Q4 2023 Huron Consulting Group Inc Earnings Call
Okay.
Yeah.
Operator: Good afternoon, and welcome to Huron Consulting Group's webcast to discuss financial results for the fourth quarter and full year of 2023. At this time, all conference lines are in a listen-only mode.
Good afternoon, and welcome to Huron consulting group's webcast to discuss financial results for the fourth quarter and full year of 2023.
This time all conference lines are on a listen only mode. Later, we will conduct a question and answer session for conference call participants and instructions will follow at that time as a reminder, this conference call is being recorded before we begin I would like to point all of you to the disclosure at the end of the company's new.
Operator: Later, we will conduct a question-and-answer session for conference call participants, and instructions will follow at that time. As a reminder, this conference call is being recorded. Before we begin, I would like to point all of you to the disclosure at the end of the 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 Huron's website.
Release for information about any forward looking statements that may be made or discussed on this call.
The news release is posted on <unk> website.
Operator: Please review that information along with the filings with the SEC for a disclosure of factors that may impact the subjects discussed in this afternoon's webcast. The company will be discussing one or more non-GAAP financial measures. Please look at the earnings release and on Huron's website for all of the disclosures required by the SEC, including reconciliation to the most comparable GAAP numbers. Now, I would like to turn the call over to Mark Hussey, Chief Executive Officer and President of Huron Consulting Group. Mr. Hussey, please go ahead.
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 Hussey Chief Executive.
And president of Huron Consulting group Mr. Hussey. Please go ahead.
Mark Hussey: Good afternoon, and welcome to Huron Consulting Group's fourth quarter and full year 2023 earnings call. With me today are John Kelly, our Chief Financial Officer, and Ronnie Dale, our Chief Operating Officer. Driven by strong growth across all three opening segments in 2023, we achieved record revenue and expanded our operating margins for the third consecutive year. Our fourth quarter performance was consistent with our expectations, culminating in record financial performance for full year 2023. Revenues in the fourth quarter and full year 2023 grew 8% and 20%, respectively.
Good afternoon, and welcome to Huron consulting group's fourth quarter and full year 2023 earnings call.
With me today are John Kelly, our Chief Financial Officer, and Ryan <unk>, Our Chief operating officer.
Driven by strong growth across all three operating segments in 2023, we achieved record revenues.
Our operating margins for the third consecutive year.
Our fourth quarter performance was consistent with our expectations, culminating in record financial performance for full year 2023.
Revenues in the fourth quarter and full year, 2023 grew 8% and 20% respectively.
Mark Hussey: In 2023, our consulting and managed services capability, which represents over half of our revenues, grew 23%, while our digital capability grew 17%, achieving revenue that is approaching $600 million and represented 43% of our revenues across all three operating segments. Foyer adjusted EBITDA margins improved 70 basis points over the prior year, reflecting continued progress toward our objective of returning to mid-team EBITDA margins by 2025. And their strong cash flow enabled us to return $124 million to shareholders via share repurchases in 2023 while maintaining a strong financial position. Our financial performance demonstrates the strength of the foundation we've established under our integrated go-to-market model to continue delivering on our medium-term investor objectives. Our deep industry expertise and leading market positions in healthcare and education, our expanding presence in commercial industries, and our growing portfolio of digital capabilities positions us well to meet or exceed our medium-term financial objectives for low double-digit revenue growth and increased profitability.
In 2023, our consulting and managed services capability, which represents over half of our revenues grew 23%, while our digital capability grew 17% achieving revenue that is approaching $600 million.
And represented 43% of our revenues across all three operating segments.
Full year, adjusted EBITDA margins improved 70 basis points over the prior year, reflecting continued progress toward our objective of returning to mid teen EBITDA margins by 2025.
And our strong cash flow enabled us to return $124 million to shareholders via share repurchases in 2023, while maintaining a strong financial position.
Our financial performance demonstrates the strength of the foundation, we've established under our integrated go to market level to continue delivering on our medium term investor objectives, our deep industry expertise and leading market positions in healthcare and education are expanding presence in commercial industries.
Our growing portfolio of digital capabilities positions us well to meet or exceed our medium term financial objectives for low double digit revenue growth.
<unk> profitability.
Mark Hussey: We now discuss our fourth quarter and full year 2023 performance, along with our expectations for 2024. In the fourth quarter of 2023, health care segment revenue grew 12% over the prior year quarter, reflecting the strong demand across our digital strategy and innovation, performance improvement, and financial advisory offerings. On a full year basis, the health care segment achieved record revenues of $674 million, growing 26% over 2022.
Now I'll discuss our fourth quarter and full year 2023 performance along with our expectations for 2024.
In the fourth quarter of 2023 health care segment revenue grew 12% over the prior year quarter, reflecting the strong demand across our digital strategy and innovation performance improvement.
The annual advisory offerings.
On a full year basis healthcare segment achieved record revenues of $674 million growing 26% over 2022.
Mark Hussey: Demand was widespread across our performance improvement, digital, financial advisory, strategy, and innovation, and managed services offerings. Our consulting and managed services revenues increased 30%, and digital capability revenues increased 16% over the prior year. We continue to diversify our portfolio to meet the expanding needs of our healthcare clients and build a strong foundation for ongoing growth for this segment. As I mentioned on our last earnings call, the operating environment for healthcare providers began to improve in 2023. Nevertheless, despite some improvements in overall patient volume, many health systems continue to face significant financial pressure.
Demand was widespread across our performance improvement digital financial advisory strategy, and innovation and managed services offerings.
Hosting and managed services revenue increased 30% and digital capability revenues increased 16% over the prior year.
We continue to diversify our portfolio to meet the expanding needs of our health care clients and build a strong foundation for ongoing growth for this segment.
As I mentioned on our last earnings call the operating environment for health care providers began to improve in 2023. Despite some improvements in the overall patient volume many health systems continue to face significant financial pressures.
Mark Hussey: A confluence of labor-driven financial and operating challenges combined with increasing competition. Deteriorating bear mix and inflationary and interest rate headwinds create challenges for health system business models. We believe these market pressures create opportunities for our diverse set of healthcare offerings. The investments we've made and will continue to make in innovation, new services, products, and partnerships. Physicians are the healthcare segment will continue growth in 2024. Turning now to the education segment.
Once a paper driven financial and operating challenges combined with increasing competition.
Our rating with payer mix and inflationary and interest rate headwinds create challenges for health system because as models.
We believe these market pressures create opportunities for our diverse set of healthcare offerings.
The investments, we've made and will continue to make in innovation, new services products and partnerships positions, our healthcare segment well continued growth in 2024.
Turning now to the education segment.
Mark Hussey: In the fourth quarter of 2023, education segment revenues increased 7% over the prior year quarter, primarily driven by demand for our digital offerings. Annual revenues in the segment grew 19% compared to 2022, achieving record revenues of $430 million. For the full year, demand was broad-based, with our digital revenues and consulting advanced services revenues increasing 28% and 12%, respectively, over 2022. We believe solid demand for our digital, research, and strategy and operations offerings will remain strong as higher education institutions face continued financial and operational challenges. The frequently mentioned demographic challenges leading to declining numbers of college-bound students create a highly competitive environment for admissions.
In the fourth quarter of 2023 education segment revenues increased 7% over the prior year quarter, primarily driven by demand for our digital offerings.
Annual revenues in the segment grew 19% compared to 2020 to achieving record revenues of $430 million for the full year demand was broad based with our digital revenues and consulting and managed services revenues, increasing 28% and 12% respectively over 2022.
We believe the solid demand for our digital research and strategy and operations offerings will remain strong as higher education institutions face continued financial and operational challenges.
Frequently mentioned demographic challenges leading to declining numbers of college bound students creates a highly competitive environment for admissions civil.
Mark Hussey: Similar to our health care clients, increased labor and facility costs, unfunded government mandates, and the increased reliance on digital platforms create financial pressures and challenges to the achievement of university missions. Huron's well-established reputation, long history of proven results, and deep client relationships make us one of the most trusted advisors to the industry, which we believe positions us well to support our clients through the diverse set of challenges faced by the higher education industry. Before I turn to the commercial segment, I would like to highlight the recently announced investment we will make to accelerate our growth in our mission-driven end markets, which is a key pillar of our strategy. Earlier this month, we announced our intent to acquire GG&X, a leading philanthropy-focused management consulting firm that serves educational institutions, healthcare, arts, and other non-profit organizations. This acquisition strengthens our philanthropic consulting offerings, complements our advancement-focused digital services, and creates new opportunities for us to serve our mission-driven clients. And we expect the transaction to close next month. Now, turning to the commercial segment.
Similar to our health care clients increased labor and facilities costs.
Funded government mandates and the increased reliance on digital platforms create financial pressures and challenges to the achievement of University admissions.
<unk> well established reputation long history of proven results and deep client relationships makes us one of the most trusted advisors to the industry, which we believe positions us well to support our clients through the diverse set of challenges faced by the higher education industry.
Before I turn to the commercial segment I would like to highlight our recently announced.
But we will make to accelerate our growth and our mission driven end markets, which is a key pillar of our strategy.
Earlier this month, we announced our intent to acquire <unk>.
Leading philanthropy focused management consulting firm service educational institutions and healthcare are another nonprofit organizations.
This acquisition strengthens our philanthropic consulting offerings.
<unk> has been focused digital services and create new pathways for us to serve our mission driven clients and we expect the transaction to close next month.
Now turning to the commercial segment in the fourth quarter of 2023 commercial segment revenues were flat over the prior year quarter.
Mark Hussey: In the fourth quarter of 2023, commercial segment revenues were flat over the prior year quarter, primarily attributable to growth or digital offerings offset by declines in our strategy and innovation offerings. On a four-year basis, commercial segment revenues grew 9% year over year. The growth was broad-based, as our consulting and managed services capability and digital capability grew 13% and 7%, respectively. The best D&L performer within the commercial segment was our financial advisory business, which grew 68% in 2022, driven by strong demand for our restructuring and turnaround offering. The uncertainties in these broader macroeconomic environments, including rising interest rates, inflationary pressures, and geopolitical risks, have created unique challenges, particularly among some of our mid-market commercial clients. As is often the case, an uncertain economic environment requires many organizations to take a more cautious approach to executing large-scale initiatives.
Primarily attributable to growth or a digital offerings.
Set by declines at our strategy the intimation offerings.
On a full year basis commercial segment revenues grew 9% year over year.
The growth was broad based as our consulting and managed services capability and digital capability grew 13% and 7% respectively.
Anl performer within the commercial segment was our financial advisory business, which grew 68% for 2022, driven by strong demand for our restructuring and turnaround offerings.
The uncertainties and the broader macroeconomic environment, including rising interest rates inflation inflationary pressures and geopolitical risks have career.
That unique challenges, particularly among some of our mid market commercial clients.
As is often the case and uncertain economic environment as many organizations to take a more cautious approach to executing large scale initiatives.
This mixed demand for this created mixed demand for our offerings in 2023.
Our financial advisory offerings, we are in strong demand during the past year as many organizations facing financial distress. So our expertise.
Mark Hussey: This mixed demand for, this created mixed demand for our offerings in 2023. Our financial advisory offerings were in strong demand during the past year as many organizations facing financial distress sought our expertise. However, our digital offerings grew more slowly, as some organizations were more cautious about responding to large-scale digital initiatives.
Our digital offerings grew more slowly at some organizations, where we're cautious of their spending a large scale digital initiatives.
We're now seeing positive indicators of demand for commercial digital projects is improving as we begin 2024.
Our growth in 2023 demonstrates the importance of a balanced commercial portfolio.
We remain focused on growing our presence in commercial industries by putting more industry tab and expanding our capabilities, while maintaining balance within the commercial segment and across a more diversified enterprise platform.
Mark Hussey: We are now seeing positive indicators that demand for commercial digital projects is improving as we begin 2024. Our growth in 2023 demonstrates the importance of a balanced commercial portfolio. We remain focused on growing our presence in commercial industries by gaining more industry depth and expanding our capabilities while maintaining balance within the commercial segment and across a more diversified enterprise platform. Now, let me turn to our expectations and guidance for 2024, which contemplates a pending acquisition of GG&A. Our revenue guidance for the year is $1.46 billion to $1.54 billion. We also expect adjusted EBITDA to range from 12.8% to 13.3% of revenues and adjusted diluted earnings per share of $5.35 to $5.95.
Now, let me turn to our expertise expectations and guidance for 2024, which contemplates our pending acquisition of <unk>.
Our revenue guidance for the year is $1 $4 6 billion to $1 $5 4 billion.
We also expect adjusted EBITDA to a range of 12, 8% to 13, 3% of revenues and adjusted.
Diluted earnings per share of $5 35 to $5 95.
Companywide guiding to 10% revenue growth at the midpoint for 2024.
Prior to the significant growth we achieved in 2022 and 2023 and we believe demand for our portfolio of offerings will continue through 2024.
We remain focused on achieving low double digit annual revenue growth objectives that we established at our 2000 to 2022 investor day, while pursuing opportunities to accelerate growth. The Oligos Kohl's has demonstrated in recent years.
In terms of margins the midpoint of our 2024 guidance, we expect a 70 basis point improvement over 2023 building off the collective 150 basis point improvement achieved in 2022 and 2023.
Mark Hussey: Company-wide, guiding to 10% revenue growth at the midpoints for 2024. We're proud of the significant growth we achieved in 2022 and 2023, and we believe demand for our portfolio of offerings will continue into 2024. We remain focused on achieving the low double-digit annual revenue growth objective that we established at our 2022 investor day while pursuing opportunities to accelerate growth beyond those goals, as demonstrated in recent years. In terms of margins, the midpoint of our 2024 guidance, we expect a seven basis point improvement over 2023, building off the collective 150 basis point improvement achieved in 2022 and 2023. The midpoint of our guided adjusted earnings per share range of $5.35 to $5.95 per share is actually 116% higher than our 2021 adjusted EPS of $2.61, which reflects the compounding impact of revenue growth, margin expansion, and return to shareholders via share repurchase. We remain committed to achieving our financial objectives for sustainable revenue growth and improved profitability. And to deliver these objectives, we remain focused on five key areas, first accelerating growth in our core and target markets of health care and education.
The midpoint of our guided adjusted earnings per share range of $5.35 to $5.95 per share it was actually 116% higher than our 2021 adjusted EPS of $2 61.
Which reflects a compounding impact for revenue growth margin expansion and returned to shareholders via share repurchases.
We remain committed to achieving our financial objectives for sustainable revenue growth and improved profitability.
To deliver these objectives, we remain focused in five key areas.
First accelerating growth in our core.
Our end markets of healthcare and education.
Second expanding our growing commercial business.
Third advancing our global digital technology and analytics platform.
Fourth broadening our offerings and capabilities to build a sustainable base from which to drive consistent revenue growth and margin expansion.
Strategically deploying capital to invest in the areas of our business with the greatest growth potential while returning capital to shareholders.
Our growth strategy has delivered strong results in recent years and we believe it will continue to be the foundation from which we will achieve top and bottom line growth into the future.
Each of the pillars of our growth strategy reinforce and build upon one another and.
And when executed together and they'll help us enhance our ability to deliver on our clients' most complex challenges strengthen our competitive advantage and create value for our shareholders.
2023 was a record year for Huron and these results are only possible because of our incredibly talented team and their commitment to making a lasting impact on our clients and our business.
Mark Hussey: Second, expanding our growing commercial business. Third, advancing our global digital technology and analytics platform. Fourth, broadening our offerings and capabilities to build a sustainable base from which to drive consistent revenue growth and margin expansion. And fifth, strategically deploying capital to invest in the areas of our business with the greatest growth potential while returning capital to shareholders. Our growth strategy has delivered strong results in recent years, and we believe it will continue to be the foundation from which we will achieve top and bottom-line growth in the future. Each of the pillars of our growth strategy reinforce and build upon one another, and when executed together, they'll help us enhance our ability to deliver on our clients' most complex challenges, strengthen our competitive advantage, and create value for our shareholders. 2023 was a record year for Huron, and these results are only possible because of our incredibly talented team and their commitment to making a lasting impact on our clients and our business. We've always had a vibrant and collaborative culture, and that culture remains at the heart of our success.
Caroline has always had a vibrant and collaborative culture and that culture remains at the heart of our success.
Together, we've collectively built a client centric culture and supportive work environment.
This was reflected by Huron, securing a 32nd position out of 100 and less doors best places to work U S large companies unless.
The Glassdoor ratings, our financial results demonstrate considerable impact our team has had on your own performance.
We don't take our recent success for granted we remain focused on executing our strategy. We are excited about our prospects for 2024, as we strengthen our competitive position and take advantage of the marketing market opportunities that lie ahead.
And now before I lose my voice I'm going to turn it over to John for a reward a detailed discussion of our financial 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 for Gaslog.
Our press release, 10-K, and Investor Relations page on the Huron website have reconciliations of these non-GAAP measures 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.
I'd first like to touch on two housekeeping items before discussing our financial results for the quarter.
First earlier this month, we announced our intent to acquire G G&A.
That transaction to close in the first quarter of 2024 and as such is not included in our fourth quarter results.
Mark Hussey: Together, we've collectively built a client-centric culture and supportive work environment, which was reflected in Huron securing the 32nd position out of 100 on Glassdoor's Best Places to Work U.S. Large Companies List. The Glassdoor rankings and our financial results demonstrate the considerable impact our team has had on Huron's performance. We don't take our recent success for granted.
The acquisition.
G&A will strengthen our industry expertise expand our consulting offerings help our mission driven clients accelerate their philanthropic programs.
Second let me provide a brief comment on a note in our press release.
GAAP net income includes a noncash unrealized loss of $19 $4 million net of tax during the quarter related to our investment in a hospital at home company.
As a reminder, in 2019, we invested $5 million any hospital that won't company as a strategic investment in annually produced meaningful implementation projects for our health care segment.
Mark Hussey: We remain focused on executing our strategy. We're excited about our prospects for 2024 as we strengthen our competitive position and take advantage of the market opportunities that lie ahead. And now, before I lose my voice, I'm going to turn it over to John for a more detailed discussion of our financial results. Okay, John?
In the first quarter of 2022, we recognized a noncash unrealized gain on this investment of $19 $8 million net of tax based on the evaluation established a round of financing that closed that quarter.
In the fourth quarter of 2023, the company recorded a noncash impairment loss of $19 4 million net of tax on the investment.
