Good afternoon ladies and gentlemen and welcome to Huron Consulting Group's webcast to discuss financial results for the fourth quarter and full year 2015. At this time, all conference call lines are on 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 the 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/or on Huron's website for all of the disclosures required by the SEC, including reconciliations to the most comparable GAAP numbers. And now, I would like to turn the call over to Jim Roth, Chief Executive Officer and President of Huron Consulting Group. Mr. Roth, please go ahead.

Good afternoon and welcome to Huron Consulting Group's fourth quarter and full year 2015 earnings call. With me today is Mark Hussey, our Chief Operating Officer and Chief Financial Officer. This is our first earnings call since the sale of Huron Legal. So we will focus most of our discussion on Q4 results based on continuing operations. Huron's full year revenue from continuing operations increased 11.4% over the prior year driven by solid performance from Studer Group and strong results in our Education and Life Sciences and Business Advisory segments. I will spend a few minutes talking about our fourth quarter and full year 2015 results before I discuss our expectations for 2016. Fourth quarter and full year Healthcare revenue grew approximately 8% year-over-year, driven primarily by Studer Group. Our revenue cycle practice turned in another year of solid results while our performance improvement costing [ph] clinical solutions, as we now referred to it, as remained flat compared to the third quarter and at levels below our initial targets. As part of the market facing adjustments that we referenced in October, we recently combined our performance improvement and clinical practices to be more responsive to the increasing need for hospitals to gain greater insight into the cost of care and ultimately modify their clinical operations to improve the cost and efficiency of delivering care. As many hospitals take on or consider risk-based contracts, it becomes increasingly critical to understand and improve the cost of care. Combining our performance improvement and clinical practices will better align our services with these emerging client needs. Our Education and Life Sciences or ELS business concluded 2015 on a strong note with 15.1% revenue growth on a full year basis over 2014 results. ELS performed strongly in the first quarter of 2015 and each practice…

Thank you, Jim 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 and adjusted EPS. Our press release, website and 10-K each have reconciliations of these non-GAAP measures to the most comparable GAAP measures along with a discussion of why management uses these non-GAAP measures. Also, as a result of our previously announced divestiture of Huron Legal, which closed in December, the Huron Legal segment will be treated as a discontinued operation for full year 2015 and all historical periods presented. Please note that immediately following our press release today, we issued an 8-K with restated quarterly results for 2014 and 2015. This information is also posted on the website. In addition, our previously announced acquisition of MyRounding, which closed in February, is not included in our fourth quarter financial results. MyRounding will be included within our Healthcare segment beginning in the first quarter of 2016. Now I will walk through some of the key financial results. Revenues from continuing operations for the fourth quarter of 2015 were $185.1 million, up 12.9% from $163.9 million in the same quarter of 2014. Revenues for the fourth quarter of 2015 reflect our acquisitions of Studer Group, Rittman Mead India and Cloud62, which in aggregate generated $25.1 million of revenues during the quarter. The year-over-year increase in revenue is primarily attributable to our acquisition of Studer Group and strong performance in our Education and Life Sciences and Business Advisory segments. Operating income from continuing operations increased $15.1 million or 69.7% to $36.7 million in Q4 2015 compared to $21.6 million in Q4 2014. Operating margin was 19.8% in Q4 2015 compared to 13.2% in Q4 2014. Adjusted EBITDA from continuing operations was $40 million in Q4 2015…

[Operator Instructions]. Our first question comes from the line of Tim McHugh of William Blair. Your line is now open. Please proceed, sir.

Yes. I guess first a question on the margins. I understand the ERP investment, but I would like a little more color there, especially since I think you already had talked about it being in investment mode in 2015. And then secondly, I guess I am just still trying to bridge, you had given in December pro forma for the sale of legal that after taking out some corporate costs you would be 21.5% EBITDA margins or so. And so a little over 200 basis point difference versus what you are guiding to, so I am trying to bridge that gap.

