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spk07: Good afternoon, ladies and gentlemen, and welcome to Huron Consulting Group's webcast to discuss financial results for the first quarter 2022. At this time, all conference call lines are on a listen-only mode. Later, we will conduct a 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'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's website for all of the disclosures required by the FCC, including reconciliation to the most comparable GAAP numbers. And now I would like to turn the call over to Jim Roth, Chief Executive Officer of Huron Consulting Group. Mr. Roth, please go ahead.
spk00: Good afternoon and welcome to Huron Consulting Group's first quarter 2022 earnings call. With me today are John Kelly, our Chief Financial Officer, and Mark Hussey, our President and Chief Operating Officer. Our strong first quarter results reflect the continued momentum that started early in 2021 and has now expanded across all three of our operating segments. Revenues grew 28% over the prior year quarter, reflective of the strong demand in each of our core industries. In addition, our digital revenues increased 36% in the first quarter of 2022 over the same period in 2021, reflecting solid demand for improved integration of technology and analytics into our clients' business operations. As we've shared on previous earnings calls, our strong results further demonstrate that we are delivering on our commitment to sustainable revenue growth and improved profitability. As we will discuss in a few minutes, demand for our services across industries remains strong, and we are strategically and operationally well positioned to take advantage of the vibrant market ahead. I will now share some additional insight into our first quarter performance. During the first quarter, healthcare segment revenues grew 27 percent over the prior year quarter. The increase in revenues in Q1 of 2022 was driven by strength in demand for our performance improvement revenue cycle managed services, and digital offerings. We've mentioned on recent investor calls the ongoing challenges facing the healthcare industry. It's worth reiterating the primary challenges facing our clients as we expect these challenges to continue for the foreseeable future. We see the most difficult challenge as the strained cost structure stemming from dramatic increases in labor costs. High turnover, increased compensation for clinical and administrative staff, and a heavy reliance on contract labor has pushed costs well in excess of the trend in reimbursement rates. These factors, coupled with employee burnout, worsening payer mix, and inconsistent volume recovery, have all contributed to increased financial pressures for much of our client base. We expect these pressures will continue to drive increased demand for our performance improvement, strategy, and people-related offerings. In addition, healthcare providers are focused on evolving their care delivery models, including by establishing virtual care in the home. Through our exclusive partnership with Medically Home, we have successfully implemented the hospital-at-home model for numerous health systems to help them create competitive differentiation, expand consumer choice, and increase their growth potential. The opportunities to treat patients at home are part of a broader trend in digital transformation among healthcare providers. As reflected in the strong growth in our digital offerings, we are providing the data, analytics, and technology to help our clients achieve growth and scale in their business models, while helping them stay competitive amidst an increasing array of nontraditional participants in the healthcare market. Our deep subject matter expertise and our consistent ability to transform our clients' businesses and deliver measurable, improved outcomes positions us to address the demand in the market today and the growing market opportunity in the years to come. Turning now to the education segment, in the first quarter of 2022, education segment revenues grew 57% over the prior year quarter. driven by strong, broad-based demand across all of our offerings in this segment. Education segment revenues grew 20 percent sequentially over the fourth quarter of 2021, highlighting the continued momentum in demand for our services in the education industry. As we indicated in our recent investor day, over 75 percent of higher education institutions are seeking to change the way they do business following the pandemic. These changes include transitioning to the cloud, executing plans to ensure future financial sustainability, expanding the research enterprise, and seeking better ways to serve the student population while attracting new students in a demographically challenged environment. Our investor day created an opportunity for us to provide greater insight into aspects of our education industry capabilities that we believe are underappreciated among the investor community. We are bringing to market offerings that are in high demand as our client base makes long-awaited changes to the way they operate their business. In particular, many of