Q2 2026 Huron Consulting Group Inc Earnings Call

July 28, 2026

Speaker #1: Noon and welcome to "Air on Consulting Groups" webcast to discuss financial results for the second quarter of 2026. At this time, all conference call lines are in a listen-only mode.

Speaker #1: 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.

Speaker #1: 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.

Speaker #1: Good afternoon, and welcome webcast to discuss financial results for the second quarter of 2026. At this time, all conference call lines are in a listen-only mode.

Speaker #1: The news release is posted on HearOn's website. Please review that information along with the filings with the SEC for disclosure of factors that may impact subjects discussed in this afternoon's webcast.

Speaker #1: 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.

Speaker #1: The company will be discussing one or more non-GAAP financial measures. Please look at the earnings release and, on HearOn's website, for all of the disclosures required by the SEC, including reconciliation to the most comparable GAAP numbers.

Speaker #1: And now, I would like to turn the call over to Marcossi. Chief Executive Officer and President of HearOn Consulting Group. Mr. Hussey, please go ahead.

Speaker #1: The news release is posted on Huron's website. Please review that information along with the filings with the SEC for disclosure of factors that may impact subjects discussed in this afternoon's webcast.

Speaker #2: Good afternoon, and welcome to HearOn Consulting Group's second quarter 2026 earnings call. With me today are John Kelly, our Chief Financial Officer; and Ronnie Dale, our Chief Operating Officer.

Speaker #1: 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 reconciliations to the most comparable GAAP numbers.

Speaker #2: Led by strong organic growth across all three operating segments, we achieved record revenues before reimbursable expenses, or RBR, in the second quarter of 2026, increasing 16% compared to the second quarter of 2025.

Speaker #1: And 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.

Speaker #2: That included record RBR across both our consulting and data services, and our digital capabilities. We're pleased with this meaningful step up in our RBR growth trajectory.

Speaker #2: Good afternoon, and welcome to Huron Consulting Group's second quarter 2026 earnings call. With me today are John Kelly, our Chief Financial Officer, and Ronnie Dale, our Chief Operating Officer.

Speaker #2: Our continued margin expansion and plus cash flow from operations delivered in the quarter. In addition, client bookings were up across all three segments during the first half of the year, with an acceleration during the second quarter.

Speaker #2: Our strong first-half performance, coupled with the continued strength of our backlog and pipeline reinforced our confidence in increasing our full-year RBR and earnings guidance, building upon our strong track record of consistent growth and margin expansion since 2021.

Speaker #2: That included record RBR across both our consulting and data services, and our digital capabilities. We're pleased with this meaningful step up in our RBR growth trajectory.

Speaker #2: Before I turn to our second quarter performance, let me provide some additional insights on how AI is creating growth opportunities and adding value to our business.

Speaker #2: Our continued margin expansion and robust cash flow from operations were delivered in the quarter. In addition, client bookings were up across all three segments during the first half of the year, with an acceleration during the second quarter.

Speaker #2: Increasingly, organizations are turning to HearOn to understand how the rapidly evolving AI and technology landscape can drive growth and operational improvement. Our teams are focused on helping clients address critical business priorities while executing shoulder-to-shoulder with them to integrate technology, including frontier AI models, and to redesign workflows and operating processes to help thrive and sustain tangible outcomes and improve financial returns.

Speaker #2: Our strong first-half performance, coupled with the continued strength of our backlog and pipeline, reinforced our confidence in increasing our full-year RBR and earnings guidance, building upon our strong track record of consistent growth and margin expansion since 2021.

Speaker #2: Before I turn to our second quarter performance, let me provide some additional insights on how AI is creating growth opportunities and adding value to our business.

Speaker #2: AI is driving demand for our digital services. During the first half of 2026, total bookings for our digital capability increased by more than 20% compared to the same period a year ago, and greater than 60% of those bookings have either direct AI scope for our clients or will have delivery that is significantly enabled by our AI tools.

Speaker #2: Increasingly, organizations are turning to Huron to understand how the rapidly evolving AI and technology landscape can drive growth and operational improvement. Our teams are focused on helping clients address critical business priorities while executing shoulder-to-shoulder with them to integrate technology—including frontier AI models—and to redesign workflows and operating processes to help drive and sustain tangible outcomes and improve financial returns.

Speaker #2: This is a significant increase in mix as such projects represented approximately 35% of our total bookings in the first half of 2025. We're increasingly confident that AI represents a significant revenue growth opportunity for our digital capability.

Speaker #2: Continued embed or deep industry expertise in proprietary data and insights into our AI-enabled solutions strengthening the differentiation of our offerings and enhancing tangible outcomes delivered to our clients.

Speaker #2: One good example of how AI is driving value in our healthcare business is our clinical intelligent automation solution, which goes healthcare organizations a scalable way to combine their trusted data with HearOn's proprietary data and expertise to drive clearer decisions and stronger financial performance.

Speaker #2: This is a significant increase in mix, as such projects represented approximately 35% of our total bookings in the first half of 2025. We're increasingly confident that AI represents a significant revenue growth opportunity for our digital capability.

Speaker #2: Specifically, this AI-enabled tool captures our proprietary data and insights, analytic methods, consulting playbooks, and then compresses the time to deliver insightful recommendations for clinical-related performance improvement opportunities to just hours rather than days or weeks.

Speaker #2: Continued embedding of deep industry expertise in proprietary data and insights into our AI-enabled solutions is strengthening the differentiation of our offerings and enhancing the tangible outcomes delivered to our clients.

Speaker #2: One good example of how AI is driving value in our healthcare business is our clinical intelligent automation solution, which gives healthcare organizations a scalable way to combine their trusted data with Huron's proprietary data and expertise to drive clearer decisions and stronger financial performance.

Speaker #2: As a result, we're able to identify even greater financial benefits, even faster, for our clients, creating new and expanded opportunities for our implementation services and increasing both our revenue and margin opportunities.

Speaker #2: AI continues to expand our addressable market as we offer new, innovative AI services and solutions to our clients. Both our own proprietary solutions as well as those we deliver with our technology partners, such as Anthropic, Microsoft, and AWS.

Speaker #2: Those engagements range from AI strategy, governance, and data modernization to AI pilots, scaling implementation, and managed services via point solutions and end-to-end transformation. Our views on AI and its potential impact on HearOn remain bullish, as we believe AI will prove to be a significant contributor to our future growth.

Speaker #2: As a result, we're able to identify even greater financial benefits, even faster, for our clients—creating new and expanded opportunities for our implementation services and increasing both our revenue and margin opportunities.

Speaker #2: AI continues to expand our addressable market as we offer new, innovative AI services and solutions to our clients—both our own proprietary solutions, as well as those we deliver with our technology partners, such as Anthropic, Microsoft, and AWS.

Speaker #2: We're confident that our collective strategic financial operational and digital offerings all enabled by AI will continue to yield positive revenue growth and margin expansion as evidenced by our continued strong backlog and pipeline.

Speaker #2: Those engagements range from AI strategy, governance, and data modernization to AI pilots, scaling implementation, and managed services via point solutions and end-to-end transformation. Our views on AI and its potential impact on Huron remain bullish, as we believe AI will prove to be a significant contributor to our future growth.

Speaker #2: Now I'll share some additional insight into our second quarter performance. In the healthcare segment, second quarter RBR grew 17% over the prior year quarter, reflecting strong demand for our healthcare-managed services, performance improvements, strategy, financial advisory, and digital offerings, as well as incremental RBR from our acquisitions.

Speaker #2: We're confident that our collective strategic, financial, operational, and digital offerings, all enabled by AI, will continue to yield positive revenue growth and margin expansion, as evidenced by our continued strong backlog and pipeline.

Speaker #2: Excluding the impact of the acquisitions, organic growth for the healthcare segment was 12% in Q2 2026 compared to Q2 2025. A significant portion of the healthcare provider market continues to be financially challenged, which in turn leads to continued growth tailwinds for our business.

Speaker #2: Now I'll share some additional insight into our second quarter performance. In the healthcare segment, second quarter RBR grew 17% over the prior year quarter, reflecting strong demand for our healthcare-managed services, performance improvement, strategy, financial advisory, and digital offerings as well as incremental RBR from our acquisitions.

Speaker #2: The OBVBA legislation is estimated to reduce federal healthcare spending by over $1 trillion, over the next 10 years. In a more meaningful regulations, our only beginning to take effect for hospitals and health systems.

Speaker #2: As these new regulations take effect, we expect strong demand for our portfolio of offerings to continue, as many organizations assess the likely financial and operational impacts on their businesses into 2027 and beyond.

Speaker #2: In combination with the ongoing trends of labor, supplies, and pharmaceutical costs that are rising faster than reimbursements, we believe the offering environment for the healthcare industry will yield solid demand for our performance improvements, strategy, digital, financial advisory, and managed services offerings, which we expect will continue to provide significant growth opportunities in years ahead.

Speaker #2: The OBBVA legislation is estimated to reduce federal healthcare spending by over $1 trillion over the next 10 years. The more meaningful regulations are only beginning to take effect for hospitals and health systems.

Speaker #2: In addition to strengthening our consulting offerings, we've also seen strong growth in our healthcare-managed services capabilities, which grew 64% in Q2 2026 compared to Q2 2025.

Speaker #2: In combination with the ongoing trends of labor, supplies, and pharmaceutical costs that are rising faster than reimbursements, we believe the operating environment for the healthcare industry will yield solid demand for our performance improvement, strategy, digital, financial advisory, and managed services offerings, which we expect will continue to provide significant growth opportunities in the years ahead.

Speaker #2: Led by 43% organic growth, clients are increasingly turning to HearOn for managed services, because of our differentiated expertise, our consistent delivery of financial benefit, and our continued investments in AI and automation.

Speaker #2: Managed services business is built upon delivering increased net revenue to our clients, higher cash flow yield, greater patient throughput, and improved patient collections. Like the majority of our performance improvement offerings, our pricing arrangements for managed services are designed around outcome-based models.

Speaker #2: In addition to strengthening our consulting offerings, we've also seen strong growth in our healthcare-managed services capabilities, which grew 64% in Q2 2026 compared to Q2 2025.

Speaker #2: Led by 43% organic growth, clients are increasingly turning to Huron for managed services, because of our differentiated expertise, our consistent delivery of financial benefit, and our continued investments in AI and automation.

