Huron Consulting Group CEO Discusses Q1 2013 Results - Earnings Call Transcript

Apr.25.13 | About: Huron Consulting (HURN)

Huron Consulting Group (NASDAQ:HURN)

Q1 2013 Earnings Conference Call

April 25, 2013 17:00 ET

Executives

Jim Roth - President & CEO

Mark Hussey - EVP & CFO

Analysts

Tim McHugh - William Blair & Company

Paul Ginocchio - Deutsche Bank

Tobey Sommer - SunTrust Robinson Humphrey

Randle Reece - Avondale Partners

Bill Sutherland - Northland Capital Markets

Joseph Foresi - Janney Montgomery Scott

Operator

Good afternoon ladies and gentlemen and welcome to : Huron Consulting Group’s webcast to discuss financial results for the first quarter 2013. (Operator Instructions). 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 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 the disclosures required by the SEC including reconciliation to the most comparable GAAP numbers.

And now, I'll turn the call over to Jim Roth, Chief Executive Officer and President of Huron Consulting Group. Mr. Roth, please go ahead.

Jim Roth

Good afternoon and welcome to Huron Consulting Group’s first quarter 2013 earnings call. With me today is Mark Hussey, Executive Vice President and Chief Financial Officer. Our first quarter was strong across all of our reporting segments except for Huron legal which was down slightly year-over-year. While I’m generally satisfied with our first quarter performance I’m highly encouraged by the underlying trends in each of our businesses. Quarterly revenues tell only part of the picture however, there is a much more exciting story that isn't revealed in the reported financials. What gives me comfort about the direction we’re going is the quality of the clients that are seeking our services and the nature and complexity of the work we’re being asked to provide.

Our clients are facing a complicated and uncertain environment and our highly experienced team of professionals is being called upon to help our clients set strategic priorities and operationally respond to their very uncertain environment. I take huge pride in the quality of our people and the caliber of their work they deliver. Our clients are very sophisticated and they continue to turn to Huron for many of their strategic and operational needs giving us a continuing level of confidence that 2013 is shaping up to be a solid year for Huron. I will now briefly discuss our performance in each segment, our Huron healthcare segment had a solid quarter, utilization remains strong at over 85% and we continue to grow our base of active assessments. Our strong results reflected the on-going strength in our performance improvement and revenue cycle practices.

As we have been expecting the clinical solutions practice which is the fastest growing portion of this segment continued to grow rapidly in the quarter and the backlog in this business is stronger than ever before. We’re hitting on all cylinders across our performance improvement, revenue cycle and clinical practices.

Driving our efforts is the ongoing pressure on our hospital clients to lower cost, improve quality and transform their operations to respond to the emerging healthcare realities. I don’t see any lead up in the demand for our healthcare services for the foreseeable future. Our Huron Legal segment had a soft first quarter, in the discovery practice our larger engagements for the most part remain strong and our global sales team initiated work at several new Fortune 200 clients.

Earlier in the quarter the discovery practice had lower than expected revenues due to the typical ebb and flow of some new and existing projects starting and others ending. The advisory practice was also weaker than expected during the quarter. Although we have started a number of large advisory engagements with new clients in the past few weeks, we remain focused on enhancing the profitability in the advisory practice and making certain that our expansion plans are executed at margin levels consistent with our expectations. This is in the third year in a row where we had a weak first quarter in this segment. In each of those prior years the last three quarters made up for the initial slowness and we have similar expectations for this year.

Our Huron Education and Life Sciences segment had another strong quarter similar to our hospital clients, colleges and universities are experiencing a major challenge to their historical business models. Lower public support, the expanding reliance on technology to deliver curriculum and significant pressure to reduce costs collectively result in an environment that is well suited to our services. Our largest practices within the segment technology, research, performance improvement and life sciences not only had a great quarter but also have solid backlog that gives us comfort that subsequent quarters will remain strong. Huron Financial while still our smallest segment had a substantial rebound from its performance over the past year. Utilization in this practice was in the mid-80s as we were apt to assist with a number of high profile cases.

We continue to believe that there will be a dramatic improvement in this segment this year as compared to last year. We have talented people that have weathered some tough times over the past year or so and they are now as busy as ever as they have been in the recent years. Turning to our view for the rest of the year, we’re not changing our previous annual revenue guidance which currently is estimated to be in a range of 655 to 685 million for 2013. We continue to be hopeful that this guidance ends up being conservative but we also recognize that some of our revenue particularly that contingent revenue in the Huron Healthcare segment can be unpredictable from quarter-to-quarter.