John D. Kelly: Thank you, Mark, and good afternoon, everyone. Before I begin, please note that I will be discussing non-GAAP financial measures, such as EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted EPS, and Pre-GAAP. The press release, the 10K, and the Investor Relations page on the Durham Website have reconciliations of these non-GAAP measures, the most comparable GAAP measures, along with a discussion of why management uses these non-GAAP measures and I'd first like to touch on two housekeeping items before discussing our financial results for the quarter. First, earlier this month, we announced our intent to acquire GG&A. We expect that transaction to close in the first quarter of 2024, and as such, it is not included in our fourth-quarter results.
Essentially reversing the 2022 game based on evaluation of established and a new round of financing is expected to close in early 2024.
As of December 31, 2023 investments carrying value was $7 4 million a net unrealized gain of $2 4 million on investments since inception.
The ownership percentage and this hospital at home company less than 5%.
Now I'll share some of the key financial results quarter and full year 2000.
Revenues for the fourth quarter of 2023 for $339 2 million up eight 1% from $313 7 million in the same quarter of 2022.
The increase in revenues in the quarter was driven by growth in healthcare and education segments.
In addition, our digital capability posted strong growth across all three segments.
For the full year 2023 revenue was $1 $3 $62 billion up 23% from 113 $2 billion in 2022.
John D. Kelly: The acquisition of GG&A will strengthen our industry expertise, expand our consulting offerings, and help our mission-driven clients build and accelerate their philanthropic programs. Second, let me provide a brief comment on a note in our press release. Gap net income includes a non-cash, unrealized loss of $19.4 million net of tax during the quarter related to our investment in a hospital-lit home company.
We achieved record revenues in 2023, reflecting broad based demand for our portfolio of offerings across all three operating segments.
Our performance in 2023 also reflects strong execution on the key elements of our growth strategy.
Salary and growth in health care and education, expanding our presence in commercial industries and further growing our digital capability.
Net income for the fourth quarter of 2023 was $2 $8 million 15 per diluted share compared to net income of $17 $1 million or <unk> 85 per diluted share in the fourth quarter of 2022 and reflects the noncash unrealized loss of $19 $4 million.
John D. Kelly: As a reminder, in 2019, we invested $5 million in a hospital-at-home company as a strategic investment that has annually produced meaningful implementation projects for our healthcare segment. In the first quarter of 2022, we recognized a non-cash, unrealized gain on this investment of $19.8 million net of tax based on the valuation established and around the financing that closed that quarter. In the fourth quarter of 2023, the company recorded a non-cash impairment loss of $19.4 million net of tax on the investment, essentially rehearsing the 2022 game based on the valuation established in the new round of financing expected to close in early 2024. As of December 31st, 2023, the investment's carrying value was $7.4 million, expecting a net unrealized gain of $2.4 million on the investment Your ownership percentage in this hospital at home company is less than $5,000.
Net of tax or $1 per.
Our diluted earnings per share related to our investment in the hospital to home company as discussed earlier.
Our full year 2023, net income was $62 5 million or.
The $3 19 per diluted share.
Repairs to net income of $75 6 million or.
The $3 64 per diluted share in 2022.
Both periods reflect the impact of noncash changes in fair value related to our investment in the hospital at home company as discussed earlier.
Yeah.
Our effective income tax rate in the fourth quarter of 2023 was negative 62%, which is more favorable than the statutory rate with some state income taxes, primarily due to a tax benefit related to non taxable gains on investments used to fund our deferred compensation liability.
And a discrete tax benefit for share based compensation awards that vested during the quarter and the positive impact of certain federal tax credits.
John D. Kelly: Now I'll share some of the key financial results of the quarter and full year of 2001. Revenues for the fourth quarter of 2023 were $339.2 million, up 8.1% from $313.7 million in the same quarter of 2022. The increase in revenues in the quarter was driven by growth in the healthcare and education segments. In addition, our digital capability posted strong growth across all three sectors. For the full year of 2023, revenue was $1.362 billion, up 20.3% from $1.132 billion in 2022. We achieved record revenues in 2023, reflecting broad-based demand for our portfolio of offerings across all three operating sectors. Our performance in 2023 also reflects strong execution on the key elements of our growth strategy, Accelerating Growth in Healthcare and Education.
On a full year basis, our effective income tax rate for 2023, 25, 5%, which is more favorable than the statutory rate inclusive of state income taxes, primarily due to a discrete tax benefit for share based compensation awards that vested during the year the positive impact certain federal tax credits each phase.
Well items were partially offset by certain nondeductible expense items.
Adjusted EBITDA was $41 $4 million in Q4, 2023, 12, 2% of revenues compared to $39 million in Q4, 2020 to 12, 4% of revenues.
For full year 2023, adjusted EBITDA as a percentage of revenues increased 70 basis points to 12, 3% compared to 11, 6% in 2022.
The increase in full year adjusted EBITDA reflects higher consulting utilization improved pricing expanded deployment of our global delivery capabilities and lower corporate SG&A expense as a percentage of revenues in 2023 compared to 2022 after adjusting for the impact of our deferred compensation plan.
Alrighty.
Partially offsetting these factors is continued investment in the growth of our business and increased bonus compensation relating to the strong performance across our business.
John D. Kelly: Spanning our presence in commercial industries and further growing our digital capabilities. Net income for the fourth quarter of 2023 was $2.8 million, or $0.15 per diluted share, compared to net income of $17.1 million, or $0.85 per diluted share, in the fourth quarter of 2022, and reflects a non-cash, unrealized loss of $19.4 million net of tax, or $1 per diluted earnings per share, related to our investment in a hospital home company, as discussed earlier. For the full year 2023, net income was $62.5 million, or $3.19 per diluted share. This compares net income of $75.6 million to $3.64 per diluted share in 2022. Both periods reflect the impact of non-cash changes in fair value related to our investment in a hospital home company, as discussed earlier. Our effective income tax rate in the fourth quarter of 2023 was negative 60.2 percent.
Adjusted net income was $25 1 million or.
A $1 29 per diluted share compared to $22 6 million from $1 12 per diluted share in the fourth quarter of 2022.
For the full year 2023, adjusted net income was $96 2 million $4 91 per diluted share compared with $71 1 million or $3 43 per diluted share in 2022.
Now I'll discuss the performance of each of our operating segments.
The healthcare segment generated 51% of total company revenues during the fourth quarter of 2023.
The segment posted revenues of $172 million up $18 7 million or 12, 2% from the fourth quarter of 2022.
The increase in revenues in the quarter was driven by strong demand for our digital strategy and innovation performance improvement and financial advisory offerings.
On a full year basis, healthcare revenue increased 26% to $674 million compared to $535 million in 2022.
John D. Kelly: This is more favorable than the statutory rate, inclusive of state income taxes, primarily due to a tax benefit related to non-taxable gains on the investments used to fund our deferred compensation liability, and a discrete tax benefit for share-based compensation awards that vested during the quarter, and the positive impact of certain federal tax credits. For your basis, our effective income tax rate for 2023 is 25.5%, which is more favorable than the statutory rate, inclusive of state income tax, primarily due to a discrete tax benefit for shared-based compensation awards that are vested during the year with the positive impact of certain federal tax credits. These favorable items were partially offset by certain non-deductible expense items.
Also driven by strong demand for our performance improvement and digital offerings as well as our financial advisory strategy and innovation offerings.
In 2023 consulting and managed services capabilities in healthcare, which is our largest capability companywide third.
8%.
Operating income margin for healthcare was 25, 9% in both Q4 2023 in Q4 2022.
On a full year basis healthcare segment operating income margin was 25, 7% compared to 24, 5% in 2022.
The increase in operating income margin year over year was primarily due to revenue growth outpacing compensation cost for our revenue generating professionals, partially offset by an increase in contractor expenses.
Yes, Casey segment generated 31% of total company revenues during the fourth quarter 2023, yes.
John D. Kelly: Just to leave it, it was $41.4 million in Q4 2012. 12.2% of revenue, compared to $39 million in Q4 2022, 12.4% of revenue. For full year 2023, Jeff Zibida, as a percentage of revenues, increased 70 basis points to 12.3% compared to 11.6% in 2022. The increase in full-year adjusted EBITDA reflects higher consulting utilization, improved pricing, expanded deployment of our global delivery capabilities, and lower corporate SG&A expenses as a percentage of revenues in 2023 compared to 2022 after adjusting for the impact of our deferred compensation plan liability. Partially offsetting these factors is continued investment in the growth of our business and increased bonus compensation to weigh into the strong performances across our business. Justin's net income was $25.1 million, or $1.29 per diluted share, compared to $22.6 million, or $1.12 per diluted share, in the fourth quarter of 2022.
The education segment posted revenues of $103 $8 million up $7 2 million or seven 4% from the fourth quarter of 2022.
The increase in revenues in the quarter was primarily driven by demand for our digital offerings.
On a full year basis education segment revenues grew 19, 4% year over year.
Driven by demand for our technology analytics services and software products within our digital capability as well as increased demand for our strategy operations and research solutions within our consulting and managed services capability.
The operating income margin for education was 21, 2% Q4 2023.
28% for the same quarter in 2022.
The increase in operating income margin in the quarter was primarily driven by decreased restructuring and contractor expenses, partially offset by increased compensation cost for our revenue generating professionals.
On a full year basis operating income margin was 23, 1% or 21, 9% in 2022.
Primarily due to a decrease in contractor expenses, partially offset by increases in compensation cost for our revenue generating professionals technology expenses.
The commercial segment generated 18% of total company revenues during the fourth quarter of 2023 and.
Posted revenues of $63 $5 million compared to $63 $8 million in the fourth quarter of 2022.
John D. Kelly: For the full year, 2023, adjusted net income was $96.2 million for $4.91 per diluted share compared with $71.1 million for $3.43 per diluted share in 2022. Now I'll discuss the performance of each of our operating sites. The healthcare segment generated 51% of total company revenues during the fourth quarter of 2023.
On a full year basis commercial segment revenues increased eight 7% to $258 4 million compared to $237 $6 million in 2022.
The increase in full year revenues was driven by strong demand for our financial advisory and digital offerings.
Operating income margin for the commercial segment was 22, 4% for Q4 2023 compared to 18, 4% from the same quarter in 2022.
The increase in operating income margin in the quarter was primarily driven by decreases in compensation cost for our revenue generating professionals to contractor expense.
John D. Kelly: The segment posted revenues of $172 million, up $18.7 million, or 12.2% from the fourth quarter of 2022. The increase in revenues in the quarter was driven by strong demand for digital, strategy, and innovation, performance improvement, and financial advisory offerings. On a full year basis, healthcare revenue increased 26% to $674 million, compared to $535 million in 2022.
On a full year basis commercial segment operating income margin was relatively even at 21% in 2023 compared to 21, 1% in 2022.
Corporate expenses not allocated at the segment level and excluding restructuring charges were $45 $2 million in Q4, 2023 compared to $40 $1 million in Q4 of 2022.
Unallocated corporate expenses in the fourth quarter of 2023, and 2022 included $3 2 million and $1 $8 million respectively.
John D. Kelly: Also, driven by strong demand for our performance improvement and digital offerings, as well as our financial advisory and strategy, and innovation offerings. In 2023, our consulting and managed services capabilities in healthcare, which is our largest capability company-wide, will be 30 percent. Operating income margin for healthcare was 25.9% in both Q4 2023 and Q4 2022. On a full year basis, the healthcare segment's operating income margin was 25.7% compared to 24.5% in 2022. The increase in operating income margin year over year was primarily due to revenue growth outpacing compensation costs for our revenue-generating professionals, partially offset by an increase in contractor expenses. The education segment generated 31% of total company revenues during the fourth quarter of 2023.
Spence related to the increase in the liability of our deferred compensation plan, which is offset by investment gains on the assets used to fund that plan reflected in other income.
Excluding the impact of the deferred compensation plan in both periods.
Unallocated corporate expenses increased $3 $7 million, primarily due to increased compensation costs for our support personnel and third party professional services expenses.
On a full year basis corporate expenses not allocated at the segment level increased to $174 $8 million, including $5 5 million of expense related to deferred compensation plan.
<unk> to $136 $5 million of unallocated corporate expenses in 2022, which included a $6 $9 million reduction of expense related to the deferred compensation plan.
Excluding the impact of the deferred compensation plan in both periods.
Unallocated corporate expenses increased $25 $9 million, primarily driven by an increase in compensation costs for our support personnel as well as increases in third party professional service expenses and software and data hosting expenses.
John D. Kelly: The education segment posted revenues of $103.8 million, up $7.2 million, or 7.4% from the fourth quarter of 2022. The increase in revenues in the quarter was primarily driven by demand for our digital office. On a full-year basis, education segment revenues grew 19.4% year-over-year.
Now turning to the balance sheet and cash flows.
Debt as of December 31, 2023 was $324 million.
As being entirely of our senior bank debt.
And we finished the year with cash of $12 $1 million for net debt of $311 $9 million.
This was a $36 $8 million decrease in net debt compared to Q3 2023.
John D. Kelly: This was driven by demand for our technology, analytic services, and software products within our digital capability, as well as increased demand for our strategy, operations, and research solutions within our consulting and managed services capability. The operating income margin for education was 21.2% for 2023, compared to 20.8% in the same quarter in 2022. The increase in operating income margin in the quarter was primarily driven by decreased restructuring and contractor expenses, partially offset by increased compensation costs for our revenue-generating professionals.
The fourth quarter included $34 $9 million of share repurchases or approximately 345000 shares.
Leverage ratio as defined in our senior Bank agreement was.
It was one six times adjusted EBITDA at December 31, 2023, compared to one nine times adjusted EBITDA as of December 31, 2022.
Cash flow generated from operations for 2023 was $135 $3 million, we used $35 2 million.
Of our cash to invest in capital expenditures inclusive of internally developed software cost purchases of property and equipment, resulting in free cash flow of $100 $1 million.
In addition in 2023, we used $123 $6 million to repurchase approximately one 5 million shares representing seven 4% our outstanding shares as of the beginning of the year.
John D. Kelly: On a full year basis, operating income margin was 23.1%, compared to 21.9% in 2022, primarily due to a decrease in contractors, partially offset by increases in compensation costs for our revenue-generating professionals to technology expenses. The Commercial segment generated 18% of total company revenues during the fourth quarter of 2023, posting revenues of $63.5 million compared to $63.8 million in the fourth quarter of 2022. On a full year basis, commercial segment revenues increased 8.7% to $258.4 million compared to $237.6 million in 2022. The increase in four-year revenues was driven by strong demand for our financial advisory and digital offerings. Operating income margin for the commercial segment was 22.4% for Q4 2023 compared to 18.4% for the same quarter in 2022. The increase in operating income margin in the quarter was primarily driven by decreases in compensation costs for our revenue-generating professionals to reduce their expenses.
And we used $1 6 million for strategic tuck in acquisitions.
As of December 31, 2023.
$86 $2 million remained available for share repurchases under our current share repurchase program.
DSO came in at 87 days for the fourth quarter of 2023 compared to 83 days in the third quarter of 2023.
At 77 days in the fourth quarter of 2022.
The increase in DSO during the fourth quarter when compared to the third quarter reflects the impact of contractual payment schedules for certain larger health care projects.
Today, we also announced that we have amended our senior secured credit facility to include a $275 million term loan. In addition to our existing $600 million revolving credit facility, both of which mature in November of 2027.
The proceeds from the term loan will be used to reduce borrowings under the company's revolving credit facility, which increases the company's capacity for investment by $275 million.
This expanded capacity will enable us to continue executing on our balanced capital deployment strategy inclusive of strategic tuck in acquisitions, and returning capital to shareholders through targeted share repurchases.
Finally, let me turn to our expectations and guidance for 2024, which contemplates our pending acquisition of <unk>.
For the full year 2024, we anticipate revenues before reimbursable expenses in a range of $1 $46 billion to $1 five $4 billion.
Adjusted EBITDA in a range of 12, 8% to 13, 3% of revenues.
John D. Kelly: On a four-year basis, the commercial segment operating income margin was relatively even at 21% in 2023 compared to 21.1% in 2022. Corporate expenses not allocated at the segment level and excluding restructuring charges were $45.2 million in Q4 2023 compared to $40.1 million in Q4 2022. Unallocated corporate expenses in the fourth quarter of 2023 and 2022 included $3.2 million and $1.8 million, respectively, 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. Additionally, unallocated corporate expenses increased $3.7 million, primarily due to increased compensation costs for our support personnel and third-party professional services expenses.
And adjusted non-GAAP EPS.
A range of $5 35.
$5 95 sites.
We expect cash flows from operations to be in the range of $155 million to $185 million.
Capital expenditures are expected to be approximately $40 million inclusive of costs to develop our market facing products and analytical tools.
And free cash flows are expected to be in the range of $115 million to $145 million net of cash taxes and interest and excluding noncash stock compensation.
Weighted average diluted share count for 2024.
Good to be in a range of 19 million to $19 5 million shares.
Finally, with respect to taxes, you should assume an effective tax rate in the range of 28% to 30%, which compromises the federal tax rate of 21% a blended state tax rate of five 6%.
The incremental tax expense related to certain nondeductible expense items.
Let me add some color to our guidance starting with revenue the.
The midpoint of the revenue range reflects 10% growth over 2023 as Mark mentioned.
We are proud of the accelerated 20% plus growth we achieved in 2022 and 2023, we believe that our guidance aligns with a more normalized level of growth for our business and is consistent with our previously stated medium term financial objectives.
John D. Kelly: On a full year basis, corporate expenses not allocated at the segment level increased to $174.8 million, including $5.5 million of expense related to the Deferred Compensation Plan, compared to $136.5 million of unallocated corporate expenses in 2022, which included a $6.9 million reduction of expense related to the Deferred Compensation Plan. Excluding the impact of the Deferred Compensation Plan in both periods, allocated corporate expenses increased $25.9 million, primarily driven by an increase in compensation costs for our support personnel, as well as increases in third-party professional services expenses and software and data hosting expenses. Now I'll turn it to the balance sheet and cash. Total debt as of December 31st, 2023 was $324 million, consisting entirely of our senior bank debt.
We remain focused on executing our growth strategy across all segments of our business.
If fully aligning incentives for all of our managing directors the principles with our strategic goals integrated operating model.
With regard to our health care segment, we expect mid to high single digit percentage revenue growth for the full year 2024, and we expect operating margins will be in a range of 25% to 27%.
The education segment, we expect low teen percentage revenue growth for full year 2024 inclusive of a mid to high teen million dollar contribution for 10 months of G. E. N E and we expect operating margins will be in a range of approximately 24% to 26%.
And the commercial segment, we expect to see low double digit percentage revenue growth for 2024, we expect our operating margins in this segment to be in a range of approximately 21, 23%.
We expect unallocated corporate SG&A to increase in the low to mid single digit percentage range year over year.
Also in the first quarter consistent with prior years.
Following items as it relates to expenses.
The reset wage basis for FICA, and our 401 can't match.
