Good afternoon, ladies and gentlemen and welcome to Huron Consulting Group’s Webcast to discuss Financial Results for the Fourth Quarter and Full Year 2021. [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 Jim Roth, Chief Executive Officer of Huron Consulting Group. Mr. Roth, please go ahead.

Good afternoon and welcome to Huron Consulting Group’s fourth quarter and full year 2021 earnings call. With me today are Mark Hussey, our President and Chief Operating Officer and John Kelly, our Chief Financial Officer. Before I begin, I would like to highlight that in our earnings release issued this afternoon we introduced our new operating model and announced corresponding changes to our segment reporting structure. We placed supplemental materials on the Investor Relations section of the Huron website to provide additional detail on our new reporting structure and recast financial information, including unaudited summary financial information. These supplemental materials should be reviewed in conjunction with our earnings call and not on a stand-alone basis. Please note these segment reporting changes apply to the reporting periods beginning January 1, 2022, and our fourth quarter results are consistent with prior reporting practices. Before I provide additional insight into our fourth quarter and full year performance, I want to briefly discuss our new operating model, which we believe will strengthen our go-to-market strategy and better position Huron to integrate our deep industry expertise with our strong digital strategy and financial advisory capabilities. Today, we are introducing business realignment and related segment reporting changes that we believe will strengthen our go-to-market strategy and competitive advantage to accelerate growth, drive efficiencies across our business, and enhance transparency for the investment community into the core drivers of our business. This is the first material change to our operating model in nearly a decade. Our markets have changed, our clients and business needs have changed, and we are taking this important step to expand and more deeply integrate our industry focus with our digital strategy and financial advisory capabilities. For Huron, our growth strategy and our business realignment are the means through which we will achieve…

Thanks, Jim. As our press release indicates, effective January 1, 2022, we have taken the next step in our strategy, most notably, for expanding on our strengths in our core industries, while more closely integrating our significant digital capabilities into a unified company-wide platform. This new integrated operating model is matrixed on industry expertise and capability and built on a rapidly expanding global platform. By unifying our company-wide resources focused on our two largest industries and aligning our capabilities across the enterprise, we expect to strengthen our go-to-market strategy, accelerate revenue growth, drive efficiencies that support margin expansion, and in turn, unlock meaningful shareholder value. Specifically, we are aligning our industry offerings that historically resided across multiple businesses into a unified platform from which to more seamlessly go to market in healthcare, education and commercial sectors. With the strengthened integration of our industry expertise, we believe we will drive accelerated revenue growth across all of our offerings within those industries. We are harnessing the power of our deep industry expertise, which has been foundational to our historical success and will continue to be critical to our growth strategy. Our core industries of healthcare, education, financial services and energy and utilities are facing significant change, which creates meaningful growth opportunities for Huron. The changes to our operating model position us to better serve our clients and to capitalize on the significant market opportunities that lie ahead. In terms of our capabilities, our primary focus is bringing together the full breadth of our digital technology and analytics capabilities across the company into a common platform called digital. Our focus with digital is to accelerate growth and innovation and to drive efficiencies as we operate the team on a unified global basis. Our collective organic and inorganic investments in technology assets over the…

Thank you, Mark, and good afternoon, everyone. Before we 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-K 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. Also, unless otherwise stated, my comments today are all on a continuing operations basis. Also, during the fourth quarter, we completed the divestiture of our Life Sciences business, which closed at the beginning of November, and is included in our fourth quarter results as part of the Business Advisory segment through the date of divestiture. We closed our acquisition of Whiteboard Higher Education on December 1. Whiteboard is included in our fourth quarter financial results within the Education segment from the date of acquisition. Our recent acquisition of Perception Health closed on December 31, and as such, is not included in our fourth quarter results. The acquisitions of Whiteboard and Perception Health strengthen our deep industry expertise in the education and healthcare sectors, respectively, while broadening our capabilities in student search, data and analytics as we expand our offerings to serve our core end markets. Now let me walk you through some of the key financial results for the quarter. Revenues for the fourth quarter of 2021 were a record of $248.3 million, up 25.2% from $198.3 million in the same quarter of 2020. The increase in revenues in the quarter was driven by strong growth across all three operating segments. For full year 2021, revenue was $905.6 million, up 7.3% from $844.1 million…

