Huron Consulting Group Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
July 27, 2023

Key Takeaways

  • Revenues grew 27% year-over-year in Q2 (25% for H1), driven by strong consulting, managed services and digital demand, and full-year guidance was raised to $1.30–1.34 billion with EPS of $4.35–4.65.
  • Adjusted EBITDA margin expanded by 130 basis points to 14% in H1 2023, reflecting improved pricing, utilization and cost control as the company targets mid-teen margins by 2025.
  • Healthcare segment revenues jumped 35% YoY, fueled by performance improvement, financial advisory and digital offerings, including generative AI call-center optimizations.
  • Education segment saw 25% revenue growth and 47% digital revenue growth as Huron assists universities with strategic planning, data analytics and digital transformations.
  • Commercial segment revenue grew 10% YoY, but operating margin fell to 16.8% from 21% due to higher performance bonuses and weaker demand for strategy and innovation services.
AI Generated. May Contain Errors.
Earnings Conference Call
Huron Consulting Group Q2 2023
00:00 / 00:00

There are 6 speakers on the call.

Operator

Good afternoon, and welcome to Huron Consulting Group's webcast to discuss Financial Results for the Q2 of 2023. At this time, all conference call lines are in a listen only mode. Later, we will conduct our question and answer session for conference call participants and instructions will follow at that time. As a reminder, this conference call is being recorded. Before we begin, I would like to point out to all of you to the disclosure at the end of the company's news release for information about any forward looking statements that may be made or discussed on this call.

Operator

The news release is posted on Huron's website. Please review that information along with the filings with the SEC for a disclosure of factors that may impact subjects discussed in this afternoon's webcast. The company will be discussing 1 or more non GAAP financial measures. Please look at the earnings release and on Huron's website for all of the disclosures required by the SEC, including reconciliations of the most comparable GAAP numbers. And now I would like to turn the call over to Mark Hasey, Chief Executive Officer and President of Huron Consulting Group.

Operator

Mr. Hasey, please go ahead.

Speaker 1

Good afternoon, and welcome to Huron Consulting Group's Q2 2023 earnings call. With me today are John Kelly, our Chief Financial Officer and Ronnie Dale, our Chief Operating Officer. We continue to drive strong organic growth in each of our 3 operating segments, while expanding our company wide operating margin consistent with our growth strategy. Revenues in the Q2 of 2023 grew 27% Over the prior year quarter and for the first half of twenty twenty three, revenues grew 25% over the same period last year, reflective of the ongoing strength in demand for both our consulting and managed services and digital capabilities. Adjusted EBITDA margin increased 130 basis points in the first half of twenty twenty three compared to the same period in 2022 as we make solid progress toward our goal of expanding company wide profitability.

Speaker 1

We're pleased that our performance has outpaced the financial objectives shared at our 2022 Investor Day, and we remain confident in our ability to deliver at or above these goals in the years ahead. I'll now share some additional insights into our 2nd quarter performance. In the Healthcare segment, 2nd quarter revenues grew 35% over the prior year quarter. The increase in revenues in the quarter was driven by strong demand Our performance improvement, financial advisory and digital offerings. As the federal and state pandemic relief funding has waned, Hospitals and health systems face ongoing financial and operational challenges.

Speaker 1

Many organizations have experienced workforce shortages, Increased costs of labor and supplies and increased competitive pressures in their markets, collectively leading to margin pressures and in many cases, Net operating losses. Healthcare organizations are focused on addressing these challenges and doing so in a manner The best positions them to stabilize near term performance and enables them to achieve their broader strategic goals. The shift in mindset highlights the need to implement more immediate financial improvements, while also designing strategies for near and long term growth centered around the consumer In responding to clients' needs to address both immediate and longer term improvements, we have significantly broadened our portfolio to create more balanced and diversification in our healthcare offerings. We strengthened our industry expertise and expanded our portfolio of capabilities To solidify our position as the partner of choice for clients seeking to address both current and longer term challenges and opportunities, which has also in turn expanded our addressable market in the healthcare industry. Let me bring this to life with a couple of examples.