Speaker #2: Improvement results are driving both strengthened demand for our services and exceptional client retention and recurring revenue for HearOn, as well as higher margins than traditional managed services models.

Speaker #2: To further enhance our managed services offerings in the second quarter, we acquired RelateCare, a leading provider of AI-enabled clinical and patient access managed services solutions.

Speaker #2: Our managed services business is built upon delivering increased net revenue to our clients and higher cash flow yield, greater patient throughput, and improved patient collections.

Speaker #2: Together, we strengthened our services around the patient journey by improving access and throughput, elevating patient and clinician experiences, and delivering measurable operational and financial performance.

Speaker #2: Like the majority of our performance improvement offerings, our pricing arrangements for managed services are designed around outcome-based models, so the results are driving both strength and demand for our services, with exceptional client retention and recurring revenue for Huron, as well as higher margins than traditional managed services models.

Speaker #2: As healthcare organizations navigate an increasingly complex regulatory and operating environment, we believe our deep client relationships, differentiated expertise, comprehensive portfolio, and outcomes-driven model position us to sustain strong performance in the healthcare segment.

Speaker #2: During next of the education segment, in the second quarter of 2026, we saw an acceleration of our growth rate, as the education segment RBR grew 8% compared to the second quarter of 2025, driven by strong demand for our digital and managed services offerings.

Speaker #2: Universities and colleges continue to face significant market pressures stemming from multiple factors, including declining enrollments, reduced research revenue, pressure on net tuition, increasing operating costs, and a challenging regulatory environment.

Speaker #2: These pressures create demand for our differentiated set of offerings. Given the opportunities and challenges facing the higher education industry, university leaders are moving beyond incremental solutions, pursuing broader enterprise transformation initiatives that modernize operating models, improve student outcomes, and leverage technology, data, analytics, and AI to drive better decisions and greater efficiency.

Speaker #2: During the next phase of the Education segment, in the second quarter of 2026, we saw an acceleration of our growth rate as the Education segment RBR grew 8% compared to the second quarter of 2025, driven by strong demand for our digital and managed services offerings.

Speaker #2: Market disruption facing higher education is creating continued opportunities for our education segment. We continue to enhance our comprehensive portfolio, strategy, operations, technology, and research offerings, to help institutions navigate these challenges and advance their missions.

Speaker #2: These pressures create demand for our differentiated set of offerings. Given the opportunities and challenges facing the higher education industry, university leaders are moving beyond incremental solutions and pursuing broader enterprise transformation initiatives that modernize operating models, improve student outcomes, and leverage technology, data, analytics, and AI to drive better decisions and greater efficiency.

Speaker #2: For example, we're further differentiating our offerings through innovative solutions, such as AI-enabled research administration tools, which are designed to enhance compliance and improve post-award quality control, and reduce administrative backlogs.

Speaker #2: HearOn's well-established reputation and long history of proven results and deep client relationships make us one of the most trusted advisors to the industry. We believe we'll drive future growth in this business as we address the comprehensive needs of our higher education clients.

Speaker #2: Market disruption facing higher education is creating continued opportunities for our Education segment. We continue to enhance our comprehensive portfolio, strategy, operations, technology, and research offerings to help institutions navigate these challenges and advance their missions.

Speaker #2: In the commercial segment, the second quarter RBR grew 25% over the prior year quarter, reflecting incremental RBR from our acquisitions, as well as strong demand for our financial advisory and strategy offerings.

Speaker #2: For example, we're further differentiating our offerings through innovative solutions such as AI-enabled research administration tools, which are designed to enhance compliance, improve post-award quality control, and reduce administrative backlogs.

Speaker #2: Excluding the impact of acquisitions, RBR in Q2 2026 grew 12% for organically over the second quarter of 2025. The increasing level of complexity in the operating environment for commercial organizations is driving global demand for transformational solutions that can bridge strategy, performance improvement, and technology execution.

Speaker #2: 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. We believe we'll drive future growth in this business as we address the comprehensive needs of our higher education clients.

Speaker #2: In the commercial segment, the second-quarter RBR grew 25% over the prior-year quarter, reflecting incremental RBR from our acquisitions as well as strong demand for our financial advisory and strategy offerings.

Speaker #2: We continue to invest organically and in targeted acquisitions, expand our capabilities, and deepen our expertise in our core industries within commercial, creating a platform that represented 21% of our total business RBR in the first half of 2026.

Speaker #2: Excluding the impact of acquisitions, RBR in Q2 2026 grew 12% organically over the second quarter of 2025. The increasing level of complexity in the operating environment for commercial organizations is driving global demand for transformational solutions that can bridge strategy, performance improvement, and technology execution.

Speaker #2: Our balanced portfolio of offerings, which are relevant in both cyclical and counter-cyclical demand cycles, has improved the durability of growth while expanding our addressable market as we add new capabilities in this segment.

Speaker #2: We believe the combination of our industry expertise and our capabilities all going to market together in an integrated operating model creates a differentiated value proposition for our clients that will help drive continued growth, diversification, and long-term value creation for our shareholders.

Speaker #2: We continue to invest organically and in targeted acquisitions to expand our capabilities and deepen our expertise in our core industries within commercial, creating a platform that represented 21% of our total business RBR in the first half of 2026.

Speaker #2: Today, I also want to highlight our digital capability. In the second quarter of 2026, digital capability RBR grew 9% over the prior year quarter, and sequentially compared to the first quarter of this year.

Speaker #2: Our balanced portfolio of offerings shows relevance in both cyclical and counter-cyclical demand cycles, as it has improved the durability of growth while expanding our addressable market as we add new capabilities in this segment.

Speaker #2: The strategically invested in our digital business since 2013, combining our deep industry expertise, our operational transformation capabilities, and technology execution, to help clients accelerate speed to value and improve the financial return on their technology investments.

Speaker #2: We believe the combination of our industry expertise and our capabilities, all going to market together in an integrated operating model, creates a differentiated value proposition for our clients that will help drive continued growth, diversification, and long-term value creation for our shareholders.

Speaker #2: We've seen the benefits of these investments build over time, including in the second quarter when we achieved record RBR. Our digital business in the healthcare segment achieved strong double-digit percentage growth in the second quarter as clients increased their investments in modernized digital platforms and data foundations, as well as distinct AI and automation projects.

Speaker #2: Today, I also want to highlight our digital capabilities. In the second quarter of 2026, digital capability RBR grew 9% over the prior-year quarter and sequentially compared to the first quarter of this year.

Speaker #2: We have strategically invested in our digital business since 2013, combining our deep industry expertise with our operational transformation capabilities and technology execution to help clients accelerate speed to value and improve the financial return on their technology investments.

Speaker #2: Based on our backlog and pipeline, we expect to see continued double-digit growth in healthcare in the back half of the year. In addition to our data management, analytics, and automation, and AI offerings, the first half of 2026 compared to the same period last year we've seen strong growth in our ERP, student information system, advisory services, and spend management offerings, as clients continue to advance their digital transformations to better position themselves to adapt in a more competitive AI-enabled market.

Speaker #2: We've seen the benefits of these investments build over time, including in the second quarter when we achieved record RBR. Our digital business in the healthcare segment achieved strong double-digit percentage growth in the second quarter as clients increased their investments and modernized digital platforms and data foundations, as well as distinct AI and automation projects.

Speaker #2: We believe our operations-led data and AI-enabled offerings position our digital capability to remain a key beneficiary of ongoing digital modernization across our core markets, for the foreseeable future.

Speaker #2: Based on our backlog and pipeline, we expect to see continued double-digit growth in healthcare in the back half of the year. In addition to our data management, analytics, automation, and AI offerings, in the first half of 2026, compared to the same period last year, we've seen strong growth in our ERP, student information system, advisory services, and spend management offerings, as clients continue to advance their digital transformations to better position themselves to adapt in a more competitive AI-enabled market.

Speaker #2: And now let me turn to our outlook for the year. Inclusive of the acquisition of RelayCare, today we're increasing and narrowing our RBR guidance to a range of 1.85 billion, to 1.89 billion, which represents an increase of 12% at the midpoint of our guidance compared to our full year 2025 results.

Speaker #2: Maintaining our adjusted EBITDA margin guidance range of 14.5% to 15% of RBR, which represents a 50 basis point increase over full year 2025 at the midpoint of our guidance range, and we're increasing our adjusted non-GAAP EPS guidance to a range of $9 to $9.40, which represents an increase of 17% at the midpoint compared to full year 2025.

Speaker #2: We believe our operations-led, data- and AI-enabled offerings position our digital capability to remain a key beneficiary of ongoing digital modernization across our core markets for the foreseeable future.

Speaker #2: And I want to turn to our outlook for the year. Inclusive of the acquisition of RelayCare, today we're increasing and narrowing our RBR guidance to a range of $1.85 billion to $1.89 billion, which represents an increase of 12% at the midpoint of our guidance compared to our full year 2025 results.

Speaker #2: We believe our updated outlook for 2026 reflects the ongoing market tailwinds for our business and the continued solid execution of our growth strategy will enable us to achieve the medium-term financial goals shared at our last investor day.

Speaker #2: We are maintaining our adjusted EBITDA margin guidance range of 14.5% to 15% of RBR, which represents a 50 basis point increase over full year 2025 at the midpoint of our guidance range. We are also increasing our adjusted non-GAAP EPS guidance to a range of $9.00 to $9.40, which represents an increase of 17% at the midpoint compared to full year 2025.

Speaker #2: And let me close by sharing that we're proud to have a track record over the last several years of consistently achieving RBR growth that has meant or exceeded many firms in the professional services industry.

Speaker #2: Our business momentum continues as reflected by our strong pipeline and bookings conversions in the quarter. In addition, we've built a multi-year track record of expanding our margins by executing against multiple operating levers, inclusive of AI, coupled with the benefits of scale stemming from a growing revenue base, which is expected to be double that of 2021, these factors collectively increase our confidence that we can continue to expand our adjusted EBITDA margins consistent with our stated goal of 15 to 17% by 2029.

Speaker #2: We believe our updated outlook for 2026 reflects the ongoing market tailwinds for our business, and the continued solid execution of our growth strategy will enable us to achieve the medium-term financial goals shared at our last investor day.

Speaker #2: And let me close by sharing that we're proud to have a track record over the last several years of consistently achieving RBR growth that has met or exceeded many firms in the professional services industry.

Speaker #2: And finally, our strong free cash flow allows us to continue to strategically deploy capital in a balanced way, while achieving our leverage target by the end of the year.