Thanks, John. Let me provide a few final comments before we open it up for Q&A. As I have mentioned, our competitive positioning centers around our ability to bring our deep industry expertise and breadth of capabilities together to serve our clients. The changes we introduced today will strengthen our go-to-market efforts, accelerate growth and drive greater efficiencies that support margin expansion, which we believe will unlock meaningful value for our shareholders. We believe we have a significant growth opportunity ahead of us, and we are making these changes now to best position Huron to capitalize on that opportunity and advance our strategy. To achieve our strategic and financial objectives, we are focused on accelerating growth in our core end markets, broadening our offerings and capabilities, advancing our global digital technology and analytics platform, expanding our growing commercial business and building a more sustainable base of revenue to drive consistent growth. The future is bright for Huron, and I look forward to sharing more with you about our strategy and our business realignment during our upcoming Investor Day on March 29th. I encourage you to review the supplemental materials we have placed on the Investor Relations page of the Huron website to provide additional context into our recast financial information. With that, I would like to now open it up for questions. Operator?

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

Hi. Good afternoon. Thanks for taking my questions. A lot of great detail here in the prepared remarks, so I appreciate that. I wanted to ask a bit more about the new operating model, specifically kind of what it takes from an execution standpoint. I understand all the benefits and you walked through a lot of that in detail. But what are the major operational lifts that are included in making this change? Where – are there different manager structures, different kind of leadership roles for individuals? If you could spend some time on that and maybe what you consider to be the major challenges in executing on this realignment, that would be helpful.

Andrew, this is Jim. I will start and maybe I will have Mark and John chime in a little bit. This is – for us, it is a big change in the sense that, first of all, we are introducing a matrix structure so that we really wanted to get all of our collective capabilities, digital, strategy, financial advisory working in unison with our industry leadership. So, as before historically, they have been more segmented. And they have certainly worked together. We have talked about collaboration for a while, but we didn’t have the incentive models in place. We didn’t have the true collaboration that we felt was needed to really accelerate the growth and be much more efficient about the way we brought those capabilities to market. So, the biggest change for us is really kind of a realignment where there is – for everyone in the company, they essentially have two types of focuses, you have an industry alignment, but then you are also going to be part of a capability as – most everybody in the practice in the company is going to have kind of a dual reporting relationship. And I think that they are very focused on making sure that we bring to market those capabilities together as opposed to, I think the way we did it historically, which was a little bit more separate. So, we do have – the head of our education industry is the same person that ran education before, except it’s now a broader education view. The head of our healthcare business is also the same person that ran the healthcare practice before, but now healthcare has broadened into a lot of other areas where we are providing healthcare services before, but are now doing it kind of together. So, there is a substantial change for us, but we have been kind of easing towards this for a while, and then we really decided probably mid last year, the time was now to really realign the organization to best take advantage of these things. So, we have been talking about this collectively throughout the practice and have been very heavily involved with all of our people in the company working this through during the last four months, five months of 2021, and we kind of hit the road running at the beginning of 2022.

Yes. The only thing I will add is, like Jim has mentioned, we talked about collaboration for a while now. And as the solutions that our clients require have evolved, our teams have really done just an excellent job over the years working together. And I think a big part of what we are doing with the operating model change is we are just making it easier and more seamless for them to be able to work together and to get the right people to our clients with the right projects. So, we are really excited about it.

I think the last thing, Andrew, I will come back – just to make one more comment, it was a little bit reflective of what John said. It’s been apparent for a long time that our – the complexity of our clients’ needs weren’t structured the way that we were structured internally. And what we really tried to do is to create an environment internally within Huron where it was much easier for us to respond to the kind of complex, whether it would be digital, whether it would be strategy, whether it would be financial or operational to really respond in a much more seamless way to their issues, which were very integrated. And we in fact, historically have not been as integrated as we perhaps should have been. So, the new model will get us to the point where it’s much easier for us to be efficient in the way we respond to and deliver our client requests. I hope that kind of clarifies a little bit.

