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 RBR, grew 17% in the third quarter, including 10% organic growth, reflecting a robust demand environment for our services and strong execution by our teams. 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 and the earnings guidance while 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 for our health care 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…

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'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 had closed in June of this year. And finally, we closed on the acquisitions of Treliant and 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…

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

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 it 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 reuse 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. And in this market, everyone talks to one another. 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 has been a time that you've seen the best of what we could ever have hoped to see out of our health care 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 health care. 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 at 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 -- and 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 the 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 health care 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 comments there. Just in terms of setting up for next year. Health care 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 the 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 -- 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 in 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 in the door and 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 Wilson Perumal's some nice, continued momentum there that has shifted perhaps what we have seen for some softness early in the year. We feel like that's certainly in a good trajectory as well.

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

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 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 need and 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 it's well said. The only thing I'd just -- maybe just put stop on that comment is a 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.

Terrific. 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, an equilibrium right now. You're seeing decisions made for the long term relative to like the comments we made about the digital transformation projects. You'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.

And 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 their 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, if I could get them in. 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 clients 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 in 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's 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.

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. I mishear. I'm glad you clarified. 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 through 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 the record status during the third quarter, but it was still strong sales conversions during the quarter. And we're a month into 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 did I miss it?

I didn't -- the reason I did, there was no change in it. So that's consistent with where we're at before, 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 I'm 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 and gives 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 in 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. And so when we're working shoulder to shoulder with our clients, it creates opportunities to work with them because we understand their business processes, their 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, do you want to maybe provide some color on how that's finding its way into the numbers?

Yes. Bill, if you think about our -- the 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 even blurrier 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 too, it extends even beyond digital. When you look at some of our performance improvement consulting, for example, I'd say the managed services part of our business, which is another one that Mark alluded to, I'd say, automated solutions, use of AI in order 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 in 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 a specialization in technology, specialization in digital. So the evolution here to some of the more advanced technology is an 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.

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 systems. 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. And 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 on to the more modern platforms, but also because they know that sets the stage for the next round of investments in AI-based functionality.

Right. Okay. That's helpful. I just want to ask about the utilization rate on the consulting side in the quarter. A 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 the head count 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 the 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 2, 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.