Q2 2025 Huron Consulting Group Inc Earnings Call
[music].
Good afternoon, and welcome to Huron consulting group's webcast to discuss the financial results for the second quarter of 2025 at this time all.
At this time all conference call lines are on a listen only mode. Later, we will conduct a question and answer session for conference call participants and instructions will follow at that time as a reminder, this conference call is being recorded before we begin I would like to point all of you to the disclosure at the end of the Companys news release for information about forward looking statements that may be made or discussed on this call. The news release.
It's posted on <unk> web site.
Please review that information along with the filings with the SEC for a disclosure of factors that may impact subjects discussed in this afternoon's webcast. The company will be discussing one or more non-GAAP financial measures. Please look at the earnings release on <unk> website for all of the disclosures required by the SEC, including reconciliation to the most comparable GAAP numbers.
And now I'd like to turn the call over to Mark Hussey, Chief Executive Officer, and President of Huron Consulting Group Rostowski. Please proceed.
Good afternoon, and welcome to Huron consulting group's second quarter 2025 earnings call with me today are John Kelly, Our Chief Financial Officer, and Ronnie Dale Our Chief operating officer.
Revenues before reimbursable expenses or RBR in the quarter grew 8% over the second quarter of 2024, including organic RBR growth across all three operating segments.
RBR in the second quarter of 2025 was a record high for our business.
Growth in our core markets continues to reflect strong demand for our services health systems universities, and commercial businesses adapt to regulatory and macroeconomic pressures, while evolving their business models or success in the future.
Clients continue to seek our deep industry expertise breath of capabilities and proven track record of delivering results to help them achieve a more sustainable path forward in the face of significant market disruption.
The current demand environment, coupled with our strong client relationships provides us confidence in our outlook for continued growth in 2025 as reflected in our updated annual guidance.
I'll now share some additional insights into our second quarter performance.
In the healthcare segment second quarter, RBR grew 4% over the prior year quarter excluding.
Excluding the results for student education, which we divested at the end of 2020 for healthcare segment RBR grew 6% over the second quarter of 2024.
The increase in RBR in the quarter was driven by continued strong demand for our performance improvement.
Services financial advisory strategy, and innovation offerings, partially offset by a decrease in our digital offerings within health care.
The passage of the one big Beautiful build act earlier this month brought some clarity the anticipated reductions in federal spending on health care.
The cuts in Medicaid funding are projected to reduce federal spending on health care by over a trillion dollars over the next decade and are expected to result in a significant increase in patients without health insurance coverage.
In response hospitals and health systems are acting with urgency to prepared for margin declines anticipated in the coming years.
Ill addressing current financial pressures driven primarily by costs that continue to increase at a faster rate than reimbursements.
Within the current legislation any hospitals and health systems will be reductions in the supplemental payments that states have made to health care providers to augment low Medicaid reimbursement rates.
The expected increase in the uninsured population has been estimated to be up to 10 million people, which will increase the cost of uncompensated care for most hospitals.
As hospitals and health systems address their budget gaps and position their business for a more sustainable future.
Turning to Huron because of our decades long track record of delivering significant measurable it's sustainable financial benefits.
In this environment demand remained strong for our performance improvement financial advisory and strategy and innovation offerings as reflected in our RBR growth.
And our solid pipeline.
While demand for our digital offerings within health care remains solid we have seen slower sales conversions and certain areas within our pipeline for larger digital transformation engagements.
We believe this to be a temporary pause as our clients focus on their immediate priorities to address their financial situations.
As we've mentioned on prior earnings calls.
The breadth of our capabilities. We believe we are well positioned across a full range of market conditions to address the wide array of opportunities and challenges facing our hospital physician group and health system clients, both now and in the future, which we believe will drive continued growth for our health care segment.
Let me also add some perspective to the recent acquisition, we announced in the health care segment.
At the end of the second quarter, we acquired eclipse insights to strengthen our performance improvement offerings.
Partnered with eclipse insights in the market for several years.
This acquisition strengthens Huron mid revenue cycle expertise.
Enhancing our ability to support providers across the full revenue cycle continuum.
Patient intake and care delivery through documentation billing and reimbursement.
Flips insights brings deep experience in charge capture optimization clinical documentation coding Niles management and revenue strategy.
