Q3 2022 Huron Consulting Group Inc Earnings Call

November 1, 2022

The conference will begin shortly to raise your hand during Q&A you can dial star one one.

[music].

Yeah.

Okay.

Good afternoon, and welcome to Huron consulting group's webcast to discuss financial results for the third quarter 2022.

At this time all conference called minds are on a listen only mode. Later, we will conduct a question and answer session for our conference call participants and instructions will follow at that time as a reminder, this conference call is being recorded before we begin I would like to point all of you to the disclosure at the end of the company's news release.

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

The news release is posted on Hurons website.

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

The company will be discussing one or more non-GAAP financial measures. Please look at the earnings release on Hurons website for all of the disclosures required by the SEC, including reconciliation to the most comparable GAAP numbers and now I would like to turn the call over to Jim Roth, Chief Executive Officer of Huron Consulting group Mr.

Please go ahead.

Good afternoon, and welcome to Huron consulting group's third quarter 2022 earnings call with me today are John Kelly, Our Chief Financial Officer, Mark Hussey, our President and Ronny Gal, our Chief operating officer.

Our third quarter performance continued to reflect strong growth across all three operating segments.

We achieved 27% revenue growth over the third quarter of 2021, primarily reflecting ongoing momentum in our education and healthcare industries and continued growth in our digital capability.

Despite increased uncertainty in the broader economic environment, we continue to anticipate strong demand for our offerings, leading us to increase our full year revenue guidance, while narrowing the range of our adjusted earnings per share guidance to the midpoint of the range.

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

During the third quarter healthcare segment revenues grew nearly 26% over the prior year quarter.

The increase in revenues was driven by strong demand for our digital financial advisory revenue cycle managed services and performance improvement offerings.

The macro trends within hospitals and health systems have continued to be challenging for most of our client base.

During the past several months many health systems have reported their largest financial losses in decade or decade.

The reason for those losses are familiar in patient volumes that are still lower than pre COVID-19 levels volume shifts to outpatient and virtual increased costs for labor equipment and supplies labor shortages and reimbursement rates that are generally have not kept up with the increased cost structure.

Prior to the pandemic, many health systems had declining margins, but those declines came from reasonably healthy levels. It is likely that operating margins will remain depressed and in some cases severely depressed for the next one to two years and possibly longer.

This collective set of challenges for hospitals and health systems has led to strong demand for our health care offerings, most notably in performance improvement digital and revenue cycle managed services.

We expect the strong demand to continue as our clients look to our industry expertise and digital capabilities to improve their operational efficiencies and patient centric patient centric interactions.

Ongoing financial pressures across the industry will also likely continue to create solid demand for our performance improvement and strategy capabilities as health systems seek to broaden our revenue base and use technology and analytics to deliver care and increasingly diverse settings.

Turning now to the education segment in the third quarter of 2020 to the education segment achieved record quarterly revenues growing 49% over the prior year quarter and 7% sequentially.

The increase in revenues over the third quarter of 2021 was driven by strong broad based demand across all of our offerings highlighted by 53% growth in our digital capability and education.

Similar to the healthcare segment colleges and universities are facing myriad challenges to their historical business model research institutions continue to grow their research portfolios, but the cost of that growth is much greater than the related reimbursement from federal or commercial funding sources generating continued strong growth for our <unk>.

<unk> services.

Our strategy and operations team has been helping institutions improve the sustainability of their business models, while some of our clients evaluate opportunities to expand beyond their trish their traditional operators in search of new revenue sources.

Our collective set of digital offerings, particularly in our cloud ERP implementations remains strong and we expect the list of institutions seeking to deploy cloud based systems will grow in the coming years.

And finally, our student business, including our cloud based students solution is demonstrating early success and what we believe will be a high demand business over the coming decade.

Collectively we believe that the education segment will continue to have solid growth as the entire industry played catch up and digital capabilities as it attempts to create more sustainable growth models.

Turning to the commercial segment in the third quarter of 2022 commercial segment revenues grew 6% over the prior year quarter, driven by strong demand for our digital offerings, primarily across the financial services and energy and oil and gas industries.

The increase in third quarter revenues revenues from our digital offerings in the commercial segment were partially offset by the divestiture of our life Sciences business, which we sold in the fourth quarter of 2021.

And a decrease in demand for our financial advisory and strategy offerings.

Excluding the life Sciences business. The commercial segment grew 17% in Q3 2022 over the prior year quarter.

Our digital offerings within the commercial industries continued their solid growth trajectory in the third quarter.

We continue to expand our offerings beyond our traditional core back office applications into CRM data management, and analytics and emerging technologies, such as an electric intelligent automation as our commercial clients advance their digital transformations.

When we held our Investor day earlier this year, we highlighted the extent to which our digital capability continues to play a critical role in the growth of our company.

Through the third quarter of this year, our digital revenues comprised 45% of total company revenues spread relatively evenly across all three of our industry reporting segments.

We anticipate continued strong growth in our digital capability and I want to provide some added context as to what is fueling our growth in this area.

The pandemic highlighted the need for all organizations to have greater digital interaction with our employees customers patients students and suppliers a.

A significant number of our clients look to cloud technology solutions to enhanced revenue opportunities and gain operational efficiencies through automation.

And our core industries of healthcare and education are clients are also looking to personalize their interaction with their patients our students through multiple digital channels and to get a consistent and informed view of their customers needs.

We believe this trend is going to lead to continued strong growth for our digital capability and the commercial healthcare and education markets.

We are succeeding in the market due to our combined industry expertise and digital capabilities and we believe these strengths will lead to profitable growth across all of our industry verticals.

The transition to a new operating model at the beginning of this year was also highly instrumental in creating an organizational structure that was more conducive to achieving the internal and market and market facing and efficiencies that we believe will continue to enable us to achieve strong industry and digital revenue growth even in uncertain economic conditions.

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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. Two I'm, sorry to $1 9 billion to $1 1 billion and we are maintaining our adjusted EBITDA guidance in a range of 11, 5% to 12% of revenues narrowing our adjusted diluted earnings per share.

Guidance to a range of $3 25 to $3 35.

Our third quarter results and updated outlook further demonstrates the vibrancy of our end markets and the strong demand for our offerings.

We continue to believe that the underlying demand for our offerings will be solid throughout the remainder of the year and we are encouraged by our growing pipeline and backlog for 2023.

To position ourselves for continued strong growth we are investing in our business primarily by growing our team to develop on current and anticipated demand across all of our capabilities and industry verticals.

