Note: This is an earnings call transcript. Content may contain errors.

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Date

Tuesday, Oct. 28, 2025, at 5 p.m. ET

Call participants

  • Chief Executive Officer — Mark Hussey
  • Chief Financial Officer — John Kelly
  • Chief Operating Officer — Ronnie Dale

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Takeaways

  • Total RBR -- $432.4 million RBR for Q3 2025, up 16.8% year-over-year, driven by broad-based growth across all segments.
  • Organic RBR growth -- 10.2% organic year-over-year growth in RBR for Q3 2025, with Healthcare segment leading at 18.6% organic growth.
  • Healthcare segment RBR -- $219.5 million RBR for the Healthcare segment in Q3 2025, increasing 19.9% year-over-year, including $6.5 million inorganic contribution offset by a $3.4 million divestiture in 2024 RBR.
  • Healthcare operating income margin -- 30.9% operating income margin for the healthcare segment in Q3 2025, up from 27.1% in 2024, with updated full-year margin guidance at 29%-31%.
  • Education segment RBR -- $129.4 million RBR for the education segment in Q3 2025, up by 6.9%, with $2.2 million in inorganic contribution; operating income margin rose to 25.7% from 24.1% in 2024.
  • Commercial segment RBR -- $83.4 million RBR for the commercial segment in Q3 2025, up 26.6% from 2024, with acquisitions contributing $19.6 million, but margin declined to 16.4% from 24.5% in 2024, attributed to higher salaries, contractor expenses, and digital mix shift.
  • Adjusted EBITDA -- $67.4 million (15.6% of RBR) in Q3 2025, versus $54.9 million (14.8%) in 2024, led by Healthcare and Education segments, partially offset by higher corporate expenses and lower Commercial segment income.
  • Adjusted net income -- $37.4 million adjusted net income for Q3 2025, or $2.10 per diluted share, a 25% increase in adjusted diluted earnings per share over 2024.
  • Net income -- $30.4 million net income for Q3 2025, or $1.71 per diluted share, with net income margin down to 6.9% in 2025 from 7.2% in 2024.
  • Effective tax rate -- 28.7% in Q3 2025, with full-year expectation updated to 23%-25%.
  • Cash flow from operations -- yielding free cash flow (non-GAAP) of $85.3 million after $8.5 million in capital expenditures; full-year free cash flow guidance is $165 million to $185 million.
  • Net debt and leverage -- Net debt at $587.1 million as of Q3 2025, senior bank leverage ratio at 2.3x adjusted EBITDA, with year-end target at 2.0x.
  • Days sales outstanding (DSO) -- 76 days in Q3 2025, improved from 86 days in 2024, attributed to strong collections in Healthcare and Education projects.
  • Share repurchases -- $18.6 million spent to buy back approximately 147,000 shares in Q3 2025, totaling $152.5 million and 1,085,000 shares year-to-date (6.1% of shares outstanding as of December 31, 2024).
  • AI and digital revenue -- CFO Kelly stated, "somewhere in the 15% to 20% range of that total revenue is work that's directly related to AI-type projects," referencing Huron's digital business revenue mix, with digital comprising a little over 40% of total revenue in Q3 2025.
  • Guidance update -- Full-year 2025 RBR guidance narrowed to $1.65 billion-$1.67 billion; adjusted EBITDA affirmed at 14%-14.5% of RBR; adjusted non-GAAP EPS raised to $7.50-$7.70.
  • Record sales pipeline -- Healthcare segment reported record pipeline levels and improved sales conversion, including October.
  • Utilization and headcount -- Consulting utilization declined sequentially due to headcount additions for future demand; management expects eventual recovery toward the high 70% utilization rate range.
  • Education digital mix -- ERP and technology modernization projects are driving demand, with "A little bit lighter on the student side," per CFO Kelly.
  • Performance fee outlook -- CFO Kelly indicated that "percent of revenue that's tied to performance-based fees may go back up again to the level it was at in 2024" based on client preferences and recent sales activity.