When we issued second quarter earnings we will have more visibility to the size and timing of our second half revenue stream and may consider making some guidance adjustments of that time. As we indicated when we released year end results in February we believe that 2013 will have less volatility quarter to quarter as compared to 2012 and correspondingly less reliance on a large second half to achieve our annual revenue guidance.

In the interim we’re encouraged by the strength of our first quarter results and are confident that the remainder of the year will result in continued strength across all of our practices. Now let me turn it over to Mark for more detailed discuss of our first quarter results.

Mark Hussey

Thank you Jim and good afternoon everyone. Let me begin with a few housekeeping items. Consistent with our past practice I will be discussing our financial results primarily in the context of continuing operations. I will also be discussing non-GAAP financial measures such as EBITDA, adjusted EBITDA, adjusted net income and adjusted EPS. Our press release website 10K each have reconciliations of these non-GAAP measures to the most comparable GAAP measures as well as the discussion of why management uses these non-GAAP measures. I will now walk you through some key financial results for the quarter. Revenues for the first quarter of 2013 were a $164 million up 18.3% from a 138.6 million in the same quarter of 2012. EBITDA for the first quarter of 2013 was 26.8 million compared to 9.4 million a year ago. A positive factor effecting EBITDA was an increase in our average full-time billable head count of 16%. These resources will relatively productive as measured by our utilization levels. For Q1, 2013 utilization was 77.9% almost flat with 77.8% a year ago.

I will provide some additional color when I discuss the reporting segments in a few moments. Adjusted EBITDA more than doubled to 25.6 million in Q1, 2013 while 15.6% of revenues compared to 11.8 million in Q1, 2012 or 8.5% of revenues. Adjusted EBITDA excludes a number of items which are listed in our press release. Operating income was 21.3 million or 13% of revenues in Q1, 2013 compared to 3.6 million or 2.6% of revenues in Q1, 2012. Net income from continuing operations was 11.4 million or $0.51 per diluted share in the first quarter of 2013 compared to 0.6 million or $0.03 per diluted share in the same period of 2012.

Adjusted non-GAAP net income from continuing operations was 11.6 million or $0.51 per diluted share in the first quarter of 2013 compared to 3 million or $0.13 per diluted share in the same period of 2012.

Our effective income tax rate in the first quarter of 2013 was 41.7% compared to 72.1% in the first quarter of 2012. The effective tax rates for both periods were higher than the statutory rate inclusive of state income taxes due primarily to the impact of foreign losses with no tax benefit and certain nondeductible expenses, these nondeductible had a larger impact on effective tax rate in Q1, 2012 due to the lower level of pretax income

In addition, the effective income tax rate for the first quarter of 2013 reflects the retroactive impact of the federal R&D tax credit which was enacted during the quarter. On a full year basis we expect our tax rate to be about 43%. Now let’s look at how each of our reporting segments performed during the quarter. We noted during our last earnings call that the company reorganized its internal financial reporting structure. Huron now reports information as five operating segments, Huron Healthcare, Huron Legal, Huron Education and Life Sciences, Huron Financial and all other. The former health and education consulting segment has become two separate segments, Huron Healthcare and Huron Education and Life Sciences.

These practices continue to share a significant number of academic medical center clients and we will continue to collaborate closely in the marketplace. The legal consulting segment will now be referred to as Huron Legal and the financial consulting segment will now be referred to as Huron Financial. The structure of these segments did not change. In addition certain immaterial practices which were historically part of our health and education consulting segment were combined and are now disclosed in an all other category.

While consolidated results have not been impacted we have recast our historical segment information for consistent presentation. There is quarterly data for 2011 and 2012 available on our website and as filed on Form 8K with the SEC.

Now turning to the segments, the Huron Healthcare segment generated 48% of total company revenues during the first quarter of 2013. The segment posted revenues of 78.7 million for the first quarter of this year, a 24.1% increase from 63.5 million in the first quarter of 2012. Operating income margin for Huron Healthcare increased to 39.6% for Q1, 2013 from 25% for the comparable quarter in 2012. Utilization in this segment continues to be strong, for the first quarter of 2013 utilization was 85.6% compared to 83.2% last year. Performance based fees in the first quarter of 2013 were 18.4 million compared to 15.5 million during the first quarter of 2012 and 32.3 million during Q4 of 2012.

