Huron Consulting Group Inc. (HURN)

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Huron Consulting Group, Inc. (HURN)

Q3 2008 Earnings Call

October 30, 2008 11:00 am ET


Gary E. Holdren – Chairman, Chief Executive Officer

Gary L. Burge – Chief Financial Officer

Daniel P. Broadhurst – Chief Operating Officer

Mary M. Sawall – Vice President of Human Resources


Tim McHugh – William Blair & Company

Jim Janesky – Stifel Nicolaus & Co.

Tobey Sommer – Suntrust Robinson Humphrey

Andrew Fones – UBS Securities

[Carl Denoccio] – Deutsche Bank

Dan Leben – Robert W. Baird & Co., Inc.

David Gold – Sidoti

Bill Sutherland – Boenning & Scattergood Inc.



Good morning ladies and gentlemen and welcome to the Huron Consulting Group’s webcast to discuss results for the third quarter 2008. (Operator Instructions) And now I would like to turn the call over to Gary Holdren, Chairman and Chief Executive Officer of Huron Consulting Group. Mr. Holdren, please go ahead.

Gary E. Holdren

Thank you and good morning. I want to thank you for joining us for today’s webcast to discuss Huron Consulting Group’s third quarter 2008 results. Before we begin, I would like to point all of you to the disclosure at the end of our news release for information about any forward-looking statements that may be made or discussed on this call. We have posted a news released on our website.

Please review that information along with our filings with the SEC for disclosure of factors that may impact subjects discussed in this morning’s webcast. Also on this call we will be discussing one or more non-GAAP financial measures. Please look at our earnings release and on our website for all the disclosures required by the SEC including reconciliation to the most comparable GAAP numbers.

Joining me on the earnings call today are Gary Burge, our Chief Financial Officer; Dan Broadhurst, our Chief Operating Officer; and Mary Sawall, our Vice President of Human Resources.

This morning I would like to cover two topics. First, results of the third quarter and second, our thoughts on what impact the financial markets and economy will have on Huron for the rest of the year and in 2009.

Let me talk first about the third quarter. Gary Burge will cover the numbers a lot more closely when I am done with my remarks. The third quarter was very successful for Huron. First of all, we completed the acquisition of Stockamp and the integration is going well. Stockamp’s third quarter financial results came in as expected so we are off to a good start and Q4 will show more normal gross margins for Stockamp.

And Huron’s legacy business on an overall basis had a very good quarter. Excluding our previously announced restructuring charges and Stockamp results, the adjusted EBITDA margin for Huron’s combined portfolio businesses in the third quarter would have been better than 26%. That’s the highest margin percentage in Huron’s history and it certainly points to a solid performance in Q3.

Our Health and Education segment had a really good quarter. As I said, Stockamp’s integration is going very well and they met all of our operating and financial expectations in the first quarter with us. We are also very excited about how they are going to combine forces with our Wellspring and Higher Education teams to address the needs for hospitals, major health systems and the academic medical centers. Excluding Stockamp’s results, the legacy Health and Education business posted record revenues and an operating margin of nearly 40%.

We continued to demonstrate our market leadership position. Demand for these businesses by the marketplaces are extremely strong. Our Legal Consulting business also turned in great results for the quarter with record revenues and margins. V3locity was off the charts with our document reuse centers averaging more than 100% utilization in the third quarter. In our Finance Consulting segment we improved segment operating income by $2 million from second quarter of 2008 through headcount reductions and increased utilization.

As you will recall from last quarter’s conference call, we’ve closed down our operational consultant business because of below average operating results. As a reminder, operational consultants, set in our Corporate Consulting segment.

So I think we had a very good quarter during what was a difficult time for a lot of companies. I believe this speaks to our ability to adapt to the market and to take advantage of our strengths. And I think it also speaks to our ability to manage through challenging times with our balanced portfolio businesses and the return on investment concept clients get for using Huron.

But based on what we are seeing in the marketplace, how does this position Huron for the rest of 2008 and 2009? It is fair to say that very few of us at Huron and our clients and American industry in general and those of you in the investment community have direct experience dealing with the kind of marketplace turmoil we are witnessing today. We are also experiencing the uneasiness caused by wide swings in the equity markets, a lack of certainty in the credit markets, and whether consumers will have funds to buy goods and products.

I would be less than candid if I didn’t say that predicting 2009 revenue growth and results will involve more variables and uncertainties than any other time in the history of Huron. We expect to see some pullbacks or delays in assignments in some sectors and certainly any future widespread liquidity issues and companies drive to conserve cash could affect our business.

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