Good afternoon, ladies and gentlemen. And welcome to Huron Consulting Group's webcast to discuss financial results for the First Quarter 2020. At this time, all conference call lines are on an listen-only mode. Later we will conduct a 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 at -- 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 first quarter 2020 earnings call. With me today is John Kelly, our Chief Financial Officer; and Mark Hussey, our President and Chief Operating Officer. Before I begin, I'd like to highlight that we have placed supplemental materials on our website at ir.huronconsultinggroup.com to provide additional detail about what we believe impacts -- that impacts that Huron could be related to the COVID-19 pandemic. These supplemental materials should be reviewed in conjunction with our earnings call and not on a standalone basis. Less than two months ago, we reported the best year in Huron's history and we discussed how excited we were about our prospects for 2020. That excitement and confidence in our future was driven by the significant challenges impacting our clients, the strength of our offerings, and the deep expertise within our incredibly talented team. The momentum we established in 2019 continued into the first quarter of 2020. We started the year strong with solid performance during the first quarter driven by organic revenue growth across all three operating segments. Needless to say, that during the past two months our clients' businesses have been deeply impacted by the COVID-19 pandemic and related economic deterioration. While these events should yield strong demand for Huron's business in the future, macroeconomic factors have created significant uncertainty in the near-term. During today's call, I will depart from our traditional approach to earnings calls in order to provide greater detail about how the COVID-19 crisis will impact Huron during the rest of 2020 and to provide some initial thoughts and demand drivers for our business over the medium and longer-term. Let me start with a very brief overview of the first quarter. Huron delivered 9% revenue growth in the first quarter driven by organic growth across…

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-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 management believes they provide useful information to investors regarding our financial condition and operating results. Also, 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 first quarter of 2020 were $222.6 million, up 8.9% from $204.4 million in the same quarter of 2019. The increase in revenues in the quarter was driven by organic growth across all three operating segments. Net loss was $42.3 million or $1.94 per diluted share in the first quarter of 2020, inclusive of the $59.8 million pre-tax goodwill impairment charge, compared to net income of $3.4 million or $0.15 per diluted share in the same quarter in the prior year. Adjusted non-GAAP net income was $9.8 million or $0.44 per diluted share in the first quarter of 2020, compared to $8.9 million or $0.40 per diluted share in the same period of 2019. Given the lack of visibility in the near-term for our strategy-focused offerings as a result of the COVID-19 pandemic, we concluded that the carrying values of our strategy and innovation in life sciences reporting units exceeded their fair value as of March 31. As such, we recorded $59.8 million non-cash pre-tax goodwill impairment charge in the first quarter of 2020. As Jim noted, with our transformational strategy offering and highly talented team,…

Thank you. [Operator instructions]. Our first question comes from Tobey Sommer from Suntrust. Please go ahead.

Hey, good afternoon. This is Jasper Bibb on for Tobey. I was hoping you could speak to how the stimulus measures put in place for hospitals and universities, maybe shaping customer decision-making at this stage?

Well, this is Jim, Jasper. I think at this point, the amount is a little bit uncertain right now. But the financial deterioration has been pretty significant, and I think most of our clients feel that they're all expecting something to come, but I don't think any of them are expecting it to cover the collective set of financial deficit that's been -- occurred over the last couple months or so. So I think they're all looking at it as something that's going to be necessary, and it may actually come in waves over time but I think nobody is viewing it as it's going to really be sufficient to help fill the gap that's developed. So we view -- that's one of the reasons why we view the chance of us -- of our demand for our services being relatively strong as this evolves, is that they're going to have to make some tough decisions because their financial situation is not going to be there. So there clearly will be some federal funding. How much there is, remains uncertain. But I think what isn't -- times we're uncertain because the fact that there's still going to be a negative hole at the end, and they're trying to prepare for that.

Thanks. And then I wanted to ask about healthcare demand. And while there might be quite a bit of opportunity with hospitals on the other side of this, are you anticipating challenges at assisted-living providers or larger urgent care networks to be an area of increased opportunity as well?

