Q2 2023 Huron Consulting Group Inc Earnings Call
Okay.
Good afternoon, and welcome to Huron consulting group's webcast to discuss financial results for the second quarter of 'twenty to 'twenty three.
At this time all conference call lines are in 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 out to 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 releases posted on <unk> 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 and on <unk> website for all of the disclosures required by the SEC, including reconciliations to the most comparable GAAP numbers and now I would like to turn the call over to Mark Ashby Chief Executive Officer.
And president of Huron Consulting group Mr. <unk>. Please go ahead.
Good afternoon, and welcome to Huron consulting group's second quarter 2023 earnings call.
With me today are John Kelly, our Chief Financial Officer, and Rami, Dale our Chief operating officer.
We continue to drive strong organic growth in each of our three operating segments, while expanding our companywide operating margin consistent with our growth strategy.
In the second quarter of 2023 through 27% over the prior year quarter and for the first half of 2023 revenues grew 25% over the same period last year.
The ongoing strength and demand for both our consulting and managed services and digital capabilities.
Adjusted EBITDA margin increased 130 basis points in the first half of 2023 compared to the same periods in 2022 as.
As we made solid progress toward our goal of expanding company wide profitability.
Please note our performance has outpaced the financial objectives shared at our 2022 Investor day, and we remain confident in our ability to deliver at or above these goals in the years ahead.
I'll now share some additional insights into our second quarter performance.
The healthcare segment second quarter revenues grew 35% over the prior year quarter.
The increase in revenues in the quarter was driven by strong demand for our performance improvement financial advisory and digital offerings as.
As the federal and state pandemic relief funding as Wayne hospitals, and health systems face ongoing financial and operational challenges. Many organizations have experienced workforce shortages increased costs of labor and supplies and increased competitive pressures in their markets collectively leading to margin pressures and in many cases net.
Operating losses helped.
Health care organizations are focused on addressing these challenges and doing so in a matter that best positions them to stabilize near term performance and enables them to achieve their broader strategic goals. The shift in mindset highlights the need to implement more immediate financial improvements, while also designing strategies for near and long term build.
Centered around the consumer.
And responding to client needs to address both immediate and longer term improvements, we have significantly broadened our portfolio to create more balanced and diversification in our healthcare offerings and strengthen our industry expertise and expanded our portfolio of capabilities to solidify our position as the partner of choice for clients seeking to address both.
Current and longer term challenges and opportunities, which is also in turn expanded our addressable market and the health care industry.
Let me bring this to life with a couple of examples we are working with several health systems facing the exact pressures I just noted.
These systems need to identify significant and sustainable financial improvement across their operations, sometimes ranging in the one hundreds of millions of dollars.
Opportunities like these play to our strengths and core performance improvement as we help transform their current operating models and capabilities across such areas as revenue cycle workforce supply chain and clinical optimization and.
In addition to driving near term efficiency gains. Our clients are also focused on driving longer term sustained improvement in growth to support their strategic goals.
The second objective, we bring together our strategy and innovation care transformation in financial advisory and digital offerings to redesign our clients' operating and care delivery models in order to fundamentally strengthen the systems underlying economics.
Our competitiveness, our competitive differentiation stems from our ability to assemble and deploy a talented team of health care experts integrated across our broad set of capabilities.
And to work collaboratively to deliver the best solution possible for our clients and that's at the heart of our new operating model.
A second example of award to improved performance in healthcare.
Is an engagement and which are using generative AI to drive efficiency and call Center operations.
Using our healthcare and contact center of expertise our digital team is implementing generative AI in conjunction with salesforce to optimize and automate processes.
This example is very different in its scope and implementation in the first example, I provided that is of course, the same client goals to drive near term and long term sustained benefit to address financial and operational challenges.
Our deep healthcare expertise and digital capabilities together enable us to design offerings that address a broad range of strategic and operational concerns of our health care clients.
