Logo of jester cap with thought bubble.

Image source: The Motley Fool.

DATE

May 5, 2026

CALL PARTICIPANTS

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

Need a quote from a Motley Fool analyst? Email [email protected]

TAKEAWAYS

  • Revenue Before Reimbursable Expenses (RBR) -- $443.7 million, up 12.1%, driven by growth across all segments.
  • Net Income -- $23.2 million, or $1.34 per diluted share, with net income margin at 5.1%, versus $24.5 million and $1.33 per diluted share in the prior-year quarter (margin 6.1%).
  • Adjusted EBITDA -- $50.6 million, representing 11.4% of RBR, compared to $41.5 million and 10.5% of RBR previously.
  • Health Care Segment RBR -- $225.2 million, up 13.5%, making up 51% of total RBR, with a flat operating income margin of 28.4%.
  • Health Care Organic RBR Growth -- 10%, excluding $7.3 million from acquisitions of Cliffs Insights and Axient Systems' consulting division.
  • Education Segment RBR -- $127.5 million, up 3.8%, constituting 29% of total RBR, with an operating income margin increase to 21.6% from 18.8%.
  • Commercial Segment RBR -- $91.0 million, up 22.3%, accounting for 20% of total RBR, with operating income margin increasing to 16.4% from 15.2%.
  • Commercial Organic RBR Growth -- 8%, excluding $11.0 million impact from Reliant and Wells Comparable acquisitions.
  • Bookings -- Increased more than 20% across each segment for the six months ended March 31, 2026, contributing to historically high backlog coverage ratios.
  • Pipeline -- "all three of the segments are up as of April versus where they were as of December 31, and they remain at near-record levels even after giving effect to the bookings and the backlog that we have been talking about." (John D. Kelly)
  • DSO (Days Sales Outstanding) -- 82 days, compared to 79 days a year ago and 73 days at prior quarter-end, influenced by performance-based fee structures in large health care projects.
  • Cash Flow Used in Operations -- $162.2 million in the quarter (versus $106.8 million prior-year), primarily due to annual incentive payments.
  • Free Cash Flow -- Negative $174.1 million for the quarter, with continued full-year guidance of positive $180 million to $220 million.
  • Leverage Ratio -- 3.1x adjusted EBITDA, up from 2.2x, with the aim to return to 2.0x-2.5x by year-end.
  • Share Repurchases -- $155.5 million deployed for approximately 1.1 million shares (6.5% of beginning-of-year share count) repurchased in the quarter.
  • Full-Year 2026 Guidance Affirmed -- RBR expected in the range of $1.78 billion to $1.86 billion, adjusted EBITDA margin 14.5%-15%, adjusted non-GAAP EPS $8.35-$9.15.
  • Health Care Segment Capability Growth -- Consulting up 13%, managed services up 42%, digital down 7% in the quarter.
  • Education Segment Capability Growth -- Digital up 10%, managed services up mid-single digits, consulting slightly down.
  • Commercial Segment Capability Growth -- Consulting up approximately 50% organically, digital down mid-single digits.
  • Headcount Trends -- Largest increases in health care driven by hiring in managed services, education segment headcount steady or slightly lower, commercial segment headcount steady outside acquisition effects.

SUMMARY

Huron Consulting Group (HURN +0.09%) presented data supporting notable top-line growth and ongoing execution of its strategic plan, with each segment contributing positively to the quarter. Management highlighted “historically high coverage ratios” from strong bookings and backlog, as well as maintained a positive near-term demand outlook across health care, education, and commercial segments, reinforced by robust client pipelines. Guidance for revenue, margins, and adjusted EPS was reaffirmed despite pressure from higher share repurchases, increased leverage, and a significant year-over-year increase in operational cash outflows.