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

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.

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

Along with the 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 walk you through some of the key financial results for the quarter.

Revenues for the third quarter of 2022 with $285 4 million up 27, 4% from $224 million in the same quarter of 2021.

The increase in revenues in the quarter was nearly entirely organic and driven by growth across all three operating segments, particularly our education and healthcare segments and was reflective of the strong demand for our digital offerings across all industries.

Revenue within our digital capability increased 45% in the third quarter of 2022 over the same period in 2021.

In addition revenues reflect continued strong demand for our consulting and managed service offerings within the education and health care segments, which grew 46% and 17% respectively. In the third quarter of 2022 over the same period in 2021.

Net income was $17 $7 million or <unk> 86 per diluted share in the third quarter of 2022.

Third to $13 7 million or 64 per diluted share in the same quarter in the prior year.

Our effective income tax rate in the third quarter of 2022 was 32% compared to 12, 5% one year ago.

Our effective tax rate for Q3 of 2022 was less favorable than the statutory rate inclusive of state income taxes, primarily due to tax expense related to nondeductible losses on the investments used to fund our deferred compensation liability and certain nondeductible expense items.

Adjusted EBITDA was $36 5 million in Q3, 2022, or 12, 8% of revenues compared to $26 4 million in Q3 of 2021 or 11, 8% of revenues.

Adjusted non-GAAP net income was $27 million or $1 <unk> per diluted share in the third quarter of 2022.

Compared to $16 8 million or <unk> 78 per diluted 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 46% of total company revenues during the third quarter of 2022.

The segment posted revenues of $131 $3 million during the quarter.

Up $26 7 million or 25, 5% from the third quarter of 2021.

Revenues for the third quarter of 2022 included $1 $2 million from our acquisition of perception health, which was completed in December of 2021.

The increase in revenue in the quarter reflects strong demand for our digital offerings as well as our financial advisory revenue cycle managed services and performance improvement offerings.

The digital capability and healthcare grew by 49%, reflecting an increased demand for our ERP electronic health record offerings.

Operating income margin for healthcare was 25, 2% for Q3 of 2022 compared to 37% for the same quarter in 2021.

The quarter over quarter decrease in margin percentage is primarily attributable to the mix.

The strength of our digital offerings during the quarter.

And our investments in head count growth that we believe will drive continued growth for this industry into 2023.

The education segment generated 33% of total company revenues during the third quarter of 2022.

The segment posted record revenues of $94 $3 million in Q3, 2022 up $31 1 million or 49, 2% from the third quarter of 2021.

Revenues in the third quarter of 2022 included $2 $2 million from our acquisition of Whiteboard, which was completed in December of 2021.

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 53%.

Third the third quarter of 2022 represented the seventh consecutive quarter of sequential growth for the education segment.

The operating income margin for education was 24, 2% for Q3 2022 compared to 23% for the same quarter in 2021.

The quarter over quarter increase in margin was primarily due to revenue growth that outpaced our corresponding cost to deliver during the quarter.

Partially offset by investments in head count growth technology expenses and cloud based training cloud based technology training that we expect will drive continued strong growth for this industry into 2023.

The commercial segment generated 21% of total company revenues during the third quarter of 2022.

Segment posted revenues of $59 $7 million in Q3, 2022 up $3 6 million.

Or six 3% from the third quarter of 2021.

Revenues for the third quarter of 2022 included $400000 of inorganic contributions from our acquisition of <unk> data, which was completed in January of 2022.

The increase in revenues reflected continued strong demand for our digital offerings, partially offset by a decline in revenues due to the divestiture of our life Sciences business in the fourth quarter of 2021 as well as a decrease in demand for our financial advisory and strategy and innovation offerings.

In the third quarter of 2021.

<unk> Sciences business generated revenues of $5 1 million.

Our digital offerings in our commercial markets grew 35% in the third quarter of 2022 as compared to the same period a year ago.

The operating income margin for the commercial segment was 23, 7% for Q3 2022 compared to 14, 7% for the same quarter in 2021.

The increase in operating income margin for this segment was primarily due to the revenue growth in this segment coupled with a decrease in direct cost during the quarter. This was primarily due to the life sciences divestiture in the fourth quarter of 2021.

Corporate expenses not allocated to the segment level were $35 7 million or 12, 5% of revenues in Q3, 2022, compared with $31 4 million or 14% of revenues in Q3 2021.

Unallocated corporate expenses in the third quarter of 2022 included a $1 $3 million reduction of expense related to the decrease in liability to participants in our deferred compensation plan, which is fully offset by the corresponding loss in other income related to the decrease in fair value of the assets used to fund that plan.

Unallocated corporate expenses in the third quarter of 2021 reflected a similar reduction of expense of $200000 related to the deferred compensation plan.

Absent the impact of our deferred compensation plan in both periods unallocated corporate expenses increased $5 $4 million, which is primarily due to increases in salaries bonus and related expenses for our support personnel.

Now turning to the balance sheet and cash flows we finished the quarter with borrowings on our revolving credit facility of $341 million with cash of $9 million.

For net debt of $332 million.

Third quarter included $45 $6 million of share repurchases of approximately 686000 shares.

On a year to date basis, we repurchased one 7 million shares representing seven 8% for outstanding shares as of the beginning of the year.

Our leverage ratio as defined in our senior Bank agreement was approximately two one times adjusted EBITDA as of September 32022, compared to two seven times adjusted EBITDA at the end of the third quarter of 2021.

As of September 32020 to $32 $3 million remained available for share repurchases under our current authorization and.

In October of 2022, our board of directors increased our authorization for share repurchases by another $100 million.

Cash flow generated from operations in the third quarter of 2022 was $44 $4 million and we used $5 $8 million of our cash to invest in capital expenditures inclusive of internally developed software costs, resulting in free cash flow of $38 $6 million.

DSO came in at 85 days for the third quarter of 2022 compared to 81 days for the second quarter of 2022, and 76 days for the third quarter of 2021.

The increase in DSO is reflective of the pace of revenue growth during the year and certain larger health care and education industry projects with extended billing and payment terms, which are normal in our mix of business and tend to ebb and flow over time.

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

As Jim noted, we are raising and narrowing our full year 2022 revenue guidance to be in a range of 1.09 billion to $1 1 billion.