Turning now to Education Education segment revenues grew 25% from the second quarter of 2023 over the prior year quarter, driven by broad based demand across all our offerings in this segment of.
Our digital offerings in education grew 47% over the prior year quarter, and our strategy and operations and our research offerings, both continued to perform well.
While some college business, obviously, we feel confident in the financial stability of their institutions over the next 10 years colleges and universities as concerns over the near term financial outlook largely as a result of the enrollment declines reduced net tuition revenue and an expense base that is increasing faster than revenues.
Our education clients are not only focused on the near term challenges. We're also committed to establishing a strong foundation to achieve our long term strategic goals.
<unk> healthcare the confluence of these factors highlights the need to drive near term improvements, while establishing sustainable long term strategies.
Let me use a couple of examples to highlight the impact that our deep industry expertise and broad set of capabilities have on our higher education clients.
As a first example, we have been engaged by a university to support the execution of our strategic plan with.
We're collaborating with them to identify opportunities that will drive growth in financial and operational improvements to create capacity to invest in high priority areas within the plan.
Our scope with the University is broad spanning administration research facilities technology and more.
To bring this to life, let me cog three of these areas within the research enterprise, we're helping institutions, we find our research strategy and administrative operations within the technology function for executing a data and analytics strategy with a goal of driving greater value and insights across the entire institution and.
And finally together with the academic units, we're working with academic affairs to empower academic leaders with greater access to data that we're advising our new offerings and capabilities to support the institution's growth goals.
Our strategy operations and research teams have done a great job collaborating with our clients leading to additional opportunities to expand our efforts into new areas of the university, including their integral EBIT Athletics program.
Our second example highlights the power of our combined consulting and digital offerings. Our recent client was seeking to create an agile operational foundation to support future growth focused on enabling a positive and an engaging students experience is a competitive advantage.
I was hired to help execute a digital transformation to establish a process driven technology enabled organization across its multi campus institution, our strategy and operations research and digital teams are all collaborating to lay a new operational foundation for the University, which will enhance their ability to recruit students faculty.
And staff and create an agile and flexible foundation to help them achieve their future strategic goals.
Together, our deep industry expertise and strong reputation coupled with the breadth of our offerings and our collaborative nimble culture has solidified our strong competitive position, helping institutions address the challenging landscape that is being today and higher education.
In the second quarter of 2023, turning to commercial commercial segment revenues grew 10% over the prior year quarter, driven by strong demand for our distressed financial advisory offerings, and our digital offerings, partially offset by a decline in our strategy and innovation offerings.
Demand for our distressed financial advisory offerings remains strong given the continued impact of higher interest rates challenging capital markets, increasing costs and expanding competitive pressures.
Healthier companies are executing digital transformations to address some of the same pressures.
Vance and agile technology capabilities, and strong data and analytics infrastructure are helping bank cost curves, enabling better faster decision, making to improve our organization engage with their customers.
Growth in our commercial segment has increased diversification in our portfolio and end markets driving new avenues for growth and expanding our addressable market.
We believe that our broad portfolio of digital financial advisory and strategy and innovation offerings, coupled with deepening industry expertise will continue to be a solid platform for growth in this 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 3 billion to $1 34 billion, an increase of $70 million at the midpoint.
We continue to expect our adjusted EBITDA margin to be in the range of 12% to 12, 5% of revenues and we are raising and narrowing our full year adjusted diluting diluted earnings per share to a range of $4 35.
<unk> to $4 65.
An increase of <unk> 50 per share at the midpoint our.
Our first half results demonstrate the continued demand for our services and products and the power of our collaborative culture and new operating model.
In summary, we're pleased with our first half performance and we expect the underlying demand across our segments to continue as reflected in our updated revenue and earnings guidance.
I reiterate our commitment to our shareholders as well.