Our annual Merit and promotion wage increases go into effect on January one.
John D. Kelly: We finish the year with cash of $12.1 million for net debt of $311.9 million. This was a $36.8 million decrease in net debt compared to Q3 2023. The fourth quarter included $34.9 million of share reverses for approximately 345,000 shares.
And an increase in stock compensation expense for restricted stock awards that were granted in March to retirement eligible employees.
Based on these factors, we anticipate approximately 15% to 20% of our full year adjusted EBITDA and full year adjusted EPS to be generated during the first quarter consistent with the pattern we've seen for the last several years.
John D. Kelly: Our leverage ratio is defined in our senior bank agreement. It is 1.6 times adjusted EBITDA as of December 31, 2023, compared to 1.9 times adjusted EBITDA as of December 31, 2022. Cash flow generated from operations for 2023 was $135.3 million. We used $35.2 million of our cash to invest in capital expenditures, inclusive of internally developed software costs, and purchases of property and equipment, resulting in free cash flow of $100.1 million. In addition, in 2023, we used $123.6 million to repurchase approximately 1.5 million shares, representing 7.4% of our outstanding shares as of the beginning of the year. And we used $1.6 million for a strategic tuck-in acquisition as of December 31st, 2023. $86.2 million remains available for share repurchases under our current share repurchase program. DSO came in at 87 days in the fourth quarter of 2023, compared to 83 days in the third quarter of 2023 and 77 days in the fourth quarter of 2022.
As a closing reminder, with respect to 2020 for adjusted EBITDA adjusted net income and adjusted EPS. There are several items that you will need to consider when reconciling these non-GAAP measures to comparable GAAP measures.
The reconciliation schedules that we included in our press release.
You through these reconciliations.
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 again.
One moment for our first question.
Our first question comes from the line of Tobey Sommer of choice Securities. Please go ahead Tobey.
Thank you.
I was curious if you could.
Q your medium term financial targets laid out at Investor day, it's been almost exactly at the midpoint between when you gave them and when they'll ultimately be rendered but how do you feel about those in particular, the EBITA margin figure. Thanks.
Hey, Tobey its John.
So we we feel good about our progress against those medium term financial objectives that we established at our Investor day back in 2022.
Certainly I think if youre looking at it from the perspective of.
EBIT dollars and adjusted EPS we.
We feel like we're pacing ahead of the projections that we talked about during that Investor day, I think the mix has maybe been a little bit different than what we.
John D. Kelly: The increase in DSO during the fourth quarter, when compared to the third quarter, reflects the impact of contractual payment schedules for certain larger healthcare projects. Today, we also announced that we have amended our senior secured credit facility to include a $275 million term loan in addition to our existing $600 million revolving credit facility, both of which mature in November of 2027. The proceeds from the term loan will be used to reduce borrowings under the company's revolving credit facility, increasing the company's capacity for investment by $275 million.
We might have projected at that point in time.
Growth has been much stronger so we talked about low double digit growth in our growth has actually been in excess of 20% past couple of years.
And.
Related to that growth, we needed to continue to invest in our talent that our team to build out.
The resources to be able to deliver on that growth and I think that's put a little bit of pressure on the margin percent. So the net net has US ahead in terms of the EBITDA dollars in terms of debt.
Adjusted EPS, but the mix has probably been a little bit different I think going forward from where we're at we still feel good about our ability to meet or beat those revenue objective.
John D. Kelly: This expanding capacity will enable us to continue executing on a balanced capital deployment strategy inclusive of strategic talking acquisitions and returning capital to shareholders through targeted share repurchase. Finally, let me turn to our expectations and guidance for 2024, which contemplates our pending acquisition of GG&A. For the full year 2024, we anticipate revenues before reimbursable expenses in a range of $1.46 billion to $1.54 billion, Justin Iveda in a range of 12.8% to 13.3% of revenue, and adjusted non-GAF EPS in a range of $5.35 to $5.95.
We feel really good about our guidance for 2024 from a margin perspective and our.
Our focus will be on meeting or beating those margin percent.
Objectives for 2020 for which at the top end would be in the low 13% range and if we're able to continue to execute and have a similar sort of step next year I think that that would get us comfortably into kind of that 14% plus range for the mid teen range at that point in time, but that's a that's kind of the outlook halfway through.
Yeah.
I'll add one comment to that just to say you know when you look at the drivers to say, okay. What is it that we're doing that enables us to achieve those things.
We've made really good progress on utilization, we have more room to run there.
Pricing work that we've been doing is probably not fully baked in yet too.
John D. Kelly: We expect cash flows from operations to be in a range of 155 to 185 million dollars. Capital expenditures are expected to be approximately $40 million, inclusive of costs to develop our market-facing products and analytical tools. The free cash flows are expected to be in the range of $115 to $145 million net of cash taxes and interest, excluding non-cash stock compensation. The weighted average diluted share count for 2024 is expected to be in a range of $19 million to $19.5 million shares. Finally, with respect to taxes, you should assume an effective tax rate in the range of 28 to 30 percent, which includes the federal tax rate of 21 percent and a combined state tax rate of 5 to 6 percent.
Everything we're doing across the enterprise.
Global delivery model continues to expand and then just continuing scaling our corporate SG&A. So we've got a lot of levers that we're pretty confident in.
As John said Theres been no would assist the growth has created some headwinds, but we think we're going to get there it will probably be in that.
14% plus range into 2025.
Thank you.
How long.
Sorry, do you think your hospital customers what are you hearing from them in terms of how long they expect activity to remain at elevated levels and therefore some of them.
Doing fine from a profitability perspective before that activity level normalizes and maybe in the context of that answer you could speak to what youre seeing from an assessment perspective in your pie offering.
Sure sure Tobey this is mark I'll keep talking as long as my voice.
Uh huh.
We actually are.
John D. Kelly: Incremental tax expense related to certain non-deductible expense items. Let me add some color to our guidance, starting with red. The midpoint of the revenue range reflects 10% growth over 2023. As Mark mentioned, while we are proud of the accelerated 20% plus growth we achieved in 2022 and 2023, we believe that our guidance aligns with a more normalized level of growth for our business and is consistent with our previously stated medium-term financial objectives. We remain focused on executing our growth strategy across all segments of our business and in fully aligning incentives for all of our managing directors and principals with our strategic goals and integrated operating model. With regard to our healthcare segment, we expect mid to high single-digit percentage revenue growth for the full year 2024. We expect operating margins to be in a range of 25 to 27 percent.
As I noted in the script, we started to see some improvement across the industry towards the latter half of 2023.
It really is I would say a mixed story coming into 2024. So we have those systems I think that have actually done a pretty good job of recovering and we're seeing them continuing to spend where they're spending on the on the growth aspect of what they're trying to do we're trying to enhance their digital platforms and things that are perhaps more pro cyclical in nature and.
We've repositioned our portfolio very well to be able to play in hope it up and down aspects of pet, but having said that there are still.
A number of clients and we are quite busy on a number of assessments coming into 'twenty 'twenty four for those clients who are still facing ongoing challenges. So by no means do we think that demand is going to run out of a cycle here, we feel that 2024 will be.
Continuing to evolve its got reflected in the pipeline.
Right, Yes, that's that's right market we look.
At the pipeline and what gives us confidence in our guidance for the year and the continued growth really is an evolving mix where we've got.
John D. Kelly: In the education segment, we expect low teen percentage revenue growth for school year 2024, inclusive of a mid to high teen million dollar contribution for 10 months of GG&A, and we expect operating margins will be in a range of approximately 24 to 26 percent. In the commercial segment, we expect to see low double-digit percentage revenue growth for 2024. We expect our operating margins in this segment to be in a range of approximately 21-23%. Additionally, we expect unallocated corporate SG&A to increase in the low to mid-single-digit percentage range year-over-year. Also, in the first quarter, consistent with prior years, we note the following items as it relates to... The Reset of Wage Bases for FICA and our 401k match.
Still plenty of projects in the pipeline that relate to clients that are going through some level of financial strain and are seeking performance improvement health, but now we're seeing increased pipeline activity related to some of our other offerings, which as Mark said are more pro cyclical like our strategy offerings are.
Non distressed financial advisory offerings, and then critically really digital offerings, which I think a lot of clients. At this point are now seeking to invest funds in their technology platforms, and really tried to modernize those to help them.
Operate more efficiently to help them better get actionable insight from their data to protect their data and automate many processes as possible in a high labor cost environment. So we're seeing a nice a nice mix of projects right now that really reflect both dynamics going on in the market.
Operator: Her annual merit and promotion wage increases go into effect on January 1st, and an increase in stock compensation expense for restricted stock holders that will be granted in March to retirement-eligible employees. Based on these factors, we anticipate approximately 15% to 20% of our full-year adjusted EBITDA and full-year adjusted EPS to be generated during the first quarter, consistent with the pattern we have seen for the last several years. As a closing reminder with respect to 2024 Adjusted EBITDA, Adjusted Net Income, and Adjusted EPS, there are several items that you will need to consider when reconciling these non-GAAP measures to comparable GAAP measures. The reconciliation schedule that we included in our press release will help walk you through these reconciliations. Thank you, everyone. I'd now like to open the call to questions. Operator?
Two things for me and I'll get back in the queue could you speak to why to expand it.
Quiddity, now and and then John if.
If you could what does the inorganic contribution to.
<unk> EBITDA and EPS.
In the initial guidance.
Sure Tobey so the the first question about why expanding the borrowing.
Borrowing capacity now it really just has to do with the significant growth we've seen in the company over the past couple of years. When we first entered into our $600 million revolving credit facility that was really designed to support three seven times EBIT leverage our trailing 12 month bank definition.
It up.
And having seen our EBITDA practically doubled since 2021.
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.
That has significantly tightened to a capacity of $600 million revolver, so really adding the $275 million term loan that just kind of gets us back to the capacity that we originally had on a leverage basis given a much bigger size of the company now so from our perspective in terms of capital deployment.
Tobey Sommer: One moment for our first question. Our first question comes from the line of Tobey Sommer of Truist Securities. Please go ahead, Tobey.
<unk> with that extra capacity I think it's the same messaging I think youre going to see some mix of strategic tuck in acquisitions as a result of our.
John D. Kelly: Thank you. I was curious if you could speak to your medium-term financial targets laid out and then yesterday. It's been, I don't know for exactly at the midpoint between when you gave them and when they'll ultimately be realized. How do you feel about those, in particular, the EBITDA margin figure? Thanks. Hey Tobey, it's John.
Programmatic M&A process as well as continued targeted share buybacks, but we see we just felt like given our increased size and we needed some more capacity and then as far as D.
<unk> on the guide.
Commented from a revenue perspective, giving us.
John D. Kelly: So we feel good about our progress against those median-term financial objectives that we established at our investor day back in 2022. Certainly, I think if you're looking at it from the perspective of even in dollars, we feel like we're pacing ahead of the projections that we talked about during that investor day. I think the mix has maybe been a little bit different than what we might have projected at that point in time.
Partial year.
Kind of high teen million dollar revenue I would expect that to flow through at the same percentage of our overall corporate EBITDA percentage just given that there will be some transition Titan expenses. During the first year and then from a EPS perspective, it's accretive but in this first partial year.
It's pretty minimal from an EPS perspective.
Thank you.
Thank you our next question.
John D. Kelly: The growth has been much stronger. So we talked about low double-digit growth, and our growth has actually been in excess of 20% the past couple years. Related to that growth, we needed to continue to invest in our talent and our team to build out the resources to be able to deliver on that growth, and I think that's put a little bit of pressure on the margin percent. So the net net has us ahead in terms of the even dollars in terms of the adjusted EPS, but the mix has probably been a little bit different.
It comes from the line of Andrew Nicholas of William Blair <unk> Company. Your question. Please Andrew.
Thanks, and good afternoon.
I wanted to double back on the margin conversation.
Pretty.
Pretty good expansion that you expect here in 'twenty four I think Mark you you highlighted a few things.
Where theres more room to run between utilization and pricing and the delivery model I'm just wondering if theres any way to to maybe split up the 70 or 80 basis points of expansion across some of those drivers like what what is the primary.
John D. Kelly: I think going forward from where we are, we still feel good about our ability to meet those revenue objectives, and I think we feel really good about our guidance for 2024 from a margin perspective. And our focus will be on meeting or beating those margin percent objectives for 2024, which at the top end would be in the low 13 percent range. And if we're able to continue to execute and have a similar sort of step next year, I think that would get us comfortably into kind of that 14 percent plus range for the mid-team range at that point in time. But that's kind of the outlook halfway through.
Set of drivers in 'twenty, four and maybe related to that how much of this is is maybe expecting a pull back in.
And head count growth and some improved utilization as we progress through the year.
But Andrew I don't know if I would describe it is all on pullback and head count growth I think what youll, probably see from our head count growth perspective, as head count growth in the base case. This year as the headcount growth will be generally in line with revenue growth I think in terms of.
Mark Hussey: And maybe Toby, I'll add one comment to that, just to say, you know, when you look at the drivers, say, okay, what is it that we're doing that enables us to achieve those things? You know, we've made really good progress on utilization. We have more room to run their pricing work that we've been doing. It's probably not fully baked in yet to everything we're doing across the enterprise.
The breakout of that 70 basis points of improvement between the key things that Mark mentioned utilization pricing and then SG&A leverage that's actually more than 70 basis points of improvement that we're expecting and then on the flip side of that we do expect to continue to invest in our business continuing to add talent and new.
Mark Hussey: Our global delivery model continues to expand and then, you know, just continuing to scale our corporate SG&A. So we've got a lot of levers still that we're pretty confident in. As John said, there's been, you know, this growth has created some headwinds, but we think we're going to get there. It'll probably be in that 14% plus range into 2025. Thank you. How long...
Areas to keep the growth going so I think the initiatives that we have underway actually contribute more than 70 basis points margin improvement and then would you expect to invest some of that back in the business. So in terms of.
Do you think of those investments is 100 basis points of investment. So if we're thinking of then okay between 150 basis points to 200 basis points.
Operational efficiency improvement I would say that that's about split.
Mark Hussey: Sorry, do you think your hospital customers, what are you hearing from them in terms of how long they expect activity to remain at elevated levels? And therefore, you know, some of them are doing fine from a profitability perspective before that activity level normalizes. And, and maybe in the context of that answer, you could speak to what you're seeing from an assessment perspective in your PI office. Sure, Tobey.
50, 50 between some of our pricing and utilization objectives as well as continued global deployment of our India team and then just some natural scaling of SG&A that we expect to experience this year.
Great. That's helpful. Thank you and then.
You you mentioned I think briefly some some pick up in in our site and some of the strategy pieces can you unpack that a little bit more and.
Mark Hussey: This is Mark. I'll keep talking as long as my voice holds up. But we actually, as I noted in the script, started to see some improvement across the industry toward the latter half of 2023. There really is, I would say, a mixed story coming into 2024. So you have those systems, I think, that have actually done a pretty good job of recovering. And we're seeing them continuing to spend, but they're spending on the growth aspect of what they're trying to do. They're trying to enhance their digital platforms and things that are perhaps more prosthetic in nature. And we've repositioned our portfolio very well to be able to play both the up and down aspects of that. But having said that, there's still... a number of clients.
Are there particular end markets, where where that is strongest and how much of of that recovery or are you baking in for 2000 and for us.
Yeah, Andrew it's Mark.
I'd say that in 2023, what we saw was for inside a little bit slower start to the year, but really what we were very excited to see was very good strength in the health care market.
And really in conjunction with working across our team so very very much kind of integrated into our overall delivery.
At the same time some of the industrial areas that we've had great strides and hit a little bit quieter year, but coming into 'twenty four we feel like they have a very strong pipeline across both sides of that business and we're excited about.
Could.
Good recovery into 2024.
Great. Thank you.
Thank you.
Our next question.
It comes from the line of Bill Sutherland of Benchmark. Please go ahead bill.
Mark Hussey: And we are quite busy with a number of assessments coming into 2024 for those clients who are still facing ongoing challenges. So by no means do we think that demand is going to run out of the cycle here. We feel that 2024 will be, you know, just continuing to evolve. And that's kind of reflected in the pipeline. Right. Yeah, that's, that's right, Mark.
Thank you.
Yes.
Another terrific.
Year in the books.
I was.
Curious on the refi.
John.
What's the.
Could you mentioned kind of how to think about interest expense would.
With the new.
With the change.
John D. Kelly: If we look at the pipeline, and what gives us confidence in our guidance for the year and the continued growth really is an evolving mix where we've got plenty of projects in the pipeline that relate to clients that are going through some level of financial strain and are seeking performance improvement help, but now we're seeing increased pipeline activity related to some of our other offerings. Marks that are more pro-cyclical, like our strategy offerings, our non-distressed financial advisory offerings, and then critically, really the digital offerings, which I think a lot of clients at this point are now seeking to invest funds in their technology platforms and really try to modernize those to help them operate more efficiently to help them better get actionable insight from their data, protect their data, and automate as many processes as possible in a high labor cost So we're seeing a nice mix of projects right now that really reflect both the dynamics going on in the market. Okay, two things for me, and I'll get back to you.
The change is really pretty minimal bill because it's if you think about the funds flow on it we added $275 million term loan, but then we used the proceeds from that term loan to immediately pay down the revolver. So it's really about adding capacity, let me some minimal incremental expense related to just the piece of.
Establishing that as well as now.
Some more unused fees on the revolving credit facility, but that that would be pretty minimal in the scheme of things.
Okay I wasn't sure. If there was I don't think you mentioned and if theres any change in rates.
So on that.
Ability there.
There's a 50 basis point additional spread on the term on.
We just think it's more reflective of the market right now versus when we were able to lock in a revolving credit facility, but again I'd probably.
And in the scheme of things that will be pretty pretty minimal we did also.
In the early first quarter due an interest rate.
<unk> that we're able to lock in some more short term savings versus the silver spot rate right now that largely offsets any of that additional expense for 2024, okay.
John D. Kelly: Could you speak to why to expand? Liquidity now? And, and then John, if you could, what is the inorganic contribution to EBITDA and EPS in the initial guide? Sure, Tobey.
Okay.
John when you were talking about the drivers.
John D. Kelly: So the first question about why expanding the borrowing capacity now has to do with the significant growth we've seen in the company over the past couple of years. When we first entered into our $600 million revolving credit facility, that was really designed to support 3.7 times EBITDA leverage, so our trailing 12-month bank deficit in EBITDA. And having seen our EBITDA practically double since 2021, that has significantly cut into our capacity on the $600 million revolver.
For the 20.
23 segment results.
It was interesting on education, you mentioned digital and then but for the year. There was the other parts of the business that seem to.
The important.
Digital just.