Speaker 1

We're working with several health systems facing the exact pressures I just noted. These systems need to identify significant and sustainable Financial improvement across their operations, sometimes ranging into 100 of 1,000,000 of dollars. Opportunities like these play to our strengths and clinical optimization. In addition to driving near term efficiency gains, our clients are also focused on driving longer term sustained improvement and growth to support their strategic goals. To support the second objective, we bring together our strategy and innovation, Care transformation, financial advisory and digital offerings to redesign the clients' operating and care delivery models in order to fundamentally strengthen the system's underlying economics.

Speaker 1

Our competitive differentiation stems from our ability to assemble and deploy a talented team of healthcare experts integrated across our broad set of capabilities and to work collaboratively to deliver the best solution possible for our clients, and that's at the heart of our new operating model. The second example of our work to improve performance in healthcare is an engagement in which we're using generative AI to Drive efficiency in call center operations. Using our healthcare and contact center expertise, our digital team is implementing generative AI in conjunction with sales To optimize and automate processes, while this example is very different in its scope and implementation in the first example I provided, It supports the same client goals to drive near term and long term sustained benefit to address financial and operational challenges. Our deep healthcare expertise and digital capabilities together enable us to design offerings that address a broad range of strategic and operational concerns of our healthcare clients. Turning now to Education.

Speaker 1

Education segment revenues grew 25% The Q2 of 2023 over the prior year quarter, driven by broad based demand across all our offerings in this segment. Our digital offerings in education grew 47% over the prior year quarter and our strategy and operations And the financial stability of their institutions over the next 10 years, colleges and universities have concerns over their near term financial outlook, largely as a result of enrollment declines, reduced net tuition revenue and an expense base that is increasing faster than revenues. Our education clients are not only focused on the near term challenges, but are also committed to establishing a strong foundation to achieve their long term strategic goals. Similar to healthcare, the confluence of these factors highlights the need to drive near term improvements while establishing sustainable long term strategies. Again, let me use a couple of examples to highlight the impact that our deep industry expertise and broad set of capabilities have on our higher education clients.

Speaker 1

As a first example, we've been engaged by a university to support the execution of their strategic plan. We're collaborating with them to identify opportunities that will drive growth and financial and operational improvements to create capacity to invest in the high priority areas within the plan. Our scope of the university is broad, spanning administration, research, facilities, technology and more. To bring this to light, let me call 3 of these areas. Within the research enterprise, we're helping the institution refine the research strategy and administrative operations.

Speaker 1

Within the technology function, We're executing a data and analytics strategy with a goal of driving greater value and insights across the entire institution. And finally, together with the academic units, we're working with academic affairs to empower academic leaders with greater access to data while advising on new offerings and capabilities to support the institution's growth goals. Our strategy, operations and research teams have done a great job collaborating with the client, leading to additional opportunities to expand our efforts into new areas of the university, including their intercollegiate athletics program. Our second example highlights the power of our combined consulting and digital offerings. Our leasing client was seeking to Create an agile operational foundation to support future growth focused on enabling a positive and engaging student experience As a competitive advantage, Huron was hired to help execute a digital transformation to establish a process driven Technology enabled organization across this multicampus institution.

Speaker 1

Our strategy and operations, research and digital teams are all collaborating to lay a new operational foundation for the university, which will enhance their ability to recruit students, faculty and staff and create an agile and flexible foundation to help them achieve their future strategic goals. Together, our deep industry expertise and Strong reputation coupled with the breadth of our offerings and a collaborative nimble culture has solidified our strong competitive position, helping institutions address the challenging landscape that is in today in higher education. In the Q2 of 2023, turning to commercial, our commercial segment revenues grew 10% over the prior year quarter, driven by strong demand for our distressed Financial advisory offerings and our digital offerings, partially offset by a decline in our strategy and innovation offerings. Demand for our distressed financial advisory offerings remains strong, given the continued impact of higher interest rates, Challenging capital markets, increasing costs and expanding competitive pressures. Healthier companies are executing digital transformations enabling better, faster decision making to improve how organizations engage with their customers.