Revenues excluding performance based fees increased 26% over Q1 of last year and sequentially 9% over Q4 of 2012. Our Huron Legal segment generated 25% of total company revenues during the first quarter of 2013. The segment posted revenues of $41 million in the first quarter of 2013 about flat with the 41.4 million in comparable quarter in 2012. After a strong finish to 2012 both our advisory and eDiscovery services businesses experienced a softer first quarter principally due to the timing of engagements.

Our full-time billable consultant utilization rate in the segment decreased to 52% during the first quarter of 2013 from 70.7% a year ago reflecting the lower advisory revenue and increased head counts. The operating income margin for our Huron Legal segment was 7.2% in the first quarter of 2013 compared to 23.0% in the first quarter of 2012 reflecting higher salaries and related expenses, technology costs and other general and administrative expenses as a percentage of revenues.

The Huron Education and Life Sciences segment generated 22% of total company revenues during the first quarter of 2013, the segment posted revenues of 35.7 million for the first quarter of this year, a 29.1% increase from 27.7 million in the first quarter of 2012. Operating income margin for Huron Education and Life Sciences increased to 26.2% from 23.3% for the comparable quarter in 2012. Utilization within the segment continued to be solid even with a 34% increase in average headcount. For the first quarter of 2013 utilization was 70% similar to the 70.8% level reported during last year’s Q1. The Huron Financial segment generated 5% of total company revenues during the first quarter of 2013. We’re very pleased with this segments results which include an increase in revenues of over 46% compared to Q1 of 2012 as well as improved profitability.

The operating income margin for the segment increased to 39.4% in Q1, 2013 from 4% in the same quarter of 2012. These positive results largely reflect initiatives that we undertook last year to increase revenue and profitability and we’re confident this practice will contribute to Huron’s Growth during 2013. Now turning to the balance sheet and cash flows, DSO came in at 72 days for the first quarter of 2013. Cash collections during Q1 slowed after a strong finish to 2012. With respect to cash flows we had negative cash flows from operations of $24.8 million and a net use of cash in operating activities is typical for us during the first quarter due to bonus payouts.

We expect that net cash flows from operations will be positive for the remainder of 2013 and in-line with guidance of approximately $100 million previously provided. Our outlook on full year guidance has now changed since our Q4 comments in February and to affirm our previous numbers, well full year 2013 we anticipate revenues before reimbursable expenses in a range of $655 million to $685 million. EBITDA in a range of $118.5 million to $127 million and adjusted EBITDA in a range of 120.5 million to 129 million. Net income in a range of 50.5 million to 55.5 million in adjusted non-GAAP net income in a range of $55 million to $60 million.

And finally GAAP EPS between $2.25 and $2.45 while adjusted non-GAAP EPS guidance is between $2.45 and $2.65. Thanks everyone and we would now like to open up the call to questions. Operator?

Question-and-Answer Session

Operator

(Operator Instructions). And the first question from the line of Tim McHugh - William Blair & Company. Please go ahead.

Tim McHugh - William Blair & Company

First I just wanted to ask about the legal segment. You talked about seeing some recent large advisory engagement kick in but I wasn’t clear if you have seen any sort of improvement lately and the bigger kind of eDiscovery piece of the business.

Jim Roth

We have had some large engagements going on the discovery side and those have really continued without any material documents and we have picked up some new engagements both on the discovery side and the advisory side. I think what really happened was the first part of the quarter was weak for us in both of those segments but we have seen some pick up on both sides in advisory and discovery towards the later part of the quarter. Does that answer your question?

Tim McHugh - William Blair & Company

Yes and I guess just was there anything, I know you gave the color I guess just to be the straight to the point. I mean was there anything in what happened in the quarter that it feels more structural in nature versus just the timing issue that gives you the performance?

Jim Roth

The answer is there really hasn’t been anything structural at all, I think we just got out of the box pretty weak. As we said this is the third year in a row and even though there may be a couple of reasons for why that happens in January. It happened again but I think there is nothing structural about the way that we’re looking at the practice as it ended the quarter we do have some decent backlog going into the second quarter and beyond and I think as I said we have had kind of crawl out of the whole the last couple of years and I think we have got some reasonable confidence that we will be able to do it again this year. There is nothing structural about the performance. I think it was just a weak start to the quarter.