Yes. No, that’s really helpful. Thanks. And maybe as a follow-up to that last comment, you kind of talked about in your prepared remarks, improved revenue growth, improved organic growth opportunities and efficiency as a consequence of this change. Are there any numbers that you can put around that, or is that something that you plan to discuss at length in the Investor Day, maybe medium-term growth targets or margin targets?

I think that is topics that we will cover at the Investor Day, Andrew. We will provide a lot more detail there. Look, when we think about the opportunities that were presented within our industries right now, just with the change that’s going on in our industries. And we think about the capabilities that we are really able to bring to bear and the way that we are now bringing those together, you will notice the guidance for this year, we expect to be able to grow in double-digit range around 10% this year. We see some tailwinds for the medium-term here, where we think we are going to able to grow at that pace. And then in terms of margin expansion, you have heard us before talk about pushing towards a mid-teen operating margin as a company. And we think that this operating model is really going to facilitate that over the next few years in a very tangible way. So, we are excited about providing more detail about that at the Investor Day at the end of the month. But it’s really in us pointing towards being able to sustainably grow in double-digit pace and being able to expand those margins to the mid-teen level over the next few years.

Great. Thank you. That’s helpful and I will get back in the queue. Appreciate it.

Thank you. Our next question comes from the line of Tobey Sommer from Truist. Please proceed.

Hey. Good afternoon. This is Jasper Bibb on for Tobey. I was hoping you could speak to the utilization assumptions in your guidance. I believe you previously talked about getting back to target utilization this year, but the fourth quarter was maybe 500 basis points, 600 basis points below 2019. But how should we think about that utilization trend? And do you think utilization could get close to 2019 levels by the end of the year?

So, to answer that last part first, Jasper, we absolutely do think that. And you are right. Our expectation is, if we are looking at the back half of the year, we expect to be more in the mid-70s. We ended up back half of the year more in the low-70s. And I would say there is really two primary factors there. I think that the biggest one is probably with the growth opportunities that we see, that we can see it starting to come through in the fourth quarter and then are baked into our guidance for next year. We have been hiring aggressively, and you can see that in the metrics that we have provided. And so there is just naturally a little bit of a ramp time with consultants when you are hiring at the pace that we have been hiring. And that has probably depressed utilization a little bit from what we might have expected at the beginning of the year. And I think there is other pockets within our business where we feel really good when we look at the pipeline, when we look at the inbound inquiries that we see coming in, and we expect to have a ramp-up in utilization in some of those parts of the business. It didn’t hit in some of those areas in the third quarter and fourth quarter like we had expected. But just given the demand that we see, given the hot labor market that’s out there right now, we have decided that it makes sense to hold on to those resources so that we are ready to go when that demand comes to fruition in the first part of 2022.

No, that makes sense. And then can you just comment on what you are seeing as far as consultant wage trends? And as you look at your ‘22 guidance, do you think that’s kind of sufficiently offset with the rate increases?

So, we did contemplate that in terms of the guidance for this year. And we do – we are impacted by it. It is a tight market right now or it’s the hot labor market. Particularly for many of our resources with technology skills, we are seeing a lot of demand for those resources right now. So, we do expect there to be some impact and it was baked into our guidance. I would say our view is that, just given the general dynamics of when we look at the demand we are seeing from our clients, that there is just not enough talent out there to service that demand, we expect that that’s going to flow through via pricing and that’s going to offset the majority of those wage increases. But at the same time, we are also going to utilize our global delivery platform. And again, pursuant to your last question Jasper, from a utilization perspective, we really feel like we have got some room to run there. So, we feel good about the increase that’s in our margin guidance for the year. And it is reflective of that wage market that we see right now.

Okay. Got it. And then I wanted to ask about the managed services business and how that fits in the new strategy plan you had. I saw you labeled it Consulting and Managed Services. So, how do those businesses kind of fit together and how you are thinking about the next couple of years?

Yes. No, you are right, Jasper. As we have talked about before oftentimes for us our managed service offerings are actually very correlated with our consulting offerings. In many cases, it’s a lead behind. So, after we have done a, for example, a performance improvement project in healthcare, part of what we are able to offer the client is ongoing managed services related to that revenue cycle afterwards. And we have had a lot of success and good execution for our clients in that regard. So, our viewpoint was, given the size of the business right now and given the close correlation of our consulting that it made sense to present those two items – present those two items together. We are still very encouraged by the growth prospects in managed services just as the success we have had with our clients and some of the demand we see from our clients who are looking for ways to more sustainably and efficiently run certain parts of the business going forward with the expertise that we have.