  • John D. Kelly said, "We did accelerate a lot of the buybacks in our plan in the first quarter, reflective of the stock price decline we saw during the quarter," indicating tactical capital deployment responsive to market valuation.
  • C. Mark Hussey stated, our views on AI and its potential impact on Huron Consulting Group Inc. remain bullish, underlining management's confidence in AI as a future growth lever and ongoing area of investment, with an emphasis on organic skill development and select partnerships rather than M&A.
  • Management described the education segment's buying environment as improving relative to last year, with institutions making longer-term, strategic investments despite ongoing industry challenges.
  • Demand trends in the commercial segment showed no adverse impact from geopolitical factors or sector-specific disruptions in the quarter.

INDUSTRY GLOSSARY

  • RBR (Revenue Before Reimbursable Expenses): Revenue measure excluding pass-through client expenses, providing a cleaner view of fee-based revenue within consulting and professional services firms.
  • DSO (Days Sales Outstanding): A metric indicating the average number of days it takes to collect payment after a sale is made.

Full Conference Call Transcript

C. Mark Hussey: Good afternoon, and welcome to Huron Consulting Group Inc.'s first quarter 2026 earnings call. With me today are John D. Kelly, our Chief Financial Officer, and Ronnie Dale, our Chief Operating Officer. I will begin by noting that the execution of our growth strategy continues to deliver performance consistent with the financial goals outlined for 2025 investor day. Revenues before reimbursable expenses, or RBR, increased 12% in 2026 compared to 2025, driven by growth across health care, education, and commercial segments including record RBR performance in health care. During the quarter, we also continued our trajectory of margin expansion reflecting disciplined execution by our highly talented team.

Encouraged by the strong start to the year, and the strength of our pipeline and backlog, we are affirming our annual RBR and margin guidance. We continue to believe we are well positioned to serve as our clients’ trusted adviser as they evolve their business models and organizations to succeed in challenging markets, in an increasingly complex AI-enabled world. We remain focused on executing against the market tailwinds driving demand for our business, and further strengthening our competitive position to enhance our ability to best serve our clients and achieve our financial goals. I will now share some additional insight into our first quarter performance.

In the health care segment, first quarter RBR grew 14% over the prior-year quarter, reflecting strong demand for our performance improvement, revenue cycle managed services, financial advisory, and strategy offerings as well as incremental RBR growth from the integration of our acquisitions. Excluding the impact of the acquisitions, organic growth for the health care segment was 10% in Q1 2026, as compared to Q1 2025. As we have discussed in prior earnings calls, health care providers are operating amidst the convergence of competitive and regulatory pressures that continue to impact financial performance and drive the need to redesign care delivery models.

Constrained reimbursements, rising operational costs, and labor shortages are intensifying the need for stronger cash flow, cost optimization, and greater operational flexibility. Health systems are facing a period of rapid transformation driven by advancements in technologies. Developing and executing an AI strategy amidst the rapid pace of change has become an increasingly important issue for a growing number of our clients. Providers are increasingly seeking trusted partners with the industry expertise that can help them integrate technology, workforce, and operating model changes into cohesive, executable strategies that deliver near-term financial benefit while positioning their organizations for sustainable growth, improved margins, and long-term competitive advantage.

We see significant opportunities for evaluating and integrating a broad and growing number of applications and use cases for AI and digital tools across clinical, administrative, and financial workflows in our clients’ complex operating environments. Our ability to help clients address enduring and new challenges and opportunities is at the heart of the growth strategy for our health care business. As we rapidly expand and integrate our AI capabilities across our health care offerings, we believe our distinctive operational and technology expertise along with innovative new solutions and partnerships position us well to continue our growth trajectory.

Turning next to the education segment, in 2026, education segment RBR grew 4% compared to 2025, driven by strong demand for our digital offerings. Higher education institutions are experiencing uneven demand among domestic students and a significant decline in international students. Amidst that backdrop, institutions are contending with rising operating costs, funding declines, heightened regulatory scrutiny, and further erosion of public confidence in the value of a traditional four-year degree. These dynamics are forcing higher education leaders to confront fundamental questions about scale, academic portfolio mix, cost structure, and long-term financial sustainability.