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

In addition, we continue to expect our full year adjusted EBITDA to be in a range of 11, 5% to 12% of revenues and we are narrowing our full year adjusted non-GAAP diluted earnings per share guidance to be in a range of $3 25 to $3 35.

The midpoint of our adjusted EPS range is consistent with our expectations as of our second quarter call.

Now, reflecting increased adjusted EBITDA expectations, and a reduced diluted share count.

Offset by increased interest and income tax expense related primarily to increased interest rates and the tax impact of the decline in value of the assets used to fund our nonqualified deferred compensation plan.

Finally, we expect our full year effective tax rate to be in the range of 30% to 32% and we continue to expect fully full year free cash flow in a range of $70 million to $90 million.

Thanks, everyone before we open the call for questions I'd like to turn the call back over to Jim for some additional remarks, thanks, John and before we turn to Q&A I do want to make a couple of comments today marks my 50, <unk> and final earnings call as CEO starting on January 1st I will be vice chairman of the board and.

And we'll be working full time in the market with a great team doing the things that I'm, most passionate about working with our clients and our people are.

I began my role as CEO in 2009 at a challenging time for this company. Since then Huron has undergone considerable strategic change to become highly respected global professional services company, providing an array of consulting digital and managed services offerings to industries that are core to the U S and global Gd.

P R.

Our evolution to where we are today was not a straight line. While there were times that the seeds were rough and the wins contrary, we stayed focused on growing the company or people proved resilient during the tough times and stay focused on supporting our clients our business and each other at all times.

I am proud of my accomplishments over the past 30 plus years in this role, but more importantly, I learned two things that warrants special mentioned.

First while the executive team and I play a critical role the quality of the people in this organization are the sole reason for our success.

All of our success and I mean, all of it is attributable to the talent of our people and their ability to apply that talent to the needs of our clients and our business.

The second lesson I learned is how critical culture is to an organization I have less of an appreciation of its criticality. When I started this role and I now believe that our culture is the most important asset we have.

When I look back at what we have achieved since I helped to start this company 20 years ago. The strength of our culture remains the single thing of which I am most proud.

As we have previously shared Mark Hussey will be taking over as CEO on January one.

I hired Mark as our CFO in 2011, and he eventually took on the added responsibilities of President and COO.

During his time at Huron, Mark has become highly knowledgeable in each of our businesses helped the company through several strategic and operational transformations and more importantly, he has earned the respect of our people Mark has been my confidant on all critical decisions in this company over the past decade, and there is no one that is better positioned to help here.

<unk> continue its growth.

This company is going to be in great hands under Mark's leadership.

Being CEO of this company has been the highlight of my career and I. Thank all of you for your confidence and support of this organization. During my tenure I look forward to continuing to help grow Huron in the coming years.

And with that we can turn it over for Q&A.

Good day, ladies and gentlemen, if you have a question at this time. Please press star one one on your telephone one moment for our first question.

And our first question for today comes from the line of Tobey Sommer from Truest. Your question. Please.

Thanks.

Question for you about the.

The health care business.

Segment, if I could.

The margin was a little bit lower on a year over year basis.

Could you describe the drivers in that and I remember historically, sometimes if youre out doing a lot of evaluation work in NPI that could drag things down on a temporary basis.

Hey, Tobey its John Youre right on that factor that you pointed out it was a.

Very busy quarter for our team.

The performance in many aspects of our teams of the consulting side of health care with a lot of.

A lot of inquiries from clients based on some of the pressures that Jim described that did lead to a number of assessments during the quarter I think the bigger issue was really just the strength of the digital business during the quarter.

I wouldn't describe that necessarily is a permanent trend line I think that there are going to be ebbs and flows between the quarters and some of the mix during the quarters between digital and consulting and our expectation is that during the fourth quarter, we're probably going to see some additional strength from our performance improvement team and consulting just based on.

Some of the pipeline that we closed in the hard backlog at the end towards the end of the third quarter as well as the potential for some performance based fee.

Opportunity upside during the fourth quarter. So I think it's going to balance back out youll, probably see margins tick up sequentially into the fourth quarter would be my expectation, but the primary driver for the third quarter was really related to just the strength in digital offerings within this segment.

Yeah.

Okay. Thank you.

How do you sit in terms of bill rate as you look into next year or you think youre going to be within historical trend in terms of pricing or do you expect to be.

Be sort of on the upper bound of what might have been considered normal over time.

I think we have seen pricing improve over the over the past year or so tobey. So obviously that's been.

Somewhat offset by the fact that the.

Cost of our delivery has also increased over that period of time, but from the pricing that we've been able to.

See with our clients.

Particularly within the health care industry, we've been able to push through the majority of those labor increases that we have into our rates and so on.

We're able to maintain a.

Steady contribution margin within that business, which implies higher bill rates compared to historical norms as we move forward.

And then with respect to the.

The way your customers are procuring your service when they decide.

To contract.

Additional time and materials or chairs choose an alternative.

Are there any trends or tendencies.

Changing the outlook for that contract type.

Type mix going forward.

There really arent that we.

We see Tobey, it's been it's been fairly consistent.

In that regard.

Obviously to the extent that we see increased demand for our performance improvement offerings based again on some of the market conditions that Jim described oftentimes those jobs are fixed fee with a performance based opportunity. In addition to that so I think thats.

Consistent with what we've seen in the past, but I think that that trend will continue.

And.

Year to date in the quarter itself.

Capital allocation towards buying back stock has been pretty pronounced.

Based on the outlook in some of the commentary.

In the early part of Jim's prepared remarks, you're talking about.

A good couple of years to look forward to at least.

Do you expect to follow through with.

Additional share repurchases at this point.

I think you will see us continue to do share repurchases Tobey what will go back to the framework that we put out there at our Investor day back in March and I think our plan is to continue to reduce the share share base in a manner. That's consistent with what we described at our Investor Day now of course, we do.

Monitor all the different levers and so obviously, it's been a increasing.

Increasing interest rate environment. So we keep our eye on that we model around that you will also have some of the tax consequences coming into play next year will be.

On the tax on top of that the market the net market value of buybacks next year. So we factor those things in.

But we also look at what our expectations are for increased.

Net income as we go forward and that's a factor as well as well as our assessment of where the stock is trading versus.

Valuation.

We expect to achieve based on the results that that we're forecasting and so we take all those factors into consideration and I think that.

The short answer is that our expectation is that share buybacks will still be part of that equation going forward, even with the increased interest rates and some of the tax implications.