I'm focused on advancing our growth strategy, our strong relationships and industry expertise and broad array of offerings in healthcare and education, along with $5 billion digital capability, which today represents about 45% of our total company revenues provides a strong foundation from which to address the myriad of challenges our clients face.
Today, our positioning them for future success.
So Billy and the commercial side and we will continue to drive new avenues of growth for our business as we've expanded upon our portfolio of offerings and further strengthen our industry expertise.
While we are still in the early stages of the strategic journey. We described at our 2022 Investor day, we've demonstrated our ability to accelerate growth across the business over the last six quarters and we remain confident in our ability to meet or exceed our medium term financial objectives and now let me turn it over to John for a more detailed discussion of our finance.
Results John .
Thank you Mark 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, Investor Relations page on the Huron website have reconciliations of these non-GAAP measures to the most comparable GAAP measures.
Along with a discussion of why management uses these non-GAAP measures and why management believes they provide useful information to investors regarding our financial condition and operating results.
Now I'll share some of the key financial results for the quarter.
Revenues for the second quarter of 2023, or $346 8 million up 26, 9% from $273 3 million in the same quarter of 2020 to achieving another record of quarterly revenues as we continued to execute on our growth strategy.
The increase in revenues in the quarter was driven by organic growth across all three of our operating segments.
From a capability perspective consulting and managed services revenues grew 33, 4% and digital revenues grew 19, 2% when compared to the same quarter in 2022, respectively.
Net income was $24 7 million or $1 27 per diluted share compared to net income of $13 9 million or 66 per diluted share in the second quarter of 2022.
Our effective income tax rate in the second quarter of 2023 was 29, 4% compared to 36% in the same prior year period.
Our effective tax rate for Q2 of 2023 was less favorable than the statutory rate inclusive of state income taxes, primarily due to certain nondeductible expense items, partially offset by the tax benefit of nontaxable gains on investments used to fund our deferred compensation liability.
Adjusted EBITDA was $48 5 million or 14% of revenues in Q2, 2023, compared to $33 2 million or 12, 2% of revenues in Q2 2020 to the.
The increase in adjusted EBITDA in the quarter was primarily attributable to the increase in segment operating income reflecting continued progress toward our goal of mid teen adjusted EBIT margins by 2025.
Adjusted net income was $27 million in the second quarter of 2023 compared to $17 $5 million in the second quarter of 2022 <unk>.
Adjusted diluted earnings per share was $1 38 in Q2 2023 compared to 83 in the prior year quarter, an increase of 66% year over year.
Now I'll make a few comments about the performance of each of our operating segments.
Healthcare segment generated 50% of total company revenues during the second quarter of 2023.
This segment posted revenues of $173 8 million up $45 3 million or 35, 3% from the second quarter of 2022.
The increase in revenue reflects continued strong demand for our performance improvement financial adviser.
<unk> and revenue cycle and managed services offerings.
Demonstrating broad based demand across our portfolio of healthcare offerings.
As a reminder, in accordance with U S. GAAP, we recognize performance based fees on our healthcare performance improvement projects as we deliver on those projects using a percentage of completion methodology and our best estimate of the total performance based fees that we expect to earn in each project, which are typically based on a portion of the recurring.
Financial benefits that we expect to generate for our clients.
To the extent that our estimate of those client financial benefits change any given period due to our performance we adjust the amount of revenue recognized under our contract to reflect the amount that we ultimately expect to build to our clients.
Our second quarter of healthcare consulting and managed services revenues included approximately $16 million and favorable adjustments related to several performance based fee contracts.
Our teams delivered financial benefits for our clients that exceeded our previous expectations.
The ability to deliver financial benefits for our clients that exceed expectations and generate incremental revenues for Huron remains an ongoing opportunity for our healthcare performance improvement business and the strength of our business model.
However, the timing and magnitude of such favorable revenue adjustments.
Can vary from quarter to quarter.
Operating income.
