Huron Consulting Group Inc. Aktie

Good afternoon, and welcome to Huron Consulting Group's webcast to discuss financial results for the third 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 1 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 Mike -- 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 2026 Earnings Call. With me today are John Kelly, our Chief Financial Officer; and Ronnie Dail, our Chief Operating Officer. We achieved record revenues before reimbursable expenses or RBR in the third quarter of 2026, reflecting 12% growth over the third quarter of 2025. Our third quarter performance was driven by organic growth across all 3 of our operating segments and double-digit percentage growth in both our Consulting and Managed Services and our Digital capabilities.

AI continues to drive demand for our digital services. In the trailing 6 months of 2026, greater than 65% of our Digital capability bookings involve direct AI scope, and delivery that was significantly enabled by our AI tools, and that was up from approximately 50% in the same period in 2025. Our third quarter results continue our strong multiyear performance and further demonstrate the consistent execution by our highly talented global team as well as the differentiation of our industry-focused proprietary offerings.

Combined with our year-to-date performance, our strong backlog and pipeline give us confidence to narrow our full year RBR guidance range and raise our earnings guidance. At the midpoint, our updated guidance continues to reflect year-over-year double-digit RBR growth and continued margin expansion while establishing a solid base for continued growth in 2027.

Now I'll share some additional insights into our third quarter performance. In the Healthcare segment, we achieved record RBR in the third quarter. RBR grew 16% (sic) [ 16.5% ] for the third quarter of 2025 (sic) [ 2026 ] and which was on top of 20% growth in Q3 2025 over Q3 of 2024. The increase in RBR in the quarter was driven by strong demand for our Managed Services, performance improvement, financial advisory, and digital offerings as well as incremental RBR from our acquisitions. Excluding the impact of the acquisitions, organic RBR growth for the Healthcare segment was 9% in Q3 2026 compared to Q3 2025.

Underlying market conditions remain favorable for driving strong demand for our Healthcare business. Healthcare systems and hospitals continue to operate in a challenging environment characterized by persistent cost and workforce pressures, evolving reimbursement models, and increasing expectations to improve access, outcomes, and the patient experience. Healthcare industry is also preparing for the next phase of the OBBBA, which takes effect in 2027 and includes stricter requirements related to Medicaid eligibility and reimbursement.

We believe the impending regulatory changes together with the broader structural challenges facing health care providers will drive continued demand for our Healthcare business. Our comprehensive portfolio of offerings across Consulting, Digital, and Managed Services positions us well to address each client's distinct challenges. We believe our multiyear track record of proven results, coupled with our proprietary data and methodologies and delivered by our highly experienced team provides a strong competitive advantage for Huron, so our clients build a more sustainable future for their organizations.

I'd also like to highlight the performance of our Healthcare Managed Services business, for which RBR nearly doubled the third quarter of 2026 compared to the third quarter of 2025. Q3 2026 marked the third consecutive quarter of 40% plus organic year-over-year revenue growth for this team. The strong steady growth is reflective of the recurring nature of this offering and our outcomes-based approach that consistently delivers meaningful, positive financial and operational results for our clients.

Beyond the impressive growth in financial performance, we're pleased with how this business has organically expanded into a broader scope of functional areas, enhanced through our acquisition of RelateCare earlier this year. Our Healthcare Managed Services team has also delivered with the highest quality, achieving a Net Promoter Score of 92, which far exceeds the industry benchmark and states the clear value that we're delivering for our clients.

Next turning to the Education segment. In the third quarter of 2026, Education RBR grew nearly 7% compared to the third quarter of 2025, driven by strong demand for our Digital and Managed Services offerings. Higher education institutions continue to navigate a broad array of pressures, including demographic headwinds, enrollment challenges, and cost and revenue pressures. Uncertainty also remains around research funding in the midst of growing regulatory complexity.

Institutions are also grappling with the risks and opportunities resulting from rapid advances in AI across their workflows and their learning environments. Increasingly, these challenges require institutions to simultaneously rethink their strategies and business models while preserving a clear focus on achieving their missions. We continue to see robust demand for digital transformation engagements as clients seek to modernize their data and technology foundations, build AI-enabled operations and create a more sustainable operating model.

As institutions make increasingly consequential decisions about their future, we believe the depth of our expertise, the breadth of our capabilities and the deep relationships built over decades provide Huron with a strong competitive advantage. We remain confident in our ability to help clients navigate this period of transformation, while continuing to build upon our competitive position in the education market.

Now moving to the Commercial segment. Third quarter Commercial RBR grew 6% (sic) [ 6.4% ] over the prior year quarter. The increase in RBR was driven by our Q3 2025 acquisition of Wilson Perumal as well as continued organic growth from our strategy offerings. Commercial organizations are navigating an increasingly complex operating environment marked by cost and productivity pressures, rapid advances in technology and AI, evolving customer expectations, and continued economic and regulatory uncertainty.

These challenges are increasingly interconnected, requiring partners that can bring together deep industry expertise across a wide array of capabilities. Similar to our Healthcare and Education businesses, we believe the growing breadth of our capabilities, along with an increasing depth of industry expertise, positions us well to help clients address these challenges with end-to-end solutions across our Commercial segment.

Over the past several years, we've strategically strengthened our Commercial business by investing in the expansion of our capabilities and industry expertise, and importantly, creating greater connectivity across our businesses. Wilson Perumal acquisition completed just over a year ago is a great example. Wilson Perumal's expertise in driving performance improvement through managing the strategic and operational impact of complexity on businesses complements our strategy, financial advisory, and digital offerings.

Together, we're creating a strategy to execution, value proposition to help our clients understand and reduce complexity that erodes value in their businesses. We've seen the benefits of the strategy in the market, greater collaboration across our teams is expanding how we engage with clients, strengthening our competitive differentiation, and creating new opportunities to serve them across a full range of needs. We believe this combination of deep industry expertise, broader capabilities, and a collaborative go-to-market approach provides a strong platform for continued growth in our Commercial segment.

Now let me turn to our outlook for the year. Today, we're updating our annual guidance by narrowing our RBR guidance range to a $30 million range of $1.855 billion to $1.885 billion, affirming our adjusted EBITDA guidance range of 14.5% to 15% and increasing and narrowing our adjusted non-GAAP EPS to a range of $9.20 to $9.40. We're pleased with our performance to date in 2026 and the midpoint of our RBR guidance reflects our expectation of continued strong growth in the fourth quarter, consistent with our backlog and pipeline.

We remain focused on advancing our growth strategy and executing with discipline to deliver strong financial performance for our business and for our shareholders. And 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 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 would like to discuss 1 housekeeping item: our Healthcare segment results do include a full quarter of operating results from our acquisition of RelateCare which closed in June of this year.

Now I'll share some of the key financial results for the third quarter. Third quarter of 2026 produced record RBR of $482.5 million, up 11.6% from $432.4 million in the same quarter of 2025. The increase in RBR for the quarter was driven by growth across all 3 operating segments, a double-digit percentage growth in both our Consulting and Managed Services and our Digital capabilities. Net income for the third quarter of 2026 was $28.4 million or $1.75 per diluted share compared to net income of $30.4 million or $1.71 per diluted share in the third quarter of 2025.

As a percentage of total revenues, net income decreased to 5.8% in the third quarter of 2026, and compared to 6.9% in the third quarter of 2025. Diluted earnings per share in the third quarter of 2026 reflects noncash credit loss recognized on our convertible debt investment in a third party, which had a $0.36 unfavorable impact on diluted earnings per share for the quarter. Our effective tax rate in the third quarter of 2026 was 32.9%, which is less favorable than the statutory rate, inclusive of state income taxes, primarily due to certain nondeductible expense items and the inability to recognize tax benefits related to the credit loss recognized on our convertible debt investment in the third party.

We now expect a full year effective tax rate between 27% and 29%. Adjusted EBITDA was $77.3 million in Q3 2026 or 16% of RBR compared to $67.4 million in Q3 2025, or 15.6% of RBR. The 16% adjusted EBITDA margin is our highest quarterly adjusted EBITDA margin in the last 8 years. Increase in adjusted EBITDA was primarily attributable 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 certain unallocated corporate expenses.

The increase in adjusted EBITDA margin to 16% from 15.6% and in the prior year period is reflective of an increase in Education segment operating income margin, scaling of our unallocated SG&A expenses. Adjusted net income was $42.6 million or $2.62 per diluted share in Q3 2026 compared to $37.4 million or $2.10 per diluted share in the third quarter of 2025, growing adjusted diluted earnings per share by 24.8% year-over-year.

