On Tuesday, Huron Consulting Gr (NASDAQ:HURN) discussed first-quarter financial results during its earnings call. The full transcript is provided below.
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Summary
Huron Consulting Group Inc reported a 12% increase in revenues before reimbursable expenses (RVR) for Q1 2026, driven by growth across healthcare, education, and commercial segments.
Healthcare segment RVR grew 14%, with a 10% organic growth rate, attributed to strong demand for performance improvement, revenue cycle management services, and strategy offerings.
Education segment RVR increased by 4%, driven by digital offerings, despite challenges like declining international student enrollment and rising costs.
Commercial segment saw a 22% RVR increase, with significant growth in financial advisory and strategy offerings.
The company affirmed its 2026 guidance, maintaining expectations for RVR, adjusted EBITDA margin, and adjusted diluted EPS.
The management remains optimistic about the benefits and opportunities provided by AI, which is expected to significantly contribute to future growth and margin expansion.
Huron Consulting Group Inc highlighted strong pipeline and backlog, with bookings up by over 20% across segments.
The company executed significant share repurchases, reducing outstanding shares by 6.5% in Q1 2026.
Management emphasized continued investment in AI capabilities and maintaining a disciplined capital allocation strategy.
Full Transcript
OPERATOR
good afternoon and welcome to Huron Consulting Group Inc's webcast to discuss financial results for the first quarter of twenty twenty six 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 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 the news release is posted on Huron Consulting Group Inc'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 one or more non gaap financial measures please look at the earnings release and on Huron Consulting Group Inc's website for all of the disclosures required by the SEC including reconciliation to the most comparable GAAP numbers and now i would like to turn the call over to mark hussey chief executive officer and president of huron consulting group mister hussey please go ahead
mark hussey
good afternoon and welcome to Huron Consulting Group Inc's first quarter twenty twenty six earnings call with me today are john kelly our chief financial officer and ronnie dale our chief operating officer i'll begin by noting that the execution of our growth strategy continues to deliver performance consistent with the financial goals outlined for twenty twenty five investor day revenues before reimbursable expenses or revenue before reimbursable expenses (RVR) increased twelve percent in the first quarter of twenty twenty six compared to the first quarter of twenty twenty five driven by growth across the healthcare education and commercial segments including record revenue before reimbursable expenses (RVR) performance in healthcare during the quarter we also continued our trajectory of margin expansion reflecting disciplined execution by our highly talented team encouraged by the strong start to the year and strength of our pipeline and backlog we're affirming our annual revenue before reimbursable expenses (RVR) and margin guidance we continue to believe we are well positioned to serve as our client's trusted advisor as they evolve their business models and organizations to succeed in challenging markets in an increasingly complex ai enabled world we remain focused on executing against the market tailwinds driving demand for our business and further strengthening our competitive position to enhance our ability to best serve our clients and achieve our financial goals i'll now share some additional insight into our first quarter performance in the healthcare segment first quarter revenue before reimbursable expenses (RVR) grew fourteen percent over the prior year quarter reflecting strong demand for our performance improvement revenue cycle managed services financial advisory and strategy offerings as well as incremental revenue before reimbursable expenses (RVR) growth in the integration of our acquisitions excluding the impact of the acquisitions organic growth for the healthcare segment was ten percent in q one twenty twenty six as compared to q one twenty twenty five as we've discussed in prior earnings calls healthcare providers are operating amidst the convergence of competitive and regulatory pressures that continue to impact financial performance and drive the need to redesign care delivery models finding reimbursements rising operational costs and labor shortages are intensifying the need for stronger cash flow cost optimization and greater operational flexibility health systems are facing a period of rapid transformation driven by advancements in technologies developing and executing an ai strategy amidst the rapid pace of change has become an increasingly important issue for the growing number of our clients providers are increasingly seeking trusted partners with the industry expertise that can help them integrate technology workforce and operating model changes into cohesive executable strategies that deliver near term financial benefit while positioning their organizations for sustainable growth improved margins and long term competitive advantage we see significant opportunities for evaluating and integrating a broad and growing number of applications and use cases for ai and digital tools cross clinical administrative and financial workflows in our clients complex operating environments our ability to help clients address enduring and new challenges and opportunities is at the heart of the growth strategy for our healthcare business as we rapidly expand and integrate our ai capabilities across our healthcare offerings we believe our distinctive operational and technology expertise along with innovative new solutions and partnerships position us well to continue our growth trajectory turning next to the education segment in the first quarter of twenty twenty six education segment revenue before reimbursable