Key areas that had a direct impact on hospital financial performance.
Turning to Education Education segment, RBR grew 5% in the second quarter of 2025 over the prior year quarter, driven by strong demand for our strategy and operations offerings and increased demand for our research software product offerings achieved.
Record education segment RBR in the quarter. The team continues to execute exceptionally well given the ongoing dynamic regulatory landscape.
The recent legislative legislation brought some clarity for taxation of endowment earnings.
However, in most other areas universities and research institutes to remain in a period of heightened uncertainty.
The impact to our broad client base is highly variable and institutions are closely monitoring the evolving regulatory environment and assessing the magnitude timing and strategic implications of the potential scenarios that will affect that.
The industry continues to face the prospect of lower indirect reimbursement rates for research grants reduced federal support for research grants and contracts anticipated declines in enrollment numbers from international and domestic students and potential reductions in federal financial aid and.
As such our clients continue to strategically prepare for a variety of future scenarios, while preemptively taking action to position their organizations for the best possible outcome.
And a sustainable future.
This environment led to a record level of sales conversion for our education segment during the quarter.
Our performance improvement offerings in education remain in high demand as clients seek opportunities to reduce cost optimize their operations and strengthen their financial positions.
Demand for our digital offerings continues to be robust as clients view investments in their technology infrastructures to be foundational to driving enterprise wide operating efficiencies.
And research many clients are focused on optimizing the research strategies to align with our mission and to retain their research faculty.
And they are increasingly turning to our software products and managed services offerings to optimize their research administration operations.
As tuition and government revenue sources are pressured institutions are increasingly focused on optimizing fundraising strategies to grow philanthropic support.
Our advancement fundraising offerings are well positioned to address these evolving needs.
Our comprehensive and balanced portfolio allows us to serve our clients across the full spectrum of challenges and opportunities that they are facing in the current landscape.
And these are our clients are wide ranging and we believe we remain best positioned to serve them in this uncertain environment, given the breadth of our diverse offerings and our deep understanding of the industry and our clients institutions.
And now let me turn to the commercial segment.
In the second quarter of 2025, we also achieved record RBR in the commercial segment.
Commercial segment RBR grew 28% over the prior year quarter.
The increase was driven by the incremental RBR from our acquisition of Ixia and strong demand for our digital offerings.
Including the acquisition of <unk>, a commercial digital capability RBR grew 23% over the prior year quarter.
Building upon the strength of our digital financial advisory and strategy capabilities, our growth strategy in the commercial segment is focused on increasing the depth of our industry expertise, while broadening our offerings and market reach primarily seeking opportunities that are highly complementary to our current portfolio.
The strategy has led to continued growth in the commercial segment during a challenging market environment.
As our global clients navigate through the broader macro not macroeconomic environment, returning to Huron to advance their competitive positions drive operational efficiency and leverage data to make better faster decisions. For example, we're working closely with one of our vendor partners in Europe to bring our deep enterprise performance.
Management experience to serve large multinational clients.
Many of these large complex companies are upgrading their technologies to improve the quality and speed of planning scenario modeling and the data integration needed to make faster decisions and operate more effectively in today's volatile and dynamic environment.
As part of our programmatic M&A strategy, we're also investing inorganically to execute our commercial industry strategy.
Earlier this month, we acquired <unk>, a leading advisory partner to the financial services industry with relationships with over the top financial organizations in the world.
<unk> brings decades of specialized expertise in areas, such as risk management compliance operations financial crimes and fraud.
Combining <unk> offerings with Huron as existing industry specific digital capabilities creates a more comprehensive portfolio to help our clients address the complex challenges our balance sheet growth operational efficiency and automation with robust risk management and compliance with the most stringent regulations.
We have a solid track record of expanding our commercial portfolio to include accretive offerings and capabilities building upon our core commercial industries of focus and financial services, industrial and manufacturing energy and utilities and the public sector.
Believes that our focused strategy and disciplined investments, we will continue to foster our competitive advantage and support the achievement of our medium term financial targets in this segment.
And now let me turn to our outlook for the year.
Inclusive of our recent acquisitions today, we're increasing our RBR guidance to a range of $1 64 billion to $1 68 billion, which represents an increase of 12% at the midpoint of our guidance when compared to our full year 2024 results.
