Release Date: October 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Huron Consulting Group Inc (HURN, Financial) achieved a record sales quarter, with high quarterly bookings company-wide.
- The company's adjusted EBITDA margins increased by 140 basis points, and adjusted EPS rose by 21% over the prior year quarter.
- The healthcare and education segments continued their long track record of consistent growth, with healthcare revenues growing by 2% and education segment RBR increasing by 9%.
- Huron's commercial segment rebounded with a 12% sequential growth in the third quarter over the second quarter of 2024.
- The company has successfully deployed AI and automation capabilities to enhance efficiency in delivering services.
Negative Points
- Revenue growth in the third quarter was modest at 3%, reflecting a difficult comparison against the strong growth of 26% in Q3 2023.
- There was a shifting of some project work from the third quarter to the fourth quarter of 2024, impacting immediate revenue recognition.
- The commercial segment RBR declined by 3% over the prior year quarter, driven by financial advisory and strategy and innovation offerings.
- The education segment experienced delays in project starts, attributed to client-specific factors, which slowed organic growth.
- The company's effective income tax rate was less favorable than the statutory rate due to certain nondeductible expenses.
Q & A Highlights
Q: Can you provide more color on the fourth-quarter implied guidance and what gives you confidence in the acceleration?
A: John Kelly, CFO, explained that the confidence in the fourth-quarter guidance is primarily due to strong sales conversion activity in the third quarter, which was a record high, particularly in the healthcare business. The timing of some project conversions was later than anticipated, but the volume of deals won was stronger than expected, providing a solid foundation for 2025.
Q: Are you planning any incremental hiring to match talent with the strong sales pipeline?
A: John Kelly, CFO, stated that they feel confident in their current talent pool to deliver on revenue growth. The utilization rate is in the upper 75% range, indicating some capacity to handle growth. However, they are prepared to ramp up hiring if needed to meet future demand.
Q: Can you discuss the revenue mix and margin implications in the healthcare segment?
A: John Kelly, CFO, noted that the healthcare segment's growth was driven by digital and managed services. The sales conversion was balanced across performance improvement and digital transformation projects. They expect steady or improving margins in the fourth quarter, trending towards the upper end of their guidance.
Q: Is the mid-teens EBITDA margin target for 2025 still achievable?
A: John Kelly, CFO, expressed confidence in achieving mid-teens EBITDA margins in 2025. The company has seen a positive trajectory in margin improvement and believes there is room to optimize utilization further, supporting continued margin expansion.
Q: How is the M&A environment and pipeline looking for Huron?
A: C. Mark Hussey, CEO, mentioned that the M&A pipeline is robust, with opportunities in the commercial segment and healthcare and education. They are actively exploring inorganic growth opportunities and have a strong track record of successful acquisitions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
