Huron's Q3 2025: Contradictions Emerge on Healthcare Sales Momentum, Utilization, and Hiring Capabilities

Date of Call: October 28, 2025

Financials Results

• Revenue: $432.4M RBR in Q3 2025, up 16.8% YOY (vs $370M in Q3 2024)
• EPS: $2.10 adjusted diluted EPS in Q3 2025, up 25% YOY (adjusted); GAAP $1.71 diluted vs $1.47 prior year
• Operating Margin: Adjusted EBITDA 15.6% of RBR in Q3 2025 compared to 14.8% in Q3 2024

Guidance:

• RBR narrowed to $1.65B to $1.67B for full year 2025.
• Adjusted EBITDA affirmed at 14.0% to 14.5% of RBR.
• Adjusted non-GAAP EPS increased to $7.50 to $7.70 for full year 2025.
• Healthcare full-year operating income margin expected 29% to 31%; Commercial ~16%–18%; Education consistent at 23%–25%.
• Full-year free cash flow expected $165M to $185M; effective tax rate now 23%–25%; year-end leverage targeted ~2.0x.

Business Commentary:

* Revenue and Growth Across Segments: - Huron Consulting Group achieved record revenue before reimbursable expenses (RBR) of $432.4 million in Q3 2025, up 17% year-on-year. - Growth was driven by robust demand across all three operating segments, with Healthcare and Education segments experiencing 20% and 7% RBR growth respectively.

• Healthcare Segment Performance Improvement:
• In the Healthcare segment, RBR grew 20% in Q3 2025 compared to Q3 2024.

• The increase was due to broad-based demand, particularly for performance improvement, financial advisory, and revenue cycle managed services offerings, driven by healthcare providers' margin pressure and regulatory challenges.

• Education Segment Digital Transformation:

• The Education segment's RBR increased by 7% in Q3 2025 compared to the same quarter in 2024.

• Strong demand was driven by digital transformation projects and the need for modernization in data and technology foundations, allowing institutions to leverage newer technologies like AI and automation.

• Commercial Segment Acquisition Integration:

• Commercial segment RBR grew 27% year-on-year, with acquisitions contributing $19.6 million of RBR.
• The growth was supported by the integration of strategy and operations expertise and the ability to deliver immediate financial savings while refining strategic growth refinements, especially with the acquisition of Wilson Perumal & Company.

Sentiment Analysis:

Overall Tone: Positive

• Company reported "record RBR of $432.4 million, up 16.8% YOY" and described "continued margin expansion and earnings per share growth." Management narrowed RBR guidance and raised adjusted EPS to $7.50-$7.70, and repeated multiple times that demand and sales conversion are strong across segments, supporting growth and margin outlook.

Q&A:

• Question from Andrew Nicholas (William Blair & Company L.L.C., Research Division): I wanted to just start on performance improvement and really consulting within the Healthcare segment this quarter, really seems to have popped quarter-over-quarter. ... maybe somewhat relatedly, if there's anything onetime 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?
  Response: Management: This is possibly the strongest market seen; broad-based margin pressure is driving large, integrated performance-improvement engagements, record pipeline and strong sales conversion; hires underway to support sustainable demand.

• Question from Andrew Nicholas (William Blair & Company L.L.C., Research Division): John, maybe I'll pick up on the last kind of comments there. Any comments that you'd make on '26 broadly? ... should we expect anything meaningfully different from that framework next year or maybe puts and takes for us to consider as we think about '26.'
  Response: Management: Still in planning; refer to Investor Day multiyear model—recent stronger demand could push outcomes toward the higher end, but no formal 2026 guidance yet.

• Question from Andrew Nicholas (William Blair & Company L.L.C., Research Division): On commercial, you talked about seeing an inflection point in demand over the course of third quarter ... Anything else that you could add there? Like what is driving that improved conversion?
  Response: Management: Increased restructuring/turnaround demand and momentum from newly acquired strategy capabilities (Wilson Perumal) are improving sales conversion and shortening time-to-engagement.

• Question from Tobey Sommer (Truist Securities, Inc., Research Division): How is your hiring capability in the company's infrastructure from your perspective ahead of what looks like it could be a decently long period of rapid growth?
  Response: Management: Confident—strong culture yields lower attrition and attracts talent; recent head count additions show ability to scale to demand.

• Question from Tobey Sommer (Truist Securities, Inc., Research Division): In education, how would you describe customer decision-making? Do your customers feel like they're through the worst of the turbulence and volatility ...?
  Response: Management: Market at an equilibrium; clients are making longer-term, thoughtful decisions (e.g., digital transformation), and outlook for education is stable.

• Question from Tobey Sommer (Truist Securities, Inc., Research Division): On managed services, where head count growth is very, very high. Can you talk about how you're going to fully absorb those people ... and what your outlook is for long-term utilization among those folks?
  Response: Management: High utilization in managed resources; hiring closely tied to sales with tight conversion-hiring correlation and measured ramp, including India team with low turnover.

• Question from Tobey Sommer (Truist Securities, Inc., Research Division): In restructuring, we saw some good wins in the news. How is the team winning bigger jobs?
  Response: Management: Wins driven by strong reputation for high-quality delivery and relationships with referral sources (law firms, PE, lenders), enabling larger engagements.