expenses (RVR) grew four percent compared to the first quarter of twenty twenty five driven by strong demand for our digital offerings higher education institutions are experiencing uneven demand among domestic students and a significant decline in international students amidst that backdrop institutions are contending with rising operating costs funding declines heightened regulatory scrutiny and further erosion of public confidence in the value of a traditional four year degree these dynamics are forcing higher education leaders to confront fundamental questions about scale economic portfolio mix cost structure and long term financial sustainability we believe our strong market position in higher education provides the opportunity to serve as an experienced partner that can help our clients move beyond incremental actions for more integrated strategic transformation universities are prioritizing solutions that deliver near term financial improvement while modernizing operating models for administrative workflows and academic offerings to accomplish this our clients are building the enabling infrastructure to improve efficiency decision making and the student experience while increasingly leveraging ai we believe our strong client relationships industry expertise ai capabilities and comprehensive portfolio of offerings have positioned us to continue to serve as a partner of choice for our clients as they address these ongoing challenges in the commercial segment first quarter rbr grew twenty two percent over the prior year quarter reflecting strong demand for our financial advisory and strategy offerings the increase in rbr in the quarter also included incremental rbr from our acquisitions of tr alliance and wilson parable excluding the impact of acquisitions rbr in q one twenty twenty six grew eight percent organically for the first quarter of twenty twenty five commercial industries are navigating heightened complexity driven by persistent cost inflation global supply chain realignment geopolitical and regulatory uncertainty and continuously evolving customer and employee expectations at the same time companies are accelerating the adoption of ai enabled data driven operating models to improve agility productivity and decision making these forces are driving demand for comprehensive solutions that integrate strategy and operations financial advisory and digital and ai transformation we continue to invest in expanding our offerings to address the rapidly changing needs of our global client base and those investments have delivered more durable growth in the commercial business in recent quarters we'll continue to deepen our industry expertise and expand our ability to deliver differentiated end to end solutions to enhance our competitive advantage and best address the growing needs of our clients through the first quarter our views on ai and its potential impact on huron remain bullish as we believe it will be a significant contributor to future growth margin expansion and shareholder value multiple third party research providers forecast that the ai services market will grow into double digits over the next several years and we believe we're well positioned to help our clients plan and execute their ai strategies and take advantage of this rapidly growing market opportunity we have substantially increased our investment in ai capabilities and we'll continue to deploy them throughout our offerings operations building upon our deep industry and functional knowledge beyond ai the fundamental market tailwinds propelling growth in our business remain to create opportunities across all three operating segments we believe our ability to bring together our strategy operations technology and people related offerings redesign core business functions and processes while integrating advanced technologies will continue to position us for long term growth now let me turn to our outlook for the year today we are affirming our twenty twenty six guidance for rbr adjusted ebitda margin and adjusted diluted earnings per share their strong first quarter results i am increasingly encouraged about our prospects for the year we remain committed to driving long term shareholder value through continued execution of our growth strategy which has delivered consistent rvr growth and margin expansion since twenty twenty two our disciplined capital allocation strategy is funded both programmatic m and a and since december thirty first twenty twenty two repurchase of five million shares or twenty five percent of our common stock outstanding we believe there is significantly more value to be unlocked by our strategy particularly as we leverage our collaborative entrepreneurial culture to compete and win in today's rapidly evolving technological and competitive landscape in summary we believe our strong competitive positions in healthcare and education enable us to leverage our expertise a powerful portfolio of consulting managed services and digital capabilities also believe our size and scale in commercial markets enables us to be nimble and aggressive integrated operating model that amplifies our impact across our consulting digital and managed services capabilities driven by the velocity of change and complexity facing our clients we were well positioned to continue to execute upon our growth strategy and achieve our stated financial goals for low double digit revenue growth margin expansion and disciplined deployment of our strong free cash flow none of this would be possible without our strong collaborative culture innovative and dedicated team continue to be the heart and soul of our company with that let me now turn it over to john for a more detailed discussion of our financial
john kelly