our large research university clients are having to make significant investments in upgrading their digital capabilities and improving the efficiency in which they manage their academic and research operations. With our team of over a thousand employees focused exclusively in the education industry, we have a distinct competitive advantage and are well positioned to help our clients achieve their goals with our strong strategy and operations, research, student, and digital capabilities. Turning to the commercial segment, in the first quarter of 2022, commercial segment revenues grew 3% over the prior year quarter, driven by strong demand for our digital and strategy offerings in the commercial industries, particularly in financial services. The increase in revenues from our digital offerings were partially offset by the decrease in revenues from the divestiture of our life sciences business in the fourth quarter of 2021 and lower demand in our financial advisory capabilities. Excluding the impact of the life sciences business, the commercial segment grew 12% in Q1 2022 over the prior year quarter. Our digital and strategy capabilities continue to perform well leveraging our deep industry expertise and distinct reputation as we build market share in the large and growing commercial market, most notably in the financial services and energy and utilities industries. Our digital offerings in the commercial markets grew 23 percent in the first quarter of 2022 as compared to the same period a year ago, further demonstrating the strong demand for our technology and analytics-related services. We've established a strong set of offerings, building a solid foundation from which we believe we can further accelerate growth in this segment. Finally, let me turn to our outlook for the year. We typically do not adjust our annual guidance after the first quarter. However, our strong first quarter results and the demand across all of our operating segments lead us to increase our annual revenue and earnings guidance. As our press release indicates, we are increasing and narrowing our annual revenue guidance to $1 billion to $1.05 billion. We are also maintaining our adjusted EBITDA guidance in a range of 11.25% to 12.25% of revenues and increasing and narrowing our adjusted diluted earnings per share in a range of $3 to $3.40. We are raising our revenue guidance to reflect the current and anticipated demand for our services across all segments. As we mentioned at our recent investor day, to achieve our strategic and financial objectives, including delivering strong revenue growth and margin expansion, we are focused on accelerating growth in healthcare and education, growing our presence in the commercial industries, advancing our integrated digital platform, building a more sustainable base of revenue to drive consistent growth, and strategically deploying capital to accelerate our strategy and return capital to our shareholders. We believe we have a significant growth opportunity ahead of us, and we are well positioned to capitalize on that opportunity. Market conditions remain favorable for our core offerings, and we believe that we will continue to achieve strong results consistent with the outlook we described in our investor day presentation and our commentary today. Now let me turn it over to John Kelly for a more detailed discussion of our financial results. John? Thank you, Jim, and good afternoon, everyone.
spk03: 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, 10Q, 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 and why management believes they provide useful information to investors regarding our financial condition and operating results. Now let me walk you through some of the key financial results for the quarter. Revenues for the first quarter of 2022 were $260 million, up 28% from $203.2 million in the same quarter of 2021. The increase in revenues in the quarter was driven by growth across all three operating segments, reflective of the significant growth opportunities in each of our core industries. In addition, revenue within our digital capability increased 36% in the first quarter of 2022 over the same period of 2021, reflecting increased demand across all of our core industries as our clients continue their digital transformation. Net income was $26.9 million, or $1.27 per diluted share in the first quarter of 2022, compared to $5.4 million or 24 cents per diluted share in the same quarter in the prior year. The increase in net income includes an unrealized gain of $19.8 million net of tax for our investment in Medically Home. As Jim mentioned, we are focused on growing and serving clients who are establishing acute care delivered in the home via our exclusive partnership with Medically Home. Our effective income tax rate in the first quarter of 2022 29.6% compared to 22.1% one year ago. Our effective tax rate for Q1 of 2022 was less favorable than the statutory rate, inclusive of state income taxes, primarily due to tax expense related to non-deductible losses on our investments used to fund our deferred compensation liability and certain non-deductible expense items. Adjusted EBITDA was $22.1 million in Q1 2022, or 8.5% of revenues, compared to $16.5 million in Q1 2021 for 8.1% of revenues. Adjusted non-GAAP net income was $10.3 million, or 49 cents per diluted share in the first quarter of 2022, compared to $7.8 million, or 35 cents per diluted share in the same period of 2021. Now I'll make a few comments about the performance of each of our operating segments. The healthcare segment generated 47% of total company revenues during the first quarter of 2022. This segment posted revenues of $121.9 million for the first quarter of 2022, up $25.9 million, or 27% from the first quarter of 2021. Revenues for the first quarter of 2022 included $600,000 from our acquisition of Perception Health. The increase in revenue in the quarter reflects strong demand across our consulting and managed services and digital capabilities within the segment. Our consulting and managed services capability within healthcare grew by 25% year-over-year during the first quarter, primarily reflecting increased demand for our performance improvement offerings. Our digital capability in healthcare grew by 31%, reflecting increased demand for our EHR and ERP offerings. Operating income margin for healthcare was 23% for Q1 2022 compared to 24.8% for the same quarter in 2021. The quarter-over-quarter decrease in margin percentage was primarily attributable to increased salaries and wages for our revenue-generating professionals, inclusive of higher performance bonuses reflective of our full-year expectations. As a reminder, our first quarter results also included the annual resetting of our wage basis for certain fringe items like the employer portion of FICA taxes and our 401 match. The education segment generated 31 percent of total company revenues during the first quarter of 2022. The segment posted record revenues of $80.7 million in Q1 2022, up $29.3 million or 57.1 percent from the first quarter of 2021. Revenues in the first quarter of 2022 included $2.3 million from our acquisition of Whiteboard. The increase in revenue reflects the continued strong demand for all of our offerings across the segment. The continued demand for our offerings is further demonstrated by the education segment's 20 percent sequential growth in the first quarter of 2022 over the record fourth quarter of 2021. The operating income margin for education was 17.7% for Q1 2022, compared to 16.6% for the same quarter in 2021. The quarter-over-quarter increase in margin was primarily due to revenue growth that outpaced increases in payroll costs, partially offset by an increase in contractor expenses as a percentage of revenues. The commercial segment generated 22% of total company revenues during the first quarter of 2022. The segment posted revenues of $57.5 million in Q1 2022, up $1.6 million, or 2.9% from the first quarter of 2021. Revenues for the first quarter of 2022 included $1 million of inorganic contributions from our acquisitions of Unico Solution and AIM data. The increase in revenues reflects strength in demand for our digital offerings, partially offset by a decrease in revenues due to the divestiture of our life sciences business, which generated $4.7 million in the first quarter of 2021. Our digital offerings in the commercial markets grew 23 percent in the first quarter of 2022 as compared to the same period a year ago. Operating income margin for the commercial segment was 21.2 percent for Q1 2022 compared to 17.6 percent for the same quarter in 2021. quarter-over-quarter increase in margin was primarily due to the decrease in expenses driven by the divestiture of our life sciences business, partially offset by increases in contractor expenses and payroll costs for our support personnel as a percentage of revenues. Let me provide some additional color on our capabilities before I turn to other corporate expenses. Our consulting and managed services and digital capabilities both achieved strong growth in the first quarter. On a full year basis, We expect the consulting and managed services capability to generate operating income margin in the upper 20 percent range and the digital capability to generate operating margin in the high teen percentage range. Turning to corporate expenses, corporate expenses not allocated at the segment level were $33.5 million in Q1 2022 compared with $28.9 million in Q1 2021. Unallocated corporate expenses in the first quarter of 2022 included a $2.6 million reduction of expense related to the decrease in liability to participants in our deferred compensation plan, which is fully offset by the corresponding loss in other income related to the decrease in value of the assets used to fund that plan. Conversely, unallocated corporate expenses in the first quarter of 2021 reflected an increase of expense of $800,000 related to the deferred compensation plan. Absent the impact of our deferred compensation plan in both periods, The $8 million increase in unallocated corporate expenses are primarily due to an increase in payroll costs, including increases in salary and related expenses, performance bonus expense, and share-based compensation expense for our support personnel. The overall increase in