We believe our strong market position in higher education provides the opportunity to serve as an experienced partner that can help our clients move beyond incremental actions toward more integrated strategic transformation. Universities are prioritizing solutions that deliver near-term financial improvement while modernizing operating models, administrative workflows, and academic offerings, while increasingly leveraging AI. We believe our strong client relationships, deep industry expertise, AI capabilities, and comprehensive portfolio of offerings position us to continue to serve as a partner of choice for our clients as they address these ongoing challenges. In the commercial segment, first quarter RBR grew 22% over the prior-year quarter reflecting strong demand for our financial advisory and strategy offerings.

The increase also included incremental RBR from our acquisitions of Reliant and Wilson Parable. Excluding the impact of acquisitions, RBR in Q1 2026 grew 8% organically over 2025. Commercial industries are navigating heightened complexity driven by persistent cost inflation, global supply chain realignment, geopolitical and regulatory uncertainty, and continuously evolving customer and employee expectations. At the same time, companies are accelerating the adoption of AI-enabled, data-driven operating models to improve agility, productivity, and decision making. These forces are driving demand for comprehensive solutions that integrate strategy and operations, financial advisory, and digital and AI transformation.

We continue to invest in expanding our offerings to address the rapidly changing needs of our global client base, and those investments are delivering more durable growth in our commercial business in recent quarters. We will continue to deepen our industry expertise and expand our ability to deliver differentiated end-to-end solutions to enhance our competitive advantage and best address the growing needs of our clients. Through the first quarter, our views on AI and its potential impact on Huron Consulting Group Inc. remain bullish, as we believe it will be a significant contributor to future growth, margin expansion, and shareholder value.

Multiple third-party research providers forecast that the AI services market will grow in the double digits over the next several years, and we believe we are well positioned to help our clients plan and execute their AI strategies and take advantage of this rapidly growing market opportunity. We have substantially increased our investment in AI capabilities and will continue to deploy them throughout our offerings and operations, building upon our industry and functional knowledge. Beyond AI, the fundamental market tailwinds for continuing growth in our business remain, creating opportunities across all three operating segments.

We believe our ability to bring together our strategy, operations, technology, and people-related offerings to redesign core business functions and processes, while integrating advanced technologies, will continue to position us for long-term growth. Now let me turn to our outlook for the year. Today, we are affirming our 2026 guidance for RBR, adjusted EBITDA margin, and adjusted diluted earnings per share. Given our strong first quarter results, I am increasingly encouraged about our prospects for the year. We remain committed to driving long-term shareholder value through continued execution of our growth strategy, which has delivered consistent RBR growth and margin expansion since 2022.

Our disciplined capital allocation strategy has funded both programmatic M&A and, since 12/31/2022, the repurchase of 5 million shares, or 25% of our common stock outstanding. We believe there is significantly more value to be unlocked by our strategy, particularly as we leverage our collaborative, entrepreneurial culture to compete and win in today’s rapidly evolving technological and competitive landscape. In summary, we believe our strong competitive position in health care and education enables us to leverage our expertise and powerful portfolio of consulting, managed services, and digital capabilities.

We also believe our size and scale in commercial markets enables us to be nimble and aggressive with an integrated operating model that amplifies our impact across consulting, digital, and managed services capabilities. Driven by the velocity of change and complexity facing our clients, our people are well positioned to continue to execute upon our growth strategy, and achieve our stated financial goals for low double-digit revenue growth, margin expansion, and disciplined deployment of our strong free cash flow. None of this would be possible without our strong collaborative culture. Our innovative and dedicated team continue to be the heart and soul of our company.

With that, let me now turn it over to John for a more detailed discussion of our financial results. John?

John D. 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 Consulting Group Inc. 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. Now I will share some of the key financial results for 2026.

