HURN - Earnings call transcript Q1 2019 | Huron Consulting Group Inc.

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Operator

Good afternoon, ladies and gentlemen, and welcome to Huron Consulting Group's webcast to discuss financial results for the first quarter 2019. [Operator Instructions].

As a reminder, this conference call is being recorded.

Before we begin, I would like to point out all of you that 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. along of filings subjects factors this webcast. information, for the discussed that afternoon's disclosure a that review with with the SEC, in Please may impact measures. discussing more The one will be non-GAAP company financial or for Please look at most including the earnings release comparable SEC, GAAP required the to all Huron's by and disclosures reconciliation of on the website the numbers. of turn Jim Roth, And to Huron Group. now over Consulting I the would call like Executive Officer to Chief Mr. Roth, Please go ahead.

James Roth

Quarter Hussey, XXXX to is Officer. welcome afternoon, X and revenue First the quarter our organic me Chief Consulting Good growth segments. Chief X% Call. Huron today all first Earnings of operating Group's driven John Financial and With Officer; our Operating our solid Kelley, by delivered across in and Huron Mark President demand

evidence and each financials. We I'll guidance. the add to then provide across growing of our color affirm continue full performance demand to and of today overview year our see will for a brief now John segment business the

Let me begin with Healthcare.

the the compared create reduce that care fundamental ending quality ahead The lowering to that to for hospital been the urgent to of revenues force contracts, consolidation never healthcare care. of primarily heavily while to performance prior healthcare grew we shift the opportunities value-based many in service a that improvement system has road - Huron's the costs. continues our health every market care consumerism with has need first to continues hospital for of offerings. the of and clients challenging uncertain. X% solution. while and has attributable what to This The health our cost delivering rise work of new gradual battle quarter. Nearly sorry, and system quarter was become cost improve The year-over-year segment and year quarter, be environment with During strong to demand Healthcare current by impacted

our services we work our health in strategically operationally are spectrum, well experience Through of reduce Healthcare and to be care and technology delivery improvements, offerings. consumers retain cost offerings to power talent total and the and positioned among are it we be Many continues new care collaboration new are between areas these market. include and require services developing breadth and central to on optimize industry, help why transforming care, to improvement. expanding reasons to primary outcomes X addressing in one segments, our our Several are focused health operating that across the delivering With consumers customer-centric our and future. in of - of achieve proactive to technology sustained so we its a our will clients to creating traditional the collaboration the of gaps leadership beyond services relates continuous the leadership particularly the of defining effective attract performance our

of We of will and a proud business the capabilities, responsive way challenges be has the are to underlying market that we believe set expanded trends the which industry. of Healthcare

driven by primarily services. their Advisory demand Enterprise the or business. of grew solid the ES&A XXXX to this continues Each in Turning X% for businesses over to and Business the Solutions Revenues segment QX see segment. Analytics, X

models. our many enhancements, technology study highlights Innosight an companies XXXX shrinking commercial The a the and corporate of landscape business combination of shifts the an global in structure the of and by As competitive new part indicator driven throughout annual forecast. in evolving sector, publishes innovations longevity the economic team lifespans

is of across of and operations we industries. a provide first of for least services demand in long Advisory during to largest we on segment our strategy Advisory segment. revenues Based Healthcare numerous of our quarter approximately commercial from of array we markets, our practices, of Huron's across in clients runway to see the XXXX XX% technology Sciences first across sector in our Business we quarter, ES&A practices assist collaboration to businesses believe there clients the Innosight total X continue at worked Life and With growth XX generated clients Also the Education with X within the Business the industries. The ahead Huron. its this multitude segments in and and

right and strengthens to client ability solutions and relationships meaningfully Our collaborate competitive bring clients our advantage. the to

in their revenues Healthcare XXXX. research and was continues Education. primarily in X% quarter-over-quarter solutions. higher of flat institutions changes traditional sources, research to growth relates higher number industry change. a competition funding it same increasing the including from as challenges business education education. undergo significant for ERP now facing of QX like to Education scrutiny XXXX cloud These the led segment by The public and value Turning and postsecondary ROI nontraditional grew our of stem models, both over strong period and and The sustainability to students,

array to most positioned this service industry. ability to We of our education of Huron. address Education solve well the challenges the differentiates remains industry wide and meet segment changing the our rapidly the collaboratively With offerings of market, further our believe depth to client's pressing experience needs