Now I'll discuss the performance of each of our operating segments. The Healthcare segment generated 53% of total company RBR during the third quarter of 2026. Segment posted record RBR of $255.8 million, up $36.2 million or 16.5% from the third quarter of 2025, driven by strong demand for our Managed Services, performance improvement, financial advisory and Digital offerings as well as incremental RBR from our acquisitions. RBR in the third quarter of 2026 included $16.7 million from our acquisitions of RelateCare and [ AXIOM. ]

Operating income margin for the Healthcare segment was 30.5% in Q3 2026 compared to 30.9% in Q3 2025. Slight decrease in segment operating income margin was primarily driven by an increase in total compensation expense as a percentage of RBR and includes the impact of the integration of RelateCare into our business. We have maintained strong margin performance in 2025 and into the first 9 months of 2026, reflective of the highly disciplined execution delivered by our Healthcare team. The Education segment generated 29% of total company RBR during the third quarter of 2026. Education segment RBR in the third quarter of 2026 was $138 million, up $8.6 million or 6.6% compared to the third quarter of 2025.

The increase in RBR was entirely organic and driven by strong demand for our Digital and Managed Services offerings. The operating income margin for Education increased to 29.1% for Q3 2026 compared to 25.7% for the third quarter of 2025. The increase was primarily driven by revenue growth that outpaced the increase in salaries and related expenses for our revenue-generating professionals and decreases in salaries and related expenses for our support personnel and technology costs.

The Commercial segment generated 18% of total company RBR during the third quarter of 2026. Commercial segment RBR was $88.8 million in Q3 2026, up $5.4 million or 6.4% from the third quarter of 2025. The increase in RBR reflects $4.3 million of incremental RBR primarily from our acquisition of Wilson Perumal, as well as strong demand for our strategy offerings. Operating income margin for the Commercial segment was 13.9% for Q3 2026 compared to 16.4% in the same quarter in 2025. The decrease was primarily driven by increases in performance bonus expenses, reflecting increased full year performance expectations for certain teams within the segment.

In addition to the increase in performance bonus expense, the decline in margin also reflects continued investment in key business development, leadership, and delivery talent that we expect to drive above company average growth in 2027. These growth-oriented investments totaled $2.2 million or 2.5% of segment RBR for Q4 (sic) [ Q3 ]. Corporate expenses not allocated at the segment level, excluding restructuring charges, were $58.7 million in Q3 2026 compared to $56.5 million in Q3 2025. Unallocated corporate expenses in the third quarter of 2026, included income of $200,000 compared to expense of $2.7 million in Q3 2025 related to the changes in the liability of our deferred compensation plan, which are offset by the change in fair value of the investment assets used to fund that plan reflected in other income.

Excluding the impact of the deferred compensation plan in both periods, unallocated corporate expenses increased approximately $5.1 million, primarily driven by increases in compensation costs for our support personnel, software and data hosting expenses, partially offset by a decrease in legal expenses.

Now turning to the balance sheet and cash flows. DSO came in at 83 days for the third quarter of 2026 compared to 79 days in the second quarter of 2026. The increase when compared to the second quarter of 2026, is primarily attributable to the impact of collections on certain Healthcare projects in alignment with the contractual payment schedules.

Cash flow from operations in the third quarter of 2026 was $57 million compared to $93.8 million in the prior year period. During the third quarter of 2026, we used $7.9 million to invest in capital expenditures, inclusive of internally developed software costs, resulting in free cash flow of $49.1 million. We now expect full year free cash flow to be in a range of $150 million to $170 million. Net cash taxes and interest and excluding noncash stock compensation. This update primarily reflects the timing of collections, including a revised payment schedule on a specific multiyear engagement and a higher mix of performance improvement projects with performance-based fee elements within our Healthcare segment during 2026.

We expect to collect working capital related to such projects in 2027 in accordance with our contractual terms. Our leverage ratio as defined in our senior bank agreement, was 2.6x adjusted EBITDA as of September 30, 2026 compared to 2.8x as of June 30, 2026. We remain confident that we are on track to achieving a leverage ratio between 2x and 2.5x by the end of 2026, in alignment with the capital allocation strategy outlined in our most recent Investor Day. Total debt as of September 30, 2026, was $815 million, consisting entirely of our senior bank debt. We finished the quarter with cash of $25.6 million for net debt of $789.4 million.

This was a $13.4 million decrease in net debt compared to Q2 2026, which incorporates the share repurchases made during the quarter. In the third quarter of 2026, we used $26.3 million to repurchase approximately 173,000 shares bringing our total year-to-date repurchases to $234.9 million or approximately 1.7 million shares, reflecting an average repurchase price of $136 per share. Year-to-date repurchases represent 10% of our common stock outstanding as of December 31, 2025.

As of October 31, 2026, $255.9 million remained available for share repurchases, inclusive of the $200 million increase authorized by our Board of Directors in October 2026. Finally, let me turn to our guidance for full year 2026. As Mark mentioned, today, we are updating our annual guidance by narrowing our RBR guidance to a range of $1.855 billion to $1.885 billion, affirming our adjusted EBITDA guidance range of 14.5% to 15%, and increasing and narrowing our adjusted non-GAAP EPS to a range of $9.20 to $9.40.

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.

To start with the Commercial, a little bit of a weaker quarter on an organic basis. Could you unpack what kind of businesses within that segment did during the quarter? And then maybe speak a little bit more to the investments that you described. Are there specific areas that you're focused on with those investments? And I guess, relatedly, are those investments in response to recent results or kind of[ proactive ] to spurring growth next year?

Yes. Andrew, I can start with just the question about the growth rate for the quarter. So from an organic perspective, Consulting overall was up about 11%. And we talked on the last call, about expecting the growth rate within Consulting to moderate from where it was earlier in the year. And that moderation primarily came from the restructuring and turnaround business where they add a couple of large assignments in the first half of the year that really drove above-average growth that normalized during the third quarter and landed more in this low double-digit percent range.

From a Digital perspective, it was down 1%, so roughly flat during the quarter. Our commentary there is, from a pipeline perspective, we see significant growth in terms of pipeline. We see good opportunities. We see continued opportunities as it relates to AI enablement projects or helping clients with AI use case projects just the execution on closing out some of those projects and getting them started was a little bit behind what our expectations were for the quarter, which led to the roughly flat results in the third quarter. The Digital part of the business is a bigger mix within commercial. So the net of all that was the low single-digit organic growth rate.

Yes. Let me add on the second part of your question, Andrew. I think the -- these are not at all in response to anything in the quarter. In fact, if you turn the clock back a couple of years at least for the multiyear journey we've been building our Commercial business into a much more, call it, industry focused, enablement on an end-to-end basis. And so I mean, even turning back clock to like, AXIA, we did, which was more in the Digital area.

But more recently, if I answer your question specifically, we have now gotten to the time where the capability across the businesses for reaching the scale that the addition of deeper industry expertise in a number of the verticals makes a lot of sense for us because now we can leverage across the full set of capabilities we have, and so what you're seeing is some of the anticipation of growth in 2027, some of the investments where we're bringing in leaders to help us scale from an industry perspective.

Very helpful. And then you touched on it at various points during the prepared remarks also in response to my last question. But just broadly on pipeline development, any areas that are especially strong or accelerating or on the other side of the coin, softening a little bit relative to what you described last quarter. It sounds like general bookings are good. But any color there would be great.

Yes, Andrew, from a -- maybe I'll just start from an overall perspective. From an overall company-wide bookings perspective, for the trailing 6-month period ended September 30. Bookings were up 20% year-over-year -- over 20% year-over-year. I think the strength of those bookings, that's not only helpful in terms of delivering the fourth quarter guidance, but we also feel good that, that really helps set the table for the next leg of growth as we start to think about 2027.

In terms of the areas, I would say the majority of the bookings strength there was within the Healthcare and Education segment. And importantly, Digital within both of those segments was a key part of that. Within Healthcare, it was also broader in terms of performance improvement and the Managed Services offerings. And then on the Education side of the shop. I think the strength was really Digital and Managed Services. There was growth in terms of bookings for the Consulting part of the business, but we continue to see a little bit of a slower than we expected sales conversion rate within Consulting and Education.

And then from a Commercial perspective, that was more in the mid-single-digit range percent in terms of increase in bookings during the 6 months ended 9/30 versus a year ago. And what's in there, I'd say it was pretty well balanced between the different lines of business within the Commercial segment.

