Global Services | Consulting Equity Research Timothy McHugh, CFA

+1 312 364 8229 ConsultingFebruary 12, 2019 [email protected] Romeo, CFA +1 312 801 7854 [email protected] 10 Key Topics That Consulting Firm Executives Are Focused on

As a follow-up to our September 2018 report titled “Five Noteworthy Changes Occurring in the Consulting Industry,” we have engaged with a number of executives within the consulting industry to discuss these trends. Based on feedback received during those conversations, some new developments (U.K. audit rule changes), and the collection of additional data (revenue trends for several privately held strategy consulting firms), we have broadened our list of significant changes to include 10 topics, which are listed below. This report includes the presentation slides that we created to discuss these trends at meetings with consulting firms. While opinions about each topic vary as we talk to consulting firm executives, we think this presentation provides a reasonable overview for some of the key changes and trends that consulting firm executives are thinking about as they assess future growth opportunities and their internal operations. Our hope is that this provides some useful context for investors as •they assess various decisions and strategies at consulting firms. • Digital Transformation • Lines of Delineation Between Specialties Are Decreasing • Alternative Staffing Models • Managed Services and Outsourcing • Era of Mega Consulting Firms • Market Share Changes are Happening Quickly • Audit Rule Changes in the U.K. Could Drive Significant Changes • Technology is Changing Internal Operations • Leveraging AI, Automation, and Emerging Technology Private Equity Investment in Consulting Is Increasing

Please refer to important disclosures on pages 21 – 22. Analyst certification is on page 21. William Blair or an affiliate does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. This report is not intended to provide personal investment advice. The opinions and recommendations herein do not take into account individual client circumstances, objectives, or needs and are not intended as recommendations of particular securities, financial instruments, or strategies to particular clients. The recipient of this report must make its own independent decisions regarding any securities or financial instruments mentioned herein. Pantone: 302

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RGB: R63 G133 B158 Ten Changes/Trends Occurring in the Industry

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RGB: R154 G155 B156 Digital Transformation Pantone: 3005

RGB: R0 G122 B201 Lines of Delineation Between Specialties Are Decreasing Pantone: 3288

RGB: R0 G133 B102 Alternative Staffing Models

Pantone: CG 11 Managed Services and Outsourcing RGB: R72 G72 B74

Pantone: 298 Era of Mega Consulting Firms RGB: R61 G183 B228

Pantone: 290 Market Share Changes Are Happening Quickly

RGB: R194 G222 B234 Audit Rules in the U.K. Could Drive Significant Changes Pantone: 2597

RGB: R87 G6 B140 Technology is Changing Internal Operations Pantone: 376

RGB: R122 G184 B0 Leveraging AI, Automation, and Emerging Technology

Pantone: 7452 Private Equity Investment in Consulting is Increasing RGB: R129 G147 B219

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RGB: R63 G133 B158 1 Digital Transformation Pantone: CG 7

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Pantone: 3005 Nearly every one of our conversations with a Digital transformation is one of the most RGB: R0 G122 B201 consulting firm CEO includes a discussion of powerful trends impact consulting firms digital transformation right now Pantone: 3288 The term digital is used differently by different RGB: R0 G133 B102 firms, but we see three main areas of focus  Combining creative/advertising capabilities Pantone: CG 11 with technology consulting

RGB: R72 G72 B74 – Accenture, Perficient, and ICF are examples – Focus is on the CMO Pantone: 298  Helping companies leverage technology to improve their operations/performance RGB: R61 G183 B228 – Strategy and operational consulting firms Pantone: 290 are taking this approach – McKinsey has a separately branded unit RGB: R194 G222 B234 called Digital McKinsey and BCG has a business unit called DigitalBCG Pantone: 2597 – These services are sold to CEO and board

RGB: R87 G6 B140  Many IT consulting companies use the term “digital” to broadly describe their capabilities Pantone: 376 related to cloud technology, analytics, robotics process automation, and other newer areas of RGB: R122 G184 B0 technology – Client focus here is on the CTO Pantone: 7452

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RGB: R63 G133 B158 2 Lines of Delineation Between Specialties Are Decreasing Pantone: CG 7