Speaker 1

Growth in the commercial We believe that a broad portfolio of digital, financial advisory and strategy and innovation offerings coupled with deepening industry expertise We'll continue to be a solid platform for growth in this segment. Finally, let me turn to our outlook for the year. As our press release indicates, we're increasing and narrowing our annual revenue guidance to $1,300,000,000 to 1,340,000,000 an increase of $70,000,000 at the midpoint. We continue to expect our adjusted EBITDA margin to be in the range of 12 Percent to 12.5 percent of revenues and we're raising and narrowing our full year adjusted diluted earnings per share to a range of $4.35 to $4.65 an increase of $0.50 per share at the midpoint. Our first half results demonstrate the continued demand for our services and products and the power of a collaborative culture and new operating model.

Speaker 1

In summary, we're pleased with the first half performance and we expect the underlying demand across our segments to continue as reflected in our updated revenue and earnings guidance. I reiterate our commitment to our shareholders as we remain focused on advancing our growth strategy. Our strong relationships, industry expertise and broad array of offerings in healthcare and education, along with a $500,000,000 digital capability, which today represents about 45% of our total company revenues, provides a strong foundation for Mitch to address the myriad of challenges that clients face today while positioning them for future success. We also believe the commercial segment will continue to drive new evidence of growth for our business as we expand upon our portfolio of offerings and further strengthen our industry expertise. While we're still in the early stages of the strategic journey At our 2022 Investor Day, we've demonstrated our ability to accelerate growth across the business over the last six quarters, and we remain confident in our ability to meet or exceed our medium term financial objectives.

Speaker 1

And now let me turn it over to John for a more detailed discussion of our financial results. John? Thank you, Mark, and good afternoon, everyone. Before we 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 Durham website have reconciliations of these non GAAP measures to the most comparable GAAP measures.

Speaker 1

Along with the discussion of why management uses these non GAAP measures, the why management believes they provide useful information to investors regarding our financial condition and operating results. Now I'll share some of the key financial results for the quarter. Revenues for the Q2 of 2023 were $346,800,000 up 26.9 percent from $273,300,000 in the same quarter of 2022, achieving another record of quarterly revenues as we continue to The increase in revenues in the quarter was driven by organic growth across all three of our operating segments. From a capability perspective, consulting and managed services revenues grew 33.4% and digital revenues grew 19.2% when compared to the same quarter in 2022 respectively. Net income was $24,700,000 are $1.27 per diluted share compared to net income of $13,900,000 or $0.66 per diluted share in the Q2 2022.

Speaker 1

Our effective income tax rate in the Q2 of 2023 was 29.4% compared to 36% in the same prior year period. Our effective tax rate for Q2 of 2023 was less favorable than the statutory rate inclusive of state income taxes, primarily due to certain nondeductible expense items, partially offset by the tax benefit of non tax new gains on investments used to fund our deferred compensation liability. Adjusted EBITDA was $48,500,000 for 14% of revenues in Q2 2023 compared to $33,200,000 or 12.2 percent of revenues In Q2, 2022, the increase in adjusted EBITDA in the quarter was primarily attributable to the increase in segment operating income, reflecting continued progress toward our goal mid teen adjusted EBITDA margins by 2025. Adjusted net income was $27,000,000 in the Q2 of 2023 compared to $17,500,000 in the Q2 of 2022. Adjusted diluted earnings per share was $1.38 in Q2 2023 compared to $0.83 in the prior year quarter, an increase of 66% year over year.

Speaker 1

Now I'll make a few comments about the performance of each of our operating segments. Healthcare segment generated 50% of total company revenues during the Q2 of 2023. This segment posted revenues of 100 $73,800,000 up $45,300,000 or 35.3 percent from the Q2 of 2022. The increase in revenue reflects continued strong demand for our performance improvement, financial advisory, digital and revenue cycle of managed services offerings, demonstrating broad based demand across our portfolio of healthcare offerings. As a reminder, in accordance with U.

