Huron Consulting Group Inc. Aktie

Good afternoon, and welcome to Huron Consulting Group's webcast to discuss financial results for the first quarter of 2026. [Operator Instructions] As a reminder, this conference call is being recorded.

Before we begin, I would like to point all of you to the disclosure at the end of the company's news release for information about any forward-looking statements that may be made or discussed on this call. The news release is posted on Huron's website. Please review that information along with the filings with the SEC for a disclosure of factors that may impact subjects discussed in this afternoon's webcast.

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

And now I would like to turn the call over to Mark Hussey, Chief Executive Officer and President of Huron Consulting Group. Mr. Hussey, please go ahead.

Good afternoon, and welcome to Huron Consulting Group's First Quarter 2026 Earnings Call. With me today are John Kelly, our Chief Financial Officer; and Ronnie Dail, our Chief Operating Officer.

I'll begin by noting that the execution of our growth strategy continues to deliver performance consistent with the financial goals outlined our 2025 Investor Day. Revenues before reimbursable expenses, or RBR, increased 12% in the first quarter of 2026 compared to the first quarter of 2025, driven by growth across the Healthcare, Education and Commercial segments, including record RBR performance in Healthcare. During the quarter, we also continued our trajectory of margin expansion, reflecting disciplined execution by our highly talented team.

Encouraged by the strong start to the year and strength of our pipeline and backlog, we're affirming our annual RBR and margin guidance. We continue to believe we are well positioned to serve as our clients' trusted adviser as they evolve their business models and organizations to succeed in challenging markets and an increasingly complex AI-enabled world. We remain focused on executing against the market tailwinds driving demand for our business and further strengthening our competitive position to enhance our ability to best serve our clients and achieve our financial goals.

I'll now share some additional insight into our first quarter performance. In the Healthcare segment, first quarter RBR grew 14% over the prior year quarter, reflecting strong demand for our performance improvement, revenue cycle [ vantage ] services, financial advisory and strategy offerings as well as incremental RBR growth and the integration of our acquisitions. Excluding the impact of the acquisitions, organic growth for the Healthcare segment was 10% in Q1 2026 as compared to Q1 2025.

As we've discussed in prior earnings calls, health care providers are operating amidst a convergence of competitive and regulatory pressures that continue to impact financial performance and drive the need to redesign care delivery models. [ Rising ] reimbursements, rising operational costs and labor shortages are intensifying the need for stronger cash flow, cost optimization and greater operational flexibility.

Health systems are facing a period of rapid transformation driven by advancements in technologies. Developing and executing an AI strategy amidst the rapid pace of change has become an increasingly important issue with a growing number of our clients. Providers are increasingly seeking trusted partners with deep industry expertise that can help them integrate technology, workforce and operating model changes into cohesive, executable strategies that deliver near-term financial benefit while positioning their organizations for sustainable growth, improved margins and long-term competitive advantage.

We see significant opportunities for evaluating and integrating a broad and growing number of applications and use cases for AI and digital tools across clinical, administrative and financial workflows in our clients' complex operating environments. Our ability to help clients address enduring and new challenges and opportunities is at the heart of the growth strategy for our Healthcare business. As we rapidly expand and integrate our AI capabilities across our Healthcare offerings, we believe our distinctive operational and technology expertise, along with innovative new solutions and partnerships position us well to continue our growth trajectory.

Turning next to the Education segment. In the first quarter of 2026, Education segment RBR grew 4% compared to the first quarter of 2025, driven by strong demand for our digital offerings. Higher education institutions are experiencing uneven demand among domestic students and a significant decline in international students.

Amidst that backdrop, the institutions are contending with rising operating costs, funding declines, heightened regulatory scrutiny and further erosion of public confidence in the value of a traditional 4-year degree. These dynamics are forcing higher education leaders to confront fundamental questions about scale, academic portfolio mix, cost structure and long-term financial sustainability. We believe our strong market position and higher education provides the opportunity to serve as an experienced partner that can help our clients move beyond incremental actions toward more integrated strategic transformation. Universities are prioritizing solutions that deliver near-term financial improvement while modernizing operating models, core administrative workflows and academic offerings.

To accomplish this, our clients are building the enabling infrastructure to improve efficiency, decision-making and the student experience while increasingly leveraging AI. We believe our strong client relationships, deep industry expertise, AI capabilities and comprehensive portfolio of offerings have positioned us to continue to serve as the partner of choice for our clients as they address these ongoing challenges.

In the Commercial segment, first quarter RBR grew 22% over the prior year quarter, reflecting strong demand for our financial advisory and strategy offerings. The increase in RBR in the quarter also included incremental RBR from our acquisitions of Treliant and Wilson Perumal. Excluding the impact of acquisitions, RBR in Q1 2026 grew 8% organically over the first quarter of 2025.

Commercial industries are navigating heightened complexity driven by persistent cost inflation, global supply chain realignment, geopolitical and regulatory uncertainty, and continuously evolving customer and employee expectations. At the same time, companies are accelerating the adoption of AI-enabled, data-driven operating models to improve agility, productivity and decision-making. These forces are driving demand for comprehensive solutions that integrate strategy and operations, financial advisory and digital and AI transformation.

We continue to invest in expanding our offerings to address the rapidly changing needs of our global client base. And those investments have delivered more durable growth in the Commercial business in recent quarters. We'll continue to deepen our industry expertise and expand our ability to deliver differentiated end-to-end solutions to enhance our competitive advantage and best address the growing needs of our clients.

Through the first quarter, our views on AI and its potential impact on Huron remain bullish as we believe it will be a significant contributor to future growth, margin expansion and shareholder value. Multiple third-party research providers forecast that the AI services market will grow in the double digits over the next several years. And we will be -- we're well positioned to help our clients plan and execute their AI strategies and take advantage of this rapidly growing market opportunity. We have substantially increased our investment in AI capabilities and we'll continue to deploy them through our offerings and operations building upon our deep industry and functional knowledge.

Beyond AI, the fundamental market tailwinds for propelling growth in our business remain to create opportunities across all 3 operating segments. We believe our ability to bring together our strategy, operations, technology and people-related offerings, redesigned core business functions and processes of integrating advanced technologies will continue to position us for long-term growth.

Now let me turn to our outlook for the year. Today we are affirming our 2026 guidance for RBR, adjusted EBITDA margin and adjusted diluted earnings per share. With our strong first quarter results, I'm increasingly encouraged about our prospects for the year. We remain committed to driving long-term shareholder value through continued execution of our growth strategy, which has delivered consistent RBR growth and margin expansion since 2022.

Our disciplined capital allocation strategy is funded both [ programmatic ] M&A and, since December 31, 2022, repurchase of 5 million shares or 25% of our common stock outstanding. We believe there is significantly more value to be unlocked by our strategy, particularly as we leverage our collaborative, entrepreneurial culture to compete and win today's rapidly evolving technological and competitive landscape.

In summary, we believe our strong competitive position in Healthcare and Education enable us to leverage our expertise, a powerful portfolio of consulting, managed services and digital capabilities. We also believe our size and scale in Commercial markets enables us to be nimble and aggressive with an integrated operating model that amplifies our impact across our consulting, digital and managed services capabilities.

Driven by the velocity of change and complexity facing our clients, we're well positioned to continue to execute upon our growth strategy and achieve our stated financial goals for low double-digit revenue growth, margin expansion and disciplined deployment of our strong free cash flow. None of this would be possible without our strong collaborative culture. And our innovative and dedicated team to continue to be the heart and soul of our company.

With that, let me now turn it over to John for a more detailed discussion of our financial results. John?

Thank you, Mark, and good afternoon, everyone. Before I begin, please note that I will be discussing non-GAAP financial measures such as EBITDA, adjusted EBITDA, adjusted net income, adjusted EPS and free cash flow. Our press release, 10-Q and Investor Relations page on the Huron website have reconciliations of these non-GAAP measures to the most comparable GAAP measures, along with the discussion of why management uses these non-GAAP measures and why management believes they provide useful information to investors regarding our financial condition and operating results.

Now I'll share some of the key financial results for the first quarter of 2026. First quarter of 2026 produced RBR of $443.7 million, up 12.1% from $395.7 million in the same quarter of 2025, driven by growth across all 3 operating segments.

Net income for the first quarter of 2026 was $23.2 million or $1.34 per diluted share, compared to net income of $24.5 million or $1.33 per diluted share in the first quarter of 2025. As a percentage of total revenues, net income declined to 5.1% in the first quarter of 2026, compared to 6.1% in the first quarter of 2025, reflecting a higher effective tax rate during the first quarter of 2026.

Our effective income tax rate in the first quarter of 2026 was 14.1%, which is more favorable than the statutory rate inclusive of state income taxes, primarily due to a discrete tax benefit for share-based compensation awards divested during the quarter, partially offset by certain nondeductible expense items. Our effective income tax rate in the first quarter of 2025 was negative 14.4% as we recognized the income tax benefit on our pretax income driven by the discrete tax benefit for share-based compensation awards that vested during the quarter.

The increase in effective tax rate during the first quarter of 2026 was anticipated in the 2026 guidance that we provided in February, and our expectation for a full year effective tax rate between 28% and 30% remains unchanged.

Adjusted EBITDA was $50.6 million in Q1 2026 or 11.4% of RBR, compared to $41.5 million in Q1 of 2025 or 10.5% of RBR. The increase in adjusted EBITDA was primarily attributable to the increase in segment operating income for all 3 segments, excluding segment depreciation and amortization and segment restructuring charges, partially offset by an increase in certain unallocated corporate expenses.

Adjusted net income was $30 million or $1.73 per diluted share in the first quarter of 2026, compared to $31.1 million or $1.68 per diluted share in the first quarter of 2025.

Now I'll discuss the performance of each of our operating segments. Healthcare segment generated 51% of total company RBR during the first quarter of 2026. This segment posted record RBR of $225.2 million, up $26.7 million or 13.5% from the first quarter of 2025. The increase in RBR in the quarter was driven by strong demand for our performance improvement, revenue cycle managed services, financial advisory and strategy offerings. RBR in the first quarter of 2026 included $7.3 million of incremental RBR from our acquisitions of Eclipse Insights, the consulting services division of AXIOM Systems. Operating income margin for the Healthcare segment was flat at 28.4% in both Q1 2026 and Q1 2025.

The Education segment generated 29% of total company RBR during the first quarter of 2026. Education segment RBR in the first quarter of 2026 was $127.5 million, up $4.7 million or 3.8% from the first quarter of 2025. RBR in the first quarter of 2026 included an inorganic RBR contribution of $600,000 from acquisitions that closed in the first quarter of 2025.

The operating income margin for Education was 21.6% for Q1 2026, compared to 18.8% for the same quarter in 2025. The increase in operating income margin in the quarter was primarily driven by decreases in compensation costs for our revenue-generating professionals, practice administration and meeting expenses.

The Commercial segment generated 20% of total company RBR during the first quarter of 2026 and grew 22.3% over the prior year period, posting RBR of $91 million for Q1 2026, compared to $74.5 million in the first quarter of 2025. The increase in RBR in the first quarter of 2026 is driven by increased demand for our financial advisory and strategy offerings and included $11 million of incremental RBR from our acquisitions of Treliant and Wilson Perumal.

Operating income margin for the Commercial segment was 16.4% for Q1 2026, compared to 15.2% for the same quarter in 2025. The increase in operating income margin in the quarter was primarily driven by decreases in contractor expenses and salaries and related expenses for our support personnel as well as revenue growth that outpaced the increase in performance bonus expense for our revenue-generating professionals, partially offset by an increase in salaries and related expenses for our revenue-generating professionals as a percentage of RBR.

Corporate expenses not allocated at the segment level and excluding restructuring charges were $60 million in Q1 2026, compared to $52.4 million in Q1 2025. Unallocated corporate expenses in the first quarter of 2026 and 2025 included income of $1.2 million and $900,000, respectively, related to changes in the liability of our deferred compensation plan, 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 $7.9 million, primarily due to increases in compensation costs for our support personnel, software and data hosting expenses. The increase in compensation costs for our support personnel includes approximately $2 million of costs that have been reclassified from our operating segments in 2026, reflective of a shift to centralized support for certain sales and operations functions.

Now turning to the balance sheet and cash flows. Cash flow used in operations in the first quarter of 2026 was $162.2 million, reflecting our annual incentive payments during the quarter. Cash flow used in operations during the first quarter of 2025 was $106.8 million.

During the first quarter of 2026, we used $11.9 million to invest in capital expenditures inclusive of internally developed software costs, resulting in negative free cash flow of $174 million. We continue to expect full year free cash flow to be in a range of positive $180 million, $220 million net of cash taxes and interest, excluding noncash stock compensation.

DSO came in at 82 days for the first quarter of 2026, compared to 79 days for the first quarter of 2025 and 73 days for the fourth quarter of 2025. The increase in DSO during the first quarter when compared to both periods, plus the impact of certain larger Healthcare projects that include performance-based fee elements that we expect to bill and collect in the second half of 2026 in accordance with the contractual payment terms.

During the first quarter of 2026, we used $155.5 million to repurchase approximately 1.1 million shares, representing 6.5% of our outstanding shares as of the beginning of the year.

Total debt as of March 31, 2026, was $856 million, consisting entirely of our senior bank debt. And we finished the quarter with cash of $26.5 million with net debt of $829.5 million. This was a $343 million increase in net debt compared to Q4 2025, primarily due to our annual cash bonus payments and share repurchases during the quarter.

Our leverage ratio as defined in our senior bank agreement was 3.1x adjusted EBITDA as of March 31, 2026, compared to 2.2x adjusted EBITDA as of March 31, 2025. As a reminder, our first quarter typically represents a seasonal high leverage ratio given the payout of our annual bonuses in March. We remain committed to achieving a leverage ratio between 2x and 2.5x by the end of 2026, in alignment with the capital allocation strategy outlined at our most recent Investor Day.

We accelerated our share repurchases during the first quarter, reflective of the decline in our share price during the quarter. I believe the reduction in share base combined with the earnings growth objectives discussed in our 2025 Investor Day position us well to achieve continued compounding adjusted diluted earnings per share growth in the future.

Now let me turn to our expectations and guidance for 2026. As Mark mentioned, today we affirm our annual RBR margin and adjusted EPS guidance. This includes RBR in the range of $1.78 billion to $1.86 billion; adjusted EBITDA in the range of 14.5% to 15% of RBR; and adjusted non-GAAP EPS in a range of $8.35 to $9.15.

Thanks, everyone. I would now like to open the call to questions. Operator?

[Operator Instructions] Our first question comes from the line of Andrew Nicholas of William Blair.

Mark, you hinted at it a few times in the prepared remarks, but I was hoping you could start by just talking about pipeline development throughout the quarter where bookings sit. I think last quarter, you gave some really helpful disclosures on bookings in particular. So any update there and maybe how you're feeling about that pipeline relative to a couple of months ago?

Go ahead, John.

Yes, Andrew. This is John. I can jump in with that. So in the trailing 6-month period, so the period now ending March 31, 2026, bookings were up greater than 20% across all 3 of the segments. Backlog -- so after we book the sales and now we look at our backlog to cover the remaining revenue guidance for the remainder of the year and beyond, that remains at historically high coverage ratios across all 3 segments.

And then from a pipeline perspective, all 3 segments are up as of April versus where they were as of December 31. And it did remain at near record levels even after giving effect to the bookings, the backlog that we've been talking about.

Awesome. And I don't think that the Q is out yet, so I was just hoping you could maybe provide some kind of segment-level color on growth by capability, in particular, just kind of interested in how digital trended within Healthcare, and Commercial, in particular, it looks like utilization a little bit lower this quarter relative to a year ago. So any color at the segment level by capability would be helpful.

Yes. Sure thing, Andrew. So from a Healthcare perspective, consulting was up 13% during the quarter, managed services was up 42%. Digital was down 7% during the quarter. And that really reflects just some of the dynamics I talked about throughout the year last year where a lot of demand we're seeing right now is attached to performance, improved engagements as well as our managed service offerings as clients grapple with some of the financial strain that we're seeing within their environment.

From an Education segment perspective, consulting was down slightly. Digital within that segment was up 10%. Managed services was up in the mid-single-digit percent range. So there, I think we continue to see really good demand across all 3 of the capabilities within the Education segment, which gives us continued encouragement about progressively increasing growth there as the year goes on, at least into next quarter.

Digital remains an area where we just see a lot of investment from our clients right now as they invest in some of the foundational tools that they need to drive operating efficiencies within the business. And then within the consulting segment -- or I'm sorry, the Commercial segment, consulting was up approximately 50% during the quarter. That does include the inorganic contributions from Wilson Perumal and Treliant during the quarter. And the digital part of the business was down in the mid-single-digit percent range.

