Um, the.

Another question I was thinking about was, um,

The disability you've had with your backlog at a moment in time, are the project durations about the same or are they getting a little longer? I know they get me in healthcare the duration went down.

A few years ago. Just curious if there's a direction there. Yeah. Try rolling in one of thosere.

Now, I think there's no noticeable difference really in the duration. So I think it's just, they're pretty much the same. We have some projects certainly that go on over multiple years. We also have a lot of projects where, you know, you've got one scope of work and you complete it and you get a second scope of work and a follow on beyond that. So that actually happens, you know, often, but from our backlog perspective, that's only one chunk of it. So I don't think there's really been any dramatic changes in the duration of the best of what is going on right now.

Okay, thanks for all the color guys. Appreciate it. Thank you. Again, to ask a question, please press star one one on your touch tone telephone. Again, that's star one one to ask a question at this time. Our next question comes from the line of Kevin Steinke of Barrington Research.

Hi, I think I'm on. Thank you Barrington Research.

Hey, just, um.

Wanted to, uh...

ask about the balance of the growth in the quarter. You know, it was the first quarter, fairly balanced growth between digital and then the consulting and managed services piece, whereas growth was more weighted towards digital in the second quarter. I don't know if there's anything to read into that, you know, if it's just kind of a quarter to quarter fluctuation that'll kind of even out.

as we move throughout the year. Hey Kevin, it's John . I think it is more just a quarter to quarter fluctuation. I wouldn't read anything from a broader trend perspective into that. I mean, part of it was the digital business just really had a tremendous quarter in terms of growth that exceeded even our own expectations. But as we look out into our forecast for the remainder of the year, we expect to see some nice growth coming from the consulting side of the business as well.

And for that to balance out a little bit more as the second half of the year progresses. Okay, understood.

Yeah, just wanted to ask

And just wanted to ask about...

labor inflation, and

Have you seen any pickup there? I know I think you're implementing some price increases.

this year at Austin in inflation, maybe just talk about it.

Those increases are keeping pace with inflation and maybe the acceptance of those increases across your client base. We'll come back to both technologies after the break.

Good Cabinet's mark. I think the labor inflation is one that again, it's been out there for a while. So while the headline inflation numbers perhaps say something bigger, it's not like they started overnight. So we've had market adjustments and state competitive throughout this, which is how we've been able to increase that egg out, you know, 21% year. The egg out, you know, 21% year.

At the same time as we go through the pricing that we sold out to cities always a little bit of a lot, but generally speaking, it's been something that our clients have not really highlighted in our conversations. The demand is there. Still very competitive market overall in terms of just competitors who show up for suits. But we're holding our own and we're able to achieve the things that we're looking to achieve in the market space. So, we're going to show up. We're going to show up. We're going to show up.

at this point we have any healthy governance in the outlook.

Okay, great. Lastly, I just wanted to ask too about an element of the guidance, obviously, an overview guidance frame raised. Dr. Palme Sleep.

you know, you, you.

Neroed the adjusted evitone margin guidance range, not necessarily an increase there, but the narrowing just maybe if you can talk about, you might, I think you touched on it a bit on in your segment comments, but just the factors behind that, you know, the eye.

Changing the margin guides relative to the revenue guides.

I think it's just the balance of factors there, Kevin. So on the one hand, growth has outpaced some of our initial assumptions, which is a good thing because that's given us an additional scale on our corporate SG&A. And I think that maybe the extent to which we can sufficient live elsewhere is just one example of that. Yes.

So, overall utilization perspective, we're not where we want to be yet, but we've seen the ramp start to pick up in the second quarter, it's up about 200 basis points. It's sequentially from the first quarter to second quarter. So that trend line is going well, as well from a segment perspective. I think on the flip side of that, we have to make an investments in the business. And, you know, we talked in in our investor day about the development of the business, and we're not where we want to be yet. But, we're not where we want to be yet. We're not where we want to be yet. We're not where we want to be yet.

you know, every year the realities are probably from an out-experts perspective, it's going to be invested in 50 to 100 basis points. We're at the up-run of that right now. We're probably closer to 100 basis points, if not even a little bit over, both in terms of building a head count ramp that we need to support this year's growth, but also next year's growth, as well as some of our training initiatives to get those employees ready to deploy on the project where we see demand. And so that's a different factor that we're going to be able to do. Thanks.