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Pantone: 3005 Some of the delineations that we would have Consulting firms are broadening their RGB: R0 G122 B201 made several years ago between different types solutions and capabilities in new ways, of consulting firms have dissipated: and increasingly do not fit into some of Pantone: 3288  McKinsey moving into restructuring and the traditional descriptions/views of the leadership consulting sectors RGB: R0 G133 B102 companies  Huron adding IT and strategy expertise Pantone: CG 11  Executive search firms adding leadership consulting RGB: R72 G72 B74  Government consulting firms are expanding Pantone: 298 in commercial sectors (and vice versa)  Big Four expanding their legal services RGB: R61 G183 B228 capabilities Pantone: 290 We believe this trend is being driven by multiple factors: RGB: R194 G222 B234  Increasingly complex challenges at clients Pantone: 2597 (which require broader perspective and a wider range of skills) RGB: R87 G6 B140  The pursuit of ancillary areas of growth Pantone: 376  Efforts to differentiate through the breadth of services RGB: R122 G184 B0  Client demand for consultants to share some risk around outcomes from consulting Pantone: 7452 engagements RGB: R129 G147 B219 Pantone: CG2 4 | Timothy McHugh +1 312 364 8229 RGB: R213 G214 B210 Pantone: 302

RGB: R0 G65 B101 William Blair Pantone: 7458 Korn/Ferry Is No Longer Just an Executive Search Firm; RGB: R63 G133 B158 Booz Allen Is Quickly Growing With Commercial Clients Pantone: CG 7

RGB: R154 G155 B156 Korn/Ferry International Advisory (Leadership and Talent Consulting) Segment Annual Revenue Pantone: 3005 ($ in millions) $1,000 $882 RGB: R0 G122 B201 $836 $785 $800 $724 Pantone: 3288

$600 RGB: R0 G133 B102 $471

$400 Pantone: CG 11 $255 $267 $168 RGB: R72 G72 B74 $200 $99 $115

Pantone: 298 $0 2011 2012 2013 2014 2015 2016E 2017 2018 2019E 2020E RGB: R61 G183 B228 Source: Company documents

Pantone: 290 Booz Allen Hamilton Holding Corporation Global Commercial Revenue ($ in millions) RGB: R194 G222 B234 $350 50% $301 $300 Pantone: 2597 $251 40% $250 $197 $200 30% RGB: R87 G6 B140 $151 $124 31% $150 27% 20% Pantone: 376 $100 21% 20% 10% RGB: R122 G184 B0 $50 $0 0% Pantone: 7452 2016 2017 2018 2019E 2020E Revenue YoY Growth RGB: R129 G147 B219 Sources: Company documents and William Blair estimates Pantone: CG2 5 | Timothy McHugh +1 312 364 8229 RGB: R213 G214 B210 Pantone: 302

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RGB: R63 G133 B158 3 Alternative Staffing Models

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RGB: R154 G155 B156  Some of the larger IT staffing companies, such Some consulting firms are using on- as Insight Global, Allegis Group, and ASGN demand labor models as part of their Pantone: 3005 Incorporated, are adding project management delivery capabilities; at the same time, expertise to compete for projects that RGB: R0 G122 B201 historically went to consulting firms staffing firms are using on-demand labor to compete for work that previously went Pantone: 3288  Freelancer marketplaces are making it to consulting firms feasible for corporations to engage individual RGB: R0 G133 B102 practitioners to perform small projects

Pantone: CG 11  We see elements of this in legal as well

RGB: R72 G72 B74  There are some inherent challenges associated with using these alternatives Pantone: 298 – Consulting firms train and develop junior consultants into senior consultants through RGB: R61 G183 B228  Most consulting firms operate with a the experiences that they gain in the job; traditional pyramid model, but there are a few narrower full-time staffing pyramids thus Pantone: 290 companies using alternative operating models require that consulting firms acquire RGB: R194 G222 B234 to compete within the consulting sector senior-level talent on a lateral basis or have a higher success rate at growing junior  Robert Half’s Protiviti consulting unit, which consultants into senior producers Pantone: 2597 generates $1 billion of revenue, actively