Summary

Huron Consulting Group (HURN +11.07%) delivered record revenue across all business segments, driven by continued demand for advisory, digital, and managed services solutions, particularly in Healthcare. Full-year 2025 adjusted non-GAAP EPS guidance was raised, while the range for revenue was narrowed and margin guidance reaffirmed. Lower Commercial segment margins resulted from higher personnel costs and a shift toward digital offerings, while the company expanded headcount to support sustained growth in all divisions. With growing cross-segment integration, record-level pipelines in the Healthcare unit suggest continued momentum through Q3 2025 and into the first month of Q4 2025, and collections improvements reduced DSO. Share repurchases materially reduced the float, with significant capacity remaining under the current buyback authorization.

  • Mark Hussey emphasized, "this is perhaps the strongest market that we've ever seen" in Healthcare, referencing a highly favorable industry demand environment.
  • Chief Financial Officer Kelly noted "record high" pipelines and sales conversion rates for Healthcare, stating that client projects increasingly combine strategy, digital, and advisory solutions.
  • Education operating income margin guidance remains unchanged at 23%-25% for fiscal 2025, with strong digital demand linked to core ERP modernization.
  • Commercial acquisitions (Axia, Reliant, Wilson Perival) contributed to segment record revenue, with integration impacts reflected in temporary margin compression.
  • Contingent and performance-based fee revenue in Healthcare declined as a percentage in 2025 compared to 2024, but management expects an increase in 2026 as recent client preferences shift.
  • Managed services utilization remained very high, with hiring tightly aligned to secured project demand, minimizing underutilization risk.

Industry glossary

  • RBR (Revenues Before Reimbursable Expenses): A measure of revenue that excludes expenses billed directly to clients, commonly used for professional services firms.
  • Performance improvement: Consulting services aimed at enhancing operational efficiency, revenue cycle, and financial outcomes within client organizations.
  • ERP (Enterprise Resource Planning): Integrated software platforms supporting core processes such as finance, HR, and supply chain in large organizations.

Full Conference Call Transcript

Mark Hussey: 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 Dale, our Chief Operating Officer. Our third quarter performance was strong, driven by growth across all three 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 are 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 earnings guidance, 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 2024. Organic healthcare segment RBR grew 19% over 2024, excluding the results of our recent acquisition of Eclipse Insights, as well as the student education business, which was divested in 2024.

The increase in RBR for 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 healthcare consulting and managed services capability grew 27% over 2024. Demand for our performance improvement offerings remains robust, and we believe this is the strongest environment for our performance improvement offerings we have seen. In addition to record revenue growth, we've also seen continued strong pipeline and sales conversion continuing at high levels in the third quarter and through the first month of the fourth quarter. The primary driver of demand for our healthcare offerings is continued margin pressure for our healthcare provider clients.

A proven track record of delivering demonstrable ROI for our clients sets us apart from our competitors and positions Huron as a go-to trusted partner for organizations experiencing financial strain. Our performance improvement solutions have consistently delivered improved revenue and cash flow yield, reduced operating costs, and improved patient experience among key operating and financial metrics. Increasingly, our performance improvement engagements have a broader scope, integrating our strategy, financial advisory, and digital offerings to better and more uniquely address our client's challenges. This has led to an increase in the average size of our healthcare engagements. Hospitals and health systems continue to prepare for reduced funding and decreases in insured patient volumes driven by shifts in the Medicaid reimbursement model.

At the same time, pressures persist to improve access and evolve care delivery models in the face of workforce shortages. The combination of these factors creates an unsustainable operating environment for many organizations. With the combination of these factors, healthcare providers are increasingly turning to Huron to evaluate their strategic, financial, and operational options to strengthen their competitive positions. We continue to expand the use of AI and automation across our offerings to drive value creation for our clients and increase the efficiency of our service delivery.

We are increasingly advising our clients on how to govern and deploy the rapidly expanding array of AI and automation solutions available to them while partnering with them to deploy solutions that will yield demonstrable results and value. We highlight an example within our revenue cycle managed services business, which has delivered 20% RBR growth in 2025 compared to the year-to-date Q3 period last year. Revenue cycle managed services can be delivered in conjunction with the consulting offerings or sold as a standalone offering depending on the client's needs. Revenue cycle managed services drive improved revenue cycle yield and cost savings for our clients, and they are complementary to our revenue cycle consulting capability.