Mark Hussey

I will just add to that that we’re pretty pleased with the new clients that we’re adding in that particular business and these are definitely household names, you know every single one of them and we’re pleased with the new relationships and actually some of them are already turning into some nice engagements on the discovery side as well.

Jim Roth

A global service organization also is really doing what they are supposed to be doing that is broadening our exposure into the market for the kind of clients that Mark was just responding to and I think that’s probably what gives us comfort not just that they are out there but also the fact that they have actually begin to contribute on both the discovery and advisory side as well.

Tim McHugh - William Blair & Company

Okay and on the healthcare side, you talked about the legal I’m sorry the clinical business doing very well. Can you give us a rough sense of how big that is and I believe there is not much contingencies in there, so overtime that will diminish the timing very soon.

Mark Hussey

We have seen this continue to grow up of a fairly small base within their overtime. If you look overall the way we think about the clinical business for us it's probably little under 15% but again in terms of growth rate each quarter continues to grow and frankly has one of the strongest trend line that we have seen just in terms of demand at the marketplace. So we think that’s going to continue up the smaller base so good percentage growth rate and overtime that will be more large, total dollars but right now it's a smaller base.

Jim Roth

I think that even a couple years or so ago a vast majority of our revenue in the healthcare practice was on the performance improvement and revenue cycle piece of things and as we predicted we really, whole market obviously was in need of services to help them transition through the fee for service towards value based billing to help them control cost, improve quality so we knew as we have been indicating for a while now that we fully expect the clinical solutions part of our business to really be picking up and it's doing exactly what we’re doing. We have had some great hires in there. We’re getting some great clients, some of the work is sold alone just through the clinic piece. A lot of it is sold as an integrated part of the overall solution including revenue and expense and so it's performing and tracking exactly as we wanted it to and I think it's going to have a very bright future.

Tim McHugh - William Blair & Company

Okay and then one last question you talked about or you alluded to the fact that after 2Q you’re better visibility in for the year, I think you also want in that same kind of group of (inaudible). You talked about how you are hopeful but the year proves conservative and then that you might adjust earnings after what gives you guidance after 2Q? I guess just to be fair or just be clear when you’re talking about looking at guidance after 2Q, can you at least say is the bias upwards here when you’re referring to that? Is that message you’re trying to say?

Jim Roth

Obviously we’re trying to be cautious until we get more visibility but I think if things continue to go the direction we’re going right now I don’t think we would be making any adjustments on the downside.

Operator

Your next question is from Paul Ginocchio with Deutsche Bank. Please go ahead.

Paul Ginocchio - Deutsche Bank

Couple of questions about financials and then the utilization at legal. Anything in the financial, you’re on financial that’s one time and is that margin sustainable, is there a success fee in there or anything else was that just trying to think about the consistency of the rest of the year based on the first quarter, is that the right revenue in margin number that kind of bring forward and then second. It looks like you have hired sort of ahead of demand in legal obviously was a little soft in the first quarter. Where does utilization go? Does it get back to more normal level in the second quarter or is it going to longer than that. Thank you.

Mark Hussey

So to answer your first question on Huron Financial in Q1 there was about a $0.5 million success fee that’s not unusual for that business so I don’t think it's a onetime deal. When you look at the revenue level in relation to the utilization this business does not operate normally at that level of utilization and so we have come into the year pretty lean on head count. We have really hung on to the people that we thought were market relevant and doing a great job and they have really sold into a very strong pipeline into 2013. So I don’t think the 85% is going to be the run-rate going forward I would expect it to come down a little bit but it's going to be, right now we’re very encouraged just with the pipeline of engagements. We think these are replacing what was missing a year ago, a year ago we talked about some of the larger longer term engagements enabled us to really keep people busier was missing and that has been replaced this year and it's not just the single engagement there is a number of them that we feel good about. So, that’s really the story on the financial side. I think the margins will be better, I don’t think quite sustainable at that level though.

On the Huron Legal side on the utilization we think that getting back to the 70% range is a reasonable target and with the larger engagements that we’re pursuing here even into the second quarter we think we will be on the way back toward that, don’t know that it will hit quite at that target on the overall quarter but we definitely expect a meaningful improvement in utilization in the second quarter.