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

I wanted to ask a question about Healthcare and PI specifically. The order of the magnitude of change in terms of enrollment in insurance rules, the Affordable Care Act this year, that changed compared to the another leg down that is forecast in the Medicaid and the 340B drug pricing? Which year between this year and next is harder on your clients? Just trying to get a sense for what you may hear from them in the coming months or if we turn the calendar to '27?

Tobey, I think you could say next year, we expect to be harder because what you're going to see is a lot of that Medicaid rolls to come back in the form of unreimbursed care. And you've got compounded by some of the ACA pressures that you've seen on enrollment. So I think it's been well expected for some period of time. But I think until you really get into it and see magnitude. So we expect '27 should be a very strong year from a Healthcare perspective, especially because now we will be into the new parts of the regulation that will take effect January 1.

On Managed Services, maybe -- are there new services within there that you're expecting to offer your customers? Perhaps I'm kind of curious what the next modules of revenue cycle that you think the company is getting more receptivity and adoption from your customers to drive growth in '27 and '28?

Well, I think the first thing to understand is that we have both end-to-end revenue cycle where we kind of lift and shift and re-badge their people and then execute under, call it, outcomes-based, performance-based contracts. But I would say an increasing number is on our point solutions that are on various parts of the revenue cycle. And then I would say with businesses like we just acquired with RelateCare, what you're seeing is an extension into some of the access areas.

And so I think there is quite a bit of adjacency that's still left to be -- left to be executed there. So I think really within, call it, both the traditional revenue cycle as well as getting into some of the access related clinical operations and just some of the triage management are definitely areas that we see really good opportunities.

Last one for me. Margins in Managed Services going forward. Could you give us your outlook there kind of not just for the fourth quarter, but a little bit longer term and broad strokes, please?

Yes. Tobey, this is John. I would say, from our perspective, this has been 1 of the really great parts of our Managed Services business story over the past few years. We've seen steady margin improvement in that business. And when you think about our Healthcare Managed Services, the margin profile segment level for our Managed Services offering are generally in line with the overall segment average. They tend to be a little bit below the performance improvement, Consulting, which has its performance-based fee opportunities and above the Digital offerings, which tend to blend a little bit lower.

And when we first got into the Managed Services business, at this point, 7 years ago, that wasn't the expectation. We actually, at that point, were thinking that the Managed Services business would be high growth, which has proven to be, but that would blend in at a lower margin rate. So it's been a really positive change for us. In terms of what is unlocked that margin growth, I think it's a few things. But first and foremost, it's the outcomes-based approach that our teams take with our clients.

So we're very focused on delivering key financial and operational metrics for our clients and to the extent that we're successful in doing that. That creates opportunity for us to expand our revenue on those projects. But as well, our team has done a great job of taking advantage of our global resources. And then this is an area where I think across the entire company, when we look at the advancements we made in automation using AI. The team has also shown great leadership in those areas too.

So you put all those things together and plus just some nice scaling now of the fixed components of the SG&A for that business. It's proven to be really margin accretive to us, coupled with the strong growth rates that Mark highlighted in his remarks.

And of course, the recurring nature.

Yes.

Our next question comes from the line of Bill Sutherland of StoneX Financial.

I can't help but notice the sequential trend in headcount, professional headcount in Education down a bit in the 9 months and then a nice expansion in margin over the same 3 quarters. And just wondering about that relationship or whether there's other factors? And also how you're thinking about headcount planning for Education going forward?

Yes. So this is -- I'll touch on Education. I think it's a broader comment, though, really across the company too, right? The Education headcount was down. I think generally speaking, if you're looking sequentially, excluding Managed Services, our headcount was roughly flat across the entire business. And I think the story behind that is, during the quarter, we were able to hit our growth objectives for the quarter as well as keeping an eye on our fourth quarter expectations, really with the scale of the current team that we have.

And so some of that is utilization, and you see that in the increased utilization metrics in our report. But some of that is increased productivity from our teams, too. And I'd highlight a couple of different areas where we've seen that increased productivity, delivery of digital projects. I think that's a place where we've seen some fairly rapid advancement in terms of our efficiency, and delivering those projects. But then also the support teams that enable some of the revenue that we have through our proprietary tools and products, of which that's a key component of our Education business.

We've also seen increased productivity in that area, too. So I think that the combination of increased utilization plus higher per consultant productivity are really the 2 ingredients that drove our ability to both grow and to improve margins without necessarily adding the same amount of headcount. I do think you'll see us continue to add head count as we grow. But our expectation is we should be able to grow the top line as we start to think about our plans into next year at a faster pace than we're necessarily growing the headcount, primarily due to some of these initiatives we have around driving increased productivity.

Got it. The -- I want to just go back to Commercial for a second, thinking about what you said about the investments you're making that you expect will take Commercial's growth above the company's average growth rate next year. And then also kind of like footing that to the situation with the pipeline. So is it -- I guess I'm sort of expecting this to be a case of some pipeline conversion that's been held up and then you'll have bookings that definitely support the cases that you're making for faster growth in '27. Is that about the right way to think about it?

And I'd say, Bill, adding new pipeline as these layers come up to speed and are effectively getting into the market, and that normally takes some amount of time just to onboard kind of reacclimate with the other folks around understand the breadth of what our capabilities are. So there's always a slight delay between hitting the door on day 1 and when you're actually highly effective in the market. So based on the quality of the people that we're hiring, I feel highly confident that you'll see that acceleration.

The areas that we're building into are inherently good industry areas we've talked about in the past: financial services, energy utilities, industrials and manufacturing. Each of these have lots of good compelling opportunities, some in various parts of the business versus others. But yes, that's to me, I think you may not see it as of the end of Q3, but I certainly -- I think coming in at '27, that's our expectation.

Okay. That makes sense. And then if I could sneak 1 more in. I'm thinking about what your clients are kind of grappling with adoption of different levels of AI for their whatever projects they are putting out there or trying to move into? And is it -- to what degree is it having an impact on the sales cycle, decision-making process or maybe the project implementation pace. Is there anything that you're noticing?

I think, Bill, we're -- I think we felt a little bit of maybe what was some hesitation on the part of clients towards the end of last year, early part of this year when that -- everyone was becoming aware of the rapid pace change with the technology and some clients wanting to make sure that whatever path, they were going down made sense in light of how the technology was evolving. I think as the year has progressed, a lot of the challenges that we've -- our clients are going through in their different industries, none of those are going away. And our clients continue to be under pressure there.

And so I think many of our clients at this point have taken more an approach of let's now start to chart the path forward, increasing confidence about how some of these tools can be used to help drive outcomes. There's a greater repository of use cases now and kind of proof of how you can use some of these tools to go and achieve some of those objectives. And I think at this point, you're seeing a little bit more assertiveness for many of our clients about now wanting to launch and wanting to -- whether that's taking advantage of some of the AI that's native to some of the big platforms that our clients implement to take advantage of that AI or whether it's working with some of the frontier firms to do more the stope building out -- bespoke building out of tools that sit on top of some of those platforms.

We see it in both ways, depending on the clients' preferences. But I think we see a shift towards more proactivity at this point versus maybe where we were a year ago.

Maybe I'll Just quickly add -- go ahead, Bill.

Yes. No, go ahead.

I was going to just say, listen, I think the other thing we're seeing here is interesting traditional delivery of price where we've had strength as an example in the past, bringing in an AI component into what they're doing. And it really is, in many respects, automating, and accelerating speed to value for clients in important areas of their business. And so you can imagine like we've done a lot in enterprise performance management over the years. It's been a very important area that we have, very good strength across the commercial businesses and the addition of AI enablement into some of that delivery ends up being really impactful when you look across how it's deployed, like planning budgeting type approach to running the business. And so that's actually been accretive to us as well.

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

Just following up on the AI discussion. Wondering if you could possibly just give us the flavor as to some of the key themes or use cases that your clients are looking to deploy AI for, maybe touching on each of the segments?

Yes, absolutely. Let me start again, just building on what I was just talking about from a commercial standpoint. So certainly from the range of AI governance and just the oversight of just management of the, call it the, strategy work is one that we see. But also then, I would say, when you look at it as an example, specific application like one is building out a digital twin as an example, to replicate more clients' environment and being able to kind of model around various scenarios within their environment.