That's helpful. And then if I could just ask one more question on Commercial. Curious, I mean, you said that bookings are up 20% plus across all the segments. High coverage ratio, strong pipelines. Did you see any change to demand within Commercial as the quarter progressed? I know it's a small part of your overall mix, but I know you have some energy and utilities business. I'm wondering if geopolitical conflict had any impact on that or conversations broadly?

Andrew, we didn't see any mix really by industry within the Commercial segment, so we didn't really see any change to demand for our energy and utilities.

I would say demand remains strong for our digital capability within Commercial. There's a little bit of timing during the quarter where we had a couple of our larger projects wound down towards the first part of the first quarter. A couple of the replacement projects that we sold during the quarter started a little later out of the gate than we initially anticipated. So our expectation is that digital more broadly for the year will get back into the mid- to upper single-digit growth range starting next quarter. And then we also expect that to be dependent to growth range within the Commercial segment next quarter as well.

Our next question comes from the line of Tobey Sommer of Truist.

I was wondering if you could talk about the pace of headcount growth year-over-year and sequentially, what's driving that, where you're sort of maybe still catching up on staffing based on the demand you're seeing? And if you could comment on domestic versus international, that would be helpful.

Sure, Tobey. I can jump in with the headcount increases. I think in the -- you see a year-over-year a larger percent increase in the Healthcare business, we finished -- let's exclude managed services, which is really just reflective of a lot higher than we did in the back half of last year to support the growth that we're seeing. So I would expect that to normalize as the year goes on. As we get towards the back half of the year, start to pick up in the comparatives. The hiring that we did last year, I expect that to normalize.

From an education industry perspective, it's actually pretty steady, if not down a little bit, which reflects what we talked about previously with utilization being lower last year than what our target was and the expectation being that as we ramp back up and to grow this year, that you're going to see that coming first in the form of stronger utilization. So you see relatively conservative growth from an education industry perspective.

And then from a Commercial perspective, you do see the impact of the acquisitions that we did year-over-year within Commercial. And then other -- beyond that, I would describe headcount is pretty much steady with the pace of organic growth that we see. And in terms of by geography, the majority of the global headcount adds that we've seen have been in the managed services part of the business. So when you look at the Healthcare managed services adds during the quarter, you're going to see that primarily coming from our global team.

And then as you look at your business, you do have the favor of describing it in a matrixed way across functional area and industry. Where do you see the company lagging or exceeding what you understand to be market rates of growth?

Tobey, I think maybe starting with Healthcare, I think we continue to see -- I think we'd characterize it as very strong in the prior call. It's still very strong. It's probably not quite exactly the same level strong, but it's driving for us, when you look at our long-term growth outlook that we described in terms of the percentages, we're seeing consistent opportunities with that. That's what we would call the tailwinds driving -- the secular tailwinds driving demand in our businesses.

I think Education, that mid-single digit continues to be consistent as well. I think Commercial is a mix of industries and capabilities. So it's a little bit harder to kind of distill that down to like a very tight description and say, when you look at it, in the areas of the business that we have -- we look at competitors and our ability to see whether it's like in our restructuring business, if we're doing at market rates, maybe a little bit better. As an example, with the acquisition of Wilson Perumal coming in and some of the growth that we've seen there, probably at or perhaps above the market growth rates that we've seen.

I think as John said, in digital, we've seen a little bit of just timing issues around what we're looking at. What we'll say we're probably consistent with what the broader market would be looking at in the digital areas in Commercial.

And after a quarter with a pretty large repurchase, could you update us on where you think you'll end the year from a leverage perspective and what the mix of your capital deployment -- what kind of mix we should expect?

Yes, Tobey. So we remain committed to a low leverage ratio at the end of the year. So that's not really a change from our objectives. We did accelerate a lot of the buybacks in our plan towards the first quarter reflective of the stock price decline that we saw during the quarter. I wouldn't say that we will be done with repurchases. I think though you will see us pace a little bit slower through the remainder of the year, just being mindful of our perspective that we want to get back to low 2s from a leverage perspective.

The other lever, obviously, where we deploy capital is strategic tuck-in M&A. We talked last call about how we're still active in terms of reviewing M&A possibilities. I think you will see some M&A. I think it will be a slower pace than what we saw last year, primarily just driven by the opportunity, quite frankly, that we've seen with our own stock at the start of the year and the desire that we've had to go and buy back as many shares as we can during the first quarter at the current valuation.

Tobey, I would just add, this greater scrutiny around valuations in the current market are perhaps a lot more just rigor to understand those. So I think as John said, the pace would be a little bit slower than last year. But I would say if you look at the full year, we have described in the past M&A contributions to our growth rate of 2% to 4%. Probably a little bit closer to the lower end of that range, but certainly consistent with what we described to our investors back in 2025.

Our next question comes from the line of Bill Sutherland of Benchmark.

John, you did not kind of update the full year expectations for segments. And I assume that means we can just used that slide from your last call, your year-end.

That's right, Bill. There's no movement based on first quarter results versus the guidance that we put out there.

I do want to take a second to give one correction to question that Andrew had asked earlier as it relates to consulting within the Commercial segment. The 50%, that's actually organic. That includes Wilson Perumal and Treliant. Wilson Perumal and Treliant are on top of that. So I just wanted to offer that one quick correction.

That's good to know. I haven't gone through the restated headcount for the -- just moving the responsibilities around. But it looks like -- are you -- it seemed to me that you had gotten ahead of the curve as far as hiring in Healthcare into the first part of this year. Was that the case? Or with the reshuffling is that -- is there more of a steady state as far as the adds that -- headcount that we should expect there?

I think you're right, Bill, the reclass that I mentioned in my commentary, that's very small, a very small item. I think the broader story with Healthcare is that we did do a kind of a hiring really in the third and fourth quarter last year. And our job was really 2 things when I talk about hiring. Part of it was catching up a little bit. Our utilization, quite frankly, in that part of the business was too high in the first half of last year. Some of that was keeping up with the demand that we saw last year. And then there was, of course, a component that was also getting us well positioned for the growth in that part of the business for next year.

So we did a lot of that hiring in the back half of last year. And I think that comes through in the metrics. What I would expect is that the year goes on, you'll see more of a normalization of headcount growth rate in Healthcare, more in line with the revenue growth rate, would be my expectation.

Okay. And the -- in the Education segment, I know it's a little more challenging from a sales motion perspective, just given the lack of centralization of some of the decision-making. But is there a general sense that you're getting that they are getting more inclined to take on whatever engagements they certainly could benefit from? Or it just feels like there's a lot of hesitation or more than I would expect given all the wood to chop that they've got.

Bill, it's always interesting in higher ed, and if you went back a year ago, we would have expected perhaps maybe more short-term kind of decision-making baked in it. It really didn't occur that way. It really continues to be a fairly steady drumbeat of thinking about the universities' positioning with a little bit of a longer-term basis.

And candidly, I've come to expect that in higher ed because we've had institutions that have been around a few hundred years, they don't really think in the short term. They think continuing, that things will be the same. But we do see just various pockets where, again, the bigger projects which we thought perhaps might have gone away continue to be in the mix of what we're doing.

And so I don't know that there's anything to conclude other than kind of business as usual in higher ed as we see it right now.

Yes. Mark, I might just add, if you go -- if you were to go back, Bill, to a year ago at this time with just some of the evolving regulatory landscape, while a lot of the strain within the industry was good for our longer-term demand, it did create some disruption in a lot of our clients last year. And it wasn't the same at every client, but at some clients, there was some fairly significant disruption. And so I think in terms of the buying environment where we were a year ago with that disruption versus now this year in terms of, look, it's still an uncertain environment, but I think a lot of our clients at this point are focused on getting on with their agendas and making investments in the areas that they need to, to pursue those strategic agendas. I think it's a stronger buying environment, is the feeling that we have this year within the Education segment than we felt that's really 12 months ago.

Good. And then last one, John, you mentioned a couple of larger health care projects where the DSO was stretching a little bit. Are you -- were those -- are you seeing -- I guess I'm trying to ask, is there a larger engagement kind of trend going on in Healthcare? Or were those just that they occurred, but there is no trend there?

I would say not a change in trend this year versus last year, Bill. I think we did see a trend last year in terms of sales, and we're still executing on those projects, of course, now towards some larger projects. And to be clear, we're still selling some larger projects this year. I wouldn't necessarily describe it as an even further increasing trend in 2026 versus 2025. But whether it's some of the larger projects that we sold last year or one this year, oftentimes within Healthcare, when you do have some of those larger projects that have performance-based fee elements, that does require some DSO investment as you go through the initial phases of those projects before you get the milestones from clients. So we're just in that phase on some of those projects whether they were sold last year or this year, where we expect to get to the point we're able to bill and collect on achievements and some of those milestones in the back half of 2026.

Yes. I was actually -- I understand the cash issue, but I was actually thinking maybe the just efficiency of extended projects you might be benefiting from in terms of your utilization and margins versus...

No, you're right. Yes, those type of projects do provide great opportunities to get significant portions of our teams engaged on those projects for a longer duration, which is good for utilization expected within the segment.

[Operator Instructions] Our next question comes from the line of Kevin Steinke of Barrington Research Associates.

Great. Most of my questions have been asked, but I wanted to follow up on a comment you made about you remaining bullish on AI being a growth driver for your business. You mentioned the AI services market expected to grow double digits. Just wondering if you feel like you have the capabilities in-house to address that market opportunity or if there could be acquisition activity in that area. And I don't even know how developed the market is from an AI services perspective to actually be able to make acquisitions there. But just any, I guess, comments on that, I'd appreciate.

Sure thing, Kevin. We have been pretty successful at organically investing in this area. We have a Chief AI Officer who has been just really helpful for us to kind of basically elevate our game across each of our businesses and continue -- but not only in the client-facing side, but also our enterprise functions increasingly as well as our delivery methodologies. And so our ability to realize the opportunity in the market is something that we're feeling confident in actually. We feel like that we hire the right people. We have not had a problem attracting talent.

From an M&A standpoint, for the reasons that you perhaps described, I think valuations are probably going to be pretty huge. And I'm not sure that that would be perhaps the best use of our capital given that we can do these things organically, but let's just be clear, we think there's more investment to be made, but it's largely built into the model that we've created, by the partnerships that we also have announced, like the Hippocratic AI and other firms that can help us accelerate in that as well.

So it's actually an area like I say, we, I think, bullish is the right word to characterize it, see a lot more opportunity, recognizing that there's going to be a risk and transformation and everything, but we're quite excited about it.

And maybe, Mark, I'd just add on. I think that that maybe is a little bit underappreciated part of our business when you look at it, is even going back several years now before a lot of the evolution of the AI tools, about 40% of our revenue comes from our technology business from our digital business. So we have natively within our employee base, a significant amount of talent with skills from a digital perspective using many of the platforms where AI is now being infused and where our clients are looking to get some of the at-scale benefits from.

So that doesn't mean that we don't need to add continued additional talent with new skill sets or new capabilities. But the base of our employees to start really was strong in terms of their digital capabilities. And it's something we talked about last call, if you look at the objectives that we're delivering for our clients in terms of outcomes, we're also very strong in that area. So a lot of what our clients look at isn't AI just for the sake of AI. It's using AI to achieve outcomes -- financial outcomes. And within the industries that we serve, we got really deep expertise in terms of how to drive those types of outcomes.

So you take those 2 things together, continue to add talent with the AI capabilities, and we feel like we're just really well positioned to serve our clients in those core areas.

Okay. That's helpful commentary. I appreciate it.

Thank you. Seeing no more questions in the queue. I'd like to turn the call back to Mr. Hussey.

Thanks for spending time with us this afternoon, and we look forward to speaking with you again in July when we announce our second quarter results. Good evening.

That concludes today's conference call. Thank you, everyone, for your participation.

Good afternoon, and welcome to Huron Consulting Group's webcast to discuss the financial results for the fourth quarter and full year of 2025. [Operator Instructions] As a reminder, this conference call is being recorded. Before we begin, I'd like to point all of you to the disclosure at the end of the company's news release for information about any forward-looking statements that may be made or discussed on this call. The news release is posted on Huron's website.

Please review that information along with the filings with the SEC for a disclosure of factors that may impact subjects discussed in this afternoon's webcast. The company will be discussing one or more non-GAAP financial measures. Please look at the earnings release on Huron's website for all of the disclosures required by the SEC, including reconciliation to the most comparable GAAP numbers.

And now I'd like to turn the call over to Mark Hussey, Chief Executive Officer and President of Huron Consulting Group. Mr. Hussey, please go ahead.

Good afternoon, and welcome to Huron Consulting Group's Fourth Quarter and Full Year 2025 Earnings Call. With me today are John Kelly, our Chief Financial Officer; and Ronnie Dale, our Chief Operating Officer.

We finished 2025 with strong fourth quarter results. Revenues before reimbursable expenses or RBR, grew 11% in the fourth quarter of 2025, driven by record RBR in the health care and commercial segments. We also continued our trajectory of margin expansion achieving 15.7% adjusted EBITDA margins in the quarter. Full year RBR grew 12% over 2024 resulting in a record RBR and a fifth consecutive year of growth.

We're also pleased with our progress, increasing our margins in 2025, which marked our fifth consecutive year of adjusted EBITDA margin expansion. In addition, we achieved a record adjusted diluted earnings per share in 2025, it grew 21% over 2024. [indiscernible] achieved in 2025 is carried forward into 2026, a as we start the year with strong backlog and our pipeline at near record levels, even after strong sales conversions.

Our market test strategy, a portfolio of offerings and strong execution by our highly talented team has delivered strong multiyear financial performance for Iran and its shareholders, consistent with the financial goals outlined at our Investor Day. I'll now share some additional insight into the progress we've made since last year's Investor Day, while providing color into our fourth quarter and full year 2025 performance along with our expectations to 2026.

Please note, we placed supplemental materials on the Investor Relations page of our website for additional detail around our 2026 outlook as well as information about our AI strategy and the evolving opportunity that AI presents to drive impact for our clients and grow our business. We demonstrated that our growth strategy continues to deliver financial performance that has met or exceeded our publicly shared growth goals since 2022 and we remain committed to 5 strategic pillars of that strategy.

First pillar of our strategy is to sustain strong growth in our largest industries, healthcare and education on which we have lean market positions. In the fourth quarter of 2025, Healthcare segment RBR grew 10% over the prior year quarter, reflecting strong demand for performance improvement, strategy and innovation, financial advisory, revenue cycle managed services offerings as well as incremental RBR growth from our acquisitions.

Excluding the impact of the acquisitions and the disposition of the Studer education business, which was divested on December 31, 2024, organic growth for the Healthcare segment was 8% on top of 18% growth in Q4 2024 over 2023. On a full year basis, the Healthcare segment achieved record RBR of $838 million, growing 11% over 2024. The increase in RBR in 2025 was driven by continued strong demand for our performance improvement, financial advisory, revenue cycle managed services and strategy and innovation offerings. Momentum we built in 2025, this has extended into 2026 as market tailwinds continue for our financial health transformation offerings. The increase in bookings in the second half of 2025 exceeded the same period in 2024 by more than 20%. We've also seen strong sales conversions continuing into January and extending the momentum of our recent sales activity.

Across the health care industry, financial performance among health systems remains uneven as reimbursements remain under increased pressure, operating cost increase and workforce constraints continue to pressure provider economics. Even organizations have returned to modest profitability are increasingly focused on scenario planning and balance sheet resilience, recognizing that shifts in payer mix, Medicaid and Medicare funding levels or further cost increases equity erode gains.

As a result, all systems are prioritizing initiatives that deliver near-term financial impact of positioning their organizations for longer-term sustainability. These dynamics continue to drive demand for our health care offerings, provider clients are seeking partners that can help them move beyond incremental cost actions for integrated solutions to drive growth improved margin performance and liquidity, support strategic repositioning and enable care delivery and operational transformation.

In parallel, health systems are accelerating the adoption of AI and automation. We're working closely with our consulting and managed services clients in this area. For example, to date, we closed over 100 AI and automation solutions to help health systems drive speed to value revenue growth and cost savings.

In addition, we measured into strategic collaborations with select health care-focused AI companies to help improve the value that our joint clients derive from deploying the new technologies. We have our deep industry expertise, breadth of offerings and proven track record of delivering tangible results, position us well to maintain our strong competitive leadership position and serve our clients across our core provider business. As we shared at our Investor Day last year, we're also focused on growing our addressable market by expanding into adjacent markets and innovating new offerings in support of our payer strategy during the fourth quarter.