Thank you very much Jim congratulations it's been a pleasure working with.

Thank you Tobey, great working with you as well.

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

And our next question comes from the line of Andrew Nicholas from William Blair. Your question. Please.

Hi, good afternoon.

With those comments, Jim congratulations on a great run.

And it's been a pleasure working with you as well.

I wanted to ask a question on head count growth really really strong on a year over year and sequential basis could you speak a bit to anthem.

Mix of that hiring is that primarily.

Undergrad hiring or younger staff.

Coming into the firm and if you could speak to kind of the competitiveness if recruiting and your ability to procure all of that talent this quarter that'd be helpful.

Andrew This is Jim I'll take that I think that I think the hiring has really been across the board.

We've obviously been hiring a lot in the digital areas Thats one of the areas where.

Frankly, a lot of the areas within our company right now are growing nicely. The digital one is the one that I think begins to give us a little bit more visibility so it's easier to hire into that area.

But I think we're.

We're we're in.

The ease with which we're doing it I think as we.

It's not it's not it's not easy at this stage, but I think we're having a pretty good platform into which to recruit people I think they really know and understand that we have been performing well, but the office the offerings that we have in the markets that we're serving are attractive and I think thats been helping us out a lot as well. So I think I think we our view is we've got.

Good.

Platform to recruit into at all levels.

I know there is always this issue of wages and I think certainly that's a part of it as well, but we believe that our wages are all very competitive, particularly on a total compensation basis. So I think you add those together nice wages good.

Benefits.

And attractive markets that we're serving in a growing company and we feel good about our ability to continue to recruit and retain our people.

Got it. Thank you and then for my follow up I.

Thank you you mentioned or gave color on on the current pipeline and just kind of the breadth of strength across all the businesses, but just wanted to make sure. There wasn't any kind of larger lumpy one time items or one time projects in the quarter, obviously again really really strong growth figures. So just wanted to get a sense for.

The repeatability of some of those those metrics.

And make sure there wasn't anything bigger in the past couple of quarters that we should be aware of thank you.

Andrew John I'll take this one no there was nothing nothing unusual or nothing lumpy in the quarter.

Nothing outside of just kind of the normal normal stuff that we see no.

Big projects, notably big projects, starting or ending during the quarter or anything like that just more broadly since you asked about the pipeline.

In terms of closed out the year, we feel good across the business.

Our hard backlog so the stuff that we've already sold covers also at the midpoint of guidance, which is a very strong indicator.

<unk> ability to attain that level for the remainder of the year and we still need to deliver on that backlog and we can't always control the pace of projects at the holidays in the back half of December , but we certainly feel good about where we stand from a backlog perspective.

Then as we start to look out into the first quarter of 2023, we're really pleased with both the backlog we have but also our pipeline.

As we look at our coverage levels really across the business.

Relative to some of our preliminary revenue targets for that for the first quarter next year that coverage level outpaces kind of where we've been from a historical norms perspective. So we feel good about that as well and then on one note.

That we referred to earlier as the health care team.

<unk> had a really nice closeouts at third quarter in terms of our sales on that again, it's just reflecting some of that debt.

Performance improvement pressures that Jim referred to earlier in fact September was the largest sales month in healthcare and that we've had since the beginning of 2020.

Understood. Thank you.

Thank you one moment for our next question.

And our next question comes from the line of Kevin. Thank you from Barrington Research. Your question. Please.

Good afternoon.

I wanted to ask first about consultant utilization ticking down a little bit sequentially approval.

Consulting.

The digital pieces of your business.

Should we just think about that is reflecting the.

Accelerated hiring youre doing to.

Demand and should we expect that.

Trend back up.

As we move forward.

And is that is what it really relates to Kevin If you look it on the head count trends for the year.

Ben.

Signaling it throughout the year, but we've been adding head count both to deliver on the growth that we've been able to achieve this year, but really the year goes on now kind of the outlook for where are we expecting to transition into the early part of 2023. So we continue to.

Make some of those investments we've been making those investments really across.

Throughout all of our all of our geographies as a company so.

That's been our.

That theme with the utilization throughout the year, but our expectation is that.

With the hiring that we're doing right now as well as the training that we're doing right now that thats going to set us up both for growth, but then also to continuing margin expansion next year is.

Those those new hires that we've had.

Get kind of through the training period and get into.

Fully fully billable period as we as we head into next year.

Okay. Good.

Okay.

Is there any one specific area or practice or segment.

The.

What's driving the increase in revenue guidance.

Or is it.

More broad based.

Bye.

If I drill down a little bit into that for where we expect to see the revenue.

Come from for next year or I'm, sorry for the remainder of the year I would say for 2022 or at this point expecting the health care industry to be a mid to upper teen percentage range for our year over year 22 versus 21, we're now expecting the education segment to grow in the low 40%.

<unk> year over year on and we're expecting the commercial industry to grow in the mid single digit range year over year, but it's importantly, remember there that thats.

Not making any adjustments with the divestiture of the life Sciences business and if you were to exclude the life Sciences business from 2021 that would be more of a.

Mid teen growth range for the commercial segment and then if you wanted to slice it by capability, we're expecting our digital capability for the full year to grow in the high 30% range year over year and for our consulting and managed services capability to grow in the low double digit range year over year.

Okay great.

Just curious about.

Your internal development of people.

Right.

If you are putting even more emphasis on that and growing.

Senior consultants and developing them internally.

Due to the tight labor market.

Reducing our reliance on external hiring or is there not really much of a.

Change going on there from what you.

We've done.

Yeah.

I think there is there is not much of a change this is Jim.

Or a change in terms of what we've historically done I think.

Clearly when youre going through a big growth spurt like this it puts added stress in terms of making sure that people will get onboard in the right way and they feel comfortable here and they can turn to their colleagues and I think as we've all experienced doing that in an environment where.

We're not working full time in the office or working full time with clients is even more difficult and so I think these are challenges I, we're not alone in having to face those but at the same time, we're making a lot of effort to find ways to get our teams together.

And in doing it in ways either at client sites in our offices and we're just making a very conscious decision to try to.

Enhance the culture that we think we have here that really people Miss if they are not going to be working with our colleagues. All the time. So we are extremely focused right now on the internal development of our people and we will continue to be I think it makes it that much more critical as we as we grow as we become even more and more global.

And then it becomes really.

Important the other thing that I would just say is that when we when we established.