Finally, outlook guidance. for company-wide to year. our the our turn Today, XXXX affirm me let we

partner lead differentiation a will unlocking organic focused we remain year the our achieving relationships strategy, competitive sustainable this new We that to become transformation creating we and increased by the our We and long-term are strategy we through clients. our believe across encouraged on company. to as commitment increased will believe by With of services driving in and on over that the market opportunities health needed strengthening growth our shareholder and client value premier I profitability to value committed growth the to businesses. portfolio enhance This culture value profitability. our exists are our sustainable the of execute our we we further prospects growth focus time. believe for strategy to have the collaborative

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

John Kelly

afternoon, Thank and everyone. you, good Jim,

financial be adjusted Before I income, adjusted that EBITDA, discussing non-GAAP as EBITDA, such net cash adjusted and free begin, please flow. note EPS measures I'll

non-GAAP most release, non-GAAP why these measures press the XX-K to Investor reconciliation these Also they and useful measures, management Relations of my have provide of regarding and page uses financial on with website management a today investors measure to the condition comparable discussion comments Our operations along and all are operating GAAP information our the the on results. believes Huron why continuing basis.

by the results million diluted in per The revenues of X from let the all Now key $X.X in organic the were across growth quarter to $XXX.X higher net quarter was of by was you in revenues of through in income in first X.X% me in driven same year. in the quarter operating quarter million diluted expenses. that Revenues and the $X.X walk outpaced increase for Net the $X.XX million, increase driven of some per growth $XXX.X compared up of XXXX XXXX. the the segments. XXXX or million financial quarter same or The quarter. solid in income the share of $X.XX prior share first net quarter was loss

Our effective a quarter first year income compared negative tax rate XX% in ago. was to of the XX.X% XXXX

tax compensation or to of diluted XXXX. for Adjusted million by or $XX.X awards for quarter losses $XX items. partially and revenues in first related was diluted or million was million state income to the $X.XX non-GAAP was compared of discrete tax XXXX compared the in rate in share during EBITDA the per rate, or XXXX same of with revenues. of tax of quarter share primarily in $X.X foreign XXXX XXXX than X.X% Adjusted certain the additional XXXX. effective taxes, unfavorable offset due period QX nondeductible per $X.XX QX share-based of million These adjusted expense first to less $X.X including benefit income favorable tax adjustments X.X% Our to net the QX no statutory benefit were

year-over-year XXXX. XX% the X.X% segment our of for strong XXXX, includes in quarter The This costs comments company's revenues in improvement The which generated compared in from Now The Education first margin are performance of in million for expenses. savings. fund million The first million $X.X Operating were same I'll margin QX primarily in expenses of increase increase and primarily research was This outpaced allocated operating company-wide $XX.X X.X% first XXXX, revenue XX.X% first for segment ES&A XXXX. was $XX.X plan. previously to revenue expenses, was from quarter $X.X generated of our increase XXXX. up performance the million in million order assets X.X% the for quarter unallocated to up revenues of or million quarter cloud of with centrally increase treated the same to reflects QX plan, compared of XXXX compared to performance primarily Advisory XXXX. the our not of QX used quarter was consolidated quarter segment XX.X% revenues in the of the of QX generated up compared in during first segment first Business the Other segments. Segment XXXX. million $X.X the The income $XX.X of of in in XXXX. total for company related for XXXX. in Education in Advisory margin business. The to to The of XX.X% reflected posted now to level or quarter the corporate offset each The was first XXXX operations. total QX as The our at due quarter the primarily during ERP QX revenue total by solution. for of expenses first or was driven make growth The XXXX million for revenue $X.X XX% for income the same XX.X% segment XXXX in quarter Business attributable operating the drive is that $XX strength revenue XXXX total an XXXX. that deferred XXXX. QX XXXX, by segment other increase quarter but margin a a to of cost $XX.X XX% corporate statement XX.X% the million our posted gain in Healthcare strength in posted $XXX,XXX during our of managed of segment during income by increase in the compensation revenues few for nonqualified of value expenses and driven operating revenue also The segment XXXX. was company solutions. XX.X% of quarter in in net Healthcare QX about income The