We acquired the consulting services division of [ Acxiom ] Systems, a leading IT services firm that specializes in core administration systems and digital transformation for payers and payer provider organizations. This acquisition broadens fair focused digital offerings and enables us to better serve our clients, seeking to modernize their claims platforms while leveraging connected data to improve operational performance and member outcomes.

Turning next to the Education segment. In the fourth quarter of 2025, the casing segment RBR was flat compared to the fourth quarter of 2024 [indiscernible] is a tough comparison in light of a 15% RBR growth in Q4 2024 for the fourth quarter of 2023. Annual RBR in the segment grew 5% compared to 2024. For the full year, the increase in RBR was primarily driven by strong demand for our strategy and operations, research and digital offerings as well as incremental RBR from our acquisitions.

Despite the more challenging operating environment for our higher education clients in 2025, we saw a 10%-plus increase in bookings in the second half of 2025 for the second half of 2024. The sales momentum has accelerated into January of 2026. Our education institutions continue to face significant pressures on revenues and costs. Many university presidents in their Boards are having strategic discussions about the sustainability of their business models in light of the dynamic regulatory environment, increasing financial pressures and declining perception of the value of a 4-year degree. We believe the breadth of our client relationships, industry expertise and broad portfolio of offerings position us as 1 of the leading trusted advisers to senior leaders as we navigate these pressing issues continue to leverage our unified go-to-market approach in serving the top 200 public and private universities and systems building upon our strong credentials, breadth of offerings to win and deliver on some of the most complex engagements in the industry. For example, we're working with a leading research university to deliver a meaningful people enabled business transformation, the modernization of their core processes and associated technologies, including leveraging AI, positioning them for a more resonated future. And another client -- we were selected to explore performance improvement initiatives to drive near-term financial benefit or redesigning system and campus level operating models and operations, including implementing new core administrative systems and inactive change management position the institution, longer-term sustainability and reinvestment in their mission.

[indiscernible] and our outlook for sustained growth in both health care and education, anchored in our deep relationships and our leading competitive positions in end markets that are facing ongoing financial pressure amidst disruption has been exacerbated by the current regulatory environment. These are large, favorable end markets facing structural challenges that we believe will continue to drive strong demand for our offerings and serve as the foundation of Huron's long-term growth strategy.

Our second strategic pillar is focused on growing our business in the commercial industries. The fourth quarter of 2025 Commercial segment RBR grew 37% over the prior year quarter, driven by incremental revenue from our acquisitions and strong demand for financial advisory offerings. Excluding the impact of acquisitions, RBR in Q4 2025 grew 9% organically over the fourth quarter of 2025.

Full year 2025 Commercial segment RBR grew 27% to a record $325 million resulting in the scaling of a commercial business to approximately 20% of total company RBR. The increase in the full year RBR was primarily driven by incremental RBR for acquisitions as well as strong demand for our digital offerings partially offset by declines in our strategy and innovation and financial advisory offerings.

In the commercial segment, we saw 20% plus increase in bookings in the second half of 2025 for the second half of 2024, similar to health care and education, we've also seen continuing strong sales conversions in January in our commercial business, which again highlights our momentum and the strength of our offerings in the market. Commercial industries are navigating heightened complexity driven by regulatory change, cost pressure and accelerating adoption of AI-enabled operating models, driving the need for a more integrated strategy and operations financial advisory, digital and people-focused solutions continued organic investment and targeted tuck-in acquisitions, we strengthened our industry expertise and broaden our capabilities coverable integrated, differentiated offerings to our clients, which has increased our win rates in this segment year-over-year.

While we remain in the early stages of executing our fully integrated commercial strategy, we believe our expanding set of offerings providing our increasing ability to a measurable ROI for our clients. We are performing some proven capabilities added by our Wilson Parade acquisition and the ongoing integration of AI, data and automation capabilities into our offerings will prove to be a meaningful competitive advantage and position us for continued growth. We've demonstrated that commercial industries represent a significant new [indiscernible] for Huron through our integrated and focused approach to investing in areas in which we have demonstrated right away. I believe the commercial segment will continue to help us achieve our growth goals.

Now let me turn to our third strategic pillar, advancing our integrated digital platform. Digital capability RBR grew 4% in the fourth quarter and 10% in the full year of 2025. The increase in RBR in the fourth quarter and the full year was driven by growth in commercial and education industries. Our digital capability, which represented 41% of total company RBR in 2025 remains a differentiated partner to our clients in a large growing market.

We have the evolution of advanced technologies, our clients' challenges remain, identifying opportunities for revenue growth, driving operational efficiencies and making better, faster decisions to propel their businesses forward in increasingly competitive landscapes. Our deep industry and functional knowledge, coupled with the rest of our technology, data and analytics and change management capabilities since at the heart of our differentiation. The technology continues to rapidly advance, we strive to share the best solutions for their clients, whether that requires modernizing their data foundation designing and deploying a strategy that embeds AI in the core platforms or data AI applications or custom developer.

It's important to highlight that AI do not create value on its own. It requires a focus on process reengineering and in nearly all cases, we focus on people to effectuate the change needed to sustain the benefits delivered by AI. We believe our ability to bring together our strategy, operations, technology and people-related offerings to reimagine operating models and redesigned core business functions and processes integrating advanced technologies will continue to position us for long-term growth. The success of our 2024 acquisition of AXIA is a terrific example of this. With the combination of our manufacturing and supply chain expertise coupled with a broader solution set of technology and people-related capabilities to draw upon recruit the RBR active business 20% in 2025 compared to 2024.

Expanding digital capabilities will continue to be an important driver of growth across our business in future years as our clients continue their focus on driving growth and productivity in their own highly competitive markets. We are innovating new offerings, expanding our technology partner ecosystem as the market and technology landscape models. For example, our data management analytics and AI business within digital grew RBR over 40% in 2025 or in 2024, and we were recognized by one of our technology partners as an AI agent partner challenged winter or innovative supplier AI agent use case.

Looking ahead, we'll further invest organically and inorganically to strengthen and broaden our portfolio of offerings, continue digital's growth trajectory. Our 2 final strategic pillars reinforce our focus on growing our margins and maintaining a strong balance sheet and cash flows, which continue to be a key contributor to our growth algorithm to drive shareholder value.

Now let me highlight the foundation of our success, our people. I want to recognize the significant contributions of our highly talented global team. Throughout the year, our team delivered exceptional outcomes for our clients by bringing deep industry, functional and technical expertise and innovation at a time of significant disruption and regulatory change. As importantly, our team advanced our business with discipline supported one another and further fostered our strong collaborative culture. This combination of client impact, business performance and teamwork is what continues to differentiate Huron on and has fostered one of the strongest and most attractive cultures among professional services firms, which reinforces our ability to attract and retain top talent. I'm deeply grateful for the dedication to our clients, our company and to one another.

Now let me turn to our expectations and guidance for 2026. As noted earlier, we placed supplemental materials on the Investor Relations page of our website that includes additional detail around our 2026 outlook. As well as information about our AI opportunity. For RBR, our RBR guidance for the year is $1.78 billion to $1.86 billion. We also expect adjusted EBITDA margin in a range of 14.5% to 15% of RBR and adjusted diluted earnings per share of $8.35 to $9.15. [indiscernible] July, we're projecting the 9.5% RBR growth at the midpoint in 2026. Going at our recent momentum for starting 2026 the strongest hard backlog coverage of our additional annual RBR guidance in the last 5 years, reflective of strong sales growth in the second half of 2025 and early 2026.

Perhaps most encouraging, our pipeline remains at near record levels even after the strong sales conversion. In terms of margins, the midpoint for 2026 guidance, we expect an approximate 50 basis point improvement over 2025, building upon the cumulative 400 basis point improvement achieved since 2020. We remain committed to achieving 15% to 17% adjusted EBITDA margins by 2029, consistent with our long-term financial objectives. We believe we will continue to drive improved profitability in our business further building on the margin enhancement levers outlined at our Investor Day, inclusive of a and automation-driven productivity gains over time.

We'll also continue to invest in areas of our business with the greatest growth potential. Midpoint of our guidance for adjusted earnings per share is $8.75, a 12% increase over 2025, which would be on top of a 21% increase achieved in 2025 over 2024. The expected increase continues our multiyear double-digit percentage EPS growth trajectory, which reflects the compounding impact of our revenue growth, margin expansion and return of capital to shareholders via share repurchases.

Our focus has and continues to be on serving blue-chip clients in mission-critical, highly regulated industries for those facing significant disruption and their trusted adviser requires a distant understanding of our clients' industries and business models, keep functional and operational knowledge and a people-first client-centric approach to deliver sustainable transformation. In light of the market's increased focus on AI, let me touch on the evolving opportunities that we see for AI in our business.

We believe AI provides us with transformational solutions that strengthened our ability to address the complex issues facing our clients. Cost of failure and the execution of AI for our clients in our core industries is high, especially when those processes or use cases sit at the heart of our clients' businesses, which is patient care, student experience for the supply chain. We believe AI will strengthen our competitive advantage and expand our wallet share by integrating advanced technologies with our offerings and building accelerators leveraging our distinct domain knowledge and IP.

In addition, we'll continue to leverage AI to help drive even faster speed to value and realization and greater financial benefit for consulting, digital and managed services clients, further strengthening the ROI for clients investments. You also see AI as an opportunity to grow our addressable market. We continue to invest in and sell our AI-focused services and solutions, which range from AI strategy and data modernization, implementation, orchestration and change management. The human element of implementing change is paramount to the success of organizations in AI-enabled transformation, especially as they redesign the way [indiscernible] is completed in operating models that must evolve to enable execution.

We also expect to expand our technology partner ecosystem to meet our clients where they are, mining AI within core systems, native AI applications and customer development to achieve a strategic, operational and technical objectives while maximizing the return on investment. Newly formed collaboration with hepogratic AI is a good example of how we are expanding our partner ecosystem, broadening our go-to-market reach and expanding our portfolio of offerings to serve our clients.

Finally, like every organization, we're applying AI intelligent automation and advanced analytics to increase productivity across our client facing and internal teams. We have and will continue to develop and scale use cases across the organization to drive efficiency gains. Let me highlight 1 additional point. In 2025, 67% of total company RBR was derived through outcome-based fixed fee and recurring revenue models. That's an increase from 57% in 2022 which was [indiscernible] at our Investor Day, we shared our focus on expanding our margins, including the new pricing initiatives that we put in place at that time. We have a long-standing history of leveraging outcomes based [indiscernible] recurring revenue pricing models to deliver our work to clients, which we believe positions us well to capitalize on the value that AI can bring both our clients and to Huron.

We believe we're well positioned to take advantage of AI and a transformation it enables. But AI capabilities alone are not enough for success. AI's impact and value are outlined when combined with our deep industry, functional and technical expertise, broad digital portfolio, demonstrable workforce transformation experience and proven track record of agility.

We continue to act as a client trusted adviser and an AI-driven world as they evolve their business models and organizations to succeed in this rapidly changing environment. I'll be close by reiterating that we're off to a strong start in 2026, and we're building on the momentum that led to strong financial performance in 2025. We're excited about the prospects we're achieving our revenue and profitability goals for the year. We continue to execute market tailwinds for our business, further strengthen our competitive position and capitalize on the market and performance-enhancing opportunities that AI offers.

And with that, let me now turn it over to John for a more detailed discussion of our financial results. John?

Thank you, Mark, and good afternoon, everyone. Before again, please note that I will be discussing non-GAAP financial measures such as EBITDA, adjusted EBITDA, adjusted net income, adjusted EPS and free cash flow. Our press release, 10-K and Investor Relations page on the Huron website are reconciliations of these non-GAAP measures to the most comparable GAAP measures, along with the discussion of why management uses these non-GAAP measures, why management believes they provide useful information to investors regarding our financial condition and operating results.

Before discussing our financial results, I'd like to discuss several housekeeping items. First, our fourth quarter 2025 results in the Healthcare segment exclude the operating results from the studio education business, which was divested on December 31, 2024. Second, our commercial segment results do include a full quarter of operating results from our acquisition of Wilson Piramal, which closed in September of 2025.

And finally, our Healthcare segment results to include a partial quarter of operating results from our acquisition of the Consulting Services division of Acxiom Systems, which closed on November 1. Now I'll share some of the key financial results for the fourth quarter and full year 2025. Fourth quarter of 2025 produced RBR $432.3 million, up 11.3% from $388.4 million in the same quarter of 2024, driven by record RBR in health care and commercial segments. For the full year 2025, RBR was $1.66 billion, up 11.9% from $1.49 billion in 2024, excluding the impact of acquisitions and the Studer education divestiture, full year 2025 RBR to 7.1% over 2024. Driven by growth across all 3 operating segments, we achieved record RBR in 2025, which also marked our fifth consecutive year of achieving high single-digit percentage or better RBR growth.

Net income for the fourth quarter of 2025 was $30.7 million or $1.72 per diluted share compared to net income of $34 million from $1.84 per diluted share in the fourth quarter of 2024. As a percentage of total revenues, net income declined to 6.9% in the fourth quarter -- in the fourth quarter of 2025 compared to 8.5% in the fourth quarter of 2024.

Results for the fourth quarter of 2025 include $2.2 million of acquisition-related contingent consideration charges out of tax is our projections for certain acquisitions with out. [indiscernible] our original expectations. Results for the fourth quarter of 2024 included a $2.4 million gain net of tax recognized upon the divestiture of our Studer Education business.

For full year 2025, net income was $105 million or $5.84 per diluted share. This compares to net income of $116.6 million or $6.27 per diluted share in 2024. As a percentage of total revenues, net income declined to 6.2% for full year 2025 compared to 7.7% in 2024. Net income for 2025 includes $7.7 million of noncash impairment charges, net of tax, related to the company's convertible debt investment in a third party.

Net income for full year 2024 includes an $11.1 million litigation settlement gain net of tax related to a legal matter in which [indiscernible]. Our effective income tax rate in the fourth quarter of 2025 was 29.2%, which was less favorable than the statutory rate, inclusive of state income taxes, primarily due to certain nondeductible expense items.

On a full year basis, our effective tax rate for 2025 to 22.2%, which is more favorable than the statutory rate, inclusive of state income taxes, primarily due to a discrete tax benefit for share-based compensation awards that vested during the year. This favorable item was partially offset by certain nondeductible expense items. Adjusted EBITDA was $68 million in Q4 2025 or 15.7% of RBR compared to $56.8 million in Q4 2024 to 14.6% of RBR. For full year 2025, adjusted EBITDA was $237.5 million or 14.3% of RBR compared to $201.2 million or 13.5% of RBR in 2024.

The increase in full year adjusted EBITDA was primarily attributable to the increase in segment operating income in all 3 operating segments, excluding the impact of segment depreciation and amortization and segment restructuring charges, partially offset by increased unallocated corporate expenses to support the growth of our business. 2025 was the fifth consecutive year of expanded adjusted EBITDA margin percentage, growing our adjusted EBITDA margins 400 basis points since 2020. This multiyear margin expansion demonstrates our continued progress towards the goal shared at our 2025 Investor Day.

Adjusted net income was $38.7 million $2.17 per diluted share in the fourth quarter of 2025 compared to $35.2 million or $1.90 per diluted share in the fourth quarter of 2024. For the full year, 2025 adjusted net income was $140.8 million or a record $7.83 per share compared with $120.4 million or $6.47 per share in 2024, representing a 21% increase in adjusted diluted earnings per share year-over-year.

Now I'll discuss the performance of each of our operating segments. The Healthcare segment generated 51% of total company RBR during the fourth quarter of 2025. This segment posted a record RBR of $221.7 million up $19.4 million or 9.6% from the fourth quarter of 2024. The increase in RBR in the quarter was driven by strong demand for our performance improvement, strategy and innovation, financial advisory and revenue cycle managed services offerings as well as $7.3 million of incremental RBR from our acquisitions of Eclipse Insights, AXIA and the Consulting Services division of Acxiom Systems. Excluding the impact of acquisitions and the disposition of the Studer education business, organic growth for the Healthcare segment was 7.8%, hence a difficult 2024 comparison.

On a full year basis, Healthcare RBR increased to 10.7% to a record $837.5 million compared to $756.3 million in 2024, which was on top of strong growth of 12.2% in 2024 over 2023. RBR in 2025 included $14.5 million from our acquisitions of Eclipse Insights, AXIA and the Consulting Services division Acxiom systems. These increases were partially offset by a decrease in RBR from the divestiture of our Studer education business which generated $13.7 million of RBR in 2024.