Among many other AI and automation use cases, we've established and deployed machine learning models that have helped us lower our costs while boosting collections for clients. The breadth of our offerings and our strong reputation in the market, along with our ability to deliver tangible results to our clients, positions us well to capitalize on robust market demand as our clients address the ongoing financial pressures on margins and the changing regulatory and technology landscape. Turning to education, segment RBR also achieved a record, growing 7% in 2025 over the prior year quarter. The increase in RBR in the quarter was driven by strong demand for our strategy and operations, research, and digital offerings.

Our education team has done a terrific job supporting our clients and sustaining our growth trajectory during this unprecedented time in the higher education industry. Many colleges and universities are managing the impact of declines in research funding and lower enrollment of both domestic and international students, as well as overall policy uncertainty. Tuition pricing pressures persist as students and parents seek affordable education and job training alternatives. Similar to our healthcare clients, our education clients are navigating through disruption and a strained financial environment. As a result, they are turning to Huron for help.

Our comprehensive set of offerings, including performance improvement, spans the entire university, making Huron the trusted partner of choice for clients looking for a partner who can comprehensively address these issues. We continue to see robust demand for digital transformation projects, and I have been very pleased with our team's win rate in this area throughout the year. Our clients' investments in digital transformation are driven by the need to modernize their data and technology foundations and take advantage of newer technologies, including AI and automation. One area that is particularly ripe for AI and automation is research administration.

We have seen this validated by the success of the solutions that we have developed to date that enable administrative staff to focus on greater value-added tasks such as research compliance or managing more awards. Let me share an example. We developed an AI offering to automate the input and processing of data across thousands of grants, drastically reducing the setup time and freeing up research administration capacity. While we are actively delivering these AI solutions to our clients directly, we can also incorporate the functionality into our research managed services offerings to optimize our delivery and support growth.

Our improving credentials, breadth of offerings, and deep client relationships have positioned us very well to serve our education and research clients as they navigate this period of heightened disruption. We believe our strong positioning and competitive advantage in this industry will drive continued growth consistent with the goals that we discussed at our Investor Day earlier this year. Now let me turn to the commercial segment. In 2025, we also achieved record RBR. Commercial segment RBR grew 27% over the prior year quarter. The increase in RBR was driven by our acquisitions of Axia and Reliant, as well as continued organic growth from our commercial digital business.

This growth was partially offset by lower demand for our strategy and financial advisory offerings during the quarter. I will note that for both our strategy and financial advisory offerings, we've seen an inflection point in market demand and saw improved sales conversion over the course of the third quarter and into October. Our commercial digital businesses continue to grow despite a more challenging demand environment. We have further integrated our strategy and operations expertise across our consulting and digital capabilities, which has strengthened our competitive advantage and positioned us to drive above-average growth during the quarter. During the quarter, we acquired Wilson Perival and Company, a leading strategy and operations consulting firm serving the commercial markets.

We believe the combination of Innosight's long-term strategy and innovation offerings and Wilson Perimals' strategic execution and operations-focused offerings creates a more comprehensive platform for our clients to realize more immediate financial savings and help drive transformation while they refine their strategies to deliver sustainable growth. As we shared at our Investor Day, another pillar of our commercial strategy was to further integrate our commercial offerings to enhance our go-to-market strategy. We have seen significant advancement in this area, including several key wins that demonstrate our competitive advantage. For example, we are one of the leading partners focused on helping CFOs transform their finance organizations to become more impactful strategic partners in their businesses through advanced enterprise performance management capabilities.

We built upon these competencies by aligning our strategy consulting, data, AI, and automation expertise with our cloud EPM offerings to compete and win against some formidable incumbents and competitors. We are also leveraging AI and advanced analytics to further enhance our competitive advantage while delivering increased value to our clients. For example, combining our deep manufacturing expertise with data, AI, and broader technology capabilities to leverage predictive modeling for preventive maintenance, which has resulted in significant savings for one of our manufacturing clients. While we remain at the early stages of execution of our integrated commercial strategy, our industry and capability strengths are already proving to be differentiated in our key end markets and offerings of focus.

