Huron Consulting Group Inc.

Good afternoon and welcome to Huron Consulting Group's webcast to discuss financial results for the first quarter of 2026. 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'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 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. Mr. Hussey, please go ahead.

Good afternoon and welcome to Huron Consulting Group's first quarter 2026 earnings call. With me today are John Kelly, our Chief Financial Officer, and Ronnie Dale, our Chief Property Officer. I'll begin by noting that the execution of our growth strategy continues to deliver performance consistent with the financial goals outlined for 2025 and yesterday. Revenues before reimbursable expenses, or RVR, increased 12% in the first quarter of 2026, compared to the first quarter of 2025, driven by growth across the healthcare, education, and commercial segments, including record RBR 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 RBR and margin guidance. We continue to believe we are well-positioned to serve as our clients' trusted advisor if they involve their business models and organizations to succeed in challenging markets and 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 setting, first quarter RVR grew 14% over the prior year quarter, reflecting strong demand for our performance improvement, revenue cycle banded services, financial advisory, and strategy offerings, as well as incremental RVR growth in the integration of our acquisitions. Excluding the impact of the acquisitions, organic growth for the healthcare segment was 10% in Q1 2026 as compared to Q1 2025. As we've discussed in prior earnings calls, health care providers are operating amidst a 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 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 deep 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, across 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 2026, education segment RVR grew 4% compared to the first quarter of 2025, driven by strong demand for our digital offerings. Higher education institutions are experiencing uneven demand on domestic students and a significant decline in international students. Amidst that backdrop, institutions are contending with rising operating costs, funding declines, high regulatory scrutiny, and further erosion of public confidence and the value of a traditional four-year degree. These dynamics are forcing higher education leaders to confront fundamental questions about scale, academic 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, 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, deep 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 22% over the prior year quarter, blocking strong demand for our financial advisory and strategy offerings. The increase in RBR in the quarter also included incremental RBR from our acquisitions of Reliance and Wilson Parable, excluding the impact of acquisitions, RBR in Q1 2026 grew 8% organically over the first quarter of 2025. Commercial industries are navigating heightened complexity driven by persistent cost inflation, global supply chain realignments, 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 include agility, productivity, and decision-making. These forces are driving the band 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 rapidly changing needs of our global client base, and those investments have delivered more durable growth in our 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 will continue to deploy them throughout our offerings, operations, building upon our 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, redesigned core business functions and processes of 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 2026 guidance for RBR, adjusted EBITDA margin, and adjusted diluted earnings per share. They're strong first quarter results. I'm increasingly encouraged about our prospects for the year. We remain committed to driving long-term shareholder value, continued execution of our growth strategy, which has delivered consistent RBR growth and margin expansion since 2022. Our discipline capital allocation strategy is funded both programmatic M&A, and since December 31st of 2022, repurchase of 5 million shares for 25% 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 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 and powerful portfolio of consulting, managed services, and digital capabilities. We also believe our size and scale in commercial markets enables us to be nimble and aggressive with an integrated operating model that amplifies our impact across consulting, digital, and managed services capabilities. Driven by the velocity of change and complexity facing our clients, We're 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 and our innovative and dedicated team to continue to be the heart and soul of our company. With that, let me now turn it over to John for more detailed discussion of our financial 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, 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, why management believes they provide useful information to investors regarding our financial conditions, and operating results. Now we'll share some of the key financial results for the first quarter of 2026. First quarter of 2026 produced RBR of $443.7 million, up 12.1% from $395.7 million in the same quarter of 2025, driven by growth across all three operating segments. Net income for the first quarter of 2026 was $23.2 million for $1.34 per diluted share compared to net income of $24.5 million for $1.33 per diluted share in the first quarter of 