Operator

Your next question is from the line of Tobey Sommer with SunTrust Robinson Humphrey. Please go ahead.

Tobey Sommer - SunTrust Robinson Humphrey

I wanted to ask question about consultant headcount additions, certainly the year-over-year rate of growth in the first quarter kind of exceeded what we had talked about when you first gave your, you’re looking at 2013. Did you expect a trend-line of more on the trajectory of the first quarter as we move throughout the year?

Jim Roth

We tried to balance it throughout the year and again you can have some quarters ahead of the others but right not Tobey our full year expectation is in-line with what we previously communicated.

Tobey Sommer - SunTrust Robinson Humphrey

And then within the business as a whole right now how much of revenue is derived from recurring and more scalable software or services as opposed to classic time and materials?

Jim Roth

It's still a fairly small percentage. I would actually have to dig it out, we don’t think I would love to sit here and tell you that we have got a large percentage that’s recurring from software licenses but right now really not the nature of what we’re doing. There is a percentage within the healthcare segment that’s recurring because we have ongoing support and maintenance for in particular our revenue cycle product that’s in there but on the education side when we sell licensing on a click software product is an example the onetime license sales and there isn't recurring support main but it's again overall just not a very meaningful percentage of companies revenue. It's 3% overall.

Tobey Sommer - SunTrust Robinson Humphrey

Okay and then I wanted to see if you can give us an update on your new service in legal what your experience has been. I know it's early days and you kind of thought that might have more of an impact headed into the end of the year and next year but any kind of update you can give would be useful. Thanks.

Jim Roth

It continues to pick up at least a lot of interest in the marketplace. We knew that this was going to be something that was probably going to begin show more results in the second half of the year. I think our experience has been that a lot of clients are extremely interested in it and they are asking a lot more questions. So I do think we will begin to see some more of an impact down at the second half. I would now expect much in the second quarter at this stage.

Tobey Sommer - SunTrust Robinson Humphrey

And just to be clear that the launch didn’t somehow influence the legal results early in the quarter that was just demand and some seasonal patterns is that accurate?

Jim Roth

I think that’s correct. I don’t think there is any correlation between it. In fact anecdotally some of the stories coming back as we have introduced it, it's integrated analytics it's great, we’re interested in trying it out but we love the velocity product. So there is just people very comfortable with the current model and these are not people that from an attorney standpoint that are probably on the leading edge of taking risks around changing the discovery process but we’re encouraged by the acceptance in I think that we stand-by the comments that we made earlier which is more than likely to start to be a second half impact.

Operator

Your next question is from the line of Randle Reece with Avondale Partners. Please go ahead.

Randle Reece - Avondale Partners

I have a question about how sequestration maybe affecting the services that hospitals the most urgently interested in right now?

Jim Roth

I think the sequestration to the extent that it's affecting our clients is putting more pressure on them from the cost side and I think therefore it's creating more opportunity for us to help other clients and helping them with cost reduction and performance improvement. It has a separate effect on the education business and life science business more from a research side as some of the research finding is now having to be strung out and as a result some of the funding is going to be coming to our clients at a slower pace and they are expected. So that puts a decent amount of pressure on some of them in areas that we’re not contemplated. So that’s one on the reimbursement side, it's not clear exactly whether it has had much of an impact yet right now on the healthcare side. Our healthcare clients and reacting more to much more to the kind of global changes in healthcare reform, much more so than any of the sequestration issues. So it's a long way of saying I think it's impacting health and education in particular but not in material amounts yet.

I will just clarify one point I think that the extent that it does impact us it will be a positive impact and us because it will simply result in putting more cost pressure on our clients.

Randle Reece - Avondale Partners

Understood. If you back the clinical practice out of the healthcare segment what would be the growth rate that looks like you had a single digit year-over-year growth rate with a segment that is growing pretty fast. Is there something in there that’s kind of slow?

Jim Roth

I’m not sure I quite follow the question. So the overall healthcare segment was up 24% so could you just restate your question?

Randle Reece - Avondale Partners

Never mind I must have looked at the wrong number. The (inaudible) numbers that we have looked at historically what segments would they fall in now? I’m just kind of wondering how I’m going to make the transition in my model because you’ve given successive numbers in the past volumes and I don’t really how to allocate them to segments.