Speaker 1

S. GAAP, We recognize performance based fees on our healthcare performance improvement projects as we deliver on those projects using a percentage of completion methodology and our best estimate of the total performance based fees that we expect to earn on each project, which is typically based on a portion of the recurring financial benefits that we expect to generate for our clients. To the extent that our estimate of those client financial benefits change in a given period due to our performance, We adjust the amount of revenue recognized under a contract to reflect the amount that we ultimately expect to bill to our clients. Our Q2 healthcare consulting and managed services revenues included approximately $16,000,000 in favorable adjustments related to several performance based fee contracts where our teams delivered financial benefits for our clients that exceeded our previous expectations. The ability to deliver financial benefits for our clients that exceed expectations and generate incremental revenues for Huron remains an ongoing opportunity for our Healthcare Performance Improvement business and the strength of our business model.

Speaker 1

However, the timing and magnitude of such favorable revenue adjustments can vary from quarter to quarter. Operating income margin for Healthcare was 28.3 percent for Q2 2023 compared to 23.6% for the same quarter in 2022. The quarter over quarter increase in margin was primarily due to revenue growth that outpaced the increase in salaries and related expenses for our revenue generating professionals, partially offset by increases in contractor expenses and project costs as a percentage of revenues. The Education segment generated 32% of total company revenues during the Q2 of 2023. The Education segment posted revenues of $110,700,000 up $22,500,000 or 25.5 percent The increase in revenues in the quarter was driven by demand across our broad portfolio of offerings in the segment.

Speaker 1

Our digital capability in education grew 47% year over year, reflecting continued demand for our digital, technology and analytics services and product offerings. Our strategy and operations and research offerings also continued their growth trajectory the Q2 of 2023. Operating income margin for Education was 24.8% for Q2 2023 compared to 24.6 percent for the same quarter in 2022. The commercial segment generated 18% of total company revenues In the Q2 of 2023, we posted revenues of $62,300,000 up $5,700,000 or 10% from the Q2 of 2022. The quarter over quarter increase in revenue was primarily attributable to strong demand for our distressed Financial advisory offerings and our digital offerings partially offset by declines in our strategy offerings.

Speaker 1

Operating income margin for the commercial segment was 16.8% for Q2 2023 compared to 21% for the same quarter in 2022. The quarter over quarter decrease was primarily driven by the increase in performance bonus expense for our revenue generated professionals as a percentage of revenues based on our updated expectations for full year performance. Corporate expenses not allocated at the segment level were $42,900,000 in Q2 2023 compared with $29,900,000 in Q2, 2022. Unallocated corporate expenses in the Q2 of 2023 including $1,400,000 of expense related to the increase in the liability of our deferred compensation plan, which is offset by the investment gain and the assets used to fund that plan reflected in other income expense. Unallocated corporate expenses in the Q2 of 2022 reflected a $4,900,000 reduction and expense related to the deferred compensation plan.

Speaker 1

Excluding the impact of the deferred compensation plan in both periods, Unallocated corporate expenses increased $6,700,000 primarily due to increased compensation costs for our support personnel. Excluding the impact of the deferred compensation plan, unallocated corporate SG and A decreased as a percentage of revenues to 12% in the Q2 of 2023 compared to 12.7% in the same period of 2022. Now turning to the balance sheet and cash flows. We finished the quarter with total debt of $395,000,000 consisting entirely of our senior bank debt with cash of $16,600,000 for net debt of $378,400,000 Our leverage ratio as defined in our senior bank agreement was 2.2 times adjusted EBITDA as of both June 30, 2023 and June 30, 2022. Cash flow generated by operations in the Q2 2023.

Speaker 1

With $78,200,000 representing a record for the Q2 of the year. We used $8,200,000 of our cash To invest in capital expenditures, inclusive of internally developed software costs, resulting in free cash flow of $70,000,000 We used $15,400,000 of our cash to repurchase approximately 194,000 shares during the quarter. DSO came in at 77 days for the Q2 of 2023 compared to 83 days for the Q1 of 2023 and 81 days for the Q2 of 2022. Finally, let me turn to our expectations and guidance for 2023. As Mark noted, we are raising our full year 2023 revenue guidance to be in the range of $1,300,000,000 to $1,340,000,000 The increase in our revenue guidance primarily reflects strong momentum across our business.