Maintaining our adjusted EBITDA margin guidance range of 14.0% to 14, 5% of RBR and increasing our adjusted non-GAAP EPS guidance to a range of $7 30.
$207 72.
It represents an increase of 16% at the midpoint as compared to full year 2024.
We're pleased with the progress we've made in executing our growth organic growth strategy in the first half of 2025, especially given the challenges posed by the current macro economic environment.
In parallel we continue to advance our programmatic M&A strategy containing a disciplined focus on delivering upon our stated goal of adding 2% to 4% inorganic growth annually.
In parallel we are <unk>.
Committed to driving continued sustainable margin expansion fueled by our ongoing pricing and efficiency initiatives.
I believe our outlook for 2025 reflects the strong foundation, we built the ongoing market tailwind for our business and continued solid execution of our growth strategy consistent with our medium term financial goals, we established at our Investor day in March.
Our strong first half of 2025 performance our pipeline of emerging opportunities and the strengthened outlook are only possible because of our deep industry expertise.
Broad portfolio of offerings, and our highly talented and collaborative team.
Disruption facing our clients and primary end markets is substantial stemming from the ongoing market uncertainty and regulatory environment as well as the rapidly evolving competitive landscape. We continue to believe this disruption creates significant opportunities for long term growth for Huron.
Now, let me turn it over to John for a more detailed discussion of our financial results.
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 free cash flow.
Our press release, 10-Q, and Investor Relations page on the Huron website reconciliations of these non-GAAP measures to the most comparable GAAP measures along with a discussion of why management uses these non-GAAP measures and by management believes they provide useful information to investors regarding our financial condition and operating results.
Before discussing our financial results for the quarter I'd like to discuss several housekeeping items.
First our second quarter 2025 results in the health care segment excludes the operating results from the studio education business, which was divested on December 31 2024.
Second our second quarter results and the education segment.
I think a full quarter of operating results from the acquisition of advancement resources, helping both of which closed in March 2025.
Third our acquisition of Eclipse insights.
On June 24th and as such a partial period of their operating results are included within the healthcare segment.
Operating results of eclipse are not material to our second quarter results.
Finally, our acquisition of <unk>, which closed in July is not included in our second quarter results.
The result of July we will begin to be included in the third quarter within the commercial segment.
Now I'll share some of the key financial results for the second quarter.
RBR for the second quarter of 2025.
$402 5 million up eight 3% from $371 7 million.
Same quarter of 2024.
Organic RBR, which excludes the RBR generated by all acquisitions completed subsequent to the second quarter of 2024 through.
Grew four 2% over the prior year quarter, driven by growth across all three operating segments.
As Mark mentioned, we achieved record RBR in the quarter crossing a $400 million Mark for the first time.
None of this would be possible without our incredible team and their dedication to our clients our business to each other.
Net income for the second quarter of 2025 was $19 $4 million.
$1 <unk> per diluted share compared to net income of $37 $5 million to.
$2 <unk> per diluted share in the second quarter of 2024.
As a percentage of total revenues net income decreased to four 7% in the second quarter of 2025 compared to nine 8% in the second quarter of 2024.
Net income for the second quarter of 2025, including $8 $2 million noncash impairment charge net of tax related to our convertible debt investment and a third party.
Net income for the second quarter of 2024 includes an $11 $1 million litigation settlement gain net of tax related to a completed legal matter in which John with the plaintiffs.
Our effective income tax rate in the second quarter of 2025 was 29, 9%.
With higher than the statutory rate primarily due to the establishment of a valuation allowance for deferred tax asset recorded as a result of the capital loss on our investment in hospital at home company as well as certain nondeductible expense items.
These unfavorable items were partially offset by a tax benefit related to nontaxable gains on our investments used to fund our deferred compensation liability.
Now expect an effective tax rate in the range of 25% to 27% for the full year.
Adjusted EBITDA was $66 million in Q2, 2025, or 15, 1% of RBR grew to $55 7 million.
15% of RBR in Q2 2024.
The increase in adjusted EBITDA for the quarter was primarily due to increases in segment operating income for all three operating segments exclude.
Excluding the impact of segment, depreciation and amortization and segment restructuring charges.
Actually offset by an increase in unallocated corporate expenses, excluding the impact of the change in the market value of our deferred compensation liability and transaction related expenses.