Yes. Tim, this is Mark. I will leave Jim to elaborate on ERP initiative, but let me start on the bridge side. I think there's probably three main components. One on healthcare on the margins. We finished this year at 38.2% operating margin for the segment. The comment I just made on the guidance is for margins of above 37%. So if you think that delta on an expected revenue, you probably have somewhere between know $5 million, $5.5 million impact and that really frankly relates to a couple of things. One is the buildout of the strategy practice. In the second half of 2015, we started hiring new managing directors and continued to expand that initiative into 2016. I think the other thing that is also an element here is, on the mix with contingent fees. And while 2015 contingent fees were at a similar level or maybe just a little bit lower than what we saw that we are guiding to in 2016, the reality is that we had expected them to be higher and to some degree that impact ended up being covered more than offset in bonus expense the way our plan works. And so to some degree, there is a little bit of a mild headwind on those being more milestone-based in 2016 on the healthcare margins. In the ELS and again I will have Jim elaborate here but essentially what we talked about was an expansion of the initiative and really what you have two pieces, Workday and then Oracle piece. The Workday is really an expansion. And so what we had talked about initially was that we thought in 2016 Workday would likely be more of a breakeven and I think that will continue to be the case in terms of our expectation.…

Yes. Tim, the only thing I would add at this point is that we announced in 2015 that we are going to be making the investment in Workday and we had anticipated certain growth trajectory for that part of the business. And I think pretty early on, we realized that some demand in the market for those kinds of services that is basically people that know and understand the cloud software that was being offered and have the knowledge and awareness of higher education and healthcare background were going be in very solid demand. So actually our investments are proving and are even better than we had thought they were going to. We feel really good about the way we have been positioned in this part of the business. And it give us that much more incentive to continue to grow and expand because we believe that for the foreseeable future, there is going to be a very strong demand and we are uniquely qualified to do this kind of work. The advantage is, a large part of it is what's driving is particularly in the higher education space is that organizations are using this as an opportunity to completely restructure the way they do business and that gives us a great opportunity to do very sizable process redesign work in conjunction with helping them implement the cloud-based solution. So we continue to view this as a very strong part of our growth strategy for the ELS business and we hope that it will also expand into the healthcare business as well.

Okay. And then just a follow-up, performance improvement, your introductory comments basically said that you don't think it's that hospitals are lacking for margin pressure. The more you have dug into it, what's the challenge there for you if it's not that the market has changed such that they are not looking for help there?

Well, Tim, it's been a little bit of a mystery to us. So we can conjecture part of it, I think it still revolves around timing. I think there were certain hospitals in 2015 that had some what we believe to be temporary relief from added volumes from ACA and that that gave them some basis for wanting to delay any of the hard effort that's required where you are to go through a cost reduction. And so I think a lot of these hospitals, it's not as though they have never done cost reduction before, they had done it over a period of three or four years. They finally found an opportunity that where there might be a little bit of a breather and I think many of the hospitals, we felt, were just waiting to see whether they could delay this any further and I think some of them did. That's our sense. We don't believe this is a competitive positioning issue for us at all. We believe that, at least for the target clients that we have, this is more of an issue of just wanting to not undertake the somewhat invasive performance improvement efforts until they absolutely have to and I think in 2015, there was a sense that at least some places didn't absolutely have to. So I think clients are also buying differently in the sense that they are probably, at least now, focused a little bit more on some of the more small targeted projects rather than the comprehensive integrated projects. And that, too, has had an impact on the way they are buying from us. So I think we are continuing to be patient with our clients. And as we have indicated, we think that there are numerous reasons to believe that the economics for our hospital clients are going to be challenging at best in 2016 and we are well prepared to address those demands when they come up. What we didn't want to do and the reason that our guidance is conservative is we did not want to begin to predict the timing of that emergence, even though we feel fairly strongly that it will emerge. We just don't want to get into a timing discussion on that.

Does the pipeline for that practice look any, even if the revenue is not different, if we assume pipeline today versus I guess in the fall, has that looked better yet?

The pipeline remains strong. I think what we are seeing is the lack of some of the really large integrated projects that have helped put some wind in our sales in the past. So in terms of just the raw number of data points, the number of clients that we have, I think the demand still is very strong. The issue for us is just the size of some of these projects that just our clients are just buying differently and they are taking a more focused approach to what they want to do. And on top of that, as we have said before, there, their needs are changing as well. Some have moved on and have done all the performance improvement work they need to do and they are now more focused on things like population health and understanding cost of care. And so the market has changed. We referenced that back in the last part of last year and we are continuing to respond to that. So our pipeline remains decent. What we don't have right now and particularly in the larger health systems and the larger academic medical centers, we don't have visibility into the large projects that we typically had. We do believe that they are going to be there. There is considerable stress in the system right now. But rather than figure out or try to predict when the timing of those are going to come around, we decided to take a cautious view given our current lack of visibility for some of those larger engagements. I think the underlying core traditional business that we have looks good in terms of the number of clients we have. It's just the size of some of the engagements is smaller and we don't have the much bigger projects that we typically had help us boost some of our revenues.