Income margin for healthcare was 28, 3% for Q2 2023 compared to 23, 6% for the same quarter in 2022.
The quarter over quarter increase in margin was primarily due to revenue growth that outpaced the increase in salaries and related expenses for our revenue generating professionals, partially offset by increases in contractor expenses and project costs as a percentage of revenues.
The education segment generated 32% of total company revenues during the second quarter of 2023.
The education segment posted revenues of $110 $7 million up $22 5 million or 25, 5% from the second quarter of 2022.
The increase in revenues in the quarter was driven by demand across our broad portfolio of offerings in this segment.
Our digital capability and education grew 47% year over year, reflecting continued demand for our digital technology and analytics services and product offerings.
Our strategy and operations and research offerings also continued their growth trajectory in the second quarter of 2023.
Operating income margin for education was 24, 8% for Q2 2023 compared to 24, 6% for the same quarter in 2022.
The commercial segment generated 18% of total company revenues during the second quarter of 2023 and posted revenues of $62 3 million up $5 7 million or 10% from the second quarter of 2022.
The quarter over quarter increase in revenue was primarily attributable to strong demand for our distressed financial advisory offerings.
And our digital offerings, partially offset by declines in our strategy offerings.
Operating income margin for the commercial segment was 16, 8% for Q2 2023 compared to 21% for the same quarter in 2022.
After over quarter decrease was primarily driven by the increase in performance bonus expense for our revenue generating professionals as a percentage of revenues based on our updated expectations for full year performance.
Corporate expenses not allocated at the segment level were $42 $9 million in Q2 2023.
Paired with $29 9 million in Q2 2022.
Unallocated corporate expenses in the second quarter of 2023 included $1 $4 million of expense related to the increase in the liability of our deferred compensation plan, which is offset by the investment gain on the assets used to fund that plan reflected in other income expense.
Unallocated corporate expenses in the second quarter of 2022, reflecting a $4 $9 million reduction in expense related to the deferred compensation plan.
Excluding the impact of the deferred compensation plan in both periods unallocated corporate expenses increased $6 $7 million.
Primarily due to increased compensation costs for our support personnel.
Excluding the impact of the deferred compensation plan unallocated corporate SG&A decreased as a percentage of revenues to 12% in the second quarter of 2023 compared to 12, 7% in the same period of 2022.
Now turning to the balance sheet and cash flows.
We finished the quarter with total debt of $395 million.
Consisting entirely of our senior bank debt with cash of $16 $6 million for net debt of $378 4 million.
Our leverage ratio as defined in our senior Bank agreement was two two times adjusted EBITDA.
As a bulk of June 32023, and June 32022.
Cash flow generated by operations in the second quarter of 2023 was $78 2 million representing a record for the second quarter of a year.
We used $8 $2 million of our cash to invest in capital expenditures.
Save of internally developed software costs, resulting in free cash flow of $70 million.
We had $15 $4 million of our cash to repurchase approximately 194000 shares during the quarter.
DSO came in at 77 days for the second quarter of 2023 compared to 83 days for the first quarter of 2023, and 81 days for the second quarter of 2022.
Finally, let me turn to our expectations and guidance for 2023 as Mark noted, we're raising our full year 2023 revenue guidance to be in the range of $1 3 billion to $1 $34 billion.
The increase in our revenue guidance, primarily reflects strong momentum across our business.
In addition, we are maintaining our adjusted EBITDA guidance range of 12% to 12, 5% of revenues and raising and narrowing our full year adjusted non-GAAP diluted earnings per share guidance to be in a range of $4 35 to $4 65.
We now expect our full year free cash flow to be in a range of $100 million to $120 million.
Finally, we expect our full year effective tax rate to be in a range of 28% to 30%.
Thanks, everyone I would now like to open the call to questions operator.
Thank you.
Ladies and gentlemen, if you have a question at this time. Please press star one one on your Touchtone telephone.