RGB: R87 G6 B140 leverages the temporary staffing capabilities  We believe corporations are gradually getting of its parent company to add resources for better visibility into the cost of different Pantone: 376 certain projects. This allows them to provide professional services (partly due to vendor services at a lower price point and add management systems and other procurement RGB: R122 G184 B0 specific skills to projects when needed tools) and are becoming more sophisticated in how they purchase professional services, so

Pantone: 7452 the lower-cost and flexible nature of these delivery models is getting some traction RGB: R129 G147 B219

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RGB: R63 G133 B158 Protiviti Is Growing Quickly

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Pantone: 3005 Protiviti Annual Revenue RGB: R0 G122 B201 ($ in millions)

Pantone: 3288 $1.20

RGB: R0 G133 B102 $1.00 $0.96 Pantone: CG 11 $0.80 $0.82 $0.80 $0.74 RGB: R72 G72 B74 $0.62 $0.60 $0.54 $0.55 $0.55 $0.53 Pantone: 298 $0.42 $0.45 $0.38 $0.39 $0.40 RGB: R61 G183 B228

Pantone: 290 $0.20

RGB: R194 G222 B234 $0.00 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Pantone: 2597 Source: Company documents

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RGB: R63 G133 B158 4 Managed Services and Outsourcing Pantone: CG 7

RGB: R154 G155 B156  Some consulting firms are embracing  We believe the legal industry is in the early Pantone: 3005 outsourcing and managed services stages of embracing these contracts arrangements with clients  The challenge is that operating an outsourcing RGB: R0 G122 B201 – Navigant has aggressively expanded its or managed services business is very different revenue cycle outsourcing business from operating a consulting firm; consulting Pantone: 3288 – Healthcare IT consulting companies are firms often struggle with the profitability of growing their managed services offerings RGB: R0 G133 B102 these operations – ICF International has meaningfully grown  Firms are attracted though to the recurring its energy efficiency outsourcing business Pantone: CG 11 nature of these services, the potential to – Investment consulting firms provide deepen customer relationships, and the RGB: R72 G72 B74 outsourced asset allocation to pensions potential to broaden their addressable – Big Four are aggressively pushing managed Pantone: 298 opportunity at clients services across many service lines

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Pantone: 290 Navigant Consulting Technology, Data, and

RGB: R194 G222 B234 Processing Revenue ICF International Commercial Energy Revenue ($ in millions) ($ in millions) $250 $300 Pantone: 2597 $211 $253 $235 $200 $250 $218 RGB: R87 G6 B140 $158 $200 $173 $127 $150 $140 $150 $125 Pantone: 376 $102 $106 $100 $86 $100 RGB: R122 G184 B0 $50 $50 Pantone: 7452 $0 $0 2017 2018E 2019E 2012 2013 2014 2015 2016 2017 2018E 2019E 2020E RGB: R129 G147 B219 Sources: Company documents and William Blair estimates Sources: Company documents and William Blair estimates

Pantone: CG2 8 | Timothy McHugh +1 312 364 8229 RGB: R213 G214 B210 Pantone: 302

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RGB: R63 G133 B158 5 Era of Mega Consulting Firms Pantone: CG 7

RGB: R154 G155 B156  Accenture, the Big Four, BCG, Bain, and  While the law of large numbers makes it Pantone: 3005 McKinsey generate $200 billion of revenue difficult for these firms to grow, it gives them – Average growth was 7% in 2017; All of significant resources to invest in new RGB: R0 G122 B201 these firms want to keep growing solutions, technology tools, innovation centers, and branding Pantone: 3288 – If these companies grow 5%-10%, they need to generate an incremental $10 billion-  Many executives at consulting firms now tell RGB: R0 G133 B102 $20 billion of revenue each year us that they feel subscale with $500 million-$1 – These companies are expanding into a billion of revenue, which we might have Pantone: CG 11 variety of new areas to support their growth considered to be a “scaled” firm in the past

RGB: R72 G72 B74 – Some growth initiatives are facing  A lot of firms debating the right path for headwinds (PWC/Strategy&), but they are growth from $1 billion to $2 billion Pantone: 298 generally performing well