Kind of a centerpiece of the fourth quarter or was that just from.
Am I reading too much into it and I'm curious, how you're thinking about.
The offerings in education.
Contributing to 24, so outlook.
It was the fourth quarter it was broad based demand.
John D. Kelly: So really, adding the $275 million term loan just kind of gets us back to the capacity that we originally had on a leverage basis, given the much bigger size of the company now. So from our perspective, in terms of capital deployment strategy with that extra capacity, I think it's the same messaging. I think you're going to see some mix of strategic tuck-in acquisitions as a result of our programmatic M&A process, as well as continued targeted shared buybacks. But we just felt like, given our increased size, that we needed some more capacity. And then as far as GGA on the guide, I commented from a revenue perspective, given it's a partial year, kind of high-key million-dollar revenue, I'd expect that to flow through at the same percent as our overall corporate EBITDA percentage, just given that there will be some transition-type expenses during the first year. And then from an EPS perspective, it's accretive, but in this first partial year, it' Thank you. Thank you.
Say that the leader in the clubhouse, though with the digital offerings during the fourth quarter, which is why we why we highlighted but our consulting offerings as well as our managed service offerings, which is a smaller base of revenue right. Now stable also had healthy growth during the fourth quarter.
And then as you pivot towards <unk>.
2024, again, I think it's going to be a broad based story and the education business clearly from a digital perspective, we see clients investing in what many institutions right now are dated legacy technology infrastructure.
That really needed to get modernized to help other universities.
I mean their meet their missions.
But then even beyond that the digital side on the consulting side of it you probably see it quite a bit down in the headlines a lot of the pressure that universities are under and so some of our offerings that help our university partners enroll students.
From a philanthropic perspective that help them with their fund raising.
And then help them.
Minimize risk and efficiently manage their research function. Those are all things that are very important to our education clients right. Now so I think the growth we expect to see is pretty balanced across those areas.
Andrew Owen Nicholas: Our next question comes from the line of Andrew Nicholas of William Blair and Company. Your question, please, Andrew. Thanks and good afternoon.
Just had research as well Richard has been a very important part of our portfolio continues to be the area that clients pay a lot of attention to because it's so important that will either revenues or risk management around the research enterprise. So.
John D. Kelly: I want to double back on the margin conversation, pretty, pretty good expansion that you expect here in 24. I think, Mark, you highlighted a few things where there's more room to run between utilization and pricing and delivery models. I'm just wondering if there's any way to maybe split up the 70 or 80 basis points of expansion across some of those drivers. For example, what is the primary set of drivers in 24?
It's been a very fair elsewhere, you may have quarters, where one is a little bit ahead of another but.
I would just say from a demand backdrop, it's been a very consistent demand across all of them.
Right now it certainly has.
And finally I was just curious as you look at your head count plans this year.
Are you waiting it heavily towards offshore or is it kind of be this kind of book.
John D. Kelly: And maybe related to that, how much of this is maybe expecting a pullback in headcount growth and in some improved utilization as we progress through the year? But, you know, Andrew, I don't know if I would describe it as a pullback in headcount growth. I think what you'll probably see from a headcount growth perspective is headcount growth. I think the base case this year is that headcount growth will be generally in line with revenue growth. I think in terms of the breakout of that 70 basis points of improvement, between the key things that Mark mentioned, utilization, pricing, and then SG&A leverage, that's actually more than 70 basis points of improvement that we're expecting. And then on the flip side of that, we do expect to continue to invest in our business, continuing to add talent and new areas to keep the growth going. So I think the initiatives that we have underway actually contribute more than 70 basis points of margin improvement. And then we do expect to invest some of that back in the business. So in terms of, you know, the, you think of those investments as 100 basis points of investment.
Same kind of mix.
I think it's gonna be a similar mix to our total lot count.
<unk>.
Okay.
That's not that's not part of the.
The 150 to 200 bps.
And so there is continued increased utilization.
Out of our team to global delivery team in India is part of that is part of the margin story, but if you look at our head count as of 12 31 2023, it's about 70%.
In North America, and about 30% and yet when we look at our head count modeling for the year I don't think we expect any big shift in that percentage it could it could be a little bit more weighted towards India, but it will be be modest I think it's going to be pretty balanced okay.
Alright, guys. Thanks.
Okay.
Thank you once again to ask a question. Please press star one one on your Touchtone telephone again star one one.
Your touch tone telephone to ask a question.
Our next question comes from the line of Kevin Steinke of Barrington Research and Associates. Please go ahead Kevin.
Hi, Mark and John.
So just wanted to ask about the education segment, certainly another strong year solid fourth quarter.
Yeah, we did see a sequential.
Dip in revenue fourth quarter versus third quarter, I guess, we've kind of gotten.
Mark Hussey: So if you're thinking of then, okay, between 150 basis points to 200 basis points of operational efficiency improvement, I'd say that that's about split 50-50 between some of our pricing and utilization objectives, as well as continued global deployment of our India team. And then just some of the natural scaling of SG&A that we expect to experience. Great. That's helpful.
Spoiled by these.
Continually sequential increases, although it's kind of flattened out third quarter versus second quarter, but.
Is there anything to note there in terms of.
Timing of projects or anything.
That might have led to that sequential.
Mark Hussey: Thank you. You mentioned, I think briefly, some pickup in in a site and some of the strategy pieces. Can you unpack that a little bit more?
<unk>.
Fourth quarter versus third quarter.
Hey, Kevin it's largely just related to your business days and holidays during the fourth quarter, we see it across the entire business Theres always less effective business days in the fourth quarter than there are in other quarters within education.
William Sutherland: And you know, are there particular end markets where that is strongest? And how much of that recovery are you baking in for? Yeah, Andrew. It's Mark.
John D. Kelly: I would say that in 2023, what we saw for InnoCyte was a little bit slower start to the year, but really, what we were very excited to see was very good strength in the healthcare market, and really in conjunction with working across our team. So, very, very much kind of integrated into our overall delivery. At the same time, some of the industrial areas that we've had great strength in had a little bit quieter year, but coming into 24, we feel like they have a very strong pipeline across both sides of that business. And we're excited about just the good recovery into 2024. Great, thank you.
Based on our clients' schedules, sometimes that can be even a little bit more pronounced and that's all that's all that youre seeing.
As I said in my remarks, we're expecting low teens.
<unk> growth for next year, so where are we.
We feel good about the growth trajectory in the education segment.
Okay great.
So.
Just following up on the GTA acquisition.
Maybe just a little more color on what attracted you to that.
<unk> and how it fits in and I.
I guess it slots in the education segment, so I'm assuming it predominantly.
Education institutions, but you also mentioned health care nonprofit.
John D. Kelly: Thank you. Our next question comes from the line of Bill Sutherland of Benchmark. Please go ahead, Bill.
Also trying to get a sense for the business mix there.
John D. Kelly: Thank you. See you guys. Another terrific year in the books. I was curious about the refi, John, kind of what's the, did you mention kind of how to think about interest expense with the new, you know, would change?
Yeah. Kevin This is mark we're very excited about the G&A acquisition that John <unk> is joining us as well and continuing to be very active in the market.
You you noted correctly that their position in the education that they actually do serve nonprofit much more broadly and also on a global basis they have clients in.
John D. Kelly: The change is really pretty minimal, Bill, because if you think about the funds flow on it, we added a $275 million term loan, but then we used the proceeds from that term loan to immediately pay down the revolver. So it's really about adding capacity. There will be some minimal incremental expenses related to just the fees of establishing that, as well as now some more unused fees on the revolving credit facility, but that will be pretty minimal in the scheme of things. Okay, I wasn't sure if there was, I don't think you mentioned if there's any change in rate.......
Europe as well and so as an example.
What we believe will be the pitch here is obviously philanthropy is a huge lever within higher education too to drive there.
Revenue at the same time, it really gives an opportunity for us to bring some of our digital solutions and enablement to advancement function to Ben just.
John D. Kelly: There's a 50 basis point additional spread on the term that we just make it more reflective of the market right now versus when we were able to lock in the revolving credit facility. But again, probably, in the scheme of things, that will be pretty minimal. We did also in the early first quarter do an interest rate. Robert Craig, Tim McHugh, William Sutherland, Tobey Sommer, Andrew Nicholas, Trevor Romeo, James Roth, John Kelly, Jasper Bibb, Huron Consulting Group Inc. Okay.
Great areas of a lesson for us from a from a sales force point of view that would take the combination of that their expertise around.
The whole management function will be highly accretive to us so.
We think it's well positioned and then at the same time because of our operating model that really enables us to bring solutions across lines you feel that as we have opportunities whether it's in health care or even outside of healthcare in the upper graph. We're generally will have really very full ability to take advantage of the full scope and scale of that.
Acquisition.
Okay great.
Thank you.
I think when you were talking about the.
John D. Kelly: John, when you were talking about, um, the drivers for the 23-segment result, it was interesting that in education you mentioned digital, and then, but for the year, there were other parts of the business that seemed to be important. Was digital just...um, kind of a centerpiece of the fourth quarter, or was that just, um, am I reading too much into it and I'm curious how you're thinking about the offerings in education contributing to 24's Outlook. It was, you know, the fourth quarter; it was a broad-based demand bill.
The progression towards that mid teens margin target by 2025.
You mentioned the mix has been maybe a little bit different than you would've expected.
Is that just you were you referring to mix of digital versus.
Salt thing or.
What.
What was that comment.
Targeted at.
Oh, Thanks for asking Kevin and <unk> to clarify I was more referring up the mix to get to the increase in adjusted EBIT dollars and adjusted EPS that we've seen and how that's at this point.
John D. Kelly: I would say that the leader in the clubhouse, though, was the digital offerings during the fourth quarter, which is why we highlighted them. But our consulting offerings, as well as our managed service offerings, which is a smaller base of revenue right now, both also had healthy growth during the fourth quarter. And then, if you pivot towards... 2024, again, I think it's going to be a broad-based story in the education business. Clearly, from a digital perspective, we see clients investing in what many institutions right now are dated, legacy technology infrastructure that really needs to get modernized to help those universities meet their missions. But then, even beyond the digital side, on the consulting side, you probably see it quite a bit now in the headlines, a lot of the pressure that universities are under. And so, some of our offerings that help our university partners enroll students from a philanthropic perspective that help them with their fundraising and then help them minimize risk and efficiently manage their research function.
<unk> significantly ahead of our investor.
Investor day targets and the path to getting to those increased EBIT dollar amounts increased EPS mouse. The MX has been a little bit more towards.
Higher growth than what we had initially projected with a little bit of pressure on the margin percent just as we've been investing in our team to deliver that growth. So I was speaking about the two levers of revenue growth versus margin percent.
Getting to the nice results, we've had from an increased EBIT dollars and adjusted EPS.
Okay understood. Thanks, and then lastly.
You mentioned continued.
Ramp or.
Greater utilization of our <unk>.
Your staff in India is one of the Ah <unk>.
Margin drivers going forward can you just.
Date us on utilization there and.
Plans to build out the team there et cetera.
So Kevin I think Jon I'll Tag team on this one so let me just tell you I think from a.
From an expansion standpoint, we're really happy with how that team has been built out and the way we view this as not an offshore capability, we really run the business is truly a global integrated pieces by each service line. So our team in India and our team in the U S. We consider part of one unified team and their goal is to.
Mark Hussey: Those are all things that are very important to our education clients right now. So, I think the growth we expect to see is pretty balanced across those areas. Yeah, and I'll just add research as well. Research has been a very important part of our portfolio, and it continues to be an area that clients pay a lot of attention to because it's so important, not only to their revenues but to their risk management around the research enterprise. So, I think it's been a very balanced story.
Optimize their performance in the market together so over time, we've continued to expand that to other areas of service line. We've got a small team as an example of a business advisory practice doing some consulting support around financial advisor engagement.
Great success and impact, but more broadly in terms of just the utilization numbers themselves whether it be desktop just give you an update yet Kevin that's been a really great story for us as the year has progressed. So as you may recall at the end of 2022, we have made some targeted investments in our team in India.
Mark Hussey: You may have quarters where one is a little bit ahead of another, but I would just say from a demand standpoint, it's been very consistent demand across all of them. Right. No, it certainly has.
John D. Kelly: And finally, I was just curious, as you look at your headcount plans this year, are you weighting it heavily towards offshore, or is it going to be the same kind of net? I think it's going to be a similar mix to our prologue now, so. Okay, so that's not, that's not part of the plan. It's 150 to 200 bits.
To really build out our capacity there anticipation of growth and part of that investment was we experienced some lower utilization in the back half of last year and interrelated first quarter. This year, we've seen that utilization steadily increase over the course of the year and by the time, we got to the fourth quarter, it's very much in line.
John D. Kelly: And so there is continued increased utilization out of our team; the Global Delivery Team in India is part of the margin story, but if you look at our headcount as of 12-31-2023, it's about 70% in North America and about 30% in India. When we look at our headcount modeling for the year, I don't think we expect any big shift in that percentage. It could be a little bit more weighted towards India, but it will be modest. I think it's going to be pretty balanced. Okay. All right, guys.
Our overall utilization, which I would note for the fourth quarter.
<unk> was in the 78% to 79% range overall as a company, which is really one of the strongest utilization metrics we posted it.
I can remember and it definitely gives us encouragement about the margins heading into next year. As we continue expect to continue to operate at roughly that level heading into 2024.
Alright. Thanks.
Kevin Mark Steinke: Thanks, www.verbalink.com, Thank you. Once again, to ask a question, please press star 11 on your touchtone telephone. Again, that's star 11 on your touchtone telephone to ask a question. Our next question comes from the line of Kevin Steinke of Barrington Research and Associates. Please go ahead, Kevin.
For the insight.
For taking the questions.
And seeing no more questions in the queue I'd like to turn the call back to Mr. F C.
Thank you very very much for joining us. This afternoon, we look forward to speaking with you again in April we announced our first quarter results have a good evening.
And that concludes today's conference call.
Thank you everyone for your participation.
John D. Kelly: Hi Mark and John. So I just wanted to ask about the education segment. Certainly another strong year, and a solid fourth quarter. However, we did see a sequential dip in revenue in the fourth quarter versus the third quarter. I guess we've kind of gotten spoiled by these continually sequential increases, although it's kind of flattened out, third quarter versus second quarter. But is there anything to note there in terms of timing of projects or anything that might have led to that sequential change, fourth quarter versus third quarter? Hey, Kevin, it's largely just related to business days and holidays during the fourth quarter. We see it across the entire business; there are always fewer effective business days in the fourth quarter than there are in other quarters. Within education, just based on our client schedules, sometimes that can be even a little bit more pronounced. And that's all that's all that you're seeing.
Okay.
[music].
John D. Kelly: As I said, my remarks were respecting both, on growth for next year. So we feel a bit about the growth trajectory in the education segment. Okay, great.
John D. Kelly: So, yeah, just following up on the DGA acquisition. Maybe just a little more color on what attracted you to that business and how it fits in. I guess it's lost in the education segment. So I'm assuming it predominantly is in the education segment. There are education institutions, but you also mentioned health care nonprofits. Just also trying to get a sense for the business mix there. Yeah, Kevin, this is Mark.
Okay.
[music].
Mark Hussey: We're very excited about the GG&A acquisition and that John Clear is joining us as well and will continue to be very active in the market. You noted correctly that, while their position in education, they actually do serve non-profits much more broadly and also on a global basis. They have clients in Europe as well. And so, as an example, what we believe will be the pitch here is, obviously, philanthropy is a huge lever within higher education to drive their revenue, but at the same time, it really gives an opportunity for us to bring some of our digital solutions and enablement to the advancement function, which has been just a great area of momentum for us from a sales force point of view. And we think the combination of that, their expertise around the whole advancement function, will be highly accretive to us. So we think it's well positioned.
Sure.
Yes.
[music].
Mark Hussey: And then at the same time, because of our operating model, that really enables us to bring solutions across lines. We feel that as we have opportunities, whether it's in healthcare or even outside of healthcare or not, more generally, we'll have the full ability to take advantage of the full scope and scale of that acquisition. Okay, great.
Yes.
[music].
Yeah.
Kevin Mark Steinke: Thank you. John, I think when you were talking about the progression towards the mid-teens margin target by 2025, you mentioned the mix has been maybe a little bit different than you would have expected. Is that just – were you referring to a mix of digital versus print, or what was that comment targeted at? Thanks for asking, Kevin.
[music].
John D. Kelly: And to clarify, I was more referring to the mix to get to the increase in adjusted EBIT as dollars and adjusted EPS that we've seen and how that's at this point, significantly ahead of our investor day targets on the path to getting to those increased even dollar amounts and increased EPS amounts. The mix has been a little bit more towards higher growth than what we had initially projected with a little bit of pressure on the margin percent just as we've been investing in our team to deliver that growth. So I was speaking about the two levers of revenue growth versus margin percent in getting to the nice results we've had from an increased need for the dollars and adjusting. Okay, I understand. Thanks.
John D. Kelly: And then lastly, you mentioned continued ramp-up or, you know, greater utilization of your staff in India is one of the margin drivers going forward. Can you just update us on utilization there and, you know, plans to build out the team there, et cetera? So, Kevin, I think John and I will tag team on this one.
Okay.
[music].
Mark Hussey: So let me just tell you, from an expansion standpoint, we're really happy with how that team has been built out. And the way we do this is not an offshore capability. We really run the business truly on a global, integrated basis by each service line. So our team in India and our team in the U.S., we consider part of one unified team, and their goal is to optimize their performance in the market together. So over time, we continue to expand that to other areas of service. We've had a small team, as an example, in our business advisory practice, doing some consulting support around financial advisory engagements.
Okay.
[music].
John D. Kelly: It's had great success and impact. But more broadly, in terms of just the utilization numbers themselves, let me ask John to just give you an update. Yeah, Kevin, that's been a really great story for us as the year has progressed.
John D. Kelly: So, as you may recall, at the end of 2022, we had made some targeted investments in our team in India to really build out our capacity there and anticipate growth. And part of that investment was that we experienced some lower utilization in the back half of last year and into the first quarter of this year. We've seen that utilization steadily increase over the course of the year. And by the time we got to the fourth quarter, it was very much in line with our overall utilization, which I would note for the fourth quarter was in the 78 to 79 percent range overall as a company, which is really one of the strongest utilization metrics we've posted that I can remember and definitely gives us encouragement about the margins heading into next year as we expect to continue to operate at All right, thanks for the insight, for taking the questions. And seeing no more questions in the queue, I'd like to turn the call back to Mr. Thank you very, very much for joining us this afternoon. We look forward to speaking with you again in April when we announce our first quarter results. Have a good evening!
Okay.
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Yes.
Okay.
[music].