of quarter days turning compared for Now at the The to days cash the for quarter XX remainder in to DSO XXXX. at sheet scheduled XX fourth in the projects first March revenue the flows. with the DSO the increase width and on came will care primarily of reflects health year. recognized certain of balance XXXX increase on the impact occur XXst contractual of billing throughout

million We of expect normalize approximately notes, our convertible and million to $X to face senior end DSO a debt, $XXX in XXXX. Total back of $XX million bank includes the of $XXX days promissory by XX debt $XXX value for debt quarter debt QX million $X.X to million. with increase $XX This cash of of net million note compared We total finished XXXX. a for million. the was

payment of reflects quarter a first The annual our up bonuses.

agreement, used inclusive product X.XXx of of our flow in approximately software Our XXXX trailing cash and million flow $X.X operations EBITDA trailing negative XX the million. to quarter QX XXXX. our for bank million was XX to expenditures senior of compared of leverage ratio, adjusted the Cash March free months as we $XX cash at of months EBITDA $XX used adjusted defined in in investment as end in internally of resulting developed XXXX X.Xx capital first XX, was

from in million expect $XX of to a continue cash million. range We to operations be for year to flows $XXX the

in million also free continue $XX the and capital and of noncash of the cash million taxes $XX be expenditures $XX flows million stock the approximately for for to million expect year be excluding interest, net cash to to to compensation. and $XX We range to year

I Finally, open to our earnings like everyone. guidance questions. as February that to Jim mentioned, we're would the we call call. during now Thanks, the provided affirming Operator?

Operator

Instructions]. [Operator

from Timothy comes William question McHugh from Our first Blair.

Timothy McHugh

comments there. of those solutions think if is Are that on I that, you're the guess, your built where source up. about already to should and And we with solutions with had investing a talking we start future those Healthcare, build maybe that investment about? Jim, new what's we consulting those are

James Roth

Yes.

the correctly, So heard the still we're Tim, I question in them think, I of I process if building think, up.

in got I to But a we've all really X.X go think in make costs we terms we of first of that have hope all, building are that So our see are our these continue competencies the or those of of up years the new is of for continue continuing new are forward. build-out competencies we string bear so fruit included progress are we to estimates these for going to as estimates. that to and

Some X got in right to now we what new market of them on to we it kind care them and But are terms of be health us are place basis. this in or developing gives are a in out probably pilot with that test things now we know to that of needed certain we marketplace. need out time able in services X mode are more new competencies, take do we've them to X as clients right confidence where the

John Kelly

guidance of is And about for some points of basis February I'll XXX John. investment basis those part were were - the is year. items that the XXX netted in this Tim, add In points. in we of that that these mentioned call, there

Mark Hussey

things Tim, are we market Jim in clear these that pilot, Be an believe when in that. they there's as we services actually says I'll and it's just internal add actually pursuing that's interested These have well. not are clients are pilot. demand into where

Timothy McHugh

or you capabilities. this than Are is more it and expertise competency - this you're these around advising developing there are - on often? these are And clients consulting more topic to

James Roth

describe broaden in them a bringing services, as can multidisciplinary and it by expertise together combined consulting solution. We characterized

Timothy McHugh

catch practice, beyond I I part? other Advisory, Okay. Business And did of guess, you pieces elaborate then the can how on just - that didn't the perform, ES&A what, that

John Kelly

needed was the a that John. have was overall expect signed From that the flat get they close grew Business the segment just the during about of Innosight After about would Sciences quarter-over-quarter during Sure, reason were also been ES&A Advisory, Life and perspective, an some year-over-year. all quarter. we issues they amendment that is paperwork flat. an Practices they just This and second that Part quarter, grower. to Tim. to

segment So businesses grew the quarter. within four generally Advisory Business speaking the from all an activity perspective during