And just a follow-up related to that. You referenced risk of large projects rolling off. I thought at least some of the big ones you talked about last year didn't start until the middle of last year. And given they were bigger and longer, I would have thought that continues, that that would have been more of a 2017 issue.

As we have said before, Tim, it's not one project on any one of our, for example, on a large project, it may have eight or nine projects that are part of it. And so what happens is, some of the projects have peaked, others are still going and we will continue to go into 2017 and maybe beyond. But some of the larger parts of those projects have peaked. It's not just where the whole project ends fully in one day. We have some things that pick up at the beginning, some things that begin later in the cycle. Some of the earlier projects are now beginning to tailoff while others continue.

Okay. Thanks.

Thank you. Our next question comes from the line of Paul Ginocchio of Deutsche Bank. Please proceed, sir. Pardon me, Paul. Your line is now open.

Sorry about that. Hi Mark, apologies. Can you give us some color on acquired revenue for 2016 and maybe some color on MyRounding? And then second, Jim, is the performance improvement, when you are talking about performance improvement, does it still hold true for clinical transformation? And I thought clinical transformation was sort of the fastest growing area. Is it concern in the marketplace about ACA or changes or things not going to happen? Is that what's causing people to pause if that is an issue? Thanks.

Yes. Let me start on that, Paul, so color on acquired revenues. Obviously, let me start with MyRounding since that deal happened. MyRounding is actually a business that we had a relationship, actually Studer, prior to our deal going back to the middle of 2014. And they co-developed a rounding product to use in connection with their clients. That quickly ended up going to market. It was pretty successful. It ended up on a combined basis between Studer, who was private labeling it and MyRounding who was selling it separately, ended up getting to roughly about 85 clients and low double digits millions of dollars of TCV for a SaaS-based product. So for us, it was a natural extension of a relationship we already had. I would tell you that there was a defensive element to acquiring that business as well as an offensive with respect to being able to deal do more with that product development capability. So at the end of the day, that one is the story behind MyRounding. But when you look at the acquired revenues, if you take Studer out of the mix, you really have an average sized deal that we have been doing probably in the range of two or three deals a year. And again, who can predict when they can come, because you never know as we all know with acquisitions. But really, even our of our $125 million of free cash flow, we think we will have conservatively, we believe that there will be some meaningful number. I don't want to put a number on it, for disclosure purposes, but I would tell you that I would be surprised if we ended the year without more than this one deal that we have already done because of just the strength of the pipeline and I think those generally for us have been good accretive deals. We talked about the criteria that we look for. It really starts with an ROI, usually in the mid to upper teens is realistic, we think, in this marketplace for the kind of businesses that we are looking for. Oftentimes, they are founder-based companies that are looking for a platform to expand. We certainly have run that play with our EPM&A business and they have a lot of success to-date integrating them. But there's others out there as well in each one of our practice areas, probably with the exception of legacy business advisory, has various deal opportunities in certain stages. So I think it's reasonable expect, even though we wouldn't put it in the guidance or be specific about the timing that there will be some deal close this year.

Paul, this is Jim. Let me take a shot at trying to respond to the second part of your question, if I understood it correctly. Let me just give you two minutes or one minute of background. Historically, we have had a business in healthcare called performance improvement and that essentially was cost-reduction effort, sometimes in the clinical area, sometimes in the administrative areas. We also then had a practice that you are correct in referring to the fact that it was called the clinical transformation and that was really helped at focusing more on helping the clinical operations transform into improved operation, more collaboration of care, things of that nature. And toward the middle part of 2016 as we continue to see changes in the marketplace, we realized that issues like the cost of care which was becoming increasingly important, particularly in a risk environment, required those practices really to be working more closely together that if you are trying to transform the clinical operations, you should be doing it in conjunction with some strategy. So we changed the emphasis and combined the two practices, really to focus on what we believe is to be one of the emerging issues and that is to have our hospitals better understand the cost of care and our view of the cost of care involve both the clinical transformation piece and the performance improvement piece. So it's a long way of saying that you are right, the clinical piece was actually a fast growing area. We combined it not out of weakness but more out of a response to market needs in terms of what they were looking for to help them with this kind of more urgently evolving practice. Keep in mind, under a fee-for-service environment, the cost of care wasn't all that important. As you begin to transition away from that, it suddenly becomes much more important. And I think what we are seeing is, I wouldn't describe the transition away from value from a fee-for-service to be rapid, but it is still emerging and more and more hospitals are focusing on the overall cost of care. We felt combining the practice put us in a better position to respond to their needs.

