Good afternoon, and welcome to Huron Consulting Group's webcast to discuss the financial results for the second quarter of 2025. [Operator Instructions] As a reminder, this conference call is being recorded. Before we begin, I would like to point all of you to the disclosure at the end of the company's news release for information about forward-looking statements that may be made or discussed on this call. The news release is posted on Huron's website. Please review that information along with the filings with the SEC for a disclosure of factors that may impact subjects discussed in this afternoon's webcast. The company will be discussing one or more non-GAAP financial measures. Please look at the earnings release on Huron's website for all of the disclosures required by the SEC, including reconciliation to the most comparable GAAP numbers. And now I'd like to turn the call over to Mark Hussey, Chief Executive Officer and President of Huron Consulting Group. Mr. Hussey, please proceed.

Good afternoon, and welcome to Huron Consulting Group's Second Quarter 2025 Earnings Call. With me today are John Kelly, our Chief Financial Officer; and Ronnie Dail, our Chief Operating Officer. Revenues before reimbursable expenses or RBR in the quarter grew 8% over the second quarter of 2024, including organic RBR growth across all 3 operating segments. RBR in the 2025 was a record high for our business. Growth in our core markets continues to reflect strong demand for our services, health systems, universities and commercial businesses adapt to regulatory and macroeconomic pressures while evolving their business models for success in the future. Clients continue to seek our deep industry expertise, breadth of capabilities and proven track record of delivering results to help them achieve a more sustainable path forward in the face of significant market disruption. The current demand environment, coupled with our strong client relationships, provides us confidence in our outlook for continued growth in 2025 as reflected in our updated annual guidance. I'll now share some additional insights into our second quarter performance. In the Healthcare segment, second quarter RBR grew 4% over the prior year quarter. Excluding the results for student education, which we divested at the end of 2024, Healthcare segment RBR grew 6% over the second quarter of 2024. The increase in RBR in the quarter was driven by continued strong demand for our performance improvement and services, financial advisory and strategy and innovation offerings, partially offset by a decrease in our digital offerings within health care. The passage of the One Big Beautiful Bill Act earlier this month brought some clarity, the anticipated reduction to the federal spending on health care. The cuts in Medicaid funding are projected to reduce federal spending on health care by over $1 trillion over the next decade and…

Thank you, Mark, and good afternoon, everyone. Before I begin, please note that I will be discussing non-GAAP financial measures such as EBITDA, adjusted EBITDA, adjusted net income, adjusted EPS and free cash flow. Our press release, 10-Q and Investor Relations page on the Huron website reconciliations of these non-GAAP measures to the most comparable GAAP measures, along with the discussion of why management uses these non-GAAP measures and why management believes they provide useful information to investors regarding our financial condition and operating results. Before discussing our financial results for the quarter, I'd like to discuss several housekeeping items. First, our second quarter 2025 results in the Healthcare segment exclude the operating results from the Studer education business, which was divested on December 31, 2024. Second, our second quarter results in the Education segment did reflect a full quarter of operating results from the acquisitions of Advancement Resources in Halpin, both of which closed in March 2025. Third, our acquisition of Eclipse Insights closed on June 24, and as such, a partial period of their operating results are included within the Healthcare segment. Operating results of Eclipse were not material to our second quarter results. Finally, our acquisition of Treliant, which closed in July is not included in our second quarter results. The results of Treliant will begin to be included in the third quarter within the Commercial segment. Now I'll share some of the key financial results for the second quarter. RBR for the second quarter of 2025 was $402.5 million, up 8.3% from $371.7 million in the same quarter of 2024. Organic RBR, which excludes the RBR generated by all acquisitions completed subsequent to the second quarter of 2024, was 4.2% over the prior year quarter, driven by growth across all 3 operating segments. As Mark mentioned,…

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

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

Yes. Andrew, the way I would characterize it, it's like there was no shock. I think in what can -- came in the One Big Beautiful Bill act, I think there was -- for the most part, I think there was a broad anticipation that there was going to be pressure on federal reimbursements. And so when I say it brings clarity, it's like, okay, well, we're no longer waiting to see what happens. We now know what's going to happen. And so now we're in a position to start to make some firmer decisions without that uncertainty. So I think it was more about coming in line with what people generally expect. There were some nuances in every part of the bill when it got passed. But I'd say, generally speaking, is consistent with our outlook for the full year in terms of the guidance that we provided. So I would say it's not necessarily propelling it more. It's consistent and we just continue to see ongoing financial pressures even besides these because for a long time, we've seen cost trends ahead of rep reimbursements and probably maybe incrementally a little bit more pressure in this past year.