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Pantone: 290 Large Consulting Firms Annual Revenue Growth RGB: R194 G222 B234 15% 14% 12% 13% Pantone: 2597 10% 10% 7% 7% RGB: R87 G6 B140 6% 6% 5% 6% 5% 4% 5% 4% 4% 3% 3% 4% 4% 5% 2% 3% Pantone: 376 1% 0% RGB: R122 G184 B0 -2% -5% -3% Pantone: 7452 McKinsey BCG Bain Accenture PwC Deloitte EY KPMG 2015 2016 2017 RGB: R129 G147 B219 Sources: FactSet, Statista, various internet sources Pantone: CG2 9 | Timothy McHugh +1 312 364 8229 RGB: R213 G214 B210 Pantone: 302

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RGB: R63 G133 B158 Big Four Accounting Firms Continue to Deliver Strong Growth Pantone: CG 7

RGB: R154 G155 B156 Top 7 Accounting Firms Annual Revenue Pantone: 3005 ($ in billions) $20.0 $18.6 RGB: R0 G122 B201 $15.6 $15.0 $13.0 Pantone: 3288

$10.0 $9.0 RGB: R0 G133 B102

$5.0 Pantone: CG 11 $2.0 $1.8 $1.4

RGB: R72 G72 B74 $0.0 Deloitte PwC Ernst & Young KPMG RSM US Grant Thornton BDO USA Pantone: 298 2010 2011 2012 2013 2014 2015 2016 2017

Sources: FactSet, Statista, various internet sources RGB: R61 G183 B228 Revenue CAGR, 2010-2017 Pantone: 290 16% RGB: R194 G222 B234 13% 14% Pantone: 2597 12% 10% 10% 9% 9% RGB: R87 G6 B140 8% 8% 7% Pantone: 376 6% 5% 4% RGB: R122 G184 B0 2% Pantone: 7452 0% Deloitte PwC Ernst & Young KPMG RSM US Grant Thornton BDO USA RGB: R129 G147 B219 Sources: FactSet, Statista, various internet sources

Pantone: CG2 10 | Timothy McHugh +1 312 364 8229 RGB: R213 G214 B210 Pantone: 302

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RGB: R63 G133 B158 McKinsey and BCG Continue to Gain Scale; HR and Benefits Consulting Firms Continue to Steadily Grow Pantone: CG 7

RGB: R154 G155 B156 Strategy Consulting Firms Annual Revenue Pantone: 3005 ($ in billions) $12 RGB: R0 G122 B201 $10 $10

Pantone: 3288 $8 $6 RGB: R0 G133 B102 $6 $5 $4 $3 Pantone: CG 11 $2

RGB: R72 G72 B74 $0 McKinsey BCG Pantone: 298 2010 2011 2012 2013 2014 2015 2016 2017

RGB: R61 G183 B228 Sources: FactSet, Statista, various internet sources Oliver Wyman Annual Revenue Pantone: 290 ($ in billions) RGB: R194 G222 B234 $2.50 $2.05 Pantone: 2597 $1.92 $2.00 $1.75 $1.79 $1.71 RGB: R87 G6 B140 $1.48 $1.47 $1.46 $1.50 $1.28 $1.36

Pantone: 376 $1.00

RGB: R122 G184 B0 $0.50

Pantone: 7452 $0.00 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 RGB: R129 G147 B219 Sources: Company documents Pantone: CG2 11 | Timothy McHugh +1 312 364 8229 RGB: R213 G214 B210 Pantone: 302

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RGB: R63 G133 B158 Other Firms Have Seen Slower Growth Though Pantone: CG 7

RGB: R154 G155 B156 PA Consulting Group Annual Revenue ($ in billions) $0.90 $0.82 $0.82 Pantone: 3005 $0.78 $0.80 $0.67 $0.70 RGB: R0 G122 B201 $0.70 $0.66 $0.58 $0.58 $0.57 $0.57 $0.60 $0.51 $0.54 Pantone: 3288 $0.50 $0.40 RGB: R0 G133 B102 $0.30 $0.20 Pantone: CG 11 $0.10

$0.00 RGB: R72 G72 B74 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Pantone: 298 Source: Companies House registry

RGB: R61 G183 B228 A.T. Kearney Annual Revenue Strategy Consulting Annual Revenue ($ in billions) ($ in billions) Pantone: 290