Operator: That concludes today's conference call. Thank you everyone for your participation. ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? Thank you for watching! ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? www.testcune.com, ?? ?? ?? ?? ?? ?? ?? ?? ?? Good afternoon, and welcome to Huron Consulting Group's webcast to discuss financial results for the fourth quarter and full year of 2023. At this time, all conference lines are on a listen-only mode.
Yes.
[music].
Yes.
[music].
Okay.
Operator: Later, we will conduct a question-and-answer session for conference call participants, and instructions will follow at that time. As a reminder, this conference call is being recorded. Before we begin, I would like to point all of you to the disclosure at the end of the 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 Huron's website.
[music].
Okay.
[music].
Operator: Please review that information along with the filings with the SEC for a disclosure of factors that may impact the subjects discussed in this afternoon's webcast. The company will be discussing one or more non-GAAP financial measures. Please look at the earnings release and on Huron's website for all of the disclosures required by the SEC, including reconciliation to the most comparable GAAP numbers. Now, I would like to turn the call over to Mark Hussey, Chief Executive Officer and President of Huron Consulting Group. Mr. Hussey, please go ahead.
Okay.
[music].
Mark Hussey: Good afternoon, and welcome to Huron Consulting Group's fourth quarter and full year 2023 earnings call. With me today are John Kelly, our Chief Financial Officer, and Rodney Dale, our Chief Operating Officer. Driven by strong growth across all three opening segments in 2023, we achieved record revenue and expanded our operating margins for the third consecutive year. Our fourth quarter performance was consistent with our expectations, culminating in record financial performance for full year 2023. Revenues in the fourth quarter and full year 2023 grew 8% and 20%, respectively.
Okay.
Thanks.
Yes.
[music].
Mark Hussey: In 2023, our consulting and managed services capability, which represents over half of our revenues, grew 23%, while our digital capability grew 17%, achieving revenue that is approaching $600 million and represented 43% of our revenues across all three operating segments. Foyer's adjusted income margins improved 70 basis points over the prior year, reflecting continued progress toward our objective of returning to mid-team income margins by 2025. And their strong cash flow enabled us to return $124 million to shareholders via share repurchases in 2023 while maintaining a strong financial position. Our financial performance demonstrates the strength of the foundation we've established under our integrated go-to-market model to continue delivering on our medium-term investor objectives. Our deep industry expertise and leading market positions in healthcare and education, our expanding presence in commercial industries, and our growing portfolio of digital capabilities positions us well to meet or exceed our medium-term financial objectives for low double-digit revenue growth and increased profitability.
[music].
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Mark Hussey: We now discuss our fourth quarter and full year 2023 performance, along with our expectations for 2024. In the fourth quarter of 2023, health care segment revenue grew 12% over the prior year quarter, reflecting the strong demand across our digital strategy and innovation, performance improvement, and financial advisory offerings. On a full-year basis, the health care segment achieved record revenues of $674 million, growing 26% over 2022.
Okay.
Yes.
Sure.
Yes.
[music].
Mark Hussey: Demand was widespread across our performance improvement, digital, financial advisory, strategy, and innovation, and managed services offerings. Our consulting and managed services revenues increased 30%, and digital capability revenues increased 16% over the prior year. We continue to diversify our portfolio to meet the expanding needs of our health care clients and build a strong foundation for ongoing growth for this segment. As I mentioned on our last earnings call, the operating environment for health care providers began to improve in 2023. Nevertheless, despite some improvements in overall patient volume, many health systems continue to face significant financial pressure.
Yeah.
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Okay.
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Mark Hussey: A confluence of labor-driven financial and operating challenges combined with increasing competition. Deteriorating pair mix and inflationary and interest rate headwinds create challenges for health system business models. We believe these market pressures create opportunities for our diverse set of healthcare offerings. The investments we've made and will continue to make in innovation, new services, products, and partnerships. Physicians are the healthcare segment will continue growth in 2024. Turning now to the education segment.
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Mark Hussey: In the fourth quarter of 2023, education segment revenues increased 7% over the prior year's quarter, primarily driven by demand for our digital offerings. Annual revenues in the segment grew 19% compared to 2022, achieving record revenues of $430 million. For the full year, demand was broad-based, with our digital revenues and consulting and managed services revenues increasing 28% and 12%, respectively, over 2022. We believe strong demand for our digital, research, and strategy and operations offerings will remain strong as higher education institutions face continued financial and operational challenges. The frequently mentioned demographic challenges leading to declining numbers of college-bound students create a highly competitive environment for admissions.
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Mark Hussey: Similar to our health care clients, increased labor and facility costs, unfunded government mandates, and the increased reliance on digital platforms create financial pressures and challenges to the achievement of university missions. Huron's well-established reputation and long history of proven results in deep client relationships make us one of the most trusted advisors to the industry, which positions us as well to support our clients through the diverse set of challenges faced by the higher education industry. Before I turn to the commercial segment, I would like to highlight the recently announced investment we will make to accelerate our growth in our mission-driven end markets, which is a key pillar of our strategy. Earlier this month, we announced our intent to acquire GG&X, a leading philanthropy-focused management consulting firm that serves educational institutions and healthcare, arts, and other non-profit organizations. This acquisition strengthens our philanthropic consulting offerings, complements our advancement-focused digital services, and creates new opportunities for us to serve our mission-driven clients. And we expect the transaction to close next month. Now, turning to the commercial segment.
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Good afternoon, and welcome to Huron consulting group's webcast to discuss financial results for the fourth quarter and full year of 2023.
At this time all conference lines are on a listen only mode.
Later, we will conduct a question and answer session for conference call participants and instructions will follow at that time.
As a reminder, this conference call is being recorded before we begin I would like to point all 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.
Mark Hussey: In the fourth quarter of 2023, commercial segment revenues were flat over the prior year quarter, primarily attributable to growth or digital offerings offset by declines in our strategy and innovation offerings. On a full-year basis, commercial segment revenues grew 9% year-over-year. The growth was broad-based, as our consulting and managed services capability and digital capability grew 13% and 7%, respectively. Our standout performer within the commercial segment was our financial advisory business, which grew 68% for 2022, driven by strong demand for a restructuring and turnaround offering. The uncertainties in these broader macroeconomic environments, including rising interest rates, inflationary pressures, and geopolitical risks, have created unique challenges, particularly among some of our mid-market commercial clients. As is often the case, an uncertain economic environment requires many organizations to take a more cautious approach to executing large-scale initiatives.
The news release is 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 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 Mark Hussey Chief Executive.
And president of Huron Consulting group Mr. Huseby. Please go ahead.
Mark Hussey: This mixed demand for, this created mixed demand for our offerings in 2023. Our financial advisory offerings were in strong demand during the past year as many organizations facing financial distress sought our expertise. However, our digital offerings grew more slowly, as some organizations were more cautious about responding to large-scale digital initiatives.
Good afternoon, and welcome to Huron consulting group's fourth quarter and full year 2023 earnings call.
With me today are John Kelly, our Chief Financial Officer, and Roger <unk>, Our Chief operating officer.
Driven by strong growth across all three operating segments in 2023, we achieved record revenues at <unk>.
Mark Hussey: We are now seeing positive indicators that demand for commercial digital projects is improving as we begin 2024. Our growth in 2023 demonstrates the importance of a balanced commercial portfolio. We remain focused on growing our presence in commercial industries by gaining more industry depth and expanding our capabilities while maintaining balance within the commercial segment and across a more diversified enterprise platform. Now, let me turn to our expectations and guidance for 2024, which contemplates a pending acquisition of GG&A. Our revenue guidance for the year is $1.46 billion to $1.54 billion. We also expect adjusted EBITDA to range from 12.8% to 13.3% of revenues and adjusted diluted earnings per share of $5.35 to $5.95.
And our operating margins for the third consecutive year.
Our fourth quarter performance was consistent with our expectations, culminating in record financial performance for full year 2023.
Revenues in the fourth quarter and full year, 2023 grew 8% and 20% respectively.
In 2023, our consulting and managed services capability, which represents over half of our revenues grew 23%, while our digital capability grew 17% achieving revenue that is approaching $600 million.
And represented 43% of our revenues across all three operating segments.
Full year, adjusted EBITDA margins improved 70 basis points over the prior year, reflecting continued progress toward our objective of returning to mid teen EBITDA margins by 2025.
At our strong cash flow enabled us to return $124 million to shareholders via share repurchases in 2023, while maintaining a strong financial position.
Our financial performance demonstrates the strength of the foundation, we've established under our integrated go to market model to continue delivering our medium term investor objectives, our deep industry expertise and leading market positions in healthcare and education are expanding presence in commercial industries.
Mark Hussey: Company-wide, we're guiding to 10% revenue growth at the midpoints for 2024. We're proud of the significant growth we achieved in 2022 and 2023, and we believe demand for our portfolio of offerings will continue into 2024. We remain focused on achieving the low double-digit annual revenue growth objectives that we established at our 2022 Investor Day while pursuing opportunities to accelerate growth beyond those goals, as demonstrated in recent years. In terms of margins, the midpoint of our 2024 guidance, we expect a seven basis point improvement over 2023, building off the collective 150 basis point improvement achieved in 2022 and 2023. The midpoint of our guided adjusted earnings per share range of $5.35 to $5.95 per share is actually 116% higher than our 2021 adjusted EPS of $2.61, which reflects the compounding impact of revenue growth, margin expansion, and return to shareholders via share repurchase. We remain committed to achieving our financial objectives for sustainable revenue growth and improved profitability. And to deliver these objectives, we remain focused on five key areas, first accelerating growth in our core markets of health care and education.
Our growing portfolio of digital capabilities positions us well to meet or exceed our medium term financial objectives were low double digit revenue growth.
<unk> profitability.
Now I'll discuss our fourth quarter and full year 2023 performance along with our expectations for 2024.
In the fourth quarter of 2023 health care segment revenue grew 12% over the prior year quarter, reflecting the strong demand across our digital strategy and innovation performance improvement and financial advisory offerings.
On a full year basis healthcare segment achieved record revenues of $674 million growing 26% over 2022.
<unk> was widespread across our performance improvement digital financial advisory strategy, and innovation and managed services offerings.
Our consulting and managed services revenues increased 30% and digital capability revenues increased 16% over the prior year we.
We continue to diversify our portfolio to meet the expanding needs of our health care clients and build a strong foundation for ongoing growth for this segment.
As I mentioned on our last earnings call the operating environment for health care providers began to improve in 2023.
Despite some improvements in the overall patient volume many health systems continue to face significant financial pressures.
<unk> of labor, driven financial and operating challenges combined with increasing competition deteriorating.
Mark Hussey: Second, expanding our growing commercial business. Third, advancing our global digital technology and analytics platform. Fourth, broadening our offerings and capabilities to build a sustainable base from which to drive consistent revenue growth and margin expansion. And fifth, strategically deploying capital to invest in the areas of our business with the greatest growth potential while returning capital to shareholders. Our growth strategy has delivered strong results in recent years, and we believe it will continue to be the foundation from which we will achieve top and bottom-line growth in the future. Each of the pillars of our growth strategy reinforce and build upon one another. And when executed together, they'll help us enhance our ability to deliver on our clients' most complex challenges, strengthen our competitive advantage, and create value for our shareholders. 2023 was a record year for Huron. And these results are only possible because of our incredibly talented team and their commitment to making a lasting impact on our clients and our business. Maryland has always had a vibrant and collaborative culture, and that culture remains at the heart of our success.
Deteriorating payer mix and inflationary and interest rate headwinds create challenges for health system business models.
We believe these market pressures create opportunities for our diverse set of healthcare offerings.
The investments we've made and will continue to make in innovation, new services products and partnerships physicians or health care segment will continued growth in 2024.
Turning now to be education segment in the fourth quarter of 2023 education segment revenues increased 7% over the prior year quarter, primarily driven by demand for our digital offerings.
Annual revenues in the segment grew 19% compared to 2020 to achieving record revenues of $430 million for the full year demand was broad based with our digital revenues and consulting and managed services revenues, increasing 28% and 12% respectively over 2022.
We believe the solid demand for our digital research and strategy and operations offerings will remain strong as higher education institutions face continued financial and operational challenges.
Frequently mentioned demographic challenges leading to declining numbers of college bound students creates a heightened competitive environment revisions Sims.
Similar to our health care clients increased labor and facilities costs.
Clinic government mandates and the increased reliance on digital platforms create financial pressures and challenges to the achievement of University ambitions.
Euro is well established reputation long history of proven results and deep client relationships makes us one of the most trusted advisors to the industry, which we believe positions us well to support our clients through to a diverse set of challenges faced by the higher education industry.
Mark Hussey: Together, we've collectively built a client-centric culture and supportive work environment, which was reflected in Huron securing the 32nd position out of 100 on Glassdoor's Best Places to Work U.S. Large Companies List. The Glassdoor rankings and our financial results demonstrate the considerable impact our team has had on Huron's performance. We don't take our recent success for granted.
Before I turn to the commercial segment I would like to highlight our recently announced.
<unk>, we will make to accelerate our growth and our mission driven end markets, which is a key pillar of our strategy.
Earlier this month, we announced our intent to acquire G G&A.
Leading philanthropy focused management consulting firm service educational institutions and health care are another nonprofit organizations.
This acquisition strengthens our total profit consulting offerings complements our advancement focused digital services and create new pathways for us to serve our mission driven clients and we expect to come transaction to close next month.
Mark Hussey: We remain focused on executing our strategy. We're excited about our prospects for 2024 as we strengthen our competitive position and take advantage of the market opportunities that lie ahead. And now, before I lose my voice, I'm going to turn it over to John for a more detailed discussion of our financial results. Okay, John?
Now turning to the commercial segment in the fourth quarter of 2023 commercial segment revenues were flat over the prior year quarter.
Primarily attributable to growth or a digital offerings.
Set by declines at our strategy the innovation offerings.
John D. Kelly: Thank you, Mark, and good afternoon, everyone. Before I begin, please note that I will be discussing non-GAAP financial measures such as EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted EPS, and Pre-GAAP. The press release, the 10K, and the investor relations page on the Durham Website have reconciliations of these non-GAAP measures, the most comparable GAAP measures, along with a discussion of why management uses these non-GAAP measures and why I'd first like to touch on two housekeeping items before discussing our financial results with the board. First, earlier this month, we announced our intent to acquire GG&A. We expect that transaction to close in the first quarter of 2024, and as such, it is not included in our fourth-quarter results.
On a full year basis commercial segment revenues grew 9% year over year.
The growth was broad based as our consulting and managed services capability and digital capability grew 13% and 7% respectively.
Anl performer within the commercial segment was our financial advisory business, which grew 68% for 2022, driven by strong demand for our restructuring and turnaround offerings.
The uncertainties and the broader macroeconomic environment, including rising interest rates inflation inflationary pressures and geopolitical risks have career.
That unique challenges, particularly among some of our mid market commercial clients.
As is often the case and uncertain economic environment, we as many organizations to take a more cautious approach to executing large scale initiatives.
This mixed demand for this created mixed demand for our offerings in 2023.
Our financial advisory offerings, we are in strong demand during the past year as many organizations facing financial distress. So our expertise.
Our digital offerings grew more slowly at some organizations, where we're cautious about their spending a large scale digital initiatives.
John D. Kelly: The acquisition of GG&A will strengthen our industry expertise, expand our consulting offerings, and help our mission-driven clients build and accelerate their philanthropic programs. Second, let me provide a brief comment on a note in our press release. Gap net income includes a non-cash, unrealized loss of $19.4 million net of tax during the quarter related to our investment in a hospital-lit home company.
We're now seeing positive indicators of demand for commercial digital projects is improving as we begin 2024.
Our growth in 2023 demonstrates the importance of a balanced commercial portfolio.
<unk> focused on growing our presence in commercial industries by fully where industry tab and expanding our capabilities, while maintaining balanced within the commercial segment and across a more diversified enterprise platform.
John D. Kelly: As a reminder, in 2019, we invested $5 million in a hospital-at-home company as a strategic investment that has annually produced meaningful implementation projects for our healthcare segment. In the first quarter of 2022, we recognized a non-cash, unrealized gain on this investment of $19.8 million net of tax based on the valuation established and around the financing that closed that quarter. In the fourth quarter of 2023, the company recorded a non-cash impairment loss of $19.4 million net of tax on the investment, essentially reversing the 2022 gain based on the valuation established in the new round of financing expected to close in early 2024. As of December 31st, 2023, the investment's carrying value was $7.4 million, requiring a net unrealized gain of $2.4 million at the investment'
Now, let me turn to our expertise expectations and guidance for 2024, which contemplates our pending acquisition of GE G&A.
Our revenue guidance for the year is $1 $4 6 billion to $1 $5 4 billion.
Also expect adjusted EBITDA to a range of 12, 8% to 13, 3% of revenues.
And adjusted diluted earnings per share of $5 35 to $5 95.
Companywide guiding to 10% revenue growth at the midpoint for 2024.
We're proud of the significant growth we achieved in 2022 and 2023 and we believe demand for our portfolio of offerings will continue through 2024.
We remain focused on achieving low double digit annual revenue growth objectives that we established at our 2000 to 2022 Investor day.
Pursuing opportunities to accelerate growth beyond those calls as demonstrated in recent years.
In terms of margins the midpoint of our 2024 guidance, we expect a 70 basis point improvement over 2023 building off the collective 150 basis point improvement achieved in 2022 and 2023.
John D. Kelly: Here's the ownership percentage in this Hospital at Home Company Lesson 5. Now I'll share some of the key financial results for the quarter and full year 2001 with you. Revenues for the fourth quarter of 2023 were $339.2 million, up 8.1% from $313.7 million in the same quarter of 2022. The increase in revenues in the quarter was driven by growth in the healthcare and education segments. In addition, her digital capability posted strong growth across all three sectors.
The midpoint of our guided adjusted earnings per share range of $5.35 to $5 95 per share it was actually 116% higher than our 2021 adjusted EPS of $2 61.
Which reflects a compounding impact for revenue growth margin expansion and returned to shareholders via share repurchases.
We remain committed to achieving our financial objectives for sustainable revenue growth and improve profitability and to deliver.
These objectives, we remain focused in five key areas.
First accelerating growth.
John D. Kelly: For the full year 2023, revenue was $1.362 billion, up 20.3% from $1.132 billion in 2022. We achieved record revenues in 2023, reflecting broad-based demand for our portfolio of offerings across all three operating segments. Our performance in 2023 also reflects strong execution on the key elements of our growth strategy, Accelerating Growth in Healthcare and Education.
Core end markets of healthcare and education.
Second expanding our growing commercial business.
Third advancing our global digital technology and analytics platform.