And I'll just add, Mark, I think from a visibility perspective, I think our visibility is stronger at this point than it was earlier in the year 3 months ago. I would -- and some of that has to do with some of the increased clarity around some of the regulatory environment. But some of it has to do, too, with just our sales conversion over the first half of the year, the pipeline at this point, even some of the activity we see heading into the third quarter. I think what is clear is that within the Healthcare segment for our health care provider clients, there are many clients who are going through either current financial strain or for a variety of factors concerned about financial constraint in the near term. And I think that is a strong driver for the consulting parts of our business, in particular within health care, performance improvement, our strategy offerings, our financial advisory offerings, our managed services offerings. So I think that -- as we've had those sales conversions and as the pipeline has strengthened to record highs, I think that does provide additional visibility for us. Within the Education segment, obviously, there's been a lot of news, I would say, during the first half of the year. We continue to see both strong revenue execution, but then also strong sales conversion. I think Mark noted in his comments, we had record sales conversion for that team in the second quarter. So that's another thing that strengthens our visibility at this point. So we feel good about that.

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

Andrew, I would say to answer that last part first, it is our guidance for the year is not contingent on any assumptions related to the pace of conversion on the digital side of the business. I think from a health care segment perspective, the strength we're seeing on the consulting side is definitely driving our confidence in the guidance moving forward. As it relates to digital, just to provide a little clarity there. We actually do see demand for certain digital offering areas and really across the board as it supports some of our performance improvement projects. We continue to see good strength there. I think what we have seen is a little bit of lower sales conversion cycle for some of the stand-alone digital sales in that segment. And I think that's somewhat intuitive, given some of the financial pressures that our clients are going through right now. I think we do see a shift in focus to some of the performance improvement projects that support clients that are going through financial strain. But the reality is those underlying projects, eventually, they need to get done. And so we know that once our clients kind of reach that point of financial stability, they're likely to have to circle back and take on some of those digital projects. So that's what gives us confidence that it's a temporary pause. But in the meantime, we feel very well positioned to help them on the performance improvement side.

Our next question comes from Tobey Sommer with Truist Securities.

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

So again, Tobey, I would say, just to add to the context of what's happening in the market, this is not by anywhere near the headline story of what is happening within the health care business. It's an element of whether one component of probably 5 or 6 other major areas. And I would just say, we've seen just the increase of our clients whose C-suites are focused on driving financial stability to their business and prioritize that ahead of some of the other conversations. So I think it's really not that they've gone away. It's just they have more pressing needs in the context of where we are. And I do think that back to the outlook for the year, I would say this is an area that we expect to have more than -- this is not just related to the approval of the legislation. These were long-term trends coming into this legislation. These have now just dialed in even more pressure beyond even 2025. So this is back to the comment we have about the longer-term secular tailwinds for our business, feeling very good about it.

Right. And if you think about the health care business from where we started the year, we've increased our guidance today from the initial outlook at the beginning of the year was mid-single-digit growth from an overall health care segment perspective to now upper single-digit revenue growth. If you go back to the original assumptions in the air for that mix between consulting and digital. I think the net effect of this is more of a shift towards our higher-margin consulting part of the business during the year. And we have just noted that some clients as we've engaged with them and they're looking at their strategic agenda for the year, we're seeing more demand on the performance improvement side and some clients that are shifting some dollars that they previously would have been allocated to digital to focusing on aspects of performance improvement.

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

Yes. So in terms of our headcount growth, I think a lot of the increase in headcount growth came from our managed services business within the health care segment. In terms of the -- excluding the managed services headcount, I think there, it's really two primary factors. You did have some increase in headcount from the Eclipse acquisition that was in the neighborhood of 40 new team members joining as a result of that acquisition. And then beyond that, it's really just the strength and demand that we see right now on the consulting side within health care. And based on the sales conversions and pipeline activity that we see, we've been aggressive in the market, adding talent in that area to support the growth that we're expecting for the back half of the year. So those would be the primary areas where we've seen headcount growth.