2025. As a percentage of total revenues, net income declined to 5.1% in the first quarter of 2026 compared to 6.1% in the first quarter of 2025, reflecting a higher effective tax rate during the first quarter of 2026. Our effective income tax rate in the first quarter of 2026 was 14.1%, 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 2025 was negative 14.4%, as we recognize an income tax benefit on our pre-tax income driven by the discrete tax benefit for share-based compensation awards that lasted during the quarter. The increase in effective tax rate during the first quarter of 2026 was anticipated in the 2026 guidance that we provided in February, and our expectation for a full-year effective tax rate between 28 and 30% remains unchanged. Adjusted EBITDA was $50.6 million in Q1 2026 for 11.4% of RBR, compared to $41.5 million in Q1 2025 for 10.5% 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 $30 million for $1.73 per diluted chair in the first quarter of 2026, compared to $31.1 million for $1.68 per diluted chair in the first quarter of 2025. Now I'll discuss the performance of each of our operating segments. Healthcare segment generated 51% total company RBR during the first quarter of 2026. This segment posted record RBR of $225.2 million, up $26.7 million for 13.5% from the first quarter of 2025. The increase in RBR 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 of 2026 included $7.3 million 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 28.4% in both Q1 2026 and Q1 2025. The education segment generated 29% of the total company RVR during the first quarter of 2026. Education segment RBR in the first quarter of 2026 was $127.5 million, up $4.7 million, 3.8% from the first quarter of 2025. RBR in the first quarter of 2026 included an inorganic RBR contribution of $600,000 from acquisitions that closed in the first quarter of 2025. The operating income margin for education was 21.6% for Q1 2026 compared to 18.8% in the same quarter in 2025. 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 20% of total company RBR during the first quarter of 2026, It grew 22.3% over the prior year period, hosting RBR of $91 million for Q1 2026, compared to $74.5 million in the first quarter of 2025. The increase in RBR in the first quarter of 2026 was driven by increased demand for our financial advisory and strategy offerings, and included $11 million of incremental RBR from our acquisitions of Treliant and Wilson Parallel. Operating income margin for the commercial segment was 16.4% for Q1, 2026, compared to 15.2% in the same quarter in 2025. The increase in operating income margin in the quarter is primarily driven by decreases in contractor expenses and salaries and related expenses for our 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 salaries and related expenses for our revenue-generating professionals as a percentage of RBR. Corporate expenses not allocated at the segment level and excluding restructuring charges were $60 million in Q1 2026, compared to $52.4 million in Q1 2025. Unallocated corporate expenses in the first quarter of 2026 and 2025 included income of $1.2 million and $900,000, 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 $7.9 million, 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 $2 million of costs that have been reclassified from our operating segments in 2026, 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 2026 was $162.2 million, collecting our annual incentive payments during the quarter. Cash flow used in operations during the first quarter of 2025 was $106.8 million. During the first quarter of 2026, we used $11.9 million to invest in capital expenditures, inclusive of internally developed software costs, resulting in negative free cash flow of $174 million. We continue to expect full-year free cash flow to be in a range of positive $180 million to $220 million, that's cash taxes and interest excluding non-cash stock compensation. DSO came in at 82 days for the first quarter of 2026, compared to 79 days for the first quarter of 2025, and 73 days for the fourth quarter of 2025. The increase in DSO during the first quarter, when compared to both periods, but 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 2026 in accordance with the contractual payment terms. During the first quarter of 2026, we used $155.5 million to repurchase approximately 1.1 million shares, representing 6.5% of our outstanding shares as of the beginning of the year. Total debt as of March 31st, 2026 was $856 million, consisting entirely of our senior bank debt. And we finished the quarter with cash of $26.5 million for net debt of $829.5 million. This was a $343 million increase in net debt compared to Q4 2025, primarily due to our annual cash bonus payment and share repurchases during the quarter. Our leverage ratio is defined in our senior bank agreement as 3.1 times adjusted EBITDA as of March 31, 2026, compared to 2.2 times adjusted EBITDA as of March 31, 2025. 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 2 times and 2.5 times by the end of 2026 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. I believe the reduction in share base, combined with the earnings growth objective discussed at our 2025 investor day, positioned 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 2026. As Mark mentioned, today we affirm our annual RVR margin and adjusted VPS guidance, which includes RVR in a range of $1.78 billion to $1.86 billion, adjusted EBITDA in a range of 14.5% to 15% of RVR, and adjusted non-GAAP EPS in a range of $8.35 to $9.15. Thanks, everyone. I would now like to open the call to questions. Operator?