going the other way. And the other thing is, you know, a lot of our businesses kind of getting back to normal from a travel perspective. The travel to clients is not

At this point yet, anywhere back to where it was, but in terms of business development, in terms of even, you know, we had a, as we noted in our prepare remarks, we had a leadership meeting there in the quarter. So we do have some of those expenses coming back to, we've always expected and was baked into our guide for the year. But in fact, as business has been picking up, we've been seeing more of that too. So I think that's another factor. So the net net, remains with a midpoint and expectation that margins will increase by 100 basis points.

last year versus this year, but those are some of the pluses and minuses netting out to that 100 basis point increase.

Got it. Yeah, that's very helpful. Thanks. Thanks for the comments. That's all I had.

Thank you. Our next question comes from the line of Toby Summer of truest securities.

Toby Sommer, your line is open.

Thank you. I had a follow up on the big four potential split up some news. First question would be where do you most directly compete with the big four?

And while I heard your aunt have really seen the notice that you changed, if we change the question and said do you expect?

a potential split in news of it to drive any changes in the industry and for Huron, if so, what do you anticipate?

I think in terms of where do we compete the most? I think if you're asking what part of our business, we can compete the most. I'd say, you know, it varies, but I would say that our digital solutions is where we're going to compete the most. With not just the big four, but also, you know, Accenture, places like that.

But it's mostly in our digital solutions. We've got, you know, every one of our businesses has a different set of competitive peers. But I'd say by and large, we compete the most with big four probably in our digital area. I found that from a more from our industry perspective, probably have more digital, I mean, we have more competitive pressure from big four in our healthcare, probably more than others.

industry verticals would be my guess. But again, we've got more boss competition across the board. So something we've been used to. You're going back to your second part of the question, though, at this stage, Mark was kind of saying a little bit earlier, I think this will play out. But if something happens within the big forest, it's going to play out over time. And I don't think that there's going to be any material change either in the business or in our, you know, in the attraction of other people. There will be some movement, but I don't think it's going to be anything that's going to, you know, move the needle.

Thank you. Seeing no more questions, I'd like to turn the call back over to Mr. Roth.

Thank you for spending time with us this afternoon. You look forward to speaking with you again in November when the announced our second quarter results. Have a good evening. That concludes today's conference call.

Thank you everyone for your participation. You may disconnect.

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participants and instructors will follow at that time. As a reminder, this conference call is being recorded.

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

The news release posted on the news release is posted on Tiran's website. Please review that information along with the filings with the SEC for disclosure of factors that may impact subjects discussed in this afternoon's webcast. The news release is a report on the news release of the SEC for disclosure of factors that may impact subjects discussed in this afternoon's webcast. The news release is a report on the news release of the SEC for disclosure of factors that may impact subjects discussed in this afternoon's webcast.

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

Please look at the earnings release and on Huron's website for all disclosures required by the SEC, including reconciliation of the most comparable gap 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 second quarter of 2022 earnings call.

With me today are John Kelly, our Chief Financial Officer, and Mark Hussey, our President.

A digital capability, between 47% over the prior year of quarter, reflecting ongoing strong demand for our technology and analytics offerings across the healthcare, education, and commercial industries.

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

During the second quarter, health care segment revenue grew 12% over the prior year quarter.

The increase in revenues was driven by strong demand for our health system clients for our digital and regular cycle managed service offerings.

And digital capabilities are used in healthcare who 53% over a prior year quarter, the fluctuation of the ongoing demand for enhanced technology and analytics across the provider industry.

While many hospitals received CARES Act funding to help address the significant losses incurred during the pandemic,

to help them achieve a more sustainable future in this complex healthcare environment. Killing out to the education segment, in the second quarter of 2022, the education segment achieved elected quarterly revenues growing 46% over the prior year quarter. The increase in second quarter revenues is driven by strong, broad-based demand across all their offerings.

highlighted by 44% growth in our education digital capabilities.

So, our numerous reasons for the continued strong wealth of our education business.