If your question has been answered or you wish to remove yourself from the queue. You may do so by pressing star one one again.
Our first question.
Comes from the line.
Tobey Sommer.
<unk> Securities.
Thank you.
Okay.
Wanted to ask a question about <unk>.
Jamie Runaway in broad terms.
Do you feel like you've got sort of.
All the pieces here.
Your business.
Continue to.
Sort of drive organic growth.
Rich.
Because you've been delevering for number of years.
You mentioned stock kind of rich risks with cash deployment or at least less risky.
And I'm wondering if there's a.
Potential for Ya pivoting and starting to spend money on acquisitions over the near term.
Tobey, it's mark Youre, breaking up a little bit, but I think we got the question about whether we would have the organic platform today. The continued growth without deploying large amounts of capital in M&A and the answer is yes.
Portfolio, if you look back to what's happened to our business over the last 10 years.
We have diversified our health care portfolio to be far more balanced between performance improvement and other solutions like digital financial advisory and strategy. Our education business has grown to a nice level of scale from what it was over that period of time.
We've expanded into areas in the commercial markets in conjunction with a digital.
The acquisition platform that through many small acquisitions got us to this very large platform we have today.
So there are what I would characterize as opportunistic pieces for us to deploy but I don't think that we see any major gaps in the platforms as we see it.
Right now.
Thanks.
Do you think you do.
Tuck ins do you think that would be.
More on the it side and getting skills for specific emerging software that are.
Thank you.
Rapid adoption or more.
Fair or.
For education sort of functional areas.
Tony I think it'll be a combination of both of those I think it will probably lean more digital because those actually work hand in hand, especially in a new operating model really worked collaboratively as a team in those markets. They are enabling to the advisory side of the business and so.
It could be a little bit more on the pure advisory side, but I would say largely speaking is likely to have a digital player.
And probably focused on it.
Again, some of the edge solutions in industries that we're not in that help us gain and foothold in an expansion to be relevant in those particular markets.
And.
So I think that will probably be a little bit leaning towards the digital solution irrespective of the industry.
As a general statement, but.
Absolutely going to have an industry focus on that as well.
Last question for me.
From some other professional services firms that.
Employee retention year to date improved pretty significantly in <unk>.
Some cases, it seems to be dampening.
Operating leverage that's not evident in your in your case, but.
Wanted to see if.
The improved employee retention is evident even though.
Sampling operating leverage so visible.
Tobey This is John yes.
Our retention has certainly improved over the course of the year I think.
Our attrition rate at this point, it's on a trajectory to be lower than even the historical norms that we had prior to the pandemic.
In our case given the pipeline that we have the backlog, we have and the growth we're seeing in our business.
This is great news for us in terms of really having the talent that we need to deploy on our our project. If we were to have a higher attrition rate that just means we have to be more aggressive in the market, bringing bringing people in because of the demand we're seeing right now across the business.
Thank you.
Again to ask a question. Please press star one on your telephone.
Our next question comes from the line of Andrew Nicholas with William Blair <unk> Company.
Sure.
Hi, good afternoon. Thanks for taking my questions I wanted to ask first on the margin guidance, obviously really really strong second quarter end.
Our second quarter EBITDA margin that was well above the full year guide just kind of curious what in the second half makes you.
A bit more conservative on EBITDA margins.
And maybe wrapped within that question is a.
Question on head count growth and hiring expectations in the back half of the year.
Sure sure Andrew So first.
You said in your question, but we are very pleased with our progress on the margin. So far this year and I think it's a reflection of a number of initiatives that we've had within the company to improve our pricing to increase our utilization to increase our deployment of global resources and really the continued scaling of our corporate SG&A.
And also during the quarter the performance based fees recognized.
The healthcare performance improvement business also powerful with margins during the quarter. So with all that said, we're also really pleased with the growth rate that we've had so far this year as well as the evolving pipeline that we see now even starting to look out into 2024 and with this in mind. We think it's likely that we'll continue to build out our resource pool in the back half of the year.