Excluding the impact of acquisitions in the Studer education divestiture, Healthcare segment RBR in 2025 grew 10.8% compared to 2024. The increase in RVR in 2025 was driven by continued strong demand for our performance improvement financial advisory, revenue cycle managed services and strategy and innovation offerings. Operating income margin for Healthcare was 32.4% in Q4 2025 compared to 30.3% in Q4 of 2024. The increase in operating income margin was largely driven by decreases, performance bonus, salaries and related expenses for our support personnel, and contractor expenses, partially offset by an increase in salaries and related expenses for our revenue-generating professionals as a percentage of RBR.

On a full year basis, operating income margin was 30.5% in 2025 compared to 27.6% in 2024. The increase in operating income margin year-over-year was primarily due to decreases in salaries and related expenses for our support personnel, bad debt expense, practice administration and meeting expenses as well as revenue growth that outpaced the increase in salaries and related expenses for our revenue-generating professionals. The Education segment generated 28% of total company RBR during the fourth quarter of 2025. Education segment RBR in the fourth quarter of 2025 was flat compared to the fourth quarter of 2024. RBR in the fourth quarter of 2025 included $1.5 million from our acquisitions of advancement Resources AXIA and Halpin.

On a full year basis, Education segment RBR grew 5.5% year-over-year to a record $500.2 million compared to $474.2 million in 2024. The increase in full year RBR was primarily driven by strong demand for our strategy and operations, research and digital offerings as well as $9.9 million of incremental RBR from our acquisitions of advancement resources, G&A, AXIA and Halpin. The operating income Margin for education was 20.7% for Q4 2025 compared to 22.4% for the same quarter in 2024.

The decline in segment -- the decline in operating income margin in the quarter was primarily driven by increases in salaries and related expenses for our revenue-generating professionals, third-party professional fees, restructuring charges, and capitalized software expense amortization related to the development of our next-generation research suite software, all as percentages of RBR. These increases were partially offset by a decrease in performance bonus expense.

On a full year basis, operating income margin was relatively flat at 22.6% compared to 22.9% in 2024. The Commercial segment generated 21% of total company RBR during the fourth quarter of 2025 and grew 36.6% over the prior year period, posting RBR of $91.9 million compared to $67.3 million in the fourth quarter of 2024.

The increase in RBR in the fourth quarter of 2025 included $18.5 million of incremental revenue from our acquisitions of AXIA, Truliant and Wilson [indiscernible] and strong demand for our financial advisory offerings. Excluding the impact of acquisitions, RBR in Q4 2025 was 9.1% organically over Q4 of 2024. On a full year basis, Commercial RBR increased 27.2% to $325.1 million compared to $255.6 million in 2024. The increase in full year RBR was primarily driven by $61.6 million of incremental RBR from our acquisitions of AXIA, Truliant and [indiscernible] as well as strong demand for our digital offerings partially offset by declines in our strategy and innovation and financial advisory offerings.

Operating income margin for the Commercial segment was 20% of Q4 2025 compared to 17.8% for the same quarter in 2024. The increase in operating income margin in the quarter primarily driven by RBR that outpaced increases in performance bonus expense and contractor expenses partially offset by increases in salaries and related expenses for our revenue-generating professionals and restructuring charges as percentages of RBR.

On a full year basis, Commercial segment operating income margin decreased to 17.2% compared to 20% in 2024, reflecting increases in salaries and related expenses for our revenue-generating professionals and contractor expenses, percentage of RBR partially offset by revenue growth that outpaced the increase in performance bonus expense for our revenue-generating professionals.

Our 2025 Commercial segment operating income margin reflected increased revenue mix shift to our digital offerings as compared to 2024 as well as certain integration expenses related to our acquisition activity during the year. Corporate expenses not allocated at the segment level and excluding restructuring charges of $54.4 million in Q4 2025 compared to $47.8 million in Q4 2024.

Unallocated corporate expenses in the fourth quarter of 2025 and 2024, included a loss of $800,000 and a gain of $200,000, respectively, related to changes in the liability of our deferred compensation plan, 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 at both periods, unallocated corporate expenses increased $5.6 million, primarily due to increases in salaries and related expenses for our support personnel, software and data hosting expenses.

On a full year basis, corporate expenses not allocated at the segment level increased to $217.6 million which included $6.2 million of expense related to the deferred compensation plan compared to $191.2 million in 2024 which included $5.2 million of expense related to the deferred compensation plan. Excluding the impact of the deferred compensation plan in both periods, unallocated corporate expenses increased $25.4 million primarily driven by an increase in salaries and related expenses for our support personnel, software and data hosting expenses and third-party professional fees primarily related to our M&A activity during the year partially offset by a decrease in legal expenses.

Now turning to the balance sheet and cash flows. Cash flow generated from operations for 2025 was $193.4 million. We used $31.1 million to invest in capital expenditures, inclusive of internally developed software costs, resulting in free cash flow of $162.3 million. DSO came in at 73 days for the fourth quarter of 2025 compared to 76 days for both the third quarter of 2025 in the fourth quarter of 2024. The decrease in DSO during the fourth quarter when compared to both periods reflects the impact of collections on certain larger health care and education projects in alignment with our contractual payment schedules.

Total debt as of December 31, 2025, was $511 million, consisting entirely of our senior bank debt. We finished the year with cash of $24.5 million from net debt of $486.5 million. This was a $100.6 million decrease in net debt compared to Q3 2025. During 2025, we used $166 million to repurchase approximately 1.2 million shares, representing 6.6% of our outstanding shares as of the beginning of the year and we used $112 million for strategic tuck-in acquisitions, inclusive of this deployment of capital and consistent with the capital allocation objectives we discussed with our 2025 Investor Day.

Our leverage ratio, as defined in our senior bank agreement, was 1.9x adjusted EBITDA as of December 31, 2025. In addition, during the first quarter of 2026, in February 20, we have used $70 million to repurchase approximately 500,000 shares. Also during the first quarter, Huron's Board of Directors authorized an additional $200 million under our current share repurchase program. Inclusive of this additional authorization we have $229 million remaining under our share repurchase program.

Let me remind everyone that we have placed supplemental materials on the Investor Relations page of our website with additional detail around our 2026 outlook as well as information about our AI strategy and the evolving opportunity that AI presents for Huron.

Now let me turn to our expectations and guidance for 2026. For the full year 2026, we anticipate RBR in the range of $1.78 billion to $1.86 billion, reflecting 9.5% year-over-year growth at the midpoint. Adjusted EBITDA in a range of 14.5% to 15% of RBR, reflecting an approximate 50 basis point improvement over 2025 at the midpoint. Adjusted non-GAAP EPS in the range of $8.35 to $9.15, reflecting a 12% increase over 2025 at the midpoint.

We expect cash flows from operations to be in the range of $220 million to $260 million. Capital expenditures are expected to be approximately $30 million to $40 million, inclusive of cost to develop our market-facing products and analytical tools and free cash flows are expected to be in a range of $180 million to $220 million, net of cash taxes and interest and excluding noncash stock compensation. Weighted average diluted share count for 2026 is expected to be in the range of 17.2 million to 17.8 million shares. Finally, with respect to taxes, for the full year 2026, we expect an effective tax rate in the range of 28% to 30%, which comprises the federal tax rate of 21%, a blended state tax rate of 5% to 6% and incremental tax expense related to certain nondeductible expense items, partially offset by certain reductions in tax credits.

Let me add some color to our guidance, starting with RBR. The midpoint of the RBR range reflects nearly 10% growth over 2025. As Mark mentioned, because of the market demand for our offerings across all 3 operating segments, we have the strongest backlog coverage of our initial annual RBR guidance in the last 5 years, our pipeline remains at record levels despite the recent strong sales activity. We believe we are well positioned to achieve growth in 2026, consistent with our financial objectives.

With regard to our Healthcare segment, we expect low double-digit percentage RBR growth for the full year 2026 driven by high single-digit percentage organic RBR growth. We expect operating margins will be in a range of approximately 29% to 33%. In the Education segment, we expect mid-single-digit percentage RBR growth for the full year 2026, nearly all organic, and we expect operating margins will be in a range of approximately 22% to 26%.

In the Commercial segment, we expect to see RBR growth in the low-teen percentage range for 2026 driven by high single-digit percentage organic RBR growth. We expect our operating margins in this segment to be in a range of approximately 18% to 22%, which reflects an anticipated modest mix shift back towards our consulting offerings as well as lower M&A integration expenses. We expect unallocated corporate SG&A, excluding the impact of the deferred compensation plan to increase in the mid- to upper single-digit percentage range year-over-year.

Also, in the first quarter, consistent with prior years, we note the following items as it relates to expenses. The reset of wage basis for FICA and our 401(k) match for annual merit and promotion wage increases going to effect on January 1, an increase in stock compensation expense for restricted stock awards that will be granted in March to retirement eligible employees and an increase in practice administration and meeting expenses driven by several larger team meetings that take place in the quarter.

In addition, we expect an effective tax rate during the first quarter of 2026 in the 15% to 20% range. This increase in effective tax rate when compared to the first quarter of 2025, reflecting anticipated lower tax deduction for shares vesting in March of 2026. Based on these factors, we anticipate approximately 15% to 20% of our full year adjusted EBITDA and full year adjusted EPS to be generated during the first quarter.

As a closing reminder, with respect to 2025 adjusted EBITDA, adjusted net income and adjusted EPS, there are several items that you will need to consider when reconciling these non-GAAP measures to comparable GAAP measures. Reconciliation schedules that we included in our press release will help walk you through these reconciliations.

Thanks, everyone. I would now like to open the call to questions. Operator?

[Operator Instructions] Our first question comes from Andrew Nicholas with William Blair.

First one I wanted to ask was on commercial. Strong quarter, total revenue growth and organic revenue growth. It looks to me like CMS revenue was especially strong. So I was hoping you could flesh that out a little bit. Was there anything onetime in the quarter or lumpy? And what at the industry level is particularly strong in that segment.

Yes. Andrew, no, you're right. It was a good quarter for our commercial team. And as we noted, it was a strong quarter for our stressed financial advisory team as you suggested. Nothing that I would call out is lumpy there during the quarter. There were some low to mid-single-digit million success fees during the quarter, but that's reflective of the size of such fees that we can get in any given quarter. So I wouldn't necessarily call it out.

But I think overall, we saw [indiscernible] in that part of the business. A lot of strength from our AXIA business, which really speaks to some of the supply chain challenges that our clients are seeing in the digital area and momentum from a strategy and innovation perspective, too, both in terms of the actual results during the quarter, but then when we look at the sale -- bookings conversions during the quarter and the backlog heading into next year.

So it was a strong quarter from a commercial perspective.

All right. And then on guidance, I guess I want to ask a question about the conservatism of guidance. It sounds like from looking at the slide deck in your prepared remarks here that it's the strongest hard backlog coverage in the last 5 years. So does that mean you just have a little bit more wiggle room to either side? Are you expecting maybe or giving yourself some room in the back half of the year? Just help me piece that comment together a little bit more, if you could.

Sure, Andrew. I can start there. I wouldn't say that there's really any change in our guidance approach than we have in any given year. I think when we're at this call in February, at the beginning of the year, we're always a little bit cautious because we still have a full year to project out. And so we don't like to get ahead of ourselves.

So I think there was kind of the normal amount of caution from us in terms of the range, just reflecting the fact that we have to execute through the rest of the year. But certainly, based on the backlog coverage that you cited, the bookings conversions that we saw during the back half of last year as well as the start that we had this year plus just the overall size of the pipeline, those are all things that give us confidence in be able to achieve that guidance. And to the extent that we're able to execute as we expect it the next step that could the potential to push us towards the upper end of the guidance of the year goes on.

Understood. And if I could just squeeze one more in, just on the AI topic. Is there any way to kind of quantify the number of projects or the revenue that is currently tied to or incorporates AI in some fashion? And then relatedly, anything from an economics perspective or a pricing perspective or even like a duration perspective, that you've seen AI projects be different from your traditional work to the extent that more work is tied to AI or implementing AI or helping your clients with AI, just wondering how that evolves the model, if at all?

Sure, Andrew. Yes, happy to provide some color there. It's difficult to quantify across the entire business because we are deploying AI really across the business and in different areas. There's -- at this point, the large majority of our projects have some element of AI embedded in that. And this is not just speaking of digital projects, this is consulting projects as well as digital projects. As we look at sales conversions, Thinking about it comparatively this year versus last year, there's been a noticeable shift in terms of projects that you have, either how we would characterize a high component or a moderate component of AI related delivery. And maybe a way to think about that is if you go back towards the first part of last year, maybe that was 25% of projects or something in that neighborhood that was around that side. This year at closer to 50%. If you look within our digital business and our data data analysis business and our AI offerings specifically, that's up about 40% at this point year-over-year, which is one of the drivers of our confidence in digital growth as we head into 2026.

Our next question comes from Tobey Sommer with Truist.

I was interested by your comment about having the highest backlog coverage of initial RBR guidance in 5 years. Could you frame that? I understand it's a high watermark, but I don't know what would be typical or an average and how this recent snapshot would compare to what those would be typical.

Yes, I can start there from a quantification perspective. So as you're familiar, typically at the beginning of the year, during the first quarter, you've got really high visibility by the time you get out the quarter into the second quarter, we got significant visibility, but we still have work to do to close out the year. And then when you get to the back half of the year is typically when you're more in that, call it, 40% visibility in range of the guidance. I would say this year, it's several percentage points higher than that really across the board and 1 characteristic of some of the work that we've sold over the back half of last year, our larger sorts of projects that span over multiple quarters. So it's not only giving us better visibility for the immediate quarters, kind of the first half of this year, but it also meaningfully improves our visibility as we get towards the back half of the year. So that's how I would quantify it Tobey.

The only point I would add to what John said is just the breadth the businesses that the coverage that it applies to is it's not that we have it equally across the board every single year. But in this particular year, it is actually quite solid across all 3 segments.

What are the areas in your portfolio where you're anticipating adding head count the fastest here in 2026?

Well, Tobey, I think the first thing I'd comment on is from a health care perspective, we actually made a lot of that investment in head count in the back half of last year. And you'll see that come through in the metrics.

So I think we really kind of set the stage for growth in health care for next year, the guidance that we talked about with primarily that capital we added in the back half of last year, which doesn't mean that we won't have some additional adds, but I think a lot of that was already accomplished by the end of the year. I'd say outside of that area, through the areas I look at would be our strategy and innovation business. We're both in the health care segment as well as the commercial segment right now or seeing a significant amount of pipeline as well as recent bookings in both of those areas where we're actively hiring to people in to help support our growth there as well as within our digital capability. And I think that -- within digital, probably no surprise to hear, but I think employees with skills in Advanced Technologies and AI continue to be an area that we're investing in and to help both grow our digital business, but also to support the consulting business. And then another one that you'd see in the metrics is our managed services business where we've added significant managed services heads towards the back half of last year. And when I think here you see that trying to continue into 2026 based on some of our recent sales in that area.

And -- when you're talking to hospital customers, particularly those maybe in the pipeline for PI projects. What are they most focused on over the next 6, 12, 18 months to -- that influences their decision to go down that path with you or sort of hold off?

Yes. I think probably the best way to summarize it would be the descriptor of financial health transformation, which is a pretty broad encompassing description a full range of things that we do, and we kind of outlined that in some of the areas in the script, but it ranges from performance improvement across all the various sub elements performance improvement.

As well as the balance sheet and financial advisory, bring better liquidity, visibility to decisions around those kinds of things that can lead into managed services as well as the strategy is for growth aspects as well. So it's pretty all-encompassing. And I think you made a comment pretty clear that the time of incremental change to solve the bigger challenges they have, we're well past those days. We're now seeing a lot more transformational type thinking that it spans across the full enterprise[indiscernible]

Sneak in one housekeeping question. What do you expect performance fees, it looks like this year compared to last?

I expect a little bit of an uptick there, Tobey. And so by way of providing some historical context you look over the past 2 years, 2024, if you look at our Healthcare segment revenues, the components of those revenues that was continued base was in a mid 20% range, a little bit north of 25% this past year in 2025, it skewed a little bit lower. It was in the low 20% range.

I think our expectation at this point, which is still subject to the types of projects that we sell as the year goes on is that, that's going to probably return to more of the level that we saw in 2024 or more in that mid-20% range.

[Operator Instructions] Our next question comes from Kevin Steinke with Barrington Research Associates.

Great. I wanted to follow up about your comment of selling larger projects and ask about specifically within health care, I know you noted greater demand for integrated solutions. So when we're talking about larger projects in health care, is it just that the performance improvement piece is larger upfront? Or are you selling more integrated work up front? And if it's just performance improvement upfront, or is the demand for integrated solutions then creating kind of a longer tail at clients as you maybe do follow-on projects and other areas with them.