So you are still seeing demand for that clinical transformation more so than you are seeing demand for [indiscernible].

Absolutely. We still have strong demand. The demand for what we are now calling the cost in clinical solutions, it still has a lot of activity. We are at the point where the jobs are a little bit slower right now. And as we said, we are lacking visibility on some of the larger fully integrated projects. But the need is there and the need is particularly acute in some of the areas that we have traditionally worked in and that is the larger health systems and the academic medical centers where, as we have said before, there is a unique set of circumstances that make it even more difficult to achieve the objectives. So there's no question there is demand. What we are trying to do is to get back to the growth rate that we have historically had. And whereas historically we have had better visibility in healthcare into the future because of some of the size of the larger projects, we don't have that visibility today. And that's what's making us cautious about our guidance for healthcare in 2016.

Thank you.

Thank you. Our next question comes from the line of Tobey Sommer of SunTrust. Please proceed, sir.

This is Kwan Kim, on for Tobey. Thanks for taking my question. I have a follow-up on Workday implementation projects. How would you characterize the progress you have made so far with regards to your prior expectations? Could you give us an update?

Yes. We are actually making better progress than we had anticipated. We have probably more clients that are active at this point in time than we had. Those projects are still emerging, but they are active. We have more people trained than we had thought we would have at this point in time, which is clearly a factor of our view of the demand in the marketplace. And we have the prospects and our success in the marketplace is probably also ahead of where we thought we would be, recognizing that this practice is relatively new for us. We know and understand, particularly in higher education, we understand the business so incredibly well. And the fact that we can get our people up and trained very readily, the fact that we can hire experienced people in this area, has built us a competency and a degree of depth in this business that I think has surprised a lot of people. And we have been successful with our clients who now see and realize the depth of experience that we have, not just in Workday but also in the higher education setting. So that's why we have got very strong hopes for the future growth of this business.

And this is Mark. Let me just add that, the investment that we ended up making which, again just to remind everybody, is in a form of OpEx, ended up being about 170 basis points in 2015, which is less than we had expected. So I think we had good results with a little bit less investment. And even as we talk about the cloud investments going ahead, the cloud in general is also, when we think about our EPM&A business, one of the major opportunities that organically is creating lots of opportunity. So there is a broader theme here, but ultimately when we get into the implementation expansion, we will hopefully have been conservative in terms of what we expect to happen.

Okay. Thank you for the color. And in the Business Advisory segment, regarding restructuring work, what is your expectation for demand in 2016? And which industries are contributing to this demand? Any comments on what you are seeing? Thank you.

This is Mark. I think it's going to be no surprise in terms of the industry that we are seeing, but in general, the easy answer is oil and gas where you see it across the board, but I think for us, we are more of a generalist practice and just as you see the junk buying markets are starting to really tighten up. There is a lot of companies that are trying to get ahead of that, either through restructuring or you if the markets are going to be quite open, figuring out what their alternatives are. So I think for the legacy Huron Business Advisory segment, the combination of the strong restructuring practice along with the broker-dealer capabilities that we added in 2014 will continue to produce a good combination of growth. And so, you we definitely are having an expectation for them to be a in a double digit range of growth in 2016 as well as our EPM&A practice.

Got it. Thank you.

Thank you. Our next question comes from the line of Randy Reece of Avondale Partners. Please proceed.

Good afternoon. The consultant headcount in healthcare was a little bit less than we had expected and I was wondering if you could maybe give us a little bit of a feel of how you expect the revenue and headcount trends to play out sequentially through the year, what you have assumed in your guidance. I am just trying to get an idea to know how slowly the year will start and how you expect it to pick up through year?