Speaker #2: Our business momentum continues, as reflected by our strong pipeline and bookings conversions in the quarter. In addition, we’ve built a multi-year track record of expanding our margins by executing against multiple operating levers, inclusive of AI. Coupled with the benefits of scale stemming from a growing revenue base, which is expected to be double that of 2021, these factors collectively increase our confidence that we can continue to expand our adjusted EBITDA margins, consistent with our stated goal of 15% to 17% by 2029.

Speaker #2: We believe the disciplined execution against our algorithm for value creation, achieving low double-digit revenue growth, consistent margin expansion, strong cash flow, and balanced capital deployment positions us well to meet or exceed our adjusted EPS goals, and will ultimately drive significant value creation for our shareholders.

Speaker #2: Finally, our continued financial performance and confidence in our 2026 outlook are only made possible because of our highly talented global team. They are a commitment to our clients, our business, and their ability to adapt to the many changes in the business environment as a testament to the strength of our culture, and furthers our ability to attract top talent to support our growth momentum, while driving our business forward through continuous innovation and distinctive client service.

Speaker #2: And finally, our strong free cash flow allows us to continue to strategically deploy capital in a balanced way, while achieving our leverage target by the end of the year.

Speaker #2: We believe that disciplined execution against our algorithm for value creation—achieving low double-digit revenue growth, consistent margin expansion, strong cash flow, and balanced capital deployment—positions us well to meet or exceed our adjusted EPS goals and will ultimately drive significant value creation for our shareholders.

Speaker #2: Now let me turn it over to John for a more detailed discussion of our financial growth. John?

Speaker #3: Sure. Thank you, Mark, and good afternoon, everyone. Before I begin, please note that I'll be discussing non-GAAP financial measures, such as EBITDA, adjusted EBITDA, adjusted net income, adjusted EPS, and free cash flow.

Speaker #2: Finally, our continued financial performance and confidence in our 2026 outlook are only made possible because of our highly talented global team. Their commitment to our clients and our business, and their ability to adapt to the many changes in the business environment, is a testament to the strength of our culture and furthers our ability to attract top talent to support our growth momentum, while driving our business forward through continuous innovation and distinctive client service.

Speaker #3: Press release 10Q and investor relations page on the year-end website have reconciliations of these non-GAAP measures to the most comparable GAAP measures, along with a discussion of why management uses these non-GAAP measures and why management believes they provide useful information to investors regarding our financial condition and operating results.

Speaker #2: Now let me turn it over to John for a more detailed discussion of our financial growth. John?

Speaker #3: Before discussing our financial results, I would like to discuss one housekeeping item. Our healthcare segment results do include a partial quarter of operating results from our acquisition of RelayCare, which closed on June 3rd.

Speaker #3: Sure. Thank you, Mark. Good afternoon, everyone. Before I begin, please note that I'll be discussing non-GAAP financial measures, such as EBITDA adjusted EBITDA, adjusted net income, adjusted EPS, and free cash flow.

Speaker #3: Now I'll share some of the key financial results for the second quarter of 2026. The second quarter of 2026 produced record RBR of 465.6 million dollars, up 15.7% from 402.5 million dollars in the same quarter of 2025.

Speaker #3: The press release, 10-Q, and investor relations page on the Huron website have reconciliations of these non-GAAP measures to the most comparable GAAP measures, along with 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.

Speaker #3: Driven by growth across all three operating segments, including 10.8% organic RBR growth in the quarter. Net income for the second quarter of 2026 was 31.2 million dollars, or $1.91 per diluted share, compared to net income of 19.4 million dollars, or $1.09 per diluted share in the second quarter of 2025.

Speaker #3: Before discussing our financial results, I would like to address one housekeeping item. Our Healthcare segment results do include a partial quarter of operating results from our acquisition of RelayCare, which closed on June 3rd.

Speaker #3: Now I'll share some of the key financial results for the second quarter of 2026. The second quarter of 2026 produced record RBR of $465.6 million, up 15.7% from $402.5 million in the same quarter of 2025.

Speaker #3: As a percentage of total revenues, net income increased to 6.6% in the second quarter of 2026, compared to 4.7% in the second quarter of 2025.

Speaker #3: Driven by growth across all three operating segments. Including 10.8% organic RBR growth in the quarter. Net income for the second quarter of 2026 was 31.2 million dollars, or $1.91 per diluted share, compared to net income of 19.4 million dollars, or $1.09 per diluted share in the second quarter of 2025.

Speaker #3: Our effective tax rate in the second quarter of 2026 was 27.2%, which is less favorable than the statutory rate inclusive of state income taxes, primarily due to certain non-deductible expense items and the inability to recognize tax benefits related to certain foreign and capital losses partially offset by a tax benefit related to non-taxable gains on the investments used under deferred compensation liability.

Speaker #3: As a percentage of total revenues, net income increased to 6.6% in the second quarter of 2026, compared to 4.7% in the second quarter of 2025.

Speaker #3: Our expectation for a full-year effective tax rate between 28 and 30 percent remains unchanged. Adjusted EBITDA was 72.6 million dollars in Q2 2026, up 15.6% of RBR, compared to 60.6 million dollars in Q2 2025, up 15.1% of RBR.

Speaker #3: The increase in adjusted EBITDA was primarily attributable to the increase in segment operating income for all three of our segments, excluding segment depreciation and amortization in segment restructuring charges, partially offset by an increase in certain unallocated corporate expenses.

Speaker #3: Our expectations for a full-year effective tax rate between 28 to 30 percent remain unchanged. Adjusted EBITDA was $72.6 million in Q2 2026, up 15.6% of RBR, compared to $60.6 million in Q2 2025, up 15.1% of RBR.

Speaker #3: We are pleased with our continued margin expansion in the quarter consistent with our medium-term financial goals. Adjusted net income was 40.2 million dollars, or $2.46 per diluted share in the second quarter of 2026, compared to 33.7 million dollars, or $1.89 per diluted share in the second quarter of 2025, growing adjusted EPS to 30.2% year over year.

Speaker #3: The increase in adjusted EBITDA was primarily attributable to the increase in segment operating income for all three of our segments, excluding segment depreciation and amortization and segment restructuring charges, partially offset by an increase in certain non-allocated corporate expenses.

Speaker #3: Now I'll discuss the performance of each of our operating segments. The healthcare segment generated 50% of company RBR during the second quarter of 2026.

Speaker #3: We are pleased with our continued margin expansion in the quarter, consistent with our medium-term financial goals. Adjusted net income was 40.2 million dollars, or $2.46 per diluted share in the second quarter of 2026, compared to 33.7 million dollars, or $1.89 per diluted share in the second quarter of 2025, growing adjusted EPS to 30.2% year over year.

Speaker #3: This segment posted record RBR of 232.3 million dollars, up 34.5 million dollars, or 17.4% from the second quarter of 2025, driven by strong demand for our healthcare-managed services and performance improvement strategy, financial advisory, and digital offerings.

Speaker #3: RBR in the second quarter of 2026 included 10.1 million dollars of incremental RBR from our acquisitions of RelayCare, Cliffs Insights, and Axion. Operating income margin for the healthcare segment remained relatively flat at 30.1% in Q2 2026, compared to Q2 2025.

Speaker #3: Now I'll discuss the performance of each of our operating segments. The Healthcare segment generated 50% of company RBR during the second quarter of 2026.

Speaker #3: Operating income margins increased nearly 300 basis points during the first half of 2025, compared to the same period of 2024, reflective of a very strong 2025 margin performance in the segment.

Speaker #3: We are pleased that we've been able to maintain strong margin performance in the first half of 2026, with the segment benefiting from healthy utilization and disciplined SG&A expense management.

Speaker #3: RBR in the second quarter of 2026 included $10.1 million of incremental RBR from our acquisitions of RelayCare, Cliffs Insights, and Axion. Operating income margin for the healthcare segment remained relatively flat at 30.1% in Q2 2026, compared to Q2 2025.

Speaker #3: The education segment generated 30% of total company RBR during the second quarter of 2026. Education segment RBR in the second quarter of 2026 was 139.4 million dollars, up 10.1 million dollars, or 7.8% from the second quarter of 2025.

Speaker #3: Operating income margins increased nearly 300 basis points during the first half of 2025, compared to the same period of 2024, reflecting very strong 2025 margin performance in the segment.

Speaker #3: The increase in RBR in the quarter was primarily attributable to strong demand for our digital and managed services offerings. The operating income margin for education was 26.8% for Q2 2026, compared to 25% for the same quarter in 2025.

Speaker #3: The Education segment generated 30% of total company RBR during the second quarter of 2026. Education segment RBR in the second quarter of 2026 was $139.4 million, up $10.1 million, or 7.8%, from the second quarter of 2025.

Speaker #3: The increase was primarily driven by revenue growth that outpaced the increase in salaries and related expenses for our revenue-generating professionals and a decrease in project costs partially offset by an increase in performance bonus expense.

Speaker #3: Commercial segment generated 20% of total company RBR during the second quarter of 2026. Commercial segment RBR grew 18.6 million dollars, or 24.6% to 94 million dollars in Q2 2026, compared to 75.4 million dollars in the second quarter of 2025.

Speaker #3: The increase in RBR in the quarter was primarily attributable to strong demand for our digital and managed services offerings. The operating income margin for Education was 26.8% for Q2 2026, compared to 25.0% for the same quarter in 2025.

Speaker #3: The increase was primarily driven by revenue growth that outpaced the increase in salaries and related expenses for our revenue-generating professionals, and a decrease in project costs, partially offset by an increase in performance bonus expense.

Speaker #3: The increase in RBR reflects 9.2 million dollars of incremental RBR from our acquisitions of Trilliant and Wilson Paramount, as well as strong demand for our financial advisory and strategy offerings.

Speaker #3: Excluding the impact of acquisitions, commercial RBR in Q2 2026 grew 12.2% organically over the prior year period, operating income margin for the commercial segment grew to 21% for Q2 2026, compared to 16.6% for the same quarter in 2025.

Speaker #3: The increase in operating income margin was primarily driven by decreases in contractor expenses and salaries and related expenses for our support personnel as well as revenue growth that outpaced an increase in salaries and related expenses for our revenue-generating professionals partially offset by increases in performance bonus expense and share-based compensation expense for our revenue-generating professionals as percentages of RBR.