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

Tobey, I think we're actually done a good job of kind of building that. I think we have -- I would expect there might be maybe 1 or 2. Some of the time of these deals, as you know, you don't get to decide exactly when they fall. But I would say they're all within the tuck-in type categories that we had. And certainly, our expectation is to try to stay in that balanced capital deployment strategy. So I would say where we've made a lot of progress. I mean you saw that with some of the transaction costs within the quarter. We've been very, very busy in the marketplace. And the good news is we're finding areas that fill in our gaps very nicely. We're finding the right partners that are not necessarily for sale when we get working together. And then it's leading to the kinds of conversations that we want to over time that will give us the long-term confidence that it's going to be a successful deal. So I'd say it's actually powering very well, but maybe there might be another transaction or two by the end of the year.

[Operator Instructions] Our next question comes from Bill Sutherland with the Benchmark Company.

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

I would say, Bill, it's closer to the top of the range in terms of utilization, which -- that doesn't mean there couldn't be individual quarters where it could flex a little bit higher. But in terms of a sustainable utilization, I think that this is towards the top or -- top end of where we want to be. And the thing to keep in mind, when you see those utilization metrics that you mentioned for consulting and digital, of course, it's not spread even across all teams. So within there, you have certain teams that have even higher utilization that blend into that up into the 80% range. And those are some of the areas where we're more aggressively hiring right now to continue to build out the team and to give us capacity as we continue to grow. So I think in those areas that are driving that average up even a little bit. Our hope is that, that will actually cool off and come down a little bit as the year goes on, and we're adding new team members to continue to support the longer-term growth of the business.

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

I would say within our strategy and operations team Bill, that's where we saw a lot of strength. And I'd really characterize what we have seen strength, particularly in education is offerings that really drive higher benefits, either on investments in technology or helping our clients right now work through their strategy through what's a fairly disruptive environment, improving student enrollment yields, reducing risk, and improving the efficacy of research, and driving more effective fundraising campaigns. I think those are the things right now that our clients are coming to in what's a fairly -- been a fairly disruptive macro environment to start the year where they're seeking our help to really navigate whether it's financial strain or operational disruption.

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

You're talking back on health care, Bill, with respect to consolidation. We certainly see systems continuing to want to acquire hospitals that are going to help them achieve their growth objectives. And I would say for us, it's not the headline, but it's certainly an element of what we're doing and helping them not only with the strategic evaluation of which targets but then helping them on the post-merger integration work as well. So it's certainly a contributor to what's happening in the marketplace, and I would expect that as you see continued pressures, sometimes those are the catalysts that lead into to transactions ultimately. So it's going to continue to be an element of what we see in the market for sure.

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

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

I mean, Bill, if you go back to the core of this business back even 16, 17 years ago when we acquired Stockamp and Wellspring over the years, we've built out a pretty comprehensive set of performance improvement offerings from revenue cycle to supply chain work to workforce set up to the clinical operations. I mean pretty much if there is any operation within the four walls of the hospital system, not only including the main hospital, but really the overall system, we're doing an assessment, not only their operations from where the cost savings opportunities, but more importantly, the balanced approach to find the growth opportunities for them to continue to improve their business. I think depth and breadth of what we have together and just the methodology, the track record of real savings and results and impact that we've made, those are the things that we're bringing to every client. Based on their own unique setting or situation, sometimes they know in advance where they want us to focus because they have certainly hit some insights there, but it's pretty much not limited. Then that goes even beyond just the, what we call it, performance improvement, the financial advisory areas, whether it's how you work with the office of the CFO and get better insights in terms of the decision-making, the speed, management of cash. There's really, I would say, we're not aware of anyone else who's got the breadth of what we do and we bring it together as a unified team and going to market in that way, I think, really gives us a great speed to value and impact for our clients.

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

Yes, what we have among our commercial portfolio, financial services has been the #1 or #2 industry segment that we've had for a long time, and a lot of those have been built in areas that are already doing risk management compliance reporting, things that as we look at Treliant are highly complementary to what they do. And this gets back to even how we came together has been an outreach to recognize where we have opportunities to take their capabilities, our capabilities and really create a more comprehensive solution. So there's a lot of joint excitement for that, and they are very much aligned, but not overlapping.

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

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

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

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