Some of it is around the data and setting up integration of how you kind of get your data in shape to take advantage of that as well. I'd say in Education, it tends to be a little bit more operational focused right now. And so if you think about the implementation of ERP as an example, how do we bring either native capabilities or outside foundational elements to help them reduce costs and increase our effectiveness. And Healthcare is a little bit all over the map. I mean there's very strong demand in Healthcare. It's both the ranging from strategy to use cases across both the clinical and the administrative areas that can drive -- generally, the theme is around trying to generate returns.

Okay. Got it. And with regard to the 40% plus organic growth you've seen with Healthcare Managed Services over the last few quarters here. I was just wondering how broad-based that's been from a client perspective? Are there a couple of larger deployments that have been driving that? Or is it broader than that? And also the same with regard to what you're seeing in the pipeline?

Kevin, it's broader than that. We certainly had our fair share of significant new logos that we've been able to add with larger scope that we've been able to take care of. But when I look at the growth we've seen this year, I wouldn't characterize it at all as highly concentrated to any specific new client relationships. We've had some of those, but we've also had expansion of where we're able to help our clients on some existing client relationships.

We've had achievement of some of the success metrics that we have in those projects that drive good outcomes. And then a lot of our clients that we partner with are growing as well and as they grow, we're helping them with larger and larger volumes. So you kind of put all those different dynamics together, growth at existing clients via adding new modules as well as just partnering along with that as they grow plus the adding of those new client relationships.

And I think increasingly, we're going to see the opportunity to, after our acquisition of RelateCare, to capture some synergies there as well in terms of clients that were RelateCare clients, where we're now able to also help them with revenue cycle managed services or vice versa, some of our Managed Services and Consulting clients from a performance improvement perspective are very interested in the offerings of RelateCare. So I think that's another factor of growth that we're really just scratching the surface on right now.

Okay. Just lastly, with the midterm elections here, any particular themes that you're watching or your clients are watching from a policy perspective? And if not, I mean, that's okay too. Just curious if there's anything on that front?

I would say, Kevin, there's an anticipation that even if there's a change in the party that's in charge of Congress that the policies that have been put out there are largely kind of baked from where we are right now. So I think at least in the short term, there's nothing that really is going to be the cavalry coming to the rescue from where some of the clients are facing the challenges right now. Certainly, over time, I think it will depend on how things go.

But if you take a step back and effectively with the size of Healthcare spending and the rate of increase, it is far beyond a political issue. It is really one that is kind of spans both sides of the political spectrum. And so in some respects, it doesn't matter because the ultimate drivers are more so just what are the real costs of delivering health care and all the access that goes along with it.

Our next question comes from the line of Steven Wahrhaftig of Wedbush Securities.

I kind of have a few topics that I want to talk on. So specifically for the demand drivers across all 3 segments, it seems like everything is sustainable and it's very durable, but they're kind of the same demand drivers that we've seen across the business over the past couple of quarters.

Are you starting to see the demand accelerate for your services as we start to head into fiscal year '27 and as clients start to rethink their budgets? Or is it kind of the same demand profile across each business?

Steven, if you go back, I mean, a really long time. So I mean, if I just said, in summary, what's driving the business? It's constrained revenue in Healthcare and Education, whether it's from reimbursements that are under pressure or tuition and other kind of funding that has been -- through the governmental through pressure on research funding. And at the same time, you're seeing high cost inflation in general, both in many areas within health care, but also the investments have been made by higher education over the years and their administrative programs and other things that have just driven call it, an upside down relationship that is hard on profitability.

And so those are long-term kind of static trends. And that's why we feel -- so when we talk about our long-term growth outlook, with 80% of our business being in Healthcare and Education, those are very long-term kind of established drivers that don't vary with the broader economic environment either. I think on the Commercial side, it really depends on what area of the business because it ranges from restructuring turnaround capabilities, which have kind of a countercyclical area, but then we also have more increasing new performance improvement, investing in digital technology.

And that may be a little bit more industry-specific over time. But yes, I think '27 for that reason, we feel like the outlook for a projection consistent with the financial objectives that we've outlined is very much our expectation.

And maybe the -- a couple of things I would add in agreement with what Mark's commentary would be, one, those same pressures that Mark talked about, that is a big catalyst for Managed Services offerings. That's another way that our clients engage with us to achieve some of those same objectives to help to offset some of that pressure that they're under. And then the other one would be within the digital side of our business. I think our clients are very eager to capture some of the returns on their investments from an AI perspective.

And I think whether that's in the form of operating efficiencies, whether that's -- how do you use those tools to help drive growth? And our clients value propositions, I think that's another area where we see a lot of demand that's probably a new theme this year and then certainly into next year versus maybe a theme going back a couple of years. So -- and that's just some extra color there.

All right. Got it. And I kind of want to talk a little bit more about utilization because when we're looking at some of the utilization metrics across both the Managed Services and the Consulting businesses, both of them are up pretty materially year-over-year. We're looking at the Consulting business that was 76% and Digital at 81%.

Do you think that, that's going to be a sustainable clip that you can continue to execute against? Or do you think that this was more so onetime in nature and then it's going to start to return to the high 70s for Digital and then closer to the mid- to low 70s for Consulting?

I think it is sustainable where it's at there, Steven. I wouldn't call in expectations that from those levels you saw in the third quarter that there's a lot of upward movement from there. But I think we've always said, look, that high 70s is sweet spot. So I think there's a little bit of room on the consulting side. From a digital perspective, it was a little bit higher than that this quarter. But I mean, if you look at the trend now at this point, we've been able to sustain that for really the better part of the last 2 quarters.

So I think the team is doing a great job kind of optimizing how they're delivering on projects to really get us into that low 80% range. So I think we feel good about where we're at. I don't -- I wouldn't describe it as a onetime surge by any means. But it also is probably approaching the upper end of what we expect versus something that I would describe as having a lot of upward movement from that spot.

Okay. Understood. And then last question from me, specifically on the cash flow guidance because it was kind of a material downtick in the cash flow guidance to the $150 million to $170 million for fiscal year '26. And then you also attributed to the collection, specifically for some of the Healthcare projects that are in longer term. So do you expect this to just be a short-term impact? Or do you think the definite carry forward into fiscal year '27 where there might be some pressure on free cash flow going into next year?

No, I think it's just a timing impact. Everything that we described is all aligned with contractual terms. So it's not like seeing delinquency in payments or anything like that. I think it's when our Healthcare business particularly the performance improvement side of the Healthcare business is performing strong. They tend to have a heavier weighting towards performance-based fees.

And those are great projects for us. They are great opportunities for us to partner with our clients to drive great outcomes. But you do make a working capital investment in those projects sometimes. I think the weighting of projects that have performance-based fee is towards the higher end for us this year. And so that's creating a little bit of a timing gap in terms of cash flow into next year. But I think we've seen this cycle before. So it's not something that gives us pause. It's just a dynamic that shifts cash from 2026 into 2027.

Our next question comes from the line of Andrew Nicholas of William Blair.

Just 1 quick one, John. Just curious if you have any changes to segment level outlooks with just 1 quarter left, I wanted to make sure I asked that on the public call?

Andrew, no big changes. I'd say a little bit of extra color that I can give I think guided to mid-teen percent full year growth from a Healthcare perspective, I think we're probably trending a little bit higher there in terms of the higher mid-teens. And I think our margin objectives that we put out there, that 30% to 32%. I think we feel comfortable that we're landing within that range.

From an Education perspective, the mid- to upper single-digit guide that we put, I think we're on track for that. From a margin perspective, I'd say, if anything, we're off towards the upper end of that, if not higher than that from a margin perspective. Commercial for the full year, we described as low teens. That may end up being more in the low double-digit percent range. And then from a margin perspective, it's probably trending to the low end of the guidance that we put out there, the 19% to 21%. But to net all that keeps us on track with our consolidated guidance.

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

Within your business focused on -- or exposed to performance fees, does -- your commentary suggest that there's a outlook for an increased percentage of performance fees as we look out into '27, just if you could frame that a little bit, that would be helpful.

Yes, Tobey, I would say I would expect it to be continued high demand for performance-based fee contracts in the '27. So the way we framed it before is, oftentimes, if you look back over history, about 20% of the Healthcare segment's revenue has been under performance-based fee contracts. An example here would be 2024, we saw that shifts up pretty significantly towards the mid-20s percent range. And then it came back down in 2025 back towards the 20%. This year, it's another year we're shifting up towards the mid-20% range.

And I would say the indications as we now think about 2027. I don't know if I would call it higher than that at this point, but I think it feels to us that we would expect it to be consistently high like it was in 2026.