Well, over the last three or four years, we've increased -- our healthcare practice has increased its scope and spectrum across a broader array of the healthcare arena. The reality is still a vast majority of our work is done in hospitals and health systems, but the hospitals and health systems are changing a lot in and of themselves. So there will be some opportunities for other areas, but don't think -- I think, still, at least for the foreseeable future, the majority of our work will still be with hospitals and health systems. As they get in new businesses, some of them even retail, certainly telemedicine, there's all kinds of businesses they'll be getting into, we'll certainly see some expansion of our scope in that area. In addition, we're also doing work for non-hospitals and health systems and that could be private equity, that could be physician-led groups. There's all kinds of new entrants into the market. And so, we're increasingly working with some of those. But at this stage, still a majority of our work will be with healthcare, with our hospitals and health systems.

Okay. Last one from me. With respect to the Adventist relationship, have you seen any impact there?

No. No. That work is ongoing, and it's going strong. And, no, we have not seen any immediate impact there.

Thank you for taking the questions.

The managed services contract continues to proceed very well. It's been a real area of strength during the quarter, so everything is going well as far as the contract that we have right now.

Thank you. Our next question comes from Bill Sutherland from The Benchmark Company. Please go ahead.

Thanks. Hey, everybody. I'm interested in what your visibility is right now as far as the professional ranks. And I know you want to keep that in place to the degree you can, but are you considering furloughs? And how are you thinking about the normal hiring cadence where -- with the freshman recruiting in the third quarter?

Hey, Bill, I'll take that one.

Okay. Go ahead, Mark.

Yes, John. Hey, Bill. This is Mark. Let me start, and then I'll have John continue on. How are you doing?

Good. Thanks.

Good. Good, good. Yes. So we're fortunate in that we've had a very healthy backlog that has come into the year as we continue to add to that. Look, I think through the second quarter, we've given some idea of what our parameters we're looking through there. And then, I think we're at a place where we just have to see how things are going to shake out. We're optimistic what that might be. And our strong intention is to try to do everything we can to keep our team together, just like we said on the call, because we feel like it's just a matter of when, not if, additional demand is going to come into play. So I think it's too early to say, but I would say, right now, things like furloughs are not something that we're contemplating, just to be clear. We don't feel like we're at that place, based on our liquidity and our expense management that we're in pretty good shape. And John or Jim, anything you'd add to that?

It's John. I'll just add in our viewpoint -- and Jim touched on it in the prepared remarks, our viewpoint is that we're going to be quite busy. On the other end of this there's a lot of the challenges our clients are facing. We think we're going to be well-positioned to help them with those challenges. And so we want to maintain that capacity to serve that need once things begin to normalize. I will say that, in terms of new hiring, that's an area where we're being more conservative right now, for the most part, to the extent that we have needs in different parts of the business, we're using existing team members. And that's where we've had some really great collaboration, quite frankly, between the teams where we've been sharing resources amongst the team to serve needs as opposed to incremental hiring at this point, just given the lack of visibility from revenue perspective created by the current uncertainty.

So as part of the impairment of strategy and life science groups, were they downsized?

No. No.

Okay. Okay. So as I think about you broad-brush, kind of, look directionally at revenue, appreciate at least a stab at it. When you think about the challenges of utilization and the greater turnover, I assume, projects, should we think about EBITDA probably more impacted than the 10% to 15% that you're taking a first stab at for revenue?

So, Bill, that 10% to 15%, just to clarify what that is, as we look at the second quarter and we compare our expectations for the second quarter of 2020 to our actual revenue for 2019, that's where we expect to see 10% to 15% decline in the second quarter. As we noted in some of the supplemental material that we put out, our expectation is that we'll be able to offset about half of that revenue shortfall with various cost-savings items.

I'm sorry. I didn't get the supplemental stuff opened. I went to the site, but -- okay. I'll go find that. I think that's it for me. Thanks, everybody.

Thank you. Our next question comes from Kevin Steinke from Barrington Research. Please go ahead.

Good afternoon. Just wondering, if in the short-term, or even over the next couple quarters here, there's been any ways that you've been able to help your healthcare clients with actual response and planning for their response to the COVID pandemic?