Q1 2026 produced RBR of $443.7 million, up 12.1% from $395.7 million in the same quarter of 2025, driven by growth across all three operating segments. Net income for Q1 2026 was $23.2 million, or $1.34 per diluted share, compared to net income of $24.5 million, or $1.33 per diluted share, in Q1 2025. As a percentage of total revenues, net income declined to 5.1% in Q1 2026 compared to 6.1% in Q1 2025, reflecting a higher effective tax rate during Q1 2026.

Our effective income tax rate in Q1 2026 was 14.1%, which is more favorable than the statutory rate inclusive of state income taxes, primarily due to a discrete tax benefit for share-based compensation awards that vested during the quarter, partially offset by certain nondeductible expense items. Our effective income tax rate in Q1 2025 was negative 14.4%, as we recognized an income tax benefit on our pretax income driven by the discrete tax benefit for share-based compensation awards that vested during the quarter. The increase in effective tax rate during 2026 was anticipated in the 2026 guidance that we provided in February, and our expectation for a full-year effective tax rate between 28% and 30% remains unchanged.

Adjusted EBITDA was $50.6 million in Q1 2026, or 11.4% of RBR, compared to $41.5 million in Q1 2025, or 10.5% of RBR. The increase in adjusted EBITDA was primarily attributable to the increase in segment operating income for all three segments, excluding segment depreciation and amortization and segment restructuring charges, partially offset by an increase in certain unallocated corporate expenses. Adjusted net income was $30.0 million, or $1.73 per diluted share, in Q1 2026 compared to $31.1 million, or $1.68 per diluted share, in Q1 2025. Now I will discuss the performance of each of our operating segments. The health care segment generated 51% of total company RBR during Q1 2026.

This segment posted a record RBR of $225.2 million, up $26.7 million, or 13.5%, from Q1 2025. The increase in RBR in the quarter was driven by strong demand for our performance improvement, revenue cycle managed services, financial advisory, and strategy offerings. RBR in Q1 2026 included $7.3 million of incremental RBR from our acquisitions of Cliffs Insights and the consulting services division of Axient Systems. Operating income margin for the health care segment was flat at 28.4% in both Q1 2026 and Q1 2025. The education segment generated 29% of total company RBR during Q1 2026. Education segment RBR in Q1 2026 was $127.5 million, up $4.7 million, or 3.8%, from Q1 2025.

RBR in Q1 2026 included an inorganic RBR contribution of $0.6 million from acquisitions that closed in 2025. The operating income margin for education was 21.6% for Q1 2026 compared to 18.8% for the same quarter in 2025. The increase in operating income margin in the quarter was primarily driven by decreases in compensation costs for our revenue-generating professionals, practice administration, and meeting expenses. The commercial segment generated 20% of total company RBR during Q1 2026 and grew 22.3% over the prior-year period, posting RBR of $91.0 million for Q1 2026 compared to $74.5 million in Q1 2025.

The increase in RBR in Q1 2026 was driven by increased demand for our financial advisory and strategy offerings and included $11.0 million of incremental RBR from our acquisitions of Reliant and Wells Comparable. Operating income margin for the commercial segment was 16.4% for Q1 2026 compared to 15.2% in the same quarter in 2025. The increase in operating income margin in the quarter was primarily driven by decreases in contractor expenses and salaries and related expenses for support personnel, as well as revenue growth that outpaced the increase in performance bonus expense for our revenue-generating professionals, partially offset by an increase in salaries and related expenses for our revenue-generating professionals as a percentage of RBR.

Corporate expenses not allocated at the segment level and excluding restructuring charges were $60.0 million in Q1 2026, compared to $52.4 million in Q1 2025. Unallocated corporate expenses in Q1 2026 and Q1 2025 included income of $1.2 million and $0.9 million, respectively, related to changes in the liability of our deferred compensation plan, which is offset by the change in fair value of the investment assets used to fund that plan reflected in other expense. Excluding the impact of the deferred compensation plan in both periods, unallocated corporate expenses increased $7.9 million primarily due to increases in compensation costs for our support personnel and software and data hosting expenses.