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

Well, thank you very much for spending time with us this afternoon. 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 financial results for the second 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 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 Second Quarter 2026 Earnings Call. With me today are John Kelly, our Chief Financial Officer; and Ronnie Dail, our Chief Operating Officer. Led by strong organic growth across all 3 operating segments, we achieved record revenues before reimbursable expenses or RBR in the second quarter of 2026, increasing 16% compared to the second quarter of 2025. That included record RBR across both our consulting and advantaged services and our digital capabilities. We think with this meaningful step-up in our RBR growth trajectory. our continued margin expansion plus cash flow from operations delivered in the quarter. Addition, client bookings were up across all 3 segments during the first half of the year with an acceleration during the second quarter.

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

Before we turn to our second quarter performance, let me provide some additional insights on how AI is creating growth opportunities and adding value to our business. Increasingly, organizations are turning the Huron to understand how the rapid evolving AI and technology nndscape to drive growth and operational improvement. Our teams are focused on helping clients address critical business priorities while executing shoulder to shoulder with them to integrate technology, including frontier AI models and to redesign workflows and operating processes to help drive and sustain tangible outcomes and improve financial returns. AI is driving demand for our digital services.

In the first half of 2026, total bookings for our digital capability increased by more than 20% compared to the same period a year ago. and greater than 60% of those bookings have either direct AI scope for our clients, but will have delivery that is significant to our AI tools. This is a significant increase in mix as such projects represented approximately 35% of our total bookings in the first half of 2025. We're increasingly confident that AI represents a significant revenue growth opportunity or a digital capability. continue to embed our deep industry expertise and proprietary data and insights into our AI-enabled solutions, strengthening the differentiation of our offerings and enhancing tangible outcomes delivered to our clients.

One good example of how AI is driving value in our health care business is our clinical intelligent automation solution, which gives health care organizations a scalable way to combine their trusted data of Huron's proprietary data and expertise to drive clear decisions and stronger financial performance. Specifically, this AI-enabled tool captures our proprietary data and insights, analytic methods, consulting players and it compresses the time to deliver insightful recommendations for clinical-related performance improvement opportunities to just hours rather than days or weeks. As a result, we're able to identify even greater financial benefits even faster for our clients, creating new expanded opportunities for our implementation services and increasing both our revenue and margin opportunities.

AI continues to expand our addressable market as we offer new innovative AI services and solutions to our clients, both our own proprietary solutions as well as those we deliver with our technology partners. such as Anthropic, Microsoft and AWS. Those engagements range from AI strategy, governance and data modernization, BI pilots, implementation and managed services via point solutions and end-to-end transformation. [indiscernible] AI and its potential impact on Huron remain bullish, as we believe AI will prove to be a significant contributor to our future growth. We're confident that our collective strategic, financial, operational and digital offerings, all enabled by AI will continue to yield positive revenue growth and margin expansion as evidenced by our continued strong backlog and pipeline.

Now I'll share some additional insight into our second quarter performance. Healthcare segment. Second quarter RBR grew 17% over the prior year quarter, reflecting strong demand for our health care managed services, performance improvement, strategy, financial advisory and digital offerings. as well as incremental RBR from our acquisitions. Excluding the impact of the acquisitions, organic growth for the Healthcare segment was 12% in Q2 2026 compared to Q2 2025. Significant portion of the health care provider market continues to be financially challenged, which in turn leads to continued growth tailwinds for our business. The [indiscernible] legislation is estimated to reduce federal health care spending by over $1 trillion over the next 10 years. The more meaningful regulations are only beginning to take effect for hospitals and health systems. As these new regulations take effect, we expect strong demand for our portfolio of offerings to continue as many organizations assess the likely financial and operational impacts on their businesses into 2027 and beyond.

In combination with the ongoing trends of labor, supplies and pharmaceutical costs that are rising faster than reimbursements. We believe the operating environment for the health care industry will yield solid demand from our performance improvement strategy, digital, financial advisory and managed services offerings, which we expect will continue to provide significant growth opportunities from years ahead. In addition to strengthen our consulting offerings, we've also seen strong growth in our health care managed services capability, which grew 64% in Q2 2026 compared to Q2 2025 led by 43% organic growth.

Clients are increasingly turning to Huron for managed services because of our differentiated expertise and consistent delivery of financial benefit and our continued investments in AI and automation. Branded services business is built upon delivering increased net revenue to our clients, higher cash flow yield, greater patient throughput and improved patient collections. The majority of our performance improvement offerings, our pricing arrangements for managed services are designed around outcome-based models. [indiscernible] results are driving both strength and demand for our services, exceptional client retention, and recurring revenue for Huron as well as higher margins for traditional managed services models.

To further enhance our managed services offerings in the second quarter, we acquired [indiscernible] a leading provider of AI-enabled political and patient access managed services solutions. Together, we strengthened our services around the patient purity by improving access and throughput, elevating patient and clinician experiences, and delivering measurable operational and financial performance. As health care organizations navigate an increasingly complex regulatory and operating environment, we believe our deep client relationships, differentiated expertise, comprehensive portfolio and outcomes-driven model position us to sustain strong performance in the Healthcare segment.

Turning next to the Education segment. the second quarter of 2026, we saw an acceleration of our growth rate as the Education segment RBR grew 8% compared to the second quarter of 2025, driven by strong demand for our digital and managed services offerings. Universities and colleges continue to face significant market pressures stemming from multiple factors, including declining enrollments, reduced research revenue, pressure on net tuition, increasing opening costs, and a challenging regulatory environment. The [indiscernible] great demand for our differentiated incentive offerings and the opportunities and challenges facing the higher education industry, university leaders are moving beyond incremental solutions pursuing broader enterprise transformation initiatives that modernize operating models, improve student outcomes and leverage technology, data, analytics and AI to drive better decisions and greater efficiency.

Market disruption facing higher education is creating continued opportunities for our Education segment. We continue to enhance our comprehensive portfolio, strategy, operations, technology and research offerings help institutions navigate these challenges and advance their missions. For example, we're further differentiating our offerings through innovative solutions such as AI-enabled research administration tools which is designed to enhance compliance and post award quality control and reduce administrative backlogs, drives well-established reputation, bond history of proven results and deep client relationships makes us one of the most trusted advisers to the industry. We believe will drive future growth in this business as we address the comprehensive needs of our higher education clients.

In the commercial segment, Second quarter RBR grew 25% over the prior year quarter, reflecting incremental RBR from our acquisitions as well as strong demand for our financial advisory and strategy offerings. Excluding the impact of acquisitions, RBR in Q2 2026 grew 12% organically over the second quarter of 2025. The increasing level of complexity in the operating environment for commercial organizations is driving global demand for transformational solutions that can bridge strategy, performance improvement and technology execution. We continue to invest organically and targeted acquisitions, expand our capabilities and deepen our expertise in our core industries within commercial, creating a platform that represented 21% of our total business RBR in the first half of 2026.

Our balanced portfolio of offerings are relevant in both cyclical and countercyclical demand cycles has improved the durability of growth while expanding our addressable market as we add new capabilities in this segment. We believe the combination of our industry expertise and our capabilities, all going to market together in an integrated operating model creates a differentiated value proposition for our clients that will help drive continued growth diversification and long-term value creation for our shareholders.

Today, I also want to highlight for digital capability. In the second quarter of 2026, digital capability RBR grew 9% over the prior year quarter and sequentially compared to the first quarter of this year. We strategically invested in our digital business since 2013, combining our deep industry expertise, operational transformation capabilities and technology execution to help clients accelerate speed to value and improve the financial return on their technology investments. We see the benefits of these investments build over time, including in the second quarter when we achieved record RVO. Our digital business in the Healthcare segment achieved strong double-digit percentage growth in the second quarter as clients increase their investments in modernized digital platforms and data foundations as well as distinct AI and automation projects.

Based on our backlog in pipeline, we expect to see continued double-digit growth in health care in the back half of the year. In addition to our data management, analytics and automation and AI offerings, the first half of 2026 compared to the same period last year. We've seen strong growth in our ERP student information system, advisory services and spend management offerings as clients continue to advance their digital transformations, better position themselves to adapt in a more competitive AI-enabled market. We believe our operations led data and AI enabled offerings position our digital capability to remain a key beneficiary of ongoing digital modernization across our core markets for the foreseeable future.