Now let me turn to our outlook for the year. Today, we are updating our annual guidance by narrowing our RBR guidance to a range of $1.65 billion to $1.67 billion, affirming our adjusted EBITDA guidance range of 14% to 14.5% of RBR, and increasing our adjusted non-GAAP EPS to a range of $7.50 to $7.70. The midpoint of our RBR guidance reflects strong year-over-year growth in the fourth quarter, so we expect the underlying demand for our offerings across all segments will continue. In 2025, we have demonstrated our ability to sustain accelerated RBR growth and margin expansion despite a more challenging macroeconomic and regulatory environment.

Our market-tested strategy and durable balanced portfolio of offerings, coupled with disciplined execution, continues to deliver strong financial performance for our business and our shareholders. Now let me turn it over to John for a more detailed discussion of our financial results. John?

John Kelly: 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 a 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 excluded 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. Finally, we closed on the acquisitions of Trevyent and Wilson Peramol in July and September 2025, respectively. Commercial segment results for 2025 do include the results of TreLiant and Wilson Peramol starting from the dates of their respective acquisitions. Now I will share some of the key financial results from the third quarter. RBR for 2025 was a record $432.4 million, up 16.8% from $370 million in 2024.

Organic RBR, which excludes the RBR generated by all acquisitions completed subsequent to 2024 and the RBR generated by the Studer Education business in 2024, grew 10.2% over the prior year quarter, led by 18.6% organic RBR growth in our Healthcare segment. As Mark mentioned, achieving another quarter of record RBR reflects robust market demand for our offerings and is a testament to our highly talented and dedicated teams and their ability to deliver high-quality, innovative offerings to our clients. Net income for 2025 was $30.4 million, or $1.71 per diluted share, compared to net income of $27.1 million, or $1.47 per diluted share in 2024.

As a percentage of total revenues, net income decreased to 6.9% in 2025 compared to 7.2% in 2024. Our effective income tax rate in 2025 is 28.7%, higher than the statutory rate inclusive of state income taxes, primarily due to certain non-deductible expense items. We now expect an effective tax rate in the range of 23% to 25% for the full year. Adjusted EBITDA was $67.4 million in Q3 2025, or 15.6% of RBR, compared to $54.9 million, or 14.8% of RBR in Q3 2024.

The increase in adjusted EBITDA for the quarter was primarily due to increases in Healthcare and Education segment operating income, excluding the impact of segment depreciation and amortization, segment restructuring charges, partially offset by an increase in unallocated corporate expenses, excluding the impact of the change in the market value of our deferred compensation liability, transaction-related expenses, and decreased commercial segment operating income. Adjusted net income was $37.4 million, or $2.10 per diluted share in Q3 2025, compared to $31.1 million, or $1.68 per diluted share in 2024, resulting in a 25% increase in adjusted diluted earnings per share over Q3 2024. Now I'll discuss the performance of each of our operating segments.

The Healthcare segment generated 51% of total company RBR during 2025. This segment posted record RBR of $219.5 million, up $36.4 million, or 19.9% from 2024. 2025 included an inorganic contribution of $6.5 million of RBR from our acquisitions, while 2024 included $3.4 million of RBR from the Studer Education business, which was divested in 2024. Excluding the impact of these items, our organic growth rate in the Healthcare segment was 18.6% in 2025 compared to the same period in the prior year. The increase in RBR in the quarter was driven by broad-based demand across all of our offerings in the segment and led by strong growth in our Performance Improvement, Financial Advisory, and Revenue Cycle Managed Services offerings.

Operating income margin for healthcare was 30.9% in Q3 2025 compared to 27.1% in Q3 2024. The increase in margin was primarily due to revenue growth that outpaced an increase in salaries and related expenses for our revenue-generating professionals and a decrease in salaries and related expenses for our support personnel. We now expect full-year operating income margin for the healthcare segment to be in the 29% to 31% range. The education segment generated 30% of total company RBR during 2025. The education segment posted record RBR of $129.4 million, up $8.4 million, or 6.9% from 2024. The increase in RBR in the quarter was driven by strong demand for our strategy and operations, research, and digital offerings.