Speaker #3: The increase in RBR reflects $9.2 million of incremental RBR from our acquisitions of Triliant and Wilson Paramount, as well as strong demand for our financial advisory and strategy offerings.

Speaker #3: Excluding the impact of acquisitions, commercial RBR in Q2 2026 grew 12.2% organically over the prior year period. Operating income margin for the commercial segment grew to 21% for Q2 2026, compared to 16.6% for the same quarter in 2025.

Speaker #3: Corporate expenses not allocated at the segment level excluding restructuring charges were 65.4 million dollars in Q2 2026, compared to 54.3 million dollars in Q2 2025.

Speaker #3: The increase in operating income margin was primarily driven by decreases in contractor expenses and salaries, and related expenses for our support personnel, as well as revenue growth that outpaced an increase in salaries and related expenses for our revenue-generating professionals. This was partially offset by increases in performance bonus expense and share-based compensation expense for our revenue-generating professionals, as percentages of RBR.

Speaker #3: Unallocated corporate expenses in the second quarter of 2026 and 2025 include expense of 6.1 million dollars and 3.7 million dollars, respectively, related to changes in the liability of our deferred compensation plan.

Speaker #3: Which is offset by the change in fair value of the investment assets used to fund that plan, reflected in other expense. Excluding the impact of the deferred compensation plan in both periods, unallocated corporate expenses increased 8.7 million dollars, which included approximately $2 million of costs that had been reclassified from our operating segment in 2026.

Speaker #3: Corporate expenses not allocated at the segment level, excluding restructuring charges, were $65.4 million in Q2 2026, compared to $54.3 million in Q2 2025.

Speaker #3: Non-allocated corporate expenses in the second quarter of 2026 and 2025 included expenses of $6.1 million and $3.7 million, respectively, related to changes in the liability of our deferred compensation plan.

Speaker #3: Reflected of a shift to centralized support for certain sales and operations functions. The remaining increase in unallocated corporate expenses reflect increases in compensation costs for our support personnel and software and data hosting expenses.

Speaker #3: This is offset by the change in fair value of the investment assets used to fund that plan, reflected in other expense. Excluding the impact of the deferred compensation plan in both periods, non-allocated corporate expenses increased $8.7 million, which included approximately $2 million of costs that had been reclassified from our operating segments in 2026.

Speaker #3: Now I'll turn into the balance sheet and cash flows. Cash flow from operations in the second quarter of 2026 was 120.5 million dollars, compared to 80.1 million dollars in the prior year period.

Speaker #3: During the second quarter of 2026, we used 9.1 million dollars to invest in capital expenditures, inclusive of internally developed software costs, resulting in free cash flow of 111.3 million dollars.

Speaker #3: Reflective of a shift to centralized support for certain sales and operations functions. The remaining increase in non-allocated corporate expenses reflects increases in compensation costs for our support personnel, as well as software and data hosting expenses.

Speaker #3: We continue to expect full-year free cash flow to be in the range of 180 million dollars to 220 million dollars, net of cash taxes and interest and excluding non-cash stock compensation.

Speaker #3: Now I'll turn to the balance sheet and cash flows. Cash flow from operations in the second quarter of 2026 was $120.5 million, compared to $80.1 million in the prior year period.

Speaker #3: We believe our robust free cash flow generation remains a highly compelling aspect of our financial model. Please note that the midpoint of our free cash flow guidance and updated full-year weighted average diluted share count expectation produced expected free cash flow per share of nearly $12, for a free cash flow yield per share of nearly 10% based on a stock price of 120 dollars.

Speaker #3: During the second quarter of 2026, we used $9.1 million to invest in capital expenditures, inclusive of internally developed software costs, resulting in free cash flow of $111.3 million.

Speaker #3: We continue to expect full-year free cash flow to be in the range of $180 million to $220 million, net of cash taxes and interest, and excluding non-cash stock compensation.

Speaker #3: DSO came in at 79 days for the second quarter of 2026, compared to 82 days for the first quarter of 2026. The decrease when compared to the first quarter was primarily attributable to the impact of collection on certain healthcare and education projects that alignment with the contractual payment schedules.

Speaker #3: During the second quarter of 2026, we used 53.1 million dollars to repurchase approximately 438,000 shares. Bringing our total year-to-date repurchases to 208.6 million dollars for approximately 1.6 million shares.

Speaker #3: ESO came in at 79 days for the second quarter of 2026, compared to 82 days for the first quarter of 2026. The decrease when compared to the first quarter was primarily attributable to the impact of collections on certain healthcare and education projects that are aligned with the contractual payment schedules.

Speaker #3: Representing 9% of our outstanding shares as of the beginning of the year. Total debt as of June 30, 2026, was $834 million. Consisting entirely of our senior bank debt.

Speaker #3: We finished the quarter with cash of 31.2 million dollars for net debt of $802.8 million. This was a 26.8 million dollar decrease in net debt compared to Q1 2026, even after consideration of the share repurchases and acquisition payments made during the quarter.

Speaker #3: During the second quarter of 2026, we used $53.1 million to repurchase approximately 438,000 shares, bringing our total year-to-date repurchases to $208.6 million, or approximately 1.6 million shares.

Speaker #3: Our leverage ratio is defined in our senior bank agreement as 2.8 times adjusted EBITDA as of June 30, 2026, compared to 3.1 times as of March 31, 2026.

Speaker #3: Representing 9% of our outstanding shares as of the beginning of the year. Total debt as of June 30, 2026, was $834 million, consisting entirely of our senior bank debt.

Speaker #3: We remain committed to achieving a leverage ratio between 2 and 2.5 times by the end of 2026, and alignment with the capital allocation strategy outlined at our most recent investor day.

Speaker #3: We finished the quarter with cash of $31.2 million and net debt of $802.8 million. This was a $26.8 million decrease in net debt compared to Q1 2026, even after considering the share repurchases and acquisition payments made during the quarter.

Speaker #3: In summary, we are encouraged by the acceleration of organic RBR growth during the first half of 2026 when compared to 2025, and our continued margin expansion trajectory.

Speaker #3: Our leverage ratio is defined in our senior bank agreement as 2.8 times adjusted EBITDA as of June 30, 2026, compared to 3.1 times as of March 31, 2026.

Speaker #3: Driven by continued strong operating income performance by our healthcare segment and meaningful operating income percentage improvements in our education and commercial segment. Compounding impact of this revenue growth and adjusted EBITDA margin percentage expansion along with the impact of our share repurchase program drove the 30% increase in adjusted earnings per share during the second quarter of 2026.

Speaker #3: We remain committed to achieving a leverage ratio between 2.0 and 2.5 times by the end of 2026, in alignment with the capital allocation strategy outlined at our most recent Investor Day.

Speaker #3: In summary, we are encouraged by the acceleration of organic RBR growth during the first half of 2026 when compared to 2025, and our continued margin expansion trajectory.

Speaker #3: Finally, let me turn to our guidance for the full year of 2026. As Mark mentioned, inclusive of our recent acquisitions, today we are increasing and narrowing our RBR guidance to a range of 1.85 billion dollars to 1.89 billion dollars, maintaining our adjusted EBITDA margin guidance of 14.5% to 15% of RBR, and increasing our adjusted non-GAAP EPS guidance to a range of $9 to $9.40.

Speaker #3: Driven by continued strong operating income performance by our Healthcare segment and meaningful operating income percentage improvements in our Education and Commercial segments, the compounding impact of this revenue growth and adjusted EBITDA margin percentage expansion—along with the impact of our share repurchase program—drove the 30% increase in adjusted earnings per share during the second quarter of 2026.

Speaker #3: Our strong first half performance continued strength of our backlog and pipeline provide us confidence in increasing our full-year RBR and earnings guidance. Now let me provide some additional color into these numbers.

Speaker #3: Finally, let me turn to our guidance for the full year of 2026. As Mark mentioned, inclusive of our recent acquisitions, today we are increasing and narrowing our RBR guidance to a range of $1.85 billion to $1.89 billion, maintaining our adjusted EBITDA margin guidance of 14.5% to 15% of RBR, and increasing our adjusted non-GAAP EPS guidance to a range of $9.00 to $9.40.

Speaker #3: We expect the acquisition of RelayCare to add approximately $30 million of RBR in 2026. We expect the adjusted EBITDA from this acquisition as a percentage of RBR to be in a range consistent with our overall consolidated margin guidance.

Speaker #3: Inclusive of certain expenses to Relay to integrate the business that we do not expect to repeat in 2027. We also expect RelayCare to be accreted to 2026 adjusted EPS by approximately 10 cents.

Speaker #3: Our strong first-half performance and continued strength of our backlog and pipeline provide us confidence in increasing our full-year RBR and earnings guidance.

Speaker #3: Our full year 2026, we now expect healthcare segment RBR growth to be in the mid-teen percentage range with healthcare segment operating income margins remaining in a range of approximately 30 to 32 percent.

Speaker #3: Now let me provide some additional color on these numbers. We expect the acquisition of RelayCare to add approximately $30 million of RBR in 2026.

Speaker #3: We expect the adjusted EBITDA from this acquisition, as a percentage of RBR, to be in a range consistent with our overall consolidated margin guidance.

Speaker #3: We now expect education segment RBR growth for full year 2026 to be in the mid to upper single digit percentage range and education segment operating income margins to be in a range of 24 to 26 percent.

Speaker #3: Inclusive of certain expenses to Relay to integrate the business that we do not expect to repeat in 2027. We also expect RelayCare to be accretive to 2026 adjusted EPS by approximately $0.10.

Speaker #3: We continue to expect commercial segment RBR growth for full year 2026 to be in the low-teen percentage range and commercial segment operating income margins to be in a range of 19 to 21 percent.

Speaker #3: For full year 2026, we now expect healthcare segment RBR growth to be in the mid-teen percentage range, with healthcare segment operating income margins remaining in a range of approximately 30 to 32 percent.

Speaker #3: We now expect unallocated corporate expenses excluding restructuring charges and the impact of our deferred compensation plan to increase in the low double-digit percentage range for full year 2026 when compared to full year 2025, reflecting the impact of our RelayCare acquisition, reclassification of certain sales and operations support expenses from our operating segments, and increases in technology, sales and marketing, and recruiting expenses to support our top-line growth.

Speaker #3: We now expect education segment RBR growth for the full year 2026 to be in the mid- to upper-single-digit percentage range, and education segment operating income margins to be in a range of 24 to 26 percent.