unallocated corporate expenses also includes an increase in non-payroll costs, primarily for legal fees and software and data hosting costs. We expect our quarterly run rate for corporate expenses to be in the low to mid $30 million range for the remainder of the year. Now turning to the balance sheet and cash flows. DSO came in at 75 days for the first quarter of 2022 compared to 69 days for the fourth quarter of 2021 and 64 days for the first quarter of 2021. We continue to expect DSO to normalize to between 60 and 65 days in 2022 as we collect on several large projects that have contractual payment schedules extending into the second and third quarters of the year. We finished the quarter with borrowings on a revolving credit facility of $335 million and with cash of $10 million for net debt of $325 million. This was a $113 million increase compared to Q4 2021 as the first quarter reflects the payment of our annual bonuses. The first quarter also included $24.1 million of share repurchases or approximately 527,000 shares under our current authorization of up to $200 million of which $106 million in repurchases remained available as of March 31st, 2022. Despite the significant outflows for annual bonus payments and share repurchases, Our leverage ratio, as defined in our senior bank agreement, was approximately 2.2 times adjusted EBITDA as of March 31, 2022, compared to 2.6 times adjusted EBITDA at the end of Q1 2021. Cash flow used in operations in the first quarter of 2022 was $79 million, and we used $6 million of our cash to invest in capital expenditures, inclusive of internally developed software costs. resulting in free cash flow of negative $85 million. Finally, let me turn to our expectations and guidance for 2022. As Jim noted, we're raising and narrowing our full-year 2022 revenue guidance to $1 billion to $1.05 billion. The increase in our revenue guidance primarily reflects the strong momentum across our business and the significant growth opportunities in each of our core industries. In addition, we are reaffirming our full-year adjusted EBIT guidance to be in a range of 11.25% to 12.25% of revenues, and we are increasing our full-year adjusted non-GAAP diluted earnings per share guidance to be in a range of $3 to $3.40. Finally, we continue to expect our full-year effective tax rate to be in a range of 28% to 30%. We continue to expect to deploy our free cash flow, consistent with the guidelines shared in our Investor Day presentation, with 25% to 50% directed towards shareholder purchases and 50% to 75% towards debt paydown or tuck-in M&A. Thanks, everyone. I would now like to open the call up to questions. Operator?
spk07: Thank you. Ladies and gentlemen, if you have a question at this time, please press star 1 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 the pound key. One moment for our first question, please. Our first question comes from Toby Sommer of Truist Securities. Your line is open.
spk02: Hey, good afternoon. This is Jasper Bibbon for Toby. One cue is much stronger start to the year than the prior expectation for a back-half-weighted guide. I just want to ask, did you see growth accelerate later in the quarter, and is there anything to call out as far as new large projects or success fees?
spk03: I can take that one, Jasper. I think the growth was fairly steady over the course of the quarter. There were no, you know, one-time big fees or anything like that. I'd say in the normal course of our business, we're always, you know, signing new projects, and some of them are larger in size, but I'd say that's kind of a normal thing. But in terms of the first quarter, I think it was demand that we saw strengthening as the quarter progressed, and it was a result of just good balance really across the different industries as well as the capabilities, including a good mix of projects, including some which were larger sized. But nothing kind of unusual during the quarter that led to the larger revenue number other than just solid demand.
spk02: Okay. And then how should we think about the cadence of utilization rates that's assumed in the updated guidance? Do you still think you could get to that historical 75%, 76% range by the end of this year?
spk03: We do. We do think that. You know, you can tell when you look at our headcount stats, Jasper, we've been in a mode where we've been hiring a lot of people. That was the back half of last year into the first quarter of this year, and we've been hiring – hiring that talent to meet the demand that we see in the market. But naturally, there is a little bit of a ramp with that talent to get them fully up and utilized in our projects. So I think you saw some of that drag on the metric during the first quarter. But certainly, as the year progresses, our expectation is that metric is going to tighten up and that we'll be able to get back to those historical levels.
spk02: Okay. And then I just want to ask about new bookings activity. How does the pipeline look today? And maybe you could contrast that for us versus how things looked at the start of the year when your customers were dealing with a good bit more uncertainty related to COVID.