I will mention a few of the primary drivers.

First, there's been a significant increase in demand for our digital solutions, particularly a cloud-based ERP business.

The recent demand is partly reflective of delays in starting new implementations, coming from the pandemic. But more broadly, it's an indicator that the education industry as a whole is in early in the means of its own digital transformation, including much needed enhancements to core administrative, student, and CRM systems. Second, our research business has been very strong reflecting our clients' challenges, managing complicated curve goals.

Finally, in our student business, our investments in whiteboard higher education in the fourth quarter of 2021 has enabled us to increase the number of clients for our student solutions and deepen our education industry relationships.

Achieving the strategic goals who support this part of that transaction. To support this strong demand across the segment, we continue to make investments in our people. We are accelerating the hiring of resources, particularly in our digital capability, to support the backlog and anticipated demand for EFP offerings.

We establish a strong training and development program between combined with our deep industry, functional and technical expertise provides us with additional leverage to achieve our strong growth goals in the second. At the bottom of our shielding plant, in the second hand.

Turning to the commercial segments in the second quarter of 2022, commercial segment revenue is good 3% over the prior year quarter, proving by strong demand for our digital offerings across commercial industries.

The increase in second quarter revenues from our digital offerings were partly offset by a decrease in demand for our financial advisory offerings.

as well as the decrease in revenues associated with our life sciences business, which we sold in the fourth quarter of 2021.

Excluding the life sciences business, the commercial segment, really 13% in the second quarter of 2022, over the prior year quarter.

A digital offerings in a commercial market scored 45% to the second quarter of 2022 as compared to the same period a year ago. Before they were demonstrating the strong demand for technology and analytics related services across the commercial industries.

Similar to the investments we are making in education, we continue to invest in hiring and training of resources to support increased demand in the commercial industries.

We believe these investments will further position us for accelerated growth in the segment.

Finally, let me turn to our outlook for the year. As our press release indicates, we are increasing and narrowing our annual revenue guidance to 1.04 billion to 1.08 billion.

We are also raising and narrowing our adjusted EBITDA guidance in a range of 11.5% to 12% of revenues, and our adjusted deluded earnings push air in a range of $3.15 to $3.45.

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

So we are cognizant of the challenges in the US and global economies. We believe that the underlying demand for our offerings will continue to be strong throughout the remainder of the year. We are encouraged by our global pipeline and backlog for 2023.

Among the key reasons for our belief in continued growth is the extent of the transformation that is taking place in our core industries where we have deep relationships and a tremendous amount of relevant experience.

Our clients are operating in a challenging environment and amidst those circumstances, they tend to rely on experts in whom they have confidence to help them achieve their desired strategic dürfen machinery goals. underneath your goals.

In turn, we remain focused on delivering and our commitment to sustainable revenue growth and improve profitability.

Our first half results demonstrate our ability to achieve our financial objectives. The market remains vibrant for our offerings and the anticipate demand that costs industries to continue as our clients, businesses, face myriad strategic operational and digital challenges and opportunities.

Before I turn over to John , I'd like to make a few comments. First is the XQ, as we execute our CEL transition. We are excited to have Ronnie Dale promoted to the Chief Operating Officer role.

Most recently, Ronnie led our healthcare performance improvement business unit, the largest business in Iran.

In his new role, he will be responsible for ensuring operational excellence across the company while supporting our strategy of achieving consistent regulatory growth and improved profitability. façon.

We look forward to working with Ronnie and his new role. Second, the strong results we achieved in the first half of the year are only possible because of the hard work of our incredible team.

They have demonstrated a tremendous amount of dedication to our clients, our company, and to each other through a highly challenging time throughout the pandemic.

I'm extremely proud of the team we have built and the culture we have fostered together, and I look forward to growing the company with the most talented team in the business.

Now, let me turn it over to John for a more detailed discussion about financials. John .

Thank you Jim, and good afternoon everyone. Before I begin, please note that I will be discussing non- GAAP financial measures, such as EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted EPS and free cash flow.

Our press release, 10Q, and investor relations page on the JIRON website have reconciliations of these non-GAAP measures to the most comparable GAAP measures, along with a discussion of why management uses these non-GAAP measures and why management believes they provide useful information to investors regarding our financial condition and operating results.