The increase in compensation costs for our support personnel includes approximately $2.0 million of costs that have been reclassified from our operating segments in 2026 reflective of a shift to centralized support for certain functions. Cash flow used in operations during Q1 2026 was $162.2 million, reflecting our annual incentive payments during the quarter. Cash flow used in operations during Q1 2025 was $106.8 million. In Q1 2026, we used $11.9 million to invest in capital expenditures inclusive of internally developed software costs, resulting in negative free cash flow of $174.1 million.

We continue to expect full-year free cash flow to be in a range of positive $180 million to $220 million, net of cash taxes and interest, excluding noncash stock compensation. DSO came in at 82 days for Q1 2026, compared to 79 days for Q1 2025 and 73 days for Q4 2025. The increase in DSO during the first quarter when compared to both periods reflects the impact of certain larger health care projects that include performance-based fee elements that we expect to bill and collect in 2026 in accordance with the contractual payment terms.

During Q1 2026, we used $155.5 million to repurchase approximately 1.1 million shares, representing 6.5% of our outstanding shares as of the beginning of the year. Total debt as of 03/31/2026 was $856.0 million, consisting entirely of our senior bank debt, and we finished the quarter with cash of $26.5 million for net debt of $829.5 million. This was a $343.0 million increase in net debt compared to Q4 2025, primarily due to our annual cash bonus payment and share repurchases during the quarter. Our leverage ratio, as defined in our senior bank agreement, was 3.1x adjusted EBITDA as of 03/31/2026 compared to 2.2x adjusted EBITDA as of 03/31/2025.

As a reminder, our first quarter typically represents a seasonal high leverage ratio given the payout of our annual bonuses in March. We remain committed to achieving a leverage ratio between 2.0x and 2.5x by year-end 2026 in alignment with the capital allocation strategy outlined at our most recent Investor Day. We accelerated our share repurchases during the first quarter, reflective of the decline in our share price during the quarter. I believe the reduction in share base, combined with the earnings growth objectives discussed at our 2025 Investor Day, positions us well to achieve continued compounding adjusted diluted earnings per share growth in the future. Now let me turn to our expectations and guidance for 2026.

As Mark mentioned, today we affirm our annual RBR, margin, and adjusted EPS guidance, which includes RBR in the range of $1.78 billion to $1.86 billion, adjusted EBITDA in the range of 14.5% to 15% of RBR, and adjusted non-GAAP EPS in the range of $8.35 to $9.15. Thanks, everyone. I would now like to open the call to questions. Operator?

Operator: Thank you. If your question has been answered or you wish to remove yourself from the queue, you may do so by pressing star-1-1 again. One moment for our first question, please. Our first question comes from the line of Andrew Owen Nicholas of William Blair. Please go ahead, Andrew.

Andrew Owen Nicholas: Hi, good afternoon. I appreciate you taking my questions. Mark, you hinted at it a few times in the prepared remarks. I was hoping you could start by just talking about pipeline development throughout the quarter, where bookings sit. I think last quarter, you gave some really helpful disclosures on bookings in particular. So any update there and maybe how you are feeling about that pipeline relative to a couple of months ago?

C. Mark Hussey: Go ahead, John.

John D. Kelly: Yeah. Andrew, this is John. I can jump in with that. So in the trailing six-month period, the period ending 03/31/2026, bookings were up greater than 20% across all three of the segments. Backlog, after we book the sales, now gives us coverage for the remaining revenue guide for the remainder of the year and beyond. That remains at historically high coverage ratios across all three segments. And then from a pipeline perspective, all three of the segments are up as of April versus where they were as of December 31, and they remain at near-record levels even after giving effect to the bookings and the backlog that we have been talking about.

