Good afternoon ladies and gentlemen and welcome to the Huron Consulting Group's broadcast to discuss Financial Results for the Second Quarter 2017. At this time, all conference call lines are on a listen-only-mode. Later we will conduct the 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 morning'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'd 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 second quarter 2017 earnings call. With me today are John Kelly, our Chief Financial Officer; and Mark Hussey, our Chief Operating Officer. Our Business Advisory and Education segments continue to meet our expectations during the second quarter, while our healthcare segment remained challenged. Let me provide some perspective on each of our segments and then turn it over to John, so he can walk you through the financials. I'll begin with Healthcare. During the second quarter, Healthcare segment revenues declined 22% compared to the prior year quarter. On an organic basis, healthcare revenues decreased approximately 27% over the second quarter of 2016. The quarter-over-quarter decline, which primarily attributable to the roll off of a large engagement in the first quarter of 2017 and to a lesser extent continued softness in our revenue cycle offering within the performance improvement solution. Excluding the impact of the large engagement in the first quarter of 2017, Healthcare segment revenues declined 10% sequentially in the second quarter. From a revenue perspective, the Healthcare segment is nearly evenly split between the performance improvement business, which includes our revenue cycle and cost and clinical offerings and the advancing solutions business, which comprises our Studer Group, technology services, medical group and strategy offerings. Within performance improvement, we believe we are nearing a point of stabilization in this business inclusive of our revenue cycle offering after a nearly two year decline. We have recently seen some positive indications related to demand for these services and anticipate a steadier run rate for the remainder of the year. Many healthcare providers are facing increased pressure on margins due to rising expenses that continue to outpace reimbursement. This scenario has created stronger sense of urgency for our performance improvement services. While our performance improvement…

Thank you, Jim and good afternoon, everyone. Before I begin, please note that I'll be discussing non-GAAP financial measures such as EBITDA, adjusted EDITDA, adjusted net income, adjusted EPS and free cash flow. Our press release, 10-Q and Investor Relations page on the Huron website 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 and why believes they provide useful information to investors regarding our financial condition and operating results. Effective as of the second quarter of 2017, we reorganized our internal reporting structure by moving our life sciences practice from the Education and Life Sciences segment, which is now the Education segment to the Business Advisory segment. The historical results of our life sciences practice have been reclassified to the Business Advisory segment for all periods presented in our 10-Q and in today's discussion. A supplemental 8-K with recast historical segment results for the 2016 quarters and full year 2015, reflecting this reorganization will be provided later this afternoon. Also our acquisition of the international business of ADI strategies, which closed in April is included in our second quarter financial results in the Business Advisory segment. Now let me walk you through some of the key financial results for the quarter. Revenues for the second quarter of 2017 declined 1.5% to $181.4 million compared to $184.3 million in the same quarter of 2016. Second quarter 2017 revenues include $19.8 million from our acquisitions of HSM Consulting, Pope Woodhead and Innosight, all of which closed after the second quarter of 2016. Second quarter 2017 revenues also included incremental revenues due to the fourth quarter impact of our acquisition of the U.S. business of ADI Strategies completed in May 2016 and revenues from our recent acquisition of…

Thank you. [Operator Instructions] And our first question comes from Tim McHugh with William Blair & Company. Sir, please go ahead.

Thank you. First just to ask about Studer, I guess can you elaborate on what you're hearing is one question on that. Secondly, maybe can you kind of quantify how meaningful I guess the slowdown is there?

Hey Tim, it's Mark. Yes so with Studer I think it was pretty descriptive in the comments. You had some larger national systems that have been under margin pressure and have had directives to reduce spending across the system. And that's been something that's been a change. I think it's reflective of the increased margin pressure within the group. And I'll let John to quantify what it means for the year.

Tim we're now expecting Studer to be down in the upper single-digit percent range full year 2017 as compared to 2016. We don't have guidance yet on 2018, until we go through our budgeting process at the end of Q4. However, the full year impact of the 2017 cancellations will be a headwind to that 2018 growth. To get the complete picture, you need to factor in assumptions about new business development, renewals of existing contracts and we'll be in a position to do that later in the year.

I guess what was the performance in the first half if you expect it down high single-digits for the full year?

I think it was relatively flat year-on-year. Let me check with John just...

I am looking it was relatively flat for the first six months Tim.

Okay. And I guess just Mark, to follow up to that. Not to I guess question it but a little bit there have been pressure I guess so and I guess it seems though little unusual for someone to cancel it sounds like early before their contract period was up. So I guess is it just as you say the pressure got that much worse. And I guess it sounds like this is a couple of hospitals I guess. So is that right to think of it that way, if that is one entity that did this?