Good question, Kevin. The typical way we started, we're just presented with the challenger business problem that they're looking for our thoughts and how we can solve it. And when we start off -- sometimes they start with single areas of solution because that's what the client is bringing into focus and they can lead to other opportunities that are adjacent all the time. That's very difficult of what we see is that we expand as we gain relationships and understanding of their business and bring our expertise and suggestions to other areas of focus that can be impactful to them occasionally started at a more integrated full-scale basis.

But it is really, as I said at [indiscernible] of full range of things that we do pretty much we cover every element of their operation today. And so we're -- that I think is one of the things that makes us distinct in the market versus a competitor. So we have just so many leverage in multiple dimensions that we can help them, which is effective, what leads to larger engagement sizes and we probably extend or it over time for longer stays at those clients.

All right. Great. Thank you. John, you mentioned just the acquisition contingent consideration adjustment in the quarter. I believe you mentioned due to outperformance of certain acquisitions or is there any particular that you would highlight there that have been outperforming expectations.

What we've talked about, this isn't -- I probably won't get into specifics, Tobey, on the earn-out considerations for those acquisitions. But Certainly, we talked a lot about Acxiom, which was in the fourth quarter of 2024, which has been one of the business units that -- or 1 of the areas of the business that's been really hot. Eclipse Insights, which we closed in June of 2025, that's been a really strong performer for us. I think as we talked about at the time, that the capabilities of that team in the middle revenue cycle area was just a perfect fit with what we do from a performance improvement consulting perspective. And we've worked with that previously, so we knew we'd give a cultural fit. So that one's off to a great start. And then Wilson Piramal would be one more that I would highlight, and that was in September of last year, but they really bring some great strategy and performance improvement capabilities to our commercial team that, together with insight their capabilities and IP has really been resonating with clients together, along with our digital capabilities that we have with commercial excitement.

So I think that -- if you think about that vertically from strategy to performance improvement to digital, we're seeing a lot of demand for those integrated capabilities right now in the commercial segment.

Okay. Yes, sounds good. That's helpful. Appreciate that. And just lastly, given the recent dislocation you've seen in your stock price, I know it's your target to return about 50% of annual free cash flow to shareholders that's being accomplished through share repurchases. Are there any thoughts to maybe even accelerating the pace of repurchase based on recent movements in the stock? Or do you just kind of stick to that formula you've laid out?

Kevin, it is dynamic. And so we do look at valuation considerations, quite frankly, both on the share repurchase and the M&A side. And certainly, when you do see the dislocation in the stock price from our expectations that does make it an attractive entry point for us from our perspective to buy shares.

So I think I would expect to see more aggressive buyback shares at this price. And that's consistent with hope what we've already done in the first quarter, but then as well as the board authorization that we discussed in my remarks.

Seeing no further questions in the queue. I'd like to turn the call back over to Mr. Hussey.

Thanks for spending time with us this afternoon, and we look forward to speaking with you again in May when we announce our first quarter results.

This concludes today's conference call. Thank you, everyone, for your participation. You may now disconnect.

Good afternoon, and welcome to Huron Consulting Group's webcast to discuss financial results for the third quarter 2025. [Operator Instructions] As a reminder, this conference call is being recorded.

Before we begin, I would like to point all of you to the disclosure at the end of the company's news release for information about any forward-looking statements that may be made or discussed on this call.

The news release is posted on Huron's website. Please review that information. Along with the filings with the SEC for a disclosure of factors that may impact subjects discussed in this afternoon's webcast. The company will be discussing one or more non-GAAP financial measures. Please look at the earnings release and on Huron's website for all of the disclosures required by the SEC, including reconciliation to the most comparable GAAP numbers.

And now I would like to turn the call over to Mark Hussey, Chief Executive Officer and President of Huron Consulting Group. Mr. Hussey, please go ahead.

Good afternoon, and welcome to Huron Consulting Group's Third Quarter 2025 Earnings Call. With me today are John Kelly, our Chief Financial Officer; and Ronnie Dail, our Chief Operating Officer.

Our third quarter performance was strong, driven by growth across all 3 operating segments. Company-wide revenues before reimbursable expenses or RVR grew 17% in the third quarter including 10% organic growth, reflecting a robust demand environment for our services and strong execution by routines. We're also pleased with our continued margin expansion and earnings per share growth in the third quarter consistent with our financial goals. The combination of our deep industry expertise and breadth of capabilities has positioned us as a partner of choice for our clients as they continue to face persistent financial challenges and regulatory disruption.

We believe strong demand across our core end markets positions us well to achieve our full year 2025 RBR in the earnings guidance of establishing a solid base for continued growth in 2026. I'll now share some additional insights into our third quarter performance. In the Healthcare segment, we achieved record RBR during the third quarter. Growing 20% over the third quarter of 2024. Organic Healthcare segment RBR grew 19% over the third quarter of 2024. Excluding the results of our recent acquisition of Eclipse Insights, as well as the Studer Education business, which was divested at the end of 2024.

The increase in RBR in the quarter was driven by broad-based demand across the entire segment, including our performance improvement financial advisory, revenue cycle managed services, strategy and innovation and digital offerings. Third quarter RBR or Healthcare consulting and managed services capability grew [ 27% ] over the third quarter of 2024. Demand for our performance improvement offerings remains robust across the market. And we believe this is the strongest environment for our performance improvement offerings we have seen.

In addition to record revenue growth, we've also seen continued strong pipeline and sales conversion, continuing at high levels in the third quarter and through the first month of the fourth quarter. Primary driver of demand for our health care offerings is continued margin pressure for our Healthcare provider clients. A proven track record of delivering demonstrable ROI for our clients, sets us apart from our competitors and positions Huron as a go-to trust and partner organizations experiencing financial strength. Our performance improvement solutions have consistently delivered improved revenue and cash flow yield, reduced operating costs, and improved patient experience among key operating and financial metrics in addition to those. Increasingly, our performance improvement engagements have a broader scope, integrating our strategy, financial advisory and digital offerings, to better and more uniquely address our clients' challenges. And this has led to an increase in the average size of our health care engagements.

Hospitals and health systems continue to prepare for reduced funding and decreases in insured patient volumes, driven by shifts in the Medicaid reimbursement model. At the same time, pressures persist to improve access and evolved care delivery models in the face of workforce shortages. The combination of these factors creates an unsustainable operating environment for many organizations. And with the combination of these factors, health care providers are increasingly turning to Huron, we evaluate their strategic, financial and operational options to strengthen their competitive positions. We continue to expand the use of AI and automation across our offerings to drive value creation for our clients and increase the efficiency of our service delivery. We're increasingly advising our clients on how to govern and deploy the rapidly expanding array of AI and automation solutions available to them while partnering with them to deploy solutions that will yield demonstrable results and value. In highlight an example within our revenue cycle managed services business, which has delivered 20% RBR growth in the first 3 quarters in 2025 compared to the year-to-date Q3 period last year.

Revenue cycle managed services can be delivered in conjunction with the consulting offerings or sold as a stand-alone offering, depending on the clients' needs. Revenue cycle Managed Services drive improved revenue cycle and yield and cost savings for our clients and are complementary to our revenue cycle consulting capability. Among many other AI and automation use cases, we've established and deployed machine learning models that have helped us lower our costs while boosting collections for clients. The [indiscernible] of our offerings and our strong reputation in the market and along with our ability to deliver tangible results to our clients positions us well to capitalize on robust market demand, as our clients address the ongoing financial pressures on margins and the changing regulatory and technology landscape. Turning to Education segment, RBR also achieved a record growing 7% in the third quarter of 2025 over the prior year quarter. The increase in RBR in the quarter was driven by strong demand for our strategy and operations, research and digital offerings. Our education team has done a terrific job supporting our clients and sustaining our growth trajectory during this unprecedented time in the higher education industry. Many colleges and universities are managing the impact declines in research funding and lower enrollment in both domestic and international students as well as overall policy uncertainty.

Net tuition pricing pressures persist as students and parents seek affordable education and job training alternatives. And similar to our health care clients, our education clients are navigating through disruption and a strained financial environment. As a result, we're turning to Huron for health. Our comprehensive set of offerings, including performance improvement, spans the entire university, taking Huron the trusted partner of choice for clients looking for a partner who can comprehensively address these issues. We continue to see robust demand for digital transformation projects and have been very pleased with our team's win rate in this area throughout the year. Our clients' investments in digital transformation are driven by the need to modernize their data and technology foundations and take advantage of newer technologies, including AI and automation. One area that's particularly wide for AI and automation is research administration. We've seen this validated by the success of the solutions we've developed to date that enable administrative staff to focus on greater value-added activities, such as research compliance or managing more awards.

Let me share an example. We developed an AI offering to automate the input and processing of data across thousands of reps, drastically reducing the set of time freeing up research and administration capacity. While we're actively delivering these AI solutions to our clients directly, they can also incorporate the functionality into our research managed services offerings to optimize our delivery and so for growth. Improving credentials, [ breath ] of offerings and decline relationships have positioned us very well to serve our education and research clients as they navigate this period of high disruption. We believe our strong positioning and competitive advantage in this industry will drive continued growth, consistent with the goals that we discussed at our Investor Day earlier this year.

Now let me turn to the Commercial segment. In the third quarter of 2025, we also achieved record RBR. Commercial segment RBR grew 27% over the prior year quarter. The increase in RBR was driven by our acquisitions of AXIA and Treliant as well as continued organic growth from our commercial digital business. This growth was partially offset by lower demand for our strategy and financial advisory offerings during the quarter. I will note, after both our strategy and financial advisory offerings, we've seen an inflection point in market demand and saw improved sales conversion over the course of the third quarter and into October.

Our commercial digital business has continued to grow despite a more challenging demand environment. And we further integrated our strategy and operations expertise across our [indiscernible] and digital capabilities which has strengthened our competitive advantage and positioned us to drive above-average growth during the quarter. During the quarter, we acquired Wilson Perumal & Company, a leading strategy and operations consulting firm serving the commercial markets. We believe the combination of Innosight's long-term strategy and innovation offerings and Wilson Perumal's strategic execution and operations focused offerings. Creates a more comprehensive platform for our clients to realize more immediate financial savings that could help drive transformation while they refine their strategies to deliver sustainable growth. As we shared at our Investor Day, another pillar of our commercial strategy was to further integrate our commercial offerings to enhance our go-to-market strategy. We've seen significant advancement in this area, including several key wins that demonstrate our competitive advantage.

For example, we're one of the leading partners focused on helping CFOs transform their finance organizations. They become more impactful strategic partners in their businesses. Through advanced enterprise performance management capabilities and built upon these competencies by aligning our strategy consulting, data, AI and automation expertise with our cloud EPM offerings to compete and win against some formidable incumbents and competitors. We're also leveraging AI and advanced analytics to further enhance our competitive advantage while delivering increased value to our clients. For example, we're combining our deep manufacturing expertise for their data, AI and broader technology capabilities to leverage predictive modeling for preventive maintenance which has resulted in significant savings for one of our manufacturing clients. While we remain in the early stages of execution of our integrated commercial strategy, our industry and capability strengths are already proving to be differentiated in our key end markets and offerings of focus. Now let me turn to our outlook for the year.

Today, we're updating our annual guidance by narrowing our RBR guidance to a range of $1.65 billion to $1.67 billion, affirming our adjusted EBITDA guidance range of 14% to 14.5% of RBR and increasing our adjusted non-GAAP EPS to a range of $7.50 to $7.70 or Midpoint of our RBR guidance reflects strong year-over-year growth in the fourth quarter, so we expect the underlying demand for our offerings across all segments will continue. In 2025, we demonstrated our ability to sustain accelerated RBR growth and margin expansion despite a more challenging macroeconomic and regulatory environments. Our market-tested strategy and durable balanced portfolio of offerings, coupled with disciplined execution, and continues to deliver strong financial performance for our business and our shareholders.

Now let me turn it over to John for a more detailed discussion of our financial results. John?

Thank you, Mark, and good afternoon, everyone. Before I begin, please note that I will be discussing non-GAAP financial measures such as EBITDA, adjusted EBITDA, adjusted net income, adjusted EPS and free cash flow. Our press release, 10-Q and Investor Relations page on the Huron website have reconciliations of these non-GAAP measures to the most comparable GAAP measures, along with the discussion of why management uses these non-GAAP measures why management believes they provide useful information to investors regarding our financial condition and operating results. Before discussing our financial results for the quarter, I'd like to discuss several housekeeping items.

First, our third quarter 2025 results in the Healthcare segment exclude the operating results from the Studer Education business, which was divested on December 31, 2024. Our Healthcare segment results do include a full quarter of operating results from our acquisition of Eclipse Insights, which it closed in June of this year. And finally, we closed on the acquisitions of Treliant in Wilson Perumal in July and September of 2025, respectively. Commercial segment results for the third quarter of 2025, do include the results of Treliant and Wilson Perumal starting from the dates of their respective acquisitions. Now I will share some of the key financial results from the third quarter. RBR for the third quarter of 2025 was a record $432.4 million, up 16.8% from $370 million in the same quarter of 2024. Organic RBR which excludes the RBR generated by all acquisitions completed subsequent to the third quarter of 2024 and the RBR generated by the Studer Education business in the third quarter of 2024 grew 10.2% over the prior year quarter, led by 18.6% organic RBR growth in our Healthcare segment.

As Mark mentioned, we achieved another quarter of record RBR, reflects robust market demand for our offerings and is a testament to our highly talented and dedicated teams and their ability to deliver high-quality, innovative offerings to our clients. Net income for the third quarter of 2025 was $30.4 million or $1.71 per diluted share compared to net income of $27.1 million or $1.47 per diluted share in the third quarter of 2024. As a percentage of total revenues, net income decreased to 6.9% in the third quarter of 2025 compared to 7.2% in the third quarter of 2024. Our effective income tax rate in the third quarter of 2025 was 28.7%, higher than the statutory rate, inclusive of state income taxes, primarily due to certain nondeductible expense items. We now expect an effective tax rate in the range of 23% to 25% for the full year. Adjusted EBITDA was $67.4 million in Q3 2025 or 15.6% of RBR compared to $54.9 million or 14.8% of RBR in Q3 2024. The increase in adjusted EBITDA for the quarter was primarily due to increases in Healthcare and Education segment operating income, excluding the impact of segment depreciation and amortization and segment restructuring charges, partially offset by an increase in unallocated corporate expenses, excluding the impact of the change in the market value of our deferred compensation liability and transaction-related expenses and decreased commercial segment operating income. Adjusted net income was $37.4 million, $2.10 per diluted share in Q3 2025 compared to $31.1 million or $1.68 per diluted share in the third quarter of 2024, resulting in a 25% increase in adjusted diluted earnings per share over Q3 2024.

Now I'll discuss the performance of each of our operating segments. The Healthcare segment generated 51% of total company RBR during the third quarter of 2025. This segment posted record RBR of $219.5 million, up $36.4 million or 19.9% from the third quarter of 2024. Third quarter of 2025 included an inorganic contribution of $6.5 million of RBR from our acquisitions, while 2024 included $3.4 million of RBR from the Studer Education business, which was divested in 2024. Excluding the impact of these items, our organic growth rate in the Healthcare segment was 18.6% in the third quarter of 2025 compared to the same period in the prior year. Increase in RBR in the quarter was driven by broad-based demand across all of our offerings in this segment and led by strong growth in our performance improvement, financial advisory and revenue cycle managed services offerings. Operating income margin for Healthcare was 30.9% in Q3 2025 compared to 27.1% in Q3 2024.

The increase in margin was primarily due to revenue growth that outpaced an increase in salaries and related expenses for our revenue-generating professionals and a decrease in salaries and related expenses for our support personnel. We now expect full year operating income margin for the Healthcare segment to be in the 29% to 31% range. The Education segment generated 30% of total company RBR during the third quarter of 2025. The Education segment posted record RBR of $129.4 million, up $8.4 million or 6.9% from the third quarter of 2024. The increase in RBR in the quarter was driven by strong demand for our strategy and operations, research and digital offerings. The inorganic RBR contribution from our acquisitions was $2.2 million in the third quarter of 2025. The operating income margin for Education was 25.7% for Q3 2025 compared to 24.1% for the same quarter in 2024. The increase in margin was primarily due to revenue growth that outpaced an increase in compensation costs for our revenue-generating professionals. The Commercial segment generated 19% of total company RBR during the third quarter of 2025, posted record RBR of $83.4 million up $17.5 million or 26.6% from the third quarter of 2024. The increase in RBR was driven by $19.6 million of incremental from our acquisitions of AXIA, Treliant to Wilson Perumal. Operating income margin for the Commercial segment was 16.4% for Q3 2025, compared to 24.5% for the same quarter in 2024.