Adjusted net income was $33 7 million or $1 89 per diluted share in Q2 2025.
Year to $18 5 million.
The $1 68 per diluted share in the second quarter of 2024, resulting in a 12, 5% increase in adjusted diluted earnings per share over Q2 2024.
Now I'll discuss the performance of each of our operating segments.
The healthcare segment generated 49% of total company RBR during the second quarter of 2025.
The segment posted RBR of $197 8 million.
Up $7 7 million.
The four 1% from the second quarter of 2024.
The second quarter of 2024 included $3 $5 million of RBR, Steve Your education business, which was divested in 2024.
Excluding the results for Studer education.
Care segment Q2, RBR grew 6% over the second quarter of 2024.
The increase in RBR in the quarter was driven by continued strong demand for our performance improvement managed services financial advisory strategy and innovation offerings.
Partially offset by a decrease in our digital offerings within healthcare and a decrease in RBR due to the divestiture of our students' education practice.
The inorganic RBR contribution from our acquisitions was immaterial in the second quarter of 2025.
Operating income margin for healthcare was 32% in Q2 2025.
Third to 29, 1% in Q2 2024.
The increase in margin was primarily due to decreases in bad debt expense and salaries and related expenses for our support personnel.
Offset by an increase in contractor expenses as a percentage of RBR.
The education segment generated 32% of total company RBR during the second quarter of 2025.
Education segment posted record RBR, $129 3 million up $6 5 million or five 3% from the second quarter of 2024.
The increase in RBR in the quarter was driven by strong demand for our strategy and operations offerings.
Increased demand for our software product offerings within our digital capability.
Inorganic RBR contribution from our acquisitions was $2 2 million in the second quarter of 2025.
The operating income margin presentation was 25% in Q2 2025 compared to 25, 1% the same quarter in 2024.
<unk>.
The commercial segment generated 19% of total company RBR during the second quarter of 2025.
<unk> record RBR, $75 4 million up $16 6 million or 28, 2% from the second quarter of 2024.
The increase in RBR was driven by $12 3 million.
Incremental RBR for our acquisition of axiom strong demand for our digital offerings.
Operating income margin for the commercial segment was 16, 6% for Q2 2025 compared to 15, 3% for the same quarter in 2024.
The increase in operating income margin is primarily attributable to revenue growth that outpaced increases in compensation costs for our revenue generating professionals, partially offset by an increase in contractor expenses as a percentage of RBR.
Corporate expenses not allocated at the segment level, excluding corporate restructuring charges of.
The $54 $3 million in Q2, 2025 compared to $45 6 million in Q2 2024.
Unallocated corporate expenses in the second quarter of 2025.
<unk> $3 $7 million of expense related to the increase in the liability of our deferred compensation plan.
$700000 of expense in the second quarter of 2024.
These amounts are offset by the change in market value of the investment assets used to fund that plan, which is reflected in other income and expense.
Excluding the impact of our deferred compensation plan and restructuring expense in both periods analogy.
Unallocated corporate expenses increased $5 $8 million in the second quarter of 2025.
Merrily driven by increases in salaries and related expenses for our support personnel and legal expenses and third party professional fees related to M&A activity during the quarter.
Now I will turn to the balance sheet and cash flows.
Cash flow from operations in the second quarter of 2025 was $80 million during.
During the quarter, we used $6 $3 million to invest in capital expenditures inclusive of internally developed software costs, resulting in free cash flow of $73 $7 million.
We continue to expect full year free cash flow to be in a range of positive $160 million to $190 million net of cash taxes and interest and excluding noncash stock compensation.
DSO came in at 78 days for the second quarter of 2025.
Compared to 81 days for the second quarter of 2020 for the.
The decrease in DSO reflects the impact of collections on certain larger health care and education projects in alignment with their contractual payment schedules.
Total debt as of June 32025 was $657 $8 million.
Entirely of our senior bank debt.
Finished the quarter with cash of $61 million.
Net debt of $596 $8 million.
This was a $43 $9 million increase in net debt compared to Q1 2025, primarily due to the share repurchases and acquisition payments during the quarter.
Our leverage ratio as defined in our senior Bank agreement was.
Two five times adjusted EBITDA as of June 32025.