$1.13 $1.11 $1.14 $3.0 RGB: R194 G222 B234 $1.20 $1.07 $0.97 $0.98 $1.02 $2.4 $1.00 $0.91 $0.88 $2.5 Pantone: 2597 $0.79 $0.79 $2.0 $0.73 $0.80 $2.0 2010 2017 RGB: R87 G6 B140 $0.60 $1.5 $1.0 Pantone: 376 $0.40 $0.7 $0.7 $0.6 $0.5

$0.20 $0.5 RGB: R122 G184 B0 $0.00 $0.0 Pantone: 7452 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Bearingpoint Roland Berger Bain Source: Companies House registry Sources: FactSet and various internet sources RGB: R129 G147 B219

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RGB: R63 G133 B158 6 Market Share Changes Are Happening Quickly Pantone: CG 7

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Pantone: 3005  New entrants are gaining market share at a New entrants and smaller firms have RGB: R0 G122 B201 faster pace than we have seen in the past been able to grow quickly – Ankura went from $0 to $500 million in Pantone: 3288 three years

RGB: R0 G133 B102 – BRG went from $0 to $400 million-plus in a short period Pantone: CG 11 – Slalom Consulting has surpassed $1 billion of revenue RGB: R72 G72 B74 – Simon-Kucher has tripled in size since 2010 Pantone: 298  IT consulting firms focused on new RGB: R61 G183 B228 technologies and faster growth markets are gaining market share Pantone: 290 – Infosys, Cognizant, and Accenture are growing mid- to high single digits RGB: R194 G222 B234 – Globant and EPAM are growing more than Pantone: 2597 20% annually . Globant now has over $500 million of RGB: R87 G6 B140 revenue . EPAM now has $1.8 billion of revenue Pantone: 376

RGB: R122 G184 B0

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RGB: R63 G133 B158 Slalom Has Grown Very Quickly in the Last 10 years Pantone: CG 7

RGB: R154 G155 B156 Slalom Consulting Annual Revenue Pantone: 3005 ($ in billions) $1.60 $1.40 RGB: R0 G122 B201 $1.40 $1.20 Pantone: 3288 $1.00

RGB: R0 G133 B102 $0.80 $0.60 Pantone: CG 11 $0.40 $0.14 $0.20 RGB: R72 G72 B74 $0.00 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Pantone: 298

Sources: Company documents, various internet sources RGB: R61 G183 B228 Simon-Kucher Annual Revenue Pantone: 290 ($ in billions)

RGB: R194 G222 B234 $0.40 $0.36 $0.35 Pantone: 2597 $0.30 $0.30 $0.27 RGB: R87 G6 B140 $0.25 $0.23 $0.23 $0.20 $0.19 $0.20 $0.17 Pantone: 376 $0.14 $0.15 RGB: R122 G184 B0 $0.10 $0.05 Pantone: 7452 $0.00 2010 2011 2012 2013 2014 2015 2016 2017 2018 RGB: R129 G147 B219 Sources: Company documents and Consultancy.org Pantone: CG2 14 | Timothy McHugh +1 312 364 8229 RGB: R213 G214 B210 Pantone: 302

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RGB: R63 G133 B158 Ankura and BRG Became Large Firms Quickly, Partly by Aggressively Recruiting from Competitors Pantone: CG 7

RGB: R154 G155 B156 Former Employer for SMD and MD New Hire Announcements at Ankura, 2015-October 2018 Pantone: 3005 (chart shows firms that showed up more than once) 80 68 RGB: R0 G122 B201 70 60 Pantone: 3288 50 42 RGB: R0 G133 B102 40 30 Pantone: CG 11 20 7 RGB: R72 G72 B74 10 3 2 2 0 Pantone: 298 FTI Deloitte Duff & Phelps/Kroll CDG Navigant All others

Source: Company press releases RGB: R61 G183 B228 Senior-Level New Hires Announced at Ankura, AlixPartners, Duff & Phelps, Alvarez & Masal, and BRG That Pantone: 290 Came From FTI Consulting, 2015-October 2018 RGB: R194 G222 B234 40 36 35 Pantone: 2597 30 RGB: R87 G6 B140 25 20 Pantone: 376 15 9 7 7 RGB: R122 G184 B0 10 5 Pantone: 7452 0 2015 2016 2017 2018 YTD RGB: R129 G147 B219 Source: Company press releases