Speaker #3: We continue to expect the commercial segment in 2026 to be in the low-teen percentage range, and commercial segment operating income margins to be in a range of 19 to 21 percent.

Speaker #3: Finally, we now expect our full year weighted average diluted share counts to be in a range of 16.6 million shares to 16.8 million shares, reflecting the accelerated share repurchases during 2026.

Speaker #3: We now expect unallocated corporate expenses, excluding restructuring charges and the impact of our deferred compensation plan, to increase in the low double-digit percentage range for full year 2026 compared to full year 2025. This reflects the impact of our RelayCare acquisition, the reclassification of certain sales and operations support expenses from our operating segments, and increases in technology, sales and marketing, and recruiting expenses to support our top-line growth.

Speaker #3: At our investor day in March of 2025, we discussed our belief that year-end well-positioned for continued RBR growth based on the strength of our position in large complex regulated end markets, durability of demand for our services, and a variety of different economic cycles, and the attractive platform we have built to recruit and retain market-relevant talent.

Speaker #3: Finally, we now expect our full-year weighted average diluted share count to be in a range of 16.6 million to 16.8 million shares, reflecting the accelerated share repurchases during 2026.

Speaker #3: We also discussed our confidence in continued margin expansion as a result of increased consultant utilization and pricing realization as a result of our outcomes-based offerings and increased operational efficiencies.

Speaker #3: At our investor day in March 2025, we discussed our belief that Huron is well positioned for continued RBR growth, based on the strength of our position in large, complex, regulated end markets.

Speaker #3: We're pleased with our progress since our investor day, as reflected in our updated full year outlook we are increasingly encouraged about our ability to deliver on our medium-term financial goals of annual double-digit percentage revenue growth, expansion of adjusted EBITDA margins into the 15 to 17 percent range, and doubling our adjusted EPS between 2024 and 2029.

Speaker #3: The durability of demand for our services across a variety of different economic cycles can be attractive, and the platform we have built helps us recruit and retain market-relevant talent.

Speaker #3: We also discussed our confidence in continued margin expansion as a result of increased consultant utilization and pricing realization, driven by our outcomes-based offerings and increased operational efficiencies.

Speaker #3: Thanks, everyone. I would now like to open the call to questions. Operator?

Speaker #2: Thank you. Ladies and gentlemen, if you have a question at this time, please press star 11 on your touch-tone telephone. If your question has been answered or you wish to remove yourself from the queue, you may do so by pressing star 11 again.

Speaker #3: We're pleased with our progress since our Investor Day, as reflected in our updated full-year outlook. We are increasingly encouraged about our ability to deliver on our medium-term financial goals, with annual double-digit percentage revenue growth, expansion of adjusted EBITDA margins into the 15% to 17% range, and doubling our adjusted EPS between 2024 and 2029.

Speaker #2: One moment for our first question, please. Our first question comes from the line of Andrew Nicholas. Of William Blair. Your line is open, Andrew.

Speaker #3: Thanks, everyone. I would now like to open the call to questions. Operator?

Speaker #3: Hi, good afternoon. Appreciate you taking my question. Our questions. I guess first, on hiring plans, the utilization in the quarter was I think as high as it's ever been and so just kind of characterize where you sit in terms of capacity and any plans.

Speaker #2: Thank you. Ladies and gentlemen, if you have a question at this time, please press *11 on your touch-tone telephone. If your question has been answered or you wish to remove yourself from the queue, you may do so by pressing *11 again.

Speaker #2: One moment for our first question, please. Our first question comes from the line of Andrew Nicholas of William Blair. Your line is open, Andrew.

Speaker #3: Well, what your plans are over the next couple of quarters to ramp hiring to the extent that you're running hot on utilization.

Speaker #4: Andrew, it's John. Yeah, we're definitely still in market hiring right now. You're right. Once we get over the 80% threshold, that's typically when we're doing more hiring in order to help ease that a little bit.

Speaker #3: Hi, good afternoon. I appreciate you taking my question—our questions. I guess first, on hiring plans: the utilization in the quarter was, I think, as high as it’s ever been, so could you just kind of characterize where you sit in terms of capacity and any plans?

Speaker #4: Our target as we talked about on an earlier calls was more in that upper 70% range. So I think it's reasonable to think that particularly in the areas of the business that are hotter right now from a utilization perspective that you will see us adding headcount to address that.

Speaker #3: What are your plans over the next couple of quarters to ramp up hiring to the extent that you're running hot on utilization?

Speaker #3: Is there any guidance in terms of headcount growth ex-managed services that you could point us to?

Speaker #4: Andrew, it's John. Yeah, we're definitely still in-market hiring right now. You're right. Once we get over the 80% threshold, that's typically when we're doing more hiring in order to help ease that a little bit.

Speaker #4: You know, Andrew, I look if you think about the revenue growth that we talked about for the year, I probably think of the headcount growth for the full year landing somewhere less than that.

Speaker #4: Our target, as we've talked about on earlier calls, was more in that upper 70% range. So, I think it's reasonable to think that, particularly in the areas of the business that are hotter right now from a utilization perspective, you will see us adding headcount to address that.

Speaker #4: So think of it as probably high single-digit percent headcount growth in consulting. I mean, we'll see how the year progresses and last year, part of what we did in the back half of the year was add additional heads with anticipation of growth into the following year.

Speaker #3: Is there any guidance in terms of headcount growth for tax managed services that you could point us to?

Speaker #4: So that's always a possibility too, but I think it's safe base case way to think about it would be headcount growth in the upper single-digit percent range.

Speaker #4: You know, Andrew, I—look, if you think about the revenue growth that we talked about for the year, I’d probably think of the headcount growth for the full year landing somewhere less than that.

Speaker #3: Got it. Thank you. And then for my follow-up, I wanted to kind of hone in on the AI impact, Mark, in your compared remarks.

Speaker #4: So think of it as probably high single-digit percent headcount growth. In consulting, I mean, we'll see how the year progresses, and last year, part of what we did in the back half of the year was add additional heads with anticipation of growth into the following year.

Speaker #3: You talked about AI driving demand for digital services in particular. Can you talk a little bit more about kind of your go-to-market strategy there and maybe how that demand is kind of coming to you?

Speaker #3: Is it natural through existing relationships? Is it a natural extension of projects that you're already working on that there may not have AI involved?

Speaker #4: So that's always a possibility too, but I think a safe base case way to think about it would be headcount growth in the upper single-digit percent range.

Speaker #3: Or really any other color that you might add to the compared remarks around AI-driven adoption or demand in particular? Thank you.

Speaker #3: Got it, thank you. And then, for my follow-up, I wanted to kind of hone in on the AI impact, Mark, in your prepared remarks.

Speaker #4: Yeah, absolutely. Andrew, you know, it starts with clients and the business units that have a relationships in the markets. To understand the unique needs and aspects of what where each of those particular segments are in their AI journey.

Speaker #3: You talked about AI driving demand for digital services in particular. Can you talk a little bit more about your go-to-market strategy there, and maybe how that demand is coming to you?

Speaker #4: And so what we do is really equip our people in the business unit both on the consulting and digital side and partnership together to go to market.

Speaker #3: Is it natural through existing relationships? Is it a natural extension of projects that you're already working on, that may or may not have AI involved?

Speaker #3: Or really, any other color that you might add to the comparative remarks around AI-driven adoption or demand in particular? Thank you.

Speaker #4: Sometimes, again, when listening to the client and what is on their mind, so it might be to just as we described, you have opportunities that come in for a standalone AI project that might be strategy or are kind of embedded into perhaps larger digital initiatives.

Speaker #4: Yeah, absolutely, Andrew. You know, it starts with clients and the business units that have their relationships in the markets, to understand the unique needs and aspects of where each of those particular segments are in their AI journey.

Speaker #4: That's one aspect. And sometimes they're AI-first as a digital initiative. So really it just depends on the client and the market. And we think the right answer for us is to let our businesses who are very close to our clients and their relationships dictate that.

Speaker #4: And so what we do is really equip our people in the business unit, both on the consulting and digital side, in partnership together, to go to market.

Speaker #4: So I would say right now it is really I would say kind of a natural flow of how we're just going to market overall.

Speaker #4: Sometimes, again, when listening to the client and what is on their mind, it might be, just as we described, that you have opportunities that come in for a standalone AI project that might be strategy or governance.

Speaker #4: You have others that are kind of embedded into perhaps larger digital initiatives. That's one aspect. And sometimes, there are AI-first digital initiatives.

Speaker #2: Thank you. Our next question. Comes from the line of Toby Summer of Truist. Your line is open, Toby.

Speaker #4: So really, it just depends on the client and the market. And we think the right answer for us is to let our businesses, who are very close to our clients and their relationships, dictate that.

Speaker #5: Thank you. I was wondering if you could give us some more detail about demand in the digital arena. How it progressed in the quarter.

Speaker #4: So, I would say right now it is really, I would say, kind of a natural flow of how we're just going to market overall.

Speaker #5: Sort of where it landed relative to your expectations and the pipeline.

Speaker #4: It progressed in a positive trajectory as the first half of the year went on. Toby and his quarter projected. I think that was part of what gave us confidence in terms of increasing guidance at this point in the year.

Speaker #2: Thank you. Our next question comes from the line of Toby Summer of Truist. Your line is open, Toby.

Speaker #4: It's Mark obviously gave the statistics about our bookings during the first half being up 20% plus. During the first half of the year, that was momentum, including into the second quarter there.

Speaker #5: Thank you. I was wondering if you could give us some more detail about demand in the digital arena and how it progressed in the quarter.

Speaker #5: Sort of where it landed, relative to your expectations and the pipeline.

Speaker #4: So I think you've seen we were year over year flat during the first quarter. Saw the accelerations of the 9% growth, which was both year over year as well as sequential for the second quarter.

Speaker #4: It progressed in a positive trajectory as the first half of the year went on, Toby, and as the quarter projected. I think that was part of what gave us confidence in terms of increasing guidance at this point in the year.

Speaker #4: And our expectation is that you should see double-digit percent growth in the back half of the year.

Speaker #5: And then could you maybe dig into what the drivers are of your managed services growth? You're clearly growing faster than the market. So customers seem to be find what you're offering appealing.

Speaker #4: Mark obviously gave the statistics about our bookings during the first half being up 20% plus. During the first half of the year, that was momentum, including into the second quarter there.

