Huron Consulting Group Q1 Earnings Call Highlights

Key Points

• Huron reported strong Q1 growth with revenue before reimbursable expenses up 12.1% to $443.7M, led by a record Healthcare quarter of $225.2M, and management reaffirmed 2026 guidance of $1.78B–$1.86B revenue, 14.5%–15% adjusted EBITDA margin, and $8.35–$9.15 adjusted EPS.
• Profitability trends improved (adjusted EBITDA margin rose to 11.4%), but operating cash flow was negative (-$162.2M) with free cash flow of -$174.0M; the company repurchased $155.5M of stock in Q1 and finished with net debt of $829.5M (leverage 3.1x), targeting 2.0x–2.5x by year-end.
• Management is increasingly investing in AI as a long-term growth driver, favoring organic development and partnerships over large acquisitions and leveraging a technology/digital base that represents roughly 40% of revenue to embed AI into client solutions.

Huron Consulting Group NASDAQ: HURN opened 2026 with revenue growth across all three operating segments and continued margin expansion, prompting management to affirm its full-year guidance. Executives emphasized sustained demand in healthcare and commercial advisory work, improving conditions in the education buying environment, and continued investment in artificial intelligence capabilities as a long-term growth driver.

First-quarter results and profitability

Chief Executive Officer Mark Hussey said the company’s “execution of our growth strategy continues to deliver performance consistent with the financial goals outlined for 2025 Investor Day.” He reported that revenues before reimbursable expenses increased 12% year over year in the first quarter, driven by growth in Healthcare, Education, and Commercial, including “record” performance in Healthcare.

Chief Financial Officer John Kelly said first-quarter 2026 revenues before reimbursable expenses were $443.7 million, up 12.1% from $395.7 million a year earlier. Net income was $23.2 million, or $1.34 per diluted share, compared with $24.5 million, or $1.33 per diluted share, in the prior-year quarter.

Kelly attributed the decline in net income as a percentage of revenue to a higher effective tax rate. The first-quarter 2026 effective tax rate was 14.1%, compared with -14.4% in the first quarter of 2025, when the company recognized an income tax benefit on pre-tax income driven by discrete tax benefits tied to share-based compensation. Kelly said the increase in the effective tax rate “was anticipated” in the guidance provided in February, and the company maintained its expectation for a full-year effective tax rate of 28% to 30%.

Adjusted EBITDA rose to $50.6 million, or 11.4% of revenue before reimbursable expenses, from $41.5 million, or 10.5%, a year earlier. Kelly said the improvement reflected higher segment operating income across all three segments, partially offset by higher unallocated corporate expenses. Adjusted net income was $30.0 million, or $1.73 per diluted share, compared with $31.1 million, or $1.68 per diluted share, in the first quarter of 2025.

Segment performance: Healthcare leads, Commercial accelerates

In Healthcare, which represented 51% of first-quarter revenue before reimbursable expenses, Kelly said the segment produced record revenue of $225.2 million, up 13.5% year over year. The increase reflected demand for performance improvement, revenue cycle managed services, financial advisory, and strategy offerings, and included $7.3 million of incremental revenue from acquisitions, including Eclipse Insights and the consulting services division of AXIA Consulting. Operating income margin in Healthcare was 28.4%, unchanged from the prior-year quarter.

Hussey said organic growth in Healthcare was 10% excluding acquisitions. He highlighted pressures on providers—declining reimbursements, rising costs, and labor shortages—alongside the push to adopt AI-enabled solutions. Hussey said clients are seeking partners who can “integrate technology, workforce, and operating model changes into cohesive, executable strategies” and pointed to “significant opportunities” for AI use cases across clinical, administrative, and financial workflows.

Education, which represented 29% of first-quarter revenue, posted revenue before reimbursable expenses of $127.5 million, up 3.8% year over year. Kelly said the quarter included $600,000 of inorganic contribution from acquisitions that closed in the first quarter of 2025. Operating income margin increased to 21.6% from 18.8%, driven primarily by lower compensation costs for revenue-generating professionals, practice administration, and meeting expenses.

Hussey described higher education institutions as facing uneven domestic demand and “a significant decline in international students,” along with rising costs, funding declines, and regulatory scrutiny. He said universities are prioritizing near-term financial improvement while modernizing operating models, “increasingly leveraging AI.” In response to an analyst question, Hussey characterized conditions in the sector as “business as usual,” noting institutions often plan with a longer-term view.

