Huron Consulting Group Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Revenues before reimbursable expenses (RBR) grew 8% in Q2 2025, with organic growth across all segments. RBR was a record high.
• Healthcare segment saw 4% RBR growth; acquisition of Eclipse Insights strengthened performance improvement offerings. Impact of Medicaid funding cuts and uninsured population growth driving demand for performance improvement, financial advisory, and strategy offerings.
• Education segment had 5% RBR growth, record RBR, driven by strategy/operations, research software, and advancement fundraising. Dynamic regulatory landscape but strong demand for offerings.
• Commercial segment had 28% RBR growth, record RBR, driven by AXIA acquisition and digital offerings. Acquisition of Treliant strengthened financial services capabilities.
• Increased RBR guidance to $1.64B-$1.68B, adjusted EBITDA margin 14.0%-14.5%, adjusted non-GAAP EPS $7.30-$7.70.

Segment Performance

• Healthcare: Second quarter RBR grew 4% over prior year quarter. Excluding Studer Education divestiture, grew 6%. Contributed 49% of total company RBR. RBR increase driven by strong demand for performance improvement, financial advisory, and strategy offerings, partially offset by decrease in digital offerings.
• Education: RBR grew 5% over prior year quarter, achieving record RBR. Contributed 32% of total company RBR. Driven by strong demand for strategy and operations, research software, and advancement fundraising offerings.
• Commercial: RBR grew 28% over prior year quarter, achieving record RBR. Contributed 19% of total company RBR. Driven by acquisition of AXIA and strong demand for digital offerings. Excluding AXIA acquisition, commercial digital capability RBR grew 23%.

Guidance

• Increased RBR guidance to $1.64 billion to $1.68 billion, representing 12% midpoint increase vs 2024.
• Maintained adjusted EBITDA margin guidance 14.0% to 14.5% of RBR.
• Increased adjusted non-GAAP EPS guidance to $7.30 to $7.70, 16% midpoint increase vs 2024.
• Recent acquisitions expected to add ~$20M RBR in H2 2025.
• Healthcare segment expects upper single-digit revenue growth and 28%-30% operating margins. Education segment expects mid- to upper single-digit revenue growth and 23%-25% operating margins. Commercial segment expects mid-20% growth and 18%-20% operating margins.

Risks

• Market uncertainty and regulatory environment posing challenges.
• Slower sales conversions in healthcare digital offerings, though temporary.
• Integration expenses related to acquisitions, particularly Treliant, which are expected to be completed by 2025.

Question and Answer

• Q: Andrew Nicholas on visibility: A: C. Mark Hussey said clarity from the One Big Beautiful Bill act brought consistency, visibility is stronger than 3 months ago, and guidance aligns with this. John D. Kelly added sales conversions and pipeline strength enhance visibility.
• Q: Tobey Sommer on pipeline conversion delays: A: C. Mark Hussey and John D. Kelly said it's a temporary pause due to clients focusing on financial stability, but underlying projects will be addressed once stability is achieved.
• Q: William Sutherland on health care consolidation: A: C. Mark Hussey said consolidation is an element of the market, and Huron helps with strategic evaluation and post-merger integration.
• Q: Kevin Steinke on Treliant acquisition: A: C. Mark Hussey said Treliant's capabilities in risk management, compliance, etc., are complementary to Huron's existing digital offerings, creating a comprehensive portfolio.