Our new operating model at the beginning of the year it kind of created opportunities for our people to work together across boundaries in ways that they haven't been able to do before and we have found that has been a real boon to our ability to get people to feel isn't that much more comfortable because we have multiple avenues that they can get to know people multiple projects and multiple <unk>.

Impotent sees that can work on and we've heard a lot of really good feedback on that as well.

The only only thing Kevin This is John I would add I think Jim summarized it very well is now.

<unk> been an area of investment for us this year, so that the internal development of people and so you made the point your question Kevin you referenced the.

The labor market and so we're always going out of the balance between experienced hires and then.

Hiring entry level.

So we then provide training to particularly in the digital area, but given the tight labor market. We've been investing significantly this year in some of those entry level employees and providing some of our own training and the reality is if you look at.

The.

The debt cost to us of having done that over the course of the year, that's probably been a mid single digit million dollar investment that has been even greater than what we would have initially planned at the beginning of the year given the growth that we've seen and gather other comment I'd make is.

Geography perspective, India has been a location, where we then making heavy investments in personnel there as well as providing some of that technology training. So thats the area.

A place where cumulatively across the entire platform.

It is good to support revenue growth, but we also think it's going to be good for our supporting continued margin improvement next year as those resources become fully billable on projects.

Okay. That's helpful commentary, just lastly wanted to ask.

About.

Economic conditions, and certainly you'd noted that.

Check.

Continued.

Strong demand despite uncertain economic conditions, but.

Are you seeing anything.

And then year for your businesses that might.

The.

<unk> an economic slowdown.

Perhaps on the commercial side or elsewhere.

This is Jim I think we're going to.

Haven't seen anything really yet if we're going to see something thats, probably going to be.

Sure first on the commercial segment.

And.

I think that'll just.

We are in.

<unk>.

Industry is one of which is financial services.

This is Rick.

Going through some challenges I wanted to one of its oil and gas and energy and which is doing well. So I think we'll have to see how that all plays out but at this stage, we're not seeing anything that causes us to have we're being cautious in terms of acne.

Acknowledging that there's likely to be some weakness someplace, but I think if it shows up first it'll show up on the commercial side to the extent that we are aware it hasnt really shown up yet on the health and education side, we're not seen it yet and I don't we don't anticipate unless something really material happens either with the economy or if theres. Some other type of Panther.

That comes up again, but otherwise those two industries seem to be going pretty well and.

And.

We feel pretty confident about our.

Our estimates for the coming for the coming year.

R R.

Our distressed business, our restructuring turnaround business has certainly seen increased inbounds as the year's progressed in there on utilization has gone quite up quite a bit as we enter the fourth quarter here. So that's.

Part of our portfolio that we expect to get busier throughout the remainder of this year and that really had in next year. If there are.

Uncertain economic conditions.

Okay, Thanks, and Jim let me add might be Gratulation glad you'll be part of here on going forward and certainly enjoyed working with you.

Kevin St. Pierre Thank you very much very kind words. Thank you I've enjoyed working with you as well.

Thank you and once again as a reminder, if you have a question at this time. Please press star one on your telephone.

And not showing any further questions at this time I'd like to turn the program back to Jim Roth for any further remarks.

Thank you all for spending time with US This afternoon, Mark and John look forward to speaking with you again in February .

Okay.

Have a good evening.

Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.

The conference will begin shortly to raise your hand during Q&A you can dial one one.

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Good afternoon, and welcome to Huron consulting group's webcast to discuss financial results for the third 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 our conference call participants and instructions will follow at that time as a reminder, this conference call is being recorded before we begin I would like to point all of you to the disclosure at the end of the company's news release.

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

This release is posted on Hurons website.

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

Please go ahead.

Our third quarter performance continued to reflect strong growth across all three operating segments.

We achieved 27% revenue growth over the third quarter of 2021, primarily reflecting ongoing momentum in our education and healthcare industries and continued growth in our digital capability.

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

During the third quarter healthcare segment revenues grew nearly 26% over the prior year quarter the.

The increase in revenues was driven by strong demand for our digital financial advisory revenue cycle managed services and performance improvement offerings.

The macro trends within hospitals and health systems have continued to be challenging for most of our client base.

During the past several months many health systems have reported their largest financial losses in decade decade.

The reason for those losses are familiar in patient volumes that are still lower than pre COVID-19 levels volume shifts to outpatient and virtual increased cost for labor equipment and supplies labor shortages and reimbursement rates that are generally have not kept up with the increased cost structure.

We expect this strong demand to continue as our clients look to our industry expertise and digital capabilities to improve their operational efficiencies and patient centric patient centric interactions.

Turning now to the education segment in the third quarter of 2020 to the education segment achieved record quarterly revenues growing 49% over the prior year quarter and 7% sequentially.

The increase in revenues over the third quarter of 2021 was driven by strong broad based demand across all of our offerings highlighted by 53% growth in our digital capability and education.

Similar to the healthcare segment colleges and universities are facing myriad challenges to their historical business model research institutions continue to grow their research portfolios, but the cost of that growth is much greater than the related reimbursement from federal for a commercial funding sources generating continued strong growth for our <unk>.

Search services.

And finally, our student business, including our cloud based students solution is demonstrating early success and what we believe will be a high demand business over the coming decade <unk>.

Okay.

A decrease in demand for our financial advisory and strategy offerings.

Excluding the life Sciences business. The commercial segment grew 17% in Q3 2022 over the prior year quarter.

Our digital offerings within the commercial industries continued their solid growth trajectory in the third quarter.

We continue to expand our offerings beyond our traditional core back office applications into CRM data management analytics and emerging technologies, such as an electric intelligent automation as our commercial clients advance their digital transformations.

When we held our Investor day earlier this year, we highlighted the extent to which our digital capability continues to play a critical role in the growth of our company.

Through the third quarter of this year, our digital revenues comprised 45% of total company revenues spread relatively evenly across all three of our industry reporting segments.

We anticipate continued strong growth in our digital capability and I want to provide some added context as to what is fueling our growth in this area.

The pandemic highlighted the need for all organizations to have greater digital interaction with our employees customers patients students and suppliers.

A significant number of our clients look to cloud technology solutions to enhanced revenue opportunities and gain operational efficiencies through automation.

In our core industries of healthcare and education are clients are also looking to personalize their interaction with their patients or students through multiple digital channels and to get a consistent and informed view of their customers needs.

We believe this trend is going to lead to continued strong growth for our digital capability and the commercial healthcare and education markets.