spk00: Just for this, Jim, you know, as John indicated, we've had a pretty steady progression of demand that's kind of picked up as the year progressed. And so I think that's really what we're kind of up against. There's really no big you know, flashpoints for us at this point in time. It's just, it has really just been very steady demand, and I think we're seeing it really across all of our segments, as we indicated, and we feel pretty good about the way the year is beginning to look at this point in time as well. I mean, we're always going to be a little bit cautious about looking too far in the future, given everything that's going on in the world, but at this stage, we feel pretty good about the way things are demanding, and again, I think it's the fact that we're seeing it across really almost all of our service lines and all of our businesses, that gives us some confidence that this is going to be a good indication of some solid demand into the future as well.
spk03: Yeah, I agree with that, Jim. And I'll just add, quantitatively, we're pleased with the growth during the first quarter. We're pleased with the guided growth for 2022. And the thing that gives us a lot of confidence is when we look at that pipeline and we look at the backlog, we're at or above our historical coverage ratios across most of the business at this time of the year. So that gives us confidence about the trend line that we've been able to project in the guidance for the year.
spk02: Last one for me. Some other professional services firms have described kind of in-year compensation adjustments as they try to keep pace with wage inflation. Have you seen that at all so far this year, or do you think you are where you need to be from a wage perspective to get the requisite talent?
spk03: From a wage perspective, Jasper, we've been monitoring that very closely going all the way back now really to the first half of last year. And so we've been proactive. along those lines along the way up through this point. So we feel good that we've made adjustments along the way and that we're very competitive from a pay perspective. And the compensation levels that we're at right now, they're all baked into the guidance that we've had out there, and there's really no change in that at this point versus the initial outlook that we gave in February. So we feel good that we've been making those adjustments as we've been going along and that those adjustments are reflected in the guide. Thanks for taking the questions. I'll take the rest offline.
spk07: Thank you. Our next question comes from Andrew Nicholas of William Blair. Your line is open.
spk06: Hi. Good afternoon. First question I had was just actually combining some of Jasper's questions there. In terms of the hiring environment, It sounds like you're competitive on the wage front, so no concerns there. But was attrition kind of normalizing in the quarter, at least relative to some elevated levels for the industry, I think, as a whole last year? And, you know, just overall thoughts on kind of hitting hiring targets this year, given what seems to be, you know, a really, really constructive backdrop for demand and seemingly a ton of work to do, just wondering how confident you are in your ability to staff those projects appropriately.
spk00: Andrew, this is Jim. I'll take a shot at answering that. First of all, I think in terms of the retention, you know, we saw we obviously had a lot of, we had through most of the pandemic, at least through the first half of, say, 21, we had lower than normal attrition. And then in the last part of 2021, the early part of 2022, we had, well, actually the last part of 2021, we had higher than normal attrition. Things seem to have steadied right now for us, where we're kind of seem to be year to date. They seem to be holding at attrition rates that were consistent with the way we looked prior to the pandemic. So we feel like we're kind of that, along with the compensation commentary that John said, where we made some adjustments. We feel pretty good about that. So from a turnover perspective, I think we're feeling that things are kind of now settling in a little bit better. at levels that we're historically used to. The ability to hire is – we're having some challenges in the sense that our demand and supply is a little bit out of whack right now. We do expect our utilization numbers to go up, but we have been, as John indicated, we've been hiring a lot of people. We also have very strong demand right now. So our hiring focus right now is our hiring efforts are going full speed ahead in almost all of our businesses. And we are, like for many years, we've had a really good culture to build into. We feel like we've got some really good momentum, so that all helps. But we have pretty strong demand right now. So we're kind of trying to balance this out a little bit, probably being aggressive on the recruiting front, but at the same time, trying to get back to our historical utilization levels, which we think are going to be important for us to hit our profitability objective. So it's a balance, and there's a lot of moving parts right now, but we feel comfortable in the metrics that we've laid out in our guidance, and I think it's just, you know, we spent a lot of time talking about recruiting, and we spent a lot of time talking about getting those people we recruited in. up and going on to existing projects. So it's going to be a little bit of a challenge, I think, for a while, just because it's a tough environment, but we seem to be managing through it very well, and I'm really appreciative of the way our teams, our recruiting teams in particular, have been working with us to get a really talented group of people, and I've been really happy with the way our businesses have been so readily deploying people and getting them trained and ready to go. So we feel good about that, but it's a lot of work right now, just particularly given the demand we have going on.