Now let me lucky to read some of the key financial results for the quarter. The revenue is for the second quarter of 2022 with $273.3 million.

Up 18.8% from $230.1 million in the same quarter of 2021.

The increase in revenues in the quarter was driven by growth across all three operating segments, reflecting with the strong demand for our digital offerings across all industries.

Revenue within our digital capability increased 47% in the second quarter of 2022, with the same period in 2021.

That income was $13.9 million for 66 cents per deleted share in the second quarter of 2022, compared to $12.8 million, or 59 cents per deleted share in the same quarter in the prior year.

Our effective income tax rate in the second quarter of 2022 was 36 percent compared to 36 percent one year ago.

Just as EBITDA was $33.2 million in Q2 2022, or 12.2% of revenues, compared to $25.6 million in Q2 2021, or 11.1% of revenues.

Adjusted non-GAAP net income was $17.5 million, or 83 cents per deleted share in the second quarter of 2022, compared to $15.1 million, or 69 cents per deleted share in the same period of 2021.

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

The healthcare segment generated 47% of total company revenues during the second quarter of 2022.

The segment posted revenues of $128.5 million for the second quarter of 2022, top $13.7 million for 12% from the second quarter of 2021. The segment posted revenues of $128.5 million for 12% from the second quarter of 2021.

Revenues for the second quarter of 2022 included $1.2 million from our acquisition of Perception Health.

The increasing revenue and the quarter with stocks strong demand for our digital offerings as well as our revenue cycle management services offerings.

The digital capability in healthcare grew by 53%, reflecting increased demand for our electronic health record and ERP offerings.

Operating income margin for healthcare was 23.6% for Q2 2022 compared to 26.6% for the same quarter in 2021.

The quarter of a quarter decrease in margin percentage was primarily attributed to the mixed impact of the strength of our digital operating during the quarter.

We still expect full-year healthcare industry margins to be in a range of 24 to 26 percent.

The education segment generated 32% of total company revenue was turned to the second quarter of 2022. The second quarter of 2022.

Segment posted record revenues of $88.2 million in Q2 2022, up $27.8 million, or 45.9% from the second quarter of 2021.

Revenue is in the second quarter of 2022, including $1.9 million from our acquisition of Whiteboard.

The increase in revenue reflects the continued strong demand for all of our offerings across the segment.

including digital capability growth in the education segment of 44%.

The continued demand for our offerings is further demonstrated by the education segments 9% sequential growth in the second quarter of 2022 over the previous record of the first quarter of 2022. nd

The operating income margin for education was 24.6% for Q2 2022 compared to 23.4% for the same quarter in 2021.

The quarter of a quarter increase in margin was primarily due to revenue growth and outpaced our core spending cost to deliver during the quarter.

We now expect a full year education industry margins to be in a range of 22 to 24% with effective environmental investments in head count growth and cloud-based technology training that we expect to drive continuing strong growth for the industry into 2023. 2% suitable demonstration economy that we hope to coordinate current 23.

The commercial segment generated 21% of total compensating revenues during the second quarter of 2022.

Second poster revenues of $56.6 million in Q2 2022, up $1.7 million, the 3.1% from the second quarter of 2021.

For our needs of the second quarter of 2022, included $900,000 of inorganic contributions from our acquisition of in-data.

The increasing revenues reflect continued strong demand for our digital offerings, partially offset by decreasing demand for our financial advisor off offerings, as well as a decline in revenues due to the divestiture of our life sciences business. In the second quarter of 2021, the life sciences business generated revenues with $5 million dollars.

Digital offerings in the commercial markets grew 45% in the second quarter of 2022 as compared to the same period a year ago.

The operating income margin for the commercial segment was 21% for Q2 2022 compared to 20.1% for the same quarter in 2021.

We now expect full year commercial industry margins to be in a range of 22 to 24 percent, reflecting favorable mix of revenue within our commercial technology offerings.

Corporate expenses not allocated to segment level or $29.9 million in Q2 2022, compared with $34.3 million in Q2 2021. On allocated corporate expenses in the second quarter of 2022, including a $5 million reduction of expense related to the decrease in liability to participate in our deferred compensation plan, which is fully offset by the corresponding loss and other income related to the decrease value of the assets used upon that plan.