We are succeeding in the market due to our combined industry expertise and digital capabilities and we believe these strengths will lead to profitable growth across all of our industry verticals.

The transition to our new operating model at the beginning of this year was also highly instrumental in creating an organizational structure that was more conducive to achieving the internal and market and market facing and efficiencies that we believe will continue to enable us to achieve strong industry and digital revenue growth even in uncertain economic conditions.

<unk>.

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

Guidance to a range of $3 25 to $3 35.

Our third quarter results and updated outlook further demonstrates the vibrancy of our end markets and the strong demand for our offerings.

We continue to believe that the underlying demand for our offerings will be solid throughout the remainder of the year and we are encouraged by our growing pipeline and backlog for 2023.

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

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.

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

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

Revenues for the third quarter of 2022 with $285 4 million up 27, 4% from $224 million in the same quarter of 2021.

Revenue within our digital capability increased 45% in the third quarter of 2022 over the same period in 2021.

Net income was $17 $7 million or <unk> 86 per diluted share in the third quarter of 2022.

Third to $13 $7 million or <unk> 64 per diluted share in the same quarter in the prior year.

Our effective income tax rate in the third quarter of 2022 was 32% compared to 12, 5% one year ago.

Adjusted EBITDA was $36 $5 million in Q3, 2022, or 12, 8% of revenues compared to $26 4 million in Q3 of 2021 or 11, 8% of revenues.

Adjusted non-GAAP net income was $27 million or $1 <unk> per diluted share in the third quarter of 2022.

Compared to $16 8 million or <unk> 78 per diluted 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 46% of total company revenues during the third quarter of 2022.

This segment posted revenues of $131 $3 million during the quarter.

Up $26 $7 million or 25, 5% from the third quarter of 2021.

Revenues for the third quarter of 2022 included $1 $2 million from our acquisition of perception health, which was completed in December of 2021.

The increase in revenue in the quarter reflect strong demand for our digital offerings as well as our financial advisory revenue cycle managed services and performance improvement offerings.

The digital capability and healthcare grew by 49%, reflecting an increased demand for our ERP electronic health record offerings.

Operating income margin for healthcare was 25, 2% for Q3 of 2022 compared to 37% for the same quarter in 2021.

The quarter over quarter decrease in margin percentage is primarily attributable to the mix.

The strength of our digital offerings during the quarter.

And our investments in head count growth that we believe will drive continued growth for this industry into 2023.

The education segment generated 33% of total company revenues during the third quarter of 2022.

The segment posted record revenues of $94 $3 million in Q3, 2022 up $31 1 million or 49, 2% from the third quarter of 2021.

Revenues in the third quarter of 2022 included $2 $2 million from our acquisition of Whiteboard, which was completed in December of 2021.

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 up 53%.

Third the third quarter of 2022 represented the seventh consecutive quarter of sequential growth for the education segment.

The operating income margin for education was 24, 2% for Q3 2022 compared to 23% for the same quarter in 2021.

The quarter over quarter increase in margin was primarily due to revenue growth that outpaced our corresponding cost to deliver during the quarter.

The commercial segment generated 21% of total company revenues during the third quarter of 2022.

Segment posted revenues of $59 $7 million in Q3, 2022 up $3 6 million.

Or six 3% from the third quarter of 2021.

Revenues for the third quarter of 2022 included $400000 of inorganic contributions from our acquisition of <unk> data, which was completed in January of 2022.

The increase in revenues reflects continued strong demand for our digital offerings, partially offset by a decline in revenues due to the divestiture of our life Sciences business in the fourth quarter of 2021 as well as a decrease in demand for our financial advisory and strategy and innovation offerings.

In the third quarter of 2021.

<unk> Sciences business generated revenues of $5 1 million.

Our digital offerings in the commercial markets grew 35% in the third quarter of 2022 as compared to the same period a year ago.

The operating income margin for the commercial segment was 23, 7% for Q3 2022 compared to 14, 7% for the same quarter in 2021.

The increase in operating income margin for this segment was primarily due to the revenue growth in this segment coupled with a decrease in direct cost during the quarter, which was primarily due to the life sciences divestiture in the fourth quarter of 2021.

Corporate expenses not allocated to the segment level were $35 $7 million or 12, 5% of revenues in Q3, 2022, compared with $31 4 million or 14% of revenues in Q3 2021.

Unallocated corporate expenses in the third quarter of 2021 reflected a similar reduction of expense of $200000 related to the deferred compensation plan.

Now turning to the balance sheet and cash flows we finished the quarter with borrowings on our revolving credit facility of $341 million with cash of $9 million for net debt of $332 million.

Third quarter included $45 $6 million of share repurchases of approximately 686000 shares.

On a year to date basis, we repurchased one 7 million shares representing seven 8% of our outstanding shares as of the beginning of the year.

As of September 32020 to $32 $3 million remained available for share repurchases under our current authorization.

In October of 2022, our board of directors increased our authorization for share repurchases by another $100 million.

DSO came in at 85 days for the third quarter of 2022 compared to 81 days from the second quarter of 2022, and 76 days for the third quarter of 2021.

Okay.

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

As Jim noted, we are raising and narrowing our full year 2022 revenue guidance to be in a range of 1.09 billion to $1 1 billion.

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

<unk>.

The midpoint of our adjusted EPS range is consistent with our expectations as of our second quarter call now, reflecting increased adjusted EBITDA expectations and a reduced diluted share count.

All set by increased interest and income tax expense related primarily to increased interest rates and the tax impact of the decline in value of the assets used to fund our nonqualified deferred compensation plan.

Finally, we expect our full year effective tax rate to be in the range of 30% to 32% and we continue.

To expect fully full year free cash flow in a range of $70 million to $90 million.

Thanks, everyone before we open the call for questions I'd like to turn the call back over to Jim for some additional remarks, thanks, John and before we turn to Q&A I do want to make a couple of comments today marks my 54th and final earnings call as CEO starting on January 1st I will be vice chairman of the board and will be working.

Full time in the market with a great team doing the things that I'm, most passionate about working with our clients and our people.

I began my role as CEO in 2009 at a challenging time for this company. Since then Huron has undergone considerable strategic change to become a highly respected global professional services company, providing an array of consulting digital and managed services offerings to industries that are core to the U S and global Gd.

P R.

I am proud of my accomplishments over the past 13 plus years in this role, but more importantly, I learned two things that Werent special mentioned.