And now let me turn to our outlook for the year. Inclusive of the acquisition of Relacare today we're increasing and narrowing our RB guidance to a range of $1.85 billion to $1.89 billion, which represents an increase of 12% at the midpoint of our guidance compared to our full year 2025 results. Maintaining our adjusted EBITDA margin guidance range of 14.5% to 15% of which represents a 50 basis point increase over full year 2025 at the midpoint of our guidance range, and we're increasing our adjusted non-GAAP EPS guidance to a range of $9 to $9.40 and which represents an increase of 17% at the midpoint compared to full year 2025.

We believe our updated outlook for 2026 reflects the ongoing market tailwinds for our business and the continued solid execution of our growth strategy will enable us to achieve the medium-term financial goals shared at our last Investor Day. And let me close by sharing that we're proud to have a track record over the last several years of consistently achieving RBR growth that has met or exceeded many firms in the professional services industry. Our business momentum continues as reflected by our strong pipeline and bookings conversions in the quarter. In addition, we've built a multiyear track record of expanding our margins by executing against multiple operating leverage inclusive of AI, coupled with the benefits of scale stemming from a growing revenue base, which is expected to be double that in 2021. These factors collectively increase our confidence that we can continue to expand -- our adjusted EBITDA margin is consistent with our stated goal of 15% to 17% by 2029.

And finally, our strong free cash flow allows us to continue to strategically deploy capital in a balanced way while achieving our leverage target by the end of the year. We believe the disciplined execution against our algorithm for value creation, achieving low double-digit revenue growth, consistent margin expansion strong cash flow and balanced capital deployment positions us well to meet or exceed our adjusted EPS goals will ultimately drive significant value creation for our shareholders.

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

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

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

I would like to discuss one housekeeping item. Our Healthcare segment results do include a partial quarter of operating results from our acquisition of Relay Care, which closed on June 3. Now I'll share some of the key financial results for the second quarter of 2026. Second quarter of 2026 produced record RBR of $465.6 million, up 15.7% from $402.5 million in the same quarter of 2025, driven by growth across all 3 operating segments, including 10.8% organic RBR growth in the quarter.

Net income for the second quarter of 2026 was $31.2 million or $1.91 per diluted share compared to net income of $19.4 million or $1.09 per diluted share in the second quarter of 2025. As a percentage of total revenues net income increased to 6.6% in the second quarter of 2026 compared to 4.7% in the second quarter of 2025. Our effective tax rate in the second quarter of 2026, was 27.2% was less favorable than the statutory rate, inclusive of state income taxes, primarily due to certain nondeductible expense items and the inability to recognize tax benefits related to certain foreign and capital losses partially offset by a tax benefit related to nontaxable gains on the investments used on our deferred compensation liability.

Our expectation is for a full year effective tax rate between 28% to 30% remains unchanged. Adjusted EBITDA was $72.6 million in Q2 2016 or 15.6% of RBR compared to $60.6 million in Q2 2025, and 15.1% of RBR. The increase in adjusted EBITDA was primarily attributable to the increase in segment operating income for all 3 of our segments, excluding segment depreciation and amortization and segment restructuring charges, partially offset by an increase in certain unallocated corporate expenses. We are pleased with our continued margin expansion in the quarter, consistent with our medium-term financial goals.

Adjusted net income was $40.2 million or $2.46 per diluted share for the second quarter of 2026 compared to $33.7 million or $1.89 per diluted share in the second quarter of 2025. Growing adjusted EPS, 30.2% year-over-year. I'll discuss the performance of each of our operating segments. The Healthcare segment generated 50% of company RBR during the second quarter of 2026. The segment posted record RV of $232.3 million, up $34.5 million or 17.4% from the second quarter of 2025, driven by strong demand for our health care managed services, performance improvement, strategy, financial advisory and digital offerings. Our VR in the second quarter of 2026 included $10.1 million of incremental RBR from our acquisitions of Lake Care, Cliffs Insights and Acxiom. Operating income margin for the Healthcare segment remained relatively flat at 30.1% in Q2 2026 compared to Q2 2015.

Operating income margins increased nearly 300 basis points during the first half of 2025 compared to the same period of 2024, reflective a very strong 2025 margin performance in the segment. We are pleased that we've been able to maintain strong margin performance in the first half of 2026, with the segment benefiting from healthy utilization and disciplined SG&A expense management. Education segment generated 30% of total company RBR during the second quarter of 2026. Education segment RBR for the second quarter of 2026 was $139.4 million, up $10.1 million or 7.8% from the second quarter of 2025. The increase in RBR in the quarter was primarily attributable to strong demand for our digital and managed services offerings.

The operating income margin for Education was 26.8% for Q2 2026 compared to 25% for the same quarter in 2025. We increase was primarily driven by revenue growth that outpaced the increase in salaries and related expenses for our revenue-generating professionals and a decrease in project costs, partially offset by an increase in performance bonus expense. Commercial segment generated 20% of total company RBR during the second quarter of 2026. Commercial segment RBR grew $18.6 million or 24.6% to $94 million in Q2 2026 compared to $75.4 million in the second quarter of 2020. The increase in RBR reflects $9.2 million of incremental RBR from our acquisitions of Treliant and Wilson Piramal as well as strong demand for our financial advisory and strategy offerings. Excluding the impact of acquisitions, commercial RVR in Q2 2026 was 12.2% organically over the prior year period.

Operating income margin for the Commercial segment grew to 21% for Q2 2026 compared to 16.6% for the same quarter in 2025. The increase in operating income margin was primarily driven by decreases in contractor expenses salaries and related expenses for our support personnel as well as revenue growth that outpaced an increase in salaries and related expenses for our revenue-generating professionals partially offset by increases in performance bonus expense and share-based compensation expense for our revenue-generating professionals as percentages of RBA. Corporate expenses not allocated at the segment level restructuring charges were $65.4 million in Q2 2026 compared to $54.3 million in Q2 2025.

Unallocated corporate expenses in the second quarter of 2026 and 2025 include expense of $6.1 million and $3.7 million, 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 $8.7 million which included approximately $2 million of costs that have been reclassified from our operating segments in 2026, bucket of a shift to centralized support for certain sales and operations functions. The remaining increase in unallocated corporate expenses reflect increases in compensation costs for our support personnel and software and data hosting expenses.

Now turning to the balance sheet and cash flows. Cash flow from operations in the second quarter of 2026 was $120.5 million compared to $80.1 million in the prior year period. During the second quarter of 2026, we used $9.1 million to invest in capital expenditures, inclusive of internally developed software costs, resulting in free cash flow of $111.3 million. We continue to expect full year free cash flow to be in a range of $180 million to $220 million, net of cash taxes and interest and excluding noncash stock compensation. We believe our robust free cash flow generation remains a highly compelling aspect of our financial model. Please note that the midpoint of our free cash flow guidance an updated full year weighted average diluted share count expectation we produced expected free cash flow per share of nearly $12 for a free cash flow yield per share of nearly 10% based on a stock price of $120.

DSO came in at 79 days for the second quarter of 2026 compared to 82 days for the first quarter of 2022. The decrease when compared to the first quarter was primarily attributable to the impact of collections on certain health care and education projects in alignment with the contractual payment schedules. During the second quarter of 2026, we used $53.1 million, repurchased approximately 438,000 shares bringing our total year-to-date repurchases to $208.6 million or approximately 1.6 million shares, representing 9% of our outstanding shares as of the beginning of the year. Total debt as of June 30, 2026, was $834 million, consisting entirely of our senior bank debt. We finished the quarter with cash of $31.2 million for net debt of $802.8 million. This was a $26.8 million decrease in net debt compared to Q1 2026 and even after consideration of the share repurchases and acquisition payments made during the quarter.

Our leverage ratio as defined in our senior banking permit was 2.8x adjusted EBITDA as of June 30, 2026, and compared to 3.1x as of March 31, 2026. We remain committed to achieving a ratio between 2x and 2.5x by the end of 2026 and alignment with the capital allocation strategy outlined at our most recent Investor Day. In summary, we are encouraged by the acceleration of organic RBR growth during the first half of 2026 when compared to 2025 and our continued margin expansion trajectory driven by continued strong operating income performance by our Healthcare segment and meaningful operating income percentage improvement in our education and commercial segments. Compounding impact of this revenue growth and adjusted EBITDA margin percentage expansion along with the impact of our share repurchase program, drove the 30% increase in adjusted earnings per share during the second quarter 2026.

