Good afternoon, ladies and gentlemen, and welcome to Huron Consulting Group's webcast to discuss Financial Results for the Fourth Quarter and Full Year 2018. At this time all conference call lines are in 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 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 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 on Huron's website for all of the disclosures required by the SEC, including reconciliation to the most comparable GAAP numbers. And now, I would like to turn the call over to Jim Roth, Chief Executive Officer of Huron Consulting Group. Mr. Roth, Please go ahead.

Good afternoon and welcome to Huron Consulting Group’s fourth quarter and full year 2018 earnings call. With me today are John Kelly, our Chief Financial Officer; and Mark Hussey, our President and Chief Operating Officer led by strong growth in our business Advisory and Education segments. Revenues in the quarter grew 10% organically over Q4 2017 and 8% on a full year basis over 2017. The strategic positioning we executed over the last two years enabled each of our segments to achieve organic revenue growth in 2018. I will now share some additional insight into our fourth quarter and full year performance and our expectations for 2019. On a full year basis, Healthcare segment revenues grew 2% over 2017. The year-over-year increase was primarily attributable to our performance improvement and technology services solutions. Healthcare revenues in Q4 2018 declined approximately 3% over the same period in 2017 but grew 3% sequentially over Q3 2018. The fourth quarter was our highest revenue quarter in the year for the Healthcare segment. On prior calls I've mentioned the dramatic changes taking place in the healthcare industry. The pace of change is readily apparent in the new partnerships that are formed in the commercial and not-for-profit healthcare sectors. Our healthcare practice has modified and is further innovating its service offerings and response to these market changes and through collaboration across Huron’s businesses. We continue to successfully evolve the way we deliver services to help our clients address, but rapidly changing healthcare landscape. Trying to the Business Advisory segment; on a full year basis, this segment grew revenues 14% year-over-year driven by growth in our Innosight and Enterprise Solutions and Analytics, or ES&A business. In 2018, the ES&A business grew approximately 10% year-over-year. The growth at ES&A came from an expansion of offerings across several…

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, adjusted EPS and free cash flow. Our press release, 10-K 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, why management believes they provide useful information to investors regarding our financial condition and operating results. Also, unless otherwise stated, my comments today are all on a continuing operations basis. Now let me walk you through some of the key financial results for the quarter. Revenues for the fourth quarter of 2018 were $205.5 million, up 10.5% from $185.9 million in the same quarter of 2017. The increase in revenues in the quarter was driven by strong organic growth in our business advisory and education segments. On a full year basis, revenue was $795.1 million in 2018 compared to $732.6 million in 2017. As Jim mentioned, the increase in revenue over the prior year period was driven by organic revenue growth across all three operating segments. Net income was $3.1 million, or $0.14 per diluted share in the fourth quarter of 2018 compared to net loss of $29.3 million, or $1.36 per diluted share in the same quarter in the prior year. The increase in net income over the prior year period primarily reflects the impact of the goodwill impairment charge taken in the business advisory segment during the fourth quarter of 2017. On a full year basis, net income was $13.9 million, or $0.63 per diluted share in 2018 compared to net loss of $170.5 million, or $7.95 per diluted share in 2017. The increase in net income over the…

Thank you. [Operator Instructions] Our first question comes from Tim McHugh with William Blair.

Yes, thanks. Just want to follow up on the commentary on Healthcare. I guess, I want to know if you could elaborate a little bit on what you're seeing as you go into 2019. It seems like the guidance includes contingent fees going up, but you're cautious on extrapolating that. So in some ways that's up to choppiness or changes in the market help demand for your solutions. So I just kind of want to reconcile that. And have you seen some sort of change in the behavior of client as you start 2019? Or I guess what's behind that comment?

Hey, Tim. It’s Mark. So let me take that in two pieces. First, in terms of outlook and pipeline, I'd say for the pipeline we have visible right now, we feel pleased with the strength and the composition of the pipeline, especially across the PI and the technology pieces of our business and there's a good mix of clients engagement sizes and solutions and – solutions in the pipeline. As you know, we don't have full year visibility. So we tend to start the year with some degree of caution just because really – it's early for us to call the full year with any degree of aggressiveness. I would say with respect to contingent, just to remind you, the rules changed on the accounting side. And so really contingent is really built into the ongoing revenue recognition expectations on an ongoing basis. So kind of in the context of that continued revenue accounting, I would say in general, we continue to see modest degree of interest of clients to take on risk in the context of the clients. We tend to see a correlation with the size of the engagement, the larger the engagement, a little bit larger the desire for some degree of risk. But I would say largely speaking, the trends as we've outlined them going forward, probably not going to be driven really by contingent. It's going to be more just from market conditions and demand for clients to address the inherent conditions right now of a lot of pressure on margins of – due from the combination of revenue under pressure as well as costs.

Yeah, and Tim, this is Jim. I would only add to Mark's comments that market conditions are really the same if not getting even more intense for our clients. And so, we have seen a buildup in demand, certainly even in the second half of last year. I think as we indicated, I think we’re just reluctant to extrapolate too much until we – because of the lack of visibility we have in the kind of current set of clients – current set of engagements that we have, which just don't afford us the kind of visibility that we used to have. So it's more of a comment on the visibility unless a comment on the overall market conditions. The market conditions, we still continue to believe to be favorable for the work that we're doing.