results john thank you mark and good afternoon everyone before i 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 huron website have reconciliations of these non GAAP measures to the most comparable GAAP measures along with the discussion of why management uses these non GAAP measures why management believes they provide useful information to investors regarding our financial condition and operating results now we'll share some of the key financial results for the first quarter of twenty twenty six first quarter of twenty twenty six produced rbr of four hundred and forty three point seven million dollars up twelve point one percent from three hundred and ninety five point seven million dollars in the same quarter of twenty twenty five driven by growth across all three operating segments net income for the first quarter of twenty twenty six was twenty three point two million dollars or one dollar thirty four cents per diluted share compared to net income of twenty four point five million dollars for one dollar thirty three cents per diluted share in the first quarter of twenty twenty five as a percentage of total revenues net income declined to five point one percent in the first quarter of twenty twenty six compared to six point one percent in the first quarter of twenty twenty five reflecting a higher effective tax rate during the first quarter of twenty twenty six our effective income tax rate in the first quarter of twenty twenty six was fourteen point one percent which is more favorable than the statutory rate inclusive of state income taxes primarily due to a discrete tax benefit for share based compensation awards that vested during the quarter partially offset by certain non deductible expense items our effective income tax rate in the first quarter of twenty twenty five was negative fourteen point four percent as we recognize the income tax benefit on our pre tax income driven by the discrete tax benefit for share based compensation awards that vested during the quarter the increase in effective tax rate during the first quarter of twenty twenty six was anticipated in the twenty twenty six guidance that we provided in february and our expectation for a full year effective tax rate between twenty eight and thirty percent remains unchanged adjusted ebitda was fifty point six million dollars in q one twenty twenty six for eleven point four percent of rbr compared to forty one point five million dollars in q one in twenty twenty five for ten point five percent of rbr the increase in adjusted ebitda was primarily attributable to the increase in segment operating income for all three segments excluding segment depreciation and amortization and segment restructuring charges partially offset by an increase in certain unallocated corporate expenses adjusted net income was thirty million dollars for one dollar seventy three cents per diluted share in the first quarter of twenty twenty six compared to thirty one point one million dollars for one dollar sixty eight cents per diluted share in the first quarter of twenty twenty five now i'll discuss the performance of each of our operating segments healthcare segment generated fifty one percent of total company rvr during the first quarter of twenty twenty six this segment posted record rvr of two hundred and twenty five point two million dollars up twenty six point seven million dollars or thirteen point five percent from the first quarter of twenty twenty five increase in rvr in the quarter was driven by strong demand for our performance improvement revenue cycle managed services financial advisory and strategy offerings rvr in the first quarter in twenty twenty six included seven point three million dollars of incremental rvr from our acquisitions of eclipse insights the consulting services division of axiom systems operating income margin for the healthcare segment was flat at twenty eight point four percent in both q one twenty twenty six and q one two thousand five the education segment generated twenty nine percent of total company rbr during the first quarter of twenty twenty six education segment rbr in the first quarter of twenty twenty six was one twenty seven point five million dollars up four point seven million dollars or three point eight percent from the first quarter of twenty twenty five rbr in the first quarter of twenty twenty six included an inorganic rbr contribution of six hundred thousand dollars from acquisitions that closed in the first quarter of twenty twenty five the operating income margin for education was twenty one point six percent for q one twenty twenty six compared to eighteen point eight percent for the same quarter in twenty twenty five the increase in operating income margin in the quarter is primarily driven by decreases in compensation costs for our revenue generating professionals practice administration and meeting expenses the commercial segment generated twenty percent of total company rbr during the first quarter of twenty twenty six and grew twenty two point three percent over the prior year period posting rbr of ninety one million dollars for q one twenty twenty six compared to seventy four point five million dollars in the first quarter of twenty twenty five the increase in rvr in the first quarter of twenty twenty six is driven by increased demand for our financial advisory and strategy offerings included eleven million dollars of incremental rbr from our acquisitions of Trilliant and Wilson Perumal operating income margin for the commercial segment was sixteen point four percent for q one twenty twenty six compared to fifteen point two percent for the same quarter in twenty twenty five the increase in operating income margin in the quarter was primarily driven by decreases in contractor expenses and salaries and related expenses first quarter support personnel as well as revenue growth that outpaced the increase in performance bonus expense for our revenue generating professionals partially offset by an increase in salaries and related expenses for our revenue generating professionals as a percentage of rvr corporate expenses not allocated at the segment level and excluding restructuring charges were sixty million dollars in q one twenty twenty six compared to fifty two point four million dollars in q one twenty twenty five unallocated corporate expenses in the first quarter of twenty twenty six and twenty twenty five included income of one point two million dollars and nine