Finally, let me turn to our guidance for the full year 2026. As Mark mentioned, inclusive of our recent acquisitions, Today, we are increasing and narrowing our RBR guidance to a range of $1.85 billion to $1.89 billion, maintaining our adjusted EBITDA margin guidance of 14.5% to 15% of RBM and increasing our adjusted non-GAAP EPS guidance to a range of $9 to $9.40. Our strong first half Strong first half performance, continued strength of our backlog and pipeline provide us confidence in increasing our full year RBR and earnings guidance.

Now we provide some additional color into these numbers. We expect the acquisition of Relate Care to add approximately $30 million of RBR in 2026. We expect the adjusted EBITDA from this acquisition as a percentage of RBR to be in a range consistent with our overall consolidated margin guidance. [indiscernible] certain expenses to relate to integrate the business that we do not expect to repeat in 2027. We also expect Relate Care to be accretive to 2026 adjusted EPS by approximately $0.10. For full year 2026, we now expect Healthcare segment RBR growth to be in the mid-teen percentage range with Healthcare segment operating income margins remaining in the range of approximately 30% to 32%. We now expect Education segment RBR growth for full year 2026 to be in the mid- to upper single-digit percentage range and Education segment operating income margins to be in the range of 24% to 26%.

We continue to expect Commercial segment RBR growth for full year 2026, be in the low-teen percentage range. Commercial segment operating income margins to be in a range of 19% to 21%. We now expect unallocated corporate expenses, excluding restructuring charges and the impact of our deferred compensation plan, increased in the low double-digit percentage range for full year 2026 when compared to full year 2025, reflecting the impact of our Relate Care acquisition, reclassification of certain sales and operations support expenses from our operating segments and increases in technology, sales and marketing and recruiting expenses to support our top line growth.

Finally, we now expect our full year weighted average diluted share count to be in the range of 16.6 million shares, 16.8 million shares, reflecting the accelerated share repurchases during 2026. At our Investor Day in March of 2025, we discussed our belief that we are well positioned for continued RBR growth based on the strength of our position in large flex regulated end markets, durability of demand for our services in a variety of different economic cycles and the attractive platform we have built to recruit retain market relevant talent. We also discussed our confidence continued margin expansion as a result of increased consultant utilization, pricing realization as a result of our outcomes-based offerings and increased operational efficiency.

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

I guess, first on hiring plans. The utilization in the quarter was I think it's as high as it's ever been. And so just kind of characterize where you sit in terms of capacity and any plans what your plans are over the next couple of quarters to ramp hiring to the extent that you're running on utilization?

Andrew, it's John. Yes, we're definitely still in market hiring right now. You're right, once we get over the 80% threshold, that's typically when we're doing more hiring in order to help ease that a little bit. Our target, as we talked about on earlier calls was more in that upper 70% range. So I think it's reasonable to think that, particularly in the areas of the business that are hotter right now from a utilization perspective that you will see us adding headcount to address that.

Is there any guidance in terms of head count growth ex managed services that you could point us to?

Andrew, look, if you think about the revenue growth that we talked about for the year. I probably think of the head count growth for the full year landing somewhere less than that. So Think of it as probably high single-digit percentage head count growth in consulting. I mean, we'll see how the year progresses -- and last year, part of what we did in the back half of the year was add additional heads with anticipation of growth into the following year. So that's always a possibility, too. But I think the same base case way to think about it would be head count growth in the upper single-digit percent range.

Got it. And then for my follow-up, I wanted to kind of hone in on the AI impact Mark, in your prepared remarks, you talked about AI driving demand for digital services in particular. Can you talk a little bit more about kind of your go-to-market strategy there? And maybe how that demand is kind of coming to you? Is it natural through existing relationships? Is it a natural extension of projects that you're already working on that or may not have AI involved or really any other color that you might add to the prepared remarks around AI-driven adoption or demand in particular?

Absolutely, Andrew. It starts with clients and the business units that have the relationships in the markets to understand the unique needs and aspects of what -- where each of those particular segments are in their AI journey. And so what we do is really equip our people in the business unit, both on the consulting and digital side and partnership together to go to market sometimes, again, when listening to the client, what is on their mind. So it might be to -- just as we described, we have opportunities that come in for a stand-alone real project that like strategy or governance -- you have others that are kind of embedded into perhaps larger digital initiatives as one aspect and sometimes they're AI first as a digital initiative. So just depends on the client in the market. And we think the right answer for us is to let our businesses who are very close to our clients and the relationships dictate that. So I would say right now, is really, I would say, kind of a natural flow of how we were just going to market overall.

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

I was wondering if you could give us some more detail about demand in the digital arena, how it progressed in the quarter sort of where it landed relative to your expectations in the pipeline?

It progressed in a positive trajectory as the first half of the year went on Tobey is the quarter projected. I think that was part of what gave us confidence in terms of increasing guidance at this point in the year. Mark obviously gave the statistics about our bookings during the first half being up 20% plus during the first half of the year. That was momentum, including into the second quarter there. So I think -- you see we were year-over-year flat during the first quarter saw the acceleration of the 9% growth, which was both year-over-year as well as sequential for the second quarter. And our expectation is that you should see double-digit percent growth in the back half of the year.

And then could you maybe dig into what the drivers are of your managed services growth, you're clearly growing faster than the market. So customers seem to be finding what you're offering appealing. What exactly are those features of differentiation? And are you growing as fast as you could or if you throw more resources could you grow even faster?

Well, thanks, Tobey, I'll start Jack can chime in. At 43%, that's -- we're pretty happy with that growth rate right now, and it's a lot to digest. But -- and we've had, as I said, outstanding client retention away. And I think what that's telling us is that the way that we're approaching solutions for clients is really resonating -- and we're very different than some of the big providers in this space, the [indiscernible] et cetera, because often we start with that deep consulting knowledge of our clients from a revenue cycle perspective, and so it can basically be looking holistically and you want to continue to manage our revenue cycle. We have been approached to help them do that. And obviously, we don't want to -- we're trying to be there to help them make that decision.

It's certainly their decision that they make. But we've also expanded in many areas with point solutions to take various aspects of the revenue cycle into our service line. And often what happens is the land and expand on those. So I think when you have the combination of those things, it does set up like a very robust environment for additional growth. The Relate Care acquisition, maybe Arandethere is just to take that same type approach and extend it, we care some -- one of our good example acquisitions in which we knew the principles of relate here for many years at referral relationships. And so this is the foundation of a good successful acquisition. But I think for us, we see a lot of upside in managed services, and it's certainly a lever that we want to continue to drive in a very thoughtful, profitable way.

Yes. And I'll just add, Tobey, it's really just underscoring what Mark said, but that outcomes-based model that we have, and that really enables that part of our business essentially be an extension as well as our performance improvement in business. So when we're in this period of time where the health care provider market is under such financial strain and going through so much disruption. The solutions that we offer that provide very tangible, clear ROI to our clients from a managed services perspective, they become very attractive to our clients in the same way that our performance is from the consulting projects are very attractive to our clients in that sort of environment.

And I think Mark touched on it, but it is -- it's one of the areas of business where we've been the most advanced in deploying AI. And so a lot of our clients partnering with us is really a good way to bring AI into the equation. So -- and the final thing I'd point out too is it's smaller at this point, but we're also seeing really good traction in our Education managed services business to our -- which is mainly focused around the research fund at university. So that's an area where -- we talked about high teen growth during the quarter and where we continue to feel like we've got a really good outlook in that part of our business going forward. A lot of the same dynamics that are driving the health care managed services demand carry over to that education part of the business too, and we're investing there as well.

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

I think, Tobey, in a steady state, the current mix of the business, I think it is that upper 70s percent range is probably the baseline you expect. So I want to say that somewhere between 77% and 79%. I think, would be a good baseline. And that accommodates some of our performance improvement areas as well as our digital business as well as areas like our distressed financial adviser, your strategy where it tends to be a little bit more of a senior team and where you might expect a mix of slightly lower utilization I think given the mix of our business now, that upper 70s is the gig base case, and we were pleased during the quarter to see any outperformance there. Like I said in response to one of the earlier questions, though, that is a trigger for us to continue hiring and our -- really, our goal is to get it back down into the high 70%.

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

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

Yes, Bill, it was definitely broad-based. And I'd say when we look at, I would say, consistent with what we've seen kind of in this year, seems like as we've gotten further into the year, we're seeing just more momentum picking up across various parts of the business, but China add any color commentary as well?

No, I agree. I think it was broad-based across the different industries. So that digital metro expands all the industries is broad-based across the industries and then it was also broad-based across the different types of offerings that we have within digital.

I was thinking probably managed services was prominent based on the momentum in the quarter.