Decline in margin in the quarter was primarily driven by increases in salaries and related expenses for our revenue-generating professionals, contractor expenses as percentages of RBR. The decline in margin is reflective of an increased mix shift toward our digital offerings during the quarter as well as the transition period for certain acquisitions that we expect to become accretive in 2026.

We expect our operating margins in this segment to be in a range of approximately 16% to 18% for full year 2025, reflecting these factors. As Mark mentioned, for both our strategy and financial advisory offerings, we've seen an inflection point and saw improved sales conversion over the course of the third quarter and into October. Corporate expenses not allocated at the segment level and excluding corporate restructuring charges, were $56.5 million in Q3 2025 compared to $46.8 million in Q3 2024. Unallocated corporate expenses in the third quarter of 2025 included $2.7 million of expense related to the increase in the liability of our deferred compensation plan, compared to $2.3 million of expense in the third quarter of 2024. These amounts are offset by the change in market value of the investment assets used to fund that plan, which is reflected in other [indiscernible]. Excluding the impact of the deferred compensation plan and restructuring expense in both periods, unallocated corporate expenses increased $9.3 million in the third quarter of 2025, primarily driven by increases in salaries and related expenses for our support personnel, software and data hosting expenses and legal and third-party professional expenses related to our programmatic acquisition activity during the quarter.

Now turning to the balance sheet and cash flows. Cash flow from operations in the third quarter of 2025 was $93.8 million. During the quarter, we used $8.5 million to invest in capital expenditures, inclusive of internally developed software costs, resulting in free cash flow of $85.3 million. We expect full year free cash flow to be in the range of $165 million to $185 million, net of cash taxes and interest and excluding noncash stock compensation. DSO came in at 76 days in the third quarter of 2025 compared to 78 days for the second quarter of 2025, compared to 86 days for the third quarter of 2024. The decrease in DSO reflects the impact of collections on certain larger health care and education projects in alignment with the contractual payment schedules. Total debt as of September 30, 2025, was $611 million, consisting entirely of our senior bank debt. We finished the quarter with cash of $23.9 million from net debt of $587.1 million.

This was a $9.7 million decrease in net debt compared to Q2 2025, which incorporates the share repurchases and acquisition payments made during the quarter. Our leverage ratio as defined in our senior bank agreement, was 2.3x adjusted EBITDA as of September 30, 2025 compared to 1.9x adjusted EBITDA as of September 30, 2024. We continue to expect our year-end leverage ratio to be approximately 2.0x full year adjusted EBITDA. In the third quarter, we used $18.6 million to repurchase approximately 147,000 shares, bringing our total year-to-date share repurchases to $152.5 million approximately 1,085,000 shares, representing 6.1% of our common stock outstanding as of December 31, 2024. As of September 30, 2025, $112.6 million remained available for share repurchases under the current share repurchase authorization from our Board of Directors.

Finally, let me turn to our guidance for the full year 2025. As Mark mentioned, today, we are updating our annual guidance by narrowing our RBR guidance to a range of $1.65 billion to $1.67 billion, affirming our adjusted EBITDA guidance range of 14% to 14.5% of RBR and increasing our adjusted non-GAAP EPS and to a range of $7.50 to $7.70.

Thanks, everyone. I would now like to open the call to questions. Operator?

[Operator Instructions] Our first question comes from the line of Andrew Nicholas of William Blair. Your line is open to Andrew.

I wanted to just start on performance improvement and really consulting within the Healthcare segment this quarter, really seems to have popped quarter-over-quarter. So I know you hit on a little bit in your prepared remarks, but just a little bit more color on all that's going on in that business, what's driving it, how the pipeline looks, how you're hiring there -- and maybe somewhat relatedly, if there's anything onetime in nature or unsustainable in the quarterly print. I think you mentioned larger-sized engagements, but just more insight into just how well that business did in this quarter?

Yes. Andrew, this is Mark. I'll start and then John can provide some additional color commentary. The comment I made was that this is perhaps the strongest market that we've ever seen, and it is really broad as well. And what we've seen is really just a reaction to collective margin pressures. If you take a step back to the macro, what's driving that is very simply and a continuing trend reimbursements from the government and from commercial payers are not keeping pace with cost increases and challenges. And that is hard to fix on a sustainable basis without some pretty deep transformation of your business and your operations and at the same time, finding ways to continue to grow because you can't cost your way out of that. And so that leads us to for Huron because we are so integrated in terms of how we go to market across the full scope of our offerings. We are finding that we resonate very well with clients of many sizes in many markets from AMCs to regional national systems it's giving us just kind of a time to shine for the integration that's happened over the last several years.

And it's all founded in as I said before, demonstrable ROI. So if you don't get real results for clients, you're not going to get rehired in this market, everyone talks to one or others. So it is very important to have a very strong reputation, and that's also propelling us is that we've been able to deliver on behalf of our clients. We have a team of people who are incredibly passionate about serving clients and care deeply about health care and the culture all plays into that as well. So I think right now, it's been a time that you've seen the best of what we could ever have hoped to see out of our Healthcare team and it continues not only in just the performance improvement area, but you're seeing that in managed services as well. where that offering continues to grow and resonate within the market. So it's -- as I said before, there's a pretty significant broad-based support and demand with that. John, do you want to add some color?

Yes, Mark, I'll add Andrew some commentary just on the pipeline as well as its head count within Healthcare. So from a pipeline perspective, even after some of the sales activity that we've seen so far this year and the strengthening revenue run rate. The pipeline still sits on a record high levels at this point, which is really encouraging to us. We had a third quarter that reflected really strong sales conversions. I'd say, as we start the fourth quarter here, that trend has definitely continued during the first month of the fourth quarter. Digging a little deeper on that pipeline, consistent with Mark said, I think it's a mix of clients that are both going through current financial strain as well as clients that are looking at some of their recent regulatory actions, some of the pressure that may be coming as it relates to Medicaid or research funding and trying to get ahead of it before we get a year or 2 down the road and they feel increased pressures related to those things. Increasingly, we're seeing -- Mark alluded to this as well. But increasingly, we're seeing scopes of projects that are larger than what we've seen in the past. And part of that reason is -- not only is it performance improvement, but there's a strategy element, there's a financial advisory element. There's a digital element.

More and more, we're seeing pull-through of really the entire set of capabilities that we have in health care. And Mark mentioned our revenue cycle managed services business. That's an area that also is really standing out as a bright spot, both in terms of new sales to new clients in that area, but also the opportunity to expand at existing clients based on really good performance by our teams on those projects. So all those things together give us a lot of encouragement in the health care segment. On the head count side, you do absolutely see us leaning into this demand in terms of our head count additions.

Excluding the managed services head count, saw some significant head count adds in the Healthcare segment. That's really building out the capacity that we need to have in order to not only deliver on closing out this year, but also based on our expectations that we're off to a strong start for 2026 as well. And then you do see the continued managed services head count build. A lot of that is our India head count for that part of the business, and that's really related to some of the opportunities that we're seeing there as well.

Perfect. John, maybe I'll pick up on the last kind of comment there. Just in terms of setting up for next year. Healthcare obviously has very good momentum. You have some deals that you've closed throughout this year that should help growth as well. Any comments that you'd make on '26 broadly? I know you gave kind of a multiyear target at your Investor Day earlier this year. Just wondering if we should expect anything meaningfully different from that framework next year or maybe puts and takes for us to consider as we think about '26?

Yes. Andrew, obviously, we're still going through our planning process and considering next year. So we're not in a position to really guide to that yet, which I know isn't what you're asking, but -- generally speaking, I think I'd go back to that Investor Day and the framework that we put out there. And I'd say a factor that we've now talked about for a couple of calls is that we have seen increased demand over the past couple of quarters related to areas that we discussed. So that's certainly a favorable item and gives us confidence in that model that we put out there at Investor Day.

And if you think about the range of outcomes for next year, continued execution on those types of projects might be the type of thing that would put you towards the higher end of that range. But I think the best thing we do would be to go back to that multiyear model that we discussed in March.

Great. And if I could just squeeze one more in. On commercial, you talked about seeing an inflection point in demand over the course of third quarter or at least as third quarter progressed and then into October. Anything else that you could add there? Like what is driving that improved conversion? Is there anything in kind of the end markets where you participate that has made that what is driving that, I guess, is the question?

Andrew, I'll take that one. I think if you look at what we said was the strategy and financial advisory. I'll take financial advisory first. So I think it's pretty clear if you look at the broader market, you've seen competitors who have seen an uptick in their demand and the restructuring and turnaround arena. And that's [ trickling ] into our business now as well. That gives us a very strong confidence. The sales conversion on those types of opportunities are really short between when they come into the door when we actually start executing. So that's certainly a momentum factor coming into Q4 that we were alluding to. And then even on the strategy side, where we've seen this combination of going to market with in the earliest days of the Wilson Perumal's some nice continued momentum there that has shifted perhaps what we have seen for some softness earlier in the year. We feel like that's certainly a good trajectory as well.

Our next question comes from the line of Tobey Sommer of Truist. Toby.

I want to start with a broad question. How is your hiring capability in the company's infrastructure from your perspective ahead of what looks like it could be a a decently long period of rapid growth?

Tobey, this is John. I can start. Mark can provide any color commentary. We feel really good about that. I think -- you hear us talk a lot, Tobey, about the culture that we've been able to build here at Huron. There's 2 tangible things that, that does for us. It leads to lower attrition rates than you see across the industry, a lot of other places, and it also makes it a really attractive platform to attract people into. And so you've seen in that increase in head count numbers over the past couple of quarters, our ability to find the talent that we needed to add that talent. And there's nothing that really gives us pause about being able to continue to do that and really leaning into the demand that we're seeing right now.

Yes. I think well said, the only thing I just maybe just put stop on that comment is strong culture for us is one of the most important things that we focus on. We start with that. It's why people join us. It's why -- if they try some other areas, they rejoin us. And for us, it is -- we think one of our most important strategic advantages in the market is just having a great place that people choose to come to work.

Perfect. In education, how would you describe customer decision-making? Do your customers feel like they're through the worst of the turbulence and volatility around sort of policy tax, et cetera, which seemed at least based on media flow to peak in late 2Q, early 3Q?

Tobey, I believe you're seeing, I would call it, in equilibrium right now. you're seeing decisions made for the long term relative to like the comments we made about the digital transformation projects. We're also seeing not a gut reaction to some of the more short-term challenges, taking a much more thoughtful way of evaluating what the options are going forward. And as a result, when you look over the course of the year relative to the disruptions that were potentially at the beginning of the year, we've really demonstrated our ability to kind of weather through this time. And we feel like the outlook is pretty stable at this point.

On Managed Services, where head count growth is very, very high. Can you talk about how you're going to fully absorb those people, how investors should have confidence that it's attached to projects and revenue that should ramp and maybe what your outlook is for long-term utilization among those folks?

Yes. Tobey, we have very high utilization. It's one of the highest areas of utilization in the firm for our managed resources, teams, there is not a lot of space between conversion of sales and the hiring of resources there. So there's a tight correlation there. It's not one of those situations where we're doing a lot of hiring in advance of anticipated demand -- the sales cycle for a lot of these types of projects tend to be a little bit longer, so that gives us the ability to -- during that period, make sure that we've got the resources that we need in the right geographies that we need to be able to serve the client and what they're particular needs are. But so far, we've been able to manage that in a measured way despite the big number of head count add that you see.

Tobey, I'll add there in India. The culture is just as strong as it is in the U.S. And it's a wonderful team. It translates into low turnover among that team. And so when people join us, we're just getting them that stay a lot longer it takes pressure off hiring when you need to. And so -- that's one of the key reasons that culture is such an important asset for us.

Just 2 other small ones [indiscernible]. In restructuring, we saw some good wins in the news, how is the team winning bigger jobs?

We've always had opportunities to win at larger engagements. I'd say, while our size is more of a boutique the reputation of quality that we have in delivery, particularly on restructuring assignments where we're representing at the client on the debtor side has been very, very strong. And it's pretty broad across a number of different industries. So it's really that reputation and just getting into the market and having the relationships, not only the referral sources, whether the law firms or private equity, private debt. It's been a good, consistent source of demand for us because of the reputation we built.

And then last one for me. With respect to health care, what's the outlook for performance fees typically when demand is accelerating and very strong. There's a favorable mix that direction. What's the outlook there?

Tobey, that's a good question. And as you know, but just as a reminder, we're -- we work with our clients on whatever type of arrangement that they're most comfortable with. That's what's important to us. So there can be some variability around that over time. In fact, despite the growth that you see this year, from a revenue perspective, from a margin perspective in our health care business, we've actually had a lower percent of contingent-based fees in 2025 than we did in 2024. And that just reflective of clients this year that had more of a preference for fixed fee type work. With all that said, based on some of the sales activity in the back half of the year, I think we have seen more clients interested to your point, in performance-based fee arrangements. So if I were to play that forward likely in 2026, my expectation is that, that percent of revenue that's tied to performance-based fees may go back up again to the level it was at in 2024.

Our next question comes from the line of Bill Sutherland of Benchmark.

Thanks, operator. Mark and John, Mark, I think in your prepared comments, I think I caught this correctly. You said there's increasing competition in the commercial side in digital. Did I hear that right?

No, I don't think it was exactly that, Bill. I'd just say we have been performing well in that market. I don't think there's any real change in the competitive environment there.

Okay. Understood and so I'm glad you clarify. In the Education Group, I know that you guys have talked in terms of the other 2 groups as far as the pipeline still being very active and the sales conversion is strong. Coming sort of the third quarter. Does that also apply to education? I don't remember you specifically saying that?

Yes, Bill, it's John. The -- we had record sales conversions in the second quarter of this year. We didn't get a record status during the third quarter, but it was still strong sales conversions during the quarter. And we -- [ mounted ] to the fourth quarter now, and we're off to a really good start from the fourth quarter perspective, too. So we continue to see strength there as well.

And John, when you were talking about the segments and the expected margin range for the year. Did you give education or I missed it?

I didn't -- the reason is there was no change in it, so that it's consistent with where we're at for, which is 23% to 25% the year.

Okay. That makes sense. And then the last one, I mean, obviously, like everybody else in the world, thinking more about the AI side of things. And curious about the percentage of your book that you're seeing that has at least somewhat of an AI focus. And with that, are you finding yourself able to build the resources internally sufficient to meet demand? Or could that be -- could that be an area where a small acquisition would be helpful?

Yes, Bill, before John jumps in I'll give you more of the color. Let me just say that we view the opportunity related to AI and automation as a positive for our business. And hopefully, that came through the remarks. Because we're not a large scale [indiscernible] and using scale and infrastructure to lower the cost or we're not a generalist firm, we're a trusted implementation partner. So when we're working shoulder to shoulder with our clients, it creates opportunities to work with them because we understand their business processes, the industries and so we can easily work hand-in-hand with them. So we think that we actually see this as very much a net positive for our business over time. So John, you want to maybe provide some color on -- that's finding its way into the numbers?

Yes. Bill, if you think about our digital business, which is a little bit north of 40% of our total revenue, somewhere in the 15% to 20% range of that total revenue is work that's directly related to AI type projects. I would say though, as time goes on, I think that, that line gets in [indiscernible] because there's increasingly, there's some aspect of automation or AI involved in many, many of the digital projects that we're working on and a much higher percent of the revenue. I'd say, to extend even beyond digital. When you look at some of our performance improvement consulting, for example, I'd say at the Managed Services part of our business, which is another one that Mark alluded to, I'd say, automated solutions, use of AI or to help our clients drive the types of outcomes that they're looking for.

That's becoming a bigger part of the equation. In terms of our talent, I think we're at a really good starting place. If you think again about for us, our starting point is 40% of our revenue out of the gate is coming from consultants with the specialization and technology, specialization in digital. So the evolution here to some of the more advanced technologies easier leap for those consultants. And it's really just part of the evolution of the tools that they already have expertise deploying. So I think we're taking advantage of that kind of high digital fluency that we have at Huron.

[Operator Instructions] Our next question comes from the line of Kevin Steinke of Barrington Research.

Great. So you talked about the strong demand in education that you're seeing for digital transformation projects. Just wondering about the mix in terms of the type of projects there. I know in the past, you've talked about really the potential of student life cycle systems and the growth opportunity that offered there for you versus implementation of traditional ERP system. So just kind of wondering a little bit more about any color on the types of implementations you're seeing in the mix there?

Yes. Right now, Kevin, it's been really, I would call it, in core ERP financials, HCM kind of full suite type implementations a little bit lighter on the student side. So I'd say our comments are targeted more toward core ERP.