Yes. Jim, do you want to take it or I can elaborate on some of the things we're doing?

Yes. Go ahead, Mark.

Kevin, I think one of the things, we alluded to this, was just the nimbleness of our team in a very short period of time responding to what really rapidly became a very broad crisis across all of our healthcare clients. There were those clients that actually had a true surge in COVID patients and there were others that were dealing with cancellation of elective procedures, which put a lot of pressure on their margins in the short-term. Kind of irrespective of what the variation in the geography has been, there's been a very broad financial impact. And we have really marshaled, I would say, collectively every resource we have to help in a variety of different fashions, one from what and how do we access the federal funds in the CARES Act to be able to compensate for some of the short-term. We have a gateway that's helping them, and basically has helped us with some engagements there. We have a team that, with Medically Home, is setting up virtual hospital beds, which essentially takes care outside the four walls of the hospital in a very rapid fashion. It's helping set up additional capacity to now even to our COVID-19 playbook how do you manage your way through this financially, operationally, et cetera. And that's all leading to now, how do you actually reengage? And as this starts to get back to some level of normality, you're starting to see some places schedule elective surgeries again, but there are a tremendous amount of questions in terms of the business model that are relevant for all of our people, how do you bring your workforce back, when do you do that, do you bring them all at the same time, in different roles? What's the role of telehealth and telemedicine? So there's just -- these are the kinds of things that just have created a very dynamic and attractive environment for the healthcare practice. And Jim, I know you've spoken to a lot of leaders as well, maybe you can add some color.

Yes. I think the only thing I would add to that would be twofold. Mark talked about the telemedicine thing. I think one of the issues is that there's no question that telemedicine is going to be an important factor as things move on. The question is what does that mean? But it has a very different view in terms of the kind of facilities that'll be needed. It's likely it'll create different economics for the hospitals. There may be different compensation approaches for both clinicians, for nurses, and for physicians. So there's just a lot of uncertainty. So it's nice when people talk about the fact that telemedicine's going to kind of surge ahead and do more and more now, but reality is that's a pretty uncertain future as well. So we're beginning to help some of the clients begin to think through what the economics are and the labor structure is going to look like, the compensation structure is going to look like. So there's just a lot of things that are happening very quickly. So that was one. Mark mentioned the margin pressures, and that's probably the more immediate area that we're beginning to help with as they anticipate a pretty significant deficit that was not anticipated two and three months ago. And the last thing I'll say was, just I think this has brought to light the fact that there needs to be a fair amount of kind of asset rationalization here. If people are going to be less inclined to go into the hospital for the foreseeable future for a variety of reasons, what does that mean? They aren't necessarily going to even go into the clinics that have recently been built up. So all this kind of creates a very different environment, but we're helping a lot of our clients think through both the strategic and operational, and ultimately, the financial issues that are associated with all this transition.

And, Kevin, let me just throw a couple more in there because I think they're really relevant. I mean, even in New York, where labs are basically under just complete overflow, helping them through some of the -- how they work in that environment to address the capacity constraints. Our ES&A team, our NSI team, every single one of our practices who touches a healthcare client in their own respective way has come together to help respond in that way. So like in our ES&A practice, they've set up Salesforce contact centers, literally in a couple of days, in a very rapid fashion. So there's been just an extraordinary response by the company and with our vendor partners as well.

Okay. That's helpful. Thanks. I was able to pull up the presentation you have on your website here, and the scenarios, base case, optimistic, pessimistic. And I was curious about your statement that you would hope to reinstate annual guidance following second-quarter results. So is that kind of the base case scenario? And what would lead you to make that statement that you think you would be able to reinstate guidance at that point?

Kevin, I'll start and -- well, let me start. And John, I'm sure you'll add something in a second. I guess there's a couple comments there. Obviously, things have evolved very quickly over the last month-and-a-half or two months. And the reason we laid out the three scenarios is because that's really kind of the way that we're looking at how we're going to position our company and prepare for it in different scenarios. I think by the end of July, when we would be offering our next release of second quarter earnings, what we should have, there'll be five months left in the year at that stage. And I think, good or bad, we should have a clearer picture, maybe not clear, but a clearer picture at that stage that should be able to help and let us provide some additional guidance at that stage.