The inorganic RBR contribution from our acquisitions was $2.2 million in 2025. The operating income margin for education was 25.7% for Q3 2025, compared to 24.1% for the same quarter in 2024. The increase in margin was primarily due to revenue growth that outpaced an increase in compensation costs for our revenue-generating professionals. The commercial segment generated 19% of total company RBR during 2025, posting record RBR of $83.4 million, up $17.5 million, or 26.6% from 2024. The increase in RBR was driven by $19.6 million of incremental RBR from our acquisitions of Axia, Reliant, and Wilson Peramol. Operating income margin for the commercial segment was 16.4% for Q3 2025 compared to 24.5% for the same quarter in 2024.

The decline in margin in the quarter was primarily driven by increases in salaries and related expenses for our revenue-generating professionals and contractor expenses as percentages of RBR. The decline in margin is reflective of an increased mix shift toward our digital offerings during the quarter, as well as the transition period for certain acquisitions that we expect to become accretive in 2026. We expect our operating margins in this segment to be in a range of approximately 16% to 18% for the full year 2025, reflecting these factors. As Mark mentioned, for both our strategy and financial advisory offerings, we've seen an inflection point and saw improved sales conversion over the course of the third quarter and into October.

Corporate expenses not allocated at the segment level and excluding corporate restructuring charges were $56.5 million in Q3 2025 compared to $46.8 million in Q3 2024. Unallocated corporate expenses in 2025 included $2.7 million of expense related to the increase in the liability of our deferred compensation plan compared to $2.3 million of expense in 2024. These amounts are offset by the change in market value of the investment assets used to fund that plan, which is reflected in other income.

Excluding the impact of the deferred compensation plan and restructuring expense in both periods, unallocated corporate expenses increased $9.3 million in 2025, primarily driven by increases in salaries and related expenses for our support personnel, software and data hosting expenses, and legal and third-party professional expenses related to our programmatic acquisition activity during the quarter. Now turning to the balance sheet and cash flows. Cash flow from operations in 2025 was $93.8 million. During the quarter, we used $8.5 million to invest in capital expenditures, inclusive of internally developed software costs, resulting in free cash flow of $85.3 million.

We expect full-year free cash flow to be in a range of $165 million to $185 million, net of cash taxes and interest, excluding non-cash stock compensation. DSO came in at 76 days for 2025, compared to 78 days for 2025 and compared to 86 days for 2024. The decrease in DSO reflects the impact of collections on certain larger healthcare and education projects in alignment with our contractual payment schedules. Total debt as of September 30, 2025, was $611 million, consisting entirely of our senior bank debt. We finished the quarter with cash of $23.9 million and net debt of $587.1 million.

This was a $9.7 million decrease in net debt compared to Q2 2025, which incorporates the share repurchases and acquisition payments made during the quarter. Our leverage ratio, as defined in our senior bank agreement, was 2.3 times adjusted EBITDA as of September 30, 2025, compared to 1.9 times adjusted EBITDA as of September 30, 2024. We continue to expect our year-end leverage ratio to be approximately 2.0 times full-year adjusted EBITDA. In the third quarter, we used $18.6 million to repurchase approximately 147,000 shares, bringing our total year-to-date share repurchases to $152.5 million and approximately 1,085,000 shares, representing 6.1% of our common stock outstanding as of December 31, 2024.

As of September 30, 2025, $112.6 million remained available for share repurchases under the current share repurchase authorization from our Board of Directors. Finally, let me turn to our guidance for the full year 2025. As Mark mentioned, today we are updating our annual guidance by narrowing our RBR guidance to a range of $1.65 billion to $1.67 billion, affirming our adjusted EBITDA guidance range of 14% to 14.5% of RBR, and increasing our adjusted non-GAAP EPS to a range of $7.50 to $7.70. Thanks, everyone. I would now like to open the call to questions. Operator?

Operator: Thank you. At this time, please press 11 on your touch-tone telephone. If your question has been answered or you wish to remove yourself from the queue, you may do so by pressing 11 again. One moment for our first question. Our first question comes from the line of Andrew Nicholas of William Blair. Your line is open, Andrew.