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RGB: R63 G133 B158 7 Audit Rules in the U.K. Could Drive Significant Changes

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RGB: R154 G155 B156  The Labour Party also released a report  The biggest beneficiaries of these changes are calling for a full structural breakup of the Grant Thornton, BDO RSM, and Mazars. One of Pantone: 3005 audit and nonaudit parts of the Big Four firms, the main goals of the CMA proposal is to help a market share cap for audits of large these firms gain market share. RGB: R0 G122 B201 companies at 50% for the Big Four firms, a five-year audit rotation rule (versus the  Audit conflicts are challenging to manage Pantone: 3288 current 10-year rule), the creation of an when there are multiple parties involved, i.e., litigation and restructuring. The Big Four RGB: R0 G133 B102 independent body to appoint auditors for large companies, and the creation of a accounting firms still maintain practices in these areas, but they run into conflicts more Pantone: CG 11 government agency to audit banks. often, so professionals in those areas could

RGB: R72 G72 B74  PWC and E&Y have said they will voluntarily move to non–Big Four firms. stop providing “non-essential” consulting  Of the £9 billion in revenue generated by the Pantone: 298 services to audit clients, but they still expect Big Four in the U.K., 79% comes from to maintain large consulting businesses RGB: R61 G183 B228 nonaudit services. The consulting portions of  The Competition and Markets Authority has  While the Big Four are precluded from selling the Big Four are proportionately a little bigger proposed a series of reforms to the audit Pantone: 290 consulting services to their audit clients, they in the U.K. than in the U.S., and the Big Four industry: still have 75% of the market that they can firms compete more broadly in the RGB: R194 G222 B234 – the Big Four separate their audit and address, and their brands, scale, and breadth restructuring, litigation, economics, legal nonaudit businesses into separate of services provide competitive advantages. services, and other consulting sectors in the Pantone: 2597 operating entities (with separate boards, U.K. than in the U.S. management, and compensation)  The Big Four firms are prohibited from RGB: R87 G6 B140 providing specific services (tax, valuation) to  Overall, the recommendations introduce – audits for companies in the FTSE 350 are their audit clients, and their nonaudit fees uncertainty, will create a lot of changes, and Pantone: 376 conducted by two firms, one of which is not cannot exceed 70% of their audit fees at audit are generally intended to reduce the market one of the Big Four firms clients, so they already have some share in audits of the Big Four firms. We thus RGB: R122 G184 B0 – a new, stricter regulator replaces the restrictions. The audit portions of the Big Four believe that these changes could create existing regulatory body (the FRC) are lower margin than the nonaudit opportunities for other firms to recruit Pantone: 7452 businesses, so separating these two consultants out of the Big Four during the

RGB: R129 G147 B219 businesses could be positive for the margins next few years. of the nonaudit businesses.

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RGB: R63 G133 B158 8 Technology is Changing Internal Operations

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Pantone: 3005  Access to information about customers from Technology changes are making some RGB: R0 G122 B201 internal resources (CRM) and external aspects of running a consulting firm sources (LinkedIn, other social media) makes easier, but they also are introducing new Pantone: 3288 it easier to perform due diligence on customers challenges RGB: R0 G133 B102  Customers expect vendors to walk in the door Pantone: CG 11 with a higher level of understanding about their business than in the past though RGB: R72 G72 B74  Consulting firms vary significantly in how Pantone: 298 well they capture data about clients and leverage that across their firms RGB: R61 G183 B228  The way customers seek out potential Pantone: 290 vendors is changing too —customers do a lot of their diligence online before or without RGB: R194 G222 B234 talking to potential vendors. Consulting firms need to actively manage their online brand Pantone: 2597 and develop content that potential clients can access before they even talk to the company RGB: R87 G6 B140  Remote work is seamless, which broadens the Pantone: 376 pool of potential talent and reduces rent expenses. Use of remote work arrangements RGB: R122 G184 B0 is shifting faster than the office footprint of consulting firms though —every consulting Pantone: 7452 firm we meet with wants less real estate RGB: R129 G147 B219

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RGB: R63 G133 B158 9 Investments in AI, Automation, and Emerging Technology Pantone: CG 7