Right, Tim. It was more than one entity and I think you're right, it's been unusual in the cadence for Studer to see cancellation out of sequence. And candidly some of the cancellations as we said have actually they've had very high net promoter scores we've done a lot of work with our clients just to really make sure that we accurately understand the rationale for that. In some areas, they have retained certain of the services that are provided with Studer. And I think there was a comment that Jim had made about the direction that we're unbundling some of the services. So historically, Studer has gone to market with a very one single contract that brought all the services together and was for a three year period of time. And I think that's in some respects the market wants more flexibility no different than we've seen in some of our PI offerings in terms of how they're buying those services. So we still think we have very high levels of service delivery, high satisfaction. And we think it really is truly a financial issue with respect to decisions that came through.

Okay. Was this requested in the second quarter results or more something that is an incremental as we look forward?

It's really reflected Tim in the second half outlook, because with the cancellation there is normally a notice period. And so that really bridges you into largely out of Q2 for the most part into Q3 and Q4.

Okay, thank you.

And our next question is from Kevin Steinke with Barrington Research. Your line is now open.

Good afternoon. So was the Studer impact to guidance only cancellations. I believe you also said just kind of delayed sales cycles as well is that part of the guidance reduction too?

Yeah Tim it's - I'm sorry Kevin it's actually a little bit of both. So the cancellations was probably the precipitating factor and the slower new business sales I think has been a factor that's been out there a little bit that we have been watching for a while, but predominantly it's the impact of the cancelations.

Okay. And taking the revenue guidance at the midpoint has gone down by $30 million you talked about Studer in both slower than expected performance improvement, can you divide that up in terms of the guidance reduction into those two buckets at all?

I would say Kevin it's probably the factors that Jim cited related to the total decline in the midpoint revenue guidance were really the healthcare factors and then also the fact that we have C&O dropping off, the C&O practice within our Life Sciences segment dropping in the back half for the year. So I'd say I think the Healthcare piece is about two-thirds of that $30 million and the Life Science piece being the other component. So as far as that Healthcare piece goes I'd probably describe is about three quarter Studer Group and then about a quarter related to changing expectations for the performance improvement practice.

Okay, that's helpful. And just you talked about you think performance improvement is stabilizing although it's been softer than expected and that's part of the guidance reduction. So can you just talk a little bit more about why you believe that stabilizing and what gives you confidence that it's doing that?

Yes Kevin this is Jim. I guess there is a couple of factors. First of all we have been like everybody else we have been looking an hearing in the market about pressures, I think we have seen a buildup in urgency among some of our clients to make cost reductions in particular, but also using the revenue cycle just trying to get better performance I think the margins are really going squeezed right now. As we have talked about for a long time there was a lot of uncertainty I think the fact is that right now people are recognizing there is probably going to be uncertainty for a long time and are now focused on addressing what I think for many places has been reduced margins. And so I think that's what we have seen it in work that we have won and we have seen it in work that appears to be up for bid or up for our piece. And so with our sense is both across the board in some of the larger hospitals and economic medical centers, but also for some of the more small to mid-size hospitals the margin pressure is getting increasingly difficult. I mean, I think it's really simple to explain that the labor costs are simply increasing significantly more than the reimbursements.

And the thing I'd add to that is that we have made changes in how we are going to market that I think are resonating and we are seeing as Jim mentioned an expansion in the client base. And we had initially started changing things our across in clinical solution probably over a year ago and we had a good success in terms of how that resonated the market. And we have pursued really the same thing on our revenue cycle offering and that is also resonating. So what it's doing is helping us just essentially increased the addressable market that really will be interested in the services and how they want to consume them. And I think collectively increase margin pressure is with our repositioning is coming together that gives us more confidence in the outlook being stable.

Okay. And Education, the restated Education segment, 18% growth there you're talking about. So was that you talked about in the first quarter some projects with some unusually high intensity did that continue in the second quarter? And then does that kind of fall off in the second half and get you more down to the low double-digit range for the full year?

Yes I think our guidance kind of anticipates lower double-digit range there I think not that dissimilar to healthcare there are a lot of changes going on in higher education and we are very well prepared to meet those. But I think it is pretty - we have been talking about this now for probably the better part of two years and our progress and our growth in higher ed is really across all of our practices within that. But I think in the most recent quarter actually probably most recent first half of the year we have had considerable strength in our technology cloud based solutions and our strategy and operations solution. So, we feel that we should be able to hit the lower double-digit growth range for the remainder of the year.

Okay. Does that imply though that maybe the growth just slows a little bit in the second half just from that 18% level. Just trying to parse I guess low double-digit what the definition of that is and if we draft them more like high single-digits or lower teens in the second half.

Kevin, we're looking high single-digits right now for the second half.

Okay, alright, perfect. And that's all I have for now. I'll turn it over.

