HURN

Huron Consulting Group Inc. (HURN)

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Huron Consulting Group, Inc. (HURN)

Q2 2008 Earnings Call Transcript

August 5, 2008 11:00 am ET

Executives

Gary Holdren – Chairman, President and CEO

Gary Burge – VP, CFO and Treasurer

Dan Broadhurst – COO

Analysts

Andrew Fones – UBS Securities

Tim McHugh – William Blair & Co.

Jim Janesky – Stifel Nicolaus

Tobey Sommer – SunTrust

Mark Bacurin – Robert W. Baird

Brandt Sakakeeny – Deutsche Bank

Kevane Wong – JMP Securities

Bill Sutherland – Boenning & Scattergood Inc.

Presentation

Operator

Good morning, ladies and gentlemen, and welcome to the Huron Consulting Group's webcast to discuss the results for the second quarter 2008. At this time, all conference call lines are on a listen-only mode. Later, we will conduct our question-and-answer session for the conference call participants and instructions will follow at that time. As a reminder, this conference call is being recorded.

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 Holdren

Good morning. And thank you for joining us for today's webcast to discuss Huron Consulting Group's second 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 release on our Web site. 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 Web site for all of the disclosures required by the SEC, including reconciliation to the most comparable GAAP numbers.

Joining me on the earnings call today in Chicago 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 with you the market demand for Huron services and how we are positioning ourselves to address these market demands for the rest of 2008 and beyond. We continue to believe Huron needs to focus its capital and resources on markets where we have unique skills, service offerings, and market positions.

Let me start with our health and education consulting practice. Many of you have heard me talk about – before about how robust the consulting spend is and the market demands are for the health and education marketplace in the United States.

Whether it is the most prestigious research university, the academic medical centers associated with them, or the over 5,000 hospitals in the U.S., there are opportunities to help each one of them improve their financial and operating results.

Revenues at these institutions are going down, and costs are going up, the perfect situation for Huron to help each of these institutions improve.

In 2008, our higher education, our pharmaceutical and health plans, and our Wellspring Healthcare business will have organic growth of approximately 30% with strong market demands for 2009 and beyond not only in the U.S., but also in the emerging Middle East market.

We believe the Stockamp acquisition is going to significantly improve our market position in the health and education sector. The acquisition created very positive market and client reactions for us, and it represents a further opportunity to increase the Huron brand equity.

Stockamp significantly broadens and diversifies our offerings in healthcare, and will allow us to further penetrate academic medical centers, teaching organizations, integrated healthcare systems, and children's healthcare organizations.

One of the very appealing aspects of Stockamp's business is that they work extensively with high performing and profitable healthcare organizations. Even the most successful and profitable organizations, the Stockamp team has a track record for delivering significant and measurable value propositions.

Their revenue cycle solution drives sustainable, annual income improvements equal to 2% to 4% of an organization's annual net revenues. And their patient progression solution typically increased in-patient capacity by 5% to 10% without adding plant, equipment, beds or increasing staff.

These two solutions, revenue cycle and patient progression are exclusively endorsed by the American Hospital Association, the trade associations whose members represent 5,000 of the nation's hospital.

Just a few weeks ago, I attended the Stockamp orientations in Portland and Dallas. I was very impressed by their passion for serving clients and know they will be a great fit for Huron. Huron's values for client and community services are identical to Stockamp's. I'm very excited about our future together.

Jim Roth, David Shade, and Paul Kohlheim, the leaders of Higher Ed, Wellspring, and Stockamp are all committed to building an integrated health and education practice that will create multiservice offerings and value solutions in this very important segment of the U.S. economy.

The health and education business with 70% of higher education's clients being repeat buyers each year and with Wellspring and Stockamp jobs lasting 6 to 12 months, gives us additional predictability in our annual revenue streams. We are very pleased with how the segment is performing and will continue to perform in the future.

In our legal consulting segment, we have begun to reap the benefits of the investments made to maintain our edge as the leading service provider to the largest and most complex law departments in the world.

The second quarter was very strong, both in terms of 34% organic revenue growth and improved operating margins. We believe our 2008 organic growth rate will approach 40% with strong demand building for 2009 and beyond.

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