hundred thousand dollars respectively related to changes in the liability of our deferred compensation plan which is offset by the change in fair value of the investment assets used to fund that plan reflected in other expense excluding the impact of the deferred compensation plan in both periods unallocated corporate expenses increased seven point nine million dollars primarily due to increases in compensation costs for our support personnel software and data hosting expenses increase in compensation costs for our support personnel includes approximately two million dollars of costs that have been reclassified from our operating segments in twenty twenty six reflective of a shift to centralized support for certain sales and operations functions now turning to the balance sheet and cash flows cash flow used in operations in the first quarter of twenty twenty six was one hundred and sixty two point two million dollars plugging our annual incentive payments during the quarter cash flow used in operations during the first quarter of twenty twenty five was one hundred six point eight million dollars in the first quarter of twenty twenty six we used eleven point nine million dollars to invest in capital expenditures inclusive of internally developed software costs resulting in negative free cash flow of one hundred seventy four million dollars we continue to expect full year free cash flow to be in a range of positive one hundred eighty million dollars to two hundred twenty million dollars debt cash taxes and interest excluding non cash stock compensation eso came in at eighty two days for the first quarter of twenty twenty six compared to seventy nine days for the first quarter of twenty twenty five and seventy three days for the fourth quarter of twenty twenty five the increase in dso during the first quarter when compared to both periods reflects the impact of certain larger healthcare projects that include performance based fee elements that we expect to build and collect in the second half of twenty twenty six in accordance with the contractual payment terms during the first quarter of twenty twenty six we used one hundred and fifty five point five million dollars to repurchase approximately one point one million shares representing six point five percent of our outstanding shares as of the beginning of the year total debt as of march thirty first twenty twenty six was eight hundred fifty six million dollars consisting entirely of our senior bank debt and we finished the quarter with cash of twenty six point five million dollars from net debt of eight hundred and twenty nine point five million dollars this was a three hundred forty three million dollars increase in net debt compared to q four twenty twenty five primarily due to our annual cash bonus payment and share repurchases during the quarter our leverage ratio is defined in our senior bank agreement with three point one times adjusted ebitda as of march thirty first twenty twenty six compared to two point two times adjusted ebitda as of march thirty first twenty twenty five as a reminder our first quarter typically represents a seasonal high leverage ratio given the payout of our annual bonuses in march we remain committed to achieving a leverage ratio between two times and two point five times by the end of twenty twenty six in alignment with the capital allocation strategy outlined at our most recent investor day we accelerated our share repurchases during the first quarter reflective of the decline in our share price during the quarter and believe the reduction in share base combined with the earnings growth objectives discussed at our twenty twenty five investor day position us well to achieve continued compounding adjusted diluted earnings per share growth in the future now let me turn to our expectations and guidance for twenty twenty six as mark mentioned today we affirm our annual rvr margin and adjusted eps guidance which includes rvr in a range of one point seven eight billion dollars to one point eight six billion dollars adjusted ebitda in a range of fourteen point five percent to fifteen percent of rbr an adjusted non gaap eps in a range of eight dollars thirty five cents to nine dollars fifteen cents thanks everyone i would now like to open the call to questions operator
OPERATOR
thank you ladies and gentlemen if you have a question at this time please press star one one on your touchtone telephone if your question has been answered or you wish to remove yourself from the queue you may do so by pressing star eleven again one moment for our first question our first question comes from the line of andrew nicholas of william blair please go ahead andrew hi
andrew nicholas
good afternoon appreciate you taking my questions mark you hinted at it a few times in the prepared remarks but i was hoping you could start by just talking about pipeline development throughout the quarter where bookings sit i think last quarter you gave some really helpful disclosures on bookings in particular so any update there and maybe how you're feeling about that pipeline relative to a couple months ago yeah andrew this is john i can jump in with that so in the trailing six month period so the period now ending march thirty first twenty twenty six bookings were up greater than twenty percent across all three of the segments backlog so after you know we booked the sales and now we look at our backlog to cover the remaining revenue guidance for the remainder of the year and beyond that remains at historically high coverage ratios across all three across all three segments and then from a pipeline perspective all three of the segments are up as of april versus where they were as of december thirty first and they remain at near record levels even after giving effect to the bookings the backlog that we talked about awesome thank you and i don't think that the queue is out yet so i was just hoping you could maybe provide some kind of segment level color on growth by capability
john kelly
