Sign in

You're signed outSign in or to get full access.

HC

Huron Consulting Group Inc. (HURN)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered record revenues before reimbursable expenses (RBR) of $395.7M (+11.2% YoY), adjusted EPS of $1.68 (+36.6% YoY), and adjusted EBITDA margin of 10.5% despite a dynamic macro/regulatory backdrop; full-year 2025 guidance was reaffirmed (RBR $1.58B–$1.66B; adj. EBITDA margin 14.0–14.5%; adj. EPS $6.80–$7.60) .
  • Versus Wall Street, Huron posted a material beat on adjusted EPS ($1.68 vs $1.156 consensus*) and a top-line beat ($395.7M vs $389.3M consensus*); EBITDA was roughly in-line/slightly below consensus* .
  • Strength was broad-based: Healthcare (+9.8% RBR; 28.4% operating margin), Education (+10.0% RBR; 18.8% margin), and Commercial (+17.0% RBR; margin compression to 15.2%) with increased utilization in Consulting and Digital and $11.9M incremental RBR from the AXIA acquisition .
  • Potential stock catalysts: sustained Healthcare margin expansion, robust sales conversion/pipeline, reaffirmed FY25 guide post Investor Day, and ongoing buybacks ($72.9M repurchased in Q1; 2.9% of shares as of 12/31/24) .

What Went Well and What Went Wrong

What Went Well

  • Broad-based growth and margin expansion: “Driven by strong growth across all three operating segments, revenues… grew 11%… while we continued to expand our margins” (CEO) .
  • Healthcare outperformance: operating margin rose to 28.4% on strong performance improvement and financial advisory demand; utilization increased ~400 bps across Consulting and Digital capabilities YoY .
  • Guidance reaffirmed with confidence: “We reaffirm our annual RBR and margin guidance… position us well to serve our clients as they navigate an evolving regulatory landscape and continued market disruption” (CEO) .

What Went Wrong

  • Commercial margin compression: operating margin fell to 15.2% (from 22.1% prior year), driven by mix and higher compensation/contractor costs; consulting saw negative growth while Digital remained strong .
  • Non-GAAP adjustments reflect market noise: Q1 included a $4.2M non-cash impairment loss on a preferred stock investment; FX losses also impacted results, partially offset in adjusted metrics .
  • Seasonally weak free cash flow and higher net debt: operating cash flow of -$106.8M reflecting annual incentive payments; net debt increased to $552.9M; management still guides FY25 FCF of $160–$190M .

Financial Results

Consolidated Performance vs Prior Periods and Estimates

MetricQ3 2024Q4 2024Q1 2025
Revenues before reimbursable expenses ($USD Millions)$370.0 $388.4 $395.7
Diluted EPS (GAAP) ($)$1.47 $1.84 $1.33
Adjusted Diluted EPS ($)$1.68 $1.90 $1.68
EBITDA ($USD Millions)$50.9 $58.9 $34.2
Adjusted EBITDA ($USD Millions)$54.9 $56.8 $41.5
Adjusted EBITDA Margin % (of RBR)14.8% 14.6% 10.5%
Net Income Margin % (of total revenues)7.2% 8.5% 6.1%
Consensus Revenue ($USD Millions)*$379.3*$380.6*$389.3*
Consensus Primary EPS ($)*$1.59*$1.523*$1.156*
Consensus EBITDA ($USD Millions)*$55.3*$52.4*$41.5*

Values marked with * retrieved from S&P Global.

Actual vs Consensus – Q1 2025

MetricActual Q1 2025Consensus Q1 2025*Surprise
Revenues before reimbursable expenses ($USD Millions)$395.7 $389.3*+$6.4M (Beat)
Primary EPS ($)$1.68 $1.156*+$0.52 (Beat)
EBITDA ($USD Millions)$34.2 (EBITDA) / $41.5 (Adj.) $41.5*~Inline vs Adj.; Below GAAP

Values marked with * retrieved from S&P Global.

Segment Breakdown

SegmentQ3 2024 RBR ($MM)Q3 2024 Margin %Q4 2024 RBR ($MM)Q4 2024 Margin %Q1 2025 RBR ($MM)Q1 2025 Margin %
Healthcare$183.1 27.1% $202.3 30.3% $198.5 28.4%
Education$121.0 24.1% $118.8 22.4% $122.7 18.8%
Commercial$65.9 24.5% $67.3 17.8% $74.5 15.2%
Total RBR$370.0 —$388.4 —$395.7 —

Q1 RBR mix: Healthcare 50%; Education 31%; Commercial 19% .