Andrew Nicholas: Thanks, and good afternoon. Appreciate you taking my questions. Wanted to 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 it on 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 one-time 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.

Mark Hussey: Yeah. Andrew, it's Mark. I'll start and then John can provide some additional color commentary. You know, 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, you know, 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, you know, 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-reduce 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 and many markets from AMCs to, you know, 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.

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've got a team of people who are incredibly passionate about serving clients and care deeply about healthcare, 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 healthcare 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 within the market. John, do you want to add some color?

John Kelly: Yeah. Yeah, Mark. I'll add, Andrew, some commentary just on the pipeline as well as headcount within healthcare. 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 definitely continued during the first month of the fourth quarter.

Digging a little deeper on that pipeline, consistent with what 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 pressures that may be coming as it relates to Medicaid or research funding and trying to get ahead of it before they get a year or two 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.

Part of that reason is not only is it 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 healthcare. 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, 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 healthcare segment.

On the headcount side, you do absolutely see us leaning into this demand in terms of our headcount additions. You know, excluding the managed services headcount, we saw some significant headcount adds in the healthcare 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 headcount build. A lot of that is our India headcount for that part of the business, and that's really related to some of the opportunities that we're seeing there as well.

Andrew Nicholas: Perfect. Thank you. John, maybe I'll pick up on the last set of comments there just in terms of setting up for next year. Healthcare 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 2026 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 2026?

John Kelly: Yeah. Andrew, you know, obviously, we're still going through our planning process and, you know, 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, you know, 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 areas that we discussed. So that's certainly a favorable item. It gives us confidence in that model that we put out there at Investor Day.

And, you know, if you think about the range of outcomes for next year, you know, 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 to do would be to go back to that multiyear model that we discussed in March.

Andrew Nicholas: 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 the third quarter or at least as the 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 what is driving that, I guess, is the question. Thank you.

John Kelly: Andrew, I'll take that one. You know, I think if you look at what we said was the strategy and 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 in the restructuring and turnaround arena. And that's trickling into our business now as well, which gives us very strong confidence. You know, the sales conversion on those types of opportunities is 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 the earliest days of Wilson Peramol's and nice continued momentum there that has shifted perhaps to what we have seen for some softness early in the year. We feel like that's certainly at a good trajectory as well.

Andrew Nicholas: Thank you.

Operator: Our next question comes from the line of Tobey Sommer of Truist. Please go ahead, Tobey.

Tobey Sommer: Thank you. I want to start with a broad question. How is your hiring capability in the infrastructure from your perspective ahead of what looks like it could be a decently long period of rapid growth?

John Kelly: Hey, 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 two tangible things that does for us. It leads to lower attrition rates than you see across the industry and a lot of other places. And it also makes it a really attractive platform to attract people into. And so you've seen an increase in headcount 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.

Mark Hussey: Yeah. I guess, well said. The only thing I just maybe just foot stomp on that comment is, you know, strong culture for us is one of the most important things that we both 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, just having a great place that people choose to come to work.

Tobey Sommer: Perfect. Thanks for the answer. 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, etcetera, which seemed at least based on media flow to peak in late Q2, early Q3?

Mark Hussey: And, Toby, I believe you're seeing a, 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, you know, 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 potential 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.

Tobey Sommer: In managed services, where headcount 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?

John Kelly: Yeah. Toby, we have very high utilizations. 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.

You know, the sales cycle for a lot of these types of projects tends 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 and 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 headcount ads that you see.

Mark Hussey: Toby, I'll add there. In India, the culture is just as strong as it is in the US. 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 to stay a lot longer. That takes pressure off hiring when you need to. And so, you know, that's one of the key reasons that culture is such an important asset for us.

Tobey Sommer: Thank you. Just two other small ones, if I could fit them in. In restructuring, we saw some good wins in the news. How is the team winning bigger jobs?

Mark Hussey: Yeah. We've always had opportunities to win at larger engagements. I'd say, well, you know, our size is more of a boutique. You know, the reputation of quality that we have in delivery, particularly on restructuring assignments where we're representing the client 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, you know, the referral sources, whether, you know, the law firms or, you know, private equity, private debt, it's been a good consistent source of demand for us because of the reputation we built.