in particular just kind of interested how digital trended within health care and commercial in particular it looks like legalization a little bit lower this quarter relative to a year ago so any color at the segment level by capability would be helpful yeah sure thing andrew so from a healthcare perspective consulting was up thirteen percent during the quarter managed services was up forty two percent digital was down seven percent during the quarter that really reflects just some of the dynamics that we talked about throughout the year last year where a lot of the demand we're seeing right now is attached to performance improvement engagements as well as our managed service offerings as clients grapple with some of the financial strain that they're seeing within their environment from an education segment perspective consulting was down slightly digital within that segment was up ten percent managed services was up in the mid single digit percent range so there i think we continue to see really good demand across all three of the capabilities within the education segment which gives us continued encouragement about progressively increasing growth there as the year goes on or at least into next quarter and digital remains an area where we just see a lot of investment from our clients right now as they invest in some of the foundational tools that they need to drive operating efficiencies within the business and then within the consulting segment or i'm sorry the commercial segment consulting was up approximately fifty percent during the quarter that does include inorganic contributions from the quarter and the digital part of the business was down in the mid single digit percent range
andrew nicholas
then if i could just ask one more question on commercial curious i mean you said that bookings are up twenty percent plus across all the segments high coverage ratios strong pipelines did you see any change to demand within commercial as the quarter progressed i know it's a small part of your overall mix but
john kelly
i know you have some energy and utilities business wondering if geopolitical conflict had any impact on that or conversations broadly thanks again andrew we didn't see any mix really by industry within the commercial segment so we didn't really see any change to demand for our energy and utilities i would say demand remains strong for our digital capability within commercial there was a little bit of timing during the quarter where we had a couple of our larger projects wound down towards the first part of the first quarter a couple of the replacement projects that we sold during the quarter started a little later out of the gate that we initially anticipated so our expectation is that digital more broadly for the year will get back into the mid to upper single digit growth range starting next quarter and then we also expect that to be the pivot to growth range within the commercial segment next quarter as well
andrew nicholas
very helpful thank you
OPERATOR
thank you our next question comes from the line of toby sommer of truist please go
toby sommer
ahead toby thank you i was wondering if you could talk about the pace of headcount growth year over year and sequentially what's driving that where you're sort of maybe still catching up on staffing based on the demand you're seeing and if you could comment on domestic versus international that'd be helpful thanks
john kelly
sure toby i can jump in with the headcount increases i think in the health you see a year over year a larger percent increase in the healthcare business finished let's exclude managed services which is really just reflective of a lot of the hiring we did in the back half of last year to support the growth that we're seeing so i would expect that to normalize as the year goes on as we get towards the back half of the year you start to pick up in the comparatives the hiring that we did last year i expect that to normalize from an education industry perspective it's actually pretty steady if not down a little bit which reflects what we talked about previously with utilization being lower last year than what our target was and the expectation being that as we ramp back up into growth this year that you're going to see that coming first in the form of stronger utilization so you see relatively conservative growth from an education industry perspective and then from a commercial perspective you do see the impact of the acquisitions that we did year over year within commercial and then other beyond that i would describe that count as pretty much a steady with the pace of organic growth that we see and in terms of by geography the majority of the global headcount ads that we've seen have been in the managed services part of the business so when you look at the health care managed services ads during the quarter you're going to see that's primarily coming from our global team as you look
toby sommer
at your business you do us the favor of describing it in a matrix way across functional area and then industry where do you see the company lagging or exceeding what you understand to be market rates of growth
mark hussey
well toby i think maybe starting with health care i think we continue to see it i think we characterize it as very strong in the prior call it's still very strong it's probably not quite exactly the same level strong but it's driving for us when you look at our long term growth outlook that we described in terms of the percentages and we're seeing consistent opportunities with that that's what we would call the tailwinds driving the secular tailwinds driving demand in our businesses i think education that mid single digit continues to be consistent as well you know i think commercial is a mix of industries and capabilities so it's a little bit harder to kind of distill that down to like a very tight description but i'd say when you look at it in the areas of the business that we have we look at competitors their ability to see whether it's like in our restructuring business if you're doing at market rates maybe even a little bit better as an example with the acquisition of wilson thermal coming in and some of the growth that we've seen there probably at or perhaps above some of the market growth rates that we've seen i think as john said in digital we've seen a little bit of just timing issues around what we're looking at but we'd say we're probably consistent with what the broader market would be looking at in additional areas in commercial and after a quarter with pretty large repurchase could you update us on where you think you end the year from a leverage perspective and what the mix of your capital deployment what kind of mix we should expect thank you