spk06: Great. That's really helpful. Thank you. And then for my follow-up, I just wanted to hone in on Q1 results a little bit further. Obviously, really, really strong growth. Was that more or less in line with your expectations, better than your expectations? Is there anything in particular that you would call out that surprised you positively? And how much of that are you kind of extrapolating over the course of the next couple quarters, if that is the case? Thank you.
spk03: Andrew, it's John. I would say it was modestly better than our expectations going into the year. We felt good at the beginning of the year about our backlog and our pipeline and the commentary we're getting from clients out in the market. So we felt good about our trajectory. I'd say that with that said, the quarter ended up even being a little bit stronger than what we had anticipated, and that strength kind of progressed as the quarter went along. I think it was a little bit better as we now start to look towards the remainder of the year. The raise that we gave in guidance, mathematically, we're basically calling for the back nine months of this year versus the back nine months of 2021 to be up overall at the midpoint of roughly 10%, around 10%. Our expectation is that we're probably going to do a little better than that in the second and third quarters, so the next couple quarters. And then we were a little bit more cautious on the fourth quarter, primarily just because it was a really strong fourth quarter last year, so it's a little bit of a tougher comp, but also just it's so early in the year. And, you know, typically we wouldn't be raising guidance this early, but we felt – like we were able to do so based on the strength of the first quarter. But given that it's still, you know, only early May, we just wanted to be a little bit more cautious about the fourth quarter at this point. But that's how you arrive at the kind of 10% implied growth for the remaining nine months of the year.
spk00: And, Andrew, this is Jim. I'll just add to what John said, and that is, you know, we were a little bit surprised. But, you know, it's interesting because the demand, you know, can be quantified to a large extent, right? The part that we try to focus on, though, is what's causing the demand. And I think the answer to that question is probably the most important thing because that's what gives us comfort as to where things are going in the future. And we have seen this buildup in our two largest industry verticals, health care. We knew that the last year has been really tough for providers for some of the reasons I outlined in my script early on. And in education, some of the same thing. I think they're both those. Those two industries went through a tremendous amount of challenges during the pandemic, and we saw that once the pandemic began to ease, we saw the demand for our services growing much quicker. So it's a very significant contrast to what happened during the middle of the pandemic when things were much quieter for them, and I think they now have looked at what it's going to take for our clients to be successful in the future. And all those issues that we've talked about are kind of front and center on so many of our clients right now. And that's what's driving our demand. So, you know, we're not that surprised at the reasons for it, but we anticipated a solid growth this year, and we kind of predicted that earlier on. But I think even the levels we saw in Q1 probably surprised us a little bit. And we do feel pretty good about the way things are evolving for the rest of the year.
spk06: Thanks again.
spk07: Thank you. Our next question comes from Bill Sutherland of Benchmark Company. Your line is open.
spk01: Thanks. Well, guys, the growth in education, of course, was particularly outsized. And I'm curious if there were any mixed changes that kind of, you know, were part of the accelerations.
spk03: No, the mix, it was really strong, Bill, across the entire segment, which was the trend line that we saw exiting last year. I guess the comment I would make is if you go back to 2021, one of the things that we discussed was really starting, even as early as the second quarter of last year, but certainly in the third and fourth quarter, really the research and strategy components of that business wrapped up very quick even last year, and we're at record levels even in the back half of last year. And our commentary was we feel really good about the growth that's coming in digital based on what we see in the market, based on deals we had closed that we knew were going to be ramping up. But I'd say you are seeing that effect now, which is something that we forecasted would happen, which would be you still have very strong demand in the research and strategy parts of the business, but now you are starting to get that. run rate increase in the digital part of the business that's reflective of some of the work that we were able to close last year along with what's now a much more robust environment from a digital perspective.