Speaker 1

In addition, we are maintaining our adjusted EBITDA guidance range 12% to 12.5 percent of revenues and raising and narrowing our full year adjusted non GAAP diluted earnings per share guidance to be in a range of $4.35 to 4 $0.65 We now expect our full year free cash flow to be in a range $100,000,000 to $120,000,000 Finally, we expect our full year effective tax rate to be in a range of 28% to 30%. Thanks everyone. I would now like to open the call to questions.

Operator

Operator? Thank you. Our first question comes from the line of Tobey Sommer of Truist Securities.

Speaker 2

Thank you. I wanted to ask a question about the organic runway in broad terms. Do you feel like you've got sort of All the pieces of your business continue to sort of drive organic growth And Bridge, because you've been delevering for a number of years, kind of buybacks and stock kind of Riskless cash deployment or at least less risky. And, I'm wondering if there's a potential for you pivoting and starting to spend money on acquisitions over the near term?

Speaker 1

Tobey, it's Mark. And you're breaking up a little bit. I think The question about whether we'd have the organic platform today to continue growth without deploying large amounts of capital in M and A. And the answer is yes. The portfolio, if you look back to what's happened to our business over the last 10 years, We have diversified our healthcare portfolio to be far more balanced between performance improvement and other solutions like digital, financial, Advisory and Strategy.

Speaker 1

Our education business has grown to a nice level of scale from what it was over that period of time. We have expanded into areas in the commercial markets in conjunction with a digital acquisition platform that through many small acquisitions got us to this very large platform we have today. So there are What I would characterize is opportunistic pieces for us to deploy, but I don't think that we see any major gaps in the platform as we see it Right now.

Speaker 2

Thanks. Do you think they'd be in to do Yes, tuck ins, do you think that would be more on the IT side and getting skills for Specific emerging softwares that are experiencing rapid adoption or more than the care or education sort of functional areas?

Speaker 1

So I think it will be a combination of both of those. I think it will probably lean more digital because those actually work hand in hand, especially in our new operating model where we really Work collaboratively as a team in those markets, they are enabling to the advisory side of the business. And so, it Could be a little bit more on the pure advisory side, but I would say largely speaking, it's likely to have a digital flair and probably focused on, Again, some of the edge solutions in industries that we're not in that help us gain a foothold and an expansion to be relevant in those particular markets. And so I think that will probably be a little bit leaning towards the digital solution irrespective of the industry That's a general statement, but absolutely going to have an industry focus on it as well.

Speaker 2

Last question for me. I've heard from some other professional services firms that employee retention Year to date improved pretty significantly and in some cases it seems to be dampening Operating leverage, that's not evident in your case, but I wanted to see if the improved employee retention is evident even though dampening operating leverage

Speaker 1

Tobey, this is John. Yes, so our retention has certainly improved over the course of the year. I think Our attrition rate at this point, it's on a trajectory to be lower than even the historical norms that we had prior to the pandemic. But in our case, given the pipeline that we have, the backlog we have and the growth we're seeing in our business, this is great news for us In terms of really having the talent that we need to deploy on our projects, if we were to have a higher attrition rate, that just means we have to be more aggressive in the market

Operator

Thank you. Our next question comes from the line of Andrew Nicholas with William Blair and Company.

Speaker 3

Hi, good afternoon. Thanks for taking my questions. I wanted to ask first on the margin guidance, obviously, Really, really strong second quarter and a second quarter EBITDA margin that was well above the full year guide. Just kind of curious what In the second half makes you a bit more conservative on EBITDA margins and maybe wrapped within that question is A question on headcount growth and hiring expectations in the back half of the year.

Speaker 1

Sure, Andrew. So first, you said it in your question, but we are very pleased with our progress on the margin so far this year. And I think it's a reflection of a number of initiatives that we've had within the company to improve our pricing, to increase our utilization, to increase our deployment of global resources And really the continued scaling of our corporate SG and A. And also during the quarter, the performance based fees recognized The Healthcare Performance Improvement business also helped with margins during the quarter. So with all that said, we're also really pleased with the growth rate We've had so far this year as well as the evolving pipeline that we see now even starting to look out into 2024.