Compared to two two times adjusted EBITDA as of June 32024.
Continue to expect our year end leverage ratio to be approximately two times full year adjusted EBITDA.
<unk>.
In the second quarter, we used $61 million to.
<unk> repurchased approximately 430000 shares.
Our total year to date share repurchases to $133 9 million and approximately 938000 shares representing five 3% of our common stock outstanding as of December 31, 2024.
As of June 32025, $131 3 million maybe.
We made available for share repurchases under the current share repurchase authorization from our board of directors.
Since December 31, 2021, we have repurchased approximately five 7 million shares under our share repurchase program, returning over $500 million of capital to our shareholders.
Today, we announced that effective with the closing in July 30.
We have amended and restated our credit facility.
We extended the maturity date on the facility to 2030 and increased our borrowing.
Borrowing capacity to $1 $1 billion and favorable pricing terms to provide additional flexibility to support the anticipated growth in our business.
As well as our capital allocation strategy.
We remain committed to deploying capital in a balanced way.
And the capital to share returning capital to shareholders and executing strategic tuck in acquisitions, while maintaining our debt levels within our target leverage ratio.
Finally, let me turn to our guidance for the full year 2025.
Mark mentioned inclusive of our recent acquisitions today, we are increasing our RBR guidance to a range of $1 64 billion to one.
168 billion.
Maintaining our adjusted EBITDA guidance range of 14% to 14, 5% of RBR.
Increasing our adjusted non-GAAP EPS to a range of $7 30.
The $7 70.
Now let me provide some additional color into these numbers.
Before consideration of our recent acquisitions of a cliff since reliant.
We are narrowing and increasing the midpoint of our previous RBR guidance to a range of $162 billion to $1 $66 billion.
Actively narrowing to the upper half of our original guidance range. We're.
We're pleased with our first half performance year to date sales conversions and pipeline of emerging opportunities.
We believe we will continue to be well positioned to help our clients address increased strategic financial and operational pressures facing our businesses.
This pressure is particularly acute for our healthcare provider clients.
Driving increased demand for our performance improvement managed services financial advisory strategy and innovation offerings in the health care segment.
We expect our recent acquisitions of eclipse into reliant to collectively add approximately $20 million of RBR in the second half of 2025.
As such inclusive of these acquisitions and now expect full year consolidated RV RBR to be in the range of $1 $64 billion.
To $168 billion.
Approximately half of this acquisition of <unk> to be in our healthcare segment.
In our commercial segment.
We expect a net adjusted EBITDA from these acquisitions as a percentage of RBR.
Range consistent with our overall consolidated margin guidance fusin of certain expenses to integrate the businesses and we do not expect to repeat in 2026.
With regard to adjusted EPS, we expect the net impact of eclipse and try to be neutral for the remainder of 2025.
The incremental integration expenses over the next two quarters, we expect to eclipse and reliant.
Adjusted EPS accretive individually and in the aggregate in 2026.
Yes.
Finally, let me provide updated segment level guidance inclusive of the eclipse and <unk> acquisitions.
With regard to our health care segment.
We now expect upper single digit percentage revenue growth for full year 2025.
We now expect operating margins will be in a range of approximately 28% to 30%.
The education segment, we continue to expect mid to upper single digit percentage revenue growth for the full year 2025 and.
Operating margins between the range of approximately 23% to one 5%.
The commercial segment, we now expect to see growth in the mid 20% range for 2025, which includes a full year of vaccine and our recent acquisition of client.
We expect our operating margin in this segment will be in a range of approximately 18% to 20%.
Putting the full year revenue mix shift towards our digital offerings and <unk> integration expenses as discussed earlier.
We expect the mix shift to be more balanced between consulting and digital and the commercial segment starting in the second half of 2025 <unk>.
Do not expect the implemented to alliance integration expenses to extend beyond 2025.
Thanks, everyone I would now like to open the call to questions operator.
Thank you ladies and gentlemen, if you have a question at this time. Please press star one on your Touchtone telephone.
My question has been answered or you wish to remove yourself from the queue. You may do so by pressing star wouldn't want again.
One moment for our first question.
Yes.
Our first question comes from Andrew Nicholas with William Blair. Please proceed.
Hi.
Good afternoon, Thanks for taking my questions.