spk01: And is the in healthcare and education, are the deal sizes any change that's noticeable there or pretty much the same?
spk00: I think they're pretty much the same. There's nothing This isn't attributable to one big, massive job. This is just a really broad-based demand across all of our competencies and services within those businesses. Right.
spk03: So along those lines, so there's a mix. There's a mix of smaller-sized jobs, medium-sized jobs, and then there are some larger ones, too, in both of those segments.
spk01: And since your guidance does imply kind of a sequentially flat the rest of the year, does that mean I'm assuming that you can probably, that's why you're thinking you should see some utilization benefit going forward?
spk03: Yeah. I mean, you know, from our perspective, Bill, we certainly are hopeful that at the end of the year we're looking back and that we were up towards the upper end of the range versus the midpoint. But I think at this point, given how early it is, It makes sense for us to, again, probably to be in that, if you're looking year over year now, above 10% growth in the second and third quarters versus last year, and then we're probably just being a little bit cautious on the fourth quarter. But our hope is, based on the demand trend lines that we see in the market, that that fills in as the year goes on and that we're able to trend towards the upper half of the range versus just at the midpoint.
spk00: Okay. Maybe put a different way, though, I guess, not a different way, but just I think we see, as we've been talking on this call, we see a lot of strong demand. We also see all the macro events that are going on in the world, and I think we just wanted to just kind of balance the two of them and not get too carried away at the outset. So we feel, you know, I'll reiterate that we feel really good about the demand. We just wanted to be a little bit cautious about all these kind of external events and just to not assume that they're not going to have any impact on anything.
spk01: Sure. And the last one, I was just kind of interested in kind of the, the status or the, or kind of where you've gotten the hospital at home program in short, in a fairly short amount of time. Um, can you talk about maybe number of relationships you have with the program or engagements, or I'm not sure how exactly you want to, you know, um, profile it. And I forget if you got into it on the investor day, um, Should have gone back and looked.
spk00: Yeah, we're at different stages. We had our first engagement in this area was really we started doing right when COVID hit. And that was in March or actually April of 2020. I think probably right now, my guess is we have somewhere between 7 and 10 people. health systems that we're working with in one way, shape, or form, helping them develop this. And each system goes at their own pace. Some want to be very aggressive with a large number of virtual beds. Others are a little bit more conservative as they kind of see what their market's going to look like and how it fits in with their operations. But we have a growing business in that area, and the whole concept of the hospital-to-home seems to be doing very well for all the reasons people thought it would. So we feel pretty good about the way that's going as well.
spk01: And are you all just curious to be classifying it in terms of the two groups, consulting or digital?
spk03: The nightly homework is in consulting.
spk01: Okay. All right. Well, good quarter, guys. Thanks. Appreciate it. Thanks, Bill.
spk07: Thank you. Again, to ask a question, please press star 1 on your touchtone telephone. Again, that's star 1 on your touchtone telephone to ask a question. The next question comes from the line of Kevin Steinke of Barrington Research. Your line is open.
spk04: Hey, good afternoon, everyone. Just wondering, as we look at the increased revenue guidance, if there's any meaningful change we should think about to the segment level growth expectations that you talked about on your fourth quarter 2021 call.
spk03: Yeah, Kevin, I think the way I would think about it is at this point we expect the health care segment to be low double digit growth for the full year. We expect the education segment to be low 20% range for the for the full year and then probably similar expectations to what we had as of the February call for the commercial business and the mid to upper single-digit range.
spk04: Great. That's helpful. And, you know, I know it's still kind of early on with regard to the operating model changes that you discussed on your last call and at the investor day. but is there anything you're seeing in how the business is operating now that you can tie to maybe a strengthening in the business pipeline or revenue trends that you're experiencing, just so maybe we can point to some tangible evidence of how those operating model changes are benefiting your company?