First while the executive team and I play a critical role the quality of the people in this organization are the sole reason for our success.

All of our success and I mean, all of it is attributable to the talent of our people and their ability to apply that talent to the needs of our clients and our business.

When I look back at what we have achieved since I help start this company 20 years ago. The strength of our culture remains the single thing of which I am most proud.

As we have previously shared Mark Hussey will be taking over as CEO on January one.

I hired Mark as our CFO in 2011, and he eventually took on the added responsibilities of President and COO.

<unk> continue its growth.

This company is going to be in great hands under Mark's leadership.

And with that we can turn it over for Q&A, certainly ladies and gentlemen, if you have a question at this time. Please press star one one on your telephone one moment for our first question.

And our first question for today comes from the line of Tobey Sommer from Truest. Your question. Please.

Thanks.

A question for you about the.

The healthcare.

Segment, if I could the margin was a little bit lower on a year over year basis.

Could you describe the drivers in that and I remember historically, sometimes if youre out doing a lot of evaluation work in NPI that could drag things down on a temporary basis.

Hey, Tobey its John Youre right on that factor that you pointed out it was a <unk>.

Very busy quarter for our team from the.

Performance in many aspects of our teams on the consulting side of health care with a lot of.

And our expectation is that during the fourth quarter, we're probably going to see some additional strength from our performance improvement team and consulting just based on.

Some of the pipeline that we closed in the hard backlog at the end towards the end of the third quarter as well as the potential for some performance based fee opportunity upside during the fourth quarter. So I think it's going to balance back out youll, probably see margins tick up sequentially into the fourth quarter would be my expectation, but the primary driver for the third quarter.

Was really related to just the strength in the digital offerings within this segment.

Okay. Thank you.

Sure.

How do you sit in terms of bill rate as you look into next year or you think youre going to be within historical trend in terms of pricing or do you expect.

Be sort of on the upper bound of what might have been considered normal over time.

I think we have seen pricing improve over the over the past year or so tobey. So obviously that's been.

Somewhat offset by the fact that the cost of our delivery has also increased over that period of time, but from the pricing that we've been able to.

With our clients.

Particularly within the health care industry, we've been able to push through the majority of those labor increases that we have into our rates and so on.

We're able to maintain a.

Steady contribution margin within that business, which implies higher bill rates compared to historical norms as we move forward.

And then with respect to the.

The way your customers are procuring your service when they decide.

To contract a traditional time and materials or chairs choose an alternative.

Or.

Are there any trends or tendencies.

<unk> the outlook for that.

Contract.

Type mix going forward.

There really arent that we.

We see Tobey, it's been it's been fairly consistent.

In that regard.

Consistent with what we've seen in the past, but I think that that trend will continue.

And year to date and in the quarter itself the capital allocation towards buying back stock has been pretty pronounced.

Based on the outlook in some of the commentary.

In the early part of Jim's prepared remarks talking about.

A good couple of years to look forward to at least.

Do you expect to follow through with.

Additional share repurchases at this point.

I think you will see us continue to do share repurchases Tobey, what we will go back to the framework that we put out there at our Investor day back in March and I think our plan is to continue to reduce the share share base in a manner. That's consistent with what we described at our Investor Day now of course.

We do monitor all the different levers and so obviously, it's been increasing.

Increasing interest rate environment. So we keep our eye on that we model around that you will also have some of the tax consequences coming into play next year will be.

Tax on top of that the market and that market value of buybacks next year. So we factor those things in but we also look at what our expectations are for increased.

Net income as we go forward and that's a factor as well as well as our.

Our assessment of where the stock is trading versus.

Valuation.

We expect to achieve based on the results that that we're forecasting and so we take all those factors into consideration and I think that.

The short answer is that our expectation is that share buybacks will still be part of that equation going forward, even with the increased interest rates and some of the tax implications.

Thank you very much Jim congratulations it's been a pleasure working with.

Thank you Tobey.

Working with you as well.

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

And our next question comes from the line of Andrew Nicholas from William Blair. Your question. Please.

Hi, good afternoon, I'll Echo those comments, Jim congratulations on a great run.

And it's been a pleasure working with you as well.

I wanted to ask a question on head count growth really really strong on a year over year and sequential basis could you speak a bit to the mix of that hiring is that primarily.

Undergrad hiring or younger staff.

Coming into the firm and if you could speak to kind of the competitiveness if recruiting and your ability to procure all of that talent this quarter that'd be helpful.

Andrew This is Jim I'll take that I think that I think the hiring has really been across the board.

We've obviously been hiring a lot in the digital areas, that's one of the areas where.

But I think we're.

We're we're in.

The ease with which we're doing it I think as.

With that it's not it's not easy at this stage, but I think we're having a pretty good platform to which to recruit people I think they really know and understand that we've been performing well, but the opposite the offerings that we have in the markets that we're serving are attractive and I think thats been helping us out a lot as well. So I think I think we our view is we've.

Good.

Platform to recruit into at all levels.

So there's always this issue of wages and I think certainly that's a part of it as well, but we believe that our wages are all very competitive, particularly on a total compensation basis. So I think you add those together nice wages, good benefits and attractive markets that we're serving in a growing company and we feel good about our ability to continue to.

Recruit and retain our people.

Got it. Thank you and then for my follow up.

I think you mentioned or gave color on the current pipeline and just kind of the breadth of strength across all the businesses, but just wanted to make sure. There wasn't any kind of larger lumpy one time items or one time projects in the quarter, obviously again really really strong growth figures. So just wanted to get a sense for.

The repeatability of some of those those metrics.

And make sure there wasn't anything bigger in the past couple of quarters that we should be aware of thank you.

Andrew John I'll take this one no there is nothing nothing unusual or nothing lumpy in the quarter.

Nothing outside of just kind of a normal normal stuff that we see no.

Big projects, notably big projects, starting or ending during the quarter or anything like that just more broadly since you asked about the pipeline.

And in terms of closed out the year, we feel good across the business that are hard backlog. So the stuff that we've already sold covers also at the midpoint of guidance, which is a very strong indicator.

<unk> ability to attain that level for the remainder of the year and we still need to deliver on that backlog and you can't always control the pace of projects that the holidays in the back half of December , but we certainly feel good about where we stand from a backlog perspective.

And then as we start to look out into the first quarter of 2023, but we're really pleased with.

Both the backlog, we have but also our pipeline as.

As we look at our coverage levels really across the business.

That we referred to earlier as the health care team.