You mentioned on a few different occasions.
That the big Beautiful Bill brought some clarity it sounds like maybe a little bit more in healthcare.
And education, but I just wanted to ask broadly on visibility is it is it better or worse than three months ago six months ago and then.
How should we think about visibility.
How it relates to maybe the conservatism of guide.
Guidance from here.
Yes, Andrew the way I would characterize it looks like there was no shock I think and webcast came in one big beautiful Bill I think there was.
For the most part I think there was a.
Brought anticipation that there was going to be pressure on federal reimbursements, and so when I say it brings clarity it's like okay, well, we're no longer waiting to see what happens we now know what's going to happen and so now we're in a position to start to make some sort of a firmer decisions without that uncertainty. So I think it was more about.
Coming in line with what people generally expect there was some some nuances in every part of the bill when it got passed but I'd say generally speaking is consistent with our outlook for the full year in terms of the guidance that we've provided so I.
I would say is not necessarily propelling it bore is consistent and we just continue to see ongoing financial pressures given the size of these because for a long time, we've seen cost trends ahead of <unk> reimbursements, and probably maybe the incremental a little bit more pressure of this past year.
I'll just add Mark I think.
From a visibility perspective, I think that our visibility is stronger at this point than it was earlier in the year three months ago I would.
And some of that has to do with some of the.
Increased clarity around some of the regulatory environment, but some of that's due to with just our sales conversion over the first half of the year.
Pipeline at this point, even some of the activity, we see heading into the third quarter I think what is clear is that.
Within the healthcare segment for our healthcare provider clients. There are many clients who are going through either current financial strain or for a variety of factors concerned about.
Financial constraint in the near term and I think that is a strong driver for the consultant parts of our business in particular within healthcare.
<unk> improvement our strategy offerings, our financial advisory offerings, our managed services offerings. So I think is that as we've had those sales conversions and as the pipeline has strengthened to record highs I think that does provide additional visibility for us within the education segment.
Obviously theres been a lot of news I would say during the first half of the year. We continue to see both strong revenue execution, but then also strong sales conversion I think Mark noted in his comments we had record.
<unk> conversion for that team in the second quarter. So that's another thing that strengthens our visibility at this point so we feel good about that.
Great. Thank you.
Maybe just on healthcare.
You talked about a little bit slower sales conversions there as it relates to digital transformation work, but I think you also said that you believe it's a temporary pause can you maybe flesh that out a little bit more what makes you confident that's temporary and to what extent do you need it to be temporarily to hit your targets for this year.
Andrew I would say to answer that last part first it is in our guidance for the year is not is not contingent on any assumptions related to the pace of conversion.
Digital side of the business.
The healthcare segment perspective, the strength, we're seeing on the consulting side is definitely driving our confidence in the guidance moving forward as it relates to digital just to provide a little clarity there we actually do see demand.
For certain digital offering areas really across the board.
Some of our performance improvement projects.
We continue to see good strength, there I think what we have seen is a little bit.
Lower sales conversion cycle for some of the Standalone digital sales in that in that segment and I think thats.
Somewhat.
Intuitive given some of the financial pressures that our clients are going through right. Now I think we do see a shifting focus to some of the performance improvement projects that support.
Clients that are going through financial strain, but the reality is those underlying projects.
Eventually they need to get done and so we know that once our clients kind of reached that point and financial stability.
We're likely to have to circle back and take out some of those digital projects. So thats what gives us confidence that it's a temporary pause but in the meantime, we feel very well positioned to help them on the performance improvement side.
Great. Thank you.
One moment for our next question.
Our next question comes from Tobey Sommer with <unk> Securities. Please proceed.
Yes.
Okay. Thanks, I kind of wanted to dig in a little bit more if we could on the.
Delays in the pipeline conversion.
<unk> given some explanation, but what is the.
What are the elements that give you confidence that the delays are temporary.
Yes.
So again, Tony I would say just back to the context of what's happening in the market.
This is not by any where near the headline story of what is happening within the health care business. It's an element of whether the one component of probably five or six other major areas and I would just say.
We've seen just the increase of our clients who C. Suites are focused on driving financial stability to their business to prioritize that ahead of some of the other conversation. So I think it's really.
Not that they are going away. It's just they have more pressing needs in the context of where we are and I do think that.