Fourth broadening our offerings and capabilities to build a sustainable base from which to drive consistent revenue growth and margin expansion.
Fifth strategically deploying capital to invest in the areas of our business with the greatest growth potential while returning capital to shareholders.
Our growth strategy has delivered strong results in recent years and we believe it will continue to be the foundation for which we will achieve top and bottomline growth in the future.
Each of the pillars of our growth strategy reinforce and build upon one another and when executed together they will help us enhance our ability to deliver on our clients' most complex challenges strengthen our competitive advantage and create value for our shareholders.
John D. Kelly: Spanning our presence in commercial industries and further growing our digital capabilities. Net income for the fourth quarter of 2023 was $2.8 million, or $0.15 per diluted share, compared to net income of $17.1 million, or $0.85 per diluted share, in the fourth quarter of 2022, and reflects the non-cash, unrealized loss of $19.4 million net of tax, or $1 per diluted earnings per share related to our investment in Hospital Home Company, as discussed earlier. For the full year 2023, net income was $62.5 million, or $3.19 per diluted share.
2023 was a record year for Huron and these results are only possible because of our incredibly talented team and their commitment to making a lasting impact on our clients and our business.
<unk> always had a vibrant collaborative culture and that culture remains at the heart of our success.
Heather we've collectively built a client centric culture that supported work environment.
Which was reflected by Huron, securing the 32nd position out of 100 and less doors best places to work U S large companies list.
The Glassdoor rankings and our financial results demonstrated considerable impact our team has had on hurons before us.
We don't take our recent success for granted we remain focused on executing our strategy. We're excited about our prospects for 2020 or as we strengthened our competitive position and take advantage of the marketing market opportunities that lie ahead.
And now before I lose my voice I'm going to turn it over to John for a reward detailed discussion of our financial results John.
John D. Kelly: This compares net income of $75.6 million to $3.64 per diluted share in 2022. Both periods reflect the impact of non-cash changes in fair value related to our investment in a hospital home company, as discussed earlier. Our effective income tax rate in the fourth quarter of 2023 was negative 60.2 percent.
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 for Gaslog.
Our press release 10-K in the Investor Relations page on the Huron website have reconciliations of these non-GAAP measures the most comparable GAAP measures.
John D. Kelly: This is more favorable than the statutory rate, inclusive of state income taxes, primarily due to a tax benefit related to non-taxable gains on the investments used to fund our deferred compensation liability, and a discrete tax benefit for share-based compensation awards that vested during the quarter, and the positive impact of certain federal tax credits. On a full-year basis, our effective income tax rate for 2023 is 25.5%, which is more favorable than the statutory rate, inclusive of state income tax, primarily due to a discrete tax benefit for share-paid compensation awards that persist during the year with the positive impact of certain federal tax credits. These favorable items were partially offset by certain non-deductible expense items.
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.
I'd first like to touch on two housekeeping items before discussing our financial results for the quarter.
First earlier this month, we announced our intent to acquire G G&A.
We expect that transaction to close in the first quarter of 2024 and as such is not included in our fourth quarter results.
The acquisition.
G&A will strengthen our industry expertise and expand our consulting offerings help our mission driven clients build and accelerate their philanthropic programs.
Second let me provide a brief comment on our note in our press release.
GAAP net income includes a non cash unrealized loss of $19 $4 million net of tax during the quarter related to our investment in a hospital at home company.
As a reminder, in 2019, we invested $5 million any hospital at home company as a strategic investment that is annually produced meaningful implementation projects for our healthcare segment.
John D. Kelly: Just to leave it, it was $41.4 million in Q4 2012. 12.2% revenue, compared to $39 million in Q4 2022, 12.4% revenue. For full year 2023, Jeff Zibida, as a percentage of revenues, increased 70 basis points to 12.3% compared to 11.6% in 2022. The increase in full year adjusted EBITDA reflects higher consultant utilization and improved pricing.
In the first quarter of 2022, we recognized a noncash unrealized gain on this investment of $19 8 million net of tax based on the valuation of established around the financing that closed that quarter.
In the fourth quarter of 2023, the company recorded a noncash impairment loss of $19 4 million.
Net of tax and the investment essentially reversing the 2022 game based on the valuation of established and a new round of financing is expected to close in early 2024.
John D. Kelly: Expanded deployment of our global delivery capabilities and lower corporate SG&A expenses at a percentage of revenues in 2023 compared to 2022 after adjusting for the impact of our deferred compensation plan liability. Partially offsetting these factors is continued investment in the growth of our business and increased bonus compensation to lead to strong performances across our business. Justin's net income was $25.1 million, or $1.29 per diluted share, compared to $22.6 million, or $1.12 per diluted share, in the fourth quarter of 2022.
As of December 31, 2023 investments carrying value was $7 4 million.
Despite a net unrealized gain of $2 4 million and investments since inception.
Whereas the ownership percentage in the small hospital it won't company less than 5%.
Now I'll share some of the key financial results quarter and full year 2000.
Revenue for the fourth quarter of 2023 with $339 $2 million up eight 1% from $313 7 million in the same quarter of 2022.
The increase in revenues in the quarter was driven by growth in healthcare and education segments in.
In addition, our digital capability posted strong growth across all three segments.
John D. Kelly: For the full year, 2023, adjusted net income was $96.2 million for $4.91 per diluted share compared with $71.1 million for $3.43 per diluted share in 2022. Now I'll discuss the performance of each of our operating sites. The healthcare segment generated 51% of total company revenues during the fourth quarter of 2023.
For the full year of 2023 revenue was $1 $3 62 billion up.
Up 23% from one $132 billion in 2022.
We achieved record revenues in 2023, reflecting broad based demand for our portfolio of offerings across all three operating segments.
Our performance in 2023 also reflects strong execution on the key elements of our growth strategy.
Accelerating growth in health care and education, expanding our presence in commercial industries and further growing our digital capability.
John D. Kelly: The segment posted revenues of $172 million, up $18.7 million, or 12.2% from the fourth quarter of 2022. The increase in revenues in the quarter was driven by strong demand for digital, strategy, and innovation, performance improvement, and financial advisory offerings. On a full-year basis, healthcare revenue increased 26% to $674 million, compared to $535 million in 2022.
Net income for the fourth quarter of 2023 was $2 $8 million 15 per diluted share compared to net income of $17 1 million or <unk> 85 per diluted share in the fourth quarter of 2022 and reflects the noncash unrealized loss of $19 $4 million net of tax or one.
Dollar per diluted earnings per share related to our investment in hospital to home company as discussed earlier.
For full year 2023, net income was $62 5 million or $3 19 per diluted share.
This compares to net income of $75 6 million or $3 64 per diluted share in 2022.
John D. Kelly: Also, driven by strong demand for our performance improvement and digital offerings, as well as our financial advisory and strategy, and innovation offerings. In 2023, our consulting and managed services capabilities in health care, which is our largest capability company-wide, will be 30%. Operating income margin for healthcare was 25.9% in both Q4 2023 and Q4 2022. On a full-year basis, the healthcare segment's operating income margin was 25.7%, compared to 24.5% in 2022. The increase in operating income margin year over year was primarily due to revenue growth outpacing compensation costs for our revenue-generating professionals, partially offset by an increase in contractor expenses. The education segment generated 31% of total company revenues during the fourth quarter of 2023.
Both periods reflect the impact of noncash changes in fair value related to our investment in the hospital at home company as discussed earlier.
Our effective income tax rate in the fourth quarter of 2023 was negative 62%, which is more favorable than the statutory rate with some state income taxes, primarily due to a tax benefit related to non taxable gains and the investments used to fund our deferred compensation liability and a discrete tax benefit for share based comp.
Sensation awards that vested during the quarter and the positive impact of certain federal tax credits.
On a full year basis, our effective income tax rate for 2023, 25, 5%, which is more favorable than the statutory rate inclusive of state income taxes, primarily due to a discrete tax benefit for share based compensation awards that vested during the year deposit the positive impact certain federal tax credits.
These favorable items were partially offset by certain nondeductible expense items.
Adjusted EBITDA was $41 $4 million in Q4, 2023, 12, 2% of revenues compared to $39 million in Q4, 2020 to 12, 4% of revenues.
John D. Kelly: The education segment posted revenues of $103.8 million, up $7.2 million, or 7.4% from the fourth quarter of 2022. The increase in revenues in the quarter was primarily driven by demand for our digital office. On a full-year basis, education segment revenues grew 19.4% year-over-year.
For full year 2023, adjusted EBITDA as a percentage of revenues increased 70 basis points to 12, 3% compared to 11, 6% in 2022.
The increase in full year, adjusted EBITDA reflects higher consulting utilization improved pricing.
And the deployment of our global delivery capabilities and lower corporate SG&A expense as a percentage of revenues in 2023 compared to 2022 after adjusting for the impact of our deferred compensation plan liability.
John D. Kelly: This was driven by demand for our technology, analytic services, and software products within our digital capability, as well as increased demand for our strategy, operations, and research solutions within our consulting and managed services capability. The operating income margin for education was 21.2% for 2023, compared to 20.8% in the same quarter in 2022. The increase in operating income margin in the quarter was primarily driven by decreased restructuring and contractor expenses, partially offset by increased compensation costs for our revenue-generating professionals.
Partially offsetting these factors is continued investment in the growth of our business and increased bonus compensation relating to the strong performances across our business.
Adjusted net income was $25 1 million or $1 29 per diluted share compared to $22 6 million from $1 12 per diluted share in the fourth quarter of 2022.
For the full year 2023, adjusted net income was $96 2 million $4 91 per diluted share compared with $71 1 million or.
John D. Kelly: On a full year basis, operating income margin was 23.1%, compared to 21.9% in 2022, primarily due to a decrease in contractors, partially offset by increases in compensation costs for our revenue-generating professionals to technology expenses. The Commercial segment generated 18% of total company revenues during the fourth quarter of 2023, posting revenues of $63.5 million compared to $63.8 million in the fourth quarter of 2022. On a full year basis, commercial segment revenues increased 8.7% to $258.4 million, compared to $237.6 million in 2022. The increase in four-year revenues was driven by strong demand for our financial advisory and digital offerings. Operating income margin for the commercial segment was 22.4% for Q4 2023, compared to 18.4% for the same quarter in 2022. The increase in operating income margin in the quarter was primarily driven by decreases in compensation costs for our revenue-generating professionals to reduce their expenses.
$3 43 per diluted share in 2022.
Now I'll discuss the performance of each of our operating segments.
The healthcare segment generated 51% of total company revenues during the fourth quarter of 2023.
The segment posted revenues of $172 million.
Up $18 7 million or 12, 2% from the fourth quarter of 2022.
The increase in revenues in the quarter was driven by strong demand for our digital strategy and innovation performance improvement and financial advisory offerings.
On a full year basis healthcare revenue increased 26% to $674 million compared to $535 million. In 2022 also driven by strong demand for our performance improvement and digital offerings as well as our financial advisory strategy and innovation offerings.
In 2023 consulting and managed services capabilities in healthcare, which is our largest capability companywide 30%.
Operating income margin for healthcare was 25, 9% in both Q4 2023 in Q4 2022.
On a full year basis healthcare segment operating income margin was 25, 7% compared to 24, 5% in 2022.
The increase in operating income margin year over year was primarily due to revenue growth outpacing compensation cost for our revenue generating professionals, partially offset by an increase in contractor expenses.
John D. Kelly: On a four-year basis, the commercial segment operating income margin was relatively even at 21% in 2023 compared to 21.1% in 2022. Corporate expenses not allocated at the segment level and excluding restructuring charges were $45.2 million in Q4 2023 compared to $40.1 million in Q4 2022. Unallocated corporate expenses in the fourth quarter of 2023 and 2022 included $3.2 million and $1.8 million, respectively, 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. Excluding the impact of the Deferred Compensation Plan, both periods.
Yes, Casey segment generated 31% of total company revenues during the fourth quarter 2023.
The education segment posted revenues of $103 8 million up $7 2 million or seven 4% from the fourth quarter of 2022.
The increase in revenues in the quarter was primarily driven by demand for our digital offerings.
On a full year basis education segment revenues grew 19, 4% year over year, driven by demand for our technology analytics services and software products within our digital capability as well as increased demand for our strategy operations and research solutions within our consulting and managed services capability.
The operating income margin for education was 21, 2% Q4, 2023 compared to 28% for the same quarter in 2022.
John D. Kelly: Unallocated corporate expenses increased $3.7 million, primarily due to increased compensation costs for our support personnel and third-party professional services. On a full year basis, corporate expenses not allocated at the segment level increased to $174.8 million, including $5.5 million of expense related to the Deferred Compensation Plan, compared to $136.5 million of unallocated corporate expenses in 2022, which included a $6.9 million reduction of expense related to the Deferred Compensation Plan, excluding the impact of the Deferred Compensation Plan in both periods. On allocated corporate expenses, the increased $25.9 million is primarily driven by an increase in compensation costs for our support personnel, as well as increases in third-party professional services expenses and software and data hosting expenses. Now I'll turn it to the balance sheet and cash. Total debt as of December 31st, 2023 was $324 million, consisting entirely of our senior bank debt.
The increase in operating income margin in the quarter was primarily driven by decreased restructuring and contractor expenses, partially offset by increased compensation cost for our revenue generating professionals.
On a full year basis operating income margin was 23, 1% or 21, 9% in 2022.
Primarily due to a decrease in contractor expenses.
We offset by increases in compensation cost for our revenue generating professionals technology expenses.
The commercial segment generated 18% of total company revenues during the fourth quarter of 2023 and.
Posted revenues of $63 $5 million compared to $63 $8 million in the fourth quarter of 2022.
On a full year basis commercial segment revenues increased eight 7% to $258 4 million compared to $237 $6 million in 2022.
The increase in full year revenues was driven by strong demand for our financial advisory and digital offerings.
Operating income margin for the commercial segment was 22, 4% for Q4 2023 compared to 18, 4% for the same quarter in 2022.
The increase in operating income margin in the quarter was primarily driven by decreases in compensation costs for our revenue generating professionals to contractor expense.
John D. Kelly: We finish the year with cash of $12.1 million for net debt of $311.9 million. This was a $36.8 million decrease in net debt compared to Q3 2023. The fourth quarter included $34.9 million in share repurchases for approximately 345,000 shares.
On a full year basis commercial segment operating income margin was relatively even at 21% in 2023 compared to 21, 1% in 2022.
Corporate expenses not allocated at the segment level and excluding restructuring charges were $45 2 million in Q4 2023 compared to $40 1 million in Q4 of 2022.
John D. Kelly: The leverage ratio defining our senior bank agreement is 1.6 times adjusted EBITDA as of December 31, 2023, compared to 1.9 times adjusted EBITDA as of December 31, 2022. Cash flow generated from operations for 2023 was $135.3 million. We used $35.2 million of our cash to invest in capital expenditures, inclusive of internally developed software costs, and purchases of property and equipment, resulting in free cash flow of $100.1 million. In addition, in 2023, we used $123.6 million to repurchase approximately 1.5 million shares, representing 7.4% of our outstanding shares as of the beginning of the year. And we used $1.6 million for a strategic tuck-in acquisition as of December 31st, 2023. $86.2 million remains available for share repurchases under our current share repurchase program. DSO came in at 87 days for the fourth quarter of 2023, compared to 83 days for the third quarter of 2023 and 77 days for the fourth quarter of 2022.
Unallocated corporate expenses in the fourth quarter of 2023, and 2022 included $3 2 million and $1 8 million.
Respectively.
<unk> related to the increase in the liability of our deferred compensation plan, which is offset by investment gains on the assets used to fund that plan reflected in other income.
Excluding the impact of the deferred compensation plan in both periods.
The allocated corporate expenses increased $3 $7 million, primarily due to increased compensation costs for our support personnel and third party professional services expenses.
On a full year basis corporate expenses not allocated at the segment level.
Increased to $174 8 million, including $5 $5 million of expense related to deferred compensation plan compared to $136 $5 million of unallocated corporate expenses in 2022, which included a $6 $9 million reduction of expense related to the deferred compensation plan.
Sure.
Excluding the impact of the deferred compensation plan in both periods.
Unallocated corporate expenses increased $25 $9 million, primarily driven by an increase in compensation costs for our support personnel as well as increases in third party professional service expenses and software and data hosting expenses.
Now turning to the balance sheet and cash flows.
Total debt as of December 31, 2023 was $324 million consisting entirely of our senior bank debt.
John D. Kelly: The increase in DSO during the fourth quarter, when compared to the third quarter, reflects the impact of contractual payment schedules for certain larger healthcare projects. Today, we also announced that we have amended our senior secured credit facility to include a $275 million term loan in addition to our existing $600 million revolving credit facility, both of which mature in November of 2027. The proceeds from the term loan will be used to reduce borrowings under the company's revolving credit facility, which increases the company's capacity for investment by $275 million. This expanding capacity will enable us to continue executing on our balanced capital deployment strategy inclusive of strategic talking acquisitions and returning capital to shareholders through targeted share repurchase. Hey!
We finished the year with cash of $12 1 million for a net debt of $311 $9 million.
This was a $36 $8 million decrease in net debt compared to Q3 2023.
The fourth quarter included $34 $9 million of share repurchases or approximately 345000 shares.
Our leverage ratio as defined in our senior Bank agreement.
It was one six times adjusted EBITDA at December 31, 2023, compared to one nine times adjusted EBITDA as of December 31, 2022.
Cash flow generated from operations for 2023 was $135 $3 million, we used $35 2 million.
Of our cash to invest in capital expenditures inclusive of internally developed software cost purchases of property and equipment, resulting in free cash flow of $100 $1 million.
In addition in 2023, we used $123 $6 million to repurchase approximately one 5 million shares representing seven 4% our outstanding shares as of the beginning of the year.
John D. Kelly: Finally, let me turn to our expectations and guidance for 2024, which contemplates our pending acquisition of GG&A. For the full year 2024, we anticipate revenues before reimbursable expenses in a range of $1.46 billion to $1.54 billion, just leave it up in a range of 12.8% to 13.3% of revenue, and adjusted non-GAF EPS in a range of $5.35 to $5.95. We expect cash flows from operations to be in a range of 155 to 185 million dollars. Capital expenditures are expected to be approximately $40 million, inclusive of costs to develop our market-facing products and analytical tools. The free cash flows are expected to be in the range of $115 to $145 million net of cash taxes and interest, excluding non-cash stock compensation. The weighted average diluted share count for 2024 is expected to be in a range of $19 million to $19.5 million shares. Finally, with respect to taxes, you should assume an effective tax rate in the range of 28 to 30 percent, which includes the federal tax rate of 21 percent and a combined state tax rate of 5 to 6 percent.