Yes. Randy, I actually think so looking at 2015, we actually had a very, very slow start to 2015. We are not expecting that to happen this year in healthcare. It should be a much better starting point. And so really addressing headcount both utilization, I would say, for utilization we would expect it to be in the full year range of 78%, 79% starting the year with hopefully some acceleration, again just like we saw this year. I think from a headcount perspective, again, it's going to be a little bit different because just like you saw at the end of the year, there was a little bit of adjustment there as we have seen the pipeline just mix and transformation there. We have made a few changes within the mix of the people and then I expect that to continue to start to grow a little bit in 2016, although again we tend to see our normal turnover. Usually the first half of the year is a little bit higher bonus payments and that's just consistent with past years as well. So I would say it largely should track revenue but it should be a lot more evenly paced with a gradual upward right slope.

And the sequential trend in Business Advisory was very impressive and I get the impression, better than maybe you had expected a few months ago and looking at the sequential revenue change, where was the pickup?

It was really on both sides of the practices. So the Business Advisory, the legacy part of the business with the broker-dealer had some success which had helped toward the end of the year. And you never know exactly on the timing with that but again collectively that was a matter of just realizing what we thought was already in the pipeline. It didn't really change necessarily our expectations for 2016. So it wasn't like we were lower in 2016 because of that. And then collectively, what's going on in the EPM&A practice is that just in general as businesses are really focusing on their need for better information from a financial perspective in terms of business intelligence, they are making investments and a little bit larger investments than we have seen in terms of just the historic mix. We have a lot of clients who are definitely in the $1 million plus category now. And these engagements, sometimes start a little bit smaller. They are looking for just entry into the cloud, but oftentimes they end up expanding quite a bit more than you may initially expect. So on both sides of the practice, I think they have a very good balance within the service offerings that they have and just right now, good momentum in the marketplace.

Thanks.

Thank you. [Operator Instructions]. Our next question comes from the line of Kevin Steinke of Barrington Research. Please proceed, sir.

Good afternoon. I believe you talked about Studer Group really driving most of the revenue growth in healthcare in 2016 and you also talked about your cautious outlook for the cost in clinical practice. What about revenue cycle? Do you expect that practice to grow in 2016?

Yes, we do, Kevin. Again, we think that practice is probably low to mid single-digit type practice on a conservative basis, but we do expect growth.

Okay. Fair enough. And you talked about the fact that in ELS, especially excluding the Workday revenue contribution that you expect, that your overall outlook for growth in 2016 in ELS is a little conservative. Any reason for that conservatism in terms of projects winding down or anything like that? Or is it just the conservative outlook to start the year?

I think it's more of the latter, Kevin. It was really the first time that in a while, we had really every practice in the business had really gone very well from the beginning and a lot of it is continuing, I think, into this year. We are just going to be cautious about how it all plays out just because of some of the uncertainty in the economy. But if you look at the core demand for the services within ELS, it's really been very strong and we don't really see any changes as we enter 2016. So we are going to probably still stay a little bit conservative and let the year play out.

And Kevin, just as a reminder, the amount of backlog that we see at any given time, because the deal sizes tend to be a little bit smaller, we have a little bit less visibility in comparison to say Healthcare on the Education Life Sciences side of practice. But at this point, as Jim said, the signals have all continued to be pretty positive. So we would hope that that guidance does prove conservative on Education Life Sciences.

And again part of what we react to is, we say the same thing for healthcare as well and frankly life sciences, but stress and strain in those industries are significant. So we are comfortable that there is going to be demand out there. We are going to cautious to see how it plays out. But certainly in ELS we have turned the corner nicely into 2016.

Okay. Great. And lastly, Mark, I think you talked about that the variance on the corporate costs takeout related to legal was about $3 million relative to your initial expectations. So what are you assuming that you realize in 2016 in terms of the $11 million of cost savings? How much of that do you expect to get within your guidance?

Kevin, I think realistically we will probably get $7 million or $8 million of the $11 million at this point and to some degree, just depending on how things wind up, as I said. I think we are pretty optimistic that we will get into the early part of the second quarter and start to be on a run rate that we expect. So I would say, at this point that's a pretty good range right now in the $7 million or $8 million of the $11 million.

Okay. That's all I had. Thanks for taking the questions.

Thank you, Kevin.

And Mr. Roth, we have conclude the allotted time for this call. I would like to turn the conference back over to you.

Thank you for spending time with us this afternoon. We look forward to speaking with you again in April when we announce our first quarter results. Have a nice evening.