Huron Consulting Group Inc. Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Revenue growth in Q3 2024 was 3% y-o-y, with Healthcare and Education segments showing consistent growth since 2021. Commercial segment rebounded with 12% sequential growth.
• Record sales quarter with high quarterly bookings company-wide. Adjusted EBITDA margins increased 140 basis points and adjusted EPS increased 21% y-o-y.
• Margin improvement due to pricing initiatives, expense management, and global delivery capabilities. AI and automation deployed to enhance efficiency.
• Healthcare segment RBR grew 2% y-o-y, driven by managed services and digital offerings. Education segment RBR grew 9% y-o-y, boosted by GG+A acquisition and technology services. Commercial segment RBR declined 3% y-o-y but grew 12% sequentially, with digital offerings rebounding.

Segment Performance

• Healthcare: Third quarter revenues before reimbursable expenses (RBR) grew 2% over prior year quarter. RBR was $183.1 million, accounting for 49% of total company RBR. Operating income margin was 27.1% in Q3 2024 compared to 26.2% in Q3 2023.
• Education: RBR grew 9% y-o-y to $121 million, making up 33% of total company RBR. Operating income margin was 24.1% for Q3 2024 compared to 23.9% for the same quarter in 2023.
• Commercial: RBR declined 3% y-o-y to $65.9 million, representing 18% of total company RBR. Operating income margin was 24.5% for Q3 2024 compared to 22.7% for the same quarter in 2023.

Guidance

• Narrowed annual RBR guidance to $1.47 billion to $1.49 billion, maintaining midpoint at $1.48 billion.
• Adjusted EBITDA margin expected to be in the range of 13% to 13.5% of RBR.
• Adjusted diluted earnings per share guidance narrowed and increased to a range of $6 to $6.20.

Risks

• No major specific risks discussed, but noted that market dynamics and client-specific delays (e.g., in Education segment project starts) could impact performance.

Question and Answer

Q: About fourth quarter implied guidance and acceleration, what gives confidence besides easier comp?

A: Strong sales conversion in Q3, with record high bookings and balanced activity across segments.

Q: On head count and talent matching, how is it?

A: Feel good about ability to have talent in place, with blended utilization in 75% range and confidence in finding needed talent.

Q: On Healthcare segment growth rates and margins, any implications?

A: Revenue mix balanced, margins trending towards upper end of guidance, with confidence in steady or improving margins.

Q: On fourth quarter comp and utilization, seasonal?

A: Not necessarily seasonal, expect sequential improvement in utilization but not to last year's high water mark.

Q: On M&A and pipeline, status?

A: M&A pipeline robust, particularly in Commercial segment, with good platform attracting opportunities.

Q: On project work shift from Q3 to Q4, how meaningful?

A: In $5 million to $10 million range, due to deals closing later than anticipated but confident in fourth quarter performance.

Q: On Education segment project delays, how significant?

A: Majority of delays in Education segment due to client-specific internal issues.

Q: On Commercial digital growth and client comfort, status?

A: Conversion picking up, with signs of clients gaining comfort and pipeline rebuilding post-election, confident in 2025 growth.