Appreciate the detail there. Thanks for taking the questions guys.

[Operator Instructions] I show our next question comes from the line of Bill Sutherland from Benchmark Company. Please proceed.

Exciting times. Wanted to just see – understand the digital part of this a little bit better. So, is the composition of it largely billable hour kind of revenue, or is this more licensing and that kind of revenue?

It’s – Bill, it’s John. It’s largely billable consultant revenue, but there is a component, sorry, that is ongoing recurring revenue. So, if you look at the split of what’s the new digital capability that we are going to be reporting, it’s about 80% billable consultant revenue related to implementation work that we do for our clients across industries, including healthcare, education, financial services, energy and other commercial sectors. And then about 20% related to our software and analytics offerings, which have more of a recurring revenue attribute to them.

And one specific segment question, you mentioned commercial, the target margin there for the year in 20% midpoint, and that’s up from, did you say 15.7%?

I did. And a thing to keep in mind there is you do have the impact of the Life Sciences divestiture, restructuring charges in that 15.7%. So, that’s a couple of hundred basis point headwind on the 2021 margins that we would not expect to repeat in 2022.

And when you are talking about growth, John, year-over-year, it’s adjusted for Life Sciences?

We have not adjusted anything for Life Sciences.

Okay. So, you are comping against – I am sorry, go ahead.

It’s all with Life Sciences in both periods. So yes, we are comping against the base that had Life Sciences in it. So, in that regard, the actual growth ex Life Sciences is a higher percentage.

Can you tell me like is it a point or two?

The Life Sciences revenue was around $16 million for 2021. That would be repeating in 2022. Yes, $16 million.

Okay. And I am curious about the India asset. Is the industry focused there kind of heavy in one or more of your segments, or is it pretty diversified?

Hey Bill, it’s Mark. Let me take that one. It’s fairly – it’s focused really in a digital capability around technology services. And that will cover increasingly broad industries. It started in our commercial areas predominantly. But we have a strong healthcare presence now supporting some demand services work. We have increasingly in the education, particularly on the products side of that business and increasing the services. So, it’s actually going to be across the company, and that’s why from a global platform point of view, it works quite well. So, you really have the managed services piece, you have got technology products and services and then really increasingly corporate shared services as well.

And you are going to just keep your asset just entirely focused in India?

It’s based in India. Once you have an infrastructure, and we are probably in six or seven cities across the entire country, it’s easier to just leverage that as a platform. They serve other areas within the region, and we are not limiting ourselves. But right now, with that investment in the infrastructure, it’s – and the size that we have today, we have plenty of room to run within India before we think about other geographies, although we can contract from time-to-time just based on – but it’s more of subcontractor-type arrangements that we get outside of India.

Yes, it’s the time zone approach. Okay. I think those were the ones that came to mind. Thanks again guys.

Thank you. I show our next question comes from the line of Kevin Steinke from Barrington Research. Please go ahead.

Good afternoon. So, you talked about the new segment structure making it easier in terms of collaborating, serve your clients. Have you added any financial incentives for consultants to drive greater collaboration, or do you think the new structure just kind of takes care of that by itself?

Hey Kevin, it’s Mark. We have definitely addressed incentives. And we always have had cross-practice collaboration incentives, and they worked for quite a while. And I think we just got to the place that the impact of those were just not sufficient to really get the level of opportunity in the market. And so really, as part of the reset of the operating model, have completely reset incentives across the organization as well. And that is what makes it really pretty seamless to work across the organization now. There is no barrier that’s created because of counting of revenue, and we have set goals for people accordingly. So, it’s actually been quite collaborative in the planning process and then the incentive funding side as well, we are expecting that to work quite well.

Alright. Great. And then as I look at how the segments have been reorganized here, we typically thought of business advisory as about 50% of its revenue coming from technology. And the new commercial segment, I guess the technology piece is going to come down and move more into healthcare it looks like. I mean just can you talk about the – I don’t even know if this is relevant to you or on your radar, but it just looks like the technology mix in commercial goes down, goes up in healthcare. Is there any strategic implication to that, I guess?