Commercial, which represented 20% of first-quarter revenue, saw revenue before reimbursable expenses rise 22.3% to $91.0 million from $74.5 million. Kelly said the increase included $11.0 million of incremental revenue from the Treliant and Wilson Perumal acquisitions, while organic revenue growth was 8% excluding acquisitions. Operating income margin improved to 16.4% from 15.2%, driven by lower contractor expenses and support personnel costs, along with revenue growth outpacing performance bonus expense, partially offset by higher revenue-generating professional costs as a percentage of revenue.

Demand trends, bookings, and capability mix

On demand indicators, Kelly said that for the trailing six-month period ended March 31, 2026, “bookings were up greater than 20% across all three of the segments.” He added that backlog coverage ratios remained “historically high” across all segments, and pipelines in April were up versus December 31, remaining “near record levels” even after accounting for bookings and backlog.

Kelly also provided capability-level trends by segment:

• Healthcare: consulting up 13%, managed services up 42%, and digital down 7%. Kelly said the mix reflected demand tied to performance improvement engagements and managed services as clients address financial strain.
• Education: consulting down slightly, digital up 10%, and managed services up in the mid-single digits, with Kelly pointing to client investment in tools aimed at operating efficiencies.
• Commercial: consulting up approximately 50% during the quarter; Kelly later corrected that this was organic growth, with Wilson Perumal and Treliant “on top of that.” Digital was down in the mid-single digits, which Kelly attributed partly to timing as some larger projects wound down early in the quarter and replacement projects began later than expected.

Kelly said the company expected Commercial digital growth to return to the “mid to upper single-digit growth range starting next quarter,” and he also expected that to contribute to a “pivot to growth” in the Commercial segment next quarter.

Cash flow, leverage, and share repurchases

Kelly said cash flow used in operations was $162.2 million in the first quarter, reflecting annual incentive payments. The company invested $11.9 million in capital expenditures, including internally developed software, resulting in negative free cash flow of $174.0 million. Management maintained its expectation for full-year free cash flow of positive $180 million to $220 million, net of cash taxes and interest and excluding non-cash stock compensation.

Days sales outstanding rose to 82 days from 79 days a year earlier and 73 days in the fourth quarter of 2025. Kelly attributed the increase to larger healthcare projects with performance-based fee elements expected to be billed and collected in the second half of 2026 under contractual terms.

The company repurchased approximately 1.1 million shares for $155.5 million during the quarter, representing 6.5% of shares outstanding at the beginning of the year. Total debt at March 31, 2026 was $856.0 million, with cash of $26.5 million for net debt of $829.5 million. The leverage ratio under the senior bank agreement was 3.1x adjusted EBITDA, compared with 2.2x a year earlier. Kelly noted the first quarter typically represents a seasonal high for leverage due to bonus payments.

Kelly reiterated the goal of ending 2026 with leverage between 2.0x and 2.5x, and said repurchases would likely proceed at a slower pace for the remainder of the year after accelerating in the first quarter amid a decline in the share price.

Guidance and AI focus

Hussey said the company was affirming its 2026 guidance, citing a strong start to the year and continued strength in pipeline and backlog. Kelly reiterated the guidance ranges discussed on the call:

• Revenue before reimbursable expenses of $1.78 billion to $1.86 billion
• Adjusted EBITDA margin of 14.5% to 15% of revenue before reimbursable expenses
• Adjusted non-GAAP EPS of $8.35 to $9.15

Management also emphasized AI as an opportunity across the business. Hussey said the company’s views on AI’s impact “remain bullish,” and that it had “substantially increased” investment in AI capabilities. In response to a question about whether acquisitions might be needed to expand AI services, Hussey said Huron has been successful investing organically, supported by a Chief AI Officer, and noted partnerships “like with Hippocratic AI.” He also cautioned that AI-related valuations “are probably gonna be pretty huge” and suggested organic investment may be a better use of capital.

Kelly added that roughly 40% of the company’s revenue comes from its technology/digital business, providing a base of talent as AI is “being infused” into platforms used by clients. He said clients are focused on achieving outcomes—often financial outcomes—rather than “AI just for the sake of AI,” and argued that combining digital skills with industry expertise positions the company to support those objectives.

About Huron Consulting Group NASDAQ: HURN

Huron Consulting Group NASDAQ: HURN is a global professional services firm that advises organizations across a range of industries on strategy, operations and technology. Founded in 2002 and headquartered in Chicago, the company helps clients address complex business challenges such as performance improvement, digital transformation and organizational change. Huron's consultants work alongside executive leadership teams to develop and implement tailored solutions that drive growth, increase efficiency and manage risk.

Huron's service offerings encompass business and financial advisory, healthcare performance improvement, life sciences consulting, higher education and research lifecycle support, as well as legal and regulatory consulting.

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