RGB: R154 G155 B156  Some consulting firms have developed Consulting firms are in the early stages of capabilities to implement AI and automation trying to use AI and automation tools as Pantone: 3005 tools at clients, which is part of the digital part of their delivery model transformation trend we mentioned earlier RGB: R0 G122 B201  One of the questions that we often get asked Pantone: 3288 by consulting firm executives is how are other consulting firms leveraging AI, automation, RGB: R0 G133 B102 and other emerging technologies as part of Pantone: CG 11 their delivery model?  We do not think these tools are being used by RGB: R72 G72 B74 most consulting firms, but many consulting Pantone: 298 executives are focused on figuring out how they can do so in the future RGB: R61 G183 B228  There is some disincentive to doing this Pantone: 290 because it could lead to smaller project sizes and the automation of some lower-end work, RGB: R194 G222 B234 which makes it harder to support wide staffing pyramids Pantone: 2597  It also is a bit unclear right now how these RGB: R87 G6 B140 tools can be applied to many aspects of consulting, particularly given the bespoke Pantone: 376 nature of the engagements

RGB: R122 G184 B0  Many executives at consulting firms have told us though that they feel like they will be Pantone: 7452 competitively disadvantaged in 5-10 years if they are not using these tools as part of their RGB: R129 G147 B219 services

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RGB: R63 G133 B158 10 Private Equity Firms Are Active in the Sector

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Pantone: 3005  Private equity firms have become active in the Private equity firms have become more RGB: R0 G122 B201 consulting sector active in the sector and consulting firms have become more comfortable with Pantone: 3288  While the asset-light nature of this industry gave financial sponsors some pause in the selling to private equity RGB: R0 G133 B102 past, they have taken a more active role in the sector during the last 5 years Pantone: CG 11  Consulting firms have become more RGB: R72 G72 B74 comfortable that they can sell from one PE firm to another PE firm – i.e., selling to PE Pantone: 298 doesn’t mean that the consulting firm will have to go public when that PE firm wants to RGB: R61 G183 B228 exit

Pantone: 290  Majority investments are still the most common, but we have seen an increase in RGB: R194 G222 B234 minority investments in this sector (i.e., BRG, Ryan) Pantone: 2597

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RGB: R63 G133 B158 Sample of Private Equity Investments in Consulting

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RGB: R154 G155 B156 Company Financial Sponsor Company Financial Sponsor

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IMPORTANT DISCLOSURES

William Blair or an affiliate beneficially own or control (either directly or through its managed accounts) 1% or more of the equity securities of Booz Allen Hamilton Holding Corporation as of the end of the month ending not more than 40 days from the date herein.

William Blair or an affiliate is a market maker in the security of Booz Allen Hamilton Holding Corporation, CBIZ, Inc., Charles River Associates, Exponent, Inc., Franklin Covey Co., FTI Consulting, Inc., Huron Consulting Group Inc., ICF International, Inc., Navigant Consulting, Inc., The Hackett Group, Inc. and Robert Half International Inc.

William Blair or an affiliate expects to receive or intends to seek compensation for investment banking services from Booz Allen Hamilton Holding Corporation, CBIZ, Inc., Charles River Associates, Exponent, Inc., Franklin Covey Co., FTI Consulting, Inc., Huron Consulting Group Inc., ICF International, Inc., Navigant Consulting, Inc., The Hackett Group, Inc. and Robert Half International Inc. or an affiliate within the next three months.

William Blair or an affiliate received compensation for investment banking services or non-investment-banking services from Huron Consulting Group Inc. within the last 12 months. Huron Consulting Group Inc. is or was, within the last 12 months, an investment banking client of William Blair & Company and/or one or more of its affiliates.

Officers and employees of William Blair or its affiliates (other than research analysts) may have a financial interest in the securities of Booz Allen Hamilton Holding Corporation, CBIZ, Inc., Charles River Associates, Exponent, Inc., Franklin Covey Co., FTI Consulting, Inc., Huron Consulting Group Inc., ICF International, Inc., Navigant Consulting, Inc., The Hackett Group, Inc. and Robert Half International Inc.

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Please contact us at +1 800 621 0687 or consult williamblair.com/Research-and-Insights/Equity-Research/Coverage.aspx for all disclosures.