Okay, that's helpful. I guess – and then just following up on the -- little -- there is a comment on Studer weakness. Is that incremental weakness versus what we talked about earlier in the year? Or is that the same kind of topic with client renewals that we've discussed earlier?

Yeah, Tim, it's the same topic on client renewals. And really I'd say if there is a broader theme, one is that just like we've gone through transformation and our performance improvement in technology services business, Studer group really has positioned itself with the changes that its had and it’s offering to take what had historically been longer term multiyear engagements to shorter term, faster speed to value. That work has been largely completed, and now is in a transition mode and rolling out in the marketplace. It really opens up the ability then to take Studer Group to other sales channels within the healthcare practice. So we feel optimistic about where Studer is at, but I think we'll still continue to see some headwinds in 2019 just because it's early on in that transformation process.

Okay. And then one, the number was one maybe. When we think about refinancing the credit facility, I guess it depends on the rates at the time, but what would be that – how do we think about that trade off versus I guess the cash interest cost of the convertible later this year? And would you wait until the October probably to make that change?

Tim, I think we likely would wait until October to make that change or at least to the very end of the third quarter. And so in the guidance we have factored in for the fourth quarter higher interest rate on as we transitioned from the one in a quarter coupon to a LIBOR based rate at that point in time. But I think as we balanced all the different considerations related to the refinancing, flexibility to be able to continue to pay down at a very quick pace was probably the most important to us and we think given our free cash flow and our attempt to use that to reduce borrowings that the revolver is that the best way for us to go.

Okay, thank you.

Thank you. [Operator Instructions] Our next question comes from Joseph Thompson with SunTrust.

Hi, this is Joseph on the line for Tobey tonight. Looking at the Education segment, what problems are you seeing most cited by clients as far as different headwinds that they're facing? Thank you.

Hi, Joseph. This is Jim. I think one of the fundamental, there's probably two issues that are really driving the business right now. As we indicated all parts of education business have really been performing well for quite some time. I think the two issues are, number one is some real challenges around the sustainability of the business model. That's the first one. And the second one is that there has been a much needed transition to improved administrative technology of ERP systems and the impact that that has on changing what is really very, very old and kind of not very efficient administrative business processes. So those combination of things are really what's driving a lot of our business. We’re obviously doing a lot of work in the research area, which continues to be fairly vibrant and is benefiting from also from some technology enhancements. But I would say those are the core issues that are driving the work right now.

Got it. And when you talk about challenges to the sustainability of university business models, when you look at that or digging into that, does that look like decline in student enrollments or decline in endowment returns? Or I guess what are clients talking about as far as their business models go? Thank you.

So I mean, the fundamental issue is really that the revenue base in many instances has been quite limited or if not negative. So and that was in many cases net tuition’s down and the state funding is also down. You've got an expense base that's growing faster than revenues and that create the challenge to the sustainability of the business model. In certain parts of the country, there are some – somewhat unique demographic challenges as well where there's been a decline in a number of students actually looking to attend college and you put all those together and that's a problem. I do think that some of the organizations have benefited by having relatively strong endowment returns over the last decade, but I think they're at a point right now where you really can't expect those to continue the way they have really since 2007 or 2008. So in general, I think there's a lot of pressure on the fundamental business model from many of our clients.

Thank you.

Thank you. Our next question comes from Kevin Steinke with Barrington Research.

Good afternoon. On your last call, third quarter call, there had been some discussion about the diversion from the top to the bottom of the ranges of guidance based on whether or not a contingent fee was going to be recognized. So did you recognize that fee or those fees in the fourth quarter?

Yeah, Kevin, this is John. So you're correct. When we had our third quarter call, we left the adjusted EBITDA and adjusted EPS ranges a little wider than we probably normally would reflecting that we had a handful actually of contingent fees in the business advisory segment that are more success-based fees that were anticipated to come in the fourth quarter about where we still needed to execute. So we ended up executing on some of those opportunities, but then there is other ones that we were not able to execute on before the end of the year. So that's one of the reasons when you look at the revenue being about the high end from a guidance perspective, actual verses guidance compared to EBIT and EPS kind of being right down the middle. It’s probably that mix created by some of those opportunities not materializing in the fourth quarter.

Okay, got it. Now that makes sense that kind of where I was going with the question. So, I mean, are those fees that you didn't recognize expected to spill into 2019? Or are those opportunities not there anymore?

There is still an opportunity to execute on them, but that's not certain I'd say at this point. I think when you look over the course of the full year for your guide, it's – the impact is actually pretty small. When you factor in the things that we did recognize in the fourth quarter plus what left over, plus kind of the larger base of the entire year, I'd say it's a relatively minor impact for the full year 2019, but there still is the opportunity to execute on those projects.

Okay. And you mentioned more investments in 2019. You invested as well in 2018. So I'm just trying to get a sense of how are you can quantify it or frame it the size of investments in 2019 versus 2018 and the impact on margin from investments you expect in 2019?