Conversely, unallocated corporate expenses in the second quarter of 2021 reflected an increase of expense of $2.1 million related to the deferred compensation plan.

As an impact of our deferred compensation plan in both periods, on allocated corporate expenses increased $2.6 million, which is primarily due to increases in salaries and related expenses for our support personnel and a leadership meeting during the quarter, partially offside by a decrease in legal fees. Now, I'll turn the balance sheet and cash flows.

The SO came in at 81 days for the second quarter of 2022, compared to 75 days for the first quarter of 2022, in 73 days for the second quarter of 2021. In 73 days for the second quarter of 2021.

We expect the SO to be between 70 and 75 days for the remainder of 2022, as we collect on several large projects that have contractual payment schedules extending into the back half of the year.

We finished the quarter with borrowings on our revolving credit facility at $342 million and with cash of $12 million from that debt of $330 million.

Second quarter also included $28.3 million of share purchases, approximately 498,000 shares under our current authorization of up to $200 million. $200 million.

78 million dollars remained available for repurchases as of June 30, 2022.

Our leverage ratio that defined in our senior bank agreement was approximately 2.2 times adjusted even up as of June 30th, 2022, compared to 2.8 times adjusted even up at the end of Q2 2021. 1.

Cash flow generated from operations in the second quarter of 2022 was $29 million, and we used $5 million of our cash to invest in capital expenditures inclusive of internally developed software costs resulting in free cash flow of $24 million.

Finally, let me turn to our expectations and guidance for 2022.

It's generated. We are raising and narrowing our four year, 2022 revenue guidance to be in a range of 1.04 billion to 1.08 billion dollars.

The increase in our revenue guidance primarily reflects the strong momentum across our business and the significant growth opportunities in each of our cooler industries.

In addition, we are narrowing our full year adjusted E-B

In raising and eroding our full year, adjusted non-gap, diluted earnings per share guidance to be in a range of $3.15 to $3.45. s

Finally, we expect our full year effective tax rate to be in the range of 29% to 31%.

Thanks everyone. I would now like to open up the call to questions. Operator?

Thank you ladies and gentlemen. If you have a question at this time, please press star 11 on your touchtone telephone. Again, that star 11 to ask a question. Again, that star 11 to ask a question.

Our first question comes from the line of Toby Summer of Truist Securities.

Our first question comes from the line of Toby Summer of Truth Securities. Toby Summer, your line is open. Toby Summer, your line is open.

Recruiting retention and head count growth. How do you think the back half shapes up in terms of those? The

recruiting, retention, and headcount growth. How do you think the back half shapes up in terms of those?

compared to the trends year to date that we already kind of have on the books.

So we did this in John , I can start. I think from a head count perspective, we continue to respect the CR head count increase into the back half of the year with reflecting expectations for continued revenue growth. And then also really getting us prepared for 2023, where we're based on the pipeline and the backlog that we see right now. And we're counting that we're gonna continue to revenue growth in the 2020 degree. So really kind of getting a team in place for now.

Thanks.

Ask the question specifically on the healthcare side in performance improvement. What does large projects look like or project size in general? And then any shifting preferences among your customers for the format with which they contract to provide more services for input.

Hey Toby, I can start on that. From a job-sized perspective, we really haven't seen a material shift in terms of either the size of the jobs in a performance improvement area in healthcare or the kind of a mix between fixed fee and contingent. I think that that's been relatively stable over the past few years. And so the other thing we talked about before depending on the size of the system or working on depending on the size of the job.

liberal arts schools kind of merging into larger schools. Is that something that drives any demand for your services? Either directly or indirectly or just sort of a symptom of the stress.

That industry is under. It's probably the trend you're identifying is absolutely a trend. There are more. I think there's not nearly as many as I think many of us, one thought there would be when it went down the kit. I think some of the federal funding is also dropping off with some of the educational industries. Can you answer a question directly though? We do have been involved in some of these mergers or integrations, whatever.

type of perspective.