KPIs

KPIQ3 2024Q4 2024Q1 2025
Consulting Utilization %73.6% 77.2% 74.1%
Digital Utilization %77.2% 77.7% 78.2%
Rev-Generating Professionals (ex-Managed Services)—4,694 4,726
Managed Services Professionals1,223 (HC); 122 (Edu) 1,420 (HC); 110 (Edu) 1,568 (HC); 111 (Edu)
DSO (days)——79
Share Repurchases ($USD Millions)—$122.2 FY24 $72.9 in Q1
Net Debt ($USD Millions)——$552.9

Guidance Changes

MetricPeriodPrevious Guidance (as of Q4 2024)Current Guidance (Q1 2025)Change
Revenues before reimbursable expensesFY 2025$1.58B – $1.66B $1.58B – $1.66B Maintained
Adjusted EBITDA Margin % (of RBR)FY 202514.0% – 14.5% 14.0% – 14.5% Maintained
Adjusted Diluted EPSFY 2025$6.80 – $7.60 $6.80 – $7.60 Maintained

Investor Day reaffirmation of FY25 guide on March 25, 2025 .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2: Q4 2024; Q-1: Q3 2024)Current Period (Q1 2025)Trend
Digital capability growthQ4: Digital RBR growth; margin expansion . Q3: Digital up YoY; strong utilization .Commercial Digital +12% ex-AXIA; record sales conversion in Commercial driven by Digital .Positive momentum; sales conversion strength.
Healthcare regulatory/macro pressuresQ4: Healthcare strong, margin expansion . Q3: Healthcare growth and margins .Management cites Medicaid, 340B, imported drug/device costs driving performance improvement demand .Heightened regulatory focus; sustained demand.
Higher Education regulatory environmentQ3: Steady demand; margin expansion .Clients seek liquidity, planning, operating model transformation amid evolving directives .Elevated advisory demand; mixed cost impacts.
Tariffs/macro in CommercialQ3: Commercial consulting softened; sequential growth .Clients modeling tariff impacts; strategy work softer, Digital strong; FA inquiries shifting back to Commercial .Mixed; watch strategy consulting softness.
Sales conversion/pipelineQ3: Strong conversion positioning for 2025 .Record conversion in Q1, notably in Commercial Digital; no cancellations; April trends stable .Robust; supports guide.
Utilization/headcountQ4: Utilization elevated; headcount growth .Utilization up ~400 bps YoY in Consulting/Digital; headcount to grow with revenue, especially in Healthcare .Efficient staffing; targeted hiring.

Management Commentary

  • CEO opening remarks: “Driven by strong growth across all three operating segments, revenues… grew 11%… while we continued to expand our margins… we reaffirm our annual guidance… position us well to serve our clients as they navigate an evolving regulatory landscape and continued market disruption” .
  • Healthcare demand drivers: “continued strong demand for our performance improvement and financial advisory offerings… operating expenses… outpacing reimbursements… potential changes to Medicaid funding… 340B… imported drugs/devices costs” .
  • Commercial outlook: “record levels of sales conversion… primarily driven by the digital business… watch item on strategy… FA inquiries more weighted back to Commercial into April” (CFO) .
  • Tax and margin notes: “effective income tax rate… negative 14.4%… recognized an income tax benefit… adjusted EBITDA 10.5% of RBR… increase driven by Healthcare/Education; Commercial margin down on mix and higher costs” (CFO) .

Q&A Highlights

  • Commercial segment pipeline: Record Q1 sales conversion; Digital strength; strategy consulting softer amid macro; financial advisory inquiries shifting back to Commercial in Q2 .
  • Headcount vs utilization: Utilization up ~400 bps YoY in Consulting/Digital; headcount expected to grow with revenue, especially in Healthcare, as pipeline remains strong .
  • April trends/cancellations: April tracking broadly normal; importantly, no cancellations of sold work thus far (CEO/CFO) .
  • Performance improvement demand: Robust assessment activity persists as clients face revenue constraints and cost escalation; no shift toward contingent fees observed .
  • Project size/duration: Average job size increasing with cross-capability delivery (digital/strategy/FA), reflecting scope and complexity across industries .

Estimates Context

  • Q1 2025 beats: Adjusted EPS $1.68 vs $1.156 consensus*; RBR $395.7M vs $389.3M consensus*; EBITDA ~inline vs adjusted consensus*, below GAAP EBITDA consensus due to non-GAAP focus .
  • Prior quarters: Q4 2024 actuals exceeded consensus on EPS and revenue; Q3 2024 EPS met/beat, revenue trailed consensus slightly* .
  • FY 2025 consensus: Primary EPS at $7.61* sits modestly above company’s guidance range midpoint ($7.20); reaffirmation suggests consensus may consolidate around guide unless Commercial strategy softness persists .

Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Broad-based growth with Healthcare-led margin expansion continues; sequential Commercial growth with Digital strength offsets strategy consulting softness .
  • Significant Q1 beat on adjusted EPS and revenue vs consensus underscores resilient demand and execution; watch Commercial margin mix going forward .
  • Reaffirmed FY25 guidance post-strong Q1 and Investor Day enhances confidence in medium-term trajectory, including margin expansion and capital returns .
  • Seasonal cash flow dynamics drive Q1 FCF weakness and higher net debt; management guides to $160–$190M FY25 FCF and leverage at 2.2x adj. EBITDA .
  • Utilization improvements and targeted hiring (esp. in Healthcare) should support FY25 revenue scaling; pipeline/sales conversion remain robust .
  • Non-GAAP filters matter: adjusted metrics exclude noise (preferred stock impairment, FX); investors should track adj. EBITDA margin progress vs 14.0–14.5% guide .
  • Near-term trading: Strength and guide reaffirmation are supportive; monitor Commercial strategy consulting trends, regulatory developments (Medicaid/340B), and tariff-driven macro impacts discussed by management .