Huron Consulting Group Q3 Earnings Call Highlights

Key Points

• Huron posted record Q3 revenue before reimbursable expenses of $482.5 million, up 11.6% year over year. Adjusted EPS rose to $2.62 from $2.10, while adjusted EBITDA margin reached 16%, its highest in eight years.
• Growth spanned all three segments, led by healthcare, where revenue rose 16.5%; education revenue increased 6.6% and its operating margin expanded. AI-related work accounted for more than 65% of digital bookings over the trailing six months.
• The company raised and narrowed its 2026 adjusted EPS outlook to $9.20–$9.40 and narrowed its revenue outlook to $1.855 billion–$1.885 billion. It lowered expected free cash flow to $150 million–$170 million, mainly due to collection timing.

Huron Consulting Group NASDAQ: HURN reported record third-quarter revenue before reimbursable expenses, or RBR, as growth across its healthcare, education and commercial segments helped lift adjusted earnings and prompted the company to raise and narrow its full-year adjusted EPS outlook.

Third-quarter RBR rose 11.6% year over year to $482.5 million, Chief Financial Officer John Kelly said, while adjusted EBITDA increased to $77.3 million, or 16% of RBR, from $67.4 million, or 15.6% of RBR, a year earlier. Kelly said the quarterly adjusted EBITDA margin was Huron's highest in the past eight years.

GAAP net income declined to $28.4 million, or $1.75 per diluted share, from $30.4 million, or $1.71 per diluted share, in the prior-year quarter. The company said diluted EPS included a $0.36 unfavorable impact from a non-cash credit loss on a convertible-debt investment in a third party. Adjusted net income rose to $42.6 million, or $2.62 per diluted share, compared with $37.4 million, or $2.10 per diluted share, a year earlier.

AI-Related Demand and Bookings

CEO and President Mark Hussey said the results reflected organic growth in all three operating segments and double-digit percentage growth in consulting and managed services as well as digital capabilities. He said artificial intelligence continued to support demand for digital services.

More than 65% of digital-capability bookings over the trailing six months involved direct AI scope or delivery significantly enabled by Huron's AI tools, compared with approximately 50% in the comparable 2025 period, Hussey said.

Kelly said companywide bookings increased more than 20% year over year during the six months ended Sept. 30. The strongest booking growth came from the healthcare and education segments, including digital work in both businesses. Healthcare bookings also benefited from performance improvement and managed services demand, while education bookings were led by digital and managed services.

Within commercial, Kelly said organic consulting revenue increased about 11%, though growth moderated from earlier in the year as restructuring and turnaround work normalized following several large first-half assignments. Commercial digital revenue was down about 1% in the quarter, which Kelly attributed to delays in closing and starting some projects despite what he described as significant pipeline growth.

Healthcare Leads Segment Growth

Healthcare generated record third-quarter RBR of $255.8 million, up 16.5% from a year earlier, and represented 53% of company RBR. The segment's revenue included $16.7 million from the RelateCare and AXIOM acquisitions. Excluding acquisitions, Hussey said healthcare organic RBR grew 9%.

The company cited demand for managed services, performance improvement, financial advisory and digital offerings. Healthcare operating income margin was 30.5%, down from 30.9% a year earlier, primarily due to compensation expense and the integration of RelateCare.

Hussey said healthcare managed-services RBR nearly doubled year over year, marking a third consecutive quarter of more than 40% organic revenue growth for the business. He said the business has expanded from end-to-end revenue-cycle work into point solutions and access-related offerings following the RelateCare acquisition. Huron's healthcare managed-services operation recorded a net promoter score of 92, according to Hussey.

Management said it expects healthcare clients to face greater pressure in 2027 as new regulatory requirements related to Medicaid eligibility and reimbursement take effect. Hussey said the anticipated changes, combined with Affordable Care Act enrollment pressures, could increase unreimbursed care for providers.

Education Margin Expansion, Commercial Investment

Education RBR increased 6.6% to $138 million and was entirely organic. The segment, which accounted for 29% of total RBR, benefited from demand for digital and managed-services offerings. Its operating income margin rose to 29.1% from 25.7%, as revenue growth outpaced salary-related costs for revenue-generating professionals and as support-personnel and technology costs declined.

Kelly said Huron has been able to grow while keeping headcount relatively stable outside of managed services, aided by increased utilization and productivity. He said the company expects to continue adding staff as it grows, but aims to expand revenue faster than headcount through productivity initiatives.

Commercial RBR rose 6.4% to $88.8 million, including $4.3 million of incremental revenue primarily related to the Wilson Perumal acquisition. The segment's operating income margin fell to 13.9% from 16.4%, reflecting higher performance-bonus expense and $2.2 million of investments in business-development, leadership and delivery talent.

Hussey said those investments were not a response to the quarter's results but part of a multiyear effort to broaden Huron's commercial capabilities and deepen industry expertise. The company is adding leaders in areas including managed services, energy and utilities, and industrials and manufacturing, with the expectation that the investments will support above-company-average commercial growth in 2027.

Guidance, Cash Flow and Capital Allocation

Huron narrowed its 2026 RBR outlook to $1.855 billion to $1.885 billion and reaffirmed adjusted EBITDA margin guidance of 14.5% to 15%. The company raised and narrowed adjusted non-GAAP EPS guidance to $9.20 to $9.40.

Kelly said management expects full-year free cash flow of $150 million to $170 million, reduced from prior expectations primarily because of collection timing, including a revised payment schedule on a multi-year engagement and a higher mix of healthcare performance-improvement projects with performance-based fees. The company expects to collect related working capital in 2027 under contractual terms.

Cash flow from operations was $57 million in the third quarter, compared with $93.8 million a year earlier, while free cash flow totaled $49.1 million after $7.9 million in capital expenditures. Days sales outstanding increased to 83 from 79 in the preceding quarter, mainly due to collection timing on certain healthcare projects.

Huron ended the quarter with $815 million of total debt, $25.6 million of cash and net debt of $789.4 million. Its leverage ratio improved to 2.6 times adjusted EBITDA from 2.8 times at the end of the second quarter. The company said it remains on track to reach a leverage ratio of 2 times to 2.5 times by year-end.

During the quarter, Huron spent $26.3 million to repurchase about 173,000 shares. Year-to-date repurchases totaled $234.9 million, or approximately 1.7 million shares, representing 10% of shares outstanding at the end of 2025. As of Oct. 31, $265.9 million remained available under its repurchase authorization, including a $200 million increase approved by the board in October.

About Huron Consulting Group (NASDAQ:HURN)

Huron Consulting Group, Inc is a professional services firm that helps organizations improve performance, manage change, and use technology to address complex business challenges. The company serves clients in the healthcare, education, and public sectors, as well as commercial organizations.

Its services include operational and financial improvement, strategy and organizational consulting, digital transformation, technology implementation, data and analytics, and managed services. Huron also provides specialized advisory support for hospitals and health systems, colleges and universities, government agencies, and businesses seeking to improve processes, financial performance, and customer or patient experiences.

Founded in 2002 and headquartered in Chicago, Huron serves clients across the United States and internationally.

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