Tobey Sommer: And then last one for me. With respect to healthcare, 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?

John Kelly: Toby, that's a good question. And as you know, but, you know, just as a reminder, we work with our clients on, you know, 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 healthcare business, we've actually had a lower percent of contingent-based fees in 2025 than we did in 2024. 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 percent of revenue that's tied to performance-based fees may go back up again to the level it was at in 2024.

Tobey Sommer: Thank you very much.

Operator: Our next question comes from the line of Bill Sutherland of Benchmark. Please go ahead, Bill.

Bill Sutherland: Thanks, operator. Mark and John, good evening. 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?

Mark Hussey: No. I don't think it was exactly that, Bill. I just say, we have been performing well in that market. I don't think there's any real change in the competitive environment there.

Bill Sutherland: Okay. I misheard. I'm glad you clarified. In the education group, I know that you guys have talked in terms of the other two groups as far as the pipeline still being very active and the sales conversion strong coming through the third quarter. Does that also apply to education? I don't remember you specifically saying that.

John Kelly: Yeah. Yeah. Bill, it's John. We had record sales conversions in the second quarter of this year. We didn't get to a record status during the third quarter, but it was still strong sales conversions during the quarter. And, you know, 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 some strength there as well.

Bill Sutherland: 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?

John Kelly: I didn't. The reason I didn't, there was no change in it. So that it's consistent with where we're at before, which is 23% to 25%.

Bill Sutherland: Okay. That makes sense. The last one, I've been obviously, like everybody else in the world, thinking more about the AI side of things. 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, you know, to meet demand or could that be an area where a small acquisition would be helpful?

Mark Hussey: Yeah, Bill. Before John jumps in and gives you more of the color, let me just say we view the opportunity related to AI and automation as a positive for our business, and hopefully that came through in the remarks. You know? Because we're not a large-scale, not a large go and using scale and infrastructure to lower the cost or that we're not a generalist firm. We're a trusted implementation partner. So and 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 when we actually see this as very much a net positive for our business over time. So John, you want to maybe provide some color on how this finds its way into the numbers?

John Kelly: Yeah. So if you think about our 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 line gets even blurrier because 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 two would extend even beyond digital.

When you look at some of our performance improvement consulting, for example, I'd say it's a managed services part of our business, which is another one that Mark alluded to. I'd say automated solutions, use of AI, or 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. I think we're taking advantage of that kind of high digital fluency that we have at Huron.

Bill Sutherland: Makes sense. That's all I've got. Thanks, guys.

Operator: Thank you. As a reminder, to ask a question, please press 11. Our next question comes from the line of Kevin Steinke of Barrington Research. Please go ahead, Kevin.

Kevin Steinke: Great. Thank you. 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, you know, in the past, you've talked about really the potential of student lifecycle 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 type of implementations you're seeing in the mix there.

John Kelly: Yeah. Right now, Kevin, it's been really, I would call it, in core ERP. Financials, HCM, you know, kind of full suite type implementations. A little bit lighter on the student side. So I'd say comments are targeted more toward core ERP. And, Kevin, as I was thinking about your question, another good point to make, yeah. 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 in 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, clients who are not only trying to reset the foundation because they're on dated tools now that they need to get out to the more modern platforms, but also because they know that sets the stage for the next round of investment in AI-based functionality.

Kevin Steinke: 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 margin expansion going forward?

John Kelly: You got it exactly right, Kevin. The lower utilization that you see during the quarter was related to the headcount 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, we build out the team to not only deliver the opportunity between the back half of this year but also setting the stage for next year as well. 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.

I think you may see, you saw it this quarter, you may see for another quarter or two a little bit of pressure on that metric as we're building out the team getting ready to continue to grow the business.

Kevin Steinke: Okay. Great. I think most of my other questions have been answered, so I'll turn it back over. Thanks.

Operator: Thank you. Seeing no more questions in the queue, I'd like to turn the call back to Mister Hussey. Sir?

Mark Hussey: 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.

Operator: That concludes today's conference call. Thank you, everyone, for your participation.