With an eye on 2024 and that that may create some additional pressure on second half margins are typically a ramp to productivity for new consultants. So we're certainly very comfortable with our guidance range.
The margins.
And from our perspective, we see the potential based on the initiatives I described to be able to push upside there, but we're just balancing that and to your point, probably being a little bit conservative with the guidance just recognizing that at the rate of our growth, we're likely going to still be in the market, adding talent in there just tends to be a little bit of a ramp as we're building up resources.
Okay. That's helpful. Thank you.
Maybe somewhat related I wanted to ask about the India initiative, which I know is a key part of your 25 margin target I think last quarter, there was a little bit of pressure in the digital utilization.
Thats ticked up nicely sequentially. So just if you could give an update on <unk>.
Progress and utilization within that part of your business.
We'll support staff.
So we are we are seeing some nice nice progress there Andrew as we've talked about on prior calls we did intentionally buildup our resource pool in the back half of last year in India.
To diversify our global talent and make sure that we have the right capacity to serve our clients, particularly in areas of digital growth and that with that came a little bit of macro of utilization pressure just as we got those resources trained up and ready to be deployed and so our expectation for the year was that as each sequential.
So quarter past, we'd start to see that ramp in utilization and that is in fact, what we're seeing so we ended when you look at the digital utilization.
That population of 74, 7% for the quarter.
The composite there if youre looking at it from a geography perspective is near 80%.
In North America, and then within India ramping up to 65% this quarter, which has been some nice sequential improvement for us.
Andrew It's mark I'm going to I'm going to add a couple of things towards John said, So the utilization is one part of the story. Another part of the story is just the breadth of what we're doing across every service line within India.
Just mentioned that in the last quarter. We also hired a country leader in Singapore, which will be served predominantly out of the India capabilities that we have today so it.
It is a great platform for us to expand we've done very well in that particular market and have clients in the channel pulling us into there. So we feel very confident in our ability to continue to leverage that is not only a source of margin expansion, but also to help drive revenue growth.
Very helpful. Thank you.
Thank you.
Our next question.
Comes from the line Bill Sutherland with benchmark company.
Thanks.
Congrats on a terrific quarter guys.
In health care.
Did you mentioned the growth that you had in digital in the health care side.
It was it was 10% for the quarter Bill.
Okay.
And the.
Is that is the education, so strong just because there's this insatiable need for.
Cloud migration.
And the universities.
Yes, Bill this is mark there's going to be a long term cloud conversion from <unk>.
Decades old investments in systems, there is opportunities for them to leverage new technologies to help grow their businesses too.
Applications like in the CRM space, Salesforce et cetera. So data analytics. There is just a tremendous opportunity to bring digital solutions broadly across.
Our higher education landscape as well as health care.
Okay.
Growth.
In terms of your.
The guidance now for the year and the growth in revenue so that implies for the second half should we think about hiring kind of being in line with that or are you going to be hiring potentially a little ahead of that growth.
I think in the.
In the base case, Bill I think of it as generally in line, but like I said in my earlier remarks.
We continue to get a good view of pipeline for the back half of the year into next year and as projects continue to convert.
The potential for up to a prior even more aggressively aggressively than that but I would think of it bill.
The base case is being generally in line with revenue in the back half of the year.
And then finally in commercial.
Yeah.
I guess this requires some view of the economic outlook is too.
Whether you've continued to build up resources in distress.
But how are you thinking about that and in the other parts of that business. Thanks.
We are so we are continuing to build out resources and the distressed financial advisory space.
Then I have one of the areas of really strong pipeline for us it's been one of the areas, where we're seeing some great success converting that pipeline into backlog and as you know, it's one of the higher margin higher bill rate areas of our business. So we've certainly been adding talent in that area and we would expect to continue to do so.
Okay, great. Thanks.