And Kevin, as I was thinking about your question, another -- another good point to make, I think this is very true in some of these education ERP projects that we're seeing. In order for our clients to be able to unlock some of the benefits of automation and AI, having a solid data structure, a solid technology infrastructure is critical. You actually can't do it at any sort of scale unless you've made some of those investments in the underlying foundation. So I think that's part of the reason we're seeing such good demand right now for those types of offerings as clients who are not only on trying to reset the foundation because they're on dated tools now that they need to get and to the more modern platforms, but also because they know that's the stage for the next round of investments in AI-based functionality.

Right. Okay. That's helpful. I just want to ask about utilization rate on the consulting side in the quarter. Step down sequentially from the second quarter. I'm assuming that's related to some of the ramped-up hiring you did there. And just maybe you could talk about the opportunity for utilization to improve going forward as more projects ramp up and how that can contribute to your margin expansion going forward?

You got it exactly right, Kevin, that lower utilization that you see during the quarter was related to that account additions that we made to really support demand. So we're in a little bit of investment mode here. I'd say in the back half of the year to build out the team to not only deliver on the opportunity we see in the back half of this year, but also -- set stage for next year as well. So I think from a long-term perspective, we'd expect ourselves to be able to get back up to the upper 70% range overall that you've seen us hit in other quarters. But I think you may see -- you saw it this quarter, you may see for another quarter or a Q a little bit of pressure on that metric as we're building out the team, getting ready to continue to grow the business.

Okay. Great. I think most of my other questions have been answered, so I'll turn it back over.

Thank you seeing no more questions in the queue. I'd like to turn the call back to Mr. Hussey. Sir?

Thanks for spending time with us this afternoon, and we look forward to speaking with you again in February when we announce our fourth quarter results. Have a good evening.

That concludes today's conference call. Thank you, everyone, for your participation.

Good afternoon, and welcome to Huron Consulting Group's webcast to discuss the financial results for the second quarter of 2025. [Operator Instructions] As a reminder, this conference call is being recorded.

Before we begin, I would like to point all of you to the disclosure at the end of the company's news release for information about forward-looking statements that may be made or discussed on this call.

The news release is posted on Huron's website. Please review that information along with the filings with the SEC for a disclosure of factors that may impact subjects discussed in this afternoon's webcast. The company will be discussing one or more non-GAAP financial measures. Please look at the earnings release on Huron's website for all of the disclosures required by the SEC, including reconciliation to the most comparable GAAP numbers. And now I'd like to turn the call over to Mark Hussey, Chief Executive Officer and President of Pure on Consulting Group. Mr. Hussey, please proceed.

Good afternoon, and welcome to Huron Consulting Group's Second Quarter 2025 Earnings Call. With me today are John Kelly, our Chief Financial Officer; and Ronnie Dail, our Chief Operating Officer.

Revenues before reimbursable expenses or RBR in the quarter grew 8% over the second quarter of 2024, including organic RBR growth across all 3 operating segments. RBR in the 2025 was a record high for our business. Growth in our core markets continues to reflect strong demand for our services, health systems, universities and commercial businesses adapt to regulatory and macroeconomic pressures while evolving their business models for success in the future.

Clients continue to seek our deep industry expertise, capabilities and proven track record of delivering results to help them achieve a more sustainable path forward in the face of significant market disruption. The current demand environment, coupled with our strong client relationships, provides us confidence in our outlook for continued growth in 2025 as reflected in our updated annual guidance.

I'll now share some additional insights into our second quarter performance. In the Healthcare segment, second quarter RBR grew 4% over the prior year quarter. Excluding the results for student education, which we divested at the end of 2024, Healthcare segment RBR grew 6% over the second quarter of 2024. The increase in RBR in the quarter was driven by continued strong demand for our performance improvement and services, financial advisory and strategy and innovation offerings, partially offset by a decrease in our digital offerings within health care.

The passage of the One Big Beautiful Bill Act earlier this month brought some clarity, the anticipated reduction to the federal spending on health care. The cuts in Medicaid funding are projected to reduce federal spending on health care by over $1 trillion over the next decade and are expected to result in a significant increase in patients without health insurance coverage.

In response, hospitals and health systems are acting with urgency to prepare for margin declines anticipated in the coming years while addressing current financial pressures driven primarily by costs that continue to increase at a faster rate than reimbursements. Within the current legislation, many hospitals and health systems will face reductions in the supplemental payments that states have made to health care providers to augment low Medicaid reimbursement rates.

The expected increase in the uninsured population has been estimated to be up to 10 million people which will increase the cost of uncompensated care for most hospitals, as hospitals and health systems address their budget gaps and position their business for a more sustainable future, returning to Huron, because of our decade-long track record of delivering significant, measurable and sustainable financial benefits.

In this environment, demand remains strong for our performance improvements, financial advisory and strategy and innovation offerings as reflected in our RBR growth and our solid pipeline. While demand for our digital offerings within health care remains solid, we have seen slower sales conversions in certain areas within our pipeline for larger digital transformation engagements. We believe this to be a temporary pause as our clients focus on their immediate priorities to address their financial situations.

As we've mentioned on prior earnings calls, the breadth of our capabilities, we believe we are well positioned across a full range of market conditions to address the wide array of opportunities and challenges facing our hospital physician group and health system clients, both now and in the future, which we believe will drive continued growth for our Healthcare segment.

Let me also add some perspective to recent acquisition we announced in the Healthcare segment. At the end of the second quarter, we acquired Eclipse Insights to strengthen our performance improvement offerings. We partnered with Eclipse Insights in the market for several years. This acquisition strengthens Huron's mid-revenue cycle expertise, enhancing our ability to support providers across the full revenue cycle continuum for patient intake and care delivery through documentation, billing and reimbursement. Eclipse Insights brings deep experience in charge capture optimization, clinical documentation, coding, management and revenue strategy, key areas that have direct impact on hospital financial performance.

Turning to Education. Education segment RBR grew 5% in the second quarter of 2025 over the prior year quarter, driven by strong demand for our strategy and operations offerings and increased demand for our research software product offerings, achieved a record education segment RBR in the quarter. The team continues to execute exceptionally well given the ongoing dynamic regulatory landscape.

The recent legislation brought some clarity for taxation of endowment earnings. However, in most other areas, universities and research institutes remain in a period of heightened uncertainty. The impact to our broad client base is highly variable and institutions are closely monitoring, evolving regulatory environment and assessing the magnitude, timing and strategic implications of the potential scenarios that will affect them.

The industry continues to face the prospect of lower indirect reimbursement rates for research grants, reduced federal support for research grants and contracts, anticipated declines in enrollment numbers from international and domestic students, potential reductions in federal financial aid.

As such, our clients continue to strategically prepare for a variety of future scenarios while preemptively taking action to position their organizations for the best possible outcome and a sustainable future. This environment led to a record level of sales conversion for our Education segment during the quarter. Our performance improvement offerings in education remained in high demand as clients seek opportunities to reduce cost, optimize their operations and strengthen their financial positions.

Demand for our digital offerings continues to be robust. As clients view investments in their technology infrastructures to be foundational to driving enterprise-related operating efficiencies. In research, many clients are focused on optimizing their research strategies to align with their mission and to retain their research faculty. In addition, we're increasingly turning to our software products and managed services offerings to optimize their research administration operations.

As tuition and government revenue sources are pressured Institutions are increasingly focused on optimizing fundraising strategies to grow philanthropic support. Our advancement fundraising offerings are well positioned to address these evolving needs.

A comprehensive and balanced portfolio allows us to serve our clients across the full spectrum of challenges and opportunities that they are facing in the current landscape. The needs of our clients are wide-ranging, and we believe we remain best positioned to serve them in this uncertain environment, given the breadth of our diverse offerings and our deep understanding of the industry and our clients' institutions.

And now let me turn to the Commercial segment. In the second quarter of 2025, we also achieved record RBR in the Commercial segment. Commercial segment RBR grew 28% over the prior year quarter. The increase was driven by the incremental RBR from our acquisition of Axia, and strong demand for our digital offerings.

Excluding the acquisition of Axia, our commercial digital capability, RBR grew 23% over the prior year quarter. Building upon the strengths of our digital financial advisory and strategy capabilities, our growth strategy in the Commercial segment is focused on increasing the depth of our industry expertise, while broadening our offerings and market reach, primarily seeking opportunities that are highly complementary to our current portfolio.

This strategy has led to continued growth in the commercial segment during a challenging market environment, as our global clients navigate through the broader macroeconomic environment, they're turning to Huron to advance their competitive positions, drive operational efficiency and leverage data to make better, faster decisions.

For example, we're working closely with one of our vendor partners in Europe to bring our deep enterprise performance management experience to serve large multinational clients. Many of these large complex companies are upgrading their technologies to improve the quality and speed of planning, scenario modeling and the data integration needed to make faster decisions and operate more effectively in today's volatile and dynamic environment.

As part of our programmatic M&A strategy, we're also investing inorganically to execute our commercial industry strategy. Earlier this month, we acquired Treliant, a leading advisory partner to the financial services industry with relationships with some of the top financial organizations in the world. Treliant brings decades of specialized expertise in areas such as risk management, compliance, operations, financial crimes and fraud. Treliant offerings with Huron's existing industry-specific digital capabilities creates a more comprehensive portfolio to help our clients address their complex challenges, balancing growth, operational efficiency and automation with robust risk management that complies with the most stringent regulations.

We have a solid track record of expanding our commercial portfolio to include accretive offerings and capabilities, building upon our core commercial industries of focus. In financial services, industrials and manufacturing, energy and utilities and the public sector.

We believe that our focused strategy and disciplined investments will continue to foster our competitive advantage and support the achievement of our medium-term financial targets in this segment.

And now let me turn to our outlook for the year. Inclusive of our recent acquisitions, today, we're increasing our RBR guidance to a range of $1.64 billion to $1.68 billion, which represents an increase of 12% at the midpoint of our guidance when compared to our full year 2024 results.

Maintaining our adjusted EBITDA margin guidance range of 14.0% to 14.5% of RBR and increasing our adjusted non-GAAP EPS guidance to a range of $7.30 to $7.70, which represents an increase of 16% at the midpoint as compared to full year 2024.

We're pleased with the progress we've made in executing our growth -- organic growth strategy in the first half of 2025 especially given the challenges posed by the current macroeconomic environment. In parallel, we continue to advance our programmatic M&A strategy, containing a disciplined focus on delivering upon our stated goal of adding 2% to 4% inorganic growth annually.

In parallel, we are committed to driving continued sustainable margin expansion fueled by our ongoing pricing and efficiency initiatives. We believe our outlook for 2025 reflects the strong foundation we've built, the ongoing market tailwinds for our business and continued solid execution of our growth strategy, consistent with the medium-term financial goals we established at our Investor Day in March.

Our strong first half of 2025 performance, our pipeline of emerging opportunities and the strengthened outlook are only possible because of our deep industry expertise, broad portfolio of offerings and our highly talented and collaborative team. Disruption facing our clients and primary end markets is substantial, stemming from the ongoing market uncertainty and regulatory environment as well as the rapidly evolving competitive landscape. We continue to believe this disruption creates significant opportunities for long-term growth for Huron. And now let me turn it over to John for a more detailed discussion of our financial results.

Thank you, Mark, and good afternoon, everyone. Before I begin, please note that I will be discussing non-GAAP financial measures such as EBITDA, adjusted EBITDA, adjusted net income, adjusted EPS and free cash flow. Our press release, 10-Q and Investor Relations page on the Huron website reconciliations of these non-GAAP measures to the most comparable GAAP measures, along with the discussion of why management uses these non-GAAP measures and why management believes they provide useful information to investors regarding our financial condition and operating results.

Before discussing our financial results for the quarter, I'd like to discuss several housekeeping items. First, our second quarter 2025 results in the Healthcare segment exclude the operating results from the Studer education business, which was divested on December 31, 2024. Second, our second quarter results in the Education segment did reflect a full quarter of operating results from the acquisitions of Advancement Resources in Halton, both of which closed in March 2025.

Third, our acquisition of Eclipse Insights closed on June 24, and as such, a partial period of their operating results are included within the Healthcare segment. Operating results of Eclipse were not material to our second quarter results. Finally, our acquisition of Treliant, which closed in July is not included in our second quarter results. The results of Treliant will begin to be included in the third quarter within the Commercial segment.

Now I'll share some of the key financial results for the second quarter. RBR for the second quarter of 2025 was $402.5 million, up 8.3% from $371.7 million in the same quarter of 2024. Organic RBR, which excludes the RBR generated by all acquisitions completed subsequent to the second quarter of 2024, was 4.2% over the prior year quarter, driven by growth across all 3 operating segments.

As Mark mentioned, we achieved record RBR in the quarter, crossing the $400 million mark for the first time. None of this will be possible with our incredible team and their dedication to our clients, our business and each other.

Net income for the second quarter of 2025 was $19.4 million to $1.09 per diluted share compared to net income of $37.5 million, $2.03 per diluted share in the second quarter of 2024. As a percentage of total revenues, net income decreased to 4.7% in the second quarter of 2025 compared to 9.8% in the second quarter of 2024. Net income for the second quarter of 2025 includes an $8.2 million noncash impairment charge, net of tax, related to our convertible debt investment in a third party.

Net income for the second quarter of 2024 includes an $11.1 million litigation settlement gain net of tax related to a completed legal matter in which Huron was the plaintiff. Our effective income tax rate in the second quarter of 2025 was 29.9%, was higher than the statutory rate, primarily due to the establishment of the valuation of balance, our deferred tax asset recorded as a result of the capital loss on our investment in a hospital and home company as well as certain nondeductible expense items.

These unfavorable items were partially offset by a tax benefit related to nontaxable gains on our investments used to fund our deferred compensation liability. Now expect an effective tax rate in the range of 25% to 27% for the full year. Adjusted EBITDA was $60.6 million in Q2 2020 or 15.1% of RBR compared to $55.7 million or 15% of RBR in Q2 2024. The increase in adjusted EBITDA for the quarter was primarily due to increases in segment operating income for all 3 operating segments, excluding the impact of segment depreciation and amortization and segment restructuring charges, partially offset by the increase in unallocated corporate expenses, excluding the impact of the change in the market value of our deferred compensation liability and transaction-related expenses.

Adjusted net income was $33.7 million or $1.89 per diluted share in Q2 2025 compared to $18.5 million for $1.68 per diluted share in the second quarter of 2024, resulting in a 12.5% increase in adjusted diluted earnings per share over Q2 2024.

Now I'll discuss the performance of each of our operating segments. The Healthcare segment generated 49% of total company RBR during the second quarter of 2025. The segment posted RBR of $197.8 million, up $7.7 million or 4.1% from the second quarter of 2024. The second quarter of 2024 included $3.5 million of RBR from Studer education business, which was divested in 2024. Excluding the results for Studer Education, Healthcare segment Q2 RBR grew 6% over the second quarter of 2024.

The increase in RBR in the quarter was driven by continued strong demand for our performance improvement managed services, financial advisory and strategy and innovation offerings, partially offset by a decrease in our digital offerings within health care and the decrease in RBR due to the divestiture of our Studer Education practice.

The inorganic RBR contribution from our acquisitions was immaterial in the second quarter of 2025. Operating income margin for Healthcare was 30.2% in Q2 2025 compared to 29.1% in Q2 2024. The increase in margin was primarily due to decreases in bad debt expense and salaries and related expenses for our support personnel, partially offset by an increase in contractor expenses as a percentage of RBR.

The Education segment generated 32% of total company RBR during the second quarter of 2025. The Education segment posted record RBR $129.3 million, up $6.5 million or 5.3% from the second quarter of 2024. The increase in RBR in the quarter was driven by strong demand for our strategy and operations offerings and increased demand for our software product offerings within our digital capability.

The inorganic RBR contribution from our acquisitions was $2.2 million in the second quarter of 2025. The operating income margin for Education was 25% in Q2 2025 compared to 25.1% for the same quarter in 2024.

Commercial segment generated 19% of total company RBR during the second quarter of 2025 and posted record RBR $75.4 million, up $16.6 million or 28.2% from the second quarter of 2024. The increase in RBR was driven by $12.3 million of incremental RBR for our acquisition of Axiom, strong demand for our digital offerings.

Operating income margin for the Commercial segment was 16.6% for Q2 2025 compared to 15.3% for the same quarter in 2024. The increase in operating income margin is primarily attributable to revenue growth that outpaced the increases in compensation costs for our revenue-generating professionals, partially offset by an increase in contractor expenses as a percentage of RBR.

Corporate expenses not allocated at the segment level and excluding corporate restructuring charges, $54.3 million in Q2 2025 compared to $45.6 million in Q2 2024. Unallocated corporate expenses in the second quarter of 2025 included $3.7 million of expense related to the increase in the liability of our deferred compensation plan compared to $700,000 of expense in the second quarter of 2024. These amounts are offset by the change in market value of the investment assets used to fund that plan, which is reflected in other income expense.