Our next question comes from Tobey Sommer with SunTrust.

Thanks. I wonder if you could size the different pieces and businesses within the Healthcare segment, just like to understand how the different trends kind of blend together to move the overall segment. Thanks.

Hey Tobey, this is John. When we look at the Healthcare segment it's really about at 50-50 split between the performance improvements side of the business and the advancing solution side. So within performance improvements it's probably about a 60-40 split between life cycle and cost and clinical on that half of the business. And then within advancing solutions the majority of Studer Group with the rest being our technology, strategy and medical group practices.

Okay, thanks. So, when you talked about performance improvement signs getting better little more urgency. Just trying to understand is that a reflection of sentiment and conversations or contracts and billing.

It's expectation in pipeline, Tobey?

Okay, got it. And then I think you described in your prepared remarks collaborative engagements that you're seem pretty excited about with respect to Innosight and I was hoping you could some more color around that and what you see as an opportunity in that area? Thanks.

Well, Tobey it's Jim, the collaborative efforts we talked about really come in a couple ways. I mean, number one, Innosight in and of itself was obviously very strong across a lot of commercial sectors and actually had done some more in healthcare sector both on the provider side and the payer side. And what we've been able to get in the short period of time that they have been under our umbrella is we have bid with them together using our industry competencies in one case life sciences and in another case healthcare where we had pretty significant competition. And we were able to win because of our collective knowledge of the industry and their approach to strategy and looking at the future and they approach in our industry competencies really resonated well with the clients I think that's what we against a very formidable set of competitors. So, we take a lot of pride in the way that's worked out over a really short period of time to which we've been together and I think we're only now just beginning to see some of the opportunities that are ahead of us as we continue to go to market together. So, these early successes has really helped our confidence that we're on to something that other really aren't able to combine and I think that's why we're going to be obviously very aggressive at taking that combined approach into the arena across Health, Education, Life Sciences segments, in addition to with our normal commercial segments that they have gone to.

Okay. In recent quarters you've been active reshaping the offering impart via acquisition, are you not to say do more acquisition, but is that flurry of activity in reshaping or do we have more of that behind of us than we have in front of us over the near-term or are you going need to continue fuel your positioning with acquisitions near-term?

We actually feel Tobey very good of our client positioning and we don't expect to be heading into M&A in the near future.

Okay. And so from a - could you maybe describe for me what that implies from a capital allocation and balance sheet perspective then?

Tobey, I'd say the focus right now is going to be our debt pay down. As I talked about in my remarks from a bank definition perspective, we're at 3.2 times leverage at the end of the quarter. Our preference is to be more and I'd say the mid-2s. So the priority right now will be paying down debt.

Okay. And then could you just repeat if you could the expectations for growth in the Education segment. I missed that detail.

Hey Tobey so for full year '16 versus '17, we expect Education to grow I the low double-digit range. And so through the first half of the year they're up 18%. And the implication for the back half of the year is that will be in the upper single-digits.

Okay, thank you very much.

And our next question comes from [indiscernible] with Benchmark. Your line is now open.

Thank you. Just a couple left at this point. Within performance improvement where you characterize a steadier run rate in the second half. Is that like a mix of cost in clinical seeing forward momentum and lesser declines in the revenue cycle?

Hey Bill it's Mark. It's actually remarkably balanced, I think we have seen with the changes in how we're going to market in terms of delivery really a stabilization and I would just say is very, very balanced across all the service offerings that we have right now. So that's also been a very nice development in terms of just the outlook in terms of how the evolution is happening. It's a more diverse client base than we've seen it's a balanced offering. Our sales model the way that we've gone to market has involved a lot broader number versus the more concentrated engagements. So it gives us a just a good feeling about the trajectory of the business.

And then as far as any remaining large scale revenue cycle deals that are ongoing. Does they have any sense of their longevity at this point in the kind of the just the magnitude that they represent at this point?

Yes Bill, we wouldn't comment on any individual one, but I would just say that when you look at the impact of larger engagements on the mix of the overall business, I would say having followed off this tough comparison from the Q1. I think we'll start to see a much more balanced mix. There are some decent size engagements. I don't want to say they're all small, I mean, I think that's always been historic mix and perhaps with the recovery and margin pressures in the business, it's what I would characterize as very healthy. It gives us the ability to deploy people and gain efficiencies and have impact. At the same time it's not so overwhelming that we feeling like we're creating up a future hole for ourselves in terms of comparisons.

And then last one on the performance fees. Are they kind of going to be ratable Q3 and Q4?

I think so Bill.

Okay.

Yes.

Okay, thanks everybody.

Mr. Roth, we have concluded the allocated time for this call. I'd 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 when we announce our third quarter results. Good evening.