Okay, and then one of that's one more on the digital offerings. Some of the headline technologies out there, the sort of motherships in software firms have described slightly longer sales cycles. It's slightly longer sales cycles.

Some of them have reported that it does.

Have you seen any change in appetite among your customer set for greenlighting new deployments and new engagements? Have you seen any change in appetite among your customers set for greenlighting new deployments

Hey, Toby. Johnny, you spoke up a little bit during the question, but I think that the question would be some of the platforms and I'm having a reported longer sales cycle, the policing and any of that. I think we've seen some isolated cases here there where we've seen a little bit of that, but I'd say from an overall perspective in terms of our pipeline and our backlogged is not been a big factor in our portfolio. Yeah, I think I would say I think it's maybe a little different than you're asking, but I think it's a little different.

Okay, I have to have a detailed question just, John , in the numbers. The other loss, other income loss was a little bit bigger than I had anticipated. Could you

Give a little bit more color into that. I apologize if you already touched it in the prepared remarks. I joined the call a little late.

At that, it's only the deferred comp plan. So we have a deferred comp plan for... So we have a deferred comp plan for...

for employees that is funded by market assets, so you know, think stocks, things like that. And so during the second quarter when the broader macro market went down quite a bit, we had, if a net zero to our P&L, it reduced our corporate expenses by about $5 million, but then we had the offsetting loss of the assets that we used at fund the plan by about $5 million. So the net zero, other than the tax impact.

The law on the assets is not tax deductible for us, and so we get in-person extra income tax expense, but I quantified it when my remark is about six cents, but that's what that is that you see another income. Thanks for the refresh. Thanks for the refresh. Thanks for the refresh.

The law on the assets is not tax deductible for us, and so we get in-person extra income tax expense, but I quantified them in my remarks is about $0.6, but that's what that is that you see in other income. Thanks for the refresh. Thank you.

Thank you. Our next question comes from the line of Andrew Nicholas of William Blair Company.

question comes from the line of Andrew Nicholas of William Blair in company. Andrew Nicholas, your line is open.

Thanks and good afternoon. I wanted to first ask a question on education and the sustainability of growth there.

two really, really good quarters in a row, not expecting 40% plus growth forever. But is this a business that can reliably grow mid-teens in your view? And as we look ahead to next year, is there anything particularly lumpy to call out from the first half that would make it?

an especially difficult comp. Sounds like there was a bit of pent-up demand from delayed projects.

that came through in the first half. So just looking to get any additional color you can provide there. Yeah, Andrew, I think, you know, we're looking at, first of all, as we indicated the growth frankly in the first quarter and the second quarter was actually very broad-based across the whole the whole segment and we expect that to continue for the rest of the year. And I think, you know, in 2023 we feel really good about the underlying reasons for the growth and I went through many of those in my comments.

in the last two quarters, but it's going to be quite strong in the coming years. That's helpful. Thank you. And then I guess you partially answered this question right there, but in terms of the growing pipeline for 2023, is it more of the same in terms of what you saw in the first half in terms of it being broad-based and across the various sub-segments within each practice, or are there particular pockets of strength that we might not even be seeing yet in the numbers?

little practice or research they're all really doing well and I expect that to be key. Thanks very much. Thank you. Our next question comes online Bill Sutherland of Benchmark.

Okay, thanks. Go southern line, your line. Thanks. Hello everybody.

the line your line. Thanks. I can't call everybody.

I was wondering on the hiring front if you are seeing some of your candidates flow from some of the big fours where there's a little bit of...

Wondering on the hiring front, if you are seeing some of your candy clothes from some of the big boards where there is a little bit of a...

you know, uncertainty right now at some levels, given the discussions about

They're business plans.

Can you, are you seeing any candidates on this floor?

Hey, Bill. Yeah, hey, Bill, it's Mark. We, you know, there's always been a low on that front, but I would say there's been no material changes, a result of some of the recent discussions that's happened about the changes there. Certainly, something we keep an eye on, and we anticipate perhaps it's potential, but nothing like we're seeing today.

It's more, you know, there's always been a low on that front, but I would say there's the no material change as a result of some of the recent discussions that's happened about the changes there. Certainly, something we keep an eye on and we anticipate perhaps is potential, but nothing that we've seen today. And for God that's your urine.....