Thank you.
Our next question.
Comes from the line of Kevin Steinke Q.
Barrington Research associates.
Hey, good afternoon.
I wanted to follow up on the discussion about utilization.
I guess, if you look at consulting and digital together consolidated.
Utilization rate is between 75% and 76%.
On a.
Consolidated basis, how much higher do you think.
Can go and you mentioned here.
Near 80% and digital.
I think in the U S and then 65% or so in India. It is the.
Expectation that.
India migrates towards that 80% ish level as well over time or.
Is that kind of the right number to think about.
Hey, Kevin it's Jon.
So we are pleased to be two to your point on the math there over the 75% Mark in terms of utilization naturally.
As high as we've been.
Prior to the pandemic. So we're very pleased with that.
We believe there is still a couple of hundred basis points of opportunity there in terms of utilization and when we deconstruct that I think.
Our resources in India will certainly play a part of that increased utilization and to your question about where should our India resources B C.
Certainly think we believe that the.
Utilization in India, It can get up to that 80% Mark and the reality is we think that there's opportunity there for us to move even higher over time. So I think that remains probably one of our big utilization opportunities and as we've said on prior calls.
Kind of per employee revenue or margin generation on our work done in India is actually quite high so for us to the extent that we're able to drive that utilization improvement, we think thats going to be accretive to our margins.
Okay great.
Just also wanted to ask.
Two of our commercial.
More around your.
Efforts to expand into.
Serving additional industries I know historically, you had some nice strength in financial services and energy, but.
Just wondering about.
What one industries your.
Working to expand into more significantly or we're making progress.
I guess on that front.
Yes.
Kevin It's mark.
The answer there is yes, you're right we have strengthened financial services energy utilities third one it's pretty broad and actually is doing very well for us too is in the industrial market, which encompasses a number of different companies and I would say collectively the power of our model is the ability to bring these.
Ability solutions into industries, where you have the combination of the expertise on both vertical dimension as well as the horizontal dimensions. So.
We will continue to grow there, that's where back to <unk>.
An earlier question on M&A, I think Youll see us continue to use not only tuck in but organic hiring to solidify the positioning in that particular market. Historically, if you go back 10 12 years ago.
It is a very low single digit percentage of our business over time as we've expanded our digital capabilities to strengthen health care and education that has naturally been taken us into much broader markets in ways that are very naturally accretive in <unk>.
Our expansion and growth and that's that's exactly why we feel like we can continue to go down this path and very thoughtfully constructed a commercial industry segment that that really ends up.
Complementing the rest of the overall Huron model.
Okay. Thank you and congratulations on the strong results.
Thank you.
Thank you.
We have a follow up question from the line of Tobey Sommer offshore securities.
Thanks for the follow up I wanted to ask a question about your <unk>.
Relatively small restructuring business.
Whats the outlook there.
The.
Capital markets at least up until today seem to be.
Looking for a soft landing and I think the chairman Powell yesterday's press conference that the fed is no longer modeling of recession.
Sure.
It looks like can tell you.
Tobey right now I'd say, it's going to continue to be in strong demand for a while while interest rate increases and slowdown in absolute terms are pretty high.
I think you have the capital markets now that prior periods would do to the.
A financial solution to our restructuring in this environment now you'd have to have an operating solution often to their circumstances and so the complexity of that plays well to the strengths that we have in that particular market and we see that continuing on for some period of time you got the senior lending market is not.
Really supportive of a whole lot of these situations right now.
Nonregulated market is that it's quite expensive and so it's going to continue to have I think a lot of pressure.
At least I would say the next 12 to 18 months.
Thank you and seeing no more questions in the queue I'd like to turn the call back to Mr. Hussey.
Thank you for spending time with US. This afternoon, we look forward to speaking with you again in November when we announce our third quarter results have a good evening.
That concludes today's conference call. Thank you everyone for your participation.
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