spk05: Hey, Kevin, it's Mark. I think it's... When you look at the demand in the current quarter, I would say it's largely unrelated to the operating model because you really just launched it. But just keep in mind, too, we have really been working collaboratively in our business for many, many years. And so that really predates the operating model. And so in some respects, it isn't surprising that we're getting good results from it. But I wouldn't maybe directly attribute it. I do think from an operations point of view, it's really now launched and live and doing well. I would say, you know, like our global capability is an example. We surpassed 1,000 employees in India in the quarter, which was a milestone for us. And, you know, I think we share that we started with perhaps in 2015, 30 or 40. So it's grown dramatically and continues to be an important part of our future. Our global products team, which is about 400 employees, we've accelerated development in some of our largest differentiated software products. And so that's all going in the right direction. And then global analytics team is focused on driving data insights and innovation. So I think we're just really getting started on what we would think of significant opportunities for continued growth and margin expansion, and really for our people, too, with just broader opportunities for growth and development. So overall, we feel like it's all on a very good track right now.
spk00: Kevin, this is Jim. I totally agree with Mark. In fact, I would also add, I mean, you're right. I don't know that we can specifically outline, you know, attribute, you know, revenues to this other than to say that, you know, one of the fundamental things we wanted to accomplish was really to be in a much better position to bring our collective set of capabilities together to our clients and not do it in kind of the more structured silos that we had prior to this. And I think it's working really well. I mean, you know, these are kind of qualitative observations, but we've seen so many more people coming, working together across boundaries that really didn't happen as often before, and people were excited about it. I think, frankly, even just having people see for the first time showing our first quarter results under the new reporting segment in real time, I think really gets people to understand this is how this is really going to be helped to see them grow, how the industries are going to grow, how the capabilities are going to grow. I think it's been very meaningful. So I have been, I mean, it certainly is not, you know, it's not the easiest thing in the world to do, and it's not been without some issues, but I think it is going, from my end, it's going very well. And I think it's going to continue to be one of the things that's going to enable us to achieve our goals in the intermediate and long term. I feel really good about the way it's gotten out of the box.
spk04: Okay, thank you. And I just lastly wanted to ask about the challenges that you talked about your healthcare clients facing with labor cost pressures and reliance on outside staffing firms and the like. I mean, is there anything you can do specifically to help them address those challenges or that you're kind of mixing into your offerings as you approach them?
spk00: Well, Kevin, I think there's a lot that we can do. I mean, the problem, as always, and, you know, it certainly is true in health care now, but, frankly, it's true in a lot of other places, is that you bump up against – they've got their own – financial objectives that they're trying to get at. And as you go back and try to achieve those financial objectives, you bump up against kind of cultural issues that they have about what kind of organization it is. And so I think it's just kind of from a, you know, we help them not just identify ways to narrow the gap between the increase in costs and the revenues that are coming in at a much slower pace. We try to close that gap with trying to find ways that will be culturally acceptable and operationally acceptable and And a lot of what we do is we do that through technology in some part, but we also have them strategically go back and kind of look at everything that they're doing and trying to figure out, can we keep doing the same things in the same way? So it's a block-by-block evaluation, and it's not easy. I think one of the things that's really come across hard is that, I mean, we've talked about some of these challenges even pre-pandemic, and then pandemic hit, and you had like this whipsaw where you had a ton of – of COVID-related costs come on early, and then you had some COVID relief coming in. But now I think the biggest issue that they're facing, as I indicated, was they just have a compensation base that's rising much, much faster than the reimbursement trends, and that has everyone concerned because there are no easy answers for that. And that's one of the reasons it's driving our demand right now. Okay, great. Thank you.
spk07: Seeing no more questions in the queue, I'd like to turn the call back over to Mr. Roth.
spk00: Thank you all for spending time with us this afternoon. We look forward to speaking with you again in July when we announce our second quarter results. Have a good evening.
spk07: That concludes today's conference call. Thank you, everyone, for your participation.
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