Sure, sure, Kevin. I guess the reminder I'd give to start is with the transition to the organic revenue growth strategy that we're executing on that does increase the need on occasion for operating expense investments since we don't have as much M&A activity going on. So kind of with that background, I'd say when we look at 2019 the areas we'll probably invest continual – continue to invest our related to our cloud-based capabilities, continuing to bring in differentiated talent there as well as delivery scale. We’re investing in data and analytics, enrich tools and that are going to enrich our consulting services including within our healthcare business. We’re investing in some new delivery models and offerings for both our consulting services and related to some of our IP. And then we're continuing to have organic hiring managers, directors within our business advisory and life sciences business. And so when you look at kind of across the business, all those different types of investments, I think of it in kind of a hundred basis point of range impact on full year adjusted EBITDA margins is probably how I quantify it.

And that's included in the guidance.

Yes, the guidance, that's included in the guidance. So that 12% to 12.5% is net of those investments.

Okay, got it. All right, all right. That's helpful. So you mentioned on the last couple of calls, improved pricing in healthcare and I'm just trying to get a sense of where you're seeing that? Is that kind of across the entire segment? Or are certain pockets of it? I mean, what is – what does that exactly relate to?

Hey, Kevin, it's Mark here. I think it's predominantly related to our performance improvement area in which there's – we think there is significant demand within the market because there is the – the long-term secular trends and pressures that are on those margins. And so, we were just finding that as we have seen market firming really for us over the last couple of years, not that saying this is broad, but what we're seeing gives us the opportunity to be – not that super aggressive, but certainly finding a floor and finding more opportunities to be leaning in.

Okay. All right, got it. So Innosight had over 40% organic growth in 2018, where there is some large projects that came in towards the second half of the year and what does that imply for how they'll grow as we move into 2019? Are there some difficult comps for Innosight as we move forward here?

Kevin, this is Jim. Yeah, I think the LC had a really strong year and they – we serve a lot of healthcare clients as well, some of which has some long tails but we also have a lot of commercial clients. That business is – it's going to be lumpy I think and we're going to – they've got some large projects that made them quiet down a little bit. They too don't have the visibility that goes much beyond a quarter or so. So, our sense is that the demand is still there. If you look at the nature of the work that we're doing irrespective of which industry we're doing it in, I think that's the part that we're increasingly getting called upon by large corporations in a number of industries to really help out on helping assess their strategy. So it's a long way of saying, I think we'll continue to grow in that business, they're doing very well from a competitive perspective, but I think it's just really hard for us to go back and predict that you're going to see that type of revenue growth again. I just don't think that's replicable. We'll certainly try, but – and they're incredibly talented people, doing really great work, but I just think it's going to be hard for us to estimate that kind of replicability in the revenue.

And this is John, I'll add. If you think about that 40% growth rate, there was – during the fourth quarter of last year on the call, they'd had a softer quarter, so at least as it relates to the fourth quarter it was a little bit of a easier comp that helps with that metric. As I look forward to 2019, if I was modeling, I would think of kind of mid to upper single digits is probably a reasonable growth rate to think of for the business, and certainly they're striving to beat that, but I think that's probably a reasonable way to look at it.

Okay, great. Jim, I was intrigued by your comment that you'll be more involved in recruiting going forward just as you go out in the market with the platform you built here. What would you just curious about here how you pitch to potential consultants joining Huron, what you'd like to sell them as you meet with people and trying to rerecruit new talent to Huron Consulting?

Well, Kevin, it's a good question because I think in fact, the answer to that is got to be the differentiator for us. We – I'll give you obviously a biased response, but it's going to be an informed, biased response. And that is, I think we have a culture here that is really unique and we know it because we hear a lot of people are coming from the outside, they talk to us about it. We have an internal culture and a way of collaborating across our businesses that I think, frankly, not only it makes it easier to go to market and more successful because we don't go in silos, but I would tell you, it's a hard world out there just like your business and our business is hard to be in business. And I think you might as well try to have a little bit of fun when you're doing it. And I think our internal culture is one where in general, people really enjoy working here. And so when I go to market and try to attract new talent, I think we have those things to offer. It's a really strong culture, that is, I think really reflective and responsive to what people want to do when they come to work. And I think the collaborative benefit really makes everybody more successful because you can go to market that much more effectively. So I would say those are the two primary things we talk about and we have a quite a lot of success in recruiting people because of those things. And even those people that occasionally will even come back and they say, you've got no idea how good it is at Huron. So we don't take that for granted, but we certainly is one of our key competitive weapons that we go to market with when we're trying to recruit people.

Okay, great. Thanks for taking the questions.

Thank you. Our next question comes from Bill Sutherland with Benchmark Company. Mr. Sutherland, your line is open. I'm showing that Mr. Sutherland disconnected.

So speakers, I'm showing no further questions in the queue. I'll turn the call back over to you, Mr. Roth for any closing remarks.

Thank you and 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. Good evening.

Ladies and gentlemen, that concludes today's conference call. Thank you for your participation everyone. You may all disconnect.