Jim Roth

They are all in the healthcare segment, so it's actually very clean. There is a minor amount in Huron Financial but it's really not material even within that segment. For the quarter it was $500,000 in the Huron Financial, 18.4 million in Huron Healthcare.

Operator

Your next question is from the line of Bill Sutherland with Northland Capital Markets. Please go ahead.

Bill Sutherland - Northland Capital Markets

I was just about (inaudible) question and I’m wondering is there like a range that we should be thinking about for the full year or do you not want to go there?

Jim Roth

On success fees Bill?

Bill Sutherland - Northland Capital Markets

Yes.

Jim Roth

Yes we continue to look in the range of 80 million to 90 million in a full year basis for success fees.

Bill Sutherland - Northland Capital Markets

Good. What was the level of Adams Grayson in the first quarter?

Jim Roth

We don’t discuss the specifics but I would tell you that Adams Grayson was a little softer in the quarter so when we look back we started out of the gate a little bit softer. Strong Q4, a little bit softer in Q1, I’m not sure that it's unusual for what we necessarily expected, what’s happening overtime is they are getting very integrated into our overall operation so going forward it's going to be a little bit more hazy to comment specifically on it but at this point there is really nothing in the acquisition that we’re terribly concerned about and continue to build on some of the other potential practices, opportunities that we see as a result of their business model versus the one that Huron Legal has historically taken.

Bill Sutherland - Northland Capital Markets

Okay. The guidance Mark that you gave initially just to give us something to work with for the full year in terms of revenue by segment, I think it was high single digit probably for healthcare, high single low double for Ed (ph) and low to middle single for legal that’s still? Personally have that correct and so that’s still of the parameters in your mind?

Jim Roth

Actually that’s correct Bill and we really have not altered any part of that outlook at this point.

Bill Sutherland - Northland Capital Markets

Okay and then finally just one more model thing with the first quarter gone and second quarter to the quarterly phasing, is it still almost like the first half and back half could be 50-50 share or 40-60 or is there any sort of rate of (inaudible).

Jim Roth

We probably think the first half is still a little bit less in the second half just as we continue to see growth in the businesses overtime. It's just a little bit more evenly not a little bit, it's a lot more evenly based than it was a year ago.

Mark Hussey

I don’t know we figured out, I don’t think it's going to be 40-60 but it's also not going to be 50-50. I don’t think it will be 50-50 by any stretch.

Operator

(Operator Instructions). Your next question is from the line of Joseph Foresi with Janney Montgomery Scott. Please go ahead.

Joseph Foresi - Janney Montgomery Scott

On the legal segment I just had, can you give us some idea of kind of what you’re expecting the ramp to be like, I just want to make sure that everybody is got some directional clarity. I know it's going to improve sort of as we go throughout the year but is it a big step-up in 2Q or are we back-end loaded. Is there any way to kind of tell based on the one quarter done and the visibility sort of what sequentially should be expecting in that business.

Mark Hussey

So the last couple of years we have had a little bit more strength in the back half of the year, not that there is anything inherently in the pattern because they are all individual engagement that can vary from time to time but I do think that the second half will be stronger than the first half. I don’t think we’re going to see a massive ramp-up in Q2 that’s going to somehow make-up for the softness in Q1.

Jim Roth

But I think we’re still targeting hopefully a low single digit growth for the practice year-over-year.

Joseph Foresi - Janney Montgomery Scott

And in the financial practice, obviously utilization rate you talked about maybe perhaps unsustainable. Anything one time in that business that should come out of the numbers as we go throughout the year or do you expect a generally slower moderation of the utilization rate?

Jim Roth

There is really nothing unusual but other than the fact that they just got really busy on a number of very intense engagements and so I think the strength in that business was as always the same reason you see great numbers is all transactional driven and sometimes when the numbers aren’t there it's because there aren’t enough transactions going on. We’re at a very busy part right now and as Mark indicated I don’t think the utilization rate will be that high but there is a lot of activity for them right now and sometimes the projects end quicker than we would like, other times they go on longer.

So I think right now we’re well positioned, the practice made some adjustments to its headcount back in the fourth quarter that I think positions them very well to more profitability enter 2013 and we saw some of that right now. I don’t think we didn’t fully contemplate the strength that we had and so I don’t know that we can necessarily predict it's going to continue at that pace for a while but I do think they are going to be busy. They are well positioned and demand seems to be at a much better pace than we have had for the last 12 to 18 months.