Operator

And Sutherland our from William with the question Company. next comes Benchmark

William Sutherland

the of Just seasonality that this of operating of margin. and the quarter first and curious businesses on the last advisory terms what in year? we Is this kind saw there typical - quarter

John Kelly

There quarter. The during as of we we full a similar XX% mix it's far year. XX% to I'll what last in things Bill, we on versus starting saw year the range the gave that while highlight were as that XX%. was guide the

perspective from Innosight. stronger do aspect a relatively quarter. was during ES&A So increased growth versus the perspective due rate ES&A margin get Innosight. the blends from to lowest of aspect in a technology first the relative revenue hit also versus the the implementation by They they of strategy fringe what

broker success the the So an is is that was it factor full another that's year success from relatively quarter then third highlight there light perspective. fees thing and I within about our and assumption and from a dealer guide fee

of some success you you in So quarters periods. margin those hitting when in higher see see will later those fees

James Roth

we that, the add to is thing only The Jim. seasonality we when because of that just is in really business in we revenue the we not seasonality, the I'll talk like our is, and careful about, fringe rates seasonality and about don't this seasonality the Bill, terms the have of always phase out have And really things meetings expense that. I in think terms

for totally our guidance also contemplated that's So the year. in

William Sutherland

velocity, performance the areas, to improvement revenues nonprofit, stable the you Right. duration characterize and not more your backdrop nonprofit - shortening you I here policies. at they're Healthcare, given lower bit engagements, engagements? were because sales better the - higher would the improving ahead, are say relatively On least in Would many as know direction and I nicely. of looking dealing the with in of systems, at looking could as for crazy tracking cycles tell you other almost a changes

James Roth

have making margins the of clients a them. and seen challenging clients, of environment our Healthcare a one much we think that's of This coming the is for you for they think just think would sales terms the margins time think while. pretty them are on facing I I I but reasons worried reasonably some the of any there reasonable say I next Jim. not a increasingly a why, in those lot a I that have urgency And I I material cycle, lot different to is is sense of the that don't that going It's reasonable more X today are growth getting are out movement lot or in X of are think, - of be years. around of flat. some types is now amongst that. getting that do troubled steady think that's

is think, feel come like now. because alternate to right That business normal other just where going are of generate I they our from things. side lot areas actions clinical to and that So reimbursement to at revenue just to not trying look driving for of some some they a have the just it's going

William Sutherland

taking? Jim, of already value-based developed expertise reimbursement in one and that have Or risk that pilots a on? lot working the of you're is And you

Mark Hussey

Bill, they've Mark. presence expand world still the every those. the in there If evolving, system business and really that, in fee-for-service more in there. contracts. risk-based is both the I holistic that how majority got you continues would of and already they're a say kind of the What doing really solution it's We to out of question it's where risk-based as sides operate work, is have environment is is what actually value-based is

doing, kind as care delivery fee-for but environment well for services. as into aspect So back the then and we really well risk-based are of that's thing gets really

Operator

next Our SunTrust. question Sommer with Tobey from comes

Tobey Sommer

when you be us update give first the among the than you year on spoke the last. segments cadence Can that of we it's any X to level, cause in So that? rates think will months at the growth different segment the

John Kelly

John. to nothing Tobey, first would it's during changed has quarter. regard first I the since of end or any with visibility the No, our really say have we quarter

is overall a there we better, any. if we are growth in rates put initial and quarter. there. second we this between affirming right of feel out But have put to updates with the there think probably want year comfortable I segments about the as all the different that guidance talked have guidance out that of the feel now growth businesses we we comfortable and coming

James Roth

John's really comments only continues with build Tobey, to businesses. the of our all it is across comfortable feel Jim. I that we the to demand add way

steady reasonably time time, at good this because demand in perspective. at to is seen part I feel increase we some You've year in - point terms of the demand evolving how about continue in that now of sense going this that's so pretty

Tobey Sommer

quarterly Okay. to year year? is With segments is should than you just growth what when your the a how unfolding? the that there respect Or among for sense consultants, makes take expect that see in we numbers different little timing you does snapshot difference would the approximate those billable - of a the