john kelly
we remain committed to a low twos leverage ratio at the end of the year so that's not really a change from our objectives we did accelerate a lot of the buybacks in our plan towards the first quarter reflective of the stock price decline that we saw during the quarter i wouldn't say that we're we'll be done with repurchases i think though you will see us pace a little bit slower through the remainder of the year just be mindful of our perspective that we want to get back to low twos from a leverage perspective the other lever obviously where we deploy capital is strategic tuck in m and a we talked last call about how we're still active in terms of reviewing m and a possibilities i think you will see some m and a i think it will be a slower pace than what we saw last year primarily just driven by the opportunity quite frankly that we've seen with our own stock to start the year and the desire that we've had to go and buy back as many shares as we can during the first quarter at the current valuation toby to that i would just add this greater scrutiny around valuations in the current market are perhaps under a lot more just rigor to understand those so i think as john said the pace will be a little bit slower than last year but i would say if you look at the full year we have described in the past an m and a contribution to our growth rate of two percent to four percent probably a little bit closer to the lower end of that range but certainly consistent with what we described to our investors twenty twenty five thank you very much
OPERATOR
thank you our next question comes from the line of bill sutherland of benchmark your line is open bill thank you
bill sutherland
hey good evening everybody john you did not kind of update the full year expectations for segments and i assume that means we can just use that slide from your last call year end that's
john kelly
right bill there no movement based on the first quarter results versus the guidance that we put out there i do want to still take a second to give one correction to question that andrew had asked earlier as it relates to consulting within the commercial segment the fifty percent is growth that's actually organic i said that includes wilson caramel and trilliant wilson paramount and trollient are on top of that so i just wanted to offer that one quick correction that's good
bill sutherland
i haven't gone through the restated headcount for the you know just moving the responsibilities around but it looks like are you it seemed to me that you had gotten ahead of the curve as far as hiring and healthcare into the first part of this year was that the case or with the reshuffling is that is there more of a steady state as far as you know the adsted headcount that we should expect there
john kelly
i think you're right the reclass that i mentioned in my commentary that's very small very small item i think the broader story with healthcare is that we did do a significant amount of hiring really in the third and fourth quarter last year and i'd say that was really two things when i talk about hiring part of it was catching up a little bit our utilization quite frankly in that part of the business was too high in the first half of last year some of that was keeping up with the demand that we saw last year and then there was of course the component that was also getting us well positioned for the growth in that part of the business for next year so we did a lot of that hiring in the back half of last year and i think that comes through in the metrics what i would expect is that the year goes on you'll see more of a normalization of that account growth rate healthcare more in line with the revenue growth rate would be my expectation okay
bill sutherland
and in the education segment i know it's a little more challenging from a sales motion perspective just given the lack of centralization of some of the decision making but is there a general sense that you're getting that they are getting more inclined to you know take on whatever engagements they certainly could benefit from or it just feels like there's a lot of hesitation or more than i would expect given all the wood chop that they've got
mark hussey
bill it's always interesting in higher ed and you know if you went back a year ago we would have expected perhaps maybe more short term kind of decision making thinking and it really didn't occur that way it was really continues to be a fairly steady drumbeat of thinking about their universities positioning with a little bit of a longer term basis and you know candidly i've come to expect that in higher ed because you know we've had institutions that have been around a few hundred years they don't really think in the short term they think continuing until things will be the same but we do see you know just various pockets where again the bigger projects which we thought perhaps might have gone away continue to be in the mix of what we're doing and so i don't know that there's anything to conclude other than kind of business as usual in high res
john kelly
we see it right now yeah mark i might just add if you go if you were to go back bill to a year ago at this time with just some of the evolving regulatory landscape while a lot of the strain within the industry was good for our longer term demand it did create some disruption in a lot of our clients last year and it wasn't the same in every client but at some clients there was some fairly significant disruption and so i think in terms of the buying environment where we were a year ago with that disruption versus now this year in terms of look it's still an uncertain environment but i think a lot of our clients at this point are focused on getting on with their agendas and making investments in the areas that they knew that they need to pursue those strategic agendas i think it's a stronger buying environment the feeling that we have this year within the education segment than we felt necessarily twelve