Andrew Owen Nicholas: Awesome. Thank you. And I do not think that the 10-Q is out yet, so I was hoping you could maybe provide some segment-level color on growth by capability. In particular, I am interested in how digital trended within health care and commercial in particular. It looks like utilization was a little bit lower this quarter relative to a year ago. So any color at the segment level by capability would be helpful.

John D. Kelly: Yeah, sure thing, Andrew. From a health care perspective, consulting is up 13% during the quarter. Managed services was up 42%. Digital was down 7% during the quarter, and that really reflects some of the dynamics that we talked about throughout last year, where a lot of the demand we are seeing right now is attached to performance improvement engagements as well as our managed services offering, as clients grapple with some of the financial strain that they are seeing within their environment. From an education segment perspective, consulting was down slightly. Digital within that segment was up 10%. Managed services was up in the mid-single-digit percent range.

We continue to see really good demand across all of the capabilities within the education segment, which gives us continued encouragement about progressively increasing growth there as the year goes on, or at least into the next quarter. Digital remains an area where we see a lot of investment from our clients right now as they invest in some of the foundational tools that they need to drive operating efficiencies within the business. And then within the commercial segment, consulting was up approximately 50% during the quarter. That does include inorganic contributions from Wilson Peril and Treliant during the quarter. And the digital part of the business was down in the mid-single-digit percent range.

Andrew Owen Nicholas: That is helpful. And then if I could just ask one more question on commercial. You said that bookings are up 20% plus across all the segments, high coverage ratios, strong pipelines. Did you see any change to demand within commercial as the quarter progressed? I know it is a small part of your overall mix, but I know you have some energy and utilities business. I am wondering if geopolitical conflict had any impact on that or conversations broadly.

John D. Kelly: Really, Andrew, we did not see any change by industry within the commercial segment, so we did not see any change to demand for our energy and utilities. I would say demand remains strong for our digital capability within commercial. There is a little bit of timing during the quarter where we had a couple of our larger projects wind down toward the first part of the first quarter. A couple of the replacement projects that we sold during the quarter started a little later out of the gate than we initially anticipated. Our expectation is that digital more broadly for the year will get back into the mid- to upper-single-digit growth range starting next quarter.

And we also expect that to pivot the growth range within the commercial segment next quarter as well.

Operator: Thank you. Our next question comes from the line of Tobey O'Brien Sommer of Truist. Please go ahead, Tobey.

Tobey O'Brien Sommer: Thank you. I was wondering if you could talk about the pace of headcount growth year over year and sequentially, what is driving that, where you are maybe still catching up on staffing based on the demand you are seeing? And if you could comment on domestic versus international, that would be helpful. Thanks.

John D. Kelly: Sure, Tobey. I can jump in with the headcount increases. In health care, you see a year-over-year larger percent increase in the business, and let us exclude managed services, which is reflective of a lot of the hiring we did in the back half of last year to support the growth that we are seeing. I would expect that to normalize as the year goes on, as we get towards the back half of the year and it starts to pick up in the comparatives. The hiring that we did last year should normalize.

From an education industry perspective, it is actually pretty steady, if not down a little bit, which reflects what we talked about previously with utilization being lower last year than our target, and the expectation that as we ramp back up into growth this year, you will see that first in the form of stronger utilization. So you see relatively conservative growth from an education industry perspective. From a commercial perspective, you do see the impact of the acquisitions that we did year over year within commercial, and beyond that, I would describe headcount as pretty much steady with the pace of organic growth that we see.

In terms of geography, the majority of the global headcount adds that we have seen have been in the managed services part of the business. The health care managed services adds during the quarter are primarily coming from our global team.

Tobey O'Brien Sommer: And as you look at your business, you do us the favor of describing it in a matrix way across functional area and then industry. Where do you see the company lagging or exceeding what you understand to be market rates of growth?