Excluding the impact of our deferred compensation plan and restructuring expense in both periods, unallocated corporate expenses increased $5.8 million in the second quarter of 2025 primarily driven by increases in salaries and related expenses for our support personnel and legal expenses and third-party professional fees related to M&A activity during the quarter.

Now turning to the balance sheet and cash flows. Cash flow from operations in the second quarter of 2025 was $80 million. During the quarter, we used $6.3 million to invest in capital expenditures, inclusive of internally developed software costs, resulting in free cash flow of $73.7 million. We continue to expect full year free cash flow to be in a range of positive $160 million to $190 million, net of cash taxes and interest and excluding noncash stock compensation.

DSO came in at 78 days for the second quarter of 2025 compared to 81 days for the second quarter of 2024. The decrease in DSO reflects the impact of collections on certain larger health care and education projects in alignment with our contractual payment schedules.

Total debt as of June 30, 2025, was $657.8 million, consisting entirely of our senior bank debt, and we finished the quarter with cash of $61 million for net debt of $596.8 billion. This was a $43.9 million increase in net debt compared to Q1 2025, primarily due to the share repurchases and acquisition payments during the quarter.

Our leverage ratio as defined in our senior bank agreement, was 2.5x adjusted EBITDA as of June 30, 2025, compared to 2.2x adjusted EBITDA as of June 30, 2024. Continue to expect our year-end leverage ratio to be approximately 2x full year adjusted EBITDA.

In the second quarter, we used $61 million to repurchase approximately 430,000 shares, bringing our total year-to-date share repurchases to $133.9 million and approximately 938,000 shares representing 5.3% of our common stock outstanding as of December 31, 2024. As of June 30, 2025, $131.3 million remained available for share repurchases under the current share repurchase authorization from our Board of Directors.

Since December 31, 2021, we have repurchased approximately 5.7 million shares under our share repurchase program returning over $500 million of capital to our shareholders. Today, we announced that effective with the closing on July 30, we have amended and restated our credit facility. We extended the maturity date on the facility to 2030 and increased our borrowing capacity to $1.1 billion on favorable pricing terms to provide additional flexibility to support the anticipated growth in our business as well as our capital allocation strategy.

We remain committed to deploying capital in a balanced way, including the capital to share -- returning capital to shareholders and executing strategic tuck-in acquisitions while maintaining our debt levels within our target leverage ratio.

Finally, let me turn to our guidance for the full year 2025. As Mark mentioned, inclusive of our recent acquisitions, today we are increasing our RBR guidance to a range of $1.64 billion to $1.68 billion, maintaining our adjusted EBITDA guidance range of 14% to 14.5% of RBR, increasing our adjusted non-GAAP EPS to a range of $7.30 to $7.70.

Now let me provide to make additional color into these numbers. Before consideration of our recent acquisitions of Eclipse and Treliant, we are narrowing and increasing the midpoint of our previous RBR guidance to a range of $1.62 billion to $1.66 billion, effectively narrowing to the upper half of our original guidance range.

We are pleased with our first half performance, year-to-date sales conversions and pipeline of emerging opportunities. We believe we will continue to be well positioned to help our clients address the increased strategic, financial and operational pressures facing the businesses. This pressure is particularly acute for our health care provider clients, is driving increased demand for our performance improvement, managed services, financial advisory and strategy and innovation offerings in the Healthcare segment.

We expect our recent acquisitions of Eclipse and Treliant to collectively add approximately $20 million of RBR in the second half of 2025. As such, inclusive of these acquisitions, we now expect full year consolidated RBR to be in the range of $1.64 billion to $1.68 billion. We expect approximately half of this acquisition RBR to be in our Healthcare segment and about half in our commercial segment.

We expect net adjusted EBITDA from these acquisitions as a percentage of RBR, to be in a range consistent with our overall consolidated margin guidance exclusive of certain expenses to integrate the businesses that we do not expect to repeat in 2026.

With regard to adjusted EPS, we expect the net impact of Eclipse and Treliant to be neutral for the remainder of 2025, reflecting those incremental integration expenses over the next 2 quarters. We expect Eclipse and Treliant to be adjusted EPS accretive individually and in the aggregate 2026..

Finally, let me provide updated segment-level guidance inclusive of the Eclipse and Treliant acquisitions. With regard to our Healthcare segment, we now expect upper single-digit percentage revenue growth for full year 2025, and we now expect operating margins to be in the range of approximately 28% to 30%.

In the Education segment, we continue to expect mid- to upper single-digit percentage revenue growth for the full year 2025 operating margins to be in the range of approximately 23% to 25%. In commercial segment, we now expect to see growth in the mid-20% range for 2025 which includes a full year of Axia and our recent acquisition of Treliant. We expect our operating margin in this segment will be in a range of approximately 18% to 20% and reflecting the full year revenue mix shift towards our digital offerings and Treliant integration expenses, as discussed earlier.

We expect the mix shift to be more balanced between consulting and digital in the commercial segment starting in the second half of 2025. We do not expect to implement Treliant integration expenses to extend beyond 2025. Thanks, everyone. I would now like to open the call to questions. Operator?

[Operator Instructions]

Our first question comes from Andrew Nicholas with William Blair.

You mentioned on a few different occasions, the Big Beautiful Bill brought some clarity. It sounds like maybe a little bit more in health care than in education. But I just wanted to ask broadly on visibility. Is it better or worse than 3 months ago, 6 months ago? And then how should we think about visibility and how it relates to maybe the conservatism of guidance from here?

Yes. Andrew, the way I would characterize it, it's like there was no shock. I think in what can came into One Big Beautiful Bill act, I think there was -- for the most part, I think there was a broad anticipation that there was going to be pressure on federal reimbursements. And so when I say it brings clarity, it's like, okay, well, we're no longer waiting to see what happens. We now know what's going to happen. And so now we're in a position to start to make some firmer decisions without that uncertainty. .

So I think it was more about coming in line with what people generally expect. There were some nuances in every part of the bill when it got passed. But I'd say, generally speaking, is consistent with our outlook for the full year in terms of the guidance that we provided.

So I would say it's not necessarily propelling it more. It's consistent and we just continue to see ongoing financial pressures even besides these because for a long time, we've seen cost trends ahead of rep reimbursements and probably maybe incrementally a little bit more pressure in this past year. .

And I'll just add, Mark, I think from a visibility perspective, I think our visibility is stronger at this point than it was earlier in the year 3 months ago. I would -- and some of that has to do with some of the increased clarity around some of the regulatory environment. But some of it has to do, too, with just our sales conversion over the first half of the year, on the pipeline at this point, even some of the activity we see heading into the third quarter.

I think what is clear is that within the Healthcare segment for our health care provider clients, there are many clients who are going through either current financial strain or for a variety of factors concerned about financial constraint in the near term. And I think that is a strong driver for the consulting parts of our business, in particular within health care, performance improvement, our strategy offerings, our financial advisory offerings, our managed services offerings, so I think that as we've had those sales conversions and as the pipeline gets strengthened to record highs, I think that does provide additional visibility for us.

Within the education segment, Obviously, there's been a lot of news, I would say, during the first half of the year. We continue to see both strong revenue execution, but then also strong sales conversion. I think Mark noted in his comments, we had record sales conversion for that team in the second quarter. So that's another thing that strengthens our visibility at this point. So we feel good about that.

Great. Maybe just on health care. You talked about a little bit slower sales conversions there as it relates to digital transformation work. But I think you also said that you believe it's a temporary pause, can you maybe flesh that out a little bit more on what makes you confident that's temporary? And to what extent do you need it to be temporary to hit your targets for this year? .

Andrew, I would say to answer that last part first, it is our guidance for the year is not contingent on any assumptions related to the pace of conversion on the digital side of the business. I think from a health care segment perspective, the strength we're seeing on the consultant side is definitely driving our confidence in the guidance moving forward. .

As it relates to digital, just to provide a little clarity there. We actually do see demand for certain digital offering areas and really across the board, support some of our performance improvement projects. We continue to see good strength there. I think what we have seen is a little bit of lower sales conversion cycle for some of the stand-alone digital sales in that segment. And I think that's somewhat intuitive, given some of the financial pressures that our clients are going through right now.

I think we do see a shift in focus to some of the performance improvement projects that support clients are going through financial strain. But the reality is those underlying projects, eventually, they need to get done. And so we know that once our clients kind of reach that point of financial stability they're likely to have to circle back and take on some of those digital projects. So that's what gives us confidence that it's a temporary pause. But in the meantime, we feel very well positioned to help them on the performance improvement side.

Our next question comes from Tobey Sommer with Truist Securities.

I kind of wanted to dig in a little bit more, if we could, on the delays in the pipeline conversion. You've given some explanation. But what is the -- what are the elements that give you confidence that the delays are temporary?

So again, Tobey, I would say, just to add to the context of what's happening in the market, this is not by anywhere near the headline story of what is happening within the health care business. It's an element of whether one component of probably 5 or 6 other major areas. And I would just say, we've seen just the increase of our clients whose C-suites are focused on driving financial stability to their business and prioritize that ahead of some of the other conversations.

So I think it's really not that they've gone away. It's just they have more pressing needs in the context of where we are. And I do think that back to the outlook for the year, I would say this is an area that we expect to have more than -- this is not just related to the approval of the legislation. These were long-term trends coming into this legislation. These have now just dialed it even more pressure beyond even 2025. So this is back to the comment we have about the longer-term secular tailwinds for our business, feeling very good about it.

Right. And if you think about the health care business from where we started the year, we've increased our guidance today from the initial outlook at the beginning of the year was mid-single-digit growth from an overall health care segment perspective to now upper single-digit revenue growth.

If you go back to the original assumptions in the air for that mix between consulting and digital. I think the net effect of this is more of a shift towards our higher-margin consulting part of the business during the year. And we have just noted that some clients as we've engaged with them and they're looking at their strategic agenda for in the year, we're seeing more demand on the performance improvement side and some clients that are shifting some dollars that they previously would have been allocated to digital to focusing on aspects of performance improvement.

Okay. I appreciate that. In terms of hiring, the headcount growth was quite high. Maybe could you disaggregate the impact of acquisitions from that? Just -- and maybe speak to what your view is on utilization and organic headcount growth going forward through the balance of the year? .

Yes. So in terms of our headcount growth, I think a lot of the increase in headcount growth came from our managed services business within the health care segment. In terms of the -- excluding the managed services headcount, I think there, it's really two primary factors. You did have some increase in headcount from the Eclipse acquisition that was in the neighborhood of 40 new team members joining as a result of that acquisition.

And then beyond that, it's really just the strength and demand that we see right now on the consulting side within health care. And based on the sales conversions and pipeline activity that we see, we've been aggressive in the market, adding talent in that area to support the growth that we're expecting for the back half of the year. So those would be the primary areas where we've seen headcount growth.

I appreciate that. And where are you sort of year-to-date with the acquisitions that you've consummated, how do they sum up to your longer-term sort of annual goals? Are you already at target for this year? Or do you think there's more to go before we flip the calendar to '26?

Tobey, I think we're actually done a good job of kind of building that. I think we have -- I would expect there might be maybe 1 or 2. Some of the time of these deals, as you know, you don't get to decide exactly when they fall. But I would say they're all within the tuck-in type categories that we had. And certainly, our expectation is to strive to stay in that balanced capital deployment strategy.

So I would say where we've made a lot of progress. I mean you saw that with some of the transaction costs within the quarter. We've been very, very busy in the marketplace. And the good news is we're finding areas that fill in our gaps very nicely. We're finding the right partners that are not necessarily for sale when we get working together. And then it's leading to the kinds of conversations that we want to over time that will give us the long-term confidence that it's going to be a successful deal.

So I'd say it's actually powering very well, but maybe there might be another transaction or two by the end of the year.

[Operator Instructions]

Our next question comes from Bill Sutherland with the Benchmark Company.

The utilization rates were impressive in the quarter, 77% consulting and 78% in digital. Should we think of that as kind of the upper end of a range that you're likely to have in any given quarter? Or is there a possibility that this is a level that maybe isn't the top of a range, it could be like midpoint now. .

I would say, Bill, it's closer to the top of the range in terms of utilization, which -- that doesn't mean there couldn't be individual quarters where it flex a little bit higher. But in terms of a sustainable utilization, I think that this is towards the top or top end of where we want to be. And the thing to keep in mind, we'll see those utilization metrics that you mentioned for consulting and digital, of course, it's not spread even across all teams.

So within there, you have certain teams that have even higher utilization that went into that up into the 80% range. And those are some of the areas where we're more aggressively hiring right now to continue to build out the team and to give us capacity as we continue to grow.

So I think in those areas that are driving that average up even a little bit. Our hope is that, that will actually cool off and come down a little bit as the year goes on, and we're adding new team members to continue to support the longer-term growth of the business.

Okay. In the Education segment with the record sales conversion in the quarter, can you kind of rank order 1, 2, 3 of what was getting the most momentum?

I would say within our strategy and operations team Bill, that's where we saw a lot of strength. And I'd really characterize what we have seen strength particularly in education is offerings that really drive higher benefits, either on investments in technology or helping our clients right now work through their strategy through was a fairly disruptive environment, improving student enrollment yields, reducing risk, and improving the efficacy of research, and driving more effective fundraising campaigns.

I think those are the things right now that our clients are coming to in what's a fairly been a fairly disruptive macro environment to start the year where they're seeking our help to really navigate whether it's financial strain or operational disruption.

And lastly, the backdrop in the health care side, where there's a fair amount of consolidation, I'm not sure if it's accelerated year-to-date, sometimes it feels like it from the headlines. But what are you guys seeing there? And how is it impacting your book on that side?

You're talking back on health care, Bill, with respect to consolidation, we certainly see systems continuing to want to acquire hospitals that are going to help them achieve their growth objectives. And I would say for us, it's not the headline, but it's certainly an element of what we're doing and helping them not only with the strategic evaluation of which targets helping on the post-merger integration work as well.

So it's certainly a contributor to what's happening in the marketplace, and I would expect that as you see continued pressures, sometimes those are the catalysts that relating to transactions ultimately. So it's going to continue to be an element of what we see in the market .

Our next question comes from Kevin Steinke with Barrington Research Associates.

So just wondering if you could give investors some tangible examples of how you can help health care clients adapt to this more constrained Medicaid funding environment and expected surge in uninsured population. I know it's the same playbook you've been following for many years, but perhaps it would be helpful if you can just kind of point to some of the things you can do on the performance improvement side, revenue cycle side and how you help the client base work through this pretty substantial change.

I mean, if you go back to the core of this business back even 16, 17 years ago when we acquired stock and Wellspring over the years, we've built out a pretty comprehensive set of performance improvement offerings from revenue cycle to supply chain work to workforce set up to the clinical operations.

I mean pretty much if there is any operation within the four walls of the hospital system, not only including the main hospital, but really the overall system we're doing an assessment, not only their operations from where the cost savings opportunities, but more importantly, the balanced approach to find the growth opportunities for them to continue to improve their business.

And I think depth and breadth of what we have together and just the methodology, the track record of real savings and results and impact that we've made, those are the things that we're bringing to every client based on their own unique setting or situation, sometimes they know in advance where they want us to focus because they have certainly hit some insights there, but it's pretty much not limited.

Then that goes even beyond just the, what we call it, performance improvement, the financial advisory areas, whether it's how you work with the office of the CFO and get better insights in terms of the decision-making and the speed, management of cash.

There's really, I would say, we're not aware of anyone else who's got the breadth of what we do and we bring it together as a unified team and going to market in that way, I think, really gives us a great speed to value and impact for our clients.

Great. That's helpful. Just I wanted to ask about the Treliant acquisition. I'm trying to recall how much of this is an expansion of maybe an adjacent services that you currently are providing? I can't recall how much you're into the risk management compliance side, but maybe just a little more color on what that particular transaction brings to you in terms of added capabilities?

Yes, what we have among our commercial portfolio, financial services has been the #1 or #2 industry segment that we've had for a long time, and a lot of those have been built in areas that are already doing risk management compliance reporting, things that as we look at Treliant are highly complementary to what they do.

And this gets back to even how we came together has been an outreach to recognize where we have opportunities to take their capabilities, our capabilities and really create a more comprehensive solution.

So there's a lot of joint excitement for that, and they are very much aligned, but not overlapping.

Okay. Yes. I appreciate the color. I'll turn it back over. .

Seeing there are no further questions in the queue. I'd like to turn the call back to Mr. Hussey. .

Yes. Well, thank you very much for joining us this afternoon. We look forward to speaking with you again in October when we announce our third quarter results. Have a good evening. .

This concludes today's conference call. Thank you, everyone, for your participation. You may now disconnect.