And I would just add, Kevin. Probably whatever the scenario is at that point in time, obviously those scenarios were just to give insight into the way we're looking at different ways it can unfold. One thing for certain is that actual reality will probably be something in between any of those. And I think no matter what the -- no matter how it does unfold, I think our expectation, like Jim said, given the amount of time that'll be left in the year at that point, is that we'll be able to give guidance in the July call.

Okay. All right. Got it. And then I was curious that we didn't see sequential increase in SG&A expenses in the first quarter versus the fourth quarter, given some of the fringe expenses you talked about. And is that a reflection of some cost reductions already being implemented or what was going on there?

That's right, Kevin. I'd say it's a combination of some of the reductions that, just as we kind of cycled into a new budget year, even absent the COVID-19 situation, there were certain areas where we had made some cuts, cutting into the year. And then as the quarter progressed, and you started to see some of the unknowns and uncertainty that was created by COVID-19, we paused on certain discretionary spending items at that point until we could get to a spot where we had better visibility. So I'd say it's a little bit of what we had expected heading into the year, just as we try to keep our SG&A expenses tight so that we can invest back in the businesses. But then, as the quarter did progress, there was some additional belt-tightening just given the visibility issues created by the COVID-19 situation.

Thank you. Our next question comes from Andrew Nicholas from William Blair. Please go ahead.

Hi. Good afternoon. Just wanted to talk a little -- I was hoping you could talk little bit about the project work that you previously expected in the second quarter. And if I'm thinking about kind of the shortfall maybe versus your previous expectations, how much of that would you characterize is a delay or a slowdown versus project work being canceled altogether?

Hey, Andrew, it's John. I can start. I would say, every quarter, the way to think about it is we never enter a quarter with 100% of the backlog already sold for the quarter, so there's always some expectation that there's going to be new business development, pipeline conversion to hit the numbers for a quarter. And so I think what the decrease reflects is a continued burn of the backlog that we have, just given how seamless the transition to work remote has been, but a slowdown of that pipeline conversion. And to specifically answer your question, I think the majority of situations we've seen at this point have been delays or deferrals. If you think about the environment in healthcare space, there's still a lot of projects that were in the pipeline in the first quarter that our expectation is, eventually, the clients are going to have to circle back and do, or that they're going to want to circle back and do because they're really strategically important to the clients. But if you think about the situation in March and April, our clients needed to shift their focus to emergency response management. So in many of those cases, they deferred some of those projects. In some cases, they were fairly well defined about when those might pop back up at a later time. In other cases, it's more TBD, but our expectation is that -- is actually they're going to come back around. What we don't have visibility to at this point is exactly what that time is going to be. And a lot of that will be driven by things in the macro environment that, at this point, it's just too early to call exactly how things will pan out.

Yes. And Andrew, this is Jim. I would just add to that a couple things. We've been talking internally. If we look at the financial and operational, strategic and technology issues that were facing our clients before all this happened, none of them have gotten better. Most of them have gotten worse. And so I agree with John's comment. And that is, there have been some deferrals. The deferrals are there for a variety of reasons, one of which is that a lot of our clients aren't working onsite, either. And so, it's maybe a little bit hard for them to pull together to do some of this work. And other times, they just said, look, it's just not the time to start a bigger project. So we really haven't seen that many cancellations, but we have seen some deferrals. And I think our sense is that even now or toward the end of April, as things are, is that some of our clients are beginning to think about the reentry into the mode. I think some of these projects, I think, will come back to life. So that's why we made this comment that I think what we can't predict is how long this kind of period of slowdown will last, but we think once it begins to pick back up, that's when we think the demand's going to come up. So we feel good about where we're positioned right now, and I think we just have to wait out and see how long the urgency is. Particularly the hospitals in some respects had it worse in probably March and April, and maybe getting back to a little bit more normal in May and June. Universities kind of have the reverse situation, where they were okay for a little while, but now they're having to face these issues about whether they want to have -- they probably gave up on their summer programs and now are trying to wonder whether they're going to have something in the fall. So there's just a lot of uncertainty at our clients, and I think some of them are reluctant to take on bigger projects until they can go get a little bit more clarity of their own operating environment. In the interim, we're still getting -- gotten new work in every one of our businesses every week throughout this whole process, so things are still moving. They're just moving at a slightly slower pace, and the visibility that we have into what would normally be a building backlog has just come down a little bit while we wait for that period to go by.