bill sutherland
ago good good and then last one john you mentioned a couple of larger healthcare projects where the dso was stretching a little bit are you were those are you seeing i guess i'm trying to ask is there a larger engagement kind of trend going going on in healthcare or were those just you know that they occurred but there is no trend there
john kelly
i would say not a change in trend this year versus last year bill i think we did see a trend last year in terms of sales and we're still executing on those projects of course now towards some larger projects and to be clear we're still selling some larger projects this year i just wouldn't necessarily describe it as an even further increasing trend in twenty twenty six versus twenty twenty twenty five but whether it's some of the larger projects that we sold last year or one this year oftentimes within healthcare when you do have some of those larger projects that have performance based fee elements that does require some dso investment as you go through the initial phases of those projects before you hit the milestones for the clients so we're just in that phase on some of those projects when they were sold last year this year where we expect to get to the point we're able to bill and collect on achievement of some of those milestones in the back half of twenty twenty
bill sutherland
six yeah i was actually i understand the cash issue but i was actually thinking maybe the just efficiency of extended projects you might be benefiting from in terms of your utilization and margins
john kelly
versus no you're right those type of projects do provide great opportunities to get significant portions of our teams engaged on those projects for a longer duration which is good from a utilization perspective within the segment yep great appreciate it guys thank
OPERATOR
thank you as a reminder to ask a question please press star eleven on your touchtone telephone our next question comes from the line of kevin steinke of barrington research associates please go ahead
kevin steinke
kevin great thank you most of my questions have been asked but i wanted to follow up on a comment you made about you remaining bullish on ai being a growth driver for your business and you mentioned the ai services market expected to grow double digits just wondering if you feel like you have the capabilities in house to address that market opportunity or if there could be acquisition activity in that area and i don't even know how developed the market is from an ai services perspective perspective to actually be able to make acquisitions there but just any i guess comments on
mark hussey
that i'd appreciate sure thing kevin we have been pretty successful at organically investing in this area we have a chief ai officer who has been just really helpful for us to kind of basically elevate our game across each of our businesses and continue to deploy not only in the client facing side but also our enterprise functions increasingly as well as our delivery methodologies and so our ability to realize the opportunity in the market is something that we confident in actually we feel like we can hire the right people we have not had a problem attracting talent you know from an m and a standpoint for the reasons that you perhaps described i think valuations are probably going to be pretty huge and i'm not sure that that would be perhaps the best use of our capital given that we can do these things organically but let's just be clear we think there's more investments to be made but it's largely built into the model that we've created partnerships that we also have announced as an example like the hippocratic ai and other firms that can help us accelerate impact as well so it's actually an area like i say i think bullish is the right word to characterize it we see a lot more opportunity recognizing that there's going to be risk and transformation in everything but we're quite excited about it and
john kelly
maybe mark i just add on i think that that maybe is a little bit underappreciated part of our business when you look at it is even going back several years now before a lot of the evolution of the ai tools about forty percent of our revenue comes from our technology business from our digital business so we have natively within our employee base significant amount of talent with skills from a digital perspective using many of the platforms where ai is now being infused and where our clients are looking to get some of the at scale benefits from so that doesn't mean that we don't need to add continued additional talent with new skill sets or new ai capabilities but the base of our employees to start really was strong in terms of their digital capabilities and it's something we talked about last call if you look at the objectives that we're delivering for our clients in terms of outcomes we're also very strong in that area so a lot of what our clients hope you get isn't ai just for the sake of ai it's using ai to achieve outcomes off of financial outcomes within the industries that we serve we've got really deep expertise in terms of how to drive those types of outcomes so you take those two things together continue to add talent with the ai capabilities and we feel like we're just really well positioned to serve our clients in those core areas
kevin steinke
okay thank you that's helpful commentary i appreciate
OPERATOR
thank you seeing no more questions in the queue i'd like to turn the call back to mister hussey
mark hussey
for spending time with us this afternoon and we look forward to speaking with you again in July when we announce our second quarter results. Good evening.
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