Speaker #4: So I think you've seen we were year-over-year flat during the first quarter. We saw the acceleration to 9% growth, which was both year-over-year as well as sequential for the second quarter.

Speaker #5: What exactly are those features of differentiation and are you growing as fast as you could? Or if you throw more resources at it, could you grow even faster?

Speaker #4: And our expectation is that you should see double-digit percent growth in the back half of the year.

Speaker #5: And then could you maybe dig into what the drivers are of your managed services growth? You're clearly growing faster than the market, so customers seem to find what you're offering appealing.

Speaker #4: Well, thanks, Toby. I'll start, Jack, and chime in. You know, at 43%, that's we're pretty happy with that growth rate right now. That's a lot to digest.

Speaker #4: But and we've had, as I said, outstanding client retention along the way. And I think what that's telling us is that the way that we're approaching solutions for clients is really resonating.

Speaker #4: And we're very different than some of the big providers in this space, the R1, Z ensembles, etc. Because often we start with that deep consulting knowledge of our clients from a revenue cycle perspective.

Speaker #5: What exactly are those features of differentiation? And are you growing as fast as you could, or if you throw more resources at it, could you grow even faster?

Speaker #4: And so it can basically be looking holistically at do you want to continue to manage your revenue cycle? We have been approached to help them do that.

Speaker #4: Well, thanks, Toby. I'll start, Jack, and chime in. At 43%, we're pretty happy with that growth rate right now, and that's a lot to digest.

Speaker #4: And we've had, as I said, outstanding client retention along the way. I think what that's telling us is that the way we're approaching solutions for clients is really resonating.

Speaker #4: Obviously, we're not we're trying to be there to help them make that decision. It's certainly their decision that they make. But we've also expanded in many areas with point solutions to take various aspects of the revenue cycle into our service line.

Speaker #4: And we're very different than some of the big providers in this space—the R1s, the Ensembles, et cetera—because, often, we start with that deep consulting knowledge of our clients from a revenue cycle perspective.

Speaker #4: And often what happens is we land and expand on those. So I think when you have the combination of those things, it does set up like a very robust environment for additional growth.

Speaker #4: And so, it can basically be looking holistically at, do you want to continue to manage your revenue cycle? We have been approached to help them do that.

Speaker #4: The relate care acquisition, maybe I'll land it there as just to take that same type approach and extend it. Relate care, some one of our good example acquisitions in which we knew the principles of relate care for many years at the referral relationships.

Speaker #4: Obviously, we're not—we're trying to be there to help them make that decision. It's certainly their decision to make. But we've also expanded in many areas with point solutions to take various aspects of the revenue cycle into our service line.

Speaker #4: And so this is the foundation of a good successful acquisition. But I think for us, we see a lot of upside in managed services.

Speaker #4: And it's certainly a lever that we want to continue to drive in a very thoughtful, profitable way.

Speaker #4: And often what happens is we land and expand on those. So, I think when you have the combination of those things, it does set up a very robust environment for additional growth.

Speaker #3: Yeah. And I'll just add, Toby, it's really just underscoring what Mark said, but that outcomes-based model that we have that really enables that part of our business to essentially be an extension as well of our performance improvement in business.

Speaker #4: The RelateCare acquisition—maybe I'll land it there—is just to take that same type of approach and extend it. RelateCare is one of our good example acquisitions, in which we knew the principals of RelateCare for many years, referral relationships.

Speaker #3: So when we're in this period of time where the healthcare provider market is under such financial strain and going through so much disruption, the solutions that we offer that provide very tangible, clear ROI to our clients for managed services perspective they become very attractive to our clients in the same way that our performance improvement consulting projects are very attractive to our clients in that sort of environment.

Speaker #4: And so, this is the foundation of a good, successful acquisition. But I think for us, we see a lot of upside in managed services.

Speaker #4: And it's certainly a lever that we want to continue to drive in a very thoughtful, profitable way.

Speaker #3: Yeah, and I'll just add, Toby, it's really just underscoring what Mark said, but that outcomes-based model that we have really enables that part of our business to essentially be an extension as well of our performance improvement business.

Speaker #3: And I think Mark touched on it, but it is it's one of the areas of the business where we've been the most advanced in deploying AI.

Speaker #3: So, when we're in this period of time where the healthcare provider market is under such financial strain and going through so much disruption, the solutions that we offer that provide very tangible, clear ROI to our clients from a managed services perspective become very attractive to our clients. In the same way, our performance improvement consulting projects are very attractive to our clients in that sort of environment.

Speaker #3: And so for a lot of our clients, partnering with us is really a good way to bring AI into the equation. So in the final thing I'd point out too is it's smaller at this point, but we're also seeing really good traction in our education managed services business too.

Speaker #3: Which is mainly focused around the research function at universities. So that's an area where we just talked about high-team growth during the quarter and where we continue to feel like we've got a really good outlook in that part of our business going forward.

Speaker #3: And I think Mark touched on it, but it's one of the areas of the business where we've been the most advanced in deploying AI.

Speaker #3: A lot of the same dynamics that are driving the healthcare managed services demand. Carry over to that education part of the business too. And we're investing there as well.

Speaker #3: And so for a lot of our clients, partnering with us is really a good way to bring AI into the equation. The final thing I'd point out, too, is that it's smaller at this point, but we're also seeing really good traction in our education managed services business, too.

Speaker #5: Thank you for that answer. With respect to the utilization, which was a relatively high number, do you level set us on how the current mix of business and the business as you see it going forward over the reasonably near to middle term range for utilization to toggle in between and sort of steady state optimized utilization from your perspective?

Speaker #3: This is mainly focused around the research function at universities. So that's an area where we talked about high team growth during the quarter, and where we continue to feel like we've got a really good outlook in that part of our business going forward.

Speaker #3: A lot of the same dynamics that are driving the healthcare managed services demand carry over to that education part of the business too, and we're investing there as well.

Speaker #4: I think, Toby, in a steady state current mix of the business, I think it is that upper 70% range is probably the baseline to expect.

Speaker #5: Thank you for that answer. With respect to the utilization—which was a relatively high number—could you level set us on how the current mix of business looks, and how you see the business going forward over the reasonably near to middle term?

Speaker #4: So when I say that, somewhere between 77 and 79%. I think would be a good baseline. And that accommodates some of our performance improvement areas as well as our digital business as well as areas like our distressed financial advisory or strategy where it tends to be a little bit more of a senior team and where you might expect a mix of slightly lower utilization.

Speaker #5: Is there a right range for utilization to toggle between, and a sort of steady-state optimized utilization from your perspective?

Speaker #4: I think given the mix of our business now, that upper 70s is a good base case. And we were pleased during the quarter to have seen the outperformance there.

Speaker #4: I think, Toby, in a steady state current mix of the business, that upper 70% range is probably the baseline to expect.

Speaker #4: Like I said, in response to one of the earlier questions, though, that is a trigger for us to continue hiring in our really our goal is to get it back down into the high 70% range.

Speaker #4: So when I say that, somewhere between 77% and 79%, I think would be a good baseline. And that accommodates some of our performance improvement areas, as well as our digital business, as well as areas like our distressed financial advisory or strategy, where it tends to be a little bit more of a senior team and where you might expect a mix of slightly lower utilization.

Speaker #5: Thanks very much.

Speaker #2: Thank you. Our next question comes from the line of Bill Sutherland of Benchmark Stonex. Your line is open, Bill.

Speaker #4: I think, given the mix of our business now, that upper 70s is a good base case. And we were pleased during the quarter to have seen the outperformance there.

Speaker #5: Thank you. Congrats on the solid print. The bookings acceleration, Mark, that you mentioned in the quarter, was it broad-based? And can you characterize it in some way for us?

Speaker #4: Like I said, in response to one of the earlier questions, that is a trigger for us to continue hiring. Really, our goal is to get it back down into the high 70% range.

Speaker #4: Yeah, Bill. It was definitely broad-based. And I'd say when we look at I would say consistent with what we've seen kind of in this year seems like as we've gotten further into year, we're seeing just more momentum picking up across the various parts of the business.

Speaker #5: Thanks very much.

Speaker #2: Thank you. Our next question comes from the line of Bill Sutherland of Benchmark Stonex. Your line is open, Bill.

Speaker #4: But Sean, you want to add any color commentary as well?

Speaker #5: Thank you. Congrats on that. Solid print. The bookings acceleration, Mark, that you mentioned in the quarter—was it broad-based? And can you characterize it in some ways for us?

Speaker #3: No, I agree. I think it was broad-based across the different industries. So that digital metric spans all the industries is broad-based across the industries.

Speaker #3: And then it was also broad-based across the different types of offerings that we have within digital.

Speaker #4: Yeah, Bill, it was definitely broad-based. And I'd say, when we look at—I would say consistent with what we've seen kind of in this year—it seems like, as we've gotten further into the year, we're seeing just more momentum picking up across the various parts of the business.

Speaker #5: I was thinking probably managed services was prominent. Based on the momentum in the quarter.

Speaker #4: So certainly the stat that Mark provided in the prepared remarks related to our digital bookings, but managed services also is a strong contributor during the quarter as you guess reflected by the growth that we saw.

Speaker #4: But John, do you want to add any color commentary as well?

Speaker #3: No, I agree. I think it was broad-based across the different industries. So that digital metric spans all the industries and is broad-based across the industries.

Speaker #4: And that's an area where the pipeline continues to be very strong for managed services. And trends quite favorably versus say at the end of last year or a year ago at this time, which is a really positive indicator for us as we look to continue scaling that business.

Speaker #3: And then it was also broad-based across the different types of offerings that we have within Digital.

Speaker #5: I was thinking probably managed services was prominent, based on the momentum in the quarter.

Speaker #5: And not to get too much in the weeds, but I noticed the actual downtick in quarter on quarter for education. Headcount. Is that just more of a shift to managed services for that business, or is there anything else going on there?

Speaker #4: So certainly, the stat that Mark provided in the prepared remarks related to our digital bookings, but managed services also is a strong contributor during the quarter, as you guessed, reflected by the growth that we saw.

Speaker #4: And that's an area where the pipeline continues to be very strong for managed services, and trends quite favorably versus, say, at the end of last year or a year ago at this time, which is a really positive indicator for us as we look to continue scaling that business.

Speaker #5: And I guess that's some place you must be ready to do some hiring.