And we used $1 $6 million for strategic tuck in acquisitions.
As of December 31, 2023.
$86 $2 million remained available for share repurchases under our current share repurchase program.
DSO came in at 87 days for the fourth quarter of 2023 compared to 83 days for the third quarter of 2023.
At 77 days of the fourth quarter of 2022.
The increase in DSO during the fourth quarter, when compared to the third quarter.
The impact of contractual payment schedules for certain larger health care projects.
Today, we also announced that we have amended our senior secured credit facility to include a $275 million term loan. In addition to our existing $600 million revolving credit facility, both of which mature in November of 2027.
The proceeds from the term loan will be used to reduce borrowings under the company's revolving credit facility, which increases the company's capacity for investment by $275 million.
This expanded capacity will enable us to continue executing on our balanced capital deployment strategy inclusive of strategic tuck in acquisitions, and returning capital to shareholders through targeted share repurchases.
Finally, let me turn to our expectations and guidance for 2024, which contemplates our pending acquisition of <unk>.
For the full year 2024, we anticipate revenues before reimbursable expenses in a range of $1 $46 billion to $1 five $4 billion.
John D. Kelly: An incremental tax expense related to certain non-deductible expense items. Let me add some color to our guidance, starting with red. The midpoint of the revenue range reflects 10% growth over 2023. As Mark mentioned, while we are proud of the accelerated 20% plus growth we achieved in 2022 and 2023, we believe that our guidance aligns with a more normalized level of growth for our business and is consistent with our previously stated medium-term financial objectives. We remain focused on executing our growth strategy across all segments of our business and in fully aligning incentives for all of our managing directors and principals with our strategic goals and integrated operating model. With regard to our healthcare segment, we expect mid to high single-digit percentage revenue growth for the full year 2024. We expect operating margins to be in a range of 25 to 27 percent.
Adjusted EBITDA in a range of 12, 8% to 13, 3% of revenues.
And adjusted non-GAAP EPS.
Range of $5 35.
$5 95.
We expect cash flows from operations to be in a range of $155 million to $185 million.
Capital expenditures are expected to be approximately $40 million inclusive of costs to develop our market facing products and analytical tools.
And free cash flows are expected to be in the range of $115 million to $145 million net of cash taxes and interest and excluding noncash stock compensation.
Weighted average diluted share count for 2024.
But could you be in a range of 19 million to $19 5 million shares.
Finally, with respect to taxes, you should assume an effective tax rate in the range of 28% to 30%, which compromises the federal tax rate of 21% a blended state tax rate of five 6%.
John D. Kelly: In the education segment, we expect low teen percentage revenue growth for school year 2024, inclusive of a mid to high teen million dollar contribution for 10 months of GG&A. And we expect operating margins will be in a range of approximately 24 to 26 percent. In the commercial segment, we expect to see low double-digit percentage revenue growth in 2024. Additionally, we expect our operating margins in this segment to be in a range of approximately 21-23%. We expect unallocated corporate SG&A to increase in the low to mid-single-digit percentage range year-over-year. Also, in the first quarter, consistent with prior years, we note the following items as it relates to... The Reset of Wage Bases for FICA and our 401k match. Her annual merit and promotion wage increases go into effect on January 1st, and an increase in stock compensation expense for restricted stock awards that will be granted in March to retirement-eligible employees.
The incremental tax expense related to certain nondeductible expense items.
Let me add some color to our guidance starting with revenue the.
The midpoint of the revenue range reflects 10% growth over 2023 as Marc mentioned, while we are proud of the accelerated 20% plus growth. We achieved in 2022 and 2023, we believe that our guidance aligns with a more normalized level of growth for our business and is consistent with our previously stated medium term.
Financial objectives.
We remain focused on executing our growth strategy across all segments of our business.
If fully aligning incentives for all of our managing directors the principles with our strategic goals integrated operating model.
With regard to our health care segment, we expect mid to high single digit percentage revenue growth for the full year 2024.
Operating margins will be in a range of 25% to 27%.
The education segment, we expect low teen percentage revenue growth for full year 2024 inclusive of a mid to high teen million dollar contribution for 10 months of G&A and we expect operating margins will be in a range of approximately 24% to 26%.
In the commercial segment, we expect to see low double digit percentage revenue growth for 2024, we expect our operating margins in this segment to be in a range of approximately 21, 23%.
John D. Kelly: Based on these factors, we anticipate approximately 15% to 20% of our full-year adjusted EBITDA and full-year adjusted EPS to be generated during the first quarter, consistent with the pattern we have seen for the last several years. As a closing reminder with respect to 2024 Adjusted EBITDA, Adjusted Net Income, and Adjusted EPS, there are several items that you will need to consider when reconciling these non-GAAP measures to comparable GA The reconciliation schedule that we included in our press release will help walk you through these reconciliations. Thank you, everyone. I'd now like to open the call to questions. Operator?
We expect unallocated corporate SG&A to increase in the low to mid single digit percentage range year over year.
Also in the first quarter consistent with prior years.
Following items as it relates to expenses.
The reset wage basis for FICA 401, K match.
Our annual Merit and promotion wage increases go into effect on January one.
And an increase in stock compensation expense for restricted stock awards granted in March to retirement eligible employees.
Based on these factors, we anticipate approximately 15% to 20% of our full year adjusted EBITDA and full year adjusted EPS to be generated during the first quarter consistent with the pattern we've seen for the last several years.
As a closing reminder, with respect to 2020 for adjusted EBITDA adjusted net income and adjusted EPS. There are several items that you will need to consider when reconciling these non-GAAP measures to comparable GAAP measures.
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.
The reconciliation schedules that we included in our press release.
You through these reconciliations.
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 again.
Operator: One moment for our first question. Our first question comes from the line of Tobey Sommer of Truist Securities. Please go ahead, Tobey.
Tobey Sommer: Thank you. I was curious if you could speak to your medium-term financial targets laid out and yesterday. It's been, I don't know for exactly at the midpoint between when you gave them and when they'll ultimately be realized. How do you feel about those, in particular, the EBITDA margin figure? Thanks. Hey Tobey, it's John.
One moment for our first question.
Our first question comes from the line of Tobey Sommer of <unk> Securities. Please go ahead Tobey.
Thank you.
I was curious if you could.
Q your medium term financial targets laid out at Investor day, it's been exactly at the midpoint between when you gave them and when they'll ultimately be rendered but how do you feel about those in particular, the EBITA margin figure. Thanks.
John D. Kelly: So we feel good about our progress against those medium-term financial objectives that we established at our investor day back in 2022. Certainly, I think if you're looking at it from the perspective of even in dollars, we feel like we're pacing ahead of the projections that we talked about during that investor day. I think the mix has maybe been a little bit different than what we might have projected at that point in time.
Hey, Tobey its John.
So we we feel good about our progress against those medium term financial objectives that we established at our Investor day back in 2022.
Certainly I think if youre looking at it from the perspective of.
EBIT dollars and adjusted EPS we.
We feel like we're pacing ahead of the projections that we talked about during that Investor day, I think the mix has maybe been a little bit different than what.
John D. Kelly: The growth has been much stronger. So we talked about low double-digit growth, and our growth has actually been in excess of 20% the past couple of years. Related to that growth, we needed to continue to invest in our talent and our team to build out the resources to be able to deliver on that growth, and I think that's put a little bit of pressure on the margin. So the net-net has us ahead in terms of the EBITDA dollars and in terms of the adjusted EPS, but the mix has probably been a little bit different.
We might have projected at that point in time the growth has been much stronger. So we talked about low double digit growth in our growth has actually been in excess of 20% past couple of years.
And.
Related to that growth, we needed to continue to invest in our talent that our team to build out.
The resources to be able to deliver on that growth and I think that put a little bit of pressure on the margin percent. So the net net has US ahead in terms of the EBIT dollars in terms of debt.
Adjusted EPS, but the mix has probably been a little bit different I think going forward from where we're at we still feel good about our ability to meet or beat those revenue objectives.
John D. Kelly: I think going forward from where we are, we still feel good about our ability to meet those revenue objectives, and I think we feel really good about our guidance for 2024 from a margin perspective. And our focus will be on meeting or beating those margin percent objectives for 2024, which at the top end would be in the low 13% range. And if we're able to continue to execute and have a similar sort of step next year, I think that would get us comfortably into kind of that 14% plus range for the mid-team range at that point in time. But that's kind of the outlook halfway through.
And I think we feel really good about our guidance for 2024 from a margin perspective and our.
Our focus will be on meeting or beating those margin percent.
<unk> for 2020 for which at the top end would be in the low 13% range and if we're able to continue to execute and have a similar sort of step next year I think that would get us comfortably into kind of that 14% plus range for the mid teen range at that point in time, but that's that's kind of the outlook halfway through.
John D. Kelly: And maybe Toby, I'll add one comment to that, just to say, you know, when you look at the drivers, say, okay, what is it that we're doing that enables us to achieve those things? You know, we've made really good progress on utilization. We have more room to run there.
Yeah.
I'll add one comment to that just to say.
When you look the drivers to say, okay. What is it that we're doing that enables us to achieve those things.
We've made really good progress on utilization, we have more room to run there.
Mark Hussey: The pricing work that we've been doing is probably not fully baked in yet to everything we're doing across the enterprise. Our global delivery model continues to expand, and then, you know, just continuing to scale our corporate SG&A. So we've got a lot of levers still that we're pretty confident in. As John said, there have been, you know, system growth has created some headwinds, but we think we're going to get there. It'll probably be in that 14% plus range by 2025. Thank you. How long...
Pricing work that we've been doing is probably not fully baked in yet to everything we're doing across the enterprise.
Our global delivery model continues to expand and then just continuing scaling our corporate SG&A. So we've got a lot of levers that we're pretty confident in it.
John said Theres been assistant growth has created some headwinds, but we think we're going to get there it will probably be in that 14% plus range into 2045.
Thank you.
Mark Hussey: Sorry, do you think your hospital customers, what are you hearing from them in terms of how long they expect activity to remain at elevated levels? And therefore, you know, some of them are doing fine from a profitability perspective before that activity level normalizes. And, and maybe in the context of that answer, you could speak to what you're seeing from an assessment perspective in your PI office. Sure, Tobey.
How long.
Do you think your hospital customers what are you hearing from them in terms of how long they expect.
The activity to remain at elevated levels and therefore some of them.
Doing fine from a profitability perspective before that activity level normalizes and maybe in the context of that answer you could speak to what youre seeing from an assessment perspective in your pie offering.
Mark Hussey: This is Mark. I'll keep talking as long as my voice holds up. But we actually, as I noted in the script, started to see some improvement across the industry toward the latter half of 2023. There really is, I would say, a mixed story coming into 2024. So you have those systems, I think, that have actually done a pretty good job of recovering. And we're seeing them continuing to spend, but they're spending on the growth aspect of what they're trying to do. They're trying to enhance their digital platforms and things that are perhaps more pro-cyclical in nature, and we've repositioned our portfolio very well to be able to play both the up and down aspects of that. But having said that, there's still... a number of clients.
Sure sure Tobey this is mark I'll keep saga as long as my voice.
We actually as I noted in the script, we started to see some improvement across the industry towards the latter half of 2023.
Really is I would say a mixed story coming into 2024. So we have those systems I think that have actually done a pretty good job of recovering and we're seeing them continuing to spend with respect of got me on the growth aspect of what they're trying to do to try to enhance their digital platforms.
Things that are perhaps more pro cyclical in nature, and we've repositioned our portfolio very well to be able to play in both the up and down aspects of pet, but having said that there are still.
A number of clients and we.
Mark Hussey: And we are quite busy with a number of assessments coming into 2024 for those clients who are still facing ongoing challenges. So by no means do we think that demand is going to run out of the cycle here. We feel that 2024 will be, you know, just continuing to evolve. And that's kind of reflected in the pipeline.
We're quite busy on a number of assessments coming into 'twenty 'twenty four for those clients, who are still facing ongoing challenges silke.
No means do we think that demand is going to run out of cycle here. We feel that 2024 will be just continuing to evolve its got reflected in the pipeline.
John D. Kelly: Right, yeah, that's right, Mark. If we look at the pipeline and what gives us confidence in our guidance for the year and the continued growth really is an evolving mix where we've got plenty of projects in the pipeline that relate to clients that are going through some level of financial strain and are seeking performance improvement help, but now we're seeing increased pipeline activity related to some of our other offerings. Marks that are more pro-cyclical, like our strategy offerings, our non-distressed financial advisory offerings, and then critically, really the digital offerings, which I think a lot of clients at this point are now seeking to invest funds in their technology platforms and really try to modernize those to help them operate more efficiently to help them better get actionable insight from their data, protect their data, and automate as many processes as possible in a high labor cost So we're seeing a nice mix of projects right now that really reflect both the dynamics going on in the market. Okay, two things for me, and I'll get back to you.
Right yes.
That's right market, we look.
At the pipeline and what gives us confidence in our guidance for the year and the continued growth really is an evolving mix where we've got.
Still plenty of projects in the pipeline up related clients that are going through some level of financial strain and are seeking performance improvement health, but now we're seeing increased pipeline activity related to some of our other offerings, which as Mark said are more pro cyclical like our strategy offerings are.
Non distressed financial advisory offerings, and then critically really digital offerings, which I think a lot of clients. At this point are now seeking to invest funds in their technology platforms, and really tried to modernize those to help them.
Operate more efficiently to help them better get actionable insight from their data to protect their data automate many processes as possible in a high labor cost environment.
We're seeing a nice.
A nice mix of projects right now that really reflect both dynamics going on in the market.
Okay. Thanks.
John D. Kelly: Could you speak to why to expand? Liquidity now? And, and then John, if you could, what is the inorganic contribution to EBITDA and EPS in the initial guide? Sure, Tobey.
Things for me and I'll get back into queue could you speak to why to expand.
Quiddity now and and then John if you could what is the inorganic contribution.
To EBITDA and EPS.
John D. Kelly: So the first question about why expanding the borrowing capacity now has to do with the significant growth we've seen in the company over the past couple of years. When we first entered into our $600 million revolving credit facility, that was really designed to support 3.7 times EBITDA leverage, so our trailing 12-month bank deficit in EBITDA. And having seen our EBITDA practically double since 2021, that has significantly cut into our capacity on the $600 million revolver.
The initial guidance.
Sure Tobey so the first question about why expanding the.
The borrowing capacity now it really just has to do with the significant growth we've seen in the company over the past couple of years. When we first entered into our $600 million revolving credit facility that was really designed to support three seven times.
EBIT leverage our trade trailing 12 month bank definition of EBITDA and having seen our EBITDA practically doubled since 2021.
That is significantly cut into our capacity and $600 million revolver, so really adding the $275 million term loan that just kind of gets us back to the capacity that we originally had on a leverage basis given the much bigger size of the company now so from our perspective.
John D. Kelly: So really adding the $275 million term loan just kind of gets us back to the capacity that we originally had on a leverage basis, given the much bigger size of the company now. So from our perspective, in terms of capital deployment strategy with that extra capacity, I think it's the same messaging. I think you're going to see some mix of strategic top-end acquisitions as a result of our programmatic M&A process, as well as continued targeted share buybacks. But we just felt like, given our increased size, that we needed some more capacity. And then as far as GGA on the guide, I commented from a revenue perspective, given it's a partial year, kind of high-key million-dollar revenue. I'd expect that to flow through at the same percent as our overall corporate EBITDA percentage, just given that there will be some transition-type expenses during the first year. And then from an EPS perspective, it's accretive, but in this first partial year, it's pretty minimal from an EPS perspective. Thank you. Thank you.
In terms of capital deployment strategy with that extra capacity.
It's the same messaging I think youre going to see some mix of strategic tuck in acquisitions as a result of our.
Programmatic M&A process as well as continued targeted share buybacks, but we see we just felt like given our increased size and we needed some more capacity.
And then as far as.
<unk> and the guide.
I commented from a revenue perspective, giving us a partial year.
And a high teen million dollar revenue I would expect that to flow through at the same percentage of our overall corporate EBITDA percentage just given that there will be some transition type expenses. During the first year and then from a EPS perspective, it's accretive but in this first partial year.
It's pretty minimal from an EPS perspective.
Thank you.
John D. Kelly: Our next question comes from the line of Andrew Nicholas of William Blair and Company. Your question, please, Andrew. Thanks and good afternoon.
Thank you our next question.
It comes from the line of Andrew Nicholas of William Blair <unk> Company. Your question. Please Andrew.
Thanks, and good afternoon.
John D. Kelly: I want to double back on the margin conversation pretty, pretty good expansion that you expect here in 24. I think, Mark, you highlighted a few things where there's more room to run between utilization and pricing and delivery model. I'm just wondering if there's any way to maybe split up the 70 or 80 basis points of expansion across some of those drivers. Like, what is the primary set of drivers in 24?
I wanted.
To double back on the margin conversation.
Pretty.
Good expansion that you expect here in 'twenty four I think Mark you you highlighted a few things.
Where there is more room to run between utilization and pricing and the delivery model I was just wondering if theres any way to to maybe split up the 70 or 80 basis points of expansion across some of those drivers like what what is the primary.
Set of drivers in 'twenty, four and maybe related to that how much of this is is maybe expecting a pullback.
John D. Kelly: And maybe related to that, how much of this is maybe expecting a pullback in headcount growth and in some improved utilization as we progress through the year? But, you know, Andrew, I don't know if I would describe it as a pullback in headcount growth. I think what you'll probably see from a headcount growth perspective is that, in the base case this year, headcount growth will be generally in line with revenue growth. I think in terms of the breakout of that 70 basis points of improvement, between the key things that Mark mentioned, utilization, pricing, and then SG&A leverage, that's actually more than 70 basis points of improvement that we're expecting. And then on the flip side of that, we do expect to continue to invest in our business, continuing to add talent, and new areas to keep the growth going.
And head count growth and some improved utilization as we progress through the year.
But Andrew I don't know if I would describe it as I'll pull back and head count growth I think what youll, probably see from our head count growth perspective, as headcount growth in the base case. This year as the headcount growth will be generally in line with revenue growth.
In terms of.
The breakout of that 70 basis points of improvement between the key things that Mark mentioned utilization pricing and then SG&A leverage that's actually more than 70 basis points of improvement that we're expecting and then on the flip side of that we do expect to continue to invest in our business continuing to add talent and new areas.
To keep the growth going so I think the initiatives that we have underway actually contribute more than 70 basis points margin improvement and then would you expect to invest some of that back in the business. So in terms of.
