Executive Summary / Key Takeaways

• Huron Consulting (HURN) is successfully leveraging its deep industry expertise and integrated service model across Healthcare, Education, and Commercial segments to capitalize on market disruption and drive robust revenue growth.
• The company's strategic focus on expanding its Digital capabilities and high-value Consulting & Managed Services, supported by accretive acquisitions, is fueling strong top-line performance, as evidenced by 11.2% RBR growth in Q1 2025.
• Significant margin expansion is a core part of the investment thesis, with Adjusted EBITDA margin increasing to 10.5% in Q1 2025 and management guiding towards 14-14.5% for FY 2025, driven by operational efficiencies, pricing initiatives, and scaling corporate costs.
• HURN's strong balance sheet and free cash flow generation support a balanced capital deployment strategy, including significant share repurchases ($72.9 million in Q1 2025) and strategic tuck-in M&A, enhancing shareholder value and future growth capacity.
• While facing competitive pressures and industry-specific headwinds (e.g., regulatory uncertainty, macroeconomic caution), HURN's differentiated capabilities and established client relationships position it favorably to continue delivering on its reaffirmed 2025 guidance and long-term financial goals.

The Resilient Advisor in a World of Disruption

Huron Consulting Group Inc. (NASDAQ: HURN) operates as a global professional services firm, strategically positioned at the intersection of complex industries undergoing significant transformation. For over two decades, Huron has built a foundation rooted in deep expertise across three core segments: Healthcare, Education, and Commercial. This industry alignment, coupled with a dual capability structure encompassing Consulting & Managed Services and Digital offerings, forms the bedrock of its business model. The company's journey, particularly since implementing an integrated operating model around 2022, has been marked by a deliberate strategy to broaden its service portfolio, enhance operational efficiency, and capitalize on the persistent challenges facing its clients. This approach has yielded consistent high single-digit or better revenue growth and a notable trend of margin expansion, even amidst dynamic external environments.

Huron's competitive landscape is varied, ranging from large, diversified global consultancies like Accenture (ACN) to more specialized firms such as FTI Consulting (FCN), ICF International (ICFI), and Korn Ferry (KFY), as well as internal client teams and technology providers. While larger players like ACN boast superior scale, broader global reach, and higher R&D investment leading to faster innovation cycles in some areas (e.g., ACN's AI tools enabling 20-25% faster data analytics processing), Huron differentiates itself through deep, specialized industry knowledge and tailored solutions. In Healthcare, for instance, Huron's expertise in areas like revenue cycle management and performance improvement offers tangible benefits, such as the potential for 10-15% greater efficiency in operational improvements compared to more generalized approaches. In Education, Huron's understanding of institutions is described by management as "unmatched by our competition," providing a competitive moat built on long-standing relationships and specialized offerings like the Huron Research Suite.

A critical component of Huron's strategic positioning lies in its technological differentiation, particularly within its Digital capability. This includes proprietary software products like the Huron Research Suite, a leading platform for research administration, and the Huron Intelligence suite, featuring solutions like Huron Intelligence Rounding (ranked #1 Digital Rounding solution in the 2024 Best in KLAS report) and the Huron Intelligence Analytic Suite in Healthcare. These technologies are not merely tools but integrated solutions designed to drive efficiency, enable data-driven decision-making, and improve client operations. While specific, comprehensive quantitative metrics comparing the performance benefits of all Huron's proprietary technologies against direct alternatives from competitors like ACN or ICFI are not detailed across all offerings, the company emphasizes their role in accelerating transformation, streamlining processes, and enhancing client experiences. The strategic intent behind investments in these digital assets and R&D initiatives is clearly to bundle deep industry expertise with unique intellectual property, creating recurring revenue streams and further differentiating Huron's consulting and managed services. This technological layer contributes to Huron's competitive moat by embedding its services within client workflows and delivering demonstrable value, even if larger competitors possess broader technological ecosystems or higher R&D budgets.

Performance Reflecting Strategic Execution

Huron's first quarter 2025 financial results underscore the effectiveness of its integrated strategy and its ability to capture demand in challenging markets. Revenues before reimbursable expenses (RBR) grew 11.2% year-over-year to $395.7 million. This growth was broad-based, with Consulting and Managed Services RBR increasing 11.1% and Digital RBR increasing 11.2%. The increase was notably supported by the acquisition of AXIA Consulting in December 2024, which contributed $11.9 million in incremental RBR in the Commercial segment, and acquisitions in the Education segment (GGA, Advancement Resources, Halpin) contributing $3.9 million in aggregate inorganic RBR.

Segment performance in Q1 2025 further illustrates the underlying trends:

• Healthcare: RBR increased 9.8% to $198.5 million, driven by strong demand for performance improvement and financial advisory solutions. Despite facing ongoing financial pressures where operating expenses outpace reimbursements, health systems are actively seeking Huron's expertise. The segment's operating margin expanded significantly to 28.4% from 23.6% in Q1 2024, primarily due to revenue growth outpacing compensation costs and better expense management.
• Education: RBR grew 10.0% to $122.7 million, fueled by demand for strategy and operations, advancement offerings, and digital software products, including contributions from recent acquisitions. This growth occurred despite the disruptive regulatory environment and demographic headwinds facing higher education institutions. The segment's operating margin slightly decreased to 18.8% from 19.7%, primarily due to increased compensation costs and administrative expenses as a percentage of RBR, partially offset by revenue growth.
• Commercial: RBR saw the strongest percentage growth, increasing 17.0% to $74.5 million. This was largely driven by the AXIA acquisition and increased demand for digital technology and analytics services. However, the segment's operating margin decreased to 15.2% from 22.1% in Q1 2024, reflecting changes in revenue mix and increased compensation and contractor expenses as a percentage of revenue. Management maintains a full-year operating margin expectation of 21-23% for this segment.