Joseph Foresi - Janney Montgomery Scott

So would you say that I mean that’s a different way, would you say that the pipeline in that business has improved over a number of opportunities and do you think that should maybe help drive the business source or sustain at a higher rate but not necessarily it's hard as the first quarter is that fair enough?

Jim Roth

To distinguish what we’re talking about, I think the revenue projections going forward reflect a good pipeline of business that’s being sold and I think the headcount is not at the level of consistent long term delivery of that revenue. So I would expect that there would be some hiring in that business that would help alleviate some of the hardness and not necessarily change the revenue but make it more loveable for the people running that practice.

Joseph Foresi - Janney Montgomery Scott

Last question for me on the healthcare side, it sounds like it's going to be a more even business this year versus last year suddenly I think that we’re all kind of hoping that as well. Anything you can say directionally as far as contingency fees, is there any reason to think that suddenly the back half is probably shorter than the first half. Any lumpiness to those that you’re seeing in the business right now that you want to call out earlier in the year from modeling perspective?

Jim Roth

I don’t think so, we feel pretty comfortable with the measures the growth we gave on the overall revenue and also I think we feel pretty comfortable about the 80 million to 90 million of contingent revenue for the year and there will be some quarters that are more than others but not anything close to the lumpiness we hope that we saw last year.

Joseph Foresi - Janney Montgomery Scott

Great and then just a very last one. I think you and given sort of a general parameters on what you think it could grow over the long term. Any thoughts about that now and are we seeing an uptick, I know that the pipeline has been historically high but can you give us any sort of larger color on the demand trends and sort of what you think a long term growth rate because obviously now it's been skewed a little bit by the comparatives you gave last year.

Jim Roth

We feel pretty comfortable still in the upper single digits, there is a lot I will just say there is a lot of activity in the market right now and to say that there is a great deal of uncertainty among our clients is a significant understatement and so we’re doing the best we can to continue to respond to what’s going on the market but we’re seeing a level of interest that’s very strong and we’re doing our best to continue to try to meet it so I think we’re going to stick with our probably upper single digit growth rate for healthcare and do our best to try to beat that overtime.

Operator

And you have a follow-up from the line of Bill Sutherland with Northland Capital Markets. Please go ahead.

Bill Sutherland - Northland Capital Markets

Mark I’m just looking at the last year’s first quarter’s for legal consulting where you said get off to a slow start typically and utilizations weren’t too differently working different in those past first quarters then the one you said finished in the mid-50s this time it was 52 and so I’m trying but you know the segment margin is so much lower from those other slow starts. So I’m just trying to give (inaudible) I guess one thing I’m wondering is about where there additional marketing cost related to integrated analytics for instance or I’m just looking for maybe what other cost works there might be.

Mark Hussey

Bill you’re right on, with the revenue flat obviously the operating income margins are quite a bit different. What you’re seeing is that we in the last year and particularly in the last year and particularly in the last beginning kind of in the second half of the year started really building out our global sales organization, so there is some part of that is it's not marketing related to integrated analytics, as much as it is taking a practice that we’re trying to grow overtime and there are some you are seeing the investment dollars, coming in that did not necessarily produce the top-line just because the timing of the engagements in the quarter and then there is just some ongoing investment around, some of the technology expenses that we have around not only just the processing and volumes that we have but some investment for the future as well. So that’s really more of a mix and timing issue. Overtime we do believe that going to an operating income margin of around 25% is a good target level for us based on where the state of the business is right now.

Bill Sutherland - Northland Capital Markets

And did you give a sense of a split in the revenue in the first quarter advisory and eDiscovery?

Mark Hussey

They were, discovery actually despite having a soft quarter was still higher than the year ago within the segment and advisory was down just slightly.

Operator

Mr. Roth we have concluded the amount of time for this call. So I would like to turn the call back over to you for any closing remarks.

Jim Roth

Thank you and thanks 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.

Operator

That will conclude today’s conference call. Thank you everyone for your participation.

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Huron Consulting (HURN): Q1 EPS of $0.51 beats by $0.07. Revenue of $164M (+18.3% Y/Y) beats by $4.71M. (PR)