So certainly, the staff that Mark provided in the prepared remarks related to our digital bookings, but managed services also was a strong contributor during the quarter as you guess, reflected by the growth that we saw -- and that's an area where -- the pipeline continues to be very strong for managed services and trends quite favorably versus, say, at the end of last year or a year ago at this time, which is a really positive indicator for us as we look to continue scaling that business.

And not to get too much in the weeds, but I noticed the actual downtick in quarter-on-quarter for education headcount. Is that just more of a shift to managed services for that business? Or is there anything else going on there? And I guess that's some place you must be ready to do some hiring.

Yes, Bill, that's primarily the consulting part of business there. And that's something we've talked about previously. Last year, within the business, utilization was a little bit lower than what we would typically expect within that business, which wasn't a surprise to us. given some of the disruption that was going on in the industry in 2025 related to research funding, for example, as well as other regulatory sorts of issues in 2025. And so we always had a strong inclination that, that demand was going to come back. And we see that now in terms of the growth rate, but also in terms of the growth in pipeline.

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

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

Great. Just circling back to the AI topic. Again, you mentioned that you believe AI will be a significant contributor to your future growth. And when I kind of think back to the growth targets you laid out at your Investor Day in March 2025 of mid- to high single-digit organic growth. Did you think AI -- the AI demand is incremental to that? Or is that kind of replacing maybe some of the technology work you would have been doing instead? I'm just trying to get a sense to -- if this can kind of push us more towards the upper end of that organic growth target you have? Or any other thoughts on that topic?

Yes, Bill, I think -- I'm sorry, Kevin, I think it's fair to say, not all of it is incremental. I mean there is definitely -- when you think about clients' technology bus, you see that there's been money in different ways. But what we've seen is that for us, our ability to understand their businesses and with the trusted relationships that we have, then on the commercial side, bringing that innovation as the challenger brand in some respects and some of the areas that we compete in. it is opening up new opportunities. And oftentimes, it's not just that it's only AI. It's now opening up new opportunities for clients to see things differently than perhaps they had not seen before.

So now the things that we've seen so far that we've not seen any kind of material price compression or other things that would be negative to revenue. And then again, I'll just maybe landed was saying what so much of our business being either outcome-based or fixed team in nature. It really has not come in way into any kind of headwind. So we're very bullish on that for that reason that we think it's likely to be one. And you can see really if anyone looks back at work in rate of penetration of AI into enterprises. It perhaps is not going as quickly as some would like. There's going to be just like every other technology transformation, very likely a continued investing this overtime. And I think that will then prove to be the kind of things that are going to bring value and growth opportunities for us.

Maybe the only thing I would add, Mark, is I think our teams are increasingly excited about take all of the collective experience, know-how, IP that we have and our ability to use AI to be able to deploy that in new ways, in new ways for our clients, expanding the addressable market in terms of what we can use using that data I think that that's something our teams are excited about. And as we think even about the consulting side of the business, so putting aside digital for a second, we think it could be a real enabler there of continued strong growth in.

Okay. That's helpful. And just looking at the segment expectations, you increased the segment growth expectations for 2026 in health care and education. I'm assuming that health care is just the relate care acquisition? Or is there more beyond that? And then on education. What -- I think before you're saying mid-single now you're saying mid- to upper. So kind of what gives you that increased confidence there?

Yes, a little bit color there. So for health care, it's not just related care also increased organic growth expectations based on our sales conversions during the first half of the year. So I think that building momentum gives us confidence in increased organic growth as well as the contribution from related care. Education, that uptick that you mentioned is based on the momentum that we've seen from signings, pipeline and backlog perspective and feeling like we've got building momentum in that part of the business. And then I'll note for the commercial segment, we did keep that consistent with our initial guidance.

And I would note that on the overall growth rate, you will see a little bit of pressure on that in the Commercial segment in the back half of the year for really 2 reasons. One, we're going to be annualizing some of the M&A that we did in the back half of last year. And then 2, from a distressed financial advisory perspective, we do have a couple of projects in that part of the business that we expect to wind down in the back half of the year as well. So that's kind of the full view from a segment perspective on the guidance, Kevin.

Great. That's helpful. And within education, the strength you're seeing there, is that -- would you mostly tie that to digital? Or is it a little more broad-based?

So in terms of dollars, it's definitely digital as well. It's digital primarily. I'd point out from a percentage perspective, we see a lot of growth in the managed services offering that we talked about before. And then given some of the building momentum, I think this was the second consecutive sequential quarter growth in the consulting part of the business. We do expect that to continue based on what we're seeing from pipeline and backlog perspective into the back half of the year against some easier comps. So I think that consulting will also be a contributor in the back half of the year.

[Operator Instructions] Our next question comes from the line of Stephen [indiscernible] of Wedbush Securities. Stephen.

I kind of want to just dive into the AI topic of conversation. A lot of the questions around the pipeline and the impact that AI has had on the pipeline has really been answered, but I want to talk a little bit more about looking to drive efficiencies across the business, each of the commercial, education and the health care businesses. where are you seeing the most opportunity to really drive a lot more margin expansion just from an AI perspective as you look to leverage those capabilities?

Yes, you're talking about our internal delivery use of that, Steven, just with clearing.

Yes. Yes, correct.

Yes. I mean I think some of the most straightforward 1 is our health care assessments, which we talked about for a long period of time that often precede our performance improvement engagements. And historically, they have been, call it, 8 to 12 weeks and a lower margin because it's there to the, call it, the data gathering, assessment and all those things. That's very just appropriate for the AI labeled tools. We're seeing [indiscernible] really good results coming out of that -- so in the context of that, it really is one of those things that takes out low-margin revenue that would otherwise be built into the base. But there's a lot of other areas as well.

We have -- we have teams deployed across our business units that are working together with deployed engineers who are really understanding bringing the subject matter of domain experts together with people who understand the technology and full stack engineers who can figure out where are those opportunities, and it really starts at that using our proprietary data to leverage the insights that we have. So we think we have a lot of that value is still well ahead of us, which is, again, when we talk about our 15% to 7%. We're right now kind of knocking at the door of 15%. We feel very comfortable looking into that 15% to 17% range over the next several years.

And I would just add, Stephen, from an internal process perspective too, we're using that, whether that's helping us with our contracting process, helping us with our billings and collections process as well as helping our sales teams in terms of doing research and gathering information. So there's a lot of things there that we've been able to -- and we already have been leveraging and that we expect to be able to continue to leverage to help streamline the expenses associated with some of those activities.

Of course, we've already mentioned managed services as well, where we're deploying those tools. So there's a tremendous amount of opportunities. We do have some software products as well. and we're building AI capabilities into them. So it's almost hard to say where we're not using it, and I can't figure anywhere that really not deploying AI at some level into this.

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

I don't think right now, Stephen, we've really seen any significant changes. We're -- as you noted, we've been increasing our percent of outcomes based contracts, but we already had a really healthy base of outcomes-based contracts to start there. So for us, it's been incremental compared to what was already really healthy base there. So I think we've seen more of a stable environment in terms of competitive pressures and pricing related to those types of projects as opposed to any significant changes.

Okay. Got it. And one more, if I may, because I mean, because you answered the question that I had around the commercial part of the business, I think in the second half I would love to hear a little bit more about the M&A process because it really seems like you're doing very well on the M&A front, especially with the acquisition of Relay Care and that incremental $30 million in -- can you talk a little bit more around the kind of capabilities that you're looking for heading into the second half of this year and into fiscal year '27?

Sure, Stephen. We've highlighted programmatic M&A as part of our strategy for a while. In fact, we've talked about 2% to 4% growth over time is the range that we think makes sense for us, which mean care fits very well in that. And by virtue of those deals, many of which are proprietary, we're out there, and we know people in the market. We see where those opportunities are to fill gaps. Those are the ones that really come to the surface of expanding our business over time. We tend to lower risk, they tend to be accretive to our EBITDA multiple for the prices that we're able to pay for those businesses. And then we end up having better retention of our teams afterwards and complementing the talent.

So it's actually us very integrated into the strategy that we have. And I think summary in this last 6 months, we certainly were continuing to be active looking. We certainly had a much higher bar for what we expected relative to where our share price was. We're very conscious of that. But we'll continue to expect we're not changing our outlook for that 2% to 4% range over time. And I think what you'll see us is those kinds of deals are the focus versus really large transformational deals, which I think have a lot of challenges with them. I think we're very comfortable being able to achieve our objectives and doing it the way that we're approaching today right now.

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

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