Speaker 1

And with this in mind, we think it's Likely that we'll continue to build out our resource pool in the back half of the year with an eye on 2024 and that may create some additional pressure on second half margins There's typically a ramp to productivity for new consultants. So we're certainly very comfortable with our guidance range on the margins. And from our perspective, we see the potential based on the initiatives I described to be able to push upside there, but we're just balancing that and to Your point probably being a little bit conservative with the guidance just recognizing that at the rate of our growth, we're likely Still be in the market adding talent and there just tends to be a little bit of a ramp as we're building up resources.

Speaker 3

That's helpful. Thank you. Maybe somewhat related, I wanted to ask about the India initiative, which I know is a key part of your 2025 margin target. I think last quarter, there was a little bit of pressure in the digital utilization That's ticked up nicely sequentially. So just if you could give an update on progress and utilization within that part of your business, the global support staff?

Speaker 1

So, we are seeing some nice progress there, Andrew. As we've talked about on prior calls, we did intentionally build up our resource pool in the back half of last year in India, Really to diversify our global talent and to make sure that we have the right capacity to serve our clients, particularly in areas of digital growth. And that with that came a little bit of utilization pressure just as we got those resources trained up and ready to be deployed. And so our expectation for the year was that as each sequential quarter passed, we'd start to see that ramp of utilization and that is in fact what we're seeing. So When you look at the digital utilization that we've published of 74.7% for the quarter, That's the composite there, if you're looking at it from a geography perspective is near 80% in North America.

Speaker 1

And then within India ramping up to 65% this quarter, which has been some nice sequential improvement for us. Andrew, it's Mark. I'm going to add a couple of things to what John said. So the utilization is one part of the story. Another part of the story is just the breadth of what we're doing across every service line within India.

Speaker 1

And I'll just mention that in the last quarter, we also hired a country leader in Singapore, which will be served predominantly out of the India capabilities that we have today. So it is a great platform for us to We've done very well in that particular market and have clients and the channel pulling us into there. So we feel very confident in our ability to continue to leverage that as a not only a source of margin expansion, but also to help drive revenue growth.

Speaker 3

Very helpful. Thank you.

Operator

Thank you. Our next question comes from the line of Bill Sutherland of The Benchmark Company.

Speaker 4

Thanks and congrats on a terrific quarter guys. In healthcare, John, did you mention the growth that you had in digital In the healthcare side? It was 10% for the quarter, Bill. Okay. And the Is the education so strong just because there's this insatiable need for cloud migration in the universities?

Speaker 1

Yes. Bill, this is Mark. There's going to be a long term cloud conversion from decades old Investments in systems, there's opportunity for them to leverage new technologies to help grow their businesses to applications like in the CRM space, Salesforce, etcetera. So data analytics, there's just a tremendous opportunity to bring digital solutions broadly across The higher education landscape as well as healthcare.

Speaker 4

Okay. The growth in terms of your The guidance now for the year and the growth in revenue that that implies for the second half, Should we think about hiring kind of being in line with that or are you going to be hiring potentially a little ahead of that growth?

Speaker 1

I think in the base case, Bill, I think of it is generally in line. But like I said in my earlier remarks, We continue to get a good view of pipeline for the back half of the year into next year and as the projects continue to convert, there's potential for us to hire even more aggressively Aggressively in that, but I would think of it, Bill, in the base case as being generally in line with revenue in the back half of the year.

Speaker 4

And then finally in commercial, I guess this requires some view of the economic outlook as to Whether you continue to build up resources in distress, but how are you thinking about that and the other parts of that business? Thanks.

Speaker 1

We are Bill, we are continuing to build out resources in the distressed Financial advisory space, it's been one of the areas of really strong pipeline for us. It's been one of the areas where we're seeing some great Success converting that pipeline into backlog and as you know it's one of the higher margin, higher bill rate areas of our business. So we've certainly been adding talent in that area And we'd expect to continue to do so.