The recession, if it begins to, you know, take on a little bit more impact in the economy, how should we think about your commercial segment in that scenario? Yeah, I think, you know, I think our commercial segment has been focused on financial services and energy and utilities. And I think, you know, our sense is at this point in time that there could be a drop off in that. I mean, we've seen, you know, in the last few years.

We told the exes have been important well for us. And you know, we had a little bit of one financial services with us. More impact. And I think that next we'll continue to be on that. We'll put down on last but we have to improve to maybe this shouldn't say. And maybe what I would add there is our distressed business has actually been, you know, one of the more subdued areas of our business and the early part of this year in last year as well. And now we're seeing increased pipeline, we're seeing increased inquiry. So that might actually be something.

that in a down market might go up quite a bit as we saw during the first half of 2020. And one other comment from a digital perspective, a lot of what we're seeing in our clients are, they've already started to make some pretty big investments in cloud-based technology. And part of why they're doing that is, they're trying to automate as many of those business processes as possible, especially in this tight labor market.

And so a lot of the indications that we see from our clients is in this market there's a premium on trying to automate, trying to get to the cloud. And so we're still seeing, you know, good demand and good inbound inquiries related to our commercial technology or rather our technology in the commercial markets related to that trend line. Year-round regret and hope for the future for our customers. This contract

John , remind me how big the turnaround bankruptcy businesses.

You say how big is it? Yes. It is about 5% of our consolidated revenues. And then last for me while I got you John is the guidance.

as I just level out the revenue from the second quarter levels for the segments, I get to the top end of your revenue guidance. So maybe is there any color you can provide as far as what the midpoint implies?

Yeah, so when we looked at the guidance bill, we obviously were really pleased with the growth we've had during the first half of the year. And frankly, it's been, it's outpaced even our initial planning assumptions with the beginning of the year. So when we look out for the back half of the year, we're still confident that we're gonna be able to post a pretty strong year over year growth numbers. I think right now when we look at the third quarter, our expectation is that we'll have growth in the 20% range. We'll be in for the back half.

If you then talk about what would be the scenario to get to more of the upper bounds of the range, that would be where we have some, you know, continued to questionable momentum into the back half of the year. And that's what we're looking at. And maybe just an additional color to give. I think at this point, if you look at the mid-point of guidance, or expecting from an industry perspective, healthcare to be up in the mid-teen range, or expecting education to be up in the mid-30 percent range,

We're expecting the commercial industry to be up in the mid single digit range, but that's got the life sciences headwind in there So if you were to strip that out that private low double-digit range And then I'll also just give the spread between our capabilities. So if you're looking at digital we expect that to be for the full year 30 per year over year growth and for Consulting and managed services in the low double-digit range for full year all those numbers I gave there were

full year, year over year percentages. Thanks for all that.

for your percentages. Thank you. Thanks for all that. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you.

Um, the.

Another question for four year year over year percentages.

Thanks for all that.

Another question I was thinking about was, um,

The visibility you have with your backlog at a moment in time, are the project durations about the same? Are they getting a little longer? I know they, particularly in healthcare, the duration went down.

a few years ago. Just curious if there's a direction there. Yeah, yeah. Now I think there's no noticeable difference really in the duration, though I think it's just there pretty much the same. We have some projects certainly that go on over multiple years. We also have a lot of projects where you know you've got one scope of work and you completed and you get a second scope of work and a follow on beyond that. So that's actually happens, you know, often but from our backlog perspective, that's only one one chunk of it. So I don't think there's really been any dramatic changes in there.

in the duration of the best of what we have going on right now. Okay, thanks for all the color guys. Appreciate it. Thank you again to ask a question, please press star 1 1 on your touch tone telephone again. That's star 1 1 to ask a question at this time. Our next question comes from the line of Kevin Steinke of Barrington Research. Hi.

in the second quarter. I don't know if there's anything to read into that, you know, if it's just kind of a quarter to quarter fluctuation that'll kind of even out as we move throughout the year. Hey Kevin, it's John . I think it is more just a quarter to quarter fluctuation. I wouldn't read anything from a broader trend perspective into that. I mean part of it was the digital business just really had a tremendous quarter in terms of growth that you know exceeded your own expectations. But as we look out into.

our forecast for the remainder of the year. We expect to see some nice growth coming from the control thing side of the business as well. And for that to balance out a little bit more is the second half of the year progresses. The second half of the year progresses.