C. Mark Hussey: Tobey, maybe starting with health care, we continue to see very strong demand. It is probably not quite at exactly the same level of strong that we characterized last quarter, but when you look at our long-term growth outlook that we described in terms of percentages, we are seeing consistent opportunities with that. Those are the secular tailwinds driving demand in our business. In education, that mid-single-digit growth continues to be consistent as well. Commercial is a mix of industries and capabilities, so it is a little bit harder to distill into a very tight description. In areas like our restructuring business, we are at market rates, maybe even a little bit better, as an example.

With the acquisition of Wilson Perrigo coming in and some of the growth that we have seen there, probably at or perhaps above some market growth rates that we have seen. As John said, in digital we see a little bit of timing issues, and we would say we are probably consistent with what the broader market would be looking at in additional areas in commercial.

Tobey O'Brien Sommer: After a quarter with a pretty large repurchase, could you update us on where you think you end the year from a leverage perspective and what the mix of your capital deployment we should expect?

John D. Kelly: We remain committed to a low-twos leverage ratio at the end of the year. That is not a change from our objectives. We did accelerate a lot of the buybacks in our plan in the first quarter, reflective of the stock price decline we saw during the quarter. I would not say that we will be done with repurchases, but you will see us pace a little bit slower through the remainder of the year, being mindful of our perspective that we want to get back to the low twos from a leverage perspective. The other lever where we deploy capital is strategic tuck-in M&A. We are still active in terms of reviewing M&A possibilities.

I think you will see some M&A, and it will be a slower pace than last year, primarily driven by the opportunity we saw with our own stock at the start of the year and the desire to buy back as many shares as we could during the first quarter at the current valuation.

C. Mark Hussey: I would just add there is greater scrutiny around valuations in the current market, with perhaps a lot more rigor to understand those. So I think the cadence with patience may be a little bit slower than last year. For the full year, we have described in the past M&A contribution to our growth rate of 2% to 4%, probably a little bit closer to the lower end of that range, but certainly consistent with what we described to our investors back in 2025.

Operator: Thank you. Our next question comes from the line of William Sutherland of Benchmark. Your line is open, Bill.

William Sutherland: Thank you. Hey, good evening, everybody. John, you did not update the full-year expectations for segments, and I assume that means we can just use that slide from your last call, your year-end?

John D. Kelly: That is right, Bill. There is no movement based on first-quarter results versus what we put out there. I do want to take a second to give one correction to a question that Andrew had asked earlier. It relates to consulting within the commercial segment. The roughly 50% growth is actually organic. I said that includes Wilson Peril and Reliant. Wilson Peril and Reliant are on top of that. I wanted to offer that one quick correction.

William Sutherland: That is good to know. I have not gone through the restated headcount for the moving of responsibilities around, but it seemed to me that you had gotten ahead of the curve as far as hiring in health care into the first part of this year. Was that the case, or is there more of a steady state as far as the adds to headcount that we should expect there?

John D. Kelly: You are right. The reclass that I mentioned in my commentary is a very small item. The broader story with health care is that we did do a significant amount of hiring in the third and fourth quarter last year. That was really two things: part of it was catching up a little bit—our utilization in that part of the business was too high in the first half of last year—keeping up with the demand we saw last year, and there was also the component that was getting us well positioned for the growth in that part of the business for this year.

We did a lot of that hiring in the back half of last year, and that comes through in the metrics. I would expect that as the year goes on, you will see more of a normalization of headcount growth in health care, more in line with the revenue growth rate.

William Sutherland: In the education segment, I know it is a little more challenging from a sales motion perspective, given the lack of centralization of some of the decision making. Is there a general sense that you are getting that they are getting more inclined to take on engagements they could benefit from, or does it feel like there is a lot of hesitation given all the wood to chop that they have?

C. Mark Hussey: Bill, it is always interesting in higher ed. If you went back a year ago, we might have expected more short-term decision making, and it did not occur that way. It continues to be a fairly steady drumbeat of thinking about their universities’ positioning with a longer-term basis. Institutions have been around a few hundred years; they do not really think in the short term. We do see various pockets where the bigger projects that we thought perhaps might have gone away continue to be in the mix. I would conclude it is business as usual in higher ed right now.