Speaker #3: Yeah, Bill. That's primarily the consulting part of business there. And that's something that we've talked about previously. Last year within that business, utilization was a little bit lower than what we would typically expect within that business, which wasn't a surprise to us given some of the disruption that was going on in the industry in 2025 related to research funding, for example, as well as other regulatory sorts of issues in 2025.

Speaker #5: And not to get too much in the weeds, but I noticed the actual downtick in quarter-on-quarter for education headcount. Is that just more of a shift to managed services for that business, or is there anything else going on there?

Speaker #5: And I guess that's someplace you must be ready to do some hiring.

Speaker #3: And so we always had a strong inclination that that demand was going to come back. And we see that now in terms of the growth rate, but also in terms of the growth in pipeline.

Speaker #3: Yeah, Bill, that's primarily the consulting part of the business there. And that's something that we've talked about previously. Last year, within that business, utilization was a little bit lower than what we would typically expect, which wasn't a surprise to us given some of the disruption that was going on in the industry in 2025 related to research funding, for example, as well as other regulatory sorts of issues in 2025.

Speaker #3: And so we had a little bit of capacity on the bench to start the year that we've been able to utilize. So that would explain kind of the both dynamics really, the uptick is part of the reason for the uptick in utilization as well as why headcount is down a little bit versus a year ago.

Speaker #5: Okay. Great. Thanks for all the color.

Speaker #4: Thanks, Bill.

Speaker #2: Thank you. Once again, to ask a question, please press star 11 on your touchstone telephone. Our next question. Comes from the line of Kevin Steinke.

Speaker #3: And so, we always had a strong inclination that that demand was going to come back. And we see that now in terms of the growth rate, but also in terms of the growth in pipeline.

Speaker #3: And so, we had a little bit of capacity on the bench to start the year that we've been able to utilize. So, that would explain kind of both dynamics, really—the uptick is part of the reason for the uptick in utilization, as well as why headcount is down a little bit versus a year ago.

Speaker #2: Of Barrington Research Associates. Your line is open, Kevin.

Speaker #5: Great. Thank you. Just circling back to the AI topic. Again, you mentioned that you believe AI will be a significant contributor to your future growth.

Speaker #5: Okay, great. Thanks for all the color.

Speaker #5: And when I kind of think back to the growth targets you laid out at your investor day in March 2025 of mid to high single-digit organic growth, do you think AI, the AI demand is incremental to that, or is that kind of replacing maybe some of the technology work you would have been doing instead?

Speaker #4: Thanks, Bill.

Speaker #2: Thank you once again. To ask a question, please press star 11 on your touch-tone telephone. Our next question comes from the line of Kevin Steinke.

Speaker #2: Of Burrington Research Associates. Your line is open, Kevin.

Speaker #5: I'm just trying to get a sense to if it can kind of push us more towards the upper end of that organic growth target you have, or any other thoughts on that topic?

Speaker #5: Great, thank you. Just circling back to the AI topic. Again, you mentioned that you believe AI will be a significant contributor to your future growth.

Speaker #5: And when I kind of think back to the growth targets you laid out at your investor day in March 2025 of mid- to high-single-digit organic growth, do you think AI—the AI demand—is incremental to that, or is that kind of replacing maybe some of the technology work you would have been doing instead?

Speaker #4: Yeah, Bill. I think it's I'm sorry, Kevin. I think it's fair to say not all of it's incremental. I mean, there is definitely when you think about client technology budgets, you see that they spend money in different ways.

Speaker #4: But what we see is that for us, our ability to understand their businesses and with the trusted relationships that we have and then on the commercial side, bringing that innovation as the challenger brand in some respects in some of the areas that we compete in, it is opening up new opportunities.

Speaker #5: I'm just trying to get a sense of if it can kind of push us more toward the upper end of that organic growth target you have, or if you have any other thoughts on that topic?

Speaker #4: And oftentimes, it's not just that it's only AI. It's now opening up new opportunities for clients to see things differently than perhaps they had not seen before.

Speaker #4: Yeah. Bill, I think it's—I'm sorry, Kevin—I think it's fair to say not all of it's incremental. I mean, there is definitely, when you think about client technology budgets, you see that they've been moving money in different ways.

Speaker #4: So the things that we've seen so far, we've not seen any kind of material ice compression or other things that would be negative to revenue.

Speaker #4: But what we see is that for us, our ability to understand their businesses and, with the trusted relationships that we have, and then on the commercial side, bringing that innovation as the challenger brand in some respects in some of the areas that we compete in, it is opening up new opportunities.

Speaker #4: And then again, I'll just maybe land it with saying with so much of our business being either outcome-based or fixed in nature, it really has not found its way into any kind of headwinds.

Speaker #4: So we're very bullish for that reason that we think it's likely to be one, and you can see really if anyone looks back at what the rate of penetration is of AI into enterprises, it perhaps is not going as quickly as some would like.

Speaker #4: And oftentimes, it's not just that it's only AI; it's now opening up new opportunities for clients to see things differently than perhaps they had seen before.

Speaker #4: So the things that we've seen so far—we've not seen any kind of material price compression or other things that would be negative to revenue.

Speaker #4: There's going to be just like every other technology transformation, very likely a continued investment in this over time. And I think that will then prove to be the kind of things that are going to bring value and growth opportunities for us.

Speaker #4: And then again, I'll just maybe land it with saying, with so much of our business being either outcome-based or fixed in nature, it really has not found its way into any kind of headroom.

Speaker #3: Maybe the only thing I would add, Mark, is I think our teams are increasingly excited about take all of the collective experience, know-how, IP that we have, and our ability to use AI to be able to deploy that in new ways, in new ways for our clients.

Speaker #4: So we're very bullish for that reason—we think it's likely to be one. And you can see, really, if anyone looks back at what the rate of penetration is of AI into enterprises, it perhaps is not going as quickly as some would like.

Speaker #3: Expanding the addressable market in terms of what we can use using that data I think that that's something our teams are excited about. And as we think even about the consulting side of the business, so putting aside digital for a second, we think it could be a real enabler there of continued strong growth.

Speaker #4: There's going to be, just like every other technology transformation, very likely a continued investment in this over time. And I think that will then prove to be the kind of thing that is going to bring value and create opportunities for us.

Speaker #4: Great point.

Speaker #3: Maybe the only thing I would add, Mark, is I think our teams are increasingly excited about taking all of the collective experience, know-how, and IP that we have, and our ability to use AI to be able to deploy that in new ways—new ways for our clients.

Speaker #5: Okay. Yeah, that's helpful. And just looking at the segment expectations, you increased the segment growth expectations for 2026 in healthcare and education. I'm assuming that healthcare is just the relate care acquisition, or is there more beyond that?

Speaker #3: Expanding the addressable market in terms of what we can use with that data—I think that's something our teams are excited about. And as we think even about the consulting side of the business—so putting aside digital for a second—we think it could be a real enabler there of continued strong growth.

Speaker #5: And then on education, what I think before you were saying mid-single, now you're saying mid to upper. So kind of what gives you that increased confidence there?

Speaker #3: Yeah, a little bit color there. So for healthcare, it's not just related care. It's also increased organic growth expectations based on our sales conversions.

Speaker #4: Great point.

Speaker #5: Okay, yeah, that's helpful. Just looking at the segment expectations, you increased the segment growth expectations for 2026 in healthcare and education. I'm assuming that healthcare is just the RelateCare acquisition, or is there more beyond that?

Speaker #3: During the first half of the year, so I think that building momentum gives us confidence in increased organic growth as well as the contribution from related care.

Speaker #3: Education, that uptick that you mentioned is based on the momentum that we've seen from a signings pipeline and backlog perspective. And I'm feeling like we've got building momentum in that part of the business.

Speaker #5: And then on education, what I think, before you were saying mid-single, now you're saying mid to upper. So, what gives you that increased confidence there?

Speaker #3: Yeah, a little bit of color there. So for healthcare, it's not just related to Care. It's also increased organic growth expectations based on our sales conversions.

Speaker #3: And then I'll note for the commercial segment, we did keep that consistent with our initial guidance. And I would note that on the overall growth rate, you will see a little bit of pressure on that in the commercial segment in the back half of the year for really two reasons.

Speaker #3: During the first half of the year, so I think that building momentum gives us confidence in increased organic growth, as well as the contribution from RelateCare.

Speaker #3: One, we're going to be annualizing some of the M&A that we did in the back half of last year. And then two, from a distressed financial advisory perspective, we do have a couple of projects in that part of the business that we expect to wind down in the back half of the year as well.

Speaker #3: Education, that uptick that you mentioned is based on the momentum that we've seen from a signings pipeline and backlog perspective, and feeling like we've got building momentum in that part of the business.

Speaker #3: So that's kind of the full view from a segment perspective on the guidance, Kevin.

Speaker #3: And then I’ll note, for the commercial segment, we did keep that consistent with our initial guidance. I would also note that on the overall growth rate, you will see a little bit of pressure on that in the commercial segment in the back half of the year for really two reasons.

Speaker #5: Hey, great. That's helpful. And within education, the strength you're seeing there is that would you mostly tie that to digital, or is it a little more broad-based?

Speaker #3: So in terms of dollars, it's definitely digital as well. Digital primarily. I'd point out from a percentage perspective, we see a lot of growth in the managed services offerings that we talked about before.

Speaker #3: First, we're going to be annualizing some of the M&A that we did in the back half of last year. Second, from a distressed financial advisory perspective, we do have a couple of projects in that part of the business that we expect to wind down in the back half of the year as well.

Speaker #3: And then given some of the building momentum, I think this was the second consecutive sequential quarter of growth in the consulting part of the business.

Speaker #3: So that's kind of the full view from a segment perspective on the guidance, Kevin.

Speaker #3: We do expect that to continue based on what we're seeing from a pipeline and backlog perspective into the back half of the year against some easier comps.

Speaker #5: Okay. Great. That's helpful. And within education, the strength you're seeing there—is that, would you mostly tie that to digital, or is it a little more broad-based?

Speaker #3: So I think that consulting will also be a contributor in the back half of the year.

Speaker #3: So in terms of dollars, it's definitely digital as well—digital primarily. I'd point out that, from a percentage perspective, we see a lot of growth in the managed services offerings that we talked about before.

Speaker #5: Great. Thank you for taking the questions. I'll turn it back over.

Speaker #2: Thank you. Our next question comes from the line of Steven. We're half ticked. Of web securities, your question, please, Steven.