Timothy McHugh attests that 1) all of the views expressed in this research report accurately reflect his/her personal views about any and all of the securities and companies covered by this report, and 2) no part of his/her compensation was, is, or will be related, directly or indirectly, to the specific recommendations or views expressed by him/her in this report. We seek to update our research as appropriate. Other than certain periodical industry reports, the majority of reports are published at irregular intervals as deemed appropriate by the research analyst.

DOW JONES: 25053.10 S&P 500: 2709.80 NASDAQ: 7307.91

AdditionalCurrent Rating information Distribution is available (as of upon February request. 12, 2019): Coverage Universe Percent Inv. Banking Relationships * Percent

Outperform (Buy) 67 Outperform (Buy) 19 Market Perform (Hold) 32 Market Perform (Hold) 7 Underperform (Sell) 1 Underperform (Sell) 0 *Percentage of companies in each rating category that are investment banking clients, defined as companies for which William Blair has received compensation for investment banking services within the past 12 months.

The compensation of the research analyst is based on a variety of factors, including performance of his or her stock recommendations; contributions to all of the firm’s departments, including asset management, corporate finance, institutional sales, and retail brokerage; firm profitability; and competitive factors.

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OTHER IMPORTANT DISCLOSURES

Stock ratings and valuation methodologies: William Blair & Company, L.L.C. uses a three-point system to rate stocks. Individual ratings reflect the expected performance of the stock relative to the broader market (generally the S&P 500, unless otherwise indicated) over the next 12 months. The assessment of expected performance is a function of near-, intermediate-, and long-term company fundamentals, industry outlook, confidence in earnings estimates, valuation (and our valuation methodology), and other factors. Outperform (O) - stock expected to outperform the broader market over the next 12 months; Market Perform (M) - stock expected to perform approximately in line with the broader market over the next 12 months; Underperform (U) - stock expected to underperform the broader market over the next 12 months; not rated (NR) - the stock is not currently rated. The valuation methodologies include (but are not limited to) price-to-earnings multiple (P/E), relative P/E (compared with the relevant market), P/E-to-growth-rate (PEG) ratio, market capitalization/revenue multiple, enterprise value/EBITDA ratio, discounted cash flow, and others. Stock ratings and valuation methodologies should not be used or relied upon as investment advice. Past performance is not necessarily a guide to future performance.

The ratings and valuation methodologies reflect the opinion of the individual analyst and are subject to change at any time.

Our salespeople, traders, and other professionals may provide oral or written market commentary, short-term trade ideas, or trading strategies-to our clients, prospective clients, and our trading desks-that are contrary to opinions expressed in this research report. Certain outstanding research reports may contain discussions or investment opinions relating to securities, financial instruments and/or issuers that are no longer current. Always refer to the most recent report on a company or issuer. Our asset management and trading desks may make investment decisions that are inconsistent with recommendations or views expressed in this report. We will from time to time have long or short positions in, act as principal in, and buy or sell the securities referred to in this report. Our research is disseminated primarily electronically, and in some instances in printed form. Research is simultaneously available to all clients. This research report is for our clients only. No part of this material may be copied or duplicated in any form by any means or redistributed without the prior written consent of William Blair & Company, L.L.C.

This is not in any sense an offer or solicitation for the purchase or sale of a security or financial instrument. The factual statements herein have been take from sources we believe to be reliable, but such statements are made without any representation as to accuracy or completeness or otherwise, except with respect to any disclosures relative to William Blair or its research analysts. Opinions expressed are our own unless otherwise stated and are subject to change without notice. Prices shown are approximate.

This material is distributed in the United Kingdom and the European Economic Area (EEA) by William Blair International, Ltd., authorised and regulated by the Financial Conduct Authority (FCA). William Blair International, Limited is a limited liability company registered in England and Wales with company number 03619027. This material is only directed and issued to persons regarded as Professional investors or equivalent in their home jurisdiction, or persons falling within articles 19 (5), 38, 47, and 49 of the Financial Services and Markets Act of 2000 (Financial Promotion) Order 2005 (all such persons being referred to as "relevant persons"). This document must not be acted on or relied on by persons who are not "relevant persons."

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