Thank you. Ladies and gentlemen, if you have a question at this time, please press star 11 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 11 again. One moment for our first question, please. Our first question. comes from the line of Andrew Nicholas of William Blair. Please go ahead, Andrew.

Hi, 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 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 31, 2026, bookings were up greater than 20% across all three of the segments. So after we book the sales and now we look at our backlog to cover the remaining revenue guides for the remainder of the year and beyond, that remains a historically high coverage ratios across all three segments. And then from a pipeline perspective, all three segments are up as of April versus where they were as of December 31st. And they remain at near record levels, even after giving effect to the bookings, the backlog that we've talked about.

Awesome. Thank you. And I don't think that the cues out yet. So I was just hoping you could maybe provide some kind of segment level color on growth by capability. In particular, just kind of interested how digital trended within within healthcare and in commercial in particular, it looks like utilization 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 13% during the quarter. Managed services was up 42%. Digital was down 7% during the quarter. And 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 services offerings. The 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 10%. Demand services was up in the mid-single-digit percent range. So they're 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 in the next quarter. 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 50% during the quarter. That does include inorganic contributions from Wilson Paramount to Lyon during the quarter. And the digital part of the business was down in the mid-tickle digit percent range.

That's helpful. And then if I could just ask one more question on commercial. I'm curious, I mean, you said that bookings are up 20% 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 i know you have some some energy and utilities business uh wondering if geopolitical conflict had any any impact on that or or conversations broadly thanks again andrew we didn't we didn't see any mix really by um 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 than 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.

Very helpful. Thank you.

Thank you. Our next question comes from the line of Toby Sommer of Truist. Please go 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.

Sure, Toby. I can jump in with the headcount increases. I think in the, you see a, Year over year, a larger percent increase in the healthcare business, 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'd 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 headcount as pretty much a study with the basic 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 healthcare managed services ads during the quarter, you're going to see that's primarily coming from

our global community.

As you look 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?

Well, Toby, I think maybe starting with healthcare, I think we continue to see it. I think we've characterized 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 big 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 and our ability to see whether it's like in our restructuring business, if we're doing at market rates, maybe a little bit better as an example. with the acquisition of Wilson Parable 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 promotion.

And after a quarter with a 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.

So 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'll be done with repurchases. I think that you will see us pace a little bit slower through the remainder of the year, just being 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&A. We talked last call about how we're still active in terms of reviewing M&A possibilities. I think you will see some M&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 during the first quarter at the current valuation.

To tell you 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&A contribution to our growth rate of 2% to 4%. probably a little bit closer to the lower end of that range, but certainly consistent with what we described to our investors back in close to 2025.

Thank you very much.

Thank you. Our next question comes from the line of Bill Sutherland of Benchmark. Your line is open, Bill.

Thank you. 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, your year end.

That's right, Bill. There's no movement based on first quarter results versus the guidance that we put out there. I do want to I'll take a second to give one correction to a question that Andrew had asked earlier. As it relates to consulting within the commercial segment, the 50% is growth. That's actually organic. I said that includes Wilson, Caramel, and Treliant. Wilson, Caramel, and Treliant are on top of that. So I just wanted to offer that one quick correction.

That's good to know. 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 in healthcare into the first part of this year. Was that the case, or with the reshuffling, is there more of a steady state as far as, you know, the adds to headcount that we should expect there?

I think, you know, you're right. So the reclass that I mentioned in my commentary, that's a very small item. I think the broader story with healthcare is that we have did do a significant amount of hiring, really in the third and fourth quarter last year. And I think that was really two things when I talk about hiring. Part of it was catching up a little bit, or 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, health care, more in line with the revenue growth rate. Okay.

And in the education segment, I know it's a little more challenging from a sales motion perspective. given the lack of centralization and 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 to chop that they've got.

You know, 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 and thinking, and it really didn't occur that way. It just really continues to be a fairly steady drumbeat of thinking about their university's 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've don't really think in the short term. They think continuing that bill, things will be the same. But we do see, you know, just various pockets where, again, the bigger projects that 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 it's kind of business as usual in higher ed as 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 at 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 need to to pursue those strategic agendas. I think it's a stronger buying environment. It's a feeling that we have this year within the education segment than we felt necessarily 12 months ago.

Good, good. And the 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 on in healthcare, or were those just, you know, that they occurred, but there's no trend there?

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 2026 versus 2025. But whether it's some of the larger projects that we sold last year or the ones 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 client. So we're just in that phase on some of those projects where 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 2026.

Yeah. I was actually – I understand the cash issue, but I was actually thinking maybe just efficiency of extended projects you might be benefiting from in terms of your utilization and margins versus – No, you're right, Bill.

Those – yeah, yeah, 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 expected within the segment.

Yep. Great. Appreciate it, guys.

Thank you. Thank you. As a reminder, to ask a question, please press star 1-1 on your touchtone telephone. Our next question comes from the line of Kevin Steinke of Barrington Research Associates. Please go ahead, 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. 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 to actually be able to make acquisitions there. But just any, I guess, comments on 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 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're 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&A standpoint, for the reasons that you perhaps described, I think, you know, 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. You know, we think there's more investments to be made, but it's largely built into the model that we've created. And finally, you know, partnerships that we also have announced as an example, like with 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, you know, recognizing that there's going to be risk and transformation in everything, but we're quite excited about it.

And maybe, Mark, I would just add on, you know, I think that that maybe is a little bit underappreciated, you know, 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 40% of our revenue comes from our technology business, from our digital business. So we have natively within our employee base a 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 to get isn't AI just for the sake of AI, it's using AI to achieve outcomes, often financial outcomes. And 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.

Okay, thank you. That's helpful commentary.

I appreciate it.

Thank you. Seeing no more questions in the queue, I'd like to turn the call back to Mr. Hussey.

Thanks 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.

That concludes today's conference call. Thank you, everyone, for your participation.