Speaker #3: And then, given some of the building momentum, I think this was the second consecutive sequential quarter of growth in the consulting part of the business.

Speaker #1: All right. Good evening, guys. Thanks for taking the time. Congrats on the good quarter. I kind of want to just dive into the AI topic of conversation.

Speaker #3: We do expect that to continue, based on what we're seeing from a pipeline and backlog perspective, into the back half of the year against some easier comps.

Speaker #1: A lot of the questions around the pipeline and the impact that AI has had on the pipeline is it has really been answered, but I want to talk a little bit more about how you're looking at to derive efficiencies across the business, each of the commercial, education, and the healthcare businesses.

Speaker #3: So I think that consulting will also be a contributor in the back half of the year.

Speaker #5: Great. Thank you for taking the questions. I'll turn it back over.

Speaker #1: Where are you seeing the most opportunities to really drive a lot more margin expansion just from an AI perspective as you look to leverage those capabilities?

Speaker #2: Thank you. Our next question comes from the line of Steven Werhaftig of Webb Securities. Your question, please, Steven.

Speaker #4: Yeah, you're talking about our internal delivery use of that, Steven, just for clarity?

Speaker #1: Yes. Yes, correct.

Speaker #1: All right. Good evening, guys. Thanks for taking the question. Congrats on the big quarter. I kind of want to just dive into the AI topic of conversation.

Speaker #4: Yeah. I mean, I think probably the most straightforward one is our healthcare assessments, which we've talked about for a long period of time that often precede our performance improvement engagements and historically, they have been called 8 to 12 weeks.

Speaker #1: A lot of the questions around the pipeline and the impact that AI has had on the pipeline have really been answered, but I want to talk a little bit more about how you're looking to drive efficiencies across the business—each of the commercial, education, and healthcare businesses.

Speaker #4: And lower margin because it's there to do the, call it, the data gathering, the assessment, and all those things. That's very just appropriate for the AI-enabled tools.

Speaker #1: Where are you seeing the most opportunities to really drive a lot more margin expansion just from an AI perspective, as you look to leverage those capabilities?

Speaker #4: And we're seeing certainly seeing really good results coming out of that. So in the context of that, it really is one of those things that takes out low-margin revenue that would otherwise be built into the base.

Speaker #4: Yeah. You're talking about our internal delivery use of that, Steven, just for clarity?

Speaker #1: Yes. Yes, correct.

Speaker #4: Yeah. I mean, I think probably the most straightforward one is our healthcare assessments, which we've talked about for a long period of time, that often precede our performance improvement engagements. And historically, they have been called eight to 12 weeks.

Speaker #4: But there's a lot of other areas as well. We have teams deployed across our business units that are working together with or deployed engineers who are really understanding bringing the subject matter, domain experts together with people who understand the technology and full-stack engineers who can figure out where are those opportunities.

Speaker #4: And lower margin because it's there to do the, call it, the data gathering, the assessment, and all those things. That's very just appropriate for the AI-enabled tools.

Speaker #4: And it really starts at that using our proprietary data to leverage the insights that we have. So we think we have a lot of that value still well ahead of us, which is, again, when we talk about our 15 to 17 percent, we're right now kind of knocking at the door, 15%.

Speaker #4: We're certainly seeing really good results coming out of that. So, in the context of that, it really is one of those things that takes out low-margin revenue that would otherwise be built into the base.

Speaker #4: But there are a lot of other areas as well. We have teams deployed across our business units that are working together with, or are deployed engineers who are really understanding—bringing the subject matter, domain experts together with people who understand the technology, and full-stack engineers who can figure out where those opportunities are.

Speaker #4: I feel very comfortable looking into that 15 to 17 percent range over the next several years.

Speaker #3: And I would just add, Steven, from a internal process perspective too, we're using that, whether that's helping us with our contracting process, helping us with our billings and collections process, as well as helping our sales teams in terms of doing research and gathering information.

Speaker #4: And it really starts with using our proprietary data to leverage the insights that we have. So we think a lot of that value still lies ahead of us, which is, again, when we talk about our 15 to 17 percent, we're right now kind of knocking at the door.

Speaker #3: So there's a lot of things there that we've been able to that we already have been leveraging and that we expect to be able to continue to leverage to help streamline the expenses associated with some of those activities.

Speaker #4: Fifteen percent feel very comfortable looking into that 15 to 17 percent range over the next several years.

Speaker #4: Yeah. And of course, we've already mentioned managed services as well, where we're deploying those tools. So there's a tremendous amount of opportunities. We do have some software products as well.

Speaker #3: And I would just add, Steven, from an internal process perspective, too, we're using that, whether that's helping us with our contracting process, helping us with our billings and collections process, as well as helping our sales teams in terms of doing research and gathering information.

Speaker #4: And we're building AI capabilities into them. So it's almost hard to say where we're not using it. And I can't think of anywhere that we're really not deploying AI at some level into this.

Speaker #3: So there are a lot of things there that we've been able to, that we already have been leveraging, and that we expect to continue to leverage to help streamline the expenses associated with some of those activities.

Speaker #1: Okay. Got it. And when thinking a little bit more around the outcome-based business and really seems like you're generating a lot of traction with this contract shift, are you seeing any sort of change in pricing strength around any of the verticals that you have, anything that you would want to note with this continued shift towards an outcome-based business?

Speaker #4: Yeah, and of course, we've already mentioned managed services as well, where we're deploying those tools. So, there's a tremendous amount of opportunities. We do have some software products as well.

Speaker #4: And we're building AI capabilities into them, so it's almost hard to say where we're not using it. I can't think of anywhere that we're really not deploying AI at some level into this.

Speaker #3: I don't think right now, Steven, we've really seen any significant changes. We're as you noted, we've been increasing our percent of outcomes-based contracts, but we already had a really healthy base of outcomes-based contracts to start there.

Speaker #1: Okay, got it. And when thinking a little bit more about the outcome-based business, it really seems like you're generating a lot of traction with this contract shift. Are you seeing any sort of change in pricing strength across any of the verticals that you have?

Speaker #3: So for us, it's been incremental compared to what was already really healthy based there. So I think we've seen more of a stable environment in terms of competitive pressures and pricing related to those types of projects as opposed to any significant changes.

Speaker #1: Is there anything that you would want to note with this continued shift towards an outcome-based business?

Speaker #1: Okay. Got it. And one more, if I may, because I mean, because you answered the question that I had around the commercial part of the business settings in the second half, I would love to hear a little bit more about the M&A process because it really seems like you're doing very well on the M&A front, especially with the acquisition of RelayCare and that extra incremental $30 million in RBR.

Speaker #3: I don't think, right now, Steven, we've really seen any significant changes. As you noted, we've been increasing our percent of outcomes-based contracts, but we already had a really healthy base of outcomes-based contracts to start there.

Speaker #1: Can you talk a little bit more around the kind of capabilities that you're looking for heading into the second half of this year and into fiscal year 27?

Speaker #4: Sure, Steven. We've highlighted programmatic M&A as part of our strategy for a while. In fact, we've talked about 2 to 4 percent growth over time as the range that we think makes sense for us, which over RelayCare fits very well in that.

Speaker #1: Okay, got it. And one more, if I may. Because you answered the question that I had around the commercial part of the business settings in the second half, I would love to hear a little bit more about the M&A process. It really seems like you're doing very well on the M&A front, especially with the acquisition of RelayCare and that extra incremental $30 million in RBR.

Speaker #4: And by virtue of those deals, many of which are proprietary, we're out there. We know people in the market. We see where those opportunities are to fill gaps.

Speaker #4: Those are the ones that really come to the surface of expanding our business over time. They tend to lower risk. They tend to be a creative to our EBITDA multiple for the prices that we're able to pay for those businesses.

Speaker #1: Can you talk a little bit more about the kind of capabilities that you're looking for as we head into the second half of this year and into fiscal year '27?

Speaker #4: And then we end up having better retention of our teams afterwards. And complementing the talent. So it's actually for us very integrated into the strategy that we have.

Speaker #4: Sure, Steven. We've highlighted programmatic M&A as part of our strategy for a while. In fact, we've talked about 2% to 4% growth over time as the range that we think makes sense for us, which RelayCare fits very well in.

Speaker #4: And I think in this last six months, we certainly were continuing to be active looking. We certainly had a much higher bar for what we expected relative to where our share price was.

Speaker #4: And by virtue of those deals, many of which are proprietary, we're out there. We know people in the market. We see where those opportunities are to fill gaps.

Speaker #4: We're very conscious of that. But we'll continue to expect we're not changing our outlook for that 2 to 4 percent range over time. And I think what you'll see from us is those kinds of deals are the focus versus really a large transformational deals, which I think have a lot of challenges with them.

Speaker #4: Those are the ones that really come to the surface in expanding our business over time. We tend to lower risk. We tend to be accretive to our EBITDA multiple for the prices that we're able to pay for those businesses.

Speaker #4: And then we end up having better retention of our teams afterwards, and complementing the talent. So, it's actually, for us, very integrated into the strategy that we have.

Speaker #4: I think we're very comfortable being able to achieve our objectives and doing it the way that we're approaching M&A right now.

Speaker #4: And I think in these last six months, we certainly were continuing to be actively looking. We certainly had a much higher bar for what we expected, relative to where our share price was.

Speaker #1: I got it. Thanks for the time.

Speaker #2: Thank you. Seeing no more questions in the queue, I'd like to turn the call back to Mr. Hussey. Sir.

Speaker #4: We're very conscious of that. But we'll continue to expect—we're not changing our outlook for that 2% to 4% range over time. And I think what you'll see from us is those kinds of deals are the focus versus really large, transformational deals, which I think have a lot of challenges with them.

Speaker #4: Thanks, everybody, for spending time with us this afternoon. And we look forward to speaking with you again in November when we announce our third quarter results.

Speaker #4: Have a good evening.

Speaker #4: I think we're very comfortable being able to achieve our objectives and doing it the way that we're approaching M&A right now.

Speaker #1: All right. Got it. Thanks for your time.

Speaker #2: Thank you. Seeing no more questions in the queue, I'd like to turn the call back to Mr. Hussey. Sir.

Speaker #4: Thanks, everybody, for spending time with us this afternoon. We look forward to speaking with you again in November when we announce our third-quarter results.

Speaker #4: Have a good evening.

Q2 2026 Huron Consulting Group Inc Earnings Call

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