Overall operating income increased substantially by 64.3% to $32.7 million, with the operating margin expanding to 8.3% of RBR from 5.6% in Q1 2024. Adjusted EBITDA increased 22.7% to $41.5 million, resulting in an Adjusted EBITDA margin of 10.5% of RBR, up from 9.5% in the prior year quarter. This margin expansion reflects improved operational efficiency, including increased utilization rates in Consulting (74.1% vs 70.2%) and Digital (78.2% vs 74.3%), effective pricing realization initiatives, and scaling of selling, general, and administrative expenses. Net income grew 36.3% to $24.5 million, and Adjusted Diluted EPS increased 36.6% to $1.68, benefiting from higher net income and a reduction in diluted shares outstanding due to share repurchases.

Financial Strength and Strategic Capital Deployment

Huron's financial health remains robust, providing flexibility for growth and shareholder returns. While Q1 2025 saw net cash used in operating activities ($106.8 million), this is typical seasonality reflecting annual incentive payments made in March. The company generated strong free cash flow in 2024 ($192.7 million) and expects positive free cash flow of $160 million to $190 million for the full year 2025.

The balance sheet includes $23.4 million in cash and cash equivalents as of March 31, 2025. Total debt under the Amended Credit Agreement was $576.3 million, consisting of $315.0 million on the Revolver and $261.3 million on the Term Loan. The weighted average interest rate was 5.60%, impacted by interest rate swaps hedging a portion of the variable-rate debt. The Consolidated Leverage Ratio stood at 2.17 to 1.00 at March 31, 2025, up from 1.39 at December 31, 2024, but well within the covenant limit of 3.75 to 1.00 (or 4.25 to 1.00 under certain conditions). The company was in compliance with all financial covenants. Unused borrowing capacity under the Revolver was $284.6 million, providing ample liquidity.

Huron actively manages its capital structure and returns value to shareholders. The share repurchase program was recently extended through December 31, 2026, with a total authorization of $700.0 million, of which $191.7 million remained available as of March 31, 2025. In Q1 2025 alone, the company deployed $72.9 million to repurchase 508,611 shares, demonstrating a commitment to enhancing shareholder value through buybacks. This balanced approach to capital deployment, combining share repurchases with strategic tuck-in acquisitions and organic investments (estimated $35-40 million in capex/software development in 2025), is central to Huron's strategy.

Outlook and Key Considerations

Huron reaffirmed its full-year 2025 guidance, signaling confidence in its ability to navigate the current environment and continue its growth trajectory. The guidance includes RBR in the range of $1.58 billion to $1.66 billion, Adjusted EBITDA margin of 14% to 14.5% of RBR, and Adjusted Diluted EPS of $6.80 to $7.50. Management's rationale for reaffirming guidance is grounded in the robust sales pipeline, strong sales conversion rates observed in Q1, and the belief that the challenges and opportunities in the external environment are adequately contemplated within the guided ranges.

Segment-level expectations for 2025 include mid-single-digit revenue growth for Healthcare (with 26-28% operating margins), mid to upper-single-digit growth for Education (with 23-25% operating margins), and low 20% growth for Commercial (including the full-year impact of AXIA, with 21-23% operating margins). The expected increase in unallocated corporate SG&A (mid to upper single-digit percentage) reflects ongoing investments to support overall business growth.

While the outlook is positive, investors should remain mindful of key risks. The dynamic regulatory landscape in Healthcare and Education poses potential threats, including changes to funding, reimbursement rates, and institutional business models. Macroeconomic and geopolitical uncertainty could continue to impact client spending decisions, particularly in the Commercial segment, as seen with some past delays in digital initiatives. Competition remains intense across all segments, requiring continuous investment in capabilities and talent. The successful integration of acquired businesses and the ability to attract and retain skilled professionals are also critical for executing the growth strategy. Furthermore, investments like the preferred stock in a hospital-at-home company carry valuation risks, as evidenced by the $4.2 million impairment loss recognized in Q1 2025.

Huron's strategy to address these challenges involves leveraging its deep industry expertise to help clients navigate disruption, expanding its portfolio with high-demand offerings (like performance improvement and digital transformation), enhancing operational efficiency through its global delivery model and technology, and maintaining a flexible balance sheet to pursue strategic opportunities. The company's culture is also highlighted as a competitive advantage in attracting and retaining the talent necessary for service delivery.

Conclusion

Huron Consulting Group's first quarter 2025 results demonstrate a company effectively executing its integrated growth strategy and capitalizing on the inherent disruption within its core markets. By combining deep industry knowledge with expanding digital capabilities and a focus on operational efficiency, Huron is not only driving top-line growth but also delivering meaningful margin expansion. The reaffirmation of full-year guidance, supported by a strong pipeline and a balanced capital deployment approach, underscores management's confidence in the company's trajectory. While external headwinds and competitive pressures persist, Huron's differentiated positioning, particularly its specialized expertise and proprietary technology solutions, provides a solid foundation. For investors, the story remains one of a resilient professional services firm well-equipped to advise clients through complexity, translating industry challenges into opportunities for profitable growth and enhanced shareholder value. Continued execution on margin expansion initiatives and successful integration of strategic acquisitions will be key factors to watch as Huron progresses towards its stated financial goals.