Forecast for the remainder of the year. We expect to see some nice growth coming from the consulting side of the business as well In for that to balance out a little bit more is the second half of the year progresses Okay understood

I just wanted to ask about labor inflation and

If you've seen any pick up there and I know I think you're implementing some price increases.

this year to Austin, and maybe just talk about it.

Those increases are keeping pace with inflation and you know, maybe The acceptance of those increases across your client base The cabinets mark I think the labor inflation is one that again has been out there for a while So while the headline inflation numbers perhaps say something bigger. It's not like this started overnight. So we've had Market adjustments and stayed competitive throughout this is which is how we've been able to increase our headcount 21% a year

the case. So at this point we have a healthy confidence in the outlook. Okay great. Lastly I just wanted to ask too about an element of the guidance. You know obviously you know a revenue guidance range raised.

You know, you narrowed the adjusted evitone margin, guidance range, not necessarily an increase there, but a narrowing just maybe if you can talk about, you might, I think you touched on it a bit on in your segment comments, but just the factors behind that. You know, the on.

changing the margin guides for all types of revenue. Biggest, it's just the balance of factors there if having someone on the one hand. Growth is, I'll pay some of our initial assumptions, which is a good thing, because that's, you know, giving us an additional scale on our corporate SGNA. And, you know, from our overall utilization perspective, we're not where we want to be yet, but we've seen the ramp start to pick up in the second quarter, it's up about 200 basis points. It's sequentially from the first quarter, so that trend line is going well.

as well from a segment perspective. I think on the flip side of that, we have making investments in the business. And we talked in in our investor day about every year, the realities are probably from an app perspective going to be invest in 50 to 100 basis points. We're at the upper end of that right now. We'll probably close over the 100 basis points if not even a little bit over, both in terms of building a head count ramp that we need to support this year's growth, but also next year's growth, as well as some of our training initiatives to...

get those employees ready to be deployed and the projects where we see demand. And so that's a different factor that's going the other way. And the other thing is, you know, a lot of our businesses kind of get back normal from a travel perspective. The travel to clients is not at this point yet. And it was back to where it was, but in terms of business development, in terms of even, you know, we had to, as we noted in our prepared remarks, we had a leadership meeting there in the quarter. So, on this unit, a lot of systems has had. We'll do it later.

helpful. Thanks for the comments. That's all I had. Thank you. Our next question comes from the line of Toby Summer of Truist Securities.

Toby Sommer, your line is open. Thank you. I had a follow-up on the Big Four potential split-ups in this. First question would be, where do you most directly compete with the Big Four?

And while I heard your aunt have and really see, notice any change. If we change the question, said do you expect a potential split in news of it to drive any changes in the industry and for Huron? If so, what's your anticipate?

So, ladies and gentlemen, I think in terms of the word, we can beat the most. I think if you're asking what part of our business, we can beat the most, I'd say, you know, it varies, but I would say that our digital solutions is really worth it to compete the most. With not just the big four, but also, you know, Accenture, places like that. But it's mostly in our digital solutions. We've got, you know, every one of our businesses has a different set of competitive peers.

But I'd say by and large we complete the most of the big four probably in our digital area. From an industry perspective, we probably have more digital, I mean we have more competitive pressure for the big four in our health care probably more than other industry verticals would be my guess. But again, we've lost competition across the board. So something we've been used to. Going back to your second part of the question though, I don't at this stage as Mark was kind of saying a little bit earlier, I think this will play out if something happens within the big four, it's going to play out over time.

of material that would show up on any of our results.

that would show up on any of our results. Thank you.

Thank you. Seeing no more questions, I'd like to turn the call back over to Mr. Roth.

Thank you for spending time with us this afternoon. We look forward to speaking with you again in November when we announce our second quarter results. Have a good evening. That concludes today's conference call. Thank you everyone for your participation.

Q2 2022 Huron Consulting Group Inc Earnings Call

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