John D. Kelly: If you go back a year ago with the evolving regulatory landscape, while a lot of the strain within the industry was good for our longer-term demand, it did create some disruption for some clients last year. It was not the same in every client, but at some, there was significant disruption. In terms of the buying environment, where we were a year ago versus now, while it is still uncertain, a lot of our clients are focused on getting on with their agendas and making investments to pursue those agendas. It is a stronger buying environment this year within the education segment than twelve months ago.

William Sutherland: Last one. John, you mentioned a couple of larger health care projects where the DSO was stretching a little bit. Is there a larger engagement trend going on in health care, or did those just occur without a trend?

John D. Kelly: I would say not a change in trend this year versus last year. We did see a trend last year in terms of sales toward some larger projects, and we are still executing on those. To be clear, we are still selling some larger projects this year. I would not describe it as an even further increasing trend in 2026 versus 2025. Often within health care, when you have larger projects with performance-based fee elements, that requires some DSO investment during initial phases before you hit milestones with the client. We are in that phase on some of those projects sold last year and this year, and we expect to bill and collect upon achievement of those milestones in 2026.

William Sutherland: I understand the cash issue, but I was actually thinking maybe the efficiency of extended projects—you might be benefiting from that in terms of utilization and margins?

John D. Kelly: Those types of projects do provide great opportunities to get significant portions of our teams engaged for a longer duration, which is good from a utilization perspective within the segment.

Operator: Thank you. Our next question comes from the line of Kevin Mark Steinke of Barrington Research Associates. Please go ahead, Kevin.

Kevin Mark Steinke: Great, thank you. Most of my questions have been asked, but I wanted to follow up on a comment you made about remaining bullish on AI being a growth driver for your business. You mentioned the AI services market is expected to grow double digits. Do you feel like you have the capabilities in-house to address that market opportunity, or could there be acquisition activity in that area? I do not know how developed the market is from an AI services perspective to actually be able to make acquisitions there, but any comments would be appreciated.

C. Mark Hussey: Sure thing, Kevin. We have been pretty successful at organically investing in this area. We have a Chief AI Officer who has been really helpful to elevate our game across each of our businesses and continue to deploy capabilities not only on the client-facing side, but also in our enterprise functions and delivery methodologies. Our ability to realize the opportunity in the market is something that we are confident in. We feel like we can hire the right people and we have not had a problem attracting talent.

From an M&A standpoint, for the reasons you described, valuations are probably going to be pretty high, and I am not sure that would be the best use of our capital given that we can do these things organically. We think there are more investments to be made, but it is largely built into the model we have created. We have partnerships—like Hippocratic AI and other firms—that can help us accelerate impact as well. It is an area where “bullish” is the right word. We see a lot more opportunity, recognizing there will be risk and transformation in everything, but we are quite excited about it.

John D. Kelly: I would add that a little-underappreciated part of our business—even going back several years before a lot of the evolution of AI tools—is that about 40% of our revenue comes from our technology business, our digital business. We have, natively within our employee base, significant talent with digital skills, using many of the platforms where AI is now being infused and where our clients are looking to get at-scale benefits. That does not mean we do not need to add additional talent with new AI capabilities, but the base was strong.

If you look at the objectives we are delivering for clients in terms of outcomes—often financial outcomes within the industries that we serve—we have deep expertise in driving those outcomes. Take those two things together, and as we continue to add AI talent, we feel really well positioned to serve our clients in those core areas.

Kevin Mark Steinke: Thank you. That is helpful commentary. I appreciate it.

Operator: Seeing no more questions in the queue, I would like to turn the call back to Mr. Hussey.

C. Mark Hussey: Thanks for spending time with us this afternoon, and we look forward to speaking with you again in July when we announce our second quarter results. Good evening.

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