Back to the outlook for the year I would say.
This is this is an area that we expect to have.
More than this is not just related to the approval of the legislation. These are these were long term trends coming into this legislation visa bell just dial it even more pressure beyond even 2025. So this is back to the comment we have about the longer term secular tailwind for our business feeling very good about it right.
If you think about the healthcare business from where we started the year, we increased our guidance today.
The initial outlook at the beginning of the year was mid single digit growth.
From an overall health care.
Segment perspective now upper.
Single digit revenue growth. If you go back to the original assumptions in the year for that mix between consulting and digital I think the net effect of this is more of a shift towards our higher margin consulting on part of the business during the year.
And we have just noted that some clients as we've engaged with them and theyre looking at their strategic agenda for the year, we're seeing more demand in our performance improvement side and some clients that are shifting some dollars that may be previously would have been allocated to digital to focusing on.
Aspects of performance improvement.
Okay I appreciate that.
<unk>.
In terms of hiring a head count.
Growth was quite high and maybe could you do.
Disaggregate the.
Impact of acquisitions from just.
And maybe speak to.
What your view is on utilization and.
Organic head count growth.
Going forward through the balance of the year.
Yes, so in terms of in terms of our head count growth I think a lot of the increase in head count growth came from our managed services business within the healthcare segment.
In terms of the excluding the managed services head count I think there it's really.
Two primary factors you did have some increase in headcount from the <unk>.
Lips acquisition that was in the neighborhood of 40, new team members joining as a result of that acquisition.
And then beyond that it's really just the strength in demand that we see right now on the consultant side within healthcare and based on the sales conversions and pipeline activity that we see we've been aggressive in the market, adding talent in that area to support the growth that we're expecting for the back half of the year. So those those will be the primary <unk>.
Areas, where.
We've seen headcount growth.
I appreciate that.
Where are you sort of year to date with the acquisitions that you have.
Thank you that you've consummated how does how do they sum up to your longer term sort of annual goals are you already at target for this year or do you think there is.
More to go before we flip the calendar 'twenty six.
Tobey I think we're actually.
Done a good job of kind of building that I think we have I would expect there might be maybe one or two some of the timing of these deals as you know you don't get to decide exactly when they fall, but I would say they are all within the.
The tuck in type categories that we have and certainly our expectation is to strive to stay in that balanced capital deployment strategy. So I would say.
We've made a lot of progress and you saw that with some of the.
Transaction costs within the quarter, we've been very very busy in the marketplace and the good news is we're finding areas that filling those gaps very nicely, we're finding the right partners.
Not necessarily for sale when we get working together and then it's leading to the kinds of conversations that we want to over time that would give us the long term confidence that it's going to be a successful deals. So I'd say, it's exactly power it very well, but maybe there might be another transaction or two by the end of the year.
Thank you very much.
Again, ladies and gentlemen, if you have a question or comment at this time. Please press star one on your telephone.
Our next question comes from Bill Sutherland with Benchmark Company. Please proceed.
Thank you.
Good evening guys the utilization rates were impressive in the quarter, 77% consulting and 78.
In digital should we think about is think of that as kind of the upper end of our range that youre likely to have in any given quarter or Sarah.
Zero.
It's a possibility that.
This is a level of it.
Maybe isn't the top of our range it could be like mid point now.
I would say bill it's closer to the top of the range in terms of utilization.
That doesn't mean, there couldnt be individual quarters work at flex a little bit higher but in terms of a sustainable rate of utilization I think that this is towards the top of our top end of where we want to be and the thing to keep in mind when you see those.
Utilization.
Metrics that you mentioned for consulting and digital of course, it's not.
Spread even across all teams. So within there you have certain teams that have even higher utilization that blend into that up into the 80% range and those are some of the areas, where we're more aggressively hiring right now to continue to build out the team and to give us capacity as we continue to grow so I think in those areas that are driving that average up.
Even a little bit our hope is that that will actually cool off and come down a little bit as the year goes on and we're adding new team members to <unk>.
We need to support the longer term growth business.
Okay.
Sure.
In the education segment with the record sales conversion in the quarter can you kind of rank order.
123 of what was getting the most momentum.
I would say within our strategy and operations team.
<unk> Bill is where we saw a lot of strength.