Got it. That's helpful color. Thank you. And then how should we think about performance-based fees, or contingent fees in this environment, thinking about kind of revenue cycle business as one aspect to that, and how declining patient volumes might impact that business, if at all in the next couple quarters?

I would say, Andrew, that I think coming out of this, if you think of our healthcare clients being under a significant amount of financial distress and needing performance improvement projects to help close budgetary gaps, things of that nature, oftentimes performance-based fees end up being a component of that because that really does a nice job of kind of matching the outcome with the amount that the clients pay. So I think that, coming out of it, that would probably be one of the types of contracts that you'll see us have within our performance improvement area, and that may become of increasing importance. In the meantime, that is potentially another timing factor for the jobs we already have is lot of those performance-based fee contracts include measurement of certain objectives. And when you've had this dramatic shift over the past couple of months to less elective-type procedures, less elective surgeries and more focused on immediate COVID-19 response, that is something that could impact temporarily, from a timing perspective, some of those metrics that you use to measure performance-based fee projects. And so in some cases, that may elongate the amount of time it takes to reach the original objectives. But I'd say, coming out of that, we'll probably see more contracts that have that element to it as our clients look to shore up financial issues coming out of the crisis.

Thank you. I show our next question comes from Kevin Steinke from Barrington Research. Please go ahead.

Hi. Thanks. Just a couple of follow-ups here. Do you have any sense as to how that 10% to 15% decline that you talked about in the second quarter would break down by segment?

Hey, Kevin, it's John. I'd say that we'll probably see the majority of that shortfall coming from the healthcare segment. I think that's the segment that's kind of been most acutely impacted from a new business development perspective in the near-term here related to the COVID-19 crisis and our clients' need to focus on that response. So I think that's where we'll see the majority of it. From a business advisory perspective, you may see it there too. As we've talked about the strategy, businesses in the near-term here have been impacted by some of the disruption that's been created by COVID-19. And I'd say probably, from an education perspective, that's going to be the area where, I would say in second quarter, you'll probably see the least impact.

Okay. Thank you. And there's just one last one. You talked about how the transition to online delivery of education or classes has been spotty at universities and that that might be kind of the delivery method even going into the next school year. Is there any way you can assist your clients with improving their ability to provide an online education platform?

Kevin, this is Jim. There is, but it's not an easy thing to do. I think there was an initial sense that you could just kind of turn this on and do it versus YouTube or something else. And some schools and some parts of schools have done this, been doing it for a while, and are actually quite good at it, and others that are just having to do it right now either don't have the technology or just don't have -- you can't just take what you would normally do in class and put it online. So it's a much more difficult process than I think most people recognize. And to really do good and to get it good to the point where the quality of the delivery of curriculum is consistent with what the university's brand and consistent with the students' expectations for the price that they're paying, there's a pretty big gap right there. I think there are firms that help with that online program and so we're not necessarily likely to get into that space, but we will help them sort out strategically how best to do it. I'll give you one example where we are beginning to work with some of our clients, is that some of those schools, if you can get it right, you can actually leverage your brand and use it as a revenue generator in ways that you haven't done before to really kind of expand your scope beyond just the people that you would normally have on campus. So that's one area where our clients are looking for opportunities, but you got to get the quality of the product reliable and good first. And I think most people would admit that it's not quite there yet.

Thank you. Seeing that there are no more questions, I'd like to turn the call back to Mr. Roth for closing remarks.

Well, thank you for spending time with us this afternoon. We look forward to speaking with you again in July when we announce our second quarter results. Have a good evening.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.