James Roth

I say, growth the Advisory, is see year. probably for Education you the Tobey, of would fairly Business we're expecting what representative that and for

headcount While what Healthcare for year have on perspective. as first progresses from the expectation growth in accelerate going a we the demand did we is and to see think, that's quarter, I our based

Tobey Sommer

free-formed and quite about all from little services. a now real is Medicare a to of for concept bit, you conversations expand for right transpire. is or kind bit for demand customers too Are you hearing talking does your Could for anything mean it election? a serious it Okay. What Congress the even in of it in more, news

James Roth

going about like they factor that to but they demand like our I that a too clients answer early think something very script not the drumbeat end. see it reimbursement I side of steady Tobey, Jim. in near at short their on have is, seems on happen to I but don't It in the of future, to eye for continue. it, referred that I and The is part we - this worried think think think our to the so that something there's would is it are during pressure

about is question there think that. I no

where and be have have could but up probably work woke big all, think problem anyone morning that predicting it. but have for to we just to a business I is factoring of that but are of into nor would are you it that yet, they time time it if think don't models think and at do I radar Medicare had doing, don't trying lot I a on is point they I they be think their think, I their anyone

Tobey Sommer

sales work your those perspective large versus pipeline have and funnel relative kind years size composition Okay. down? of in of new the tapering look the of When you particular, kind look engagements health of last kind been what of of in at where couple is care like and

Mark Hussey

it's Mark. Tobey,

profile back the say I if had years in from think we We've steady. general ago, mix has would been historic has that nice down the X, about fairly our engagements. a you talked X come engagement of I fact size look highs.

outlooks think of good I I midsize, a of several over really a and that's a by I base that bit expanded really quite mix. think last two in large really mix the the is But always years. has client is would smaller there kind our engagement revenue performance And got we say with or the cycle medical now improvement, or the the offering. even look positive got we're for for as you optimization. HR group well technology doing more offerings, whether across the When much balanced or of practice things services the costing respect as we a to us have clinical one

gives that kind mix. lot a us the more in of with just it balance engagement mix So

James Roth

would of think opposed been for big to relationships really sequential project. our having panning lot much broader away longer-term working possibility a services, may And I of back-to-back-to-back really about as moved thing doing much small have we that some where being would actually of as Healthcare of to jobs larger say portfolio a broader number be strong was I you clients we in to in we And of we one and historically similar and of from that us the able have ongoing to it last for the from which would what us our to they enables smaller projects, are education And to higher of a think product, much been, client but a longer for I our good. are is in you which maybe at see and of I some they when sales time. enhance cuts longer extent clients to longer continue period to successive relationship that a talk in period of portfolio other when and just the lead cost time, that stay down kind end, knew that a at do think projects all are we

the we're pretty So evolved. comfortable way it has

and said today, we from past was As we go bumps are we ago, knew to years well think those where up be - but a bodes larger past relationship, 'XX I were well have must longer it for have bumpy to we back now larger number I going we going part number having a are a to we lasting bumps, the we think and those got have, stable think, to a bumpy that in we're where X.X - road where in clients end larger, more but I a practice. of we

Tobey Sommer

consultant and the and of you the growing Could pace your difficulty about a about talk you internal kind headcount comment at recruiting make the of are? environment turnover

John Kelly

John. is This

that's turnover the been and trending has first pleased year. during how we're unfolded headcount of Our the with very part lower

positive. a been has throughout So

from year the recruiting start need. to the So far confident we we out perspective find people that able we're we're that a

retention this encouraged a from we from a And recurring then but also point. so at on perspective, both more perspective encouraged are we're

Operator

with comes Barrington Research. Steinke next from question Kevin our And

Kevin Steinke

evidence you the across talked made now. the as of that to And environment whole. Healthcare a So your comment continue right growing about business you see favorable obviously, demand you in

worthwhile other your if data any lot or demand wondering all a that of segments highlighting would across be points more are trends, more. there Just drawing

expand of upon you Just that made about evidence statement that of growing demand.