John D. Kelly: So, I think the initiatives that we have underway actually contribute more than 70 basis points of margin improvement. And then we do expect to invest some of that back in the business. So, in terms of, you know, think of those investments as 100 basis points of investment. So, if you're thinking of then, okay, between 150 basis points to 200 basis points of operational efficiency improvement, I'd say that that's about split 50-50 between some of our pricing and utilization objectives, as well as continued global deployment of our India team, and then just some natural scaling of SG&A that we expect to experience. Great. That's very helpful. Thank you. And then You mentioned, I think briefly, some pickup in innoCite and some of the strategy pieces. Can you unpack that a little bit more?
What do you think of those investments is 100 basis points of investments. So if youre thinking of then okay between 150 basis points to 200 basis points.
Of operational efficiency improvement I would say that thats about split.
50, 50 between some of our pricing and utilization objectives as well as continued global deployment of our India team and then just some natural scaling of SG&A that we expect to experience this year.
Great. That's helpful. Thank you and then.
You mentioned I think briefly some some pick up in in our site and some of the strategy pieces can you unpack that a little bit more in.
John D. Kelly: And, you know, are there particular end markets where that is strongest? And how much of that recovery are you baking in for? Yeah, Andrew. It's Mark.
Are there particular end markets, where that is strongest and how much of of that recovery or are you baking in for 2000 and for us.
Mark Hussey: I would say that in 2023, what we saw for InnoCyte was a little bit slower start to the year, but really, what we were very excited to see was very good strength in the healthcare market, and really in conjunction with working across our team. So, very, very much kind of integrated into our overall delivery. At the same time, some of the industrial areas that we've had great strength in had a little bit quieter year, but coming into 24, we feel like they have a very strong pipeline across both sides of that business. And we're excited about just the good recovery into 2024. Great, thank you.
Yeah, Andrew it's Mark I would say that in 2023, what we saw was for insight a little bit slower start to the year, but really what we were very excited to see was very good strength in the health care market and really in conjunction with working across our team so very very.
Much of kind of integrated into our overall delivery.
At the same time some of the industrial areas that we've had great strength and had a little bit quieter year, but coming into 'twenty four we feel like they have a very strong pipeline across both sides of that business and we're excited about just the <unk>.
Good recovery into 2024.
William Sutherland: Thank you. Our next question comes from the line of Bill Sutherland of Benchmark. Please go ahead, Bill.
Great. Thank you.
Thank you.
Our next question.
Comes from the line of Bill Sutherland of Benchmark. Please go ahead bill.
John D. Kelly: Thank you. See you guys. Another terrific year in the books. I was curious about the refi, John, kind of what's the deal? Did you mention kind of how to think about interest expense? with the new, you know, would change. The change is really pretty minimal, Bill, because it's a, if you think about the funds flow on it, we added a $275 million term loan, but then we used the proceeds from that term loan to immediately pay down the revolver. So it's really about adding capacity. There will be some minimal incremental expense related to just the fees of establishing that, as well as now some more unused fees on the revolving credit facility. But that would be pretty minimal in the scheme of things.
Thank you.
Yes.
Another terrific.
Year in the books.
I was curious on the refi.
John.
What's the did you mentioned kind of how to think about interest expense would.
With the new.
With change.
The change is really pretty minimal build because if you think about the funds flow on it we added $275 million term loan, but then we use the proceeds from that term loan to immediately pay down the revolver. So it's really about adding capacity, let me some minimal incremental expense related to just a piece of.
Establishing that.
As well as now.
Some more unused fees on our revolving credit facility, but that that would be pretty minimal in the scheme of things.
John D. Kelly: Okay, I wasn't sure if there was, I don't think you mentioned if there was any change in rate. There's a 50 basis point additional spread on the term that we just think is more reflective of the market right now versus when we were able to lock in a revolving credit facility. But again, that probably, in the scheme of things, that will be pretty minimal.
Okay I wasn't sure. If there was I don't think you mentioned and if theres any change in rates.
So on that.
Ability, there's a 50 basis point additional spread on the term.
We just think it's more reflective of the market right now versus when we were able to lock in a revolving credit facility began at probably.
And in the scheme of things that will be pretty pretty minimal we did also.
John D. Kelly: We did also in the early first quarter do an interest rate. Wow, that we're able to lock in some more short-term savings versus the silver spot rate right now that largely offsets any of that additional expense of 2024. Okay. Okay.
In the early first quarter due an interest rate swap.
Wow.
We're able to lock in some more short term savings versus the silver spot rate right now that largely offsets any of that additional expense for 2024, okay.
John D. Kelly: John, when you were talking about, um, the drivers for the 23-segment results, it was interesting that in education, you mentioned digital, and then, but for the year, there were other parts of the business that seemed to be important. Was digital just...um, kind of a centerpiece of the fourth quarter, or was that just, um, am I reading too much into it and I'm curious how you're thinking about the offerings in education contributing to 24's Outlook. It was, you know, the fourth quarter; it was a broad-based demand bill.
Okay.
And Tom when you were talking about the drivers.
For the 20.
'twenty three segment results.
It was interesting on education, you mentioned digital and then but for the year. There was the other parts of the business which seem to.
The important.
Digital just.
Kind of a centerpiece of the fourth quarter or was that just.
Am I reading too much into it.
I'm curious how you're thinking about.
The offerings in education.
John D. Kelly: I would say that the leader in the clubhouse, though, was the digital offerings during the fourth quarter, which is why we highlighted them. But our consulting offerings, as well as our managed service offerings, which is a smaller base of revenue right now, both also had healthy growth during the fourth quarter. And then if you pivot towards... 2024, again, I think it's going to be a broad-based story in the education business. Clearly, from a digital perspective, we see clients investing in what many institutions right now are gated, legacy technology infrastructure that really needs to get modernized to help those universities meet their missions. But then, even beyond the digital side and the consulting side, you probably see it quite a bit now in the headlines, a lot of the pressure that universities are under. And so, some of our offerings that help our university partners enroll students from a philanthropic perspective that help them with their fundraising, and then help them minimize risk and efficiently manage their research function.
Contributing to 24, so outlook.
It was the fourth quarter it was broad based demand.
I'd say that the leader in the clubhouse, though with the digital offerings during the fourth quarter, which is why we why we highlighted but our consulting offerings as well as our managed service offerings, which is a smaller base of revenue right. Now stable also had healthy growth during the fourth quarter.
And then as you pivot towards.
2024, again, I think it's going to be a broad based story and the education business clearly from a digital perspective, we see clients investing in what many institutions right now are.
Dated legacy technology infrastructure.
That really needs to get modernized to help other universities.
I mean their meet their missions.
But then even beyond that the digital side on the consulting side of it.
Probably see it quite a bit down the headlines a lot of the pressure that universities are under.
And so some of our offerings that help our university partners enrolled students.
From a philanthropic perspective that help them with our fund raising.
And then help them.
Minimize risks and efficiently manage their research function. Those are all things that are very important to our education clients right. Now so I think the growth, we expect to see a pretty balanced across those across both areas.
Mark Hussey: Those are all things that are very important to our education clients right now. So, I think the growth we expect to see is pretty balanced across those areas. Yeah, and I'll just add research as well. Research has been a very important part of our portfolio, and it continues to be an area that clients pay a lot of attention to because it's so important, not only to their revenues but to their risk management around the research enterprise. So, I think it's been a very balanced story. You may have quarters where one is a little bit ahead of another, but I would just say from a demand standpoint, it's been very consistent demand across all of them. Right, no, it certainly has.
I'll just add research as well Richard has been a very important part of our portfolio continues to be the area that clients pay a lot of attention to because it's so important that most of the revenues.
Risk management around the research enterprise so.
I think it's it's been a very fat elsewhere, you may have quarters, where one is a little bit ahead of another but.
I would just say for body demand backdrop, it's been a very consistent demand across all of them.
Alright.
Mark Hussey: And finally, I was just curious, as you look at your headcount plans this year, are you weighting it heavily towards offshore, or is it going to be the same kind of net? I think it's going to be a similar mix to our program now. Okay, so that's not, that's not part of the plan. It's 150 to 200 bits.
He has.
And finally I was just curious as you look at your head count plans this year.
Are you waiting it heavily towards offshore or is it going to be this kind of book.
Same kind of mix.
I think it's gonna be a similar mix to our total lot count.
<unk>.
Okay. So that's not that's not part of the.
The 150 to 200 bps.
John D. Kelly: And so there is continued increased utilization out of our team; the Global Delivery Team in India is part of the margin story, but if you look at our headcount as of 12-31-2023, it's about 70% in North America and about 30% in India. When we look at our headcount modeling for the year, I don't think we expect any big shift in that percentage. It could be a little bit more weighted towards India, but it will be modest. I think it's going to be pretty balanced.
And so there is continued increased utilization.
Out of our team the global delivery team in India is part of the as part of the margin story, but if you look at our head count as of 12 31 2023, it's about 70%.
In North America, and about 30% and yet when we look at our head count modeling for the year I don't think we expect any big shift in that percentage it could it could be a little bit more weighted towards linear but it will be be modest I think it's going to be pretty balanced okay.
John D. Kelly: Okay. All right, guys, thanks. Thank you. Once again, to ask a question, please press star 11 on your touchtone telephone. Again, that's star 11 on your touchtone telephone to ask a question. Our next question comes from the line of Kevin Steinke of Barrington Research and Associates. Please go ahead, Kevin.
Alright, guys. Thanks.
Thank you once again to ask a question. Please press star one on your Touchtone telephone again Thats Star one one on your Touchtone telephone to ask a question.
Our next question comes from the line of Kevin Steinke of Barrington Research and Associates. Please go ahead Kevin.
Kevin Mark Steinke: Hi Mark and John. So I just wanted to ask about the education segment. Certainly another strong year, and a solid fourth quarter. However, we did see a sequential dip in revenue in the fourth quarter versus the third quarter. I guess we've kind of gotten spoiled by these continually sequential increases, although it's kind of flattened out, third quarter versus second quarter. But is there anything to note there in terms of timing of projects or anything that might have led to that sequential change, fourth quarter versus third quarter? Hey, Kevin, it's largely just related to business days and holidays during the fourth quarter. We see it across the entire business; there are always fewer effective business days in the fourth quarter than there are in other quarters. Within education, just based on our client schedules, sometimes that can be even a little bit more pronounced. And that's all that's all that you're seeing.
Hi, Mark and John.
So just wanted to ask about the education segment.
Certainly another strong year solid fourth quarter.
Yeah, we did see a sequential.
Different revenue fourth quarter versus third quarter, I guess, we've kind of gotten.
Spoiled by these.
Continuing sequential increases, although it's kind of flattened out third quarter versus second quarter, but.
Is there anything to note there in terms of.
Timing of projects or anything.
That might have.
Led to that sequential.
Change fourth quarter versus third quarter.
Hey, Kevin it's largely just related to business days and holidays during the fourth quarter and we see it across the entire business Theres always less effective business days in the fourth quarter than there are in other quarters within education.
Based on our clients' schedules, some time back and be even a little bit more pronounced and that's all that's all that youre seeing.
John D. Kelly: As I said, my remarks were respectingly low on growth for next year. So we are. We feel a bit about the growth trajectory in the education segment. Okay, great. So, yeah, just following up on the DGA acquisition. Maybe just a little more color on what attracted you to that business and how it fits in, and I guess it's lost in the education segment. So I'm assuming it predominantly serves education institutions, but you also mentioned healthcare nonprofits. Just also trying to get a sense for the business mix there. Yeah, Kevin, this is Mark.
As I said in my remarks, we're expecting low teens.
<unk> growth for next year, so we're on it.
We feel good about the growth trajectory in the education segment.
Okay great.
So yes.
Just following up on the GTA acquisition.
Maybe just a little more color on what attracted you to that.
<unk> and how it fits in and.
I guess it slots in the education segment, so I'm assuming it predominantly.
Education institutions, but you also mentioned health care nonprofit.
Also trying to get a sense for the business mix there.
Yeah. Kevin This is mark we're very excited about the G&A acquisition that John <unk> is joining us as well and will continue to be very active in the market.
Mark Hussey: We're very excited about the GG&A acquisition and that John Clear is joining us as well and will continue to be very active in the market. You noted correctly that, while their position in education, they actually do serve non-profits much more broadly and also on a global basis. They have clients in Europe as well. And so, as an example, what we believe will be the pitch here is, obviously, philanthropy is a huge lever within higher education to drive their revenue, but at the same time, it really gives an opportunity for us to bring some of our digital solutions and enablement to the advancement function, which has been just a great area of momentum for us from a sales force point of view. And we think the combination of that, their expertise around the whole advancement function, will be highly accretive to us. So we think it's well positioned.
You noted correctly that they're positioned in education that they actually do serve nonprofit much more broadly and also on a global basis they have clients in.
In Europe, as well and so as an example.
What we believe will be the pitch here is obviously philanthropies, a huge lever within higher education too to drive there.
Revenue at the same time, it really gives an opportunity for us to bring some of our digital solutions and enablement to advancement function to Ben just.
So a great area of momentum for us from a from a sales force point of view they would take the combination of that their expertise around.
The whole management function will be highly accretive to us so.
We think it's well positioned and then at the same time because of our operating model that really enables us to bring solutions across lines, we feel that as we have opportunities whether it's in health care, even outside of healthcare in the US. We're generally will have really very full ability to take advantage of the full scope and scale of that app.
Mark Hussey: And then at the same time, because of our operating model, that really enables us to bring solutions across lines. We feel that as we have opportunities, whether it's in healthcare or even outside of healthcare or not, more generally, we'll have a really very full ability to take advantage of the full scope and scale of that acquisition. Okay, great.
Acquisition.
Okay great.
Kevin Mark Steinke: Thank you. John, I think when you were talking about the progression towards the mid-teens margin target by 2025, you mentioned the mix has been maybe a little bit different than you would have expected. Is that just, were you referring to a mix of digital versus, or what was that comment targeted at?
Thank you.
I think when you were talking about the.
The progression towards that mid teens margin target by 2025.
You mentioned the mix has been maybe a little bit different than you would've expected.
Is that just what are you referring to mix of digital versus.
<unk> thing or.
What.
John D. Kelly: Thanks for asking, Kevin. And to clarify, I was more referring to the mix to get to the increase in adjusted EBIT as dollars and adjusted EPS that we've seen and how that's performing at this point. Pacing significantly ahead of our investor day targets in the path to getting to those increased even dollar amounts and increased EPS amounts. The mix has been a little bit more towards higher growth than what we had initially projected with a little bit of pressure on the margin percent just as we've been investing in our team to deliver that growth. So I was speaking about the two levers of revenue growth versus margin percent in getting to the nice results we've had from an increased need for dollars and just. Okay, understood, thanks.
What was that comment.
Targeted at.
Oh, Thanks for asking Kevin and <unk> to clarify I was more referring up the mix to get to the increase in adjusted EBIT dollars and adjusted EPS that we've seen and how that is at this point.
<unk> significantly ahead of our.
Investor day targets and the path to getting to those increased EBIT dollar amounts increased EPS mouse. The MX has been a little bit more towards.
Higher growth than what we had initially projected with a little bit of pressure on the margin percentage just as we've been investing in our team to deliver that growth.
Speaking about the two levers of revenue growth versus margin percent in getting to the nice results. We've had from an increased EBIT dollars and adjusted EPS.
Okay understood. Thanks, and then lastly.
John D. Kelly: And then lastly, you mentioned continued, ramp-up, or you know, greater utilization of your staff in India is one of the margin drivers going forward. Can you just update us on utilization there and, you know, plans to build out the team there, et cetera? So, Kevin, I think John and I will tag team on this one. So let me just tell you, from an expansion standpoint, we're really happy with how that team has been built out. And the way we do this is not an offshore capability.
You mentioned continued.
Ramp or.
Greater utilization of our <unk>.
Your staff in India is one of the Ah <unk>.
Margin drivers going forward can you just.
Date us on utilization there and.
No plans.
Plans to build out the team there et cetera.
So Kevin I think Jon I'll Tag team on this one so let me just tell you I think from a.
From an expansion standpoint, we're really happy with how that team has been built out and the way we view this as not an offshore capability, we really run the business truly on a global integrated pieces by each service line. So our team in India and our team in the U S. We consider part of one unified team and their goal is to.
John D. Kelly: We really run the business truly on a global, integrated basis by each service line. So our team in India and our team in the U.S., we consider part of one unified team, and their goal is to optimize their performance in the market together. So over time, we've continued to expand that to other areas of service. We have had a small team, as an example, in our business advisory practice, doing some consulting support around financial advisory engagements. It's had great success and impact. But more broadly, in terms of just the utilization numbers themselves, let me ask John to just give you an update. Yeah, Kevin, that's been a really great story for us as the year has progressed. So, as you may recall, at the end of 2022, we had made some targeted investments in our team in India to really build out our capacity there and in anticipation of growth.
Otherwise there are performance in the market together.
So over time, we've continued to expand that to other areas of service line we've added.
<unk> is an example of a business advisory practice doing some consulting support around financial advisory engagements is that.
Great success and impact, but more broadly in terms of just the utilization numbers themselves whether it be desktop just give you an update yes, Kevin that's been a really great story for us as the year has progressed. So as you may recall at the end of 2022, we have made some targeted investments in our team in India.
To really build out our capacity there anticipation of growth and part of that investment was we experienced lower utilization.
John D. Kelly: And part of that investment was we experienced some lower utilization in the back half of last year and into really the first quarter of this year. We've seen that utilization steadily increase over the course of the year, and by the time we got to the fourth quarter, it was very much in line with our overall utilization, which I would note for the fourth quarter was in the 78 to 79 percent range overall as a company, which is really one of the strongest utilization metrics we've posted that I can remember, and definitely gives us encouragement about the margins heading into next year as we expect to continue to operate at roughly that level heading into 2024.
In the back half of last year and interrelated first quarter of this year, we've seen that utilization steadily increase over the course of the year and by the time, we got to the fourth quarter. It is very much in line with our overall utilization, which I would note for the fourth quarter.
Was in the 70, 879% range overall as a company, which is really one of the strongest utilization metrics we posted.
That I can remember.
And definitely gives us encouragement on the margins heading into next year as we continue expect to continue to operate at roughly that level heading into 2024.
John D. Kelly: All right, thanks for the insight and for taking the questions. And seeing no more questions in the queue, I'd like to turn the call back to Mr. Thank you very, very much for joining us this afternoon. We look forward to speaking with you again in April when we announce our first quarter results. Have a good evening. That concludes today's conference call. Thank you everyone for your participation.
Alright, thanks for the insight.
For taking the questions.
And seeing no more questions in the queue I'd like to turn the call back to Mr. Hussey.
Thank you very very much for joining us. This afternoon, we look forward to speaking with you again in April we announced our first quarter results have a good idea.
Yes.
That concludes today's conference call. Thank you everyone for your participation.