<unk> had a really nice closeouts at third quarter in terms of our sales on that again is just reflecting some of that debt.

Performance improvement pressures that Jim referred to earlier in fact September was the largest sales month in healthcare on that we've had since the beginning of 2020.

Understood. Thank you.

Thank you one moment for our next question.

And our next question comes from the line of Kevin. Thank you from Barrington Research. Your question. Please.

Good afternoon.

I wanted to ask first about <unk>.

<unk> utilization, just ticking down a little bit sequentially or both.

Consulting.

The digital pieces of your business.

Should we just think about that is reflecting the.

Accelerated hiring youre doing to.

Demand just and should we expect it.

Trend back up.

As we move forward.

And is that is what it really relates to Kevin If you look it on the head count trends for the year, we have been.

Ignoring it throughout the year, but we've been adding head count both to deliver on the growth that we've been able to achieve this year, but really the year goes on now kind of the outlook for where are we expecting to transition them into the early part of 2023. So we've continued to.

Make some of those investments we've been making those investments really across.

Throughout all of our all of our geographies as a company so.

That's been a hit.

The theme with the utilization throughout the year by our expectation is that it.

The hiring that we're doing right now as well as the training that we're doing right now that thats going to set us up both for growth, but then also to continuing margin expansion next year as.

Those those new hires that we've had.

Get kind of through the training period and get into.

Fully fully billable period as we as we head into next year.

Okay. Good.

Okay.

Is there any one specific area or practice or segment.

That is.

What's driving the increase in revenue guidance.

Or is it.

More broad based.

If I, if I drill down a little debt into that for where we expect to see the revenue come from for next year or I'm, sorry for the remainder of the year I would say for 2022 or at this point expecting the health care industry to be a mid to upper teen percent.

Range grow our year over year 22 versus 21, we're now expecting the education segment to grow in the low 40% range year over year on our expecting the commercial industry to grow in the mid single digit range year over year, but it's importantly, remember there that that's.

Not making any adjustments with the divestiture of the life Sciences business and if you were to exclude the life Sciences business from 2021 that would be more of a.

Mid teen growth range for the commercial segment and then if you wanted to slice it by capability, we're expecting our digital capability for the full year to grow in the high 30% range year over year and four our consulting and managed services capability to grow in the low double digit range year over year.

Okay great.

Just curious about.

Your internal development of people.

<unk>.

Okay.

Yes.

You are putting even more emphasis on that.

Growing.

Senior consultants and developing them internally.

Due to the tight labor market.

Reducing our reliance on external hiring areas theyre not really much of a change going on there from what you've historically done.

I think there is theres not much of a change this is Jim.

How much of a change in terms of what we've historically done I think.

And I think as we've all experienced doing that in an environment, where we're not working full time in the office or were not working full time at clients.

Even more difficult and so I think these are challenges I, we're not alone in having to pesos, but at the same time, we're making a lot of effort to find ways to get our teams together.

And doing it in ways either at client sites in our offices and we're just making a very conscious decision to try to.

Enhanced.

The culture that we think we have here that really people Miss if they are not going to be working with our colleagues. All the time. So we are extremely focused right now on internal development of our people and we will continue to be I think it makes it that much more critical as we as we grow as we become even more and more global.

And then.

And it becomes really important.

The thing that I would just say is that when we when we established.

Our new operating model at the beginning of the year it kind of created opportunities for our people to work together across boundaries in ways that they haven't been able to do before and we have found that has been a real boon to our ability to get people to feel isn't that much more comfortable because they have multiple avenues that they can get to know people multiple projects and multiple.

<unk> sees that it can work on and we've heard a lot of really good feedback on that as well.

The only only thing Kevin This is John I would add I think Jim summarized it very well is now that it has been an area of investment for us. This year, so that internal development of people and so you made the point of your question Kevin you referenced the.

The labor market and so we're always get out of a balance between experienced hires and then.

Hiring entry level <unk>.

Employees, who we then provide training to particularly in the digital area, but given the tight labor market, we've been investing significantly this year and some of those entry level employees and providing some of our own training and the reality is if you look at.

The.

Ted.

Cost to us of having done that over the course of the year, that's probably been a mid single digit million dollar investment that has been even greater than what we would've initially planned at the beginning of the year given the growth that we've seen in the other other comment I'd make is.

From a geography perspective, India has been a location, where we've been making heavy investments in personnel there as well as providing some of that technology training. So that they are up.

A place where cumulative work across the entire platform.

It's good to support revenue growth, but we also think it's going to be good for supporting continued margin improvement next year as those resources become fully billable on projects.

Okay. That's helpful commentary, just lastly wanted to ask.

About.

Economic conditions, and certainly you'd noted that.

<unk>.

Continued.

Strong demand despite.

Uncertain economic conditions, but.

Are you seeing anything.

And then year for your businesses that Mike.

Be indicating an economic slowdown.

Perhaps on the commercial side or elsewhere.

Okay.

This is Jim I think we're going to we haven't seen anything really yet if we're going to see something thats probably going to.

Show up first on the commercial segment.

And.

I think that'll just.

Our in.

Industry is one of which is financial services.

Absolutely.

Which is going through some challenges one of which is oil and gas and energy and which is doing well. So I think we'll have to see how that all plays out but at this stage, we're not seeing anything that causes us to have we're being cautious in terms of.

Acknowledging that there's likely to be some weakness someplace, but I think of it shows up first it'll show up on the commercial side to the extent that we are aware it hasnt really shown up yet on the health and education side, we're not seen it yet and I don't we don't anticipated unless something really material happens either with the economy or if theres. Some other type of Panther.

That comes up again, but otherwise those two industries seem to be going pretty well.

And.

We feel pretty confident about our.

Our estimates for the company for the coming year.

Part of our portfolio that we expect to get busier throughout the remainder of this sharing early next year. If there are.

Uncertain economic conditions.

Okay, Thanks, and Jim let me add might be Gratulation glad you'll be part of here on going forward and certainly enjoyed working with you.

Kevin same period. Thank you very much very kind words. Thank you I've enjoyed working with you as well.

Thank you and once again as a reminder, if you have a question at this time. Please press star one one on your telephone.

And not showing any further questions at this time I'd like to turn the program back to Jim Roth for any further remarks.

Thank you all for spending time with US This afternoon, Mark and John look forward to speaking with you again in February .

Have a good evening.

Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.

Q3 2022 Huron Consulting Group Inc Earnings Call

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