Speaker 4

Okay, great. Thanks.

Operator

Thank you. Our next question comes from the line of Kevin Steinke of Barrington Research and Associates.

Speaker 5

Hey, good afternoon. I wanted to follow-up on the Discussion about utilization, I guess if you look at consulting and digital together, your consolidated Utilization rate is between 75% and 76%. On a consolidated basis, how much Hi, Ernie. You think that can go and you mentioned near 80% in digital and I think in the U. S.

Speaker 5

And then 65% or so in India, this is the expectation that India migrates towards that 80% -ish level as well over time or is that kind of the right number to think about?

Speaker 1

Kevin, it's John. I would say, so we are pleased to be To your point on the math there, over the 75% mark in terms of utilization, that's really, as high as we've been since prior to the pandemic. So we're very pleased with that. I think we believe there's still a couple of 100 points of opportunity there in terms of utilization. And when we deconstruct that, I think, our resources in India will certainly play a Part of that increased utilization and to your question about where should our India resources be, certainly think we believe that the Utilization in India can get up to that 80% mark.

Speaker 1

And the reality is we think that there's opportunity there for it to move even higher over time. So I I think that remains probably one of our big utilization opportunities. And as we've said on prior calls, that kind of Per employee revenue or margin generation on our work done in India is actually quite high. So for us to the extent that we're able to drive that Utilization improvement, we think that's going to be accretive to our margins.

Speaker 5

Okay, great. And just also wanted to ask 2 about commercial, more around your efforts to expand into Yes, serving additional industries. I know historically we had some nice strength in financial services and energy, but Just wondering about what industries you're looking to expand into more significantly or where you're making progress on that

Speaker 1

Kevin, it's Mark. The answer there is, yes, you're right. We have strengthened financial services, energy utilities. The third one is pretty broad and actually is doing very well for us too is in the industrials market, which encompasses a number of different companies. And I would say collectively the power of our model is the ability to bring these capability solutions into industries where you have that Combination of the expertise on both vertical dimension as well as horizontal dimension.

Speaker 1

So as we continue To grow there, that's where back to an earlier question on M and A, I think you'll see us continue to use not only tuck in but organic hiring to Solidify the positioning in that particular market. Historically, if you go back 10, 12 years ago, this was a very low single digit Percentage of our business over time as we've expanded our digital capabilities to strengthen healthcare and education, it has naturally taken us into Much broader markets in ways that are very naturally accretive in our expansion and growth. And that's exactly why we feel like we can continue to complementing the rest of the overall here on model.

Speaker 5

Okay. Thank you and congratulations on the strong results.

Speaker 1

Thank you.

Operator

Thank you. We have a follow-up question from the line of Tobey Sommer of Chorus Securities.

Speaker 2

Thanks for the follow-up. I wanted to ask a question about your Relatively small restructuring business. What's the outlook there? The capital markets, at least up until today, seem to be looking for a soft landing. And I think the Chairman Powell yesterday in his Press conference said the Fed is no longer modeling a recession.

Speaker 2

What's your time look like and tell you?

Speaker 1

Toby, right now, I'd say it's going to continue to be in strong demand for a while. While interest rate increases have slowed down in absolute terms are pretty high, I think you have the capital markets now that in prior periods we do to the financial solution to a restructuring. In this environment now you have to have an operating solution often to those circumstances. And so the complexity of that Plays well to the strengths that we have in that particular market, and we see that continuing on for some period of time. You got the senior lending market is not really supportive of a whole lot of these situations right now.

Speaker 1

The non regulated market is quite expensive. And so it's going to continue to have, I think, a lot of pressure in at least, I would say the next 12, 18 months.

Operator

Thank you. And seeing no more questions in the queue, I'd like to turn the call back to Mr. Hussey.

Speaker 1

Thank Thank you for spending time with us this afternoon. We look forward to speaking with you again in November when we announce our Q3 results. Have a good evening.

Operator

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

Powered by Quartr