Well, this is Jim. We have historically – this is one of the reasons we think one of the benefits with the new operating model and the reporting structure along with it is that we have historically, we have had digital capabilities provided by – in our old practice, ES&A that did a lot of work in healthcare and education. We had our education practice that had a lot of technology work that was actually done for our healthcare clients. And so we had kind of a mismatch of where that work was being done. And just – it was kind of – it was done because that’s the way we had kind of originally developed the practice, that kind of evolve that way. And so we think the new model now is going to – like anything that’s going to be digital is going to be reported with – I am sorry, anything that’s digital, for example, in the healthcare – and for a healthcare client of any kind, is going to be reported in under the healthcare segment and within the digital capability. So, the reason we kind of looked at it right now is to provide two different ways of looking at our business. One of them is purely from an industry perspective and one of them is going to be purely from a capability perspective. But you will be able to see the collective amount of healthcare revenues that we have within digital will become much more evident than it ever was before. And we just think it’s a much better way for us to run the business. It’s a much easier way for us to report it. And I think we will evolve – we will kind of get past some of the complexities that we had in our historical model.

Yes. I will just add. So, with the – with the shift in segment reporting structure, it’s true that we are now picking up digital offerings that were in the Business Advisory segment and shifting those over to healthcare and education. But there was also strategy offerings and distressed offerings that are shifting as well. So, it’s really just giving a total full view inclusive of all those things, strategy, digital and financial advisory in all the segments. And just to give like some perspective in the new Healthcare Industry segment, it’s going to be about 70% consulting and about 30% digital. The new Education Industry segment is going to be about 50% consulting and about 50% digital. And the Commercial Industry segment is going to be about, think of it was like 40% consulting and about 60% digital. So, that’s going to kind of be the split now as we move forward of digital and management consulting, plus managed services in each of the industries.

Okay. That’s very helpful. Okay. I don’t know, John, you may have touched on this or maybe I missed it, but just the margin guidance for 2022, obviously implies some healthy margin expansion. But are there any meaningful investments baked into there? And what kind of impact would they be having on the margin outlook for this year?

There are. So, embedded in the expanded margin guidance for next year, I think of it probably is 50-plus basis points of investment across the business that’s in that plan right now. And some of it’s in our digital areas as far as that recurring revenue part of the business that we talked about related to products and analytics. And then some of it is really just broadening some of our capabilities from a management consulting and advisory perspective. So, we have been making those investments. We continue to make those investments. And those investments, we think are really key to the growth that we are able to produce in the back half of this year and that we are expecting next year. So, it’s going to be an important part of how we grow our business. But that 50 basis points is embedded in the margin expansion that we have talked about.

Okay. Thanks. And just lastly, I want to ask about education. You mentioned that demand outperformed your expectations in the fourth quarter, and guiding to some really healthy growth, mid to high-teens in 2022. What’s the state of large technology implementation projects moving forward? And what are you seeing in the student information systems market, are some of those projects starting to come to the floor as well?

Kevin, this is Jim. Yes, I will go in the reverse order. The student work is definitely – is picking up nicely and we expect that to be a very solid growth driver for us in the coming years, many years in advance. It’s going to be a big business for us, and we are really looking forward to that. But yes, it continues to pick up and is performing quite well from our perspective. More broadly, in terms of just the overall, you recall during the – during most of – certainly the end of 2020 and the earlier part of 2021, there was a slowdown in the ERP business and a lot of the digital business within our education – for our education clients. And because they were – as our clients were focused on other things. That did begin to pick up nicely certainly in the second half of 2021, and we expect that to get kind of right back to where we kind of where when we left off back in the pre-COVID area, a very strong growth. There is a lot of pent-up demand, and we are well positioned to address that demand.

Okay. Thanks for taking the questions. Thanks for all the detail.

[Operator Instructions] I am showing no further s in the queue at this time. I would like to turn the call back over to Mr. Roth for closing remarks.

Thank you all for spending time with us on this kind of a little bit elongated call this afternoon. We look forward to providing more detail and speaking with you at our Investor Day at the end of March. Have a good evening.

Thanks. That concludes today’s conference call. Thank you everyone for participating. You may all disconnect.