• Question from Tobey Sommer (Truist Securities, Inc., Research Division): With respect to health care, 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?
  Response: Management: 2025 had a lower percent of contingent fees as clients preferred fixed-fee work, but based on late-year sales, performance-based fee percentage is expected to rise again in 2026.

• Question from William Sutherland (The Benchmark Company, LLC, Research Division): 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?
  Response: Management: No—digital competitive environment unchanged; Huron is performing well in commercial digital.

• Question from William Sutherland (The Benchmark Company, LLC, Research Division): In the Education group ... Does that also apply to education? ... pipeline still very active and the sales conversion is strong coming through the third quarter?
  Response: Management: Education had strong sales conversions in Q3 (not record) and is off to a strong start in Q4 as well.

• Question from William Sutherland (The Benchmark Company, LLC, Research Division): When you were talking about the segments and the expected margin range for the year, did you give education? Or did I miss it?
  Response: Management: Education operating income margin unchanged at 23%–25% for the year.

• Question from William Sutherland (The Benchmark Company, LLC, Research Division): Curious about the percentage of your book that has at least somewhat of an AI focus. And with that, are you finding yourself able to build the resources internally sufficient to meet demand? Or could that be an area where a small acquisition would be helpful?
  Response: Management: Digital is ~40% of revenue; 15%–20% currently AI-focused and rising as AI permeates projects; Huron has strong internal digital talent and is well positioned to scale organically.

• Question from Kevin Steinke (Barrington Research Associates, Inc., Research Division): You talked about the strong demand in education for digital transformation projects. ... wondering a little bit more about any color on the types of implementations you're seeing in the mix there?
  Response: Management: Mix is primarily core ERP (financials, HCM, full-suite) rather than student-life systems; clients invest in foundational platforms to enable future AI/automation.

• Question from Kevin Steinke (Barrington Research Associates, Inc., Research Division): Utilization rate on the consulting side stepped down sequentially; assuming related to ramped-up hiring. Talk about opportunity for utilization to improve going forward and how that contributes to margin expansion?
  Response: Management: Q3 utilization dipped due to investment hiring; expect to return to upper-70% range over time, but may see 1–2 quarters of pressure while building capacity.

Contradiction Point 1

Sales Conversion Trends in Healthcare

It involves differing perspectives on the sales conversion trends in the healthcare segment, which impacts investor expectations for growth and revenue.

How did conversion rates improve in commercial strategy and financial advisory for Q3? - [Andrew Nicholas](William Blair & Company L.L.C.)

2025Q3: We're seeing demand upticks in restructuring and turnaround, leading to short sales cycles. Combining strategy and financial advisory capabilities is driving momentum. We feel confident in the sales conversion trends. - [Mark Hussey](CEO)

Are slower digital transformation sales conversions temporary, and do they impact guidance? - [Andrew Owen Nicholas](William Blair & Company L.L.C.)

2025Q2: The slowdown in sales conversions for digital transformation is temporary due to clients focusing on financial stability. The consulting side remains strong, driving confidence in guidance. - [John D. Kelly](CFO)

Contradiction Point 2

Healthcare Utilization and Margin Expansion

It involves differing expectations regarding utilization levels and their impact on long-term margin expansion, which are critical for financial forecasting and investor confidence.

How are managed services headcount adjustments being managed, and what is the outlook for utilization? - [Tobey Sommer](Truist Securities, Inc.)

2025Q3: Lower utilization is due to headcount additions for capacity. As projects ramp up, utilization should improve, supporting long-term margin expansion. - [John Kelly](CFO)

What are your expectations for healthcare utilization and growth with rising medical costs? - [Tyler Barishaw](Truist Securities)

2024Q4: Utilization remains strong, with expectations for improvements in the first half of 2025. - [Mark Hussey](CEO)

Contradiction Point 3

Pipeline and Sales Conversion Strength in Healthcare

It highlights differing perspectives on the strength and stability of the sales conversion pipeline in the Healthcare segment, which is crucial for forecasting and investor expectations.

Can you detail the drivers, pipeline, hiring, and any one-time or unsustainable factors behind the Healthcare segment's performance and consulting improvements this quarter? - [Andrew Nicholas](William Blair & Company L.L.C.)

2025Q3: We've seen strong sales conversion rates, and the pipeline remains at record highs. - [John Kelly](CFO)

How has the pipeline been affected by the changing regulatory environment? - [Andrew Nicholas](William Blair & Company)

2024Q4: In the past two financial quarters, we have delivered a combined 20% of our organic sales growth from conversions out of our robust pipeline, which has been stable throughout the year. - [John Kelly](CFO)

Contradiction Point 4

Headcount Growth and Hiring Capabilities

It involves differing statements on the company's ability to hire talent and accommodate headcount growth, affecting investor confidence in the company's operational capabilities.

How is Huron's hiring capacity prepared for expected growth? - [Tobey Sommer](Truist Securities, Inc.)

2025Q3: We feel confident in our ability to hire talent due to our strong culture, which leads to lower attrition and attracts new talent. We've successfully added headcount despite a strong demand. - [John Kelly](CFO)

Can you discuss headcount growth in the current market? Where are new hiring priorities focused? - [Andrew Nicholas](William Blair and Company)

2025Q1: We expect headcount growth to largely flux with revenues the year goes on, excluding managed services headcount. - [John Kelly](CFO)