Huron Consulting(US:HURN)2020-11-03 03:28Financial Data and Key Metrics Changes - Revenues for Q3 2020 were $205.3 million, down 6.4% from $219.3 million in Q3 2019, driven by declines in healthcare and education segments, partially offset by growth in business advisory [25][6] - Net income decreased to $11.1 million or $0.50 per diluted share in Q3 2020 from $13.7 million or $0.61 per diluted share in Q3 2019 [26] - Adjusted EBITDA was $23.6 million in Q3 2020, representing 11.5% of revenues, compared to $28.8 million or 13.1% of revenues in Q3 2019 [28] Business Line Data and Key Metrics Changes - Healthcare segment revenues were $87.4 million, down 12.6% from Q3 2019, with an operating income margin of 29.3% compared to 32.9% in the prior year [29] - Business advisory segment revenues grew 5.6% to $66 million, with an operating income margin of 16.3%, down from 19.1% in Q3 2019 [30] - Education segment revenues declined 8.7% to $51.9 million, with an operating income margin of 24.2%, down from 25.4% in Q3 2019 [31] Market Data and Key Metrics Changes - The healthcare segment accounted for 43% of total revenues, while business advisory and education segments contributed 32% and 25%, respectively [29][30][31] - The company noted a healthy sales pipeline in healthcare, driven by demand for consulting services related to the pandemic [10] Company Strategy and Development Direction - The company continues to execute its five-year strategy aimed at driving profitable growth, with a focus on technology and analytics to meet evolving client needs [8] - Recent acquisition of ForceIQ is expected to enhance capabilities in digital technology and analytics, particularly within the healthcare sector [12][13] - The company is proactively managing costs and adjusting its workforce to align with current demand, while also reducing its real estate footprint [18][39] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the healthcare segment, noting recovery in hospital patient volumes but acknowledging ongoing margin pressures [10][21] - The education segment faces significant challenges due to lower enrollments and funding cuts, prompting a reevaluation of business models among clients [15][22] - The company is increasing its revenue guidance for 2020 to a range of $835 million to $855 million, with adjusted EBITDA guidance raised to 10% to 10.5% of revenues [20][40] Other Important Information - Cash flow from operations in Q3 2020 was $76 million, with free cash flow of $73 million, driven by proactive cost management and a reduction in days sales outstanding (DSO) [35] - The company reported total debt of $251 million and a net debt of $176 million, reflecting a decrease in leverage ratio [34] Q&A Session Summary Question: Details on restructuring plan and headcount changes - Approximately 140 roles were eliminated, with specific reductions in healthcare, education, and corporate teams [44] Question: Insights on ForceIQ acquisition - Expected to contribute high single-digit revenue next year, with $1 million to $2 million anticipated in Q4 2020 [50] Question: Sequential decline in fourth quarter guidance - Anticipated pressure primarily in the education segment, with some impact on healthcare and business advisory due to fewer business days and holiday schedules [55] Question: Margin and cash flow better than expected - Cautious expense management and reduced spending contributed to better-than-expected EBITDA [60] Question: Impact of student return on education segment - Universities are managing through the current year with fewer students than expected, but are focusing on long-term strategic adjustments [64] Question: COVID response revenue in healthcare - Continued demand for laboratory testing, telemedicine projects, and consulting related to Medically Home implementation [66] Question: Future bill rates and pricing momentum - Strong bill rates in healthcare, with competitive pressures in education leading to a dip in rates [82][83]