James Roth

industries particularly I we is to to they in and the structure through because this the to happening start know manage Jim. where as in for ways. leadership quick those kind that significant education and enable I'll that at governance just environment. I'll pace. from responding it position a nimble two pretty be otherwise in our to get a That's a the you both to of are think by that's Health place clients be. transformation of And guess very Education really of taking in difficult through. to when both been Kevin, is doesn't trying nature the respond as pretty are rapidly And I'd a changing tough perspective higher

reason where to you've obviously most deep part Healthcare and So those relationships they those credentials got the arrive very, the they come I to areas need so for think client and feel and naturally very needs in assistance in begin Education, our when us.

there those think I is pressures be a what going time, while. giving that's is to for I that and demand some think are going to continue for comfort work us the

is lot ways of of about have think industries, it in the model different of of and story. We more we being you many On models, commercial, to I a terms sustainability different industries terms one it part but is different a a thing own look would how be It's we of lot we read read health the you mostly segment, Advisory through I of be trying are would it talk energy, and going retail, same commercial of the in solutions that clients about of each sustained. but in those think about - it serve one it develop of I confident a side, state when serve whether we uncertainty that's and in X every one it's capable Business are see are our helping operations that striving lot environments, collectively whether to exactly and challenged we of day I services those really education pressure structures what a that to transformation, are about of their growing think about their be business financial that at demand. future future and type them think, we again, but bring organizations that demand the about business having, being actually

John Kelly

market of pipelines Jim that market you to our and business, now specific all when overview. demand down some John. to you that I'll pipelines. When is at across it's trends look strong pipelines described across our right solid add of those our the look at This take specific

Kevin Steinke

helpful about a That's and there within but did it, make expectations if and Group I missed Healthcare? trends I Okay. Studer color. you comment know don't

James Roth

Yes.

If during year, single-digit for solution low that and look in when had we and there. I technology and decline and first within in we quarter Studer to year. expect we line throughout the that upper the growth to was then rest if Healthcare, Group of reasonably I you services PI look see commentary quarter trend any it you digit have we the saw the a the Mark, think, single at at color, know the continue growth something

Mark Hussey

I we think we for the Stuter flexible made various within offering have that the changes where talk arrangements the have were made in than to are they about there really past. the

it's just into. We really have things early a we're to new expanded months And I start would markets. few just those that, take into These see hold. are to say,

evidence bit all we this in are a So we're we but points. unfolds see of it cautious at few until very terms more optimistic point how also little

Kevin Steinke

anticipated internally you seeing technology the build student solutions you're offerings in update those Okay. of to you market terms And to well terms on then the as there of services? demand development the the market, previously the how for as address continue development out what any segment, in of of Education touched the in in

James Roth

Jim, Kevin, this is again.

a management to higher our and a throughout them when to talked So, saying of X, the really of that's is that model the of admitting the contact business ed. with beginning acute guess, being that. very really the lot the student to than of and It getting about around couple business people handle is ways We and their better X key they're years part to are it that more is from afterwards. probably healthcare a much is of able clients in successions school the them retain going challenges in I

So become terms it and this our least clients core for technology. in of a business has their part is of of many mature really

one is be I solutions it this out for way of the that The are bearing still growing we immature. seeing the little core There how things fastest in a technology a exactly now market is we our with to So the areas does of have bit now. while of likely lot a right company, think said that's are are activity. and

And quite probably going they're this see they beginning up, growth stories So to our soon. by we X, far within up starting now but company. biggest start as one being are of the is to are not X, X from I years this think

we'll up will from lot see I is are think think, starting play see major to all XXXX confident it will in of we some part our start university XXXX. we of as relationships be part - and because I that a is in that this the shaping because big this to But it very just of would and capabilities technology that of our we within thought a in along environment. we're role part as deep

Operator

to remarks. turn like you at queue closing no to Roth, in time. back I'll further this over I'm the call Mr. for any questions showing the

James Roth

Thank quarter us second announce spending July you forward afternoon. this we time evening. speaking when results. again you for our We with in Have a with to good look

Operator

for gentlemen, program. This the you and does concludes today's Ladies conference. thank participating in

day. a all disconnect, may have wonderful and You

Huron Consulting (HURN) 1 May 192019 Q1 Earnings call transcript