And I'd really characterize what we have seen strength, particularly in education is.
Offerings that really drive higher benefits either on investments in technology or.
Helping our clients right now work through their strategy through was a fairly disruptive environment improving student enrollment yields.
Reducing risk and improving the efficacy of research and driving more effective fundraising campaigns.
Those are the things right now that our clients are coming to you and Melissa.
Fairly in a fairly disruptive macro environment to start the year, where they are seeking our help to really navigate whether it's financial strain or operational disruption.
Mhm.
And lastly, the backdrop in the house in the health care side, where Theres, a fair amount of consolidation I am not sure if its accelerated year to date, sometimes it feels like it from the headlines, but what are you guys seeing there and how is it impacting your book.
That side.
You're talking back on health care, Bill with respect to consolidation.
Okay.
We certainly see.
Systems, continuing to want to acquire.
Hospitals that are going to help them achieve their growth objectives.
I would say for us it's not the.
Headlines, but it is certainly an element of what we're doing and helping them not only with the strategic evaluation of which targets, but then helping them on the post merger integration work as well.
So it's certainly a contributor to what's happening in the marketplace.
I would expect that as you see continued pressures sometimes those are the catalyst relating to transactions. Ultimately so it's going to it's going to continue to be an element of what we see in the market.
For sure.
Okay.
Okay. Thanks, guys.
One moment for our next thanks Joe.
Our next question comes from Kevin Steinke with Barrington Research Associates. Please proceed.
Hey, Thank you good afternoon.
So.
Just wondering.
If you could give.
Give investors some.
Tangible examples of.
How we can help health care.
Clients adapt to this more constrained.
Medicaid funding environment.
As expected surgeon.
On uninsured population I know it's the.
Same playbook <unk>.
<unk> been following for many years, but.
Perhaps you would be helpful. If you can just kind of point to.
Some of the things you can do on our performance improvement side revenue cycle side and.
How you hope the client base works through this.
Pretty substantial change.
I mean, if you go back to the core of this business back even.
16, 17 years ago, when we acquired.
Scott and wellspring over the years, we've built out a pretty comprehensive set of performance improvement offerings from revenue cycle to supply chain were two workforce setup to the clinical operations I mean pretty much. If there is any operation within the four walls of a hospital system.
Not only including the main hospital, but really the overall system.
We're doing an assessment not only other operations from where the cost savings opportunities, but more importantly, the balanced approach to find the growth opportunities for them to continue to improve their business I think depth and breadth of what we would have together and just the methodology of the track record of real savings that results are impacted we've made those are the things that are.
That will bring to every client based on their own unique setting in a situation.
Sometimes they know in advance where they want us to focus because they'd have.
Certainly some insights there but it's.
Much not limited and then that goes even beyond just the we call. It performance improvement the financial advisory areas, whether it's how you work with the office of the CFO and you get better insights in terms of the decision, making speed management of cash there is really I would say.
We're not aware of anyone else who's got the breadth of what we do and then we bring it together as a unified team and going to market in that way I think really gives us a great <unk>.
The value and impact for our clients.
Great. Thank you that's helpful.
Just.
Wanted to ask.
About the <unk> acquisition.
I'm trying to recall.
How much of this is an expansion of <unk>.
Maybe an adjacent services that Youre currently are providing.
Recall, how much you are into the risk management compliance side, but maybe just a little more color on what that.
Particular transaction brings to you in terms of.
Added capabilities.
We have.
Among our <unk>.
Commercial portfolio of financial services has been.
The number one or number two industry segment that we've had for a long time and a lot of those have been built in areas that are already doing risk management compliance reporting things that as we look at reliance are highly complementary to what they do and this gets back to even how we came together as Ben and outreach to.
To recognize where we have opportunities to take.
Air capabilities, our capabilities and really create a more comprehensive solution. So there's a lot of joined excitement for that.
We are very much aligned but not overlapping.
Okay.
Okay.
We should see the color I'll turn it back over.
Thank you are seeing there are no further questions in the queue I'd like to turn the call back to Mr. Husky.
Well. Thank you very much for joining us. This afternoon, we look forward to speaking with you again in October when we announce our third quarter results have a good evening.
This concludes today's conference call